The Ramsey Show - App - Use Retirement Funds to Pay Off Mortgage? (Hour 1)

Episode Date: December 22, 2020

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Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, it's the Dave 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. Dr. John Deloney, Ramsey personality, best-selling author of the book Redefining Anxiety, is my co-host today as we talk to you about your life and your money. So you've got questions about the people you're going to see this week known as crazy relatives. John's here. He's got a degree in counseling.

He cannot help you. I can tell you what I'm doing. That's all. Man. Oh, wait a minute. You just called your relatives crazy. Be careful there. It's a broadcast.

You know what? By this time, we all know those cats are out of the barn. They are what they are. All right. Cats are out of the barn. Okay. All right. Good. I didn't know you kept cats in a barn in Texas.

I don't know what's in the barn in Texas. Okay. All right. Just checking. Just checking. The horse is out of the barn. Who comes out of the barn? Cattle, usually.

But what do I know? All right. Open phones at 888-825-5225. Let's move on from the farm animal anthology here, and we will talk to you about your life and your money. Diana is going to start us off in San Bernardino, California. Merry Christmas, Diana. Merry Christmas, Dave. Hi, Dr. D.

How are you guys today? Great. How can we help? Good. Well, I was calling. I Christmas, Dave. Hi, Dr. D. How are you guys today? Great. How can we help? Good. Well, I was calling. I might get emotional. Sorry. I'm a widow.

My husband died a year and a half ago. And my kids get a Social Security survivor benefit. It's $900 each a month until they're 18. My son is 10. My son is 10. My daughter is 8. And I just want to know how to be the best steward of that money for them. I myself, I'm a teacher. Thankfully, through COVID and all of this, I still work.

I make $92,000 a year. And I myself am on Baby Step 2. I'm trying to keep Sally Mae to the curb. Good, good. But I live on what I make, and I don't use that money for anything else. And I just want to know what to do with it for them. Okay. Wow, what a hard time you've been through.

I'm so sorry. Thank you. Well, my opinion on this is very strong, like most of my opinions. You spend way more than $900 per child per month to take care of those children. It takes more than that to buy food, lights, water, clothing, and so on for an individual in San Bernardino, California. And so if I were you, I would simply take that $1,800 a month and make it part of your budget. And your budget should take care of your family first, food, shelter, clothing, transportation,

and utilities. And then it should start working on the future, working your baby steps. And you would save for kids' college and you would save for retirement and you'd work to pay off your home. And this is all after you clear Sally Mae to the curb. But clearing Sally Mae to the curb is a gift to your children because it puts you in a position then to send them to school and you save for that. There is no law nor any ethic nor any moral obligation for you to set this $1,800 aside somewhere while you on the left side, set it over to the right while you on the left are starving to death.

You're not starving at $92,000, but you're not like filthy rich or something either. Right. So your budget is tight enough, and I just put the $1,800 in there. Same thing with child support. You're not obligated to set child support aside for children because you spend more, you single parents out there, you spend more on that kid than the child support is. Right. In every state in America, you spend more on that kid than the child support is. So it's not like you're getting rich off of child support, any of you out that are living on this so just mix it in as part of your budget so i just

want to give you the freedom to do that because you got enough things on your plate without being shamed or guilted about this 1800 bucks and and sometimes when when we're dealing with grief and it looks like you're about six months into trying to reconfigure what your head and heart and world is going to look like for those two little kids, and then COVID hit, and you've had to navigate this by yourself, right? Yes. There's this mythological notion that if you just follow these steps in the right order and do the right things, that it will make the passing of someone that you love. Okay. And Dave is right. There is no magical use for this money. You'd give every penny of it back to have this guy back sitting at your kitchen table. You know that we know that. And then we also have to recognize that's not going to happen. And so the next right thing to do

is to work hard and diligently and intentionally on dealing with the loss of your husband. It's going to take years and years and minutes and some minutes. Love those kids. And like you said, man, use this money as though it is part of your income and rock on and go from there. Because it is part of your income. That's right. That's what it's designed for. If the law was that it had to be set aside for children, they would force you to set it aside for children.

