The Ramsey Show - App - Will Giving My Kids an Inheritance Spoil Them? (Hour 3)

Episode Date: July 26, 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. This is your show. We're glad you're here. Open phones at 888-825-5225. 888-825-5225. Tim starts off this hour in Phoenix. Hi, Tim.

How are you? Hi, Dave. Thanks for taking my call. Sure, man. What's up? Hey, I got a question for you. I listen to your show and have listened to it for quite some time. And the topic either just come up and I've missed it or I've never heard it,

but we stand to inherit a sizable amount of money. We're guessing the estate probably in the neighborhood of around $2 million. And I'm 54, my wife's 52, and we don't need the money. But our homes are paid for, our cars are paid for, we've lived a life pretty much by the book and not borrowed a lot of money and raised three boys very successfully. Well, good for you. Well done. When will this money be coming?

Yeah, thanks. My oldest is a police officer and recently bought a pretty expensive home from selling another home. And he's kind of at the top of the pay grade for his payment on the house. And then my middle son is doing a third-year residency as a radiologist, and he's got about $300,000 worth of med school debt. Brendan, my oldest, has got about the same, probably in a mortgage. And my youngest is in the Coast Guard and doesn't have any debt, but he's got a little bit of money saved up.

What we're thinking is, when and if, and we're talking within the next five to ten years, we don't know. We're just anticipating this. We're realists. The inheritance is coming from an in-law that's in their 80s, and we're the sole inheritance, so we know we've got to do something with it. We were thinking of taking the money and maybe not all of it, but half of it, and divide it up between the three kids and then kind of give them a head start

and a jump on life. But on the other side of that, we never had that happen to us, and we managed to make it. And they're following in our footsteps. We just don't want to spoil them. It's too late to spoil them. They're too old to spoil. Okay, great.

All it would do is make them more of what they already are. If they're losers, you're going to make them wealthy losers. If they're great people of character, then they're going to follow in their parents' footsteps of being frugal and take the advantage of having medical school paid off, the advantage of a $300,000 cash account, or the advantage of a paid school paid off, the advantage of a $300,000 cash account, or the advantage of a paid-for home, and use that to continue this wonderful legacy that your family seems to have. Well done, sir.

Well done. Thank you. Well, that's kind of what we were thinking, but again, you know, nothing has ever been handed to me, and I just hate that when you hand something to somebody and it backfires. Well, the thing is, how do you keep it from backfiring? Number one, money makes people more of what they already are. Okay? And so just know that that's coming.

And so if you have one of the three that was off the rails, I'm not going to give them money. That's not fair. It's perfectly fair. They're off the rails. They got a heroin addiction. I'm not financing it. That's not fair. It's perfectly fair. They're off the rails. They got a heroin addiction. I'm not financing it. That's not a loving act. And so, you know, that kind of thing.

But that's not the case with your three. So we don't have to worry about that. But the second thing I'm going to do, if I'm you, and I have done this with mine, we sat down with them when they came into adulthood and went over the estate plan, and we said, you know, simultaneously as you see what is going to be given to you to manage someday, we want you to, for the first time in your life, realize how much money is here, and we want you to have a moment where you feel the weight of the responsibility to carry this legacy forward and to manage this money for God. This is not a woo-hoo, I hit the lottery moment. Right, right.

And you can say that out loud to these men and their wives and look at them. And if you're handing somebody a $300,000 check, you can say a lot of things to them. Sure. And the second thing I'd do is I'd put them through Financial Peace University and say, that's a, you know, you going through this class and continuing the smart, common sense methods of handling money is a condition of this gift. Because I want this gift to be a blessing to you, not because I'm a control freak. Yeah, that's a great idea.

