The Ramsey Show - App - When You Should Use a High-Yield Savings Account (Hour 2)

Episode Date: April 13, 2023

Dave Ramsey & Rachel Cruze answer your questions and discuss: "Should I sell because my HOA dues are high?" "Where should I keep my emergency fund?" from the blog: What Is a High-Yield Savings Account and Do I Need One? "How should we pay to build a new house?" "Can I afford to buy a new car?" Have a question for the show? Call 888-825-5225 Weekdays from 2-5pm ET Want a plan for your money? Find out where to start: https://bit.ly/3cEP4n6 Listen to all The Ramsey Network podcasts: https://bit.ly/3GxiXm6 Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy

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co-host today. 888-825-5225. Smart conferences this weekend here on the Ramsey campuses in our brand new Ramsey Events Center. It is the first public event completely sold out. There will be about 3,000 of our closest friends hanging out with us all weekend.

It starts tomorrow night and prior to tomorrow at 6 o'clock our time in Nashville. It's sold out, as I said, but we are going to broadcast this show from 1 to 4 Central Time from the stage of the Ramsey Event Center, which is a bit of a trip. I was up there doing the sound check, and it's an interesting process we've got here. But we're going to be doing this show for three hours from the stage. Lots of people have gotten the tickets. They're free to come in. And so I think there may be a few more for those of you out in the lobby

if you want to come watch the show in the event center tomorrow. But let's say you're out of town or you're like doing something else. You don't want to come over here to this campus or whatever. It's going to be on YouTube live, straight up, straight through. And so you'll get to see what the event center. Normally it's delayed, YouTube, right? Exactly. It's delayed by a little bit.

Exactly. And you're going to get to see the interior of the event center and the staging and all that stuff. So tune in. If you don't normally tune in live, tune in from 1 to 4 Central tomorrow. We will be live streaming the Ramsey Show on everything. But certainly the best way, if you want to pick it up for free, is on YouTube. And we'd love to have you come and join us. Daniela is with us in Dallas.

Hi, Daniela. How are you? Hey, Dave. Thank you so much for taking my call. I'm so grateful to be on today. Well, honored to have you. How can we help? Yes.

So I'm wondering if I should sell my condo because the HOA is really high. It's $650, and I live in Dallas, Texas, and I wonder if I should sell it and just pay off the rest of my debt. Wow. Why is the HOA is really high. It's $650,000 and I live in Dallas, Texas. And I want to touch and sell it and just pay off the rest of my debt. Wow. Why is the HOA so high? I have no idea. What's the condo worth? I think

it's worth $250,000 and I owe $122,000 on it. Okay. I'm as a homeowner uh if i'm you i i am by the end of the day i want some information from these people what they're doing with the money yeah that's asinine what is going on a $250,000 condo with a $650 i mean that sounds like a two or million dollar property or three million right exactly and it's like i'm in Texas. Like, what's going on?

Well, I mean, you could do it. Stupid's in Texas, too. But, you know, I mean, wow. Yeah. Yeah, I want to find out what's under this. And, you know, did they jack it? How long have you been there? Since 2018. So I started out with $450, and they just really went up like 100 every year so now we're at 650 and these i have these like assessments that we would pay every other month so now they just tacked it all together every month every month right so now there's no have they were the conduct were they doing a major renovation like parking lot replacement or roof replacement or something that's the thing i haven't, and, like, the residents are really complaining about it.

People are trying to, like, run for office. I'm not the only one concerned about it. At this point, I just feel like these years people have been complaining nothing has happened, so I'm like, I don't even own the land. Like, is it worth continuously, you know, owning this condo or should I step out of it? Well, the problem, you've got to find out about this anyway because this devalues your condo nobody wants to buy a $250,000 condo with this ridiculous HOA fee so it's going to make your condo not worth as much right so you've got to find out what the flip's going on to having maybe it's going on for one more year because they're building up a war