It doesn't. It comes to you to take care of your children. And the assumption in the law is accurate, is that a mom is going to take care of her kids. And very few times does that assumption not play out. And we would call those bad parents you know and you said it's a whole different issue getting out of debt letting that that pressure off of you like taking that weight off of you that's a gift to your kids right use that money get out of debt and mathematically it sets her up to be able to care for them in the next stages as well that's

right and so this idea that somehow people have it in their head that it needs to be separated off or whatever. It's part of that magical grieving and that magical thinking there. Yeah. And, you know, another situation where the exact same question, the exact same answer comes up is someone gets divorced. They're getting child support and then they get remarried. And so now they've got a household income that concerns step-parent, step-father, step-mother, and then you're getting child support on the other side, and you've got an income from the other. Is it okay to mix that in?

Yeah, it's absolutely mixed in because that step-parent is freaking writing checks taking care of these kids. That's right. That's part of the deal. They're paying for that roof over the head. They're paying for that electricity. They're paying for that water bill when that kid flushes that commode 63,000 times. You know? And sticks the rabbit, the stuffed rabbit in there, and it leaks for 24 hours.

All of that, right? Or they never flush. It's that one, too. Oh, I see you had to go there. I'm just telling you. I was trying to run up a bill. You just got gross. Okay.

No, man. Hey, I'm living it. I'm living it. Oh, I wish they were flushing 63 times a day oh man you'd gladly pay the water uh no but yes but yes but yes well you're out in the country you're on a well aren't you yes i'm on a well there you go it doesn't cost much all right so where the cats are in the barn where the cats are in the barn in Where the cats are in the barn. In these Tennessee barns, right? For the record, for the record, America, I have a cat that's living in the barn.

No. You're a cat guy? No, they just show up. You're a barn cat guy. I'm a dog guy. Okay, you're a barn cat guy. Right. Cats belong in the barn.

I'm the father of a son and a little girl and they saw this barn cat and such it is such as it is and so the tragedy begins so the tragedy has begun their dad it's all unraveled the grinch is my co-host to this hour very few principles open phones at 888-825-5225 dr john del, two PhDs and can't figure out what to do with a barn cat. We'll be back on The Dave Ramsey Show. This year has been unpredictable. Well, that's an understatement. But make this Christmas and New Year's your time to save money and give your loved ones gifts that will teach

them how to make a plan for their money and their future. Our famous $10 sale is ending soon. This is your last chance to choose from over 40 of our most popular books, audiobooks, and more, all for just $10. Get my number one best-selling book, The Total Money Makeover. It's helped millions get out of debt. Or invest in yourself and learn what it takes to build wealth with Chris Hogan's number one national bestseller, Everyday Millionaires. For a limited time, you can pick up Debt-Free Degree by Anthony O'Neill in the $10 sale so your teens can learn to go through college without student loans. Shop our famous Christmas $10 sale before it ends

at our online store at DaveRamsey.com or call Ramsey Concierge Team at 888-22-PEACE. 888-227-3223. Dr. John Deloney, Ramsey personality, writer of the bestselling book, Redefining Anxiety, What It Is, What It Is Not, and How to Get Your Life Back. If you want to talk about that type of thing and talk about your life and maybe boundary issues or whatever else is going on in your family, he's here today with me. And we'll certainly take your questions about life and maybe boundary issues or whatever else is going on in your family he's here today with me and we'll certainly take your questions about life and money the phone number 888-825-5225 mo is next in belgium hey mo how are you hey dave hey john how are you guys doing i'm doing great good how can we help uh it's uh it's a money-based question, so sorry, John. The emotional things are not necessary with me. So the question that I have is actually about I started a business a year ago,

and it's been doing okay with the cash flow, but I'm just asking about what is the best way to invest my money like and what should I do? Just pay myself out and do something with that or just keep it in the business and invest in something else? You know? Well, there's three things that I invest in. I put money back into my business. I put money in mutual funds and I put money in real estate. I do not know the real estate landscape in Belgium well enough to tell you if that's a good investment or not.

