The Ramsey Show - App - The Truth Behind "Leverage" & "Arbitrage" (Hour 1)

Episode Date: December 21, 2022

Dave Ramsey & George Kamel discuss: Hesitations paying off a future spouse's debt, The problem with the concept of "leverage" (aka Debt), Moving out of your parents' house, Pulling from retirement funds to pay off a vacation home. Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3nInETX Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

Live from the headquarters of Ramsey Solutions, broadcasting from the Pod's moving and storage studios, it's the Ramsey Show, where debt is dumb, cash is king, and the paid off home mortgage has taken the place of the BMW as the status symbol of choice. We help people build wealth, do work that they love, and create actual amazing relationships. Thank you for joining us, America. Merry Christmas to you. George Campbell, Ramsey Personality, host of the podcast, The Fine Print, is my co-host

today as we answer your questions about your life and your money. The phone number is 888-825-5225. Merry Christmas, America. We're glad you're here. Thanks for hanging out with us. Krista's with us in Charleston, South Carolina to start this hour. Hi, Krista. How are you? Hi, George.

Hi, Dave. How are you? Better than we deserve. What's up? So I am four months away from getting married to the love of my life. And that means I am, yes, thank you. That means I'm going to be, quote unquote, adopting his debt. And I was originally planning on using all of my money that I've saved up for my house to essentially pay off his debt when we get married. But I really don't know, like, how, Like how to like start back at square one once I've wiped my mutual fund out. And when I talked to my financial advisor, they suggested, well, this was years ago,

they suggested that I use my Roth IRA to save up for a house. And now I'm kind of torn because if I were to use my Roth IRA, I would lose like $250,000 by the time I retire. So I'm very torn with what account I should use and if we should go month to month to pay off the debt or if we should wipe my mutual fund, pay off the debt, and then not touch the Roth. Okay, so how much is the total debt? It's going to be about $20,000. And then you have mutual funds outside of retirement that you can cash out? Correct.

How much? And that's going to be $21,000. Perfect. Sounds like a match made in heaven. Now, what I hear from you is you're emotionally frustrated because it's kicking you back to what you called square one. You're going, I worked so hard to save up all this money, and now I've got to throw it at this debt that is now our debt.

It's because you're marrying this loser, Krista. That's the problem. Is that the heart behind it, though, is the frustration? Because it's a simple math equation. You clear the debt, but now you've got $1,000 in the bank instead of $21, right? You have an emergency fund as well. That is what I'm working on currently. The answer is no. Do you have one or yet not

i am so i have i have my thousand dollar month um i paid off all my debt last month and so i'm debt free but now i'm working on step three and i should have that probably in a month or two. Does he have any money? Yes. How much money does he have? Cash, he probably has $4,000, $4,000 or $5,000. And you're married four months from now, correct? Mm-hmm.

So fast forward four months from now, you're married. We combine bank accounts once we're married. We pay off his debt. And by then, you'll probably have most of your emergency fund plus his cash. And so you'll already be at baby step four by the time you guys are married. Then you start saving for a house. And no, you do not use your Roth IRA for a house down payment. And any financial advisor that tells you to do that needs their butt fired.

Okay. So what's your income and what's his income? Well, with all of my side jobs that I'm hoping to stop soon, right now I'm at about $85,000. My regular work, 9 to 5, is about $55,000. What does he make? He makes $75,000. Okay. So you make $150, 000 married four months from now you have no debt

and you have your emergency fund you ought to be able to save very rapidly for a down payment on a house and buy a house in the fall a bit full yeah yeah what a blessing that is i mean think about think about you make 150 000 you. You make $150,000. You got no payments. You can't save $25,000 or $30,000 by fall. Of course you can. Yeah. Yeah.

