The Ramsey Show - App - Why Putting Money in Bonds Isn't a Good Investment (Hour 2)

Episode Date: July 11, 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. Thanks for joining us. Open phones at 888-825-5225. That's 888-825-5225. Brad starts off this hour in Dallas. Hi, Brad.

How are you? Good, Dave. Thanks for taking my call this afternoon. Sure, man. What's up? So I've got a question for you. My wife and. Thanks for taking my call this afternoon. Sure, man. What's up? So I've got a question for you. My wife and I are just starting out in your program, just getting our baby steps going along.

We've got $1,000 put aside, and we're kind of rolling through the debt snowball, but we were house broke at the time because we'd made a poor decision coming out of college and signed up for more house than we could afford because the bank said we could afford it. To kind of break up the logjam, we decided to make a drastic decision and took a new job and sold the house and took all of the equity proceeds and sold half the furniture in the house as well and used that to kind of tackle the debt. We paid off all of our credit card debt and about half the student loan debt. So I'm down now to about $28,000 in student loan debt. And this new job that we took, there's some benefits with it because it required about a

year of travel up front. And there were some financial incentives that came with that travel. So we're able to put away about $4,500 a month, maybe $5,000 a month in the savings, apart from all of our living expenses. But that's going to expire in about a year. So my question is... Why are you putting it towards savings instead of towards a student loan? There was some indecision there. That's the question that I was going to ask. In a year, we've got to make a decision on where we're going to live, whether that's sign an apartment lease or put a down payment down on a house. And we haven't quite yet had the courage to write the check to pay off the student loans

because we're unsure what our living situation is going to be. So I wanted to ask you, should we just kill the student loan debt and then try and go through like a Churchill mortgage because we won't have much in the way of credit score or down payment, or do we try and take a more traditional route and get a 15-year with a large down payment and then keep the student loans on the back burner? We tell people not to buy a home until they're out of debt and have their emergency fund in place plus their down payment.

Okay. So paying off the student loan is a precursor to buying, prerequisite. So I'm paying off the student loan immediately, and then I'm going to build my emergency fund, then I'm going to build my down payment. And if that means you live in an apartment for a year, then so be it. It's not going to kill you. I'm not suggesting you rent the rest of your life, but if you do for one year in order

to get your financial house back on solid ground, you've taken a lot of radical decisions here. You've done a great job. You've not been afraid to embrace a lot of change in order to pull this off. So very well done. Congratulations. Thank you. Yeah, I want you to be 100% debt free and then build your emergency fund, then build your down payment for the house in that order. I do not suggest people buy a house until they get their debts cleared. Now, you can get them cleared really fast with what you're doing. Very, very fast. You're doing a great job. Yeah, that's exactly what I would do doing. Very, very fast. You're doing a great job.

That's exactly what I would do there. Hey, thanks for the call. Michael's with us in San Diego. Hey, Michael, welcome to the Dave Ramsey Show. Hey, Dave, how you doing? I'm really excited to be talking with you. You too, sir. What's up?

Awesome. So I got a question for you. So my wife and I have been investing regularly since about the year 2000. And we just retired from the military less than a year ago and have finally been able to start talking with Vanguard and the possibility of using them for advising services. And they gave us a plan on how to diversify our portfolio from what we've been doing, which has been essentially 100% stocks, to now a mixture, which they call aggressive on their end, of 85% stocks and 15% bonds.

26% they're saying should be in international stocks. And so besides being wary about including bonds, which I've never done before, I'm also really wary about the international. And so I'm just wondering, as we get a bit closer to retirement, I'm 47. My wife and I would like to retire when I'm 60. So 13 years from now, I'm wondering if getting, you know, as I see it relatively much more conservative, if I go with the recommendation, what that's going to do in terms of being a little more conservative than we should be as we near retirement.

I'm 57, and my personal 401Ks and Roth IRAs are invested in good growth stock mutual funds spread across four categories evenly. 25% in growth, 25% in aggressive growth, 25% in international, and 25% in growth in income. I don't own a single bond. And especially, I'm not going to own a bond in an increasing interest rate environment. How stupid. Here's why. Bond values go down. They have an inverse relationship with interest rates. As interest rates rise, the value of the bond goes down.