You probably could tell me. And what types of vehicles you've got that are similar to mutual funds that you can get into? Yeah, yes. So I actually don't know much about investing or anything. I actually know a lot about housing, and I really think housing is a good investment in Belgium. Okay. All right. I'm just thinking about should I keep the money in the business

and buy houses from the business or put it on my personal accounts and pay the taxes on that and then buy the houses. Again, I don't know the tax implications there, but if all things are equal, I would have them separate from your business because you wouldn't want your business to appear to be so wealthy that it became a target for lawsuits. And so I don't own any real estate inside my Ramsey Solutions business.

Ramsey Solutions is actually a tenant of mine on another company that owns the building. And so your structure that way is typically good risk management to not have all your investments in one entity, and that would include separating your business from your real estate and even with real estate once it gets to a certain size i would have a different entity in the states we use an entity called an llc for real estate and i don't get but about five to ten million dollars worth of real estate into an llc and then i open another one because i don't want if someone sued us that got hurt on a property or something and we lost everything in that llc that would be

all there is that they would get it's limited to whatever that holds and then the other buckets the other llcs are safe they're protected from that and so um you know that that's just risk management once you get to a certain level of wealth that you spread around the target so that it's a series of smaller targets, not a super large singular target. And so that's why I would not put it in the business. Again, I am not familiar with structuring stuff in Belgium, though. I would be known as clueless. But conceptually, you want to spread that risk around. Open phones at 888-825-5225.

Jeff's in Phoenix. Hi, Jeff. How are you? I'm doing well, Dave. How are you? Great. How can we help? Okay.

Just wanted to get some feedback from you. The situation is my daughter finished her bachelor's degree back in May. She's been accepted into a graduate occupational therapy program. I've talked to the finance people there and run through the numbers, done some financial modeling. And it looks like after, if you consider the loans she would take, and I would pay for the plus loans, but she would have to take on the direct loans. The program is about three years long. The numbers show that given those factors and the interest on those loans when she graduates, that she would graduate with about $88,000 of student loan debt. So the fly in the ointment is she has a pretty good job right now.

So she's considered deferring for a year. On this job, we conservatively estimate that she should be able to make about $60,000 to $70,000 a year. Yep. make about $60,000 to $70,000 a year. And so we think after taxes and expenses, if she lived conservatively, she could have about $40,000 to $45,000 saved to apply toward the debt and not have to go in as much debt if she deferred a year. What's your question? What's your input on what your thoughts are? Should she just go ahead and start the program and buy it the bullets or wait and use this chunk of money to pay for the program so she doesn't have to go into debt so much

absolutely under no circumstances do you borrow money at all any a penny of it for an ot program period so the magic about an ot program is they make you feel like you were, you know what, we scoured earth and you're the one. We accepted you. And the reality is there is a ton of empty seats in a number of these graduate programs across the country and the tide has turned in many, many, many academic programs where there's more seats than there are students. Which, what does that mean?

That means next year. That means the year after. After she works her butt off for two years and decides this is really, really what I want to do. Then she's saved up 80 grand and she can go write a check. And it's going to be a painful check. She's going to pay cash for that job. And then she's going to walk out. And as an OT, Dave, you may have seen different numbers.

But we're talking 65 to 80 000 bucks a year being an ot depending on where you're doing the work and so if she's doing it to make more money or to quote unquote move up she's already got a pretty good job and so i'd really dig in as to why she wants to do that but under no circumstances do you borrow money jeff just to give you a little context john has a phd in higher ed and has served on served in universities all over america uh lately as dean of students so this is not something he just made up uh he's lived this for decades my opinion is the same thing ot is treated like your medical student or something like you uh were given a gift from heaven to be let in, and that's a bunch of hogwash.