Of course you can. Don't go buy a new car. Save up for a house. Oh, no, no, no. Definitely no new car. So if you're married in March, october you know you look six months further down six months save up five grand each month that's 30 grand right there so it's a simple math equation we didn't give you permission we just did some napkin math to show you that it's

possible if you do it this way yeah um so our rent ends in october and um I'm really stuck on that 20% down 15-year fix. Well, that would be nice to have the 20% down, but if you want to wait until spring, maybe you've got the 20% down. The point is, Krista, you've got zero debt under what we're outlining here. As soon as you return from the honeymoon, you write checks, and you've got a fully funded emergency fund, and you make $150,000 a year. Rent something very inexpensive and pile up a bunch of cash by fall or by the next spring i don't care it's not like you're going to be homeless you're going to get a home you make 150 grand you just

got married good lord you're going to be okay this is the square one i'm doing good where you're getting up where you're getting all your stresses you're having trouble making up your mind, and you're having trouble releasing what was your plan as a single and instead developing a really cool plan as a married couple because you're still floating around back there before you were getting married. Now you're getting married, and that's a whole new deal. The bad news is you took on $20,000 worth of debt. The great news is you brought in an extra $75,000 worth of income to work on this. So it's going to work out. You're going to be in really good shape. You're doing good. You're doing good. There's so much data coming out, Dave, about married couples being

able to build wealth so much faster than singles, even than cohabitating couples. $7,000 was the median net worth of a single person, $68,000 for married couples, and only couples and only 17 for cohabitating couples there is power when you come together and become one truly in your marriage and your finances and so that's some encouragement to our friend krista out there that you're about to get catapulted financial you look like a millennial millennial but you sound like a boomer i'm such an old person deep down dave i know i look like inside it's all all that wisdom. It's all that wisdom coming deep out of the soul. You're finally rubbing off on me. That's what it is. I don't know. You still got a pretty good head. You're shedding your age onto me, and you're becoming younger. You got a pretty good head of hair. I haven't rubbed off on you yet.

Give it time. 30 years of radio later, I'll be bald too. Well, we got rid of the headsets. Maybe it won't wear the hole in your head. That's what it was. Sure. Blame the headsets. That's won't wear the hole in your head. That's what it was. Sure, blame the headsets. That's what caused it. This is the Ramsey Shack. សូវាប់ពីបានប់ពីបានប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពីប់ពី george camel ramsey personality is my co-host today our question of the day comes from our friends at blinds.com a great american company they have a satisfaction guarantee that's 100 and that means even if you screw up which i have done this and you mismeasure or you pick the wrong color oh i definitely picked the wrong color

and they'll remake your window blinds for free you get free samples free shipping and new promos they run every month always use the magic word to get the best deal. The promo code is RAMSEY. Today's question comes from Teresa in Oklahoma. She's asking, The term leverage has become a ubiquitous term I encounter when discussing anything financial in almost any setting, be it business or personal. The user drops leverage into the conversation

with a smug and confident tone that makes one believe that only a buffoon wouldn't use the power of leverage. The implication is that through some modern and smart financial jujitsu, $1 gains the power of 10 with zero downside. Whenever I hear the term leverage, I act dumb and say something like, by leverage, do you mean take on debt? And then listen poker faced as the spectrum of responses unfold. I used to find it entertaining. Now it's just kind of boring and sad. I'm curious if you have any thoughts on the current use of the term leverage in the financial sense.

I once saw this as sort of a verbal curiosity and a fun game for me, but I now believe it's actually a quite evil use of the word, thanks for all you do. Well, Teresa might be one of the most well-spoken blinds.com questions we've had. Just wonderful prose there, Teresa. Well, and she's on to something. They're trying to say, I am sophisticated. I am an aristocrat. I use debt.

The other one you'll hear thrown around, especially with the tech tech guys, is arbitrage. Oh, yes. Arbitrage. It's another. That sounds French and fancy another code word for i'm about to get myself in debt that's what that means exactly well charcuterie is just uh adult speak for lunchables and so don't always believe the big words people just because if it's a ten dollar word doesn't mean it's worth nothing yeah she's on to something and and uh typically what you find is that the people in like she's talking about using the word leverage or arbitrage or something in conversation actually heard it on Tic Tac.