And the bond, long-term interest rates I'm talking about, not prime, not any of that, not stuff set by the Fed, but I'm talking about the bond market determined. So, for instance, mortgage interest rates are long-term interest rates driven by the bond market. They're up almost one and a half points since two years ago. And we are in an increasing interest rate environment steadily. And if you're in an increasing interest rate environment, that's the last time you would

buy a bond, because that means you are in a decreasing bond price environment. So you're pretty much assured you're going to lose money on that in this setting. I think it's just a ridiculous suggestion, especially for a 47-year-old. Yeah, and so I raised that point, essentially, effectively what you said, and their response was basically stating that the analysis that they've done shows them projecting in the next 5 to 10 years, the term they used was a muted return for the broader U.S. stock market. As a matter of fact, they said they anticipate international stocks, equities,

performing slightly better than the U.S. returns. They're estimating between a 4% and 6% return over the next 10 years. Several people that are writing on this are saying the same thing about international. International has been the dog of the four in the category for about 11 years. Right, that's why I got out of that. We had this international stock for a while. Yeah, you got out of it at the wrong time. It appears that the international runs inverse to my other three categories,

growth, growth and income, and aggressive growth. And so we just ran a full analysis because I've recommended that exact same mix for 25 years, and that's personally what I've done for 25 years it's a very simple wealth building process okay and uh but the international had been bad for so long i was getting disgusted with it and so i had one of our elps we sat down a couple of us in our research team did a detailed analysis and said okay what would happen in the coming, in the, you know, over a 40-year period of time if we'd had no international? And it came out negative than if we'd had international.

And that's when we saw this inverse, and that's when we started seeing all these pieces that are being written. So I don't like the advice you're being given. Not at all. On two or three fronts there. I'd definitely be an international. I would not be in bonds. And I'd be where I am. And our SmartVestor team that we recommend, that's what they do.

So if you want to get a different opinion, click SmartVestor at DaveRamsey.com. Hey, thanks for calling in. For years, I refused to endorse any company that claimed to get people out of timeshares. I told my listeners it's a horrible product and that, unfortunately, they didn't have a lot of options. Then a few years ago, I sat down with Brandon Reed, the owner of Timeshare Exit Team. Brandon walked me through the timeshare industry, and I learned that you can't sell them, and you can't even give them away. And then we talked about Timeshare Exit Team's process. Every ownership situation is different, which is why they have more solutions than any other company.

And that's when they earned my respect. Don't call any of the imposters out there, and there's a lot. The only timeshare exit company I stand behind is Timeshare Exit Team. They have exited thousands from their timeshare burden this year alone. Yes, you will write them a check, but they stand behind their guarantee. They will get you out, or they'll give you a full refund. Call 844-999-EXIT. Online at timeshareexitteam.com. Heather's with us in Kansas City.

Hey, Heather, how are you? I'm doing well. Good. How can I help? Yes, sir. First of all, I just want to say thank you so much for helping me start to change my family tree. And in the course of this, I, from you, I got the courage to ask my parents, you know, how are you doing financially? Is there, what can I do to help you? And I found out that my mom has about 30,000 in her 401k that's just sitting there. And I figured maybe we could roll it into a mutual fund or something that it's just not sitting there making profit

because she doesn't need to use it. She doesn't need the money right now. She doesn't have to touch it. So what can we do with that money? Does she still work for that company? She does not. Okay. She's retired.

Yeah, she can roll it to an IRA, a direct transfer rollover to a traditional IRA. There will be no taxes on it. And how old is she? She is 68. Okay. Well, we always recommend that you invest across four types of mutual funds. As I was saying to the caller before the break, I personally, at 57, have mine in growth, growth in income, aggressive growth in international. If you want to tame that down a little bit, you could change the aggressive growth out for a balanced,

and that would give you a little bit calmer portfolio if you didn't want to have quite as wild a ride. And so what I would have her to do is just sit down with one of our SmartVestor pros, click SmartVestor at DaveRamsey.com, put in your information. It drops down a list of the pros in your area that we recommend. We are not in the investing business, but we have shown people how to invest in mutual funds with good brokers, reputable people for 25 years. And so lots and lots of people become millionaires as a result. And I'm not saying that's going to happen with $30,000 when you're 68, but I am saying these are people that are quality folks.

