The Ramsey Show - App - You Can Always Count on the Unexpected (Hour 2)

Episode Date: February 13, 2020

Savings, Retirement Tools to get you started:  Debt Calculator: http://bit.ly/2QIoSPV Insurance Coverage Checkup: http://bit.ly/2BrqEuo Complete Guide to Budgeting: http://bit.ly/2QEyonc Interview Guide: http://bit.ly/2BuGnZE Check out other podcasts in the Ramsey Network: http://bit.ly/2JgzaQR 

Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studios, 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. You jump in. We'll talk about your life, your money. It is a free call at 888-825-5225. That's 888-825-5225. Margie is with us, and she is in... I'm sorry.

I'm hitting the wrong buttons everywhere here. Where'd you go? There she is. Margie's in St. Petersburg hitting the wrong buttons everywhere here. Where'd you go? There she is. Margie's in St. Petersburg, Florida. Hi, Margie. How are you? Hello. Thank you so much for taking my call.

Sure. What's up? Okay. I live in St. Petersburg, Florida. However, I just sold a condo I had in Colorado Springs. It closed today. And roughly, I'm wondering if I should take the proceeds, the $85,150, and do a 1031. Because if I receive $85,000, from what I understand, I have to pay $30,000 in taxes.

So I'll only have $55,000 versus if I take the $85,000 and roll it into another piece of property. Another piece of property, I understand that to avoid the taxes, I could rent it out for a year and then go move in it and make it my primary residence, and then I wouldn't lose the $30,000 in taxes. Okay. Yeah, that could all be true. The place you live now, do you own it? No.

Yes, I own it, but it's not paid off. Okay. Yeah, you can only have one primary residence. Right. That's why that's primary. So you're going to lose the tax break on one of these two properties. Well, what I would do is um what i would do this property is a rental the one in colorado springs is currently a rental that i understand understand okay and i have a property in right now here but i could rent out the other property i could buy another property here in

st petersburg let's say and rent it out for a year and then next year sell this which is by primary resident okay if you sold that that might work now the only problem is i and you need to double check and you probably need to do it like immediately with a tax professional because i'm not one but i have 100 i have 45 days to name a property in 180 days, but you had to close this into a 1031. You closed it into a 1031? 1031 exchange, and I have 45 days to either not do it or... Stop a minute. When you did the closing on the condo,

you closed it with a title company that does 1031s? Correct. Okay, good. Because I don't think you can go back and undo it otherwise. That's what I was afraid of. Correct. All right, good. So the only question is, should you do a 1031?

Now, I don't know if I'm going to do all of those gyrations just to save $30,000. If it saves $30,000 and it ends up being where I want to live anyway, okay, that's fine. So let's talk about it for a second. You have an actual gain over your basis of $90,000? Correct. Or no, no, more than that if your taxes are $30,000. What is your household income? Okay, well, my household income is $4,000 a month.

Okay, then your tax rate on a capital gain should be 15%, not 30%. No, $30,000. I know. I got that. So you've refinanced this property at some point? I did refinance it. And pulled cash out? No, never pulled cash out.

I bought it in 2007 for $195,000 and then lived in it a year, and my job took me somewhere else. And then the market, I couldn't give it away for $140,000 because the market dumped. So you sold it for how much? I sold it for $227,500. Okay. And how long did you rent it? I rented it like, I think it was eight years.

Okay. I believe. There's no way your tax bill is $30,000. Where did you get that? From the person that does my taxes. Okay. He said it would be between $27,500 and $30,000. I mean, I don't know how you got your adjusted basis down that low in eight years to where,

because that would be the whole thing would be taxable. This is what she told me. My basis was $195,000. My depreciation was $69,551. That's what it should be. That makes more sense. That would be $130,000, which would be a $100,000 gain, which would be a $15,000 tax bill, not a $30,000 tax bill. You need to get a second opinion on your taxes.

