The Ramsey Show - App - Where Do You Draw the Line on Helping Kids With Money? (Hour 1)

Episode Date: April 13, 2023

Dave Ramsey & Rachel Cruze answer your questions and discuss: "What do we do with money that's over our Roth limit?"  "Where do you draw the line on helping kids with money?" "How do I factor in military retirement?" Saving for a house, from the blog: How to Save for a House, 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

Live from the headquarters of Ramsey Solutions, broadcasting from the pods, moving, and storage studios, it's The Ramsey Show, where we help people build wealth, do work that they love, and create actual amazing relationships. Rachel Cruz, Ramsey personality, number one best-selling author, and my daughter is my co-host today. She's also the co-host of The George Camel, who was a big star this week on Smart Money Happy Hour,

but George's new YouTube channel launched, and he's a big deal now. I know. He's diversifying the love on the Internet. He's doing big deal now. I know. He's diversifying the love on the Internet. He's doing other stuff now. That's a nice way of saying he abandoned you. I felt a little bit. No, it's great. I really am.

It's such a great channel. He's done such a good job with it. So yeah, the George Camel New YouTube channel. You need to check it out. Camel with a K. And check out Smart Money Happy Hour. Anyway, the phone number here if you want to talk is free, and some say the advice is worth exactly what you pay for it. 888-825-5225. Thank you for jumping in. John's going to start this hour in Oklahoma City. Hey, John, welcome to the Ramsey Show. Hey, Dave and Rachel. Thanks so much for taking my call. I'm a big fan of the show. Um, my question for you guys today is about the adjusted gross income limits, uh, you know, the income limit to be able to contribute

to a Roth IRA. Um, so in 2022, like, you know, my wife and I already, we already contributed like our 6,000 each, you know, a couple of months ago toward the 2022 year. However, we just filed our taxes with our tax guy yesterday and learned that we made just over the adjusted gross income limit, apparently, which I think is $214,000 for 2022. And apparently we made $215,000. I hate it when you make too much money. That happens all the time. Gosh. He missed it by $1215,000. I hate it when you make too much money. That happens all the time. Gosh.

He missed it by $1,000, though. It's like, man, right there. You're okay. You're just going to have to do some gymnastics, okay? Are you working with a SmartVestor Pro or with a good investment broker that's helping you do this? No, sir. Okay. Reach out to one of our SmartVestor pros.

You're going to have to undo the Roth that you did because you don't qualify for a Roth. And so that's going to get backed out, okay? And then you make an investment. You need to do what's called a backdoor Roth, but you can't do it from where you are. So you've got to back out from where you are back to even, okay? Now, a backdoor Roth, I do them, and my income is more than that.

So a backdoor Roth is where you make an after-tax traditional IRA contribution, which is very weird. Okay? And then instantaneously, 30 seconds later, roll it to a Roth. There's no taxes due when you do that, but you're not allowed to put money into a Roth, but you're allowed to roll money into a Roth regardless of your income. And so what we're doing is we're opening up an after-tax,

which Roth is after-tax as well. We're doing an after-tax traditional, and you roll it to a roth 30 seconds later so now you've got the money into a roth and you're you're smart investor pro at ramsey solutions.com find somebody in your area you like that can help you back out of the one you're in and then set up the after tax and do the backdoor rollover does that make sense to you yeah i think i'm following you and I can talk with the smart investor pro about other questions. Yeah. And I feel like to that whole idea of the backdoor Roth is something that

I feel like a lot of people don't realize and they don't, they don't even know is an option either. So that's why I think having someone in your corner and investment professional in general is such a great idea because they, they know these types of things and even more of like, what can we do from an estate level planning to your future to retirement, everything? What's best to be able to take advantage of these things that you may not even know, John? And frankly, most people don't. I mean, there's the idea of a backdoor Roth. Some people have never even heard of it. Exactly. It's technically a loophole. One of these days, they're going to write into one of these laws and close it. It's technically a loophole one of these days they're going to write into one of these laws and close it it's technically a loophole because the you know the the very purpose