And you can sit down with them with the heart of a teacher and learn, she can and you can, about investing and get that moved over into something that's producing a little bit anyway. Hey, good question. Billy's with us in Fort Walton Beach. Hi, Billy. Welcome to the Dave Ramsey Show. Hey, Dave. How are you doing?

Better than I deserve. What's up? I've got probably about 20 questions for you, but I'm going to stick it to one. I'm trying to figure out. I know the answer is to sell to Harley, but the question is I'm upside down in it, so I can't sell it for what I need to get. Should I rearrange the order in which I do my debt from the snowball so that I can pay that down and get rid of it?

Because I definitely don't want to sell it, but I know that I'm supposed to sell it. So I'm kind of trying to use it as an excuse. You know what I mean? Yeah. So let's stop a second. Let's stop. What do you owe on the Carly? About $15,000.

Okay. And what's it worth? I could probably sell it privately for about $11,000, $10,000 or $11,000. Gotcha. Okay. What's your household income? I take home $103,000. Okay.

And so your gross is about $140,000 probably? Yeah, I would suppose. Yeah, I don't know. Okay. I just look at what I take home in $140,000 probably? Yeah, I would suppose, yeah. I don't know. I just look at what I take home in the bank, you know. I got you. Have you stopped your 401K temporarily to get out of debt? Yeah, I haven't been putting in that.

Okay. So I'm unfortunately. Are you married? Not yet, but I'm working on it. Okay, cool. And what other vehicles other than the Harley do you have? Oh, I've got, Dave, I've made about every mistake you can think of. I've got the minivan, because I do have four kids now. So I've got the minivan, I've got a pickup truck, and I've got the Harley.

Okay. All right. And you're a single dad? Well, I'm technically single. I have a live-in girlfriend with four kids living in the house. That are your kids and her kids? Yes. Okay. All right. And does she work outside the home? She works part-time right now while she's going full-time.

She's expecting to graduate actually next month, so we're hoping she'll be lined up for something real soon. Okay. So what's her income potential in the coming year, do you think? Probably $35,000. Okay, so that puts you at like $35,000. What's the van worth? Oh, it's probably $35,000. $ or hundred 35 000 i the problem is i was in a

fleece and the truck is worth what oh it's a probably 10 okay so do you owe money on those two yeah yeah on both of them okay so counting your mortgage, what's your total debt? I don't have my Excel spreadsheet, but I think I'm about 115 to 120. Normally I would think I had it memorized because I look at it every day, but I don't have it in front of me. All right. The rule of thumb I use on whether to sell something with a motor or wheels, either one, is can I be 100% debt-free, not counting my house, if I don't sell it within two years? And do the total of things that I have with motors and wheels equal and value more than half my annual income?

Okay. So your household income, were you all to be married which you probably just thought i go do that you're pretty much acting married all the way around here oh yeah and so um definitely feeling the pressure yeah there's not really anything to wait on you've already done all the other stuff so anyway um you might as uh so if you had $175,000 household income and you had a car worth $10,000 and a car worth $35,000 and a motorcycle worth $10,000, that's not out of line if it was all paid for. Okay? So meeting guideline one, being half your annual income on stuff with motors, you don't violate that in order to keep the Harley. Okay?

Guideline number two is can you be debt-free in two years? Probably, but it's going to be really, really tough. But the Harley's not really causing you to be debt-free or not debt-free, one of the two. If you make it within $10,000 in two years, you made it. You know? And so can you pay off $50,000 a year for two years making $175,000? Yeah, I think you can.

Yeah. But that's going to be beans and rice, rice and beans. She's getting a job. You're getting married. We're going to start acting like we're going to be grown-ups, and we're going to pay off all this crap. And that's what it amounts to. I mean, $50,000, that's $4,000 and some change a month.

Mm-hmm. And that's... Like, right now now I don't have that available. No, but I'm saying if she's working and making $30,000 or $40,000, you do. Yeah, yeah, yeah. You got that available, but you're going to have to cut your lifestyle down. Beans and rice, rice and beans, no restaurants, no vacations. Christmas is a craft. We're getting this mess cleaned up.