And you can actually put all of them in one room and do it at once. Well, I would, but they're scattered across the country. I know, but, you know, you can afford a plane ticket at this point, right? Exactly. So, I mean, maybe at Christmas or something, we go on a family vacation. You take everybody and pay for it, and then you announce that they're splitting a million dollars among them when this happens someday. But you can put some strings attached to this from an emotional and moral standpoint. And, you know, like one of my buddies paid off all his kids' houses, and he bought the other one's cash houses because he wanted his family

to never have any debt again anywhere in the family. But the condition was with them and their spouses agreed to never borrow money ever again under any circumstances. I'm going to make you debt-free, but you've got to stay that way, he said. And that means that my grandkids are going to have money, and my great-grandkids are going to have money. And so we're going to pass on the knowledge and the common sense and the wisdom that causes this lady to have $2 million,

that causes you to be where you are, and so we're creating a legacy with information and money does that make sense well i appreciate great idea yeah i would do that i'm going to send you a copy of a book called the legacy journey which is the only book i have written on wealth all the other books i wrote were on money there's a difference and it's got a lot of that kind of stuff in there uh when you're dealing with this kind of stuff lastly make sure you check with an estate planning attorney before you give a gift that size, because under current tax law, if you give more than $15,000 without structuring it properly in a calendar year, you're going to get hit heavily with a gift tax.

You can do it, though, easily by doing it under the unified estate tax credit methodology. And currently you've got plenty of room in the law to do that with what you're describing to me. But there's some paperwork that needs to be done to keep you from getting gift tax, and gift tax is 55 percent. So you want to be sure you do this right. So seek some good estate planning tax and legal advice as you're doing the gift when that does occur. And let's see where the tax law changes because this new tax law changed the, if you all didn't know, it changed the estate tax exemptions from $5 million to $11.2 million,

which means a couple can have up to $22.4 million right now in assets when they die and have zero estate tax, which is most people, by the way. That covers almost everybody. And that goes away in 2026. The tax law only passed it up to 2026, and it goes away again, and it comes back down. And there's one theory out there that maybe the estate tax law is finally going to go away, the death tax, we call it, forever. But so estate tax laws changed dramatically this year, this calendar year. And so if you haven't, if you've got some wealth and you haven't looked at your will and estate plan, you desperately, desperately need to do that.

So, well, that's how it's done. Hold on. Kelly's going to pick up and give you a copy of the book, The Legacy Journey, and get you going on that. This is The Dave Ramsey Show. Thank you. Okay, I need you to listen to this, because one normal routine that everyone does can cause total chaos in your life. Folks, I'm talking about the simple act of using Wi-Fi. When you're on Wi-Fi anywhere in public or at home, you're at risk of hackers easily seeing every site you visit

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Download Hotspot Shield today. Here at Ramsey Solutions, on Monday I signed a proclamation making this Coordinator Appreciation Week. We've had a week-long celebration of Financial Peace University Coordinators. If you don't know, Financial Peace groups are 10, 15, 20,000 of them at any given time are operating all around America. And when you join a Financial Peace membership, you're plugged in for a year. But the first nine weeks, you join a group and you go to nine different classes during that time. And a coordinator, a local coordinator, causes that to happen. And has caused over 5 million people to get the information to change their lives. So we're tipping our hats to these coordinators and just saying thank you.

Thank you. Thank you. Thank you. Thank you, Dan and Michelle. How are you guys doing? Good to talk to you guys. How long have you guys been leading Financial Peace University? Okay, I'm having trouble hearing you. Can you speak directly into your phone? Leading Financial Peace University. Oh, my goodness. It's been since 2010.

Okay, I'm having trouble hearing you. Can you speak directly into your phone? Yeah, it's been since 2010. 2010. How many classes have you all led? We have done how many classes, Michelle? 25. We're on our 25th class.

Wow. Unbelievable. What made you guys start doing that? Well, back in 2008, 2009, during the recession, we really hit it hard. And so we decided we're going to do the class and we're going to start doing the steps and get out of debt. And that's kind of where it all started. Wow. So how much debt did you guys pay off uh we paid out just on the morning about $154,000 a million dollars

i guess that story motivates your group right oh yeah and that was business and personal debt oh Oh, my gosh. Absolutely amazing. So if you've led 25 classes having a front row seat to people changing their lives that many times, you have to have had some stories that were just amazing, haven't you? Tell me one. Oh, yeah, we have. Can I let Michelle tell you? I'm sorry?