OT is not med school, and it shouldn't cost like med school, and some of them try to charge for it like it's med school. We know it's not med school because you make $60 to $80 coming out, not $160 to $180 coming out. That's how we know it's not med school. And so I think it's overrated. I'm not sure that's what she wants to do i think she just got in this track and then got accepted and felt approval from being accepted and i'm trying to john's trying to truncate that and so am i so definitely work a year uh the other thing i would try to do is i try to work a year or two in the freaking field so she can get in there and get

her hands in the middle of our occupational therapy and figure out if it's what she really wants to do. Oh, by the way, the company she's working for may pay her tuition after that to go up and finish her master's and go ahead and get the degree. Free, I'd be okay with. Going in student loan debt for anything is a bad idea. I really would beg you not to go into student loan debt, you her for this right of any amount not two dollars worth oh and by the way there's a vast array of charges depending on which school you get approved for that's right there's books and fees and hospital charges well no what i'm saying is that school a may be double what school b is yeah yeah yeah school b may be half of this and again this idea that oh that's the one i got accepted in they picked me they picked me and i'm special and bullcrap

you know this you are shopping for the cheapest eggs man and you just get the you go to store to store and get the cheapest eggs is their eggs and because no one ever walks into an occupational therapies office and goes, you know, I see you went to that school. I don't think I'll come. I'm out. Right? No one even asks where you went to school.

They're not even positive you did go to school. Now, I'm a nerd, and I had both of my knees done two summers ago, and my occupational therapist was incredible, and I did ask, hey, where'd you go to school? After. After. Oh, I wasn't gonna walk out yeah well you couldn't your knees are messed that's right that's right we're gonna hobble out to the table anyway but yeah i want my ot to be awesome i also don't want them to

be a bunch of lawyers in my life a bunch of docs and i've never asked one where they went to school because i'm just not impressed with your pedigree all i know is can you fix what's broken that's all i want to know. And so this idea you pay double because you went to that school, it's laughable. It's just laughable. Don't do it. So, yeah, take a year off, preferably working in the field, and then get free tuition. This is my best course of action on this.

This is the Dave Ramsey Show. Dr. John Deloney, Ramsey Personality, is my co-host today here on the air. Open phones at 888-825-5225. Cliff and Ryan are with us in Cleveland, Ohio. Hey, guys, how are you? Good, Dave. How are you? Very cool. I see on my screen you're debt-free. Congratulations. Thank you. Love it. How much have you paid off

71,135 dollars love it how long did this take don't want to forget the 52 cents that's right get the 52 cents in there it came out of the corner of the couch right so uh how long did this take uh just under two years, so right around 23 months. Okay, very good. And your range of income during that time? It was $113,000 to $117,000. Okay, cool. What do you all do for a living?

We both work in television broadcast production, actually. Very cool. I work in professional sports, and Cliff works in television. Okay. And a local affiliate there. Yes. Okay, great. Yep.

Very cool. What kind of debt was the $71,000? Well, it was a range. We had cards and cards and cards, four credit cards uh credit union credit card uh both of our school loans uh and then a vehicle uh vehicle loan and then a home improvement loan what was the big one those pesky student loans i think they were the biggest student loans are gigantic okay oh pesky shallally may had to go how long you guys been married sally how long you guys been married we've been married just over 11

years okay we've been together about 17 so what happened two years ago this sets you guys on fire what's the story to this journey so a lot of my family had been mentioning your name at various holidays and I always brushed you off and, you know, I thought we were good with our money. We had good debt, you know, like everybody says you're, you have, you should have good debt. And then fast forward a couple months and my best friend Whitney came over and she pulls out these white envelopes and I was like, what are those? You know, we were just trying to pay for some pizza. And she's like, oh, these are my cash envelopes. I'm following this Dave Ramsey plan.