Mm-hmm. Now, if you sold anything, it'd be the van. Yeah, right. The Harley is a toy, and if you told me you owed $26,000 on it, it'd be gone because of the numbers I just gave you. Okay? Right. But at $10,000, it does not solve a $100,000 problem. No. What solves a $100,000 problem is all this other stuff I'm talking about.

Oh, you have no idea. I got the timeshare disaster. I've got everything you think of. How much of the $100,000 is your timeshare? Probably $40,000, $45,000. You owe $45,000 on a timeshare? Well, it's

like one of those vacation ownership crap things. I've been looking at that timeshare. That needs to be sold. Yeah, like you said, like you said in the commercials, you can't sell them, you can't give them away. So, like, I'm in the middle of trying to figure out that timeshare. So it is a timeshare. Okay. If it's a timeshare, I mean, if it's not a timeshare, if it's a vacation ownership position,

if you have an actual ownership position in a series of properties, that's a different thing than a timeshare i mean if it's not a timeshare if it's a vacation ownership position if you have an actual ownership position in a series of properties that's a different thing than a timeshare and that does sometimes have a market uh but i would talk to timeshare exit team if that's half your debt that's a big chunk of the problem here dude let's get that thing gone and um yeah i the harley is not a deal breaker for me. But you got to do the other stuff, man. And if you need to sell the Harley just to prove you're doing the other stuff to yourself and to your new wife, yeah, sell it. But mathematically, it's not your problem. The timeshare is and the van is.

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Thanks for visiting. How can I help today? Well, I had a question. We are debt free yay thanks to your program and you um and we're having trouble staying on track for becoming millionaires now that we're debt free and we want to be able to save save and give okay so um you're not investing we are we have our 15 in our 401ks i work part-time now to. We have our 15% and our 401Ks. I work part-time now to take care of our 15-year-old.

Okay. All right. And, Daryl, you're still working full-time or are you retiring? I am. Okay. All right. And so how are you having trouble staying on track? What are you, you're just spending money or what do you mean?

You don't have any payments. Sticking to the budget. Don't have any payments. Sticking to the budget. Don't have any payments. Sticking to the budget and don't know if it's possible for us to become millionaires at this stage. I'm a little older, 58. He's 55. Okay. And what's your household income? About $50,000.

Okay. 55. And how much do you have saved? In cash, equity, about $216,000. Okay. Yeah, you're on your way. You're going to be fine. $216,000 in your 401k?

Combination, 401k and Roth IRA. If that's invested like we teach in good growth stock mutual funds, it should double about every seven years. So that means when you're 65, that should be worth about $400. And then when you're 72, if you don't add anything to it, and when you're 72, that would be worth about $800. And your house, of course, is going up in value during that time that we're talking about as well. So I predict if you don't do anything, you'll probably be millionaires by the time you're 70. If we continue to work it. No.

If you just let the money that's in there sit there and grow, and your house is paid off, and you own it, right? Yes. What's it worth? Roughly between $150,000, $160,000. Okay. So basically, out of a million, you've currently got about 380 or so. Okay? Yes.

Something like that. So you're about a third of the way there. And if you just consider that's going to double if you don't do anything else every seven years. Okay. So it'll double once from 350 to seven and double again from seven to 1.5 by the time you're 72, give or take. So you're fine. But if you want to do more, you can do more. And I would.

I would do more. I would invest some more. And you've got the 15% of your income going in, so that's another $7,500 a year on top of what we're talking about, continuing to go into the 401K. If you want to crank that up a little bit now that the house is paid for, you can. You can max that out, put the most that they allow you to put in, and max out a couple of Roth IRAs. The thing I have found is if I can do stuff that is kind of on autopilot and doesn't require my

force of will to create discipline, it helps me. And so I just put all kinds of stuff just drafting out of my checking account going straight into investments and then i don't think about it i just run the house then whatever is left in there and it's like you know all that money went over there that mutual fund and into those retirement accounts and and um then i just make it you know i do the budget on whatever's left over that helps me because it's kind of on autopilot um the second thing you should do is you need to make sure that you're uh setting some milestones that when you hit a certain point on different things that you do something to celebrate you guys aren't celebrating

you're not spending any money on you no we're not and you need to do some of that and you need to go on a cruise or whatever you know whatever the thing is you've always wanted to do. And you always wanted to buy one of those old cars. Or you wanted to, I don't care what it is. But you need to go spend a little bit of money on you once you hit some of these marks. Because otherwise it just becomes a pure grind. And it's living like no one else so that later you can live. Like no one else.

