The Ramsey Show - App - When Should We Pay Off Our Mortgage? (Hour 2)

Episode Date: March 5, 2020

Real Estate, Debt, Retirement Tools to get you started:  Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR 

🎵 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 am Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Evan starts off this hour in North Carolina. Hi, Evan. Welcome to the Dave Ramsey Show.

Hey, Dave. How are you? Better than I deserve. What's up? So my wife and I are in maybe step 3B right now, as you call it. And I was wondering what's your general idea or thoughts on buying a, you know, more of a starter home, paying it fully off, and using that as a rental before buying more of a longer-term home and getting another mortgage, but not having both mortgages at the same time, obviously. No, I would not do that. I would pay cash for my next property by selling the starter home. Okay.

I don't want you to go into debt debt because if you borrow on the new home the second home you're purchasing while your first home you're living in is paid for it's the same thing as having borrowed to buy a rental is effectively what you've done and no i'm not going to lead you that way i won't lead you out of debt not, not into debt. And I'm not going to, you know, I wouldn't borrow. Let's say you owned a home that was paid for. Okay. Would you borrow on that to buy a rental? No, I would never do that. And effectively, what you're describing is the same thing. It's as if you borrowed on that second home to buy the rental for cash. And so, no, I would liquidate the first starter house at the time you get ready to move up. That's how I would go about it. Good question.

Thank you for joining us. Our question of the day comes from Blinds.com, the number one online retailer of custom window coverings. You get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the promo code RAMSY to get the best possible deal. Travis is in New York with our question. Dave, I recently asked a friend if it would be all right with being listed as the beneficiary to her retirement account in the event that something was to happen to her. I am wondering if there are precautions I need to take or questions I need to ask before accepting.

Oh, asked by a friend. Oh, okay. So your friend wants to give you their retirement account upon their death because they don't have anybody to leave it to and they're going to name you as the beneficiary. Yeah, I got it now. No, there's nothing you should be worried about. It's a wonderful gift. In the event they die, if they don't die, then it's not.

But, I mean, you know, the money, they don't have anyone to leave the money to. They're willing to leave it to you. That's all it is. It's like saying, I'd like to leave you in my will. Oh, okay. As long as there's no strange part of the will. But, yeah, I mean, that's it. It's very, very simple in that regard.

Shanna is with us in Oklahoma. Hi, Shanna. How are you? I'm good. How are you? Better than I deserve. What's up? I just have a question on the matter of paying off our home.

My husband and I are 26 with three little kids, and we are completely debt-free aside from our home. Way to go. So my question is, my husband just took a job, actually started yesterday, where he's making a significant amount of money up to the total of close to $90,000 a year. Wow. And we could pay our home off by the end of the year, but we're also trying to save to buy a new family car and to build up our emergency fund to a higher

status. What would you recommend us do? Well, baby step three, if you're debt-free except the home, then baby step three is to make sure you have a fully funded emergency fund of three to six months of expenses. I would not build it up any more than that. How much do you have? I only have $2,000 right now. Oh, you're low. Okay. Yeah, you need to build that up to three to six months of expenses.

That's your first goal before you do anything. You don't even need to have a discussion about anything else until you do that. Immediately start on that in your budget. And you don't have any debt right now except the house, right? Just the house. That's it. Okay, good. Okay, then once that is done, I would start putting 15% of my income into retirement,

and I would start putting something towards kids' college. It doesn't have to be a lot. If you want to just give $50 a month, that's fine per kid or something. But sit down with a SmartVestor Pro, get your retirement savings at 15% of your household income. Your house, that's about $14,000 a year going in. And then start your kids' college. Any money you can squeeze out above that, reach over and start paying extra on the house and it's and it sounds to me like if you do the things i'm talking about there instead of the way

you were describing it it's probably going to take you two years to pay off your house instead of one okay all right oh wait i left out the family car you want to move up in car yes okay so you move up in car with cash yes and then then I would start paying on the house. Okay, that sounds good. Because our monthly payment on our house is not that much. I don't want you to keep the debt on the house. I'm just saying in what order do we attack it? Right.

