The Ramsey Show - App - What Do You Do After Maxing Out Your 401(k)? (Hour 1)

Episode Date: November 25, 2021

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🎵 Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental 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. I'm Dave Ramsey, your host. Christy Wright, Ramsey personality, number one best-selling author, is my co-host today as we talk about your life and your money. It's a free call, and some say the advice is worth exactly what you pay for it. The phone number, 888-825-5225.

That's 888-825-5225. That's 888-825-5225. David is with us in Baton Rouge to start off this hour. Hi, David. How are you? Good, Dave. How are you? Better than I deserve. What's up?

So me and my wife, we are running into a little bit of an issue. I actually teach your class to high school students. Awesome. Yeah, and so I am really trying to follow you by the book, by the key. But what we're running into right now is I make $26.50 a month take-home pay. We have $11,000 in savings. And my wife just graduated with her master's in speech therapy in May. Wonderful.

And she brought in $20,000 in student loans with that. Now, I know your step-by-step says to pay $10,000 of our $11,000 and throw it towards a debt, but we are expecting in the next two weeks our first child. Good. Well, you're not working the baby steps then. You push pause on the baby steps. You don't push play until baby comes and mommy comes home and everybody's healthy and everybody's okay.

But yeah, you would not be paying down debt during the pregnancy. Okay. So yeah, we were planning on setting aside $10,000 to a separate savings account and attacking it fairly aggressively, but it's still there if we need it. Well, you won't need it once the baby comes home. If the baby comes home and mommy and baby are okay, why would you need to do that? Okay, yeah, that makes sense. But if everybody's not okay, you got the money right now, you cover the emergency. Why would you need to do that? Okay. Yeah, that makes sense.

But if everybody's not okay, you got the money right now. You cover the emergency. That's what it's for right now. But once they come home, is she going on into speech therapy six or eight weeks or whatever from now? Yeah, we're planning that by year. We're not sure exactly when she's going to start working, but I'm hoping in the next few months after the baby comes home that she's going to start getting into work. Is she going to work somewhere for a practice or a company,

or is she going to do her own thing? No, she's going to be working for a practice. Okay. Good. She already has a client up, and they're being very generous with when she can start. Oh, that's wonderful. Good. Well, she ought to make really good money with that degree, and that's a wonderful field,

and both of you are in great fields. And so, you know, if you want to hold it until she goes back to work, that's okay, you know? But the bottom line is, is really having a baby that's healthy and everything's going okay becomes part of your budget then, whether

it's daycare or formula or diapers. And, Christy, I mean, obviously, I got the seventh grandbaby will be here any minute, budget then uh whether it's daycare or formula or diapers and uh christy i mean obviously i got not i got the seventh grandbaby will be here any minute and and you've got little babes little kids so um you know the the truth is is that your budget doesn't other than daycare your budget does not change that substantially diapers a little bit formula a little bit but it's not like thousands of dollars a month out of your budget just because you had a baby. No, and what's interesting is after a couple months of living on this new budget with a baby, it gives you a sense of confidence of knowing that you can. I think it's the unknown that's scary, especially to new parents going, oh my gosh, how much are diapers? How much is formula? How much is all this?

Okay, give yourself a couple months, just like when you set your budget the first time you were learning what this is like it's going to be just like that and sure it'll change a little bit especially if your wife goes back to work and daycare and all that but you work it into the budget you live the budget a few months and tweak it as necessary and then before you know it you're like oh this is just our new normal with our family of three which is great and it's not as scary because it's no longer unknown yeah and the little critters are not as expensive as everybody carries home and i mean they're not they're expensive and it's not as scary because it's no longer unknown. Yeah, and the little critters are not as expensive as everybody carries home. And, I mean... They're expensive, but it doesn't break the bank.

No. It's not like $200,000 a year or something. No, and Rachel Cruz talks about this, but you don't need all the things. The list of things you could get for the baby is infinite, and you will learn what you actually need and what you actually use and what you actually want, and then everything else you can let go. So it's just going to take a couple months to figure that out, and that's okay. Yeah, yeah.

