The Ramsey Show - App - Why Leasing A Car is Financially Stupid (Hour 1)

Episode Date: August 24, 2018

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Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show. Where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. This is your show. It's a show about common sense for your dollars and cents. God's and Grandma's ways of handling money. Ancient wisdom. Common sense. Yeah, learning to say no to yourself so you can say yes to others later. Hard to be generous when you're a broke person, have you noticed?

When you're a broke person because you keep buying stuff that you can't afford with money that you don't have to impress people that you don't really like. And this show is all about waking up the culture in that regard. So thanks for joining us. Open phones at 888-825-5225. Trey starts off this hour in Sacramento. Hi, Trey. How are you?

Hi. Hey, Randy. How are you? Better than I deserve. How are you? Hi. Hey, Ramsey. How are you? Better than I deserve. How are you? Actually, I have been, because of the pastor Bill Carlson in Sacramento, I've been involved in your institution about 10 years now. Oh, my goodness. Yeah, and it paid off. The material was well worth it.

Well, thank you. How can I help today? I think you should increase it, just a side note. So I went to Geico to increase my deductible um and uh well to increase it um they the geico insurance agency itself says well due to the clause in my loan car loan uh i couldn't raise my deduct with any higher than 500 i never knew that i've never seen that before but i don't doubt it's there they're trying to make sure that they're uh the bank's trying to make sure that the car that they own more than you own is actually insured to where it gets replaced if something happens so how much do

you owe on this car actually i owe 20 no as you were i owe twenty thousand dollars on it wow okay so when are you gonna get it paid off? Well, see, that's it. Paying off would have been by December, but if you read the clause, if you pay it off before a year, then the gap is not covered. The gap or gap? What gap is not covered? What gap is not covered? What gap is not covered? So there's a thing, well, when you purchase a car or so, they have it where you pay your insurance, and it's assessing at the gap.

There's gap insurance that says if your car gets totaled and you owe more on it than it's worth, the gap insurance covers the difference. That doesn't matter if you pay the car off. Okay. Okay. Okay. And I'm glad we had this conversation. So, yeah.

If you get paid off by December, then you can set the dadgum deductible at whatever you want it to be at. And the way to look at your deductible properly, Trey, is, you know, shop it with an insurance broker. Go to DaveRamsey.com. Click on ELP for car shop it with an insurance broker. Go to Dave Ramsey dot com. Click on ELP for car and homeowners insurance there. Get with a broker in your area. They'll shop several different companies. Now, if you're going to raise your deductible from 500 to, say, one thousand dollars, you're going to take five hundred dollars and more risk.

And the way you decide if you want to do that is you look at the savings of premium that that creates. If that creates $5 a year in savings, it would take 500 years to break even. I don't think we'll do that. Okay, it's $500, right? Savings. And I take 100 years to break even. I'm sorry sorry my math was bad either way we're not driving the car that long so uh but if it saves you you know three hundred dollars a year by raising your deductible by five hundred dollars then you only got to drive the car a year and a half two years to be actually making money even if you had a wreck after that. So you measure the extra risk you're taking against the premium savings, and that's called a break-even analysis.

And you look and say, am I going to drive the car that long without a wreck on average? And, you know, you just kind of look at, you know, are you accident prone or not, that kind of a stuff. But, you know, if you can make your money back on the deductible in under five years, usually it makes sense to do it if you break even on that. And that's the way you look at how high to raise your deductible. And I've run that analysis sometimes, and it's 10 or 15 years you've got to go without having a wreck before you make your money back.

I'll let them take the risk for that. I'm not planning on having any wrecks, but 10 or 15 years, I've seen the way some of the rest of you drive while you're eating and texting and putting on your makeup and combing your hair and everything else. And one of you is going to hit me probably during that 10 or 15 years. So I'm going to go ahead and carry that extra deductible. Valerie's with us in New York. Hi, Valerie. How are you? I'm excellent.

Thank you. How are you? Better off. Better than I deserve. How can I help? I have a question about credit card debt and settling it versus bankruptcy versus paying in full. Okay.