That's all. Right. It's not do we pay it off. It's when we pay it off. It's when we pay it off. Right's when we pay it off, right. That's all. So it doesn't matter if you got a good payment. It doesn't matter if you got a low interest rate.

We're still going to pay it off, but we got to hit a few of these other goals first to lay a foundation in your personal finance plan. So very, very good question. Well, guys, I am so excited about our upcoming Smart Conferences. We're going to be in Orlando April the 4th with Chris Hogan, Rachel Cruz, Christy Wright, Anthony O'Neill, Dr. Les Parrott on money, Dr. Meg Meeker, the country's leading authority on parenting, best-selling author and nationally syndicated radio host and career expert, Ramsey personality, Ken Coleman. And I'll be there.

It is a day-long smart conference. When you leave this conference, we will have talked about money, marriage, career, parenting. We will have dealt with everything. We will have dealt with millionaires. When you leave after spending the entire day with us, you're going to be pumped up, jacked up, and smart. That's why we call it Smart Conference. Get it? So we're going to be doing this April the 4th in Orlando. There are a few tickets left.

These Smart Conferences typically sell out, and this one has not yet done so. So there's still time for you to get your tickets. Then we will be in Minneapolis on November the 7th, and it is tracking for selling out very, very early. So I would recommend get your tickets as fast as you can there. Tickets start as low as $49, and you would spend that to hear any one of these speakers. And you get an entire day of some of the best thought leaders on the planet do not miss this year's smart conferences orlando april the 4th minneapolis november

the 7th i'm dave ramsey your host we'll be right back. Listen, there are some basic things that you should be doing to take care of your family. A roof over their head, food to eat, even if it's rice and beans, a car to get you from A to B, and term life insurance. Term life insurance is an immediate need no matter where you are in the baby steps since your family is at no greater risk than when you're in debt. That's why I tell you to get 10 to 12 times your income in coverage to replace those lost dollars and do it with a 15 or a 20 year guaranteed level term plan so you can make sure your family is protected long-term. The only place I send you is to Zander Insurance.

They shop all the top insurance companies and they're committed to serving you. That's why I use them and why I've recommended them for over 20 years. Whether you prefer to work online or you need personalized assistance, you pick your path. Go to Zander.com or call 800-356-4282 please please get this done it is an absolute necessity Well, if you're saying goodbye to the old neighborhood and you're looking for a new place to call home, buying a home is one thing,

but buying and selling at the same time is quite another. The stakes are double, the details are double, and there's usually a doubly tight timeline. You basically got to be an expert juggler and really know everything about real estate to pull this off. That's why it's so important to have the right agent on your team. You don't want some jumpy amateur managing one of your biggest assets. You need a trustworthy, experienced, productive agent to guide you. We've created a network of top real estate agents from across the country who follow the principles we teach. We call them our endorsed local providers, or ELPs for short. When you work with one of these, you don't have to wonder

if the person you've hired is the real deal. We've made sure they are. DaveRamsey.com slash agent is how you can connect to one of these folks. That's DaveRamsey.com slash agent. Dalton is with us in California. Hi, Dalton, how are you? I'm doing well sir, thank you for the opportunity to speak with you Sure, what's up?

So I've got a quick question So my wife and I, our lease is about to end with our apartment here in California And we're trying to escape when we can And we're looking at possibly moving out to Tennessee And the jobs that we're looking at right now have the same pay If not more than what we're looking at possibly moving out to Tennessee, and the jobs that we're looking at right now have the same pay, if not more than what we're currently at, so we're trying to figure out when the right time would be to make that jump. Economically, yesterday.

You have a lower cost of living and no state income tax, and you're making the same money. That's one of the big benefits. You're making the same money. We would love to have you in Tennessee, but only if you know how to vote properly. Yeah, we're on the right side of the fence. No, I'm kidding with you, dude. But seriously, I mean, it sounds like a great deal.