Good stuff, man. Congratulations. Yeah, congratulations. That's wonderful for you. Christina is in El Paso. Hi, Christina. Welcome to the Ramsey Show. Hi, Dave.

Thank you for taking my call. I really appreciate it. Sure. How can Christina help? Yes. So my question is my twins are getting ready to start school, and I wanted to get in a career to be able to help my husband out so we could get out of debt. And I wanted to know if it would be a good idea to invest in a career as a real estate agent in this market right now.

What's drawing you to that? Well, I mean, I really want to be able to help out my husband. He's the only one working right now, and he's basically bringing home. Yeah, but why real estate? Oh, real estate. Well, I was thinking it would be good money. And basically, I went to school for cosmetology when I was out of high school. And that didn't really bring in that much money. And we do have a lot of debt. And we're just trying to get out of it quick and, you know, look into a brighter future soon. It's just we barely started our debt snowball, and we just want to, you know, get out of it as quickly as possible.

Christina, I hear that, and that's a noble thing to want. I will encourage you that there are a lot of career paths that can make good money, and you're going to need to want more than money to be really good at it and to stick with it for the long haul. So I think it goes back to Dave's question, why real estate? Is there anything else that draws you to that particular field other than money? Because it's going to need more than money to sustain you. Especially real estate can be hard, and there's some upfront costs and that kind of thing. So when you think about what you want to do. You work when other people are off. Yeah, weekends, nights when you think about what you want to do. You work when other people are off.

Yeah, weekends, nights. So think about what you want to do. Yes. Well, I did want to, you know, focus in my career, but it's just that I recently got diagnosed with arthritis. And basically what I was doing was a nail technician, and that's just too much on my hands now. But I am interested in selling houses

and it looks like a bright future to me. Well, real estate's really hot right now. That's not in question. I mean, obviously you could get into the business. It's very difficult because there's not much inventory to make a quick sale. We're hearing multiple offers, and all the offers are over asking price, and so the few listings that are out there go rather quickly and rather competitively,

which is tough for a brand-new agent. But it can be done. I mean, you're going to have a few dry months. You're going to work for two months or three months or four months with no money coming in. And if you're prepared to do that, that's okay. It's a wonderful career. I've had my real estate license since I was 18 years old. I've not been practicing in the business other than as an investor in a long time.

But you can do it if you want to do it. If you just think it's quick, easy money, it's not. It's not. It's not quick, and it's not easy. This is The Ramsey Show. You know, I heard a sad and touching story recently. Zander Insurance has set up a scholarship for children whose parents died without life insurance. Last year, they gave away over $165,000 to help kids avoid debt and go to college to pursue their dreams. It's touching, but also sad since it's a situation that occurs all over the country and can be avoided in so many cases.

This is the reason why I talk about Zander and term life insurance every day. It's not expensive or complicated, and it's gotten even easier with many companies no longer requiring medical exams. Zander shops and compares all the top term life plans and stays with you the whole time to make sure your family is taken care of. That's why I've used and recommended them for over 20 years. Go to Zander.com or call 800-356-4282. So I don't have to keep talking about these sad stories. Christy Wright Ramsey personality is my co-host today. Open phones at 888-825-5225.

Marissa is with us in Trenton. Hi, Marissa. How are you? Hi. Thank you so much for taking my call sure what's up so i am 29 years old i have been working as a nurse for the last six years i am a single mom my daughter is six years old and i made the big financial um commitment to go back to nurse anesthesia school. Wow. So, yes, I paid off my undergraduate loan, which was $30,000. My parents did help me and support me through the way. That was paid

before going into school, as well as my car, and I have no credit card debt. The school now will cost me about $250,000, and with interest, it'll be about $300,000. I've been with my boyfriend for about four years. And besides paying back the loan, we're looking to get married in the next few years and have more kids. So I just wanted to see what your thoughts were on coming up with a plan. I think I could realistically pay off this almost $300,000 in the next three to five years, but it's very daunting, and I don't know how to balance that with having a wife, getting married, and having more kids at the same time. Okay.