chest to go do the roofs or something like that but you don't have to be by bylaws very transparent oh yeah you have the right you have the right to know exactly where the money yeah you have to be able to they're supposed to document everything so yeah you should be able to pull yeah i want to see i want to see the copy of the financials and explain to me why the flip this is double what it should be and minutes from the meetings i mean all of that i think you you you need to pull all of that and see yeah see what's going on because that is that is strange but just say for your sake danielle like say it is like well sorry this is just what it is and you know i don't know yes i would sell i would get out of there because it's being poorly managed yes oh i'm so excited to hear this i like that okay i'll do the first step but yeah because you've got to have you've got to have an explanation for your buyer otherwise i don't want to buy it if i'm the buyer i don't i don't want to walk into

this yeah because that's a red flag i mean if you just say i have high and you mean 25 high but this sounds to me like it's double what it should be um i mean we own a property for instance that the hoa fees uh include a golf course and several other things and it's only 750 and the properties in that neighborhood are uh 5 to 20 million dollars just to give you an idea that's how stupid this number is so um that's just nuts and and so you know and there's a lot of amenities built into that's what i'm saying like country club type stuff yeah so pools and clubhouses and yeah yeah and so into that it's an entire development yeah little city so obviously you're going to pay more but for a $250,000 condo to be paying as much as you're paying that's what i'm saying that's just yeah that's just nuts so i'm gonna want to know more and the problem is is that

that's i hate hoas i just hate them this is such a free spirit thing to say i don't even know how much our winston pays it's not much it's always in our yeah i know but no i'm sorry we don't live with a community with a golf course that's not not what the point was. The point is you guys are in a very efficiently run neighborhood. Winston and I have talked about this. It was not the fact that you're living in the slums. It was that you live in a very well-run thing. It's obviously not as expensive as mine. Oh, my gosh.

I'm just saying, all you free spirits out there, it's okay if you have a nerd spouse and they run every little thing. I just was thinking in my head, I was like, I need to go to my every dollar budget and see how much our HOA fees are. Because I'm like, I don't even. Yeah. We're members of a whole bunch of HOAs and none of them are fun. So, none of them.

You just don't like being told what to do. I don't like paying and then being told what to do that's exactly right by people who don't have anything else to do with their lives you should run for your board no thank you i have a life you should be h-o and you should you should i have vowed to never waste my time on that. Serve your community. Serve your community. Time, talents, and money is the way to give in life. And Dave? We'll have to find another way to serve, Rachel. This could be a good way to serve.

We'll have to find another way to serve, Rachel. Dave for president. Dave for president. You might see signs throughout. 2024. You're gated. Serve your country. You sound like the OC.

I'm more likely to serve my country than i am my and both of them are not going to happen one of the intros the oc is like you know gated community all bougie you should be you should be a part of the real housewives too you'll fit right in i should be a real housewife what are you you should be in that cup what are you drinking over here? This is The Ramsey Show. Hey, you guys. Health insurance costs are only moving one way, and that way isn't down.

And if higher costs aren't enough, the wait times to see your doctor are longer, and it's harder than ever to get anything approved through the bureaucracy. So if you feel like the system is working against you, try a biblically-based alternative to health insurance, Christian Healthcare Ministries. CHM is a health cost-sharing ministry that's helped hundreds of thousands of families like yours take care of over $11 billion in medical bills since 1981. And CHM has also helped them stay true to their values and avoid miles of red tape. And CHM support goes far beyond meeting financial needs. They'll also help meet spiritual needs. Members become part of a family who will pray with them and for them when they experience a medical event.

So listen, y'all, there's no better way to take care of health care costs. CHM programs start as low as $98 a month. So learn more today and join at chministries.org slash budget. That's chministries.org slash budgets. That's chministries.org slash budgets. Rachel Cruz, Ramsey personality, is my co-host today. Thank you for joining us, America. Hey, if you like the show, we need some help from you. We need you to share the show. You can do that if you're a podcast listener or a youtube listener by clicking the share link or sharing the link either one however you want to do that the share button do all that we need you to subscribe and follow the show in whatever format you're taking the show

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those things it moves us forward in the algorithms and people learn about us that didn't know we were here and we're able to help more people and that's why we're here so thanks for hanging out with us jorge is with us in orlando florida hi jorge how are you hi i'm doing pretty good how are you better than i deserve what's up all right, so I have no debt. I'm getting married in June. My goal after the wedding is to buy a house after one year. Congratulations. Thank you.