And that makes them think they're funny or that they are know something or that they can throw this around as if they're on top of something. But it literally does mean debt. That's exactly what it means. But it doesn't sound as cool when you say, well, you should take on're on top of something. But it literally does mean debt. That's exactly what it means. But it doesn't sound as cool when you say, well, you should take on a whole bunch of debt. Exactly. And so, but basically, she's really identified that the person that is speaking this, in most cases, in most conversational cocktail settings around the family dinner table i'm talking about leverage generally that's billy bob who can't find his butt with both hands and so you know that's uh so i

mean she's on to something this is just arrogance is what it is and it is just simply taking on and it is uh in that way it is you know cloaking the fact that leverage has two sides. There's a great write-up by Warren Buffett on this. And he talks about – he always has a big paragraph or almost a page-long letter at the front of his annual report every year. And it's always pithy and fun. And right after 2008, he talks about this whole thing of leverage. Yeah. As anyone who has ever used leverage discovered in 2008,

any number multiplied by zero will equal zero. And it's really pithy. It's like a comeback for the type of people that Teresa is talking about here but Teresa you're exactly right it is simply debt and the idea that debt will lift something that you can't lift by yourself is leverage a fulcrum if you remember your uh you know the seesaw right that's leverage right uh and so it's a physics term in that sense. But yeah, it's always thrown around as if it doesn't have risk implications and as if the person doing it is so much smarter and sophisticated than everyone who doesn't use that term. And so you're onto something. It's horse crap. Well, and it sounds so good on social media to the younger generations who are broke. They don't have money to invest into real estate or the stock market.

And so the idea of leverage sounds so wonderful that I don't even need to have money and I can get all this real estate and have Airbnbs and be investing into single stocks. Well, technically debt is leverage. It will lift things you can't lift by yourself. But the thing that is every is forever been left out of the discussion is is the risk that it entails so as you add this leverage you add risk and the more leverage you add the more you can lift and the more risk you have the more volatile your life is the more unstable everything is the more likely you're about to hit the wall and you know bust the car up like

nascar throw the throw the engine up into the stands i mean it's like you're about to go put and that's i mean we were taught that i was taught this in finance class i was taught this in real estate business and that's how i went broke was i over leveraged um meaning i got my butt so far and dead i couldn't breathe that's what that means so, you know, and I don't have enough liquidity. There's another one you can throw around. You know, I don't believe in having a lot of liquidity, which means you don't like cash, which means you're adding more risk to your life.

That's an illiquid investment. It's like, what are you buying, water? I mean, why can't we just discuss this? But we have to throw around $42 words to act like we're doing something. And around Ramsey, we know what all that means. We don't do it. We keep the cookies on a shelf where everybody can reach them and everybody understands

that stupid is stupid. You don't need an MBA for this. Nope. We'll help you get there. I got a PhD in DUMB. That's all you need. Sign me up. Open phones at 888-825-5225 geo's with us in orlando hi geo welcome to the ramsey show good afternoon how you doing great how can we help so i have a question i'm 23 years old and i live with my parents and i'm and i'm kind of on the fence if i should move out or should i stay here with my parents, and I'm kind of on the fence if I should move out

or should I stay here with my parents. What do you make? What's your income? I make $30,000 a year. Actually, I just started working with HP1 at Medicare for about three months now, so it'll be $30,000 a year. I have nothing in my savings, nothing in my bank account. I'm starting from fresh.

HP1. Are you selling insurance? No, sir. I'm basically a CSR agent, so I'm enrolling prospects. Okay.

All right. Well, I mean, Orlando at at thirty thousand dollars a year i want you to get out as soon as you can get out for your sake because you will have a higher quality life your development uh into adulthood emotionally will be faster when you pay your own light bill and you clean your own laundry and you buy your own eggs for the refrigerator right and but 30 000 is pretty tight so i might hang a cup i mean let's let's develop a plan that by may you move out or something like that and during that time let's try to get your income up and during that time let's see what uh what we can do to to you know to make sure that when you move out you may be with a roommate you create a budget situation where you can afford the apartment or afford the little house or whatever that you're renting. But in general, the faster you can move out of the house in your early 20s,

the better it's going to be for you 10 years from now. And Gio, I'll give you some homework to do here. Start to research the areas around you, the apartments, what is out there, what's the price. And I would definitely get roommates. I had roommates just about up until I was married. So unless you're making crazy money and you want to get your own place and it makes sense where it's not more than a quarter of your take home pay, for example, then you need to get a roommate and you might need to get that income up beforehand. You might need to have some money in the bank for initial deposits with wherever you're renting. And so you have a little bit of groundwork to do, but you're close, man. Right, right. Exactly. And I have been doing some research and I see a great apartment around this area. It's for about 900 bucks for one bedroom and 1200 for a two bedroom. There you go. So I was thinking about getting the one-bedroom myself, but I was speaking to my brother about getting us the two-bedroom. But I'm kind of on the fence of living on my own because I've been living with them for so long.