You got jobs lined up making the same money? That's great. The biggest thing right now, my wife's finishing her degree in may and our lease ends in april so we're trying to figure out if i should come out ahead of time or wait until she's done with school to be able to make the move together yeah i would attempt to make it together there's no benefit to you going ahead you just got to have housing for that month what are you going to do you're going to ask them to extend your lease by let you go month to month on the lease or something

we have that option or we could also move in with my parents for that month just to be able to ride it out till the end well that'd give you some money to make the move with right yep exactly if you don't kill each other in the meantime yeah yeah all right i guess yeah i mean i don't know i don't hear any reason not to do this do you are you telling me a reason not to do it we're just trying to figure out the right timing that's the biggest the biggest part of this whole thing i you do what you want to do i i have done a few things in my life where i was separated from my wife for a month, and I didn't enjoy any of them. But I'm kind of a wuss. I like having my family and my stuff around, you know.

And so I'm just not good at the separation thing. I travel a little bit, but it's in small spurts. I travel a lot, but it's in small spurts. And I'm not gone for a month at a time and that kind of thing it's very tough especially in the early years of being married so you do what you want to do but i'm just a wuss and i would i would wait and bring her with me that's what i would do hey man thanks for the call all right up next gonna be heather in colorado hi heather how are you hi dave i'm doing well how are you better than i Dave. I'm doing well. How are you? Better than I deserve. What's up?

I'm, first of all, totally fangirling right now. Like, I've listened to you for the last year. I have you on podcasts, playing all throughout the day in the background. So I drank Kool-Aid. Well, thanks. Yeah, my husband and I are on baby step two. We're about to finish up. But the owner of my company company it's a small association

management company for non-profits um wants to sell it to me next year or two for only a dollar um and i just want to know what questions i should be asking and how i can go ahead and start making a plan so that i can be successful and not wind up in debt or having to lay off anybody or anything like that. So he's going to give you the company. She is, yeah. A dollar. Why? She said that one of her previous employers did her a favor before, and she always wanted to give back and do it to one of her employees.

That's neat. Okay. Are you able to look at the books and understand how the inner workings of the finances work on the place? I'm sure she will let me, I'm sure closer to the date. Just right now there are other employees and I'm sure there's something with salary and you know, that might not be the most appropriate thing. When is she talking about doing this? In the next year or two. Okay. All right.

Well, I think what I would ask her to do is mentor me on how to run the business. Okay. So that I don't mess up. Because it sounds like she's been running it successfully for a while, correct? It's actually a younger company. It's only about four years old. And someone gave it to her four years ago? No, she just started it.

Oh, someone did that for her at a different place at a different time. Yes, yes, yes. I got you. Okay. All right. Well, I mean, that's one way for you to get to the inner workings because there are basic components to running a business, basic things that drive a business.

You, your personal growth, profit, people, the product, and so on, right? And so you start looking at, okay, what's the product? How do we sell it? What are we doing? In your case, it's the service. It's not an actual hard product. And, you know, that whole thing. And just go that direction and just begin to look at all the different components of a business, the drivers of a business, and understand what is driving how this business is being driven.

What are the people issues in the business? What are the product issues, the profit issues? What are the issues with you, the personal issues? What are the issues with you, the personal issues? What leadership things do you need to be doing to get prepared? And ask her to walk you through some of those things. And if you jump on Entrez Leadership and get involved in our Entrez Leadership communities, it's called All Access. We can guide you on what those things are and exactly what the drivers of business are and how you can address each one of them. And it'll, you know, that'll give you what you need to do to be able to get a hold of it. But jump on EntreeLeadership.com.

That's named after, that's our business and leadership department inside of our company here that teaches and guides small business people. Travis is with us in Florida. Hi, Travis. How are you? Hey, Dave. I'm doing great, sir. How are you?

Better than I deserve. What's up? Well, I found your podcast about a year ago and was doing a lot of driving at the time and basically listening to everyone that I could get on my phone. And in the last year, we've knocked out about $35,000 in credit card debt, and it's been over a year since we've used a credit card. Good for you. I'm really excited about that.