You've been listening to us not a long time, I take it. For the past few months, my boyfriend actually turned me on to this show, and I've been listening a few hours every single day. I just don't know how to make the baby steps really work for me. I saved $30,000 to live on for the three years that I'm in school. Yeah. Okay. Well, to start with, let's pretend that you had already graduated and you had this loan.

You would be making how much? $300,000 a year, right? $200,000 a year? Where I'm training, I would start at $205,000. Okay, and you make what now? I actually just stopped working because of the program. But what were you making when you just stopped working? I was making $75,000.

Okay, which makes a difference of $140,000. So you could pay off $300,000 in two years if you continue to live like you were living right before you stopped working. Yeah. Which would be what I would tell you to do were you already here. But you're not already here. In 30 years of doing this show, I've never told anyone to go into debt to go to school, and I'm not going to start today.

So I'm Mr going to start today so i'm mr dream killer today i love the idea of you being a nurse anesthetist i love the idea of your income going from 75 to 205 and i think those are accurate numbers by the way i don't think you're living in a dream world i think think that's about right, based on what I the number of nurse anesthetists I have coached over the years. And by the way, I think 205 is a floor. I think that's starting. I think it'll head towards 300 pretty quick, especially if you pick up OT and other things. You could knock that debt out very quickly. The problem comes into play in that you're talking to a guy who has coached people where this plan didn't work that your mother became ill your child became ill you became ill there was a car wreck there

was something and you're two hundred thousand dollars into this and you don't complete or you get married you have more babies and you want to stay home and you don't complete. Or you get married, you have more babies, and you want to stay home, and you don't want to work at all, which you don't know what you're going to want in three years or five years with a different family and situation, but you have that debt anyway. I just want to clarify.

I'm actually in the program already. I'm in the second year of the program. Oh. So you've already taken out the loan? That was not what you said. I'm confused. You've already taken out the loan? That was not what you said. I'm confused. You've already taken out the loan for the program. You're in it.

I'm in it. I'm in the second year. So we're living off my boyfriend's income. He makes $90,000. By the time I'm finished, he'll make $130,000. So I'm not paying for living expenses right now. I'm living off my savings. And we're planning when I graduate to put all of my paychecks towards the loan and he continues to pay for

living. When are y'all getting married? That's the thing. I think he says we probably would have been doing that now. We really push everything off because of my going back to school, taking out the large debt. Why does going back to school keep you from getting married? You just go down and get married. It's a cost. We want a really small wedding. Okay, then just go get married.

Go tomorrow. What's this? Painter, get off the ladder. Yeah, and we're renting right now. What's that got to do with it? Renters get married all the time. Yeah. I just feel guilty.

I don't have any money to put towards a wedding or a house. I don't have any money whether you're married or not. You have nothing to feel guilty about. You're playing house. You might as well get a piece of paper that says it's okay. It's going to bring a different level of being a team and attacking these financial goals together when you're

married. I'm really afraid for you. I mean, if he decides to walk off, there's nothing If he decides to walk off, you're screwed. I could live with my parents if I had to. You kind of missed the point, didn't you? Oh, you mean with paying back the loan? Yeah.

Okay. So, I don't know what the question is now. I think you have your plan. I guess you need to execute your plan. It would be a different plan than Christy and I would sign you up for. We hope good things for you. We want good things for you. We're not mad at you.

We don't want anything to come to you but blessings. But, yeah, these plans of going this far into debt to get a valid degree with a great income, like becoming an attorney or becoming a medical doctor or becoming a nurse anesthetist, they only work when they work. But the guy that didn't pass the bar four times will tell you that that $185,000 worth of law school debt is not a freaking guarantee. So I worry for you, kid.