I have a very large amount of credit card debt, a car loan, a consolidation loan, and a student loan. I am trying to pay those things off. Good. I'm going through a divorce. I'm going to get a sum of money from being bought out of my home. Uh-huh. So I potentially could pay everything in full

and be at zero. My question is whether or not, I'm trying to salvage my credit score, obviously, because I would like to be in a position in a few years where I could purchase my own home. So I guess I'm wondering the difference between settling some of these credit card accounts and having some money left in the bank instead of being at zero. How much credit card debt have you got? Probably a little over $40,000. Okay, and how much in the consolidation loan? The consolidation loan is about $3,700 left.

Okay, and what about the other loan? Was it a car loan? The car loan is about 3,700 left okay and what about the other loan was a car loan the car loan is 16,000 okay and how much is the sum of money uh i'm gonna get around 80 a little over um my student loan i'm hoping is um gonna qualify right about now for loan forgiveness i've paid it on time for 10 years with no issues, and I'm in the field of my degree. So I'm hoping that I qualify for that. I'm in the process of that. So hopefully that can be cleared. What's the balance? On the student loan?

I don't know off the top of my head. Okay. It just automatically for so many years. To answer your question, this, your credit bureau report or your credit score has to do with did you pay the accounts as agreed? Right. So my credit report, my score is low because of the amount of debt that I have. Yeah, but if you don't pay the debt.

I have paid every single thing consistently. If you don't pay the debt in any form, you're going to lower it substantially. Bankruptcy is going to keep you from buying a home for several years. So bankruptcy is off the table. Everything is paid on time. You have the money to pay the bill, so bankruptcy is off the table. It's not even up for discussion. The only thing is, do you settle a debt for less than is owed?

And basically, let's say that I owed you $10,000, and I had the money to pay you, but I hadn't paid you in a while and you didn't think you were going to get your money. And then I said, hey, would you take $3,000? You went, yeah, because I'm probably not getting anything anyway. But that's not going to make you real happy because you didn't get your $10,000 that was owed to you. That's the way the credit card companies feel, too.

Actually, they don't have feelings, but that's the way it reacts on your credit bureau report. So just pay it all in full is what you do. Okay, things are getting pretty weird out there. I thought the Equifax breach was bad enough. It exposed the personal financial info of half of all Americans. Now we have breaches affecting almost every U.S. citizen, and the data stolen is more personal and equally dangerous. One company had over 230 million consumer files hacked, which included not only the home address, but info related to religion, pet lovers, smokers, you name it. And the businesses were not any luckier this time, with 110 million files hacked.

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How are you? Hi, Dave. I'm great. How are you? Better than I deserve. How can I help? So I have a question about a car lease. Okay.

My husband and I make about $90,000 a year gross. We have no debt, no children. We live well below our means. Our total absolute necessity cost every month is right around $2,000. We bring home around $6,000. And my husband wants to lease a cheap car, something like a Hyundai Elantra or something like that. And I want to know if I should say yes to it. Why?

Well, because we've always bought cars that were about 10 years old, paid about $5,000 cash, and they've always given us problems. The one I have now is about to lose its transmission. Do you have any money? And I think he's just tired of that stress. Yeah, he wants to buy a new car. He just wants to buy a new car. You don't have the money to buy the car? We could if we wanted

to deplete our savings and I'm not willing to do that. How much is in your savings? Right now, about $15,000. Okay. No, I wouldn't take it down. Is that your only savings? That would be your emergency fund and everything? No, our emergency fund is separate.

How much is that? About three months' worth of expenses in the emergency fund. Why would you not spend the other $15,000 on a car if your transmission is going out on a car? I guess because I have a really unhealthy relationship with money. I grew up very, very poor. I've never really had a sensible income before. So why would you want payments then? I don't know the answer to this question.

He really wants to lease a car. Okay, well, let me start. Let's go at this another way, okay? Leasing a car is financially stupid okay it's the most expensive way to operate an automobile according to consumer reports smart money magazine and my calculator it is the most profitable way a car dealership can sell you a car. They make more money on the contract of the lease than they actually do spread of profit on the car. Plus, you're buying a new automobile, which is going down in value like a rock. Now, I don't want you to go buy a $5,000 junker anymore.