of having the limits is to keep wealthy people from having a Roth because wealthy people are supposed to be punished in America so that's who we are now anyway that's tax law so that yeah that's the thing so Rachel's exactly right it's always good to get a SmartVestor Pro, at least someone like that in your corner. And here's what you're looking for to remind you folks out there, because we've got a lot of new people. When you're hiring a SmartVestor Pro, you're always looking for someone that does not have the heart of a salesman. Instead, they have the heart of a teacher. Yeah. they have the heart of a teacher yeah because you you you the you do not need to do things with your money because rachel said to do them with your money or dave said do them with your money

or some goober in a suit at an investment place said to do them with your money it's your freaking money and the number of times you have more money than the person you're talking to is not that unusual. Well, and I think what's hard with investing specifically, because I even felt this way when Winston and I first were looking at retirement and all of that, it can be so intimidating because there's terms, there's even having to follow a map of like, okay, this to that. And what is that again? I'm confused here. I mean, it's just, you're learning a whole new set of knowledge. For most people you're learning a whole new set of knowledge. For most people, it's a whole new set of knowledge. So to have somebody who's a professional sitting on the other end of the desk,

that you feel like, okay, you're actually a person I can talk to. And I don't feel stupid. I can ask questions. Their job is to educate you. It's to teach you this. Not to wag their finger. And you should do it just because they said. That's right.

And a big part of learning, learning though is getting your questions answered and learning so much we say to the point that when you walk out of that building that you could explain to a fifth grader what you just did with your money like you you need the basic knowledge the overall knowledge of what happened and again people don't do that in the investment world they sit across from somebody they're intimidated this person's saying this this and they just say sure that sounds great yeah whatever you want to do yeah i mean i trust you go do and that's not the way i did let me tell you what that gives you it gives you when you trust somebody you just throw it across and you don't know what the flip's going on two things are going to happen to you in your life one is every time you hear bad news about the economy and the stock market on the news you're

going to freak out because you don't know what the flip is going on. Number two, you're going to get conned. You very seldom get screwed on things you understand, but you'll get screwed and conned. And let me tell you, more often than not, someone that's going to mess you over and screw you over is not an actual con artist. They're just stupid,

and they're enthusiastic ignoramuses and they've talked themselves into it and then they talk you into it and because somebody talked them into it and that's all that and nobody nobody in the whole chain decided to stop and go how the flip does this really work anyway that's a good point because ignorance is as dangerous as a con artist because you're like oh my gosh if they really don't understand or know what they're doing on that end yeah or they got sold some idea or some product and they're trying to get you in it yeah i'm convinced that a lot of people that sell whole life life insurance are that they really believe it's great. Yeah. And they're just ignorant. They're just enthusiastic ignoramuses. And they don't last. I mean, 90-something percent of people sell

whole life or gone. They don't even last one year in the business. Because once they start figuring out that the stuff is as bad as it is, people with honor and integrity won't sell it. But boy, buddy, they get all fired up about it and open up a Tic Tac account. You know, there you go. This is The Ramsey Show. Rachel Cruz, Ramsey personality, number one bestselling author many times over, co-host of the Smart Money Happy Hour. My daughter is my co-host today.

Hey, when folks are calling us for advice on their money, you can hear how worn down they are sometimes. When you're living paycheck to paycheck, you feel like you're getting your teeth kicked in. Been there, done that. Sometimes your family's falling apart. You're stuck in a cycle. And the worst part is you don't think there's any way out. Well, you do not have to accept that. It does not have to be that way.

I know it's scary, and I know you've had the crap beat out of you. Me too. I know what it looks like. I know what it feels like. And sometimes it's your fault. I know what that feels like. I've got a PhD in DUMB. I know what it looks like to do stupid with zeros on the end.

I've done it. But we're going to do something special for you. Or maybe you know someone that's like that. Or maybe you know somebody who's just kind of hovering around the edges of this common sense Ramsey stuff. This Saturday, we're doing a free live stream from our Smart Conference weekend. Now, the Smart Conference is sold out, so just go ahead and get your FOMO going. You missed it.

But we're going to stream for free the first couple of hours and hear me speak briefly. And Rachel Cruz and George Camel both are going to do their talk about how to get your income up, control your spending, change your mindset. Sign up for free at RamseySolutions.com slash live. Rachel, give them a little preview. What are you going to be talking about? A smart conversation. I know. So it's just George and I's talk.