So I just want to be on my own right now, but I don't have a vehicle. So should I purchase a vehicle first? Yes, you need to buy a vehicle and you need to pay cash for it. That's A1. Absolutely. That'll get you in a position to do that. This is The Ramsey Show. so George Campbell Ramsey personality is my co-host today. He is the host of the podcast on the Ramsey Network. It's called The Fine Print.

You can be sure and check him out there. So one of our favorite things to do is debt-free screams. One of our super favorite things to do is debt-free screams on the debt-free stage live here in the Ramsey lobby. And our most favorite thing is when it's one of our team members doing their debt-free scream on the ramsey stage here in the lobby dalton and uh ashley are with us dalton is a software engineer with us so welcome guys congratulations thank you hey thank you now we have to get this out of the way you have um you have the world's best possible mustache for those of you watching on youtube and that's actually real that's high praise too and um and uh so your co-workers who apparently adore you enough to make unbelievable fun of you they

there are 60 of them standing around with fake mustaches on to match up and man and woman i might ask yeah and some of you and i'm just saying some of you women, that's disturbing. It's just, I was like, what is going on in my lobby? It's uncomfortable, to say the least. Yeah, it's a little awkward. So we're just going to put that aside, and now we're going to deal with your success. Thank God. All right. So, all right.

How long you been with us? Just over three years. Okay. And how much debt have you guys paid off? $120. Mm- off 120 and how long did this take 35 months about the time you got here all right and so ashley welcome good to have you i'm not going to ask your incomes because we don't do that for the team members since all these mustaches i mean team members are standing around uh but wow what kind of debt was the 120 000

primarily student loans and a little medical bill. Okay. All right. Cool. So did you just start this because you came to work here or tell us the story? Yeah, that kind of leading up to this, I had kind of grew up a Ramsey kid, I guess you could say. My dad, who's sitting right here, him and my mom were working their baby step plan.

So growing up as a kid, I remember riding in the car, listening to your show, wondering why are they listening to this crazy guy named Dave? What's this finance stuff they're doing? And then fast forward to us getting married. My dad said, Hey, I'm going to give you a wedding gift. But the conditions of getting that gift is you have to go through FPU. So we went through FPU in 2018, uh, wrap that up. And then we kind of hit this crossroads in our journey where we were thinking, you know, do we stay where we were at or do we maybe make a leap of faith, um, and go work for Dave. And I mean, here we are now, like it's, it's just kind of hitting me right now. I'm like, Holy cow,

this is actually happening. Yeah. Three years you've been here in three years you've been working on this how long have you been married three years five years five years you said okay so where did you move from louisville kentucky okay all right so you your dad gives you fpu you abandon your family and come to the come to work for the cult and uh yeah and move to the south further south than Louisville Kentucky and uh then you guys just turn it on so Ashley uh you it sounds like you kind of got sucked into all of this yeah I didn't actually know much about you or financial peace and in fact I was a little hesitant when he brought that to the table when we were first married. I just had an assumption that that's not something that we can do, that it's not possible for someone like us,

not making six figures, all of these things. And he just encouraged me to try, to like, let's just see what happens. And I think by lesson two which was really overwhelming and i remember us sitting at the kitchen table me crying because i was so overwhelmed with our financial situation thinking what could it hurt to at least try and by lesson three four i was sold and i was ready to do this and a lot of it was because of him and his encouragement. Way to go, Dalton. Well done, man.