That's it. And give like no one else. And then that's the last thing make sure that your giving is done and it's done in a personal enough way that you see the people's lives changed it's good to give sometimes to an institution to your church and those kinds of things we do and um and i do too but i also want to do something occasionally where I just see somebody's life changed. And we try to do that direct type thing. And that keeps you fired up, too, because that shows you the power of money when you've got it.

And it's in the hands of a generous person. But if it just goes in a line item somewhere off in some company or some nonprofit off in the distance, you don't feel it. You see what I'm saying? Yeah. So that'll jazz you. Spend a little money on you. It'll jazz you when you hit some of these milestones. And then I would just go ahead and max out your 401Ks and your Roth IRAs right now.

Do all of that. Sit down and do that. Does that help you? Yes, it does. Thanks for coming by. It's an honor to meet you, too. Appreciate you hanging out with us. All right. Shayla is with us in Phoenix. Hi, Shayla. Thanks for coming by. It's an honor to meet you two. Appreciate you hanging out with us. All right, Shayla is with us in Phoenix.

Hi, Shayla. How are you? Hi, Dave. I'm great. How are you? Better than I deserve. What's up? Good.

Well, first I want to say I'm new to the community, recommended by some friends, and I've just been watching a few of your YouTubes, and I am welcoming the butt-kicking that I am getting, so thank you for that. Well, when you're new, that's not necessary. We're nice to you when you're new. Oh, you know what? But I need it. When you're new, you kind of need it the most because you have a lot of just bad habits

that need to be broken down quickly, so thank you for that. I'm calling because I'm just in a bit of a mess between me and my husband. We currently just kind of have our own debt issues. His are a little bit more dramatic than mine. But really, we're just trying to figure out, well, I'm trying to figure out kind of where we can start to kind of be the initiative and, you know, being able to. So how much debt do you have? Well, I'll start with mine. I know I have about $8,000 in credit card debt, which is crazy because I had little to no credit card debt all my life in the last couple of years. What else?

So I have that. What else? And then IRS. I work for myself, so just not really withholding. We have not got time for you to give me an explanation on every one of them. Just tell me how much debt you've got, okay? Okay, so I think I have the $9,000 that I owe for IRS. Okay, who else?

And then I have a $30,000 car loan. Okay, and what else? That I have. And then that's it for me. Okay, what about husband? What about your husband? He's kind of iffy right now, but I know he has about $16,000 or so in tax debt, as well as I think just like a few things like medical bills.

I wouldn't say it's any more than about like $5,000 or $6,000. He just recently did bankruptcy. What about a car? Most of that's gone. He did a bankruptcy? Yeah, he did a bankruptcy. He had tons of debt before then. It was really, really bad.

Okay. So it took a lot of the IRS debt away, but he still was left with some that couldn't, you know. And so what's your household income? So I make $92,000, and he's at 46. Okay. All right. And, well, I think the first thing I'm going to have you do is to sit down together and say, Are we sick of this?

Both of you. I know you are. I know you are. But are we sick of this? You just went through a bankruptcy. And then I want you to combine all your money and combine your incomes. You're married. And combine all of your debts and just say, okay, we have 16 plus 9 that we owe the IRS.

Woo, that's scary. We have credit cards that need to be cut up. We have a really expensive car. And we have got to sit down and clean this dadgum mess up. Now, you can because you make $138,000 a year between the two of you. And can you clean up, let's see, $30,000, $40,000, $50,000, $60,000, $70,000 in debt? Yeah, you can do that. Okay.