I get that you're tired of those. I get that you make $90,000, but I would go buy a $5,000 junker anymore. I get that you're tired of those. I get that you make $90,000. But I would go buy a $15,000 really, really nice one- or two-year-old car and get over yourself on your worry about your childhood or whatever. You make $90,000 a year. You don't have any payments. You've been very responsible. But, no, I would not. Leasing a car is just a it's financing

a car at 15 interest a new car a new car that goes down in value faster than anything else see you take that take a twenty thousand dollar car twenty twenty five thousand dollar car okay that car is going to be worth $10,000 in 48 months. That's straight up stupid. Okay. Unless you're worth over a million dollars, you should not buy a brand new car under any circumstances. But you should never lease a car under any circumstances at all because all it is is financing the car. You're just borrowing the money. Okay.

So a two-year-old vehicle is it's fine that's a good purchase the typical millionaire until they become a millionaire or greater drives a two-year-old or older car that no one knows they're a millionaire and they pay cash for them most of the loss of the value occurs in the first one to two years i mean think about it the worst car accidents happen on the showroom floor as soon as you drive it off the curb it has dropped in value right right by the time you get it home i mean we all know this it's kind of common sense but what's happened here is as you guys have saved up the money you're clutching the 15 000 with both hands till your knuckles are white and he and he's tired of messing with these dadgum,

half-butt, breaking-down cars y'all have been driving, and you make $90,000 a year. So he's got a right to be disgusted with that part of it, but his reaction due to his disgust is taking him into the land of stupid. Is that logical? Do you see what I'm saying here yes so it's not a stupid man but he's getting ready to do a very stupid thing out of frustration so yeah and i was just hoping i could let him do something stupid as a way to make him happy but no no no

no no no never never let someone hurt themselves or you as as a way to make them happy that's just enabling that's codependent as it can be. Now, go look up that exact car. What did you say, a Hyundai Elantra? Yes. Or Sonata? Those are great cars, by the way. They're high quality.

All the reports on them, they're right up there with like a good Honda Accord. They run, run, run, run, run, run, run. I mean, they do really well. But go look at what a two-year-old one is versus a brand-new one with, you know, 15, 20, 30,000 miles on it. Okay, no miles. Just get something real low mile. You might find something with 10,000 miles on it. And look at its stinking half.

I mean, half. I mean, I did look, and it seemed like it was only somewhere between $3,000 and $6,000 different from new. You're looking at dealer lots. Right. Yeah, see, they're trying to sell new cars. They've got the used car prices high. Jump online and do a little research on just used cars, straight up buying a used car in your area. You'll find these depreciations to be very, very heavy.

So anyway, what would I do if i were in your shoes all the data points tell us that the millionaires buy used cars until they're millionaires and they pay cash for them avoid a car fleece at all possible in all possible scenarios it's a really i mean when you put the thing in a calculator and you know how to run the calculator it'll make you throw up. It's horrible. Bob is with us in Louisville, Kentucky. Hey, Bob, how are you? Great. Good.

How can I help? I'm glad to be able to talk to you today. You too, sir. What's up? Well, I've been laid off again. I'm not in a hurry. I'm not hurting. But I'm also not ready to retire.

So I'm trying to figure out what to do with my life because I keep getting laid off. I'm in the education field. And this fellow I know, he's thinking about retiring, and his family doesn't want to take over his locksmithing business. And he's offering the business to me, and he's willing to train me. And, you know, it's so different from being in a classroom, and I'm trying to figure out whether that's something that's worthwhile doing. Okay. Cool. Is it mobile, a mobile locksmith?

Yes. Okay, good, because that's going to be necessary in today's world. How old is this guy? This guy's getting ready to retire. Yes. Okay. And then he wants to sell you the business. Do you have any idea what the price would be?

He's asking $30. Why? What's that based on? We haven't actually discussed how he's evaluating or evaluating his business, but he has mentioned he's made six figures in the past. I think he's brought it down because as he's gotten older, he's done less and less work. Let's stop on business valuation just a second and camp there.