And I'm like, wait a minute. My family talks about this guy. Like, who is he? You know, and then I brushed it off again. And fast forward to July of 2018, and I just couldn't get you out of my head, Dave. And so I Googled you, and you happen to be running a Christmas in July special. And lucky for me, I was able to get the bundle of the Total

Money Makeover, Rachel's book, Live Your Life Not Theirs, and then a kid's financial piece set for our son. And we created our first budget that day on every dollar. I read the Total Money Makeover in two days flat. And we immediately performed plastic surgery on all our credit cards, became mega gazelle intense, and literally the rest was history. Cliff, how did you keep up? Because once she stepped on the gas, she went. Yeah, so just enjoy the ride. That's good.

So, you know, at what point did you join into this process? Well, like she said, we were together over at her friend's house. And like she said, the family talked about it all the time. And, you know, we're like, get in the car driving driving home and we're like what are they even talking about like what is this thing what is this thing you know you get more and more interested and then next thing you know you're reading books and paying off debt okay so you were in there right from the start with her then oh for sure okay all right very good congratulations you guys.

We're so proud of you. Thank you. So peaceful. As a part of this journey, Cliff and Ryan, what happened to your marriage? I'm always fascinated by these joint journeys people go on and what happens to their marriage. I mean, it definitely strengthened it. How so? The communication, especially, because I do think that's one of

the main keys of getting out of debt and being on this journey is just clear, open, constant communication. I mean, just the way that it, you have to have that between the two of you. And then I think dreaming together for what the future holds for us now that we are on our way to financial freedom. And dreaming together, alone, and then for our family. Say that again, Cliff? We talk about retirement all the time now. It's a real thing. It's not a boogeyman in the closet waiting to pounce later.

It's something you're going to make happen. It's within reach, for sure. Yeah. Yeah. Way to go, guys. Very, very proud of you. So this is 23 really tough months, $35,000 a year, about $3,000 a month average that you paid off during this time.

Mm-hmm. What was the toughest part of this? I would say saying no. And really, I think that was a complete sentence, especially to our son. He was eight and nine years old, and having to say no to him a lot for certain things that now he throws back in our face, which is hilarious. You said no to me all these times. Now that now he throws back in our face, which is hilarious. You know, you said no to me all these times. Now let's order as much pizza as we want. So I would say saying no to him was definitely hard. And then the last big debt of our snowball, because we weren't getting those small victories that you get at the beginning to keep the motivation going.

So I had to create some sort of reward or treat for ourselves for every thousand dollars that we ended up knocking off of that last debt. So those are the two hardest parts, I think. Very cool. Yeah. You know, saying no to certain sports for kids and for parents is kind of difficult. But when you know it's going to be a short-term decision, it makes it a lot easier. So I know there's families all over the country that listen to this and tell themselves, I've got two little kids. We just can't do that right now.

This isn't the right season. So you're living proof. You've got two beautiful little kids. I'm't get we can't do that right now this isn't the right season so you're living proof you've got two beautiful little kids i'm looking here on the monitor your kids survived right they made it yep everybody's okay and safe and fed and all that yep and they're stronger on the other end yeah they're not they're not going to counseling for missing a pizza. Right. Right. Or instead of an understanding of the sacrifices that we were having to take on in order to put ourselves in better success financially for the future. Yeah. Way to go. You guys.

Today it is now is the right time. Today is the right time to get started. Hogan says some days not on the calendar. It's always too late to wait. It's never too late to start. Yeah. Never too late to get a great head start on something. Well done, you guys.

Well done. We're so proud of you. You're heroes. You took control of your life, changed your family tree. You absolutely rocked this. Well done. We got a copy of Chris Hogan's book for you. You're heroes. You took control of your life, changed your family tree. You absolutely rocked this. Well done. We got a copy of Chris Hogan's book for you, Everyday Millionaires. We definitely want that to be the next chapter in your story. You truly have lived like no one else, and now you're going to be in a position to live and give like no one else,

including all the pizza you want. $71,000 paid off in 23 months, making $11 117 count it down let's hear a debt-free scream three two one a b c d we're debt-free Yeah! This is how it's done. Oh, fabulously done. Man. What she said about the impact on marriage is essential. Right.