Thanks. And sold the trucks. And as of today, I'm starting a second job to bring in an extra $1,000 a month because we're trying to go get it all in tents. And the question that I have is around the car that we bought last year and if we should keep it or sell it. How much do you owe on it? We owe 31 on it. How much other debt have you got other than that? We have 140 in student loans and no other debt. And what's your household income?

As of today, it's $132,000, and when I start the new job next week, it'll go up to $144,000. Okay. That's a car you could afford if it were paid off and you were debt-free, but it's a very, very big car loan while you're facing $100,000 of student loan debt. So were I in your shoes, I'd move down to about a $10,000 car. That's what I was wondering because I could have this paid off in the next five or six months, but then there's all that equity sitting there that we could be using to pay off the

student loans. So we've been talking about it. Yeah, you could have $30,000 worth of student loan debt paid off in that same period of time. Right, right. Yeah, ever since we started listening to you i've always thought you know wwd what would dave do and my wife isn't always on board with that and trying to decide if i'm being too hard or if she's being you know well it's not it's not a freak out thing i mean it's not you know

jumping up and down like you're an idiot or something but it is a it is a big old chunky car loan and it is you know it's going to slow down your get out of debt plan by probably a year and a half or two years it's pretty tough this is the dave ramsey show I love talking about companies that know how to do business right. You've heard of Grip6 belts, right? Well, if you haven't, it's the only belt you can get online with no holes, no flap, and no bulk. I'm talking weightless, and the buckles come in really cool designs and are interchangeable i personally own a number of these belts and they're so comfortable you forget you're wearing it plus these guys have a great story bj minson started grip six on kickstarter from his garage in 2014

and now sells hundreds of thousands of these american-made belts to customers all over the world as a mechanical engineer and a minimalist, BJ took his dislike for heavy, bulky leather belts that never fit right and created the perfect belt, a high-quality, minimalist belt that gives the strength and support of a belt without even knowing you're wearing one. I'm really proud of these guys. Check out this month's special offers for my listeners at grip6.com Thank you for joining us, America. This is the Dave Ramsey Show.

We're so glad you're with us. Open phones at 888-825-5225. Cindy is with us in Minnesota. Hi, Cindy. Welcome to the Dave Ramsey Show. Hello. Thank you for taking my call. I'm so excited to talk with you.

You too. What's up? So I would love your perspective on am I in baby step two or am I moving on? So I'll be as quick as I can. About four years ago, I was in a soul-crushing corporate job making six figures, and I hated it. So without a plan, I left it and had to quickly figure out how to live on half of my income. And we downsized our house. We sold our new cars.

We tightened up the budget as much as we could. A couple years into that, we found you. Loved it. Totally revamped our plan. We stopped the retirement. We paid off our credit cards, our van, all of our consumer debt last year. So, hooray, we're done that far. But my question is more about our second mortgage.

So when we bought our new house, we renovated it. So we have a first mortgage for $150,000. We have a second mortgage. Right now it's at $60,000. What's your household income? $110,000 combined. My husband and I are 47 and 48. We have about $188,000 saved in retirement right now.

What we teach folks on the second mortgage is that if it's more than half your annual income, which it is, then I roll it to baby step six, which means I'm going to do one of two things with it is I'm just going to start paying on it when I get to baby step six extra before I reduce the first mortgage, or you might consider refinancing and rolling it into a new first mortgage. What's the interest rate on your current first mortgage? 3.75. Okay. And what's the interest rate on your current first mortgage? $3.75. Okay.

And what's the interest rate on the second mortgage? I believe it's $4.5. Okay. And what's the balance on your first? $150. Yeah, you told me that. Okay. I think, I mean, you certainly can get a 2% off of or 1.5% off that second mortgage, and you can probably save a half a percent on your first mortgage by refiing onto a 15-year fixed and rolling them together.