Good work. She's being a little nice, I think. It sounded like it. She's making you look like an ace right now. I'm just saying, I think she gets big wife points today. Yeah, well done. So tell us about the journey. What was the process like to actually do this stuff and go,

all right, we've got to find a bunch of money to throw at this debt immediately? Yeah, that's a great question. So thinking of primarily our debt being student loans and just encouraging people out there to hear just a crazy situation. At one point, our minimum payments for student loans were going to be almost $3,000 a month because Sally Mae can do whatever the heck she wants she's a nasty old oh she's terrible um so we were staring at that number before we had made the move here um and we were terrified we didn't

know like god how are you going to do this what's this going to take so we just took small steps let's try and refinance some of those loans, which we did. Let's maybe put some of these on deferment just so we can kind of start treading water to get an idea of where we were at, kind of get bearings. And then we made the move here. And once we both knew our incomes were going to be steady, Ashley was a trooper and found random odd jobs. But once she got consistent work, it was game on. And so we started thinking, OK, maybe we'll throw an extra thousand this month.

Maybe we'll throw an extra 2,000. And it just kept going to where we were making like serious whacks at this massive tree we're trying to knock down. And it's finally down. And God gets all the glory for that because we literally, we were those people that were like, that can't be us. There's no way this is going to happen. And here we are now. we were those people that were like, that can't be us. There's no way this is going to happen. And here we are now. And so encouraging people out there, like we know that feeling that you had starting this journey or being in the midst of it. It's all worth it and you can do it. And I got to say, we played a small part, the Camel family, Whitney and I played a very small

part in your debt-free journey. Would you tell the people what happened there? Yeah. So this is very fun. So Ashley, very much lover of French bulldogs. We knew in the midst of our journey, we were not going to be able to buy a dog that expensive because it cost more than a car. Yeah, literally. It was definitely worth more than my car at the time. So we just started planting seeds around here and George and I got connected and he was like, a car yeah literally yes uh it was definitely worth more than my car at the time uh so we um we just started planting seeds around here and george and i got connected and he was like hey would you guys ever want to like dog sit sometime and sure enough we've done that a handful of times for george and whitney so call that a side hustle and maybe delayed gratification because we didn't own the dog but we got the puppy love too which's, man, that is the best end of that deal for sure.

And you got paid and you got to give them back. Yeah. So George, you get all the credit. That's exactly right. I love it. Well, I've got to watch your journey and it's been inspiring for me and for so many other team members to show that, hey, if you actually do this stuff, it works. And we love to live out the things that we teach.

And you guys are such great, shining examples of that. We're so proud of you. Got the Walk the Talk t-shirt on. About two years ago, we started making sure the whole company, everybody working here, is not hypocrites. Like we're telling everybody we do this stuff, you guys need to be doing it. And so Walk the Talk became a whole company-wide movement to make sure everybody went through Financial Peace University,

everybody was walking the talk and doing the stuff we teach and that kind of a thing so that we're not walking around you know again hypocritical all in our own community here that would be horrible and so you that was perfect timing for you guys because you were right in the thick of it yeah yeah very cool very cool all right and so there's one other thing we got to work in here right quick there's the believe sign over here so word is you're like a big ted lasso fan is that right yeah call that maybe why that's i have the mustache ashley gets credit for even saying like hey you should just just try it she used my words against me and was like just try to grow one to see what happens and here we are now there we go okay so oh that's

where it all comes from oh now i'm catching i thought it was more of like a top gun thing but ted lasso makes more sense for you. That makes sense. That's fair. Very, very good, guys. Hey, of course, we've got the live and give bundle for you that everyone gets that does a debt-free stream. You've already got all that stuff, but you can give it away. The Total Money Makeover book, the Baby Steps Millionaires book, and, of course, a one-year membership to Financial Peace University. Way to go, you two. We're proud of you.

Very, very well done. All right, it's Dalton and Ashley, software engineer here, working on the Ramsey Trusted team for three years. And oddly enough, 35 months is the exact time it took to pay off $120,000. Count it down. Let's hear a debt-free scream. Three, two, one. hear a debt-free scream three two one we're dead free that'll put pep in your step right there man america is running on that right there i'm

telling that adrenaline what a very very well done, guys. And it's all due to French Bulldog sitting. I can't take all the credit. Who knew that was the breakthrough moment? This is The Ramsey Show. I'm going to go ahead and get my George Campbell Ramsey personality is my co-host today. You hear a lot of myths and outright lies about income taxes, like all tax software is the same. No, it's not. Or you're in good hands with any expert who sets up shop during tax season. You really don't even have to do anything.