Right. Because we have other keynotes throughout the whole day. So it's just the morning. Okay, perfect. Yeah, I'm talking about the four lies that our culture, our society believes about money. So it's everything from the stuff you hear with debt and all that, but also your identity and how much

that is placed. That scorecard is so huge in America about your number, right? Whether it's your income and what you make, how much that is placed. That scorecard is so huge in America about your number, right? Whether it's your income, what you make, how much money you have, like it has become this identity where your net worth has become your self-worth. And so kind of unpacking that and how do you look at money in a healthy way? That's one of the lies talking about that you're not supposed to do this alone. And again, so much of our world applauds independence and there's like a healthy level of independence but then also you can become so isolated because you're so independent

doing your own thing versus bringing people in and living in community and uh john delaney talks a lot about friendships and relationships and how key that is to having a holistic life so that obviously plays into your money too so we could talk about that so uh it's a really fun talk i'm really excited about it. It's a great talk. It's going to be great. So George Camel, Rachel Cruz, both talking and teaching money first thing in the morning on Saturday morning, this coming Saturday, day after tomorrow, the sold out smart conference. You can join for free for the first two lessons.

Just well, the first two lessons on Saturday morning anyway. Just jump in at Ramsey solutions.com slash free and you can register slash events slash events are live it is free whoa don't hit that mic it's live are you sure it says okay yeah i'm looking at a monitor over there okay that says slash live yeah there we go okay i dropped my copy but there we go we got lots of places figure it out it's at ramsey solutions.com but slash live. Yeah, there we go. Okay. I dropped my copy, but there we go. Slash live. Did you throw it away? We got lots of places. Figure it out. It's at RamseySolutions.com. But slash live is what the copy says.

I'm sure it'll come up. Don't miss this live stream and spread the word. Put it out on your social. Tell people. It's completely freaking free. So if you don't like it, just turn it off. But you're going to love it. All right.

Lisa is with us. Lisa is in Jacksonville, Florida. Hi, Lisa. Welcome to the Ramsey Show. Well, thank you, Dave is with us. Lisa is in Jacksonville, Florida. Hi, Lisa. Welcome to the Ramsey Show. Well, thank you, Dave. Good afternoon. How are you guys? Better than we deserve.

What's up? So my husband and I, we have a blended family. He has two children from a previous marriage, and I have four children from a previous marriage and three grandchildren. Of late, each of the children for various reasons and in different circumstances have gotten themselves into a situation where they need help, which is understandable. The last of the brood are 17-year-old twins who will be graduating high school this year and the oldest would be my 31-year-old daughter and her three children.

And so we've got everything in between. We're trying to figure out where to draw the line to help them and not enable them. I don't believe that money is the answer to everything. That's just not how I view money. And I don't want them to think that either. And we are certainly not independently wealthy. We work very hard for what we have. So what was the last request that spurred this call?

Hello? I'm sorry? What was the last request from a kid that spurred this call? Well, my second oldest daughter, who is 21, got into some trouble at school, and it looks like there's going to need to be money paid out. And my oldest daughter got into an automobile accident where the car was totaled, and then she had to admit to me that not only was she behind on the car payments, but did not pay the insurance. Okay.

Your youngest getting criminal activity, or your middle one, criminal activity? Misdemeanor, yep. She got in trouble, and it looks like there may be some restitution that might be being requested. She's a junior in college. Like how much? Undetermined. I really won't know anything

about it. Well, $10,000, $1,000. I'm going to say maybe $5,000. Okay. Lisa, my knee jerk is, which granted I have three little ones at home and i'm realizing after you experience parenting you have different opinions on stuff so so rachel in 10 years may have a different opinion lisa i'm going to humbly say that so to me the 21 year old are you still are they still under you financially your daughter is are you guys paying for school are you helping her out or is she completely independent financially she is not completely independent with all of my children i've tried to follow the same protocol as soon

as she turned 18 i had the cell phone put into her name she pays for that i just turned over the vehicle that i was allowing her to drive in her name. Within the last two or three months, I put the insurance in her name, and she pays that. If she needs help with her bills, she knows that she can come to me and I'm willing to help out because I know that school is becoming more taxing. Sure. But those – it's part of being an adult, you know. Yeah, no, absolutely.