I'm going to let Michelle tell you. Okay. Hey, Michelle. Hi, Dave. Hey, tell me one of the stories that have the most grabbed you out of these 25 classes you all have led. One of them, it was probably the very first class we did, and it was in 2010, and there were 17 households represented there and we're in southern california the housing collapse hit us hard and fast and every household

there was either um in foreclosure doing a short sale or had already lost a home so everybody including me and dan, we were scared and we were kind of lost and we didn't know what to do. And there was this couple that came through and it was their second time starting FPU. They went through about half of one series. And at that time they said basically, oh, this is for broke people. it's not for us, because they were doing just fine as realtors at that time. But then the economy turned, and they had a business partnership that went bad, and it caused the IRS to confiscate all the cash in their accounts. And for a while, they were paying their utilities with money orders or cashier's checks, and they were scared.

And so they came through our class. They really enjoyed it, and they just stood out as leaders. And we asked them, our second class was really big. It had a lot of people, and so we asked them if they would help us coordinate, and they've been side-by-side coordinators with us since then. Oh, my gosh. How fun. How rewarding.

They're awesome. In the trenches together, fighting your way through it. Well, thank you, guys. We have, yep. Thank you, guys, so much. Thanks for letting us call and talk to you, and thank you for leading 25 classes. The number of families that have been changed in that is absolutely amazing.

That's astounding. Very well done. Folks, we are thankful for people like Dan and Michelle. If you've ever thought about leading a group, because we're celebrating coordinators this week, if you agree to start a class in August or September, we've got the leadership kits on sale for $99. They're usually $300 to $400 in that range. And if you want the $99 special, you have to get it this week, and you have to get a class going.

So just go to DaveRamsey.com to do that, and we can get you set up, and one of our team members will get in touch with you, and we'll walk you through the whole thing. Very, very cool. So under the heading of stupid stuff that's out there, man, I've seen some stupid stuff. This is the dumbest thing I've seen, and I don't know when. So when you take out a loan on your 401K, which you should never do, when you leave your company, because you die, because you get a better job,

or because they fire you, you will leave your company, in other words. But just when you leave, if you've not repaid the loan, the loan is considered an early withdrawal, and it's due in full. If you don't repay it in 60 days, you get all the penalties and all the taxes. And so there's a new financial wellness benefit out there now called Loan Eraser. So when you borrow money, your own money, in your 401k, if you're dumb enough, you can pay these people a fee and, oh gosh, you can pay them a big fee, and they will have insurance for you that when you leave the company or get fired from the company, it will pay your 401K. This is absolutely insanity. Because it's insanity. It's a really, really dumb idea to start with, to go into debt on your 401K, to borrow your own money self back,

just your own money back. That's just nuts. But on top of that, to turn around and pay insurance premiums to insure your stupidity. These people know no bounds. Instead of saying, don't do this, instead of teaching people the way we do, stop it. No, we're going the way we do, stop it. No, we're going to encourage it by insuring it.

You know, 86% of 401K loans default when people lose their jobs. 86% of 401K loans default when people lose their jobs. $6 billion in defaults annually which what that means is you get paid you know you borrow ten thousand dollars on your 401k you leave you get hit with your tax rate plus a ten percent penalty so this is like a 35 or 45 percent hit on your money and so you're getting like a $4,000, $3,000 smack in the face when you get fired 86% of the time. That's almost every time that people lose their jobs,

they default on the 401K loans, and it becomes an early withdrawal. This is a bad idea. Insuring it is a bad idea ensuring it is a worse idea oh you employers when you put together your 401k don't even offer the ability to borrow on the 401k you don't have to offer that we don't offer it here don't even offer it and if you're going to offer it, for God's sakes, don't bring in a loan eraser. This is like a stupid sandwich. Two pieces of stupid bread, and you make a stupid sandwich. Two stupid things together.

