The Ramsey Show - App - Wealthy People Don't Do YOLO! (Hour 3)

Episode Date: May 18, 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. I'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. That's 888-825-5225. My co-host on today's show, Ramsey Personality, Chris Hogan, number one best-selling author. Sohaib joins us from Canada, our first caller of the hour. Hey, Sohaib, what's up? Hey, David and Chris, how are you?

Better than we deserve. How can we help? So I had a question. I know you recommend between a three- to six-month emergency fund, and I was wondering if you'd be able to help me put a dollar amount on what my emergency fund should be. Okay. Well, talk to us. What's your household income right now? So I'm a student right now.

I'm 21 years old, and I'm taking a year off income right now? So I'm a student right now. I'm 21 years old, and I'm taking a year off school right now doing an internship. Okay. So I was just wondering with my fluctuating income, what should I set my thing to be? So in the next year that I'm taking off, I project an income of about $95,000. But I'm just wondering,

since I'm going to be going back to school for another year, does that affect how much I make my emergency fund? Okay. So you're going to make $95,000 in this internship while you're out of school? That's correct. Okay. And where are you going to be living? I'm going to be moving away for the internship. Okay. And so you need to look and calculate where you're going to be renting their rent while you're there and then your general life expenses. So I would tell you hop over to look at everydollar.com. That's the best budgeting tool on the planet. And even though you don't know exactly where you're going to be living,

you can start to ballpark some expenses to get an idea of how much you're going to be spending or needing to spend each and every month. I would say as a student, you know your salary is going to be this $95,000 over that internship, so the three months of an emergency fund should be more than enough. Three to six months of expenses. Right. So calculate your expenses times three or six. That's a standard emergency fund, and that's assuming you're out of debt and you have the money to finish school, do you?

I should, after the internship, should have enough money. Okay. Are you out of debt? Yeah, I'm out of debt, yes. Okay. Very good. All right. So that would put you to baby step three then, which is three to six months of expenses, and I want you to save that and I want you to save enough to finish school. And those are really your major priorities. So, you know, just what do you think your expenses are going to be a month? So I actually went on every dollar and I already done like my expenses. So I expect in a month with rent and everything, I'd probably be around a thousand or like twelve hundred dollars a month because I want to try and save

as much as possible in this emergency fund and build it up. Okay. But, I mean, you're going to eat, pay lights and water, and rent for $1,000 a month. It's going to be about $1,200 is what I expect, yeah. Something's awfully cheap here. That sounds very low.

Do you have like eight roommates or who are you living with? I am living with a bunch of roommates. That's correct. Ah, okay. All right. I know that. I know that mindset. Okay, let's just round up to $2,000, given that you're dealing with $95,000.

Okay? So if we round up to $2,000, three times that would obviously be six. Six times that would obviously be $12,000. So $6,000 to $12,000 would be the range I would look at in your situation, somewhere in there. If you had $10,000 sitting there plus enough to finish school, we call that a touchdown in your situation. That's a decent internship, too, by the way.

Yeah, I think. $95,000. I mean, hey. I never saw it. Didn't have that when I was there. Keep working. Diane is in Massachusetts. Hey, Diane, how are you?

I'm great, Dave. How are you? Better than I deserve. How can we help? Well, my toddler got injured while we were grocery shopping last August, and she has a rather large settlement coming to her, and I'm trying to figure out, because she's currently four, so this money is going to sit in the bank until at minimum 18 when she can use it for college, ideally, or whatever she feels to do with it at that time.

Me, personally, I am still working on baby prep, too. I'm like, I don't even know where to put this money or allow it to go for her. Help me. even know where to put this money or allow it to go for her help me well assuming the court allows you to what i would do with money for invested for a child in this situation is i would invest it in good mutual funds i don't know that the court will allow you to do that sometimes they they have a lot of controls over a settlement um i would not i would try to get a lump sum settlement, assuming you keep your hands off of it. But obviously, sitting in the bank, it's going to have a horrible rate of return for 18 years. It's going to become worth less and less every year, because you're not going to even earn as

much interest as you do as the rate of inflation is. And so I would rather you have the money invested, but I don't know how much power the court is going to exert over you. They want to make sure the child is taken care of, and sometimes they get rather stupid in the process of that. Do you have any guidelines yet from your attorney as to how much structure they're going to put on this? It's my understanding that I just have to find this is where it's going as of right now. Okay.