Because for the 21-year-old with a whole criminal thing and you're a junior in college, all of that, for some reason, I have, as a parent, I feel the need to step into that situation faster than I would the 31-year-old in the car I want to ask. So, you know, for the junior in college, so there's obviously, there's choices that are being made in life that are not wise. So there's a big thing there. That's not necessarily a money issue. It's become a money issue because she may have to pay $5,000 or whatever it may be. So you helping pay the financial side of that while walking with her through life and saying, hey, how can I walk beside you as your mom and love you well and understand what caused the situation? That's one thing for me. The 31-year-old, I'm like, okay, so then why are you behind on your car payment? Why are you behind on your insurance? Because that's an adult problem. To me, that's an adult problem. You didn't pay something that

you're supposed to be paying. And so why is that? Is it because you don't have the money? Is it because you're not keeping up with payments and all that? So asking that why question is really big for me, Lisa, to understand am I enabling or am I helping? But that 21-year-old, for some reason, my heart was just like, whew, that's not a money problem. Yes, it's become a money problem.

But there's life choices that are occurring there that I would want to step into fast. The level of help that we would extend would be based on really two things. How repentant are they? And repentance means turning away. So we were walking towards stupid or we were running towards stupid. We not only stopped, but now we're running the other way. That is repentance. I'm never going to do this again. I'm completely changing whatever behavior that caused this in either of these cases

and I'm running the other way. I just need some help this one time to turn the corner. That is repentance. If that is not there in spades, I mean like enthusiastic repentance, just let them bathe in it. Let them bathe in the pain. If that is there, and then you can figure out how you can, on a one-time basis, help them move towards smart from dumb with a little bit of cash on a one-time basis then that's good where we just continually are bailing them out that's enabling or where you're bailing out someone who's not repentant then you want good things for them more than they do and only lisa if you guys have the money you said we're not financially yeah well only if you don't have the

cash you can't help you can't help. You can't help. Sorry. Sorry. Yeah. Nope. This is The Ramsey Show. Rachel Cruz, Ramsey personality, is my co-host. It is Financial Literacy Month, and we're celebrating the incredible work of incredible teachers that help us with foundations in personal finance and all the work they're doing. Our foundations in personal finance curriculum for high schoolers, teaching them common sense about money, is now in 48% of the high schools.

That means there's 52% that don't have it. That's a problem, because everyone should be learning this stuff. We have one of our foundations. Financial literacy is an important subject. We don't talk about it with our kids enough. That's why we created this Foundations of Personal Finance curriculum. It's now been taught, as I said, in 48% of the high schools. Over 6 million students have now been through this.

We've got one of the foundation's teachers on the show with us today to celebrate this month. Orlando is a teacher in Memphis, Tennessee. Hey, Orlando, how are you? Dave, I'm doing great. It was great to talk to you. All my students are excited that I'm talking to Uncle Dave and the Rachel Cruz. Uncle Dave and Cousin Rachel. There we go. I love it. So what school do you teach at, Orlando? So I teach at Memphis University School right here in Memphis, Tennessee, not far down the road from you. We're a private high school of about roughly 700 kids,

college preparatory school, big academic excellence, good athletics, and just always teaching the boys how to do right here. Very cool. So it's a boys' school? It's a boys' school. It's all males? Yes, sir. Okay, cool. Very cool. I love it. boys' school? It's a boys' school. It's all males? Yes, sir. Okay, cool.

Very cool. I love it. That's interesting. All right. So how long have you been teaching foundations? The literal curriculum that you have put out, we've only done really for the last three years. One of our great alumni decided to donate it to the school. But, Dave, I've been teaching your principles for at least the last 10 years here at the school.

I've listened to the show for a lot of years. And to be honest with you, I've memorized pretty much all of your lines and all of your curriculum. And so we've had it in some way, shape, or form for about the last 10 years. And the kids absolutely love it. That's so great. So Orlando, if it's been over a decade of teaching just the principles in general, do you have students that come back after they graduate or they go to college or even after college

and they come back and they're like, oh my gosh, what you talked about with money in our class, I used it and there's like success stories around it? Son, who's 24 now, really took to it. And he started his own financial blog. It's a financial literacy blog. And what was funny about his first post in it was, I had to sit there and listen to unsolicited lectures about Dave Ramsey's principles, but it finally took, and he's on path to being a millionaire. And one of my best success stories, young man named JJ Johnson, currently a senior at Vanderbilt. He had been at one of my summer camps. I work with

a group called Rising Together Foundations. And what I do is financial literacy for young kids. JJ was a counselor, sat there, listened to it and took the knowledge and said, man, I got to do something at Vanderbilt. Got together with a couple of his friends, Gabby Martin and Kevin West, and they started money readers right there at Vanderbilt because he saw Vanderbilt students just taking loans left and right, not knowing how to manage their money and not understanding compound interest. So JJ got together with them and started that group. And I get young people all the time, alums calling me. A lot of times they're asking advice. Hey, I'm getting ready to open a Roth IRA. What do you think?