Is it smart to put the emergency fund and house fund in a high-yield savings account so it could grow a little? Yes, I think it's a great place to put it. Yeah, high yield savings accounts actually are getting a little bit better even than money markets, depending on your bank. And so, yeah, I think a high yield savings account is a perfect place to keep an emergency fund. That's where we keep ours, Jorge, my husband and I. And then we have another one that's in the same account that we use for short-term savings so that's basically exactly what what we personally do and what we recommend to people so you're you're doing it exactly right so congrats on the wedding and it's smart to

thank you so much to wait a year I think you're being really wise in that decision as well so uh yeah you guys are starting off on a really great foot. Here's the warning. Yes, you should do that. And yes, that's wise. And I completely agree. But here's the warning. Okay. You're getting 4% instead of 1%. On $10,000, it's 400 bucks.

Right. Translation. Whoopee. What's important is that you're paying attention. That's important. What's important is that you have an emergency fund for emergencies, not going into debt for that, and that you've earmarked it for that and you don't touch it for anything else, right?

And all of those wise things are what are going to cause you to build wealth oh and by the way the money that's going to be in your house fund to buy a house with is not going to be because of the interest rate on this it's going to be because you put money in there because 400 is not going to get you a house yeah yeah no the plan is to put 50 uh 50 is for 50k for house fund and then it'll probably be 18k for emergency fund now but if you put in 50k in a year um the amount of interest you make in that year while you're putting in 50k is nothing compared to the fact that jorge is a genius and put in 50k so you're the secret sauce, not the investment. That's what I'm trying to tell you.

Yeah. And I want everybody to grasp that, that the reason money is in a short-term savings account is because you put the money in there, not because it earned interest. Because it doesn't earn enough interest mathematically to do that. So all you're doing is being wise with a very short-term play. That's all you're doing. And that is a good thing and you're very you are way ahead of the curve dude every quite everything you brought up you are doing it correctly that's right and the fact that you know the big purchase is coming in you know less than three years that you know you're going to write a check so but for a

lot of people though because inflation is so high you know i I if you had a lot of money it just sitting in a high yield savings though without a plan you're going to lose so it's not a long term cash is not like in that in that regard you make four you're not even keeping up with inflation you're not even keeping up yeah but if you but you want to be able to get to it quickly which is the emergency fund key it's more like insurance versus an investment and putting money in the market with something that you know you're going to be pulling out in a year, two years, even three years, there's just some risk with the volatility of the market. So having it somewhere safe that you can get to is always a great plan.

Tara is in Harpers Ferry, West Virginia. Hi, Tara. How are you? I'm doing well. How are you doing, Dave? Better than I deserve. What's up? So at the moment, I'm on baby step three. I found you guys a year ago and paid off $20,000 in debt. Good for you. And at the moment, I'm trying to move out of my parents' house.

But I have no credit. And everything requires you to have credit. No, it doesn't. Which I do. No, it doesn't. The places around here here everyone's telling no they don't i need a credit score no they don't i don't believe you anthony o'neill that was a ramsay personality called 20 apartment complexes in our immediate area and two of them required a

credit score if you didn't have a credit score because you were moving out of your parents house and you were 100 dead free and you had an emergency fund five of them asked for because there was no credit score an additional deposit but only two out of 20 required a credit score or they would not rent for you rent to you you have not checked you've just talked to your friends i've been through zulu i've tried to talk to people around here. I've even talked to realtors. Did you call apartment complexes and ask them on the phone to the manager if you could rent their apartment without a credit score?

You're moving out of your parents' house, and you have an emergency fund, and you have the deposit, and you have a job. Yes. The few that was going to let me require the cosigner and you talk badly about no i would not do a cosigner i wouldn't rent from them how many did you call that told you that really tell me the truth um each week i look through zulu and call about 50 around me because it's a large area in Martinsburg and Harper's Ferry. Tara, I don't want to be disrespectful, but you're doing something wrong here

because what you have found is completely opposite of what we found as we researched this. We have sat and physically called from Ramsey and said, I'm moving to Nashville from another place from my mother's basement. I don't have a credit score. I have an emergency fund and I have a full time job making this. Do you require a credit score? And all very few of them required this.