I just don't want bad things to happen for you i hope it all works out i hope it all plays through i hope you come out making 205 he's making 135 and he finally gets around to marrying you or you finally get around to marrying him and then you've got a 340 000 or 50 000 household income and you pay off this 300 in like one year 18 months 24 months that's what i would do but um you know i if that's your question yeah that's what i would do i would attack it like a vengeance and the first thing you need to do is quit borrowing if he's got enough income coming in and you're sharing income as if you're married i wouldn't recommend that but apparently that's what you're doing so then maybe if he's got 130 coming in maybe you don't have to borrow some

dadgum much if you're married it'd be no question that would be what you should doing. So then maybe if he's got $130,000 coming in, maybe you don't have to borrow so much. If you're married, it'd be no question that would be what you should do. I'm not sure he should pay for his girlfriend's education, though. Matter of fact, I'm sure he shouldn't. Let me try that again. I've never told anybody to do that either. So I get so confused. You're like, what am I saying?

What question are we answering here? What have I committed to? What have I signed up for? How did we get here? Man, I'm just, oh, okay. So here's the deal. Let's backtrack a second because we have about a minute before the break. So let's say you're out there and you're facing this exact dilemma, the mountainous amount of tuition to get an equal mountainous amount of income if it all

works out perfectly and sometimes it does admittedly but it doesn't always we all have to admit that and we can't act like it's a hundred percent right it's a lock it's not a lock doesn't always happen maybe there's another way to get at this. Maybe you're working for a hospital company who wants you to commit to being their nurse anesthetist, which they're recruiting for and having trouble getting right now. And you promise to stay there three years in return. They promise to pay your tuition. And you go ahead and lock down a contractual rate

at which you're willing to work. That way you don't have any debt. So the way it's around it, yeah. Or maybe you get a fellowship and you're working a fellowship at a med school and you're teaching grad classes and other things while you're doing this and you get through. Maybe you work overtime like crazy as a nurse and pile up lots and lots and lots of money and you pay cash for your education.

But it takes you three years longer and you don't have all the risk. These are the things we would tell someone facing similar situations to do. This is The Ramsey Show. We'll be right back. In the lobby of Ramsey Solutions, Will and Samantha are with us. Hey, guys, what's up? How are you doing, sir? On the debt-free stage. It must mean one thing and one thing only. You're debt-free.

How much did you pay off? We paid off $62,800. Good for you. Awesome. And how long did this take? About 12 months. Good. And your range of income during that time?

We started at $100,000 and we ended up about $105,000. Cool. What do you all do for a living? I'm a teacher, but during our debt-free time, I actually took a job as a tutor during the summer, so I was still able to work 40 hours a week. And then I also picked up a job during the holidays at a department store. So it could be done in a year. Hustle, hustle. Yeah. Guess you worked about four jobs.

Hustle and grind. I love it. What kind of debt was the $63,000? Student loan debt. All of it? All of it. And where do you guys live? Louisville, Kentucky.

Okay. And how long have you guys been married? November of 19. So about a year and a half. Awesome. A little over a year and a half. Intense first year and a half of marriage, working on this. That's awesome. Yes. So you said you're

a teacher, and what do you do, Will? I work for a community bank up in Louisville. Okay, great. Very cool. So what happened a year ago? What got you fired up to do this? Well, I grew up listening to Dave. My dad's a CPA. I remember we'd be leaving church, and Dave Ramsey'd be

playing on Sunday in the car. There you go. I said, we'd be backing out and there's some redneck from Antioch, Tennessee that's on the radio leaving. He was. He was obsessed for a long time. Before we got married, he was like, we're going to do the Dave Ramsey.

I was like, no, we are not. I love money. And so a couple years ago, I actually had type 1 diabetes. And so I had an incident where I was out of work for a couple weeks. A stomach bug that just didn't turn out too well. And we just talked about it. And we didn't want to be in a situation where we couldn't afford the debt because I couldn't work or something. And I don't want to put Will in that situation also.