That's amazing. That's very good. I'm like a doctor. I'm on call. Just call me. I'm ready to go to talk to you. You're a good teacher. That's amazing.

You are a great teacher. Thank you. We need people like you all over the place in America. Thank you for doing this. Absolutely. My pleasure. Yeah, it's more of a thankless job than it used to be to be a teacher these days, and it shouldn't be.

So we admire you. We appreciate you, all of you that are teachers. It's an incredible, incredible calling. Okay, so you're in the classroom with juniors and seniors, and you're going through the Ramsey Personal Finance Foundations curriculum. What's the number one question you get from the kids? Okay, so it's a million of them, but what it is, Dave, that they love, and you do it all the time, is the power of the compound interest.

If you'll allow me, I'm going to give you a quick example. I did this the other day. I do the car example, and they love to see the car example. One guy purchases a brand-new car in America right now. It's $49,500. If he has good credits, about 9%, 72 months, that's $900 a month. You're going to pay $64,000. It's going to be worth about $18,000 after seven years. That's a $46,000 loss. Then I take guy B and say he drove Uber, delivered pizzas, scraped together $2,000. He takes the same $900 payment. Now, he's not going to be able to

put all of it into a mutual fund, obviously, because you need the sync fund for repairs. I know this because I've done it before. $200 a month for the sync fund for repairs, $300 a month to replace the car in two years. You'll have $7,000 to replace it in two years and another $7,000 to replace it. And then the other $400 goes into a mutual fund that outperforms the S&P. Now you've got a $52,000 gain versus a $46,000 loss. Now, my math, that's a $100,000 opportunity cost going to the guy that bought the $2,000 car. And the main difference between the two of them, the only other difference, one looked to go to the stoplight.

So when they see that math they go nuts and they're like you get mr k tell us the next thing because that's amazing i want to see the next way that i get compound interest working for me yeah that's powerful numbers work because i've done them in my own life yeah and i'm on face for millionaire status even though i didn't start doing your stuff till i was 40 so the stuff works and the kids love it because they know it works. Orlando, thank you. Thank you for being who you are, for being the kind of man you are, the kind of teacher you are. And thank you for teaching the foundations and personal finance curriculum.

You're a hero, man. You're absolutely amazing. And I think what's so refreshing about doing the high school, even that example of using a brand new car versus you know a two thousand dollar car is high school students it's almost like they haven't been uh persuaded in culture and in life brainwashed brainwashed into believing again that it's like oh my gosh if i have a great car i have to have a great car there's something about the car that is such an identity piece to us as adults and they haven't experienced that yet so they it's almost like this car that is such an identity piece to us as adults and they haven't experienced that yet so they it's almost like this purity that they're looking at these numbers because they're like they haven't felt that pressure in a really deep way besides as much as teenagers compare which i know they do but on in a really deep way so i'm like it's so fun to

hear 16 17 year olds be like oh yeah well of course of course before they're tainted with the idea that like no you have to have a nice car you have to have a great car you have to have a great car and that's part of your quote unquote success so it just it just shows that they they are sponges and these high schoolers they they are they're getting it winston and i were downtown last night for this concert event thing um and we were in the parking garage and this young girl i mean she probably was college or early 20s and yeah she stopped me and she was like i took your personal finance class oh my gosh you know so she was just telling me how how great it was like i still use this stuff today and i was like oh that's so great so that's cool so they're just sponges i'm like so parents out there that's encouragement to you

to start if you're not talking to your kids talking to your teenagers about money and some of your businesses in the areas you could could do what that guy did. And teachers, yes. A local entrepreneur sponsored that class, paid for it for that high school to get this class. And get it in the classrooms. And, man, you talk about investing. That's good investing right there. That's awesome stuff. So we're celebrating, as we said, the Financial Literacy Month.