Unbelievable. Gosh, guys, we have got to start thinking. Somebody out there at some point has got to start using their noodle. You've just got to think. You just got to think. You got to think. This is silly. So you never borrow on your 401k. If you're an employer, don't even offer it.

Don't even offer it. The number of employers that we work with, with our Smart Dollar program, which is the program where we go in and the employer educates all of their team members and we show them how to cause their 401k contributions to go up dramatically and the borrowing to stop. Yeah, when we go in, that's, you know, I'm going to start telling them. I'm going to start saying, hey, stop. The number of employers that have a serious problem with people making contributions and turning around and borrowing it back out.

Contributions, turning around and borrowing it back out. It's like a dog chasing its tail. You've got to stop it, people. You've got to think. So, just, yeah, don't take out insurance on your stupidity. That's a stupid sandwich. This is the Dave Ramsey Show. Our high health care costs getting you down? Are you confused trying to navigate your options?

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And our members have shared over $2.5 billion in medical bills. To learn more, visit chministries.org. That's chministries.org. Christian Healthcare Ministries is a proud sponsor of Dave Ramsey Live Events. chministries.org In the lobby of Ramsey Solutions, Doug and Sally are with us. Hey guys, how are you? Hi Dave, we're doing great.

We're honored to be here., Dave. We're doing great. Humble to be here. Thank you. We're honored to have you. Where do you guys live? Parker, Colorado, a suburb southeast of Denver. Oh, yeah. Well, welcome to Nashville.

It's good to be here. And all the way over here to do a debt-free screen. Yes, sir. Amen. Cool. How much have you paid off? $503,000. Oh!

And how long did this take? Two and a half years. Okay, there's a story here. And your range of income during this time? We started at $240,000 and finished at $550,000. My goodness gracious. What do you guys do for a living? We're airline pilots.

Okay. And so you just stayed in the air, huh? Well, some way. Well, one of us did for a short period of time. Wow. $550,000. I mean, man, oh, man, you got the old contracts. This is great. Very well done.

Oh, man. So $503,000 in two and a half years. What kind of debt was that? Was that your house? That was included. And we had a timeshare that timeshare exit team took care of. Six thousand. We had two of your nasty 401k loans for sixty two thousand and a home equity loan for eighty two five and a visa for fifty two four.

Whoa. And that was a total of two or three300,000 on the house. So two and a half years ago something lit you on fire. What was that? What happened? Well it started before that and we had had FPU and we had tried the debt, the budget and tried the

envelope system and we were not successful with that at that point in time and we were having a with that at that point in time. And we were having a lot of family struggles. We had a, an older child who was having a lot of difficulties through schooling. And so we fast forward to 2000 and July, 2015,

you had just come out with the every dollar budgeting tool, which I latched onto. And we had just cash flowed two and a half years of military boarding school for this youth. And that was cash flowed. And then that didn't work out real well. And so we went to a more aggressive step, which was basically crisis management, if you will, very expensive. And at that point, we were beyond all funding that we could get our hands on. We had 529s, we had 401ks, but we didn't have the cash. So we took out all these loans and um and when we did that we basically both decided that um when we were finished with that we had to aggressively pay it off so uh july 2015 was when he graduated out of the program and high school and um and this is our younger son so not the one I'm referencing. But at any rate, so that at the same time that July 15th, Doug had already been on long-term disability for one year.

We didn't know what the time was for that. And so that actually wound up to be 20 months. And for... So all the stress piled up and the debt piled up with it. Big time. And then you just said, okay, now I bet I can make this envelope system work. Now I bet I can make this budget work. And the every dollar tool was a godsend.

You were ready, though. I was more... Y'all reached the point, it's whatever we need to do, because this isn't working. Absolutely. It wasn't working. And how'd the story turn out with your son? Awesome. He turned out.

He's fabulous. He's in the Navy. He's married. He's doing wonderful. Wonderful. Thank you, Lord. Yes, absolutely. Worth the investment.

Worth the investment, completely. Very cool. Good for you guys. Very well done. So what do you tell people? Since you kind of started it but didn't do it, and then you did it, what's the difference? What's the key to getting out of debt? Getting serious about it.