But, you know, it's going to take you a year and a half, two years. You're going to be on a written budget. You're going to cut up your credit cards. You quit going to restaurants. And we and a half, two years. You're going to be on a written budget. You're going to cut up your credit cards. You quit going to restaurants. And we are sick and tired of being broke. We make over $100,000 a year, and we're broke and going through bankruptcy and owe the IRS. Man, yeah. Get disgusted with yourself, kiddo.

You don't need me to kick your butt. You can kick your own. Just get disgusted with yourself. Get sick and tired of being sick and tired. Hold on. I'm going to send you a copy of the book, The Total Money Makeover, to help you get this going. This is the Dave Ramsey Show. Okay, I need you to listen to this. Because one normal routine that everyone does can cause total chaos in your life.

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Ben is with us in Kansas City. Hi, Ben. How are you? Doing great, Dave. How are you? Better than I deserve. What's up? Hey, it's an honor to City. Hi, Ben. How are you? Doing great, Dave. How are you? Better than I deserve. What's up? Hey, it's an honor to speak with you, sir. But I've been considering leading a financial peace university course as a coordinator, but I've got a little bit of a moral dilemma, I guess.

I'm actually an independent insurance agent, and so I don't want the students to get the wrong impression that I may be coordinating it for the wrong reasons. If you're not coordinating it for the wrong reasons, if you're not in there sharking them, then they're not going to worry about it. Okay. All right. I guess that really answers my question. I just wanted to get your take on it. I feel like I am doing it for the right reasons.

I want to make sure they get the most out of the class that they can because it made a huge difference in my life for myself and my family. So I want to share that with others. You could go to the extreme and just say, if you wanted to be super safe, and just go, I'm not doing transactions with any of you under any circumstances. Okay. That would be an extreme version, okay? Or the other version in the middle would be an extreme version, okay?

Or the other version in the middle would be you just don't bring it up, but if one of them asks you and comes towards you and you want to serve them by selling them, then that's certainly not immoral or illegal or anything like that. You and I both have been slimed. We've both been in a situation where somebody's doing stuff for the wrong reason. We call that transactional rather than relational, right? Correct. They're there for what they can get rather than what they can give.

We all know that spirit. You know it or you wouldn't be concerned about it. Yes, sir. You're not that guy or you wouldn't have even asked the question. Correct. That's why I'm not worried about you. So I think you'll be great at it. I think you've got a good heart.

Because the guy that's that guy wouldn't even ask this question, would he? Good point. And so I think your people in your class will smell the spirit, will sense the spirit of you and go, this guy's not a slimer. He's just here. And you'll probably end up a couple of them. You may be able to help them. If you're, you said you're an independent, you probably shop around, help them get a better deal on some of their PNC, but they'll probably bring it up to you and you won't

even have to talk about it. Um, and, uh, but if you want to be just extreme about it, just go, you know, in order to, uh, avoid that, I'm just not going to, none of you can be my just go you know in order to uh avoid that i'm just not gonna none of you can be my clients while you're in the class you know a year later maybe or something like that i'll tell you an example of what i have done in that situation god has blessed me with an an ordinarily large income over the years. I mean, when I started, I was making nothing. But I started, I mean, we've made a lot of money helping millions and millions of people. And we make millions and millions of dollars doing it.

I mean, God has blessed me. And so years ago, when I first started, I really felt like God whispering to me and saying, when you speak in a church, don't get paid. That way you're not in church for the wrong reason. You're not seeing all the churches as an opportunity, serving God in the church on Sunday as an opportunity to fleece the sheep. You know, you're not there to do that. So I have never gotten paid on a Sunday morning for speaking at a church, ever, in 30 years of doing this. And, you know, back when I used to do actual speaking events

for money, I don't hardly ever do that anymore. Most of our speaking events are stuff we do that are hour events and are ticketed and that kind of thing but back then i mean we were charging a lot for me to go show up and and you know speak somewhere but not on sunday morning and if a church tries to write me a check i just have them directed to one of the one of the ministries that that we support and they can send make an off you know make a donation to them if they want to or just don't pay me but i't take money. I'm prohibited from taking money on Sunday morning by myself, by my own prohibition. You see what I'm saying? So that's kind of the same thing, because I just didn't want to be that guy. And I think God was telling me not to be that guy.