If you're going to stay in that home, you may want to look at that. You may want to just sit there and pay them like they are, but it's a baby step six item because it's so stinking big. That's what it amounts to. So you just treat the two mortgages as if they're one in baby step six, and you start paying them in baby step six when you get there in the process. In the meantime, you pay minimum payments on both of them. Now, if your second mortgage has a balloon or a call or is a variable rate, then that just tells us, period, you need to refinance

and get one mortgage that takes care of both of them. And that would wrap it up for sure. Cynthia is with us in Iowa. Hi, Cynthia. Welcome to the Dave Ramsey Show. Hi, how are you? Better than I deserve. What's up?

Great. So I'm a bit newer to your program. My son actually introduced me to you. He buys your Total Mike Elmer books by the case and gives them as wedding gifts. Oh, my goodness. Yeah, so it's awesome. So my husband became disabled 35 years ago, and he's not been able to work for 25 years. And we weren't prepared for this.

We had six young children at home at the time. And, you know, we've been just trying to keep our heads above water financially. Sure. He just turned 65 and will be receiving his pension. So we're trying best to decide how to utilize that money. So that's why I'm calling. Okay. So you're getting ready to get an income increase. Yes. Yes. How much? He's going to $274,000. In lump sum? Well, that's the question. His company is offering lump sum or they have like 10 different options.

We could put it into their 401k. We could take their annuity with death benefit plus refund for kids if I die. No, thank you. What I would tell you to do is to sit with one of our SmartVestor pros. I'm not in the investment business, but we have people that we recommend that do a great job and sit down with one of them, and I would roll this into an IRA in some good growth stock mutual funds that have a long track record. Here's why. That's going to give you a much better rate of return

than leaving it over there at the old company. So you'll make more money on the money while you're alive. Also, if it's in a pension and he dies, it dies with him. You lose it unless you have the survivor benefit. But then when you die, it dies. But when you roll it over into your name, now that money is yours, your family's for life and past life. Okay. So actually they do offer a death benefit.

It goes to me and then to my children with the company. And then I thought, what about a variable annuity? No. No. Okay. I think you need to be in some good mutual funds and a good IRA and do a direct transfer rollover is what I would do. That's going to give you the most control and the most money, the most rate of return on the money. And so click SmartVestor at DaveRamsey.com and sit down with someone with the heart of a teacher. They'll show you what you're doing, and you'll understand what you're doing.

And then you can roll it into a good IRA and some good mutual funds, and that's what we recommend. It's what I would do if I were in your shoes, but you do whatever you want. This is the Dave Ramsey Show. Open phones at 888-825-5225. Dave is with us in Ohio. Hi, Dave. How are you?

Dave Ramsey. Good to talk to you, sir. You too, man. What's up? Hey, okay, so here's what I want to do. I work at a church. It's about 26, 28 miles from my house. I've got a Honda minivan. We have all old cars.

We don't have very, I mean, one of the kinds we have about, because of you and your program, we've got about $3,000 worth of debt that we're going to be done with soon here. Go ahead. So, but what I want to do is, and I'll bet I could talk you into it, is I spend about $160 in gas a month going to and from work. I'd like to, I don't have the cash to do it, but I'd like to borrow $5,000 to get a Toyota Prius and cut my gas payment in half. Basically, $5,000 would be about $100 a month, and I'm saving $80 a month in gas, so that means I'm paying $20 a month for my car.

What do you think? I have never in 30 years told someone to borrow money to buy a car. And I'm certainly not going to start today. Oh, so that makes total sense, doesn't it? No, it does not make sense because the Prius is going to have higher maintenance and higher insurance than the car you've got now. And so your analysis is leaving out a whole bunch of numbers, and you're going to end up losing money on this transaction when it's all said and done. Plus, the Prius is more expensive and is going to go down in value

more than the car you've got. No, it would be the used one. I know, but they'll go down in value more than the car you've got. So I don't mind you getting a better car. It sounds like you need to get a better car. What's your car worth? Probably about, I don't know, four or five. It's a 2007 Honda Odyssey. It's worth four or $5,000. Yeah. I thought you were getting a $5,000 Prius. You're getting a

$10,000 Prius you meant, right? Why? What's happening to the van van the van's going to my daughter oh okay so you're borrowing money so you can give your daughter a car okay whatever i yeah i'm definitely borrowing money that's what i'm trying to say but i'm spending 20 bucks a month on a on a on a prius rather than here's a better idea here's a better idea. How old is your daughter? She's 17. Okay, good. I think she needs to get a great part-time job and save up and buy herself a Beater.