The initial form. Diane, what is the range of dollar amount you're talking about in this settlement? Between $20,000 and $30,000. Okay. $20,000 and $30,000. Okay. What happened to the child? We were in a grocery store and a vertical shell fell and hit her directly in the forehead,

causing a two-and-a-half-month-long concussion. Oh, my Lord. And permanent scarring. Is she fully recovered, though? She's doing decent now. We have a couple more follow-ups with a neurologist, but it is rare that a three-year-old goes to see a sports medicine clinic for a concussion. Yeah.

And the Department of Children and Family Services had plenty of fun with that. I bet they did. Oh, yeah. Wow. As if it was your fault, huh? Yeah. Of course. Well, you and I have actually spoken before, Dave.

I had half a million dollars in medical debt for a head injury myself. Oh, my goodness. You've been through it. Yes, she has. Amazing. Wow. But, Dave, you're right. You know, getting that money, being able to invest, it's going to be a better, much better option for your daughter in the long haul.

SmartVestor Pro will be able to guide you with that. Again, if you have the freedom to be able to do that, that's the way to go. I do know when we work with people, Dave, who are getting life insurance settlements or, excuse me, payouts, we advise people to park that somewhere in a money market account. Just allow yourself to breathe for three to six months as you make decisions on what you're going to do going forward. Yeah, if there's a grief situation involved with this, I'm simply going to invest the money, again, if the court allows it. So, yeah, I'm with Chris. I would just click SmartVestor at SmartVestor at DaveRamsey.com. It'll drop down a list of the SmartVestor pros in your area.

You sit down and talk to them with the heart of a teacher. They'll advise you. And they may even, in the case that the court makes it a super conservative investment, they may be able to even help you with that structure rather than simply putting it into a CD, a certificate of depression. So just DaveRamsey.com slash SmartVestor. For those of you trying to figure out what to do with your stimulus check, I'd love for you to stimulate your investing.

That would be a good idea. Good idea. This is the Dave Ramsey Show. For most of us, health care costs seem to increase every year, and saving money on health insurance feels more and more out of reach. For example, take the Olcheski family from LaGrange, Texas. Jeff and Carice had just celebrated the birth of a new baby boy. Shortly after, they had a health scare involving one of their kids that was completely unexpected. With today's healthcare climate, this could have bankrupted them. But thanks to Christian

Healthcare Ministries, the Olcheskis were spared from a ton of medical bills. As members of Christian Healthcare Ministries, they're part of a group of believers who financially and spiritually support each other. CHM is the original health cost-sharing ministry and is a Better Business Bureau accredited charity. It's biblical, affordable, and it shared nearly $97,000 to help the Olcheskis. To be a part of Christian Healthcare Ministries, visit chministries.org. That's chministries.org. CHM is a proud sponsor of Dave Ramsey Live Events. Thanks for joining us, America.

Chris Hogan is with us as a co-host today on the Dave Ramsey Show, Ramsey Personality bestselling author. Aaron is up next. Aaron's in Iowa. Hi, Aaron. How are you? Hey, Dave. Hey, Chris. It's a pleasure to talk to you guys. You too. What is up next. Aaron's in Iowa. Hi, Aaron. How are you? Hey, Dave. Hey, Chris. It's a pleasure to talk to you guys. You too. What's up? Hey, I got a question for you on my mortgage. Me and my wife have been talking and we're kind of wondering, is there a time in the baby steps

that it's better to refinance or do you guys have that as like a guideline or is it just kind of whenever? Hmm. Okay. So Aaron, you guys are on baby step number two. Uh, but the, the big deal with looking to refinance is really a matter of the math. Uh, what's your current interest rate on your mortgage? So right now we're at 4%. Okay. All right. And so you're at four percent and what are the rates going in your area for right now um i was looking into them we've been looking into them for a couple weeks um and they're like three and a quarter two nine nine if it's like really really good but i think that's probably a larger portion down past where you're at and so I imagine probably in that three and a quarter range. Okay.