The minimum a business is worth, the floor, the least price, is what he could sell off the parts of the business for, the equipment. If he sold off his inventory and the equipment and just closed it, that's called book value. And so it's worth that or more. The way it's worth more is if he's been making a profit after having paid himself a reasonable salary. But if all he's getting out of it is a reasonable salary, he just owns his job.

He doesn't own a business. So if he's working 40 hours a week and the business is generating $100,000 a year, I suspect if he sat at home, he could hire someone to do all of that work for, say, I'll just make up a number, $30,000. Okay? So just as an example here, if the business is making $100,000 and you could hire someone and be an absentee owner to run the thing for $30,000, then the real profit in the real world is $70,000.

Do you see how I'm doing that? Yes. And then the business would be worth about four times that number. So I suspect... Four times the 70? Yeah. I suspect it's not making anywhere near that. Net profit.

Net profit is what we're looking at. I suspect 30 is a reasonable price. If you can pay cash for it, I don't think that's a bad thing to jump in there and learn and pay cash for it. But figure out why he wants 3030 and when he wants $30 and know we're not borrowing money to buy the business under any circumstances. Lastly, be sure you're studying technology changes in the locksmith world because everything is being affected by technology now. Can you believe this real estate market? Home shopping has become so competitive.

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This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee 37027. In the lobby of Ramsey Solutions, Justin and Ariel are with us. Hey, guys, how are you? Good. We're good. Welcome. Where do you guys live?

Memphis, Tennessee. Wow. And all the way to Nashville to do your debt-free screen. Yes, sir. Welcome. Good to have you guys. Glad to be here. So how much have you paid off?

We've paid off $45,000. Wow. How fast did you do that? It took about a little bit under three years. Okay. Very good. And your range of income during that time? It's about $75,000.

That's the max. About $35,000 is the least. Gotcha. What do you all do for a living? I'm a photographer. And I just opened a home daycare. I was a teacher for five years. Okay, cool.

Very good. So what kind of debt was the $45,000? $40,000 of it was my student loans. Sallie Mae for the photographer. Sallie Mae. Sallie Mae. And five was credit cards. Right.

Okay, cool. So how long have you guys been married? Almost four years. Yes. And five was credit cards. Right. Okay, cool. So how long have you guys been married? Almost four years. Okay. Four years in December. Okay, so after you get married and go along about a year, you decide we're going to get out of debt. Tell me the story. What started this?

Well, I grew up listening to you in the car. My dad plays you all the time. Oh, you're a financial peace baby. Yeah, I am. He paid for five kids to go to college, so I didn't have debt yeah he was hardcore look at him way to go dad and then i met justin and we got together and then he told me he had debt and i was like okay that's not going to stay for long i knew nothing about paying off that okay so because you've been listening since you were a wee child in the car uh justin's got a whole new idea if he's going to marry you.

Whole new world. Okay. All right. But it took about a year to get started? Yes, sir. It took about a year or so just to get really serious. Okay. All right.

Now tell me, what's the secret to getting out of debt? You pay off $45,000. Very good. Very good. Being married to her. And also just being, I guess, consistent and just looking forward to the end goal. Live on less than what you make. We didn't finance anything.

We cash flowed a car. We lived in a tiny apartment and kind of humbly for some years and weren't afraid to look kind of crazy to people. Don't care what other people think. No, not at all. That's good. That's good. So tell me about the home daycare. Did you have a baby and decided to come home and then take care of other people's or how this works? I was teaching for a while and my last year teaching, the Lord was just laying it on my heart to go out and try something new. And so kind of setting it up so when the kids do come that I can be there and just go with the flow. Okay. I love it, though.

Very cool. Very cool. Good. So are you making more money or less money than when you were teaching? So I just started. So right now it's less. Okay. But enrollment and all of that's going on.

And we just bought a new house, too. Ah, okay. Got out of debt and got the house. Yes.'s less. Okay. But enrollment and all of that's going on. And we just bought a new house, too. Ah, okay. Got out of debt and got the house. Yes. Perfect order. Good. Very good. Right.