So that's when I kind of jumped on board, too. Yeah, it gives you a different level of motivation when you think of it through that lens. Oh, no, definitely. Now, I mean, if that were to happen now, it wouldn't really even be a big deal. Right. Like, it'd stink because you'd be in the hospital, but outside of that, you know, we could write a check for it. The money part would be a problem. That's right.

You could focus on healing, focus on getting the care that you need and not worry about the bills. Yeah, that's good. So 12 months ago, you made that decision for that reason. And then what did you do? Did you all jump through financial peace or did you, what'd you do? Yeah, we got in financial peace through our church, Southeast. Went out there with Pete. And I remember the toughest moment was when we made that first payment,

we put all of our wedding money towards it. And we went down to a thousand dollars in our, uh, savings account. And it was really, really tough. Um, cause she was crying and that was just rough,

you know, being a newly married guy and, uh, laying next to your bride, who's crying because of that, you know, that was just really rough. That kind of lit a fire underneath both of us to get it done with

and just put everything towards it. Yeah. I cried a lot. Yeah. What was the reason for that cry? I was more frustrated in myself. So I have two different degrees, and so I was really frustrated in the first part of not looking at student loans differently

because we just weren't taught. So it was a I feel guilty cry. Oh, definitely. Because he came in the marriage with no debt. And I was like, oh, we're a little bit in debt because of me. And so that's really why I took on so many jobs. And he was like, let me deliver pizza. And I was like, no, it's my debt.

So he was being so nice towards it. Yeah, she wouldn't let me work another job but hey wow so yeah that that's a but at least you're processing it and at that moment when you put that wedding money out there and we're doing this together we're locking arms we're going to do this and it sucks but we're doing it and that's kind of that's kind of what it was i was so frustrated frustrated. We listed all the debt, because, you know, it was a nail net. We listed all the different loans out. And when I listed them out, I was just like, dadgummit, that's just. We're not going to say.

Yeah. Just kind of get mad. Yeah. And you did it in 12 months. Yeah. I mean, did you sell stuff? How much did you have in savings? I think we put about 10 was the first payment.

So you cash flowed 50 grand yeah well i mean they were all principal payments the covid was the best thing that ever happened to us yeah um there's no interest accruing on them um everything was principal payment from about i don't know when they started doing that craziness like may or june yeah may or june on um which then we just really looked at each other and hunkered down. I was like, they're not accruing any interest. Everything's a principal payment. We just need to pay these off as fast as possible. That's good.

But still on that income, that's impressive. Y'all paid that off in 12 months on that income. You went down to Beans and Rice. You did. Yes. Lots of leftovers. I told people we would go to Sam's Club and buy the huge things of meat, and we would literally eat on it all week because it was the cheapest thing you could buy.

Oh, God, I'd forgotten that. That's really what we did. Sharon used to get that dadgum frozen chicken, bags of those breasts of chicken at Sam's or Costco, and I hate that because we would eat it so much. I haven't heard you talk about that. I've heard you talk about the tuna fish to this day. Oh, the tuna fish was really broke.

To this day. This was a little bit later. Yeah, we had the same. Because she's still a tightwad. That's a problem. She is. Buy a filet mignon. Good Lord.

Bring me the cheaper chicken. Y'all are going to be ruined from that Costco meat now. I know, right? Yeah. We are. That's all right. That's all right. We did it.

That's all that matters. One guy I heard one time, he said, I want to get wealthy enough where I read the menu from the left to the right. Yep. Instead of starting with the prices on the menu and figuring out what I'm going to eat, I'm going to figure out what I'm going to eat because the price doesn't matter. Yep. That's a good place to work for, Baby Step 7. Yeah.

Good for you guys. Well done. How does it feel now that you did it? Oh, it feels great. Amazing. Tears of joy? Yeah. There you go.