And you're at four right now. What's your loan balance? So we owe $129,200. Yeah, probably three and a quarter. So you're only going to save three quarters of a point by doing this. Yeah. And then my big thing is to get rid of our PMI. So we're right at the point where we can get rid of it with being at that 20% of our loan

to value. But I was in FHA and apparently the PMI is going to be there for however long a half a loan. Yeah. So it might be worth it just to do for that. Plus you'll save three quarter. Are you going to stay in the home? I think we, I mean, we talk about probably another three or four, possibly five years. It depends on when we have another baby. Okay. So here's how you do the math. You take the PMI savings plus $1,000 a year, which is roughly three quarters of a point on 129,000. Okay.

Yep. If you want to do it exactly, it's.75 or.0075 times, or anyway,.0075 or.75 is what it'll be. I'm sorry. No,.0075 is what it'll be, times 129,000. You'll get it exactly. Anyway, you figure out the interest rates, savings, and the PMI savings. Add those together annually. Div divide that into your closing costs. It tells you how long it takes you to break even. Okay.

So your annual savings, if it takes you two years to break even and you're only going to be there three years, it's probably not worth screwing with. Sure. So it's probably the longer term or the longer we stay there, the better the gain. Exactly. But there's no gravy on the biscuit until you recoup your closing costs with the savings. Okay, because I was even looking at everybody.

I used to work with quite a few people, and they all refinanced their houses through this bank that didn't cost. They didn't have to use any closing costs. They did a streamlined refinance, which is no closing costs, but it's a higher interest rate. Okay. Which does away with the need, because a streamlined refinance right now is probably going to bump up close to what your rate is.

Yeah. And unfortunately, with that FHA, you've got that PMI on there for the life of that loan. Yeah. So until you go conventional and they're able to drop that, it's going to hang around. So you guys need to just make a decision, you and your wife, on how long you're going to be there. And again, if you can see yourself being there four to five years, then it could be something to definitely move forward with.

Any less than that is just not going to make sense. Well, add up your PMI. Find out what the closing costs are. How much is the PMI savings in a year by getting rid of it? How much is the three-quarters of a point savings worth in a year? Add those two together and look at that versus your closing costs. If you can break even in one year, you might. I don't know.

I don't know how egregious the PMI is on your deal. But what's your break-even point, and are you going to be there long enough past that? Because there's no joy until you break even. Yeah, that's right. So you want to be there long enough to have some joy. And if it's one year's worth of joy and it's $1,000, God, man, it's probably not worth all the trouble. No.

But if you're going to make $3,000 or $4,000 fooling with this, then, yeah, it's definitely worth doing. Mike is with us in Michigan. Hey, Mike mike welcome to the dave ramsey show well thank you dave and chris it's an honor to talk to both of you guys uh you do very very great things for a lot of people and uh thank you appreciate it thank you very much my question is you know i'm looking at alternative investments other than the stock market. And I ran across a couple of investment companies that do asset-backed lending,

like on real estate, oil and gas, distressed debt, and those kinds of things. I was just curious if you had any comments on that. Well, I've looked at them over the years myself, and basically you're getting in the lending business is what it comes down to, and can you get good enough due diligence on the documentation and then actually your position on the asset in order, in other words, if you have to end up with the asset if you end up with a collateral where are you going to stand on it and I haven't found any that I thought were

worth the trouble uh they you know in other words the risk the risk profile on them felt so high to me versus the return that I didn't want to fool with it I don't like risk I don't I don't play the slot machines I don't play roulette I don't buy bitcoin I don't like risk. I don't play the slot machines. I don't play roulette. I don't buy Bitcoin. I don't buy single stocks. I don't buy gold. I buy mutual funds and real estate that I pay cash for. And so, I mean, you can fool with that if you want. You may end up with a few points, but you may end up with a few headaches. Yeah, Dave, and I can remember years ago, I was coaching someone that went down this path to the tune of around close to $300,000, and it was all headache, red tape and headache.