I don't know how you managed to find 50 a week that require it when we can't even find one. So something's wrong with this equation yeah because for majority of time if you have proof of income if you have security deposit and cash sometimes they make you a front first month's rent last month's rent you know there's usually do yeah there's that credit score all of that that you're gonna have to to provide but i would yeah tara i mean i wouldn't and here's the deal right so say it is that extreme then keep moving out keep moving out your circle well further further you know find an individual

landlord that owns a property that is an is a real person and is not some corporate owner of because the only people that require this are corporate idiots real humans that are, all they want to see is that you can pay the bill. And, you know, like, for instance, I've got a bunch of real estate. If you came to rent from us and you had no credit score, but you had proof of job and a good down payment, and, you know, and you're moving from another city, we can verify where you used to live, whatever it is. You know, we're going to do the background checks and everything. But if we can find all of that, then we don't, I couldn't care less if you have a credit score.

All I want is my money as the landlord. And so, and that's a lot of individual landlords as well. So you may need to find that instead of some corporate thing. I think there's something else in your formula that I misunderstood from you or you didn't represent correctly. One of the two. Because what you're telling me is just not happening out there. It just doesn't happen.

So it's theory. People talk about it on the internet. But when we actually call apartment complexes, we did not find that. And it's on YouTube. Anthony calling. Anthony O'Neill was here. He was calling. You can find it on YouTube right now.

Yeah. He's calling apartment complexes. Nope.ill was here. He was calling. You can find it on YouTube right now. Yeah. He's calling apartment complexes. Nope. Nope. Nope. Nope. Nope. Yep.

I mean, it was just over and over. I thought it would be half of them. I was a little shocked. When you were saying, nope, nope, that means you don't need a credit score. Don't need a credit score. Don't need a credit score. Don't need a credit score. Don't need a credit score.

That was the answer. Over and over and over again. This is The Ramsey Show. Rachel Cruz, Ramsey personality, is my co-host this hour. In the lobby of Ramsey Solutions on the debt-free stage, Randy and Audra are with us. Hey, guys. how are you? Doing great. How are you? Welcome. Where do you guys live? Whitewater, Wisconsin. Very cool. Welcome to Nashville. Thank you. And how much debt have you paid off?

$130,000. Love it. And how long did this take? 29 months. Good for you. Your range of income during that two and a half years?,000 to 180,000 cool what y'all do for a living I'm a contractor slash handyman okay and I work for the insurance okay you work to get a free insurance I'm actually a technical designer so okay good for you well done what kind of debt was the 130 it was a beautiful house in Whitewater, Wisconsin. Paid off the house. Weird people. Looking at weird people.

Paid for house and everything. No payments anywhere in the world. Not a thing. Congratulations, you guys. Thank you. That is fabulous. What's this house worth? About $550,000.

I love it. How much have you guys got saved in retirement? We're about $350,000 within retirement, and we have some other property property we own so we're probably just over a million good for you looking at baby steps millionaires too way to go guys all right tell us what happened two and a half years ago made you decide you're gonna do this ramsey stuff and pay off the house well i worked by myself quite a bit so i was looking for some new podcasts to listen to and nodra said well why don't you listen to the day ramsey show i'm like okay well after I listened to it I'm like you know what I think there was an underlying meaning behind her asking me to listen to that wait I mean I told him she's sneaky that way the free

insurance girl he listened to the podcast and literally three days later said we have to do this we have to do this right now I to do this right now. I drop everything. We're doing this. Have you listened to the podcast? We're doing this. And I said, yes, honey.