Trust me. On December 31st, I was crying again, and I was like, I can't believe we did it. Oh, it feels great. Amazing. Tears of joy. Yeah. There you go. Trust me. On December 31st, I was crying again. And I was like, I can't believe we did it. Oh, wow. Because. Was that when you hit the submit button on the last one? Yeah. New Year's Eve.

Because that's how I got the job at Macy's. Yeah. Because I told him, I was like, we are so close. If I can just get this department job, we're not going to wake up on January 1st. There it is. With a payment. And so that's really. You started this year debt free. So close. If I can just get this department job, we're not going to wake up on January 1st with a payment. And so that's really... You started this year debt-free.

Yes. You can see the finish line you're sprinting into. We were just talking about that, yeah. Wow. That is so cool. Will, how excited were your parents? Oh, they were super. Oh, everyone.

We had a bunch of... My uncle and I had a race. He could pay his farm off. And us, if we could pay our debt off first. That's awesome. He beat us by a couple of days. and i had a race so you could pay his farm off and us if we could pay our debt off first he beat us by a couple of days okay he did but man yeah it was uh no they're everyone was super proud of us yeah nobody lost that race yeah no we didn't no and he didn't either um but yeah it was uh everyone's super proud of us um you know we're just really thankful because my parents, you're about the same age as them. They modeled that for me growing up.

My dad just bought himself his first new car. And he's an everyday millionaire now. He's easy. I don't know. We've talked about that stuff. Yeah, but he is. You and I both know he is. He's listening in, so he'll be excited you said that.

Well, I mean, if he's not, he really did a bad job of listening all these years. Somehow. He didn't retain it. Well, he probably couldn't hear over the three boys fighting in the back of the van. That's true. It's interesting, the three boys fighting. The Financial Peace Babies are showing up these days. They are.

On the debt-free stage. And how old are you two? 28. All right. I'm so proud of y'all. They are. On the debt-free stage. And how old are you two? 28. All right. I'm so proud of y'all. She's 29 Fridays. Yeah. Well, happy birthday.

Thank you. Well done. Well done. And you did all this before you're 30, and you got the whole rest of your life to do it smart. Yeah. So very, very good. Tears of joy followed from tears of shame. I understand.

I've had both myself. Very well done. All right. It's Will and Samantha. We got a copy of the Legacy Journey book because that's the next stage in your life is to move on now and build a full-on legacy. Really continue the legacy your dad started, in a sense. Very well done. And a copy of the Total Money Makeover so you can pay it forward by giving that to somebody who needs their wake-up call.

So good stuff. Very good stuff. Will and Samantha, Louisville, Kentucky, $63,000 paid off in 12 months, making $100,000 to $105,000. Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free! Yeah!

This is how it's done. That is so fun. So well done, you two. So well done. That last sprint took the job in Christmas. You turn the corner. That's right. And you see that last bit, and you can see the yellow tape.

You can see you're going to make it, and you bust into it. And even if it's Macy's, you bust into it. This is the Ramsey Show. We'll be right back. Christy Wright Ramsey personality is my co-host today. Open phones at 888-825-5225. If you want to talk about your life and your money, we're here to help. Nathaniel's with us in Louisville, Kentucky. Hi, Nathaniel. How are you?

I'm doing well. Thank you for taking my call, Ramsey. Sure. How can we help? Hey, I just finished to pay off my house, and I need some financial advice on what else to do with the money after you max out your 401k and your Roth for the wife and me. What other investments are good to keep doing so you can, you know, keep building your

portfolio? Way to go, man. Congratulations. Baby step seven, huh? Yeah. Well, I never did any of the stuff. I just used biblical principles to grow my money. Okay, I'll take that. But I did hear from Joe a lot, yeah. Good, well, thanks, good. But anyway, you're 100% debt-free, right? Yes. Good, good, okay.