So it's not anything I would recommend fooling with, knowing what I know from those instances. Here's the thing, Mike. I mean, you can do it if you want to do it. Parts of the business have got to you can get screwed. So just be careful. But there's parts of the business that are straight up. It's just the risk profile versus the return wasn't attractive to me and I don't want to play with it. And here's where I'm coming from on that. built wealth the second time and i started hanging out with people that had money

and um started learning from wealthy people and i'm not talking about one million dollar net worth i'm talking about 10 20 30 million dollar net worth or 100 million or 200 million whatever um substantial wealth and uh in every case with uh maybe two exceptions, but in almost every case, they were self-made, meaning they started with nothing. These weren't people that inherited money. But what I found was I grew up on the side of the tracks where rich people were like mystical animals, like they had special powers or something. And they were over there in the mist on the other side of the tracks like unicorns leaping around in fields of skittles or something i i thought rich people were mystical and once i got around them you know what i found they're like plain as

an old shoe they don't do double backflip family partnership limited this or that. They don't. They just, and their investments are just boring. They just invest in stuff they understand. And some of them, you know, it's people that, you know, it can be a business line that they understand. They keep buying those same kinds of businesses. I've got a friend that is a billionaire. He's worth about $2.5 billion,

and all he does is buy businesses in the same line that he made his original money in. Dramatically consistent. Yeah, they just don't do fancy stuff. They're not looking for an extra couple points by taking extra risks. They go, this is what got me here i'm gonna dance with the girl that brung me and um it was i just wanted more sex appeal it was just

boring as crud and it's not fancy yeah and it and it was that they find what they like that works and they do a lot of that and the vast majority of the time, it is not high-risk stuff. No. It's steadiness. That's right. And you see this when you meet with them. Oh, yeah. I mean, in doing this millionaire study.

If you've got a plan and you stick to it, it works, my friends. It works. That's how we do it. This is The Dave Ramsey Show. Hey, folks, there's literally never been a better time to try online grocery. My friends at eMeals make it incredibly easy for you. eMeals creates a shopping list based on the meals you want for the week and then directly sends it to Walmart, Kroger, Instacart, Shipt, or Amazon Fresh. Your choice.

Head to emails.com slash grocery. Find what delivery and pickup providers are available in your area. Try eMeals free for two full weeks. That's emails.com slash grocery. teaching you to live on less than you make a concept congress can't grasp this is the dave ramsey show chris hogan my co-host today on the air ramsey personality best-selling author of the book retire inspired also number one best-selling author of the book, Retire Inspired, also number one best-selling author of the book, Everyday Millionaires. Kalen is with us in Canada. Hi, Kalen. How are you? I'm very good. How are you?

Better than I deserve. What's up? I have a question for you guys. I'm looking to move out. I have no debt. I've got about $15,000 in savings. And I was looking around on real estate websites, and I found a mobile home for that's for $50,000. It's in kind of disarray, but I have experience in renovating so I could renovate it. Or should I save up another year and buy a condo for $185,000? Okay. How old are you? I'm 20. Okay. In your experience, have you observed mobile homes' value changes? And if you were to guess and say this $50,000 mobile home, if you put $10,000 in it and renovate it, you've got $60,000 in it, what do you think it will be worth in 10 years?

I've done too much research into that part of the home. But what's your guess, Kalen? What's your gut feeling tell you that that mobile home is going to do? Is it going to go up in value or down in value? Probably not very much in value. Probably not going to go up in value very much. It's not going to go up in value or down in value? Probably not very much in value. Probably not going to go up in value very much. It's not going to go up at all. But I'm just, yeah, I'm probably going to go up,

but I'm just trying to get it to do as quick as I can. It's going to go down in value. It's going to go down in value. Okay. It's a car you sleep in. Okay? And so for a piece of real estate, we don't buy real estate that we know has a known track record of going down in value uh they simply don't go up in value and so that's why we don't buy them it's that simple it's not because we're snobs it's not because we don't like them it's not

because of the construction technique it's not because of how nice they are they just don't go up in value they go down in value you're going the wrong way so i mean chris i'd wait galen i mean my friend like you said wait buy a condo this is something that's going to actually appreciate um i think that's the better plan for you in the long haul my friend yeah you want to make decisions on your finances that the 10 year from now version of you is smiling about. Whatever the decision is, you know, you're getting ready to turn this amount of money into less money or more money in over 10 years. More, please. Yeah, I'll take more. Yes.