Yeah. Having that goal and being on the same page and understanding that we have to take responsibility and we need to be good stewards. It just is so important, I think, that you have the plan and you follow the plan. So, Doug, you came off a long-term disability back into the air. That's correct. I was one of the fortunate few because a lot of times you go on disability, it's very, very hard to come back as a commercial pilot. Yeah, pilot stuff is pretty serious, particularly commercial pilot.

Yeah. As it should be, but still, come back as a commercial pilot. Yeah, pilot stuff is pretty serious, particularly commercial pilot. Yeah. As it should be, but still, it's a pretty fine comb. We didn't get serious about the financial debt in your program until I was on disability. And, of course, we had a mountain of debt, and now one of us is working, or one of us can't work. So that was an eye-opener. Wow. Wow. Way to go, you guys. I mean, you did it.

How does it feel? Amazing. Well done. For me, because I'm the one that was dealing at the time he was on long-term disability, especially with the budget and the job and the whole works while he was trying to recover. So it's a great place to be. I highly encourage it. Amen.

So debt-free for everybody. It's awesome. And your younger son's with you. What's his name and age? He's Noah, and he's 16. Okay. And is that NASA I see on the shirt? Yeah.

Okay. So he's going to be a rocket scientist. Yes, sir. That's his hope. That's good. Following the aerodynamic path of his parents then. I love it. Good deal.

Congratulations, you guys. i'm proud of you thank you so much appreciate that people cheering you on or people saying you're crazy both the the ones that thought we were crazy probably didn't say it out loud too much but because we weren't going to listen anyway but the yeah you reach a point you don't care what they think right and and honestly we didn't so um there was a lot of encouragers, though. That's good. There was a lot of people that, though they thought they might not be able to do it, it was good that we were trying to do it. So you said years ago you went through Financial Peace University.

Did you go back through then when you started getting serious? Yes. Three times, didn't you? Maybe three times. I know the second time, but we were already pretty much gung-ho. You knew what to do from before. Right. You just got back into the group to get the encouragement and the right culture around you.

And we've gone to see you live all over the country, basically. Well, you do it for airline miles. Sometimes. I don't think so. Well, congratulations, you guys. Very, very well done. Proud of you. Thank you.

Again, we've got Chris Hogan's book, Retire Inspired, for you. That is the next chapter in your story to not only be debt-free but now be millionaires and outrageously generous along the way. And you've already proven that you know how to do that, investing into your son the way you did. So very, very well done. Like any good parent would do, but you guys did it on steroids. Well done. Doug, Sally, and Noah from Denver, $503,000 paid off in two and a half years, making $240,000 to $550,000.

Count it down. Let's hear a debt-free scream. All the glory to God. Three, two, one. We're dead free! Wow. Wow. You know, sometimes I hear somebody's paid off $50,000 that makes $50,000.

But sometimes we have people that pay off $500,000 that make $500,000. That's a lot of money. It's a lot of debt and a lot of income both, isn't it? I don't make $500,000. Yeah, you probably don't have $500,000 in debt either. I hope. I mean, we hear all kinds of numbers on this show, but you know what's interesting?

Chris Hogan says it well. The numbers change when people do. You get to make a decision right now, today. What are you going to do? You have the power, the freedom, and the obligation to intentionally make a decision about what you're going to do with your life. People don't lose at life. People aren't unsuccessful because they set out for that to be their goal. People are unsuccessful because they don't have intentionality No one accidentally wins the Super Bowl

It was an act of intention Practice and work and practice and work and practice and work and practice and work and practice and work and practice and work and practice and work You hustle and you grind, you hustle and you grind, you hustle and you grind And then you're not surprised when you're successful because you know how you got there. Financially successful. Successful in raising your kids. Successful in your marriage. Successful in your career.