Well, what I have done and what we've recommended in those situations is do what you've done. That's max out all available anything to keep the government's hands off the money and any kind of a retirement plan, 401Ks, as you said, Roth IRAs, as you said. If you've got any self-employment income of any kind, you can look at a self-employed pension plan. But even then, that maxes out pretty quick. And then what I personally have done is two things. You can do whatever you want, but this is what I have done and what we have recommended. I have invested in mutual funds.

Now, at this point, you want to invest in mutual funds that have what's called a low turnover ratio. And their turnover ratio is how often they sell the stocks inside the mutual funds. If it has a 4% turnover ratio, that means 96% of the portfolio does not sell every year. That's pretty cool. So if it doesn't sell, then as it increases in value, there's no taxes on it until you do sell it. So just like if you buy a single share of stock and it goes up in value, you do not pay taxes on it until you sell it. So just like if you buy a single share of stock and it goes up in value, you do not pay taxes on it until you sell it. The other thing I do is I buy real estate that I pay cash for.

So my first goal when I hit where you are years ago is I just start dumping money in a low turnover mutual fund. You can do that like an S&P 500 fund, no load if you want. That's what I did and just dumped money in there. And when I got enough money in that account to buy a piece of real estate i'd buy a piece of real estate then i'd dump money in there until i got enough money in there to buy a piece of another piece of real estate and i would buy another piece of real estate because i'm i love real estate but you may or may not that's the two things i've invested in oh that's great great idea i appreciate that thank you. Thanks for the advice.

I appreciate your call. Dave, do you have a formula or a percentage, like in that scenario, if someone was going to do both, where they were going to do some real estate and some just putting in an investment, do you have any kind of percentage or whatever you're comfortable with, whatever you're interested in? Just whatever you're comfortable with. Mine has resulted in being much heavier real estate. Yeah, because you love real estate. A, I love real estate, but the other thing that happened was 2008.

Yeah. So I bought like about $200 million worth of real estate in 2008 for about $20 million. Wow. About 10 cents on the dollar. Real estate was just A. It was on sales, on fire sales. Yeah. So consequently, my net worth is lopsided just from the fact that I stole that stuff. Right, right, right.

And that changed it. So even more so than just investing steadily into it. I just caught that wave, the best wave of my entire 60-year life in terms of the market being way down, and it was really good for people who had money to buy stuff while it was way down. And then we've developed these properties that our offices are in, and they're very expensive, too. So I've got those two things that's caused mine to be very heavy real estate. You certainly would not want to do that if you don't want to deal with tenants. And in my case, we've got Rachel's husband, Winston, as you know,

runs all of our property management and our development and all that. And so I'm blessed that I have Winston and a company, a real estate company that does that for me day to day. So that takes a lot of hassle off of me personally. I'm not over trying to make sure the heat and air is getting fixed on the house or something. I'm not because I got to run this place. And so, but anyway, all that to say that when you're first starting, you know, you can,

you can change the ratio back and forth. You could get into real estate and go, I don't like it. Yeah. And move back towards mutual funds or vice versa.

Let's talk about this real estate things. I'm thinking there's probably people listening right now that they may be in that spot where they are ready. They've maxed everything out and they want to get into real estate, but they've never done it before other than their own home that they've paid off.

And they're looking to save up and pay cash for their first piece of real estate. Do you have any advice for them? Like, hey, you've got to do this. You're just getting into it. Here's what you need to know from someone who's done it. Things to look out for that type of thing. Yeah. The cheaper the property, the better the rate of return typically is and the higher the

hassle factor interesting so you can buy lower income stuff yeah in that end of town that uh that your roi your math on it is really sweet okay but your roi on your time is not it's quite the opposite yeah so on the other end of the spectrum is like a credit commercial real estate so if you've got a a household name as a tenant or let's even go further the post office yep wants you to do a build a suit on a commercial so the post office is your tenant the federal government right well that's kind of like automatic right you're going to get your check. You don't have to worry about the collections. And it's a 50 year lease. It's kind of just becomes you just go the mailbox, open it. There it is. And there's your money. But your rate of return is way down. They don't give much of a cap rate, much of a rate of return on that. So like a Walgreens, there's a lot of Walgreens. Walgreens doesn't buy those properties. They do build the suits, and they get investors. But Walgreens is a credit tenant, meaning that you can actually take that contract to the bank and borrow against it.