And, you know, here's the thing. It's a great question, Kalen. Whether you're 20, whether you're 40, or whether you're 60, it's still a great question to bring up. You know, when I first started doing the show, Chris, years ago, I saw a study that showed that wealthy people, especially people who have built their wealth, have a different planning window, a different mentality, when they're making a financial decision. The Bible says where there is no vision, the people perish. And so what the study showed was that wealthy people, when they're making a decision, have

a tendency to ask themselves, how is this purchase or this investment going to treat me 10 years or 20 years from now? And people who are broke and remain broke, poor and remain poor, tend to think in short planning windows like, thank God it's Friday, oh God, it's Monday. That's right. And so adults devise a plan and follow it. Children do what feels good. So it turns out wealthy people just don't YOLO.

That's right. You only live once. Nope. Got to have a party on the weekend. Yeah. It's not to say that wealthy people don't have fun. Not to say that they don't enjoy themselves. It's not to say they don't do these things as in the process of building wealth.

That's right. They don't live in a cave, collect Lent, and do triple coupon Thursday. But they do think about their purchases over longer periods of time, and even for that matter, when they're sitting there and saying, okay, we're going to go on a trip. And is this trip something, when we look back on it, that's going to be a high quality memory building trip 10 years from now or is this just the booze cruise for the weekend and which you don't even remember what

happened that's right you know and so it's a different mentality no you're absolutely and when you go on those trips are where you see the wealthy people when you go on the other trips are where you see the others the other kind of yeah no you're absolutely right dave and that mentality you know is something that uh in looking at it i would think wow is it possible to outgrow that or to shake it off and it really is just a decision it is a decision and you know i'm seeing people you know the debt-free screamer that we had on uh earlier who you know talked about her family tree, how they didn't do well with money. But for her, she decided.

And I just love the power in that, that regardless of how you were raised, you can decide and you can pursue. Yep, just like that. All right, up next is going to be John in D.C. Hey, John, welcome to The Dave Ramsey Show. How can Chris and I help? Hey, Dave and Chris, thanks for taking my call. Sure. What's up?

So my question is, my wife and I, we're on steps four, five, and six. I'm in the military in about a little over a year. I'll be getting out. We'll be moving back to Missouri. My question is, so once I get out, I'll be using the GI Bill to go to school to become a pilot, hopefully. And so for the first part of that training, I won't be receiving the housing allowance that comes with it. So my thought process, me and my wife, was that we would save up as much as possible for a down payment on a home. So our monthly payment when we get there will be as small as possible. My question is, should I do a little bit less than 15% investing for retirement

during this year so it allows us to save more for that down payment on a home? Now, you're going to stay in that area for how long? In Missouri, we'll be there at least three years for me to finish my flight school. And then you can be transferred somewhere else after that, correct? I believe so. Okay. Okay. So is this St. Louis? No, it'll be in Springfield, Missouri.

Okay. Well, here's the trick um three years is kind of on the bubble yeah in terms of whether you would buy or not you might be better off to rent and uh so let me give you a little bit of math on investigation to do to decide uh number one the answer to your question is yes if you want to slow or temporarily stop your baby step four to do what we call baby step 3b which is save up for a down payment people often do that it's not unusual at all especially if it's only for a year like you're talking about okay so the answer your question is yes but here's the number okay and um the number is uh uh uh you need to ask your real estate agent in Springfield, in the neighborhood that you're looking in, there's two numbers,

what the average appreciation of homes has been per year for the last several years. And they can pull that up as an MLS statistic on their computer pretty quickly. Okay? Okay. And the second thing is average days on the market, DOM it's called. And so usually these two numbers run together, meaning a low appreciation would typically have a long days on the market, meaning this is a pretty cold market. And so if you've got 270 days on the market, that's nine months and a 2% or 3% appreciation rate. After three years, you're going to lose money

and have a hard time selling the house by the time you pay expenses. Do you see how I did that? Yeah, I see where you're going. Okay. But if you've got a 10% appreciation rate and average days on the market of 18 days, you've got a white-hot market. The thing's going to go up 30%, and you're going to be able to sell it and make a bundle on it when you leave, and you're going to yell touchdown as you drive out of the driveway, right?