That's such a great idea. You're so wise. It's always better when it's my idea. Okay. So you were obviously, you were more on board beginning. What was it that kind of roped you in that you were like here listen to this because there's a lot of spouses that say i want to do

this but my husband or my wife you know they're hesitant so we do tell them tell them to listen to the podcast because maybe that'll help my family was very into it maybe 10 years prior okay and i had mentioned to him at that time and he was like um yeah yeah not ready not ready yeah exactly and I said the opportunity will come around again okay so did y'all have any debts besides the house or was that really the thing that was um we did have some consumer debt which we we took care of pretty quickly okay um then after that, we refinanced in 2019 and got one of those nice low rates that they were offering at the time. And all your friends are telling you, well, don't pay off your house

because that money is going to make you more money than paying off your house. And I'm like, you know what? I'm getting older. I want to make sure that that house is gone by the time I'm ready to retire. So I can retire whenever I want now. How old are you two? I'm 56. I'm 54.

Okay. And your baby steps from millionaires, a paid for house worth $500,000, $600,000. How's that feel? Oh, it's fantastic. Pretty amazing. Have you ever been debt free since you got married? If we were, it was right when we first got married but it was probably for a very short period of time for 10 minutes and then we

figured out we decided we probably needed a car or something back then so i'm stupid but okay but you were living pretty frugally and under control to start with because you didn't have a big mortgage you didn't have a bunch of debt no and so you just reach over and smack the house and you're done right no when we first got married i just said we need to have a savings uh like emergency fund and i'm like what the heck's an emergency fund but little did i know she knows way more than i do okay so you guys i mean you to to a degree you were pretty intense i mean you guys lived on half of your income basically to do this in two years right uh did the kids feel the the sacrifice you feel like it was a lot of sacrifice or do you feel

like oh no we like i still had a great because there are support groups for teenagers out there that have endured the dave ramsey stuff we think they were fine i'm not so sure that they felt they were fine crying there was some crying but There was some crying. But at the end of the day, as parents, worth it. Yes, and they got on board rather quickly when they saw how excited we were about it and that it wasn't, we weren't taking things from them. We were actually giving them freedom to do with their money what they wanted to

instead of somebody else saying you know yeah oh me yeah way to go you guys i'm proud of you thank you very much outside of your immediate family who were your biggest cheerleaders who was saying this is smart you should do it um i think both of our immediate families are i mean our parents and stuff were pretty supportive um we didn't tell a lot of people outside of that but um you know most of them were pretty supportive yeah good they were happy we were doing it not them i guess but yeah so what do you tell people the key to getting out of debt is for me it was the budget i just had no clue where my money was going. So writing it down, using every dollar app was just instrumental.

Again, there was crying involved, trying to figure out how to use it and just wrapping my head around budgeting. But like I said, three months in, we were like pros at it. And still doing it today. For me, it's mostly being patient with the process um i tend to want to do things really fast and get them over with um but i knew that was a bigger amount than i was going to be able to get over with in a minute or two so i had to learn to

be patient and and kind of follow the process and not try to get ahead of myself yeah cool very cool you guys great job excellent we're proud of you you're amazing i mean in your 50s your baby steps millionaires house and everything's paid for you know make it 180 you can do anything you want to do now what's the first big thing you're going to do now that you're debt free well the first thing was coming here but um we have some plans to do quite a bit more traveling this year so um now that we can go back into canada we're going to canada fishing for a week there you go doing some fun stuff like that there you go good that's a good trip very cool good stuff good stuff all right bring the kiddos up we've got a copy of baby steps millionaires for you a copy of total money makeover for you

and a financial peace university membership for you you can use those or give them that's the live and give box so what are the kiddos names and ages kiddos they're like adult teenagers they are adults this is my son-in-law wendell our daughter ashley and our daughter carson are you guys all sorry are y'all teenage are the teenage what's ages real quick um ashley's 25 carson's 18 okay very cool congratulations you guys very well done all right are proud of your parents too so love it love it they are randy and aldra carson ashley and wendell milwaukee wisconsin area 130 000 paid off in 29 months making 140 to 180 count it down let's hear a debt-free scream three three two one that's awesome that is how it's done it is interesting that um you get new information and some people act on it and some people don't

yeah i mean depending on probably how um where you are in your financial journey and for them it was retirement he's like i don't want to look up and solve this house at retirement so you know so there's usually that why what's that thing that's kind of that motivator so uh but the fact that i love even just with the numbers like man they did so well uh with being wise with it and they did it in you know a little over two years where we say on average it takes about seven years to pay off the whole house but as they've been chipping away at it throughout you know their journey being able just to like for two years just really focus in you get that result and and now you get to live