And I think you take your $5,000 van and sell it and buy a $5,000 Prius, and now you don't have a car payment, but you've got a teenager that doesn't have a car. Oh, well, we can work that through. This is the Dave Ramsey Show. Thank you for joining us, America. We're so glad you're with us. Common Sense for your dollars and cents.

It's called the Dave Ramsey Show. Zev is in Maryland. Hi, Zev. How are you? I'm doing well. And yourself? Better than I deserve. What's up?

So my wife and I are on baby step two. We both share a car that's about 13 years old. I just recently put $1,000 towards it, and it should hopefully keep going. But we have a tax refund coming up that I'm looking towards three options, either putting it towards the last $10,000 we have in debt for my student loan, either to save for a car for when this one eventually dies, or to save for my wife who's going to be going to hopefully go to PA school in about a year's time. Okay.

Don't need to do PA school until we get out of debt and save the money to do it. So that would not be on the list for this money. How big is the tax refund? Looks like about $4,000 this year, and I've adjusted it for this coming year using the IRS calculator, so i won't have that again next year good for you well done all right so four thousand bucks um i wouldn't use it what about a second car i was kind of thinking i was going to hear that um i happen i happen to work fairly local and we're managing with one car do you think there's a reason for us to get a second car?

No, I kind of thought you were going to bring that up. It's okay. I'm fine. Hey, look, I don't want to get into debt. No, I don't want you in debt. I don't want you in debt. You have your $1,000 starter emergency fund, right? Yes.

Okay, and you only have $10,000 in debt left. Correct. And what only have $10,000 in debt left? Correct. And what's your household income? I'm making $55,000, and my wife right now is in school. We're cash flowing that for her to get her bachelor's degree. Okay. So if you put the $4,000 towards the debt, how quickly is the other $6,000 gone? I'm really pushing and aiming to get it done less than a year's time before she gets her bachelor's degree. $6,000 in a year?

Yes. No, that's wussy. We're not doing that. You need to do better than that. That's only $500 a month, dude. Are you guys living on a written budget? We are living on a written budget. Unfortunately, where we're living, we don't really have any option to move elsewhere.

So my rent is $1,200. I do have a written budget. Okay. Right now, I have. I want you to get that done and uh like i was hoping you're gonna tell me like three or four months um i really could push for that what i do i guess there's a couple thousand dollars let's say right now in my checking account that i wasn't sure how to touch but now using what you just said i can just throw that at the debt in which case they'll knock it down even more. Yeah, and let's just get that.

What I'm trying to do is get that thing done so that we can move up in car a little bit with cash and get your emergency fund done so that we can get her start saving towards PA school. I'm trying to lay out a timeline of dominoes here that work together. Got it, got it. And that's what I was seeing mathematically in my head. The faster I can get rid of that $10,000, so I would use the $4,000 towards the $10,000, but under the assumption that we're going to go crazy and get the rest of that done so that we can get you a little better car because that's what you're worried about

and then get your emergency fund built on up, and then you'll be in a position to save towards her pa school because you'll have a little wiggle room got it and yeah that's exactly how i would do it but but i would not do that if it's going to take you i might i might rethink that if it's going to take you 12 14 months to get rid of six6,000. Because that's a long time for this whole car to have to stay together. I hear what you're saying. I'm trying to get rid of the debt fast enough so I can get you out of this car before it blows up on you. Makes sense to me.

That's my plan. Because the longer you drag this out, the more we've got to rethink, oh, we probably just need to change cars if it drags out. I mean, if you told me you had $60,000 in debt, I'd tell you to use the money to upgrade your car so that you can make the slog through the rest of the $60,000. But we've got $6,000. There's $10,000 with four to throw at it and a couple out of the checking account.