But it's probably, honestly, somewhere between those two numbers. But typically, the longer days on the market is going to indicate a cooler market, and you're going to see a lower appreciation rate in that particular area of town in and around Springfield. Now, Springfield has an anomaly to it, so it's really worth looking into. Because of the huge tornado mess they had a few years ago, there was for a while a housing shortage there, which might have driven the prices up. So you need to check on it and see what the status is of the supply-demand there right

now. So it's worth looking into. But most of the time we tell people, for instance, in the military, you're going to be there two to three years. Most of the time you're not going to make money. You're better off to rent. Yep. This is the Dave Ramsey Show. Please hear me loud and clear. The government is not going to bail you out of your student loans,

at least not completely and not without a catch. What they're talking about only impacts federal, not private loans, and you need to take responsibility for what you owe and pay your debt down quicker. Right now, Splash Financial is offering their lowest rates ever. With lower rates and extra payments, you could just find yourself debt-free in the next five years. Visit SplashFinancial.com slash Ramsey to see if you qualify. our scripture of the day psalm 37 5 commit your way to the lord trust in him and he will act will craig said accountability is the glue that bonds commitment to the results. Joshua is with us in Michigan.

Hey, Joshua, welcome to the Dave Ramsey Show. Dave, Chris, I'm so excited, man. Good to talk to you, sir. How can we help? Here's my issue. A couple months ago, I went crazy and decided I was tired of being in debt. I started selling everything with the kitchen sink. Just got tired of never seeing my check. Well, I'm at a point now where I'm only maybe $16,000 in debt besides my home. I owe $48,000 on my home.

I have a lake property across the street from me that I originally bought five years ago because it gives me lake access to a private lake. Now I could sell that for around $24,000, which would obviously get rid of all my debt, boom, done, except for the house. And then I could have the house paid off in less than two years. My issue is I'm scared that I might regret that later because it's a lake that you can't find a lot on. I've lived there for 11 years. I know all the neighbors. But I don't plan on living where I live forever.

So I guess I need help deciding, you know, am I going to look back five years from now and say, oh, I wish I still had that lake lot to go hang out on now that I don't have any debt at all. Okay, I can tell you this. I'm going to dive in before Dave does because Dave loves water and has a passion for it. What is your household income, Joshua? I made last year before taxes, I made around $70,000. All right, around $70,000. And so you've got $48,000 left on the house.

And then did you say you owe 16 grand in debt yes sir okay what is the 16 000 on uh credit cards vehicle uh a mattress stuff like that but i haven't paid off yet joshua you financed the mattress yes sir okay listen no more okay no more how much is the car uh the vehicle i think i owe 45 45 or 49 on my truck okay not much yeah i would just say i would not sell that that property to be honest with you uh just for the fact that you are going to use it you are going to find some enjoyment i would tighten down and get serious with the income that you have about paying it off. Paying off the other debt.

You don't have any debt on the property, right? That's correct. I actually refinanced my home four or five years ago here, and I rolled that into it to pay it off, which is why I still owe what I owe on my home. But I was listening to your show the other day, and somebody gave an example. He said if you had $18,000 in cash on your kitchen table, would you go buy that thing right now? He said if not, why do you have it? But I don't know if I would because I love that.

Well, then that's the answer. If you had $24,000 sitting in the middle of your table, that's what the lot's worth, right? Right. And would you buy that lot? And the answer is you might. You're right. I might. Yeah. So right now, you buy that lot? And the answer is you might. You're right. I might. Yeah.

So right now, you might not sell it. You hold it for today. You know, it's okay. There's nothing. If you told me you never used it and it was an investment. Right. And you didn't give it. It was just an item and you didn't care anything about it.

If it was in another state or something like that i'd sell it in a heartbeat it's across the street from you you go over there and use it for access to the lake it's not that big a deal you can clear your debt inside of 18 to 24 months inside of 12 to 18 months making the kind of money you make not counting your house you're going to be just fine and what you're telling me is there's a shortage of these lots so if you ever do move you can sell it easy enough right because in five years i'd i'd like to have some property somewhere else but i still want that lake lot if possible i just want to make sure that i was making the right decision by keeping it yeah i don't hear anything that's huge again if it was um if you owed money

on it you owed a hundred thousand bucks on it and making the kind of money you make right now, I'd dump it because it would be out of your league. But it's a fairly small number considering what it is and where you are, and it's not blocking you from good financial success in a fairly short period of time. Natalia is with us in California. Hi, Natalia. How are you? Hi, Dave. I'm doing great.