with no payments yeah i like it that she dropped that podcast on him didn't even know what he was getting into made it his idea yeah pretty great that's what we tell because a lot of spouses you know or people we talk to married couples one of the biggest questions is my spouse won't get on board and we say one of the ways is to have a third party be the one to deliver the message so whether it's through a book or through a podcast, so all you spouses out there that want this plan, but maybe your other spouse is hesitant, they're a great picture of, hey, just give them some information. Let us be the bad guys and give them what they need. It's great.

It's our spiritual gift. This is The Ramsey show. Rachel Cruz, Ramsey personality is my co-host today. Folks, a lot of you got questions about taxes because it's tax time. We get it. Taxes are confusing. To help you get a better handle on them, let's unpack a question from one of our listeners. Dave, my son has got a W-2 from his first job this year. He's 18 and still in high school. Does he have to file separately? Your son will need to file a separate tax return if his earned income was more than $12,950.

The good news is you can still claim him as a dependent on your tax return as long as he indicates that someone else is claiming him as a dependent on his return. He can do all of that and get all of his refund money back as well, which you'll probably get 100% of it back. So to claim adult children as dependents, they have to live with you for more than half of that year. They must be under age 19 at the end of the tax year or under age 24 and a full-time student. They must file single, not jointly, and you must provide more than 50% of their financial support for expenses like housing, food, clothing, and so forth. That's the IRS rules. If you're ready to file your taxes, check out Ramsey Smart Tax. It lets you file online with upfront low pricing, no hidden fees, and you can save up to 70% when you switch from another software.

And we won't try to sell you a credit card like TurboTax. So check it out. Go to RamseySolutions.com slash Smart Tax. It's quick, it's easy. Also at RamseySolutions.com, since we're up on tax time, if you need a tax professional because you've got a complicated return, we have a group of endorsed local providers around the nation. Just click on ELP for Taxes at RamseySolutions.com,

and we'll help you find that as well. All right, let's go to Paul in Kansas City. Hey, Paul, welcome to the Ramsey Show. Hey, Dave and Rachel, thank you for taking my call. Sure. My wife and I would like to build a new home and we would like your advice in regards to the financial implications of building that new home. We currently own our home and we are trying to figure out whether it makes sense to sell our home and rent a place for a period of

time and pay for the home with cash, or if it made more sense to borrow a sum of money temporarily and continue to live in our home while the new home is being built. We've followed your debt-free philosophy, and it's been a great inspiration for us. So it feels strange or odd to us to be borrowing money again, but just wondering if you thought that made sense maybe in this particular case. Well, obviously you'd just be doing it for a very short period of time until your home sold. Yes. Okay.

Agreed. until your home sold yes okay agreed um so neither one of these uh fall in a in a dumb column we would not click dumb or check dumb beside you on either one of these both of them are fine you're going to end up at the end of the story with a paid for house am i understanding that correct correct okay so a couple of just comments one is One is be careful of and almost write it down and both of you sign it that we're not keeping this house that you live in now, no matter what. We're selling it because I don't want you to get into this and go well you know i think we'll run that i think we want to be i saw something on tic tac and i want to be a landlord now i don't want you you know going sideways on this and that can happen that can happen often and uh so you have to be both of you have to be my brother wants to live in. I don't care.

Okay. You are selling this freaking house. You got to have that kind of mentality. You with me? And nothing sneaks up on you. Nothing changes that if you go this way. So that's comment number one. Comment number two is I don't borrow money for anything ever.