It's that strong. Wow. But on that end of the spectrum, that's the least hassle. And so kind of in the middle is like just regular offices or apartments, and then on down a little bit. It's just a nice single-family home. You're not going to make as much on that, but you also are dealing with a little different class of person, typically, and how you're going to interact with them, and the hassle factor goes down. So that's thing one. Thing two would be your money is made at the buy.

And what happens on almost all of us, including me, on our very first investment property, we get really excited about being an investor. Yeah. And you pay too much. You pay too much. You should always buy investment properties at a discount.

You should never pay appraisal, ever. Okay. And in a market like today, that sidelines you. Right. It's very difficult. You don't have a chance, yeah. It's very difficult to find deals today. It's quite the opposite of 2008.

But if you buy a $200,000 property for $200,000, it's a little tougher to get your ROI on it. But if you can pick up that $200,000 property for $150,000, now you've got that built-in $50,000 to start with, and you're going to always not only have the appreciation, but then your rents, you're ready to return on that $150,000, because your rents aren't based on what you paid for it. They're based on what it's worth. Right. Right. All right.

That makes sense. A $200,000 house rents for the same, whether you've got a mortgage on it, whether you don't, whether you paid $250,000 for it, or whether you paid $150,000 for it, it still rents for the same amount. Yeah. And so your rate of return on your rents and everything is changed by the monies made at the buy, which requires this most difficult thing in real estate, and that's patience. Yeah.

And you're just shopping and shopping, and you're not emotionally involved, and you're looking for a deal. We're not trying to hurt anybody's feelings. We're not trying to rip anybody off. But I just don't put money in stuff unless it's a deal. Yeah. And I own... Because that's why you're doing it, is to make money.

That's why you're doing it. If you remember that, that's going to help you resist that temptation to overpay. This is a mathematical transaction. Right. Nothing else. Right. But there's something about real estate that's just very emotional. Yeah.

For all of us. Even if you're not going to live there. The first house I flipped, I made 800 bucks on. Wow. Translation, I almost lost money. Yeah. Yeah. Yeah.

If I hadn't crawled around under the stinking house and put the pipes in myself, I would have lost money. Lost money. So I didn't even make my labor back. Yeah. You know, I probably made a buck an hour on working on the stupid thing, right? On my labor. And didn't make a dime as an investor. So that's unwise.

Yeah. But I was all excited. I had to buy it. And I thought it was a HUD foreclosure. I thought because it said foreclosure on it, it meant deal. I didn't think that. But something in my emotions said, plus it's a foreclosure. It justified it for you.

It's got to have some work. I've got to work on it. It's got to need some fixing up. It's a fixer-upper. But I paid stinking, obviously, full price for it almost. Yeah. Because it took 90 days to sell the stinking thing. It didn't sell super fast.

And I had to work on it. And I barely got out, even with my own labor in it for free. So that's all about I was excited to be a real estate investor. Now, granted, I was 21 years old, too. Sure. But still, that's the mistake that beginners make. Yeah. So that's a good discussion.

Good. Christy Wright, Ramsey Personality, is my co-host today. James Childs is in the booth running the show. Ellie Daniels is running the show and letting James think he is. She's the associate producer. I'm Dave Ramsey, and we'll be back. Hey, it's Kelly, associate producer for The Ramsey Show. This episode is over, but if you heard about an event product or service,

it didn't have a chance to write it down. Don't worry. We list everything you've heard about during this episode of the podcast show notes section or head to the Ramsey show.com. Thanks for listening.