And that gives you the room to do it. Yeah. Correct. Obviously. We actually have space to have people in the house now. Kind of refreshing. Yeah. Oh, to do the photography as well or just visitors?

Oh, no. Just visitors, family and friends. Just entertaining. Okay. Correct. Instead of one bedroom. Ah, I got you. Yeah, you get out of that little cramped apartment, it makes a difference.

Stretch your legs a little bit. Exactly. That was a good motivation, too, to pay it off. Like, okay, I want to get out of here. Right. I want to get out of here. Let's pay this off. Right.

Very good. Well, congratulations, you guys. Thank you. Did you have people cheering you on? I know Dad was, I'm sure. Who else? Well, he actually passed away when I was in college. Oh, my gosh. Well, he was cheering you on anyway I know Dad was, I'm sure. Who else? Well, he actually passed away when I was in college, but I definitely was thinking about it.

Well, he was cheering you on anyway. Yes, absolutely. Yeah. We were in a marriage group, so we got to share our experience with them along the way of getting there. Family, parents. Yeah, my parents.

And my mom. Alright, good. Very good. Well, family, my parents and my mom. Yeah. OK. All right. Good. Very good. Well, congratulations, you guys. Very proud of you.

Thanks for making the trip from Memphis to do your debt free screen. Absolutely. We've got a copy of Chris Hogan's retire inspired book for you. Awesome. That is the next chapter in your story to be millionaires now. Yes. Outrageously generous along the way. I want to hear from you when you hit the millionaire status, okay?

Absolutely. Very good. All right, Justin and Ariel from Memphis, Tennessee, $45,000 paid off in three years, making $75,000 a year. Count it down. Let's hear a debt-free scream. What are we doing? Five, three, two, one.

We're debt-free! There we go. Game on. Love it, love it, love it. Very well done. Very well done. Kathy's in St. Cloud, Minnesota. Hi, Kathy.

How are you? Good. How are you? Better than I deserve. What's up? So I've got a question here for you on our situation. I'm 26 years old, my husband's 31, and we have a 15-month-old daughter. So currently we're on baby step four, and we're investing at 9.5%.

With my husband's income and mine combined, we make $77,000. Without my income, my husband makes roughly $38,000. Without my income, my husband makes roughly $38,000. Our mortgage is at, we owe $63,000 on our mortgage, and it's a 15-year loan at 4.5%. So when I do the math, that's 27% of my husband's take-home pay, and then if you include property tax, it's 31%. What does your husband do? He is an assembler welder. Okay, and what do you do? I actually am an eligibility worker at the county.

Okay, all right. And so your question is what? So my question is with my job and my pension, I'm not quite yet vested, but I will be in about 15 months. We just found out that we are expecting a second child. And so my question is, is it okay to just pull away and become a stay-at-home mom? Well, what I would do is practice living on his income only, which means you would bank your entire check. Yeah, that's what we plan on doing this winter.

If you can bank your entire check, you've proven to yourself, what I think doesn't matter, but you want to prove to yourself that you can live on his check, right? Right. And if you can do that, say pay all the bills with his, and you put your entire check in savings, I mean, you could pull a little bit out to cover gas or something that you won't have when you're not working, right, outside the home.

And so some of your costs will go down when you stay home. There's some other savings as well, but I don't want to lean too heavily on those. I want you to learn to live on his income. And then the second part of the equation is um i'm gonna have some real strong discussions about what he's doing to increase his income you know he's 32 at 42 i don't want him making 38 yeah you know i hear all these you hear all these news reports about stagnant wages yeah wages are stagnant but stagnant people sometimes have stagnant wages because we just don't pay attention.

And so what you've got to do is not be stagnant. You've got to say, I'm going to look and what have I got to do to make, instead of 32, what have I got to do to make 62? What have I got to do to make 162? And I don't know what he does with that. Maybe he owns a welding shop someday and has people working for him. I don't know. But long-term, 10-year plan, 5-year plan, what are we doing to get his income up?