And so were I in your situation, I would have to move into a rental because I wouldn't even borrow the short term because I simply am never going into debt again ever for anything even if it costs me inconvenience even if it costs me money because I don't borrow money period and that has served me really really well that's caused me to be able to prosper and to avoid risk and downturns and pandemics and everything else and so um so yeah so there's just extra cost in the moving and then the hassle in the butt but at the end of the day there's no bank transaction you're not dealing with all of that right so yeah so there's a freedom there that you carry through this whole process uh but paul if you do choose and again like dave just said there's no stupid, quote unquote, box to check here on either one,

but also a risk that we see people, whether it's, oh, we're not going to end up selling the house, we're going to end up renting it or whatever, they go off on that, or the loan, as you start building, and my husband and I, we built in 2019. And slowly, man, the upgrades that oh we could do these kind of cabinets this um you want those fixture as well you could how that but like that fixture is just a little bit more and you start creep it's like the lifestyle creep but it's the house creep and then you can kind of start to justify well we'll just take out like fifty thousand dollars more and pay it but you know we'll just take out a little bit more to get what we want. You start to just move that finish line when debt and a loan is part of it. It's hard to have

this more black and white stance that when it's just cash. So if you guys do stay in your home, take out a loan to build again, just as just as passionately as you are that you're going to sell the house, you have to be as passionate with this is our number and we're sticking to it no matter what because it it is hard and trust me it's not fun when you're like oh i'm building a house and this and we have to cut stuff i remember we had to do that we had to look at our budget came over budget and it was like you have to cut stuff and it's just it's not fun to go backwards when you have your dream you're like oh man we can't have all of this so we have to cut things and when it's with cash it is what it is versus we don't have the money we can't do it you just you don't and so versus the loan you can kind of

be in that gray so just be careful just words of caution paul words of caution you when you're borrowing money rachel's point is you're more apt to have scope creep on the size of the build than you are when you're using real cash. Because real cash runs out eventually. And so, and that's a very wise insight. Good, very good. Jonathan's with us in Gainesville, Florida. Hey, Jonathan, how are you? Hey, I'm doing well.

Y'all doing all right? Better than we deserve. What's up? So, my wife and I have never really done Ramsey before, but also never had debt. But we've gotten to a point where I'm considering a new car, and y'all are about the most conservative on this, so I just wanted to run the numbers with you.

It's scaring me a little bit, but it might be an okay decision, and if Jade, of all people, gives me the green light, I'll feel better about it. Ha, ha, ha, ha, ha. All right, how much are you going to buy? So it's a $36,000 or $37,000 Tacoma for my wife. After a tax tag out the door, it's like $40,000 or $41,000. That's not a new. That's used. No, it's brand new.

Brand new, okay. I got one. No, it's brand new. Brand new. I got one. Is your net worth over a million dollars? No, sir. I'm sorry? No, sir. No. Okay.

Are you paying cash? Yes, sir. Okay. What's your household income? $80. I live on $40. And we invest, save, and I don't't know do other stuff with the other 40 okay the rule of thumb that we use is don't buy a total of everything that you own that has wheels and motors

because everything that has wheels and motors goes down in value don't buy more than half your annual income total so unless you're walking that's why i feel a little unless you're walking yeah you're not buying this car then while your wife drives the brand new truck yeah you know you're making 80 you just spent 36 unless you're walking she's not getting this car gotcha i mean i have to meet the half i have part of it too would be so she just got in a car crash and so we've got an inflow of of money from hers and then i have a second car that she's driving now that won't work that we're going to sell no matter what and so between well either i'd get her you know another beater that we just put so much into tires no you don't have to do that you just don't go buy a new car go buy a twenty thousand dollar truck for her get her a twenty thousand

dollar tacoma tacos are great we've had a bunch of tacos that's what we call them in our family uh when winston rachel he was driving a taco winston's drove a tacoma most of his life yep when i met him in college the new one a big tacoma no that's the ton he went yep he went full size it was a big deal the big dog it was a big Tacoma? No. No, that's the Tundra. He went full size. It was a big deal. It was a big deal, but Tacomas are great trucks. We like the Tacos. And they keep their value. They do keep their value. They are better.

Nothing keeps its value. Get a used one that you can afford. Don't buy new cars unless you have a net worth of a million dollars, and don't buy cars that total over half your annual income. Don't buy. This total over half your annual income. So, eh, don't buy. This is The Ramsey Show.

Dave here. You can find all of our shows with the Ramsey Network app on your smartphone. It's the only place to listen to the entire back catalog of episodes. Download the Ramsey Network app in your favorite app store today.