Successful in running a marathon. It's never a shock. It was an act of intentionality. A choice. So choose. Guys, let's talk about that timeshare pitch that you fell for. They promised you exclusive access to travel anywhere you want, tropical beaches, mountain getaways, or whatever. Oh my gosh. They claimed it was the affordable way

to travel, and then they convinced you it was a good investment. But here's the deal. Search any auction site for your exact timeshare and see what it's selling for. It's listed for a dollar with no bids. That's not a good investment. Now, I know I'm just adding salt to a very old wound, but look, if you tried calling the resort and they won't take it back, if you tried selling it and no one will buy it, call Timeshare Exit Team. Timeshare Exit Team will get you out. You'll have to be patient. It can be a long process and it costs money, but it works. They're so confident in their exit service that if they don't get you out, you get a 100% refund. Call 844-999-EXIT. It's free to talk.

844-999-EXIT. TimeshareExitTeam.com. Our scripture of the day, Proverbs 16, 9. The heart of a man plans his ways, but the Lord directs his steps. Robert Louis Stevenson said, Life is not a matter of holding good cards, but of playing a poor hand well. That's good. Condi Rice said similarly. She said, It doesn't matter where you're coming from.

It matters where you're going to. Robertson, Philadelphia. Hey, Robert. Welcome to the Dave Ramsey Show. Hey, Dave. How you doing? Better than I deserve. What's up?

Nothing. I just wanted you to maybe evaluate what I'm thinking about doing and my overall situation. I'm 51. Four taxes make around $100,000. I have probably four or five months left on my mortgage. I've really been aggressive towards that in the last year. Good for you. I took a lot of my savings. Good for you. I took a chunk out of my savings, and I want to get that mortgage done with. Mm-hmm. So right now, I have in my Flow 3B account about $560,000 and another $60,000 in a separate IRA.

Mm-hmm. And I have about a $ five thousand emergency fund. I have one car payment, five hundred a month. And I help my daughter with college. It comes out to the apartments and cell phone and all this. In a year and a half, I'll be paying about a thousand a month to help her. So my question is, what would you think about, once my mortgage is paid, I like to have a goal. So I was kind of thinking I would just really max out the four through three, that would be $924 bi-weekly I'd be allowed to put in. My employer puts in about $50 every time I do that. And really go towards that.

But, you know, I remember 2007 when the stock market went ugly. I lost a lot of money. And, you know, right now. You didn't lose any money because you didn't take it out. Well, right, right, exactly. But I was thinking, what's your opinion on refinancing my house? It's worth about $280, $300. And taking that money and buying an investment property.

No, no, no. I'd never borrow on my home to invest in anything. Now, let's get your house paid for. And then before you max out that $403 billion, you get that stupid car paid off. $500 car payment? Yeah, well, I, pay it off. I know, I know. I'm going to actually double those payments.

Quadruple them. Let's get this stupid thing done. And then max out your 403B. Now, once your 403B is maxed out and your home is paid for and you've got the college thing budgeted, then if you want to start saving money to pay cash for a house,

a small rental in a few years, there's no problem with that. If you want to do an after-tax regular mutual fund, I did a lot of that at that stage. You're at what we call baby step seven at that point. The house is paid for. There's zero debt, no car debt or anything. You have your emergency fund. You have the kids' college fund funded.

You've got the $60,000 going there. And you're funding your 403B. If you want to start saving then to pay cash for a house, I just use an S&P 500 no-load because I'm not going to be leaving it in there that long, two or three, five years, whatever it is that it takes to build up the money to pay cash for a piece of real estate. So that's my little real estate fund. I just build that up on the side and pay cash.

But no, I'm not ever going to tell you to borrow on your home to invest in anything, ever. Alan's in Boise, Idaho. Hey, Alan, how are you? Dave, it's such an honor to talk to you. You've saved our lives. Well, I'm honored. How can I help?

Hey, we got ourselves into a situation. We were working on our three to six months of expenses. We paid off everything, including our house, when Murphy slapped us silly. And we ended up doing what we said we'd never do. And we went into our home equity line of credit to the tune of about $20,000. My question for you is, do we stay intense and pay off this line of credit, or do we treat it kind of like our house payment and start investing and then just pay extra toward the thing to get us out? I'd stop everything and pay it off immediately. Okay.