You know, I think we can get there before the car leaves us, before it goes to car heaven. All right. Let's go to Monica in Texas. Hey, Monica, how are you? Hi, Dave. It is an honor to speak with you. I'm so excited.

Good to talk to you. Thank you for taking my call. Sure. How can I help? All right. Me and my husband are currently in Financial Peace University, and we are in Baby Steps 4, 5, and 6. I am a government employee, so I have the TSP for retirement. I'm putting 15% into the TSP, currently at 60% in C

Fund, 20% in S, and 20% in I. Is that kind of, I read it in the Complete Guide to Money. That's kind of how – Yeah, that's okay. Sometimes – I mean, lately we've been also saying 80% in C and 10 and S and 10 and I because the I has been so underperforming. Okay. But it's okay either way. It's not the end of the world. And have you got it in the Roth option, TSP? I do.

That was my next question on what do you think. We have a 5% match, so do you recommend doing 5% and just the TSP and those funds and then doing a Roth TSP? Yeah, you have to do the Roth on everything, but the match portion is not Roth. That's all. Here's the rule of thumb. It's kind of a rock, paper, scissors thing. It's easy to remember.

Match up to the match beats everything. So the first thing we would do is we'd take that 5% proportion. You put 5 in to get the 5 match, right? Okay. Match beats Roth. Roth beats traditional. Okay? And so you've got a Roth available.

The only reason you would do an outside Roth is if you wanted to get in some mutual funds that were outperforming your TSP options. And you probably could do that. So if you really wanted to get like super nerdy about this, you're okay doing Roth TSP and just take your match and go to town. You're fine with that uh but if you wanted to say okay i can do better in a mutual fund in some mutual funds with a smart investor pro than the at than the um the s and the i and the c you're giving me which you can uh it wouldn't be like light years better but you can do better you might make another couple percent a year in other words something like that and you know so if you're gonna do that

you'd take the match portion into the TSP Roth, and then you'd go do regular individual Roths. And if those two figures together don't get you to the 15%, then you would do more non-matching TSP Roth. Okay? Okay. So you're not going to be out of the Roth. You've got Roth available. So we're going to do Roth something, And we're certainly going to take the 5%

match. Then the only question is, do you want to do it all in the TSP or do you want to soup it up a little bit by going and going to the outside mutual funds with a SmartVestor Pro? And you

could do that. That'd be okay to do. That would be technically, mathematically the best thing to do. So, good question. Thank you for joining us. Open phones at 888-825-5225. On Facebook, Shay Lynn says, Dave, I'm on baby step two. How much should I contribute every month to an HSA? Nothing. HSA is a health insurance program that has inexpensive health insurance because it has a high deductible and usually covers 100% most of them after the deductible is covered. And it has a savings account that's optional as an additional thing. And I would not put money in your savings account,'s optional as an additional thing. And I would not put money in your savings account, your HSA, at this point.

I would later on. But now, while you're in your Baby Step 2, I would not do that. So thanks for the call. You can follow the Baby Steps, the official Baby Steps community, and there's about a couple hundred thousand of you on Facebook in that community. Jump in there. If you want to be part of it, obviously that is free and and we look forward to it to having you in there and having you join us. So that puts us hour of the Dave Ramsey show in the books.

Our thanks to James Childs, our producer, Kelly Daniel is our associate producer. They do a great job to making sure that you don't get on the air, unless you're supposed to. Kelly's our mean and nasty phone screener. That's just legend. But legends usually have some truth to them. This is The Dave Ramsey Show video channel. You can now listen to the show on your smart speaker.

Just tell your Alexa or Google device to play the Dave Ramsey Show or find out all the ways you can benefit at DaveRamsey.com slash smart speaker. Just tell your Alexa or Google device to play the Dave Ramsey show or find out all the ways you can benefit at DaveRamsey.com slash smart speaker.