You don't even have to know about taxes. You can just decide you do. It's crazy. There's no regulation on this. Probably the worst is getting a big refund every year is a good thing. Well, that's awful. Of course not. It's time to stop falling for these lies. You're smarter than this. You can arm yourself with the truth when you check out tax resources on our website. They're free,

they're easy to follow, and they'll actually help you feel good about doing your taxes this year, or at least as good as you can feel about it. Our free resources walk you through what you need to know about taxes. You'll learn how to get organized. You'll learn the truth about things like refunds and how to stop giving drunk Uncle Steve an interest-free loan. That's what a guy called it yesterday. Drunk Uncle Steve is the IRS.

You don't want to loan Uncle Sam or his brother, Drunk Uncle Steve, money all year and then get it back interest-free. That's what a refund is. And you'll figure out how to choose the right tax software or a Ramsey-trusted pro who will help you do this. So how do you do all this? We'll help you go to ramseysolutions.com slash tax, tax. There you'll see our free resources and the tax services we trust that Ramsey trusted. RamseySolutions.com slash tax. Rachel is in Washington, D.C. Hi, Rachel. Welcome to the Ramsey Show. Oh, thank you. It's very much an honor. I'll try to keep it brief. My husband is 72. And by the way,

George, I'm bringing a lunchable board with me on Christmas Day. I was supposed to bring a charcuterie board, but I've learned the new name. They'll never know the difference. I thought that was great. Anyway, my husband's 72. I just took his first RMD this year. I'm 57. We have two kids in the university right now. And here's my dilemma. You were on a call yesterday with a gal who thought her husband felt the cash was just a mirage, or you thought it was a mirage. And I'm kind of in that similar situation that we were debt-free eight years ago, and then we stupidly did the dumb, stupid thing. We bought a beach house in 2020.

We have since paid off more than half of it. It was about 650,000 and we've about 390 left. And I was thinking, should I just take our cash, which I've been holding on to, um, and I can pay off, um, another 300, but leave maybe about 50,000 in cash. Um, you know, but it's making 4%. That's my main question because with that gal that called yesterday i think you were adamant that they pay it off because it's only making one percent fitting enough no i wasn't paying off i wasn't adamant because it's only making one percent that just made it even worse i gotcha but here's the thing a beach

house is a toy and if you can't pay cash for a toy you shouldn't buy a toy so pay it off just pay it off asap don't worry about the you've got other money what is in your nest egg how much is in your retirement accounts um but you know retirement just total our total net worth is like five and a half but five and a half million yes okay so 390,000 bucks is nothing but that includes real estate i'm sorry dave that's okay but 390,000 is still nothing you got you got you have an emergency fund in addition to the money in the 300,000 vanguard account the 350 um no i do not okay well you need you need a good emergency fund if you want to call that 50,000 like you did a few minutes ago, that's fine. Yeah.

Let's do that. And so throw $300,000 at it. Now, how quick can we pay the $90,000 off? Do you have any other cash laying around? Well, yes and no. We have our $59,000. We get cash flow to kids' education. That's college.

We're not messing with that. We're not messing with retirement. We're not messing with college. But do you have any other just miscellaneous cash laying around? Or an investment account of some kind, a little brokerage account? Yeah. How much? That's small.

It's like 60. The rest is all in IRAs and 401ks and things of that nature. What's your household income? About 400 combined. Okay. I'll tell you what I would do, and you guys may not be up for this you may want to do it a little slower than that is um i would take the 60 and the 350 and i would pay the house off today that's going to leave you about 20 000 bucks laying around but with a 400 000 income you can rebuild an emergency fund of 50 in just a couple of months.