We take calls virtually every hour on this show about, well, can I do this without my spouse? I don't get my spouse involved. My spouse, my spouse, my spouse. And on top of that, you know, we've got 7 million people have been through Financial Peace University now. So we actually know what we're talking about when it comes to it's almost impossible to do this against the will of your spouse. Right. And not only that, when you do it on the other side with your spouse you find yourself closer sweeter yeah communications increased unity has increased unified vision that you created together yeah we're truly walking out this as the preacher said and now you are one there it is and now you are one this This is the Dave Ramsey personality is my co-host today.

Open phones at 888-825-5225. Mitch is in Cleveland, Ohio. Hi, Mitch. Welcome to the Dave Ramsey Show. Merry Christmas, guys. Thanks for having me. Merry Christmas to you. What's up? I've got kind of a two-part money housing question, but I also want to tell Dr. Deloney, I've never been a big psychology guy, but I'm pretty hooked on your show. I like the podcast, so keep it up. Well, I appreciate you. Thanks for listening. I think it's you and my mom right now, so I appreciate you, man.

There's probably more. Yeah, a few hundred thousand. My question is, I'm 26. I'm on baby step four. I'm excited to buy my first house in the spring. I'm trying to decide if I should consider buying a duplex and renting it because I can get one for about the same price as a single family. And then I've got roughly $75,000 cash, $18,000 or so with my emergency fund. And so I'm trying to decide exactly how much to put down because I wouldn't mind keeping a little extra cash too. So I was thinking more like $50,000, which is a little more than 20%. But just wanted some guidance on whether you think that's a good move on either one of those. I'd hold your emergency fund.

If you want to keep it at six months instead of three, that's fine with me. And beyond that, I'd put everything else on the house. The idea, the more you put down, the the less you got to pay off sure what about the duplex uh duplex is fine uh the uh good news is your renter lives next door the bad news is your renter lives next door and uh the other thing is is that the buyer when you get ready to sell it is more of a wholesale investor than a retail joe and suzy buyer with a picket fence and a little puppy dog that they want to live in the house with and that that single family is going to appreciate all things being equal faster than a duplex will in most markets because of who the buyer is on the other side. And duplex buyers are typically not owner-occupants.

You would be one of the rare exceptions. I get this question on the air fairly often, but it's still out of all the number of duplexes in the United States, the vast majority are owned by non-owner-occupants, and so that's typically who your buyer is. I didn't know that. That's new information for me. That's good to know, because I thought they were all, I'm going to buy one side and rent out the other side and knock out this mortgage.

Hardly any of them. Most of them are. Matter of fact, I used to buy, when I was buying real estate back in the day, I'd buy like a whole street of them. Right. You know, about like 10 of them or 15 of them or something like that. And it just turns into a little a miniature apartment complex right sort of thing like that or if you own 10 or 15 of them all over town even it's the same situation so it's now i mean there are people do it now the zero lot line looks like a duplex but you own half

of it or and it's called different things in different markets but it's a meaning you have a shared wall a single but it's not not technically a condominium in most cases. And so those are almost all owner-occupied, depending on the market and depending on the city and what's going on there. But, yeah, you just think about the property and go, okay, who's your buyer on the other end? And how sophisticated are they? And are they a retail buyer or a wholesale buyer? Obviously, if they're a wholesale buyer, the property's not going to appreciate as much. Tim's in Milwaukee. Hi, Tim.

How are you? Better than I deserve, Dave. Thanks for taking my call. Sure, man. What's up? Well, I got a question for you. My wife and I are looking at paying off our home. Good.

We've got a balance on it right now of $83,000. And we have about $375,000 sitting in tax-deferred accounts. And we have our emergency fund fully funded. And our concern is that if we only pay off this house right now, we're going to have a tax bill of about $18,000 due. My concern would be one of two things. Do we go ahead and do it, pay the house off, pay the $83,000, and then just stop contributing to our deferred comp or our retirement next year just to fund the taxes. How old are you guys? I'm 54. My wife's 49. Okay. And so what type of account is this that you can pull it out without a penalty?