Because, you know, I don't want you at $38,000, which is less. The average household income in America is about $56,000 right now. And so you would be at, you know at considerably less than the average household income, which is fine, but I don't want that to be my long-term game plan. Does that make sense? Okay. So I want to talk about his career track, and I want you to live on his check. And if you do both those things, then absolutely,

if your desire is to be home full-time with the children, then absolutely go do that. No matter the pension, no matter, you know, because when the second child comes, we'd roughly get about $300 for my income and net income after all expenses, daycare, all of that. Doesn't matter. But I've just been struggling with that. Yeah, it doesn't matter if you can live on his and your desires to be at home. Okay.

And if he has a plan to use my heart and if he has a plan to increase his over time and you know maybe you've got a plan to do something and start a business or start a new career when the kids start school someday i don't know but anything and that's okay but let's have an idea that you know yes where you're going to come home and yes there's going to be some sacrifice for you to be a full-time mom. But that's not our permanent, stagnant way of looking at this. That's all I'm asking. But I think it's a great idea, especially since it's what you want to do, kiddo.

Hey, thanks for the call. This is the Dave Ramsey Show. Thank you. Chris is with us in New York. Hi, Chris. How are you? Hey, Dave. How are you? Better than I deserve. What's up?

Well, back in May, me and my wife, we started your program. However, December of last year, we wound up getting a leased car now since starting your program i'm confused how do you start my program and then get a leased car no no back in december of last year we got the car and then we started your program in may oh may of this year oh okay i understand okay all right so you have a lease that's in the in the deal you got to get paid off. Okay. Right. So, well, here's the thing.

Since we started your program, we've paid off $75,000 worth of student loan debt, and that's basically all the debt that we have with the exception now of just this car lease. My question is, can I move on to baby step three while still having the lease and cash flow it, the rest until the end of the lease? So right now my household income is $170,000. At the end of the three-year term, the car will cost $15,000. Are you going to keep the car? Yes, we've decided that we want to keep the car. Well, just find out what the payoff balance on it is today and pay it off. Okay, so then just save up for the payoff balance.

It's a car debt right now. A car lease is just a financing program. That's all it is. It's just another way to have payments. And they have an early payoff called the early buyout amount. How much is left on the lease? How much time is left? Two years.

Just slightly over two years. You would save the equivalent of two years' worth of interest. They don't technically call it interest in a lease because they're not technically loaning you money. In a lease, it's called cost of capital. But you're going to pay less, probably about 10% less, if you pay it off early. You're going to get about the equivalent of 10% interest rate. So usually 10% to 14% is what these things cap out at. And so just call and get the early buyout and put that in your debt snowball

and pay that off before you move on to baby step three. It's a debt on your car. Okay. Fair enough. Easy enough? Yeah. Yep. I wanted to start saving, but if I've got to do it, I've got to get this out of the way.

You're almost there. You're there. You've got it, man. You're doing good. Thanks. John's with us in San Antonio. Hey, John, how are you? Hi.

Thanks for taking my call, Dave. Sure. I've got a question you've probably answered before. I want to give you a few numbers. I've got about $1.4 million in savings. $200,000 of that is in a 401k plan. About half of it was still remaining with the company. And about half of the other $1.2 is in 401K, and the whole 1.2 is with

an investment firm. So I've got about $100,000 in debt on a house, a car, and a garage that I built. And I'm just wondering, I'm about 60 years old, my life's two years younger than me, I'm kind of looking at retirement, and what could I expect? And I've talked to my investment guy. He's saying I should work until 64, 65. And health care costs are kind of one of the fear factors that's built into that, right? If I were to retire earlier, then I could get Medicare and Medicaid.

Regardless of your health care issue, what do you need to live on a year income-wise if you quit working? So monthly, our fixed expenses are about $10,000. Now they go to about $7,000 in three years when I pay off the house, car, and garage.

So about $100,000 does all that? How much does it take to pay off all that? $100,000. Okay. You have $100,000 well i would just pay that off today regardless regardless of what i quit i'm sorry regardless yeah i would be debt free but i would be debt free by the end of the day okay i'd write a check and be out of debt i'm not going to sit there and borrow money to keep it in my 401K, which is effectively what you're doing. Even if you want to just save more later, that's fine. I don't care. But to pay off the debt today, I'd be debt-free.