And you free up the payment on that vacation home as well, which is only going to catapult you guys even faster into this process. Yeah. Right, because the rentals, we only rented eight weeks out of the year. And even that rental income is like, what, 45K. So we'll be getting that later in the year as well. You didn't buy this for a rental. You bought it because you wanted a beach house. Yes and no. I looked at it. Actually, I looked at it, Dave, honestly. So we'll be getting that later in the year as well. You didn't buy this for a rental. You bought it because you wanted a beach house.

Yes and no. I looked at it. Actually, I looked at it, Dave, honestly, as a long-term, like another form of. Oh, it's a long-term capital gain. It'll do well that way as an investment. But you didn't buy it for the rental income. Beach house rental income is a pain in the butt. And it's 99% of the time rationalization justification for buying something I just wanted so yeah it's just it's it's not it's not it just drives you crazy because it's the place where you stay you got renters in most of the time it's just bad so yeah i pay it off

pay it off or sell it but pay it off and it's what i would do and that'll leave you let's see it'll leave you 20 000 bucks i was right you have 20,000 bucks left over and then you make 400. And so you put another 20,000 in another 20,000 in, and you'll have 60 in three months or two months, something like that. And you'll have your emergency fund. And then if you're going to buy toys, it's fine.

You're worth five and a half million dollars pay cash for them. He has retirement accounts at 72 that you can access without any penalty. If you want to go buy another something for $300,000, that's fine. You can afford it, but just take the money out of the retirement account and go do it. But I'm not going to take it out to pay it off in this case. You've got the money. You're just kind of cleaning up, sweeping the dust out of the corners here. Well, Dave, this is a question, the heart of it is when we get a lot, especially now where interest rates are up on savings accounts and people go, well, Dave, why is a question, the heart of it is when we get a lot, especially now where interest rates are up on savings accounts. And people go, well, Dave, why would I pay off my low interest debt when I can make 4% on my emergency fund?

Why would I throw savings? And there's a principle underneath it of when you just look at interest rates versus freedom and sleeping better and not having that monthly payment. They're not factoring those pieces of the equation into it. It's just, well, I can make 5% here and my interest is 3% on the debt. Why would I do this? What do you say to those people? Because that's not the only equation. That's a very naive equation. There's more to the equation than that. There's the stress and the weight that the debt represents. If it's not a lot of debt, it's not a lot of stress or weight, but it's there. The borrower is slave to the lender. There is risk involved when you don't have debt.

And if it's not a lot of debt, there's not a lot of risk. But this idea that you're just simply comparing these two interest rates and that that's the proper mathematical analysis of this is very naive because you've left out the toll on your relationship. You know, the weird thing is somebody worth $5.5 million, I'm not saying she would necessarily do this personally, but here's an example. I do not have any of our second homes that we rent.

They're not owned by you. I own a couple of, I own a lake house, I own another house other than the one I live in, okay? And I don't rent any of them, ever. You don't have to fool with it. I don't need to. And here's what's weird. Five and a half million dollar net worth,

they don't have to rent that. But the reason they're doing it is because they've got dadgum payment, and they're trying to figure out a way that this makes sense mathematically. Well, it's easier to justify when there's revenue. This payment is driving these decisions. And if you don't have any payments, Lakehouse can just sit there. It's okay. It's a toy.

It's a small percentage of my net worth. Hers is a small percentage of our net worth. And it can just sit there. It's a toy and i don't have to rent it to somehow feel like i'm not being wasteful or feel like because the the stinking debt starts driving you to do stupid stuff you wouldn't do otherwise like put renters in your very nice beach house you know um you don't need to. And, you know, if you need to, it's because you got payments because you did some kind of mathematical thing. And you left out the fact then that you got to screw with all this stuff and stuff gets torn up. And where is the cost on your time and on your emotions?

Where's the cost on a piece of furniture or a family item that you left in there and forgot to lock up before the Airbnb doobers came in there and tore up something, you know? No, thank you. No, thank you. All that means is you can't afford it. That's all that means. And there's more cost involved than a simple, naive formula of, well, interest rates are Oh, shut up. It's not about it.

There's more to this in life than that. There's more stress involved. There's the physical toll. There's making bad decisions because you're trying to justify something mathematically. There's all this stuff involved. Not worth it. This is The Ramsey Show. Do you love a good day, Brandt?

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