We do this with a teacher appreciation giveaway. If you are an in-class teacher of any kind, I don't care if you teach kindergarten through K through 12, if you teach in a class, you're a teacher. We want you to enter the Ramsey Teacher Appreciation Giveaway. No purchase is necessary. Sponsored by the Army National Guard. One teacher randomly is going to be drawn and will win a five thousand dollar vacation of your choice

we're going to write a check of five thousand dollars to whoever you say you want to go on vacation with and two more teachers are going to win three thousand dollar vacations each because lord knows a good teacher needs a vacation. So there we go. Check it out. Go to ramseysolutions.com slash teacher to enter. If you're not a teacher and you love one, one that you had as a student, or maybe you're married to a teacher, or maybe your brother or sister is a teacher or whatever, tell them to go to ramseysolutions.com slash teacher to enter. This will end at the end of the month. April is Financial Literacy Month. This is our teacher appreciation giveaway brought to you by the Army National Guard.

Very cool stuff. These teachers are amazing. They're amazing, and we need to salute them. We need to back them. We need to support them, and this is just one little way we can do it here at Ramsey. This is The Ramsey show Rachel Cruz Ramsey personality open phones at 888-825-5225 Sean is with us in Washington DC D.C. Hey, Sean, welcome to The Ramsey Show.

Hi, Dave and Rachel. Thanks for taking my call. I actually have a two-part question related to how military retirement and VA disability factor into retirement savings. Okay. And just a little background. My wife and I are both retired military. We're debt-free, and we're on baby steps four and six. We have, between our military retirement pensions and our VA disability, it's about $110,000 a year. And then we both currently work and bring in an additional $125,000 in income from those jobs.

Wonderful. Yeah, our assumption has been that we invest 15% of that retirement and VA disability even though it's quote-unquote a pension. So that was my first question. Is that correct according to the Baby Steps? Well, I mean, the purpose of Baby Step 4, putting 15% away for retirement, is to build wealth. Right. And so, obviously, the more you put in the build wealth category, the more wealth there's going to be.

So, I would tend towards agreeing with you, in other words, because I want you to build a big old hairy nest egg. And you have a great income. I don't know why you couldn't save. I mean, you make $250,000 between all of these sources, income i don't know why you couldn't save i mean you make what two hundred fifty thousand dollars between all of these sources and i don't know why you couldn't save thirty thousand dollars or forty thousand dollars it's you should be able to and you're going to want that um it's not as if you need it to eat it's just a matter of building wealth at this point to be able to change your family tree to be generous to um enjoy and those kinds of things but this is not a oh if you don't save you're going to be generous, to enjoy, and those kinds of things. But this is not a, oh, if you don't save, you're going to be eating dog food at retirement

because you're not. I mean, you've served your country. Thank you for that. And your country is giving you a wonderful military retirement. Good. We should. And you guys served, and that's the deal you made. And so, yeah, that's good.

And then you got the extra income on top of that. I would. I would save out of everything 15%. Because when we get to baby step seven and the house is paid off, we don't have a 15% rule then. We say, you know, save all you can. Invest all you can. Okay. Give all you can and live all you can.

We want to load it all up. And so that leads me to the second part of my question is, is there ever a time, you know, this income, the VA disability and military retirement are essentially until we pass away. Is there ever a time where we say we don't need to invest it anymore? Or once we're retired and enjoying our retirement life, do we stop or do we keep going forever? I don't think you're going to need it. Okay.

I mean, you, again, you know, you're going to have a pile of money. You're going to have these wonderful retirement benefits, and you can continue to invest. Now, if you do not have an earned income, meaning all you have is military retirement and disability, you cannot do 401ks and Roth IRAs. You have to have an earned income to do those. So at that point, you'd be limited on that. But could you just put it in mutual funds?

Sure, you could. I just don't think it's ever going to be a thing where you're ever having to make a choice between a good life and continuing to invest. I think both of those are going to coexist because you've done a wonderful job. Yeah, our dog, he heard me just mention money and he ran off because we're, I don't say we're gazelle intents now on paying off the house, but we're definitely white-tailed deer intent we're working hard to get our house paid off so we can get the uh so we can really get into i think that's accurate i've seen both in the wild and white-tailed deer are definitely a lazier

gazelle they're so fast they can go but not like a gazelle sean thanks for your service that's very cool you and your family we appreciate you asher's in oklahoma city hey asher what's up hey uh thanks for taking my call sure so pretty much i'm trying to decide if i want to um do step three b to save our house or if i should start four which already did, and then save on top of that. So when are you looking to move? When do you want to buy a house? Well, I'm renting right now. I know. Do you...