Now, we're debt-free, so $7,000, which is $84,000 a year. Can you make $84,000 on a million-two, million-four? You should be able to. That's less than 8%. Right. I'm making a percent a month now. That's why I'm keeping the debt. I'm making more in investment.

Yeah, but I'm not going to play that game. If you were going to play that game, you'd go borrow $2 million on your house and say, oh, I'm making the spread. You're not going to do that. You're nickel and diamond. You're not making any money on that. It's $100,000 out of a million and a half dollar net worth.

You know, you got more than a million and a half net worth because you got the house. You probably have a $2 million net worth. So if you can live, you know, on $60,000, $80,000 a year, which it sounds like you can, and you keep your – the point is I want you to keep your hands off the principal. So whatever the assets that you have invested create an income, you have to live on that or less. And so I just say if you take $1.4 million, put it in mutual funds, and if it makes 10%, that's $140,000 a year. If it makes 8%, it's less than that. If it makes 6%, it's less than that.

But somewhere down in there is $80,000, right? Yeah. Which is $7,000, right? Yep. Which is $7,000 a month. Right. So, yeah, I think you can do it. It's just a matter of what you want to do. Now, here's the other thing. Do you like what you're doing?

Yeah, I do. I really love my job. I make a lot of money. What do you make? What do you make? I'm going on a hike every day and riding my motorcycle, too. So, I mean, you don't have a – it's not like you – I hate my job. I want to go fishing here.

So you are financially independent, but that doesn't necessarily equal quit work. Like, here's an example, okay? I'm worth tens tens of millions okay so i haven't had to work for years but i work every day just about it's just because i want to i just thoroughly enjoy what i'm doing and i can't imagine playing that much golf or fishing that much it just doesn't run it's not the way my brain works i I enjoy engaging with people. I enjoy growing things and the challenge in the business. And, you know, we're about, you and I are about the same age. And so, if I'm you, I'm going to keep working just because of that stuff, not because of the money.

So, one of the things that kind of confused me is the investment guy said, to outlive my money at the current rate, I need to work till about 64 well he's running a different calculation than you and i are running that he's being more conservative but uh if your mutual funds are averaging 10 that's 140 000 a year you're not touching any principal pulling 140 if that's the average right well not counting medical uh health care i mean if you gotta live on everything you you've got to pay everything on $140,000. Can you do that?

Or on $100,000 or $80,000 or whatever it is. You can. You can. You can cover medical and have a really nice life on $100,000 a year. So you're financially independent because you could set this up and never touch the principal and live a very good life off of just what the mutual funds create do you understand that i mean you see that right yeah yeah so what he's doing is is he went to training somewhere and they said oh no you need to calculate this at six percent i'm like well you can calculate six percent that's

nothing wrong with that it's just more conservative i'm just saying what does the mutual fund really make and am i going to live am i willing to live on that or less where i never touch the goose all i do is crack and scramble the eggs that's all i want to do i'm going to leave the goose alone that's the principle and now i'm not suggesting you max that out but i think you're going to work anyway because i think you make a lot of money and you like what you're doing and you have a good life so i'd probably go ahead and work, but I would not be working because my financial advisor told me I had to work with a $2 million net worth. I would be debt-free, though, by the end of the day.

Hey, man, thanks for the call. I appreciate you joining us. Open phones at 888-825-5225. Well, Dave, that's just irresponsible. That's one of those things I disagree with Dave Ramsey on, so I'm going to put out a blog where I get clickbait. Oh, well, that's okay. You just go ahead and do whatever you want to do, people.

It doesn't matter to me. But here's the thing. I own a mutual fund that for 84 years has averaged 12.7%. My personal portfolio for the last 30 years has averaged just under 12%, the whole group of mutual funds. So, if it's averaged 12, and all I pull off is 10, is my nest egg not growing by 2? Hello? Why is this hard, people? Why is that hard? This is the Daveave ramsey show hey it's kelly daniel associate producer and phone screener for The Dave Ramsey Show. Did you know that in 2017, Dave Ramsey Show listeners paid off $50 million of debt?

That's pretty impressive. And it could be you this year. Keep listening for more inspiration.