Yeah, get it done, and then kick everything back in hardcore, and then cancel the line of credit. Don't leave it laying on there. Absolutely. So it never grows back ever, ever, ever again. But it's not going to take you long. It's only $20,000, and you know how to do this. You've done it before.

And just lean into it. Smack it silly this time, and let's get rid of it, and then build your emergency fund up. And, you know, having walked where you walk, you may want a bigger emergency fund. I don't know what happened that caused that to happen and whether the probability of that situation is ever there again. But, I mean, truthfully, with Sharon and I having been broke, we've never touched the emergency fund ever in our lives because we're so paranoid,

especially Sharon, that the emergency fund ever in our lives because we're so paranoid, especially Sharon, that the emergency fund has its own emergency fund. And so we never get to the real one. We just touch the outer ring if we ever got to an emergency. So we're big, big piles of cash people because we don't ever want to be back there again. We don't ever want to be back there again. David is with us in Jacksonville, Florida. Hi, David. How are you? Good, Dave. Thanks for taking my call. I've got two quick

questions. We are on baby step number two. We're about $40,000 in debt between a car and some credit card debt. I'm in sales. Now, I get a car allowance of $500 a month, and should we include the car in Baby Step 2, or because I get a car allowance, should we handle it differently? Yeah, no, your car allowance is part of your income, and your car is in your Baby Step 2.

Because here's the thing. No, your car allowance is part of your income, and your car is in your baby step, too. Because here's the thing. If you get fired, you don't get a car allowance anymore, but you still have a car payment. You still have a car payment. Okay. They don't, like, say, oh, you don't have a car allowance anymore, so now you don't owe anything on your car. That's not how it works. Okay.

Now, also, though, my expenses i i have to put out all my expenses um and then i'm reimbursed yeah and so it's making you know budgeting a little hard because i don't i can't really budget it between gas and how much are your expenses how much is your expense account a month i don't there's not a set no i mean what do you usually spend that is reimbursable in a month it's usually about 1500 okay so set up a separate checking account and let's put 1500 bucks in it with a debit card on that account never leave it completely separate never yeah never use that account for anything that is not reimbursable. Okay.

And you'll never have to touch it again. Because every time you take $500 out or $800 out, $800 or $500 is going to come back in because they pay their bill back to you, but it's just a delay, right? Right, right. And we were trying to do it out of our regular checking account. Drive you nuts. But it was messing up our regular checking account. Drive you nuts. But it was messing up. Yeah, it'll drive you nuts.

Plus, you forget what's reimbursable. When you're traveling, you do buy some things that are not reimbursable. I mean, shampoo is not reimbursable. You know what I mean? So I don't have that issue. But, you know, whatever, right? I mean, whatever it is you're buying that's a personal item is not reimbursable. You know what that is.

And the problem is that it's all commingled. So if you're on the road and you buy something that's not reimbursable, you would use your personal account for that. Right. But you'd use your expense account that we set up on the side just now only for reimbursables, and that way you'll never have to fund it again. You fund it one time, and they give you the money back each time. They give you the money back each time. They give you the money back each time, so it'll always be there.

As long as you don't go over $1,500, you'll never be in the hole, right? Right, right. So, I mean, put $2,000 in there if you want, just to make sure. But it makes your life a lot easier to just keep it very, very segmented like that, very compartmentalized, departmentalized, so you break it out. So good question. Hey, thank you for joining us. Open phones at 888-825-5225.

Michaela says, my husband is on Facebook, thinks that the American economy is so high and with too much debt that it will soon crash worse than 2008. What are your thoughts? So what if it does? What are you going to be doing? I don't think it's going to crash, but that doesn't change my investment strategy. I'm investing in exactly the same things if it's going to crash or if it doesn't crash. Nothing changes.

I'm going to get out of debt either way. Nothing changes. The strategies that we use cause you to prosper in up times and be protected in down times. So use those strategies. And whether he's right or whether I'm right won't matter. That puts this hour of the Dave Ramsey Show in the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace,

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