And that's not to say somebody's wrong for getting paid to speak in a church. I mean, pastors get paid. It's their job to speak in churches. And they should get paid. And they should get paid well. And if some of you are evangelists and you get paid. It's their job to speak in churches, and they should get paid, and they should get paid well. And if some of you are evangelists and you get paid from going to different churches, and there's nothing wrong with that, and other people get paid in churches. And I've got friends that are Christian speakers, and they get paid in churches.

That's all okay. I'm not saying there's anything wrong with it. I just think for me, apparently because it's the money subject and because God blesses me in the other six days a week so unbelievably over the top that god just said don't do that i went okay i can do that i can stick with that so you can you can set yourself some boundaries along those lines but ben you're going to be fine you're you're the good you're good you're the good people and that that you're going to be fine and thank you for offering to lead a financial peace university class we're going to be fine. And thank you for offering to lead a Financial Peace University class. We're going to be honored to have you.

Jason is with us in Lexington, Kentucky. Hi, Jason. How are you? I'm good. How are you, Dave? Better than I deserve. What's up? I've got a real estate question for you.

Okay. Two years ago, I bought my first house. It was a dump. It was a fixer-upper. I paid $27,000 for it. I now owe about $14,000 after working on it and getting it pretty close to being finished. I'm looking at selling it, so I had a real estate agent come in, and she advised me it's worth now about $125,000. Wonderful.

Completely blew my mind. So anyway, my question is, since I did so well in technically flipping this house, do I sell the house, pay my truck off, pay the house off, and basically have $100,000 liquid cash to rent for a year, fund maybe three more flips so that I can pay cash for a house a year later and still have money left over to continue flipping, or would you, $100,000, pay 50 grand for some land and build a $50,000 house? Which one do you want to do? Both.

Okay. All right. Well, I mean... I enjoyed the flipping process here. I've always wanted to do it. Of course, we lived in the flip, and I will never do that again. Okay. So where are you going to live?

In a rent? Well, again, yeah, I'm thinking about renting for a year while I fund, you know, maybe three more flips so that I can, again, pay cash. And you're going to fund the flips with cash only? From then forward, yes. From today forward, yeah. But the future flips will all be done with cash, and you're going to do that a couple times and then move out of the apartment and buy something with cash? Yes, but also have enough money left over to continue flipping with cash.

Yeah, sounds like fun. That's where you go yeah how old are you uh 36 okay all right well you the thing that happened here was um i don't want you to be surprised even if it's a delightful surprise at the value of the property when you get it finished you need to start with the idea that the property is going to be worth that, and that's the basis by which you buy it. Instead of like, wow, that was cool. Don't be shocked, okay?

I mean, this needs to be a very scientific process. We're going to buy this house for X number of dollars. We're going to spend Y number of dollars on it, and then we're going to make a profit of Z. Absolutely. I've been in sales for almost 20 years, so I understand that. But I was under the assumption fixed the house would be worth about $65,000. Yeah, and you missed it too far.

You should have known better what that house was going to be worth. You missed it bad. In a wonderful way, thank goodness. If you'd have missed it that bad the other way, it would have been a bad day. Absolutely. So that's what I mean. I want you to get better at that part of the business. But I love your plan, and I love the success you've had.

Congratulations. Very, very well done. And as you know, the money is made at the buy, and you bought that property right, and it needed the right kind of renovations, the ones that didn't cost so much and got a big bang for their buck, and apparently the particular neighborhood you bought in is hot as a firecracker too, and that helped, and that price range is a great price range to flip in.

The more expensive, the harder the flip. Because the more expensive, the harder, the more likely you are to get stuck in the thing. Average house price in America right now is about $218,000. And so you were down about half of that. And, oh, that's a real sweet place to do a flip. So, yeah, I love your plan. Go do it, man. Go do it.

But be a little bit more scientific. Make sure your money's made at the buy, meaning that you bought the right property that you can make money on. And you know that you know what's up. And you're not shocked one way or the other on the rehab costs or the valuation. This is the Dave Ramsey Show. Here's a tip. To keep from missing Dave's classic facial expressions to some of those calls, make sure you watch him live.

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