Mine's in a deferred comp. So I'm retired law enforcement. Okay. So you can get that with only being taxed with no penalty then in your situation? That's correct. Okay. Yeah, I'd pay off the house, and I'd wait a lot for the first year to do it, so your tax bill's not due for 14 months or 15 months then. Okay. And that gives you that time to, if you wanted to pull the plug on their deferred comp and build up the $18,000, that'd be the same thing.

It'd be really neat if you could do the deferred comp and cash flow the $18,000 during that 15 months that you've got to save it up. That was my question. What's your payment every month? What's your mortgage? It's only $392. Oh, wow. Okay. What's your household income? About $120,000.

Okay. You might be able to continue your deferred comp and save $18,000 in 15 months if you wait until January to do this. That would be best of all worlds because that way you're paying your taxes out of pocket, which has, in effect, mathematically is the same thing as investing that much more, is the way it will turn out. And because otherwise you would have pulled the money out of there to pay the taxes and would have lost that much.

Or not put it in, which is the same thing again. So basically by doing both, we're adding to the net effect of your investments. I'd pay it off, yeah, but I'd wait until January to do it. Hey, thanks for the call. Open phones at 888-825-5225. Connor is in Seattle, Washington. Hey, Connor, welcome to the Dave Ramsey Show. Merry Christmas.

Hey, Dave and John, Merry Christmas. Thanks for taking my call. I wanted to be on with you guys. You too. How can we help? Okay. So I'm 27, single, baby step four, five, and six, and I've been thinking about looking for a house pretty soon here.

My mother and father are starting to go through, they're going through their will again, and my mom is presenting me with kind of what feels to me like an unusual option. So she's let me know that I have about 750,000 inheritance coming whenever they pass away. She has given me the option to purchase the house that I'm living in, which is their house, from them at a discounted rate. And it wouldn't be quite 750,000, but I've been just kind of trying to figure out how to run the numbers, figure out if this is a good choice for me or if I should, I guess, politely decline.

The house they're currently living in? No, excuse me, one of their rental homes that I am renting. Oh, you're living in? Yes, I'm currently living in. And so what would you be paying for the house? About $600,000. Okay, and'm currently living there. And so what would you be paying for the house? About $600,000. Okay. And what is the house worth?

Well, I'm working on that. I think the main real estate sites think anywhere between a million and a million two. Okay. So you would be getting $400,000 of your inheritance up front, and they would discount your inheritance by the amount of the equity. Yeah, that's correct. Okay.

All right. Would you buy this house otherwise? Well, not at the price that it would normally list at, but yeah, if I could afford it, sure. I like the house. Okay. Well, if your parents are doing good estate planning, they can gift you that much under the Unified Estate Tax Credit. As long as their net worth is under $40 million right now, they can pull that off. And they won't have any taxes on it, you won't have any taxes on it,

and you would get $400,000 less upon their death than you would get now, right? So you're paying full price for the house. You're just getting part of your inheritance early to buy the house with. Yeah, that's correct. The inheritance part is a little bit complicated because I have siblings. This particular 750 came from, I have house siblings on my dad's side. The last thing I would tell you is this. I would get the house appraised or get a real estate agent to give you a comparative market analysis,

and it should not be at 100% of value. It should because if they sold the house, they wouldn't get 100% of value. They'd get about 80% of value or 88% of value. So somewhere around 85% of value minus the mortgage is the amount deducted from your inheritance. And then, yeah, there's no reason not to do that deal as long as you can afford the $600,000 mortgage. This is the Dave Ramsey Show. This is James Childs, producer of The Dave Ramsey Show. You can listen to Dave, Rachel Cruz, Chris Hogan, or the rest of the Ramsey Network anywhere with the Ramsey Network app on your smartphone.

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