I was actually calling for a quick question for you. My husband and I have $45,000 in a 457B account, and we are thinking about pulling it out and see if it's okay, if it's the right choice to pay off about $16,000 in debt that we have. Now, the issue, of course, is that half of that would go to state and federal taxes, so it would literally just clear off our debt. And you would have a 10% penalty, would you not? Or is it the B is?

Right. Okay. Right. Okay. Yeah, we don't cash out retirement to pay off debt unless it's to avoid a foreclosure or a bankruptcy. Got it. Okay. Because of the hit.

We owe $10,000 in state tax. Yeah, because of the hit. Because of the hit, okay. Yeah, and you're not there. You just got excited about getting out of debt, and you're willing to do almost anything reasonable to do that. So there you go. Which is a good thing. We just need to do the right things

yeah which are side hustles uh third and fourth ones uh natalia and you and your husband getting on board and committing to that but i don't want you that budget's going to be the game changer but don't want you to steal from the future you to clean up the present mess you guys can do this riley is in utah hi riley welcome to the dave ramsey show hey dave how's it how's it going better than i deserve what's up in your world firstly this huge fan thanks for all you do been a listener for a while now thank you secondly my question today um is how would you go about renting what would be your advice for renting uh my first apartment when i've never rented before okay uh do you have a credit score no good good okay uh the odd thing is people believe that a lot of people believe that it's

very difficult to rent an apartment without a credit score and anthony o'deal did a little experiment the other day in our area and he posted the whole thing on YouTube of him calling apartment after apartment after apartment in our area and said, hey, I'm moving in from out of town. I don't have a credit score, but I've got the deposit, and I've got my job. I can give you proof of a job. And all of them said, no problem. They all said, you know, one of them wanted an extra deposit for six months, and they would give it back or something like that.

But I don't have a credit score. I can rent an apartment. And he only found one that gave him a hard time. That's right. So you can do that. And then the trick is just to shop for something that is reasonable because you're not going to buy it. You're just going to live there. It's glorified camping.

So don't spend a ton of money on it riley are you going to be living with roommates or is it just you oh i'm not entirely sure i'm just trying i'm 16 years old and i'm trying to develop a plan for the next couple years to move out um for college oh he's 16 he's developing a plan over the next two years dave he's a planner you think just a little bit two years out at 16 awesome i was driving yeah barely yeah you little hogan couldn't see over the wheel okay all right that's not funny wow that's wonderful okay so yes, the answer is that anytime you're renting, it's because you're at a stage of your life that you're not going to be in the area for long, for instance, college, or you are saving money to buy,

or you're working your way out of debt, or something along those lines. In all those cases, we call rent patience. It is not a way of life. We're parked. We're on hold until we get the house. And so rent is not evil, but renting over a decade or two is not going to be a smart move. That's right. It's just a short-term thing, so you're buying patience.

So how much do you want to pay for patience? The least amount possible. That's right. So you rent something that's So how much do you want to pay for patients? The least amount possible. That's right. So you rent something that's clean and safe, but not necessarily fancy. You don't need the racquetball court, the skylight, the jacuzzi that everybody thinks they need. Oh, it's got a whirlpool. Oh, give me a break here. And Riley, I would tell you, I would work the numbers to where you're living on your own, meaning just you, if at all possible,

or someone that is a friend that's really good with money. Why? Are you antisocial? Well, Dave, he doesn't need to get two to three roommates in there that are going to act right. I'm just saying he's got to be smart. Okay. All right. Right. He's got a couple years. Do references on these friends. I'm just kidding. Yeah, take an application on there.

There you go. Friend application. James Childs, our producer. Thanks for taking care of us today. Kelly Daniel, our associate producer and phone screener. Chris, great job. Thank you, sir. I am Dave Ramsey, your host.

We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the prince of peace christ jesus in the middle of these uncertain times ramsey solutions wants to give you some hope for the very first time ever we're giving you financial peace university free for 14 days go to davramseycom slash hope so you can watch from home.