I'm not looking. Are you in a position... It seems like I'm afforded, I guess. Yeah, are you in a position, meaning life stage-wise, that you're going to be staying in Oklahoma City for a bit do you see yourself being there permanently for you know multiple years uh at least for the foreseeable

future yeah okay okay when do you want to buy when I can't so I was no I mean when do you think you're actually going to be ready to buy what's your plan well I crunched the numbers, and it would take about five and a half to six years if I didn't do baby step four at all. To save up 5%? To save up enough to send the recorder to my take-home and a 15-year fix. What do you make? 67 base. What do you make? I made 77 last year.

Okay. Are you married? Nope. Okay. base what do you make i made 77 last year okay are you married nope okay why is it going to take you six years to save up a down payment that's ridiculous yeah well um 185 000 house away did my numbers on and to be able to keep it under a quarter of my take-home, I would need to save up like $100,000. No, you must have done something wrong. That doesn't work. You're going to afford more than an $85,000 mortgage on a 15-year fixed at a quarter of your take-home when you make $75,000 or $80,000 a year. So you messed up something on the math, dude. Yeah, and so that changes the formula so i i think what you gotta

do is you gotta what i do might do is just holler at churchill mortgage and start talking to them about how this is going to work exactly what you've got to do get some real numbers and um if you're if your take home if you got a bunch of crap coming out of your check other than taxes that's not what we mean by take-home pay what we mean by take-home pay is after tax okay so if you've got like an 800 health insurance thing or child support or a car payment going to your credit union or something like that yeah and you're calling that take-home pay then that might mess up the numbers but with what you make you can qualify for more than you're talking about and so then what you've got to do qualify for more than you're talking about.

And so then what you've got to do is you've got to, you know, because we're at a 6% rate right now, roughly, is where we're hovering right now on fixed rates on a 15 year. Yeah. And so. 6.8. No, just. Break. Yeah. I was just running his numbers.

Yeah. Okay. Property tax, everything. So. I had 6.3 at the beginning of the week. Maybe it jumped up. I don that's uh but right in there and the point here is that uh you know you get your numbers right and then you start figuring out how you're going to do your down payment but dude you do not have to have a hundred thousand dollars down on 185 000 house that's just not that is not going to be where you know because this is even saying you know because we say for first-time homebuyers too that you know the range really

is from five to twenty percent is kind of like that ideal twenty percent is great to avoid PMI but if you're a first-time homebuyer it can you know it can be as low as five percent now don't quote me on this this is just I just pulled up a mortgage calculator real fast it's looking like a down pay for a 15 year no not No, not the down payment, the payment. He was concerned about getting the payment low enough that it was a fourth of his take-home pay. Yeah, but his monthly, yeah, it would be a $1,600 payment. On what, $185,000?

On $175,000 is what I put in, and a down payment's $8,750, 5%. I mean, so I would run those. But he's going to have to put down more than that because 1,600 is going to be more than a fourth of his take on pay on 7,700. That's not what I'm talking about, but it's not going to be $100,000 down either to get the payment down low enough. So, you know, you may have to have 30 down or 40 down or something like that.

And during this time i'm sure your your income is going to be coming up yes over those years that's such a good point um but but i will say because people they do get frustrated with our house formula saying that it's very conservative there's you know when you when you run the numbers 30 years yeah yeah i know that's but i'm just saying for 30 years they've been no i know i know i i felt it as a as a wee child that they've been frustrated i know uh but the but the why behind it though is what ends up happening is that home ownership the quote-unquote american dream robs so many people from their income that you you pay so much out on a on a mortgage that you

don't have the margin to invest and to give and to save and to do all these other things with your money because so much of it goes to the mortgage. So that's one of the whys. Just because you're pissed about interest rates or you're pissed about house prices or you're pissed about Dave Ramsey, none of those things give you a pass on math. Math will still kick your butt. So you don't get a pass. This is The Ramsey Show. Hey, it's Rachel Cruz. If you love the show and want a deeper dive on your money journey, we have a weekly newsletter that gives you trending and helpful articles and tips on following the Ramsey way. Just go to ramseysolutions.com

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