Oh, because she said my adjusted basis was $125,467. Okay, and if you sell it for $225,000, that's $100,000 gain minus sales expenses. Oh, because... Your gain is sale price minus sale expenses minus adjusted basis is your gain times 15%. There's no way it's $30,000. Okay, because this is what she did. She took $227,000. Then she said it was $125,467 depreciation.

My gain was $1,233. And then I paid my realtor, which was $13,542. And then my net gain was $86,691. Yeah, times.15 is your tax bill. So then I'm better off. Capital gains rate is 15%. I don't know why she's calculating unless she somehow got you to pay an ordinary income on this, which doesn't make any sense.

It should be 15%. I think you have a bad tax person. I'm not a tax pro, but I do know those numbers because I do enough real estate transactions that I'm pretty much on top of that. I don't have the luxury of a 15% in my income bracket, but mine's a little higher than that. But still, yeah. Anyway, the question starts to to become is all this gyration worth it for 15 grand so first the answer number one to your question as we dig into it is get a second opinion on the taxes because i think she screwed them up number two if it is 15 000 or if

it's 30 000 whichever it ends up being then you start asking yourself the question is it worth it to go through all this crap all this buying and selling and back and forth and moving? Are you going to end up where you want to end up for $30,000 or $15,000? Probably not for $15,000. It's probably not worth all of it unless you want to move anyway. And the house you do with the 1031, the property you buy with the 1031 that you're going to rent for a little while for one year, is your ultimate goal, where you want to end up. If you're just doing all of this just for taxes, it's probably not worth it.

But if you're doing it because you're going to end up there anyway, and it saves you 15 or 30, either one, if you're going to end up there anyway, it might be an okay move. It might be an okay move. A 1031 is a valid process. And you've really done a great job of researching everything and thinking it through. And you're quite a chess player, Margie. I mean, you've got these moves all over this board beautifully done. And you're on top of it, kiddo.

So I think you can play it through if you want to. But don't do it all just for the money, just for the tax savings, unless it's where you want to end up anyway. Where does Margie want to live? That's the answer to the question. This is the Dave Ramsey Show. For over 20 years, I've recommended Zander Insurance and their term life programs. I'm still amazed at how many families have no life insurance or not enough and would be financially devastated if a spouse or parent died. It's inexcusable since the cost of term life is just

plain cheap and Zander really has figured out a way to make it simple and straightforward. They only sell the plans I recommend and their system is built to your needs. You pick your path. If you want to work online, you can compare all the companies and handle everything over the web, even signing up and getting your policy electronically. If you have questions or you need that personal touch, well, they're there to help. It's all about serving you like no one else so you get the protection you need. There really is no excuse not to get this done. Call 800-356-4282 or go to zander.com. You pick the path to getting your family protected. Our question of the day comes from Blinds.com.

Brand new custom blinds from Blinds.com are the easiest and most affordable way to give your entire home a facelift. With Blinds.com, you get free samples, free shipping, and with the new promos they run every month, you'll save even more. Use the magic word, the promo code RAMSY, and you get the best possible deal. Blinds.com. Today's question is from Ricky in Washington. He said, Dave, I've just gone through my second beater car, tired of being on a first-name basis with the triple-A tow truck diver.

I'm out of debt. I have my emergency fund saved, and I have the money to get a little nicer car. Having a hard time parting with it because I work so hard to save it. Can you talk a bit about the struggle people have with spending money, even when they have it to spend? Yeah, it's so hard to finally get some in savings. It's hard to release it, especially if you're wired as a saver. Now, I'm wired as a spender. My wife is wired as a saver. Usually we fall in one of two categories. I think you're wired as a saver. She gets great comfort from having that pile of money more than she would get great comfort from having a reliable car.

Me, I'd rather have a reliable car. Pass the emergency fund. You're at the, you know, this is an emotional thing at this point. It's not a financial thing. It's a, I have the money, but I have trouble releasing it. And so what that says is you're just getting some, you know, it's a normal normal thing and it's not a bad thing but it's it just says i get security from that extra money beyond my emergency fund um and i'll tell you this i i think it's something we all have to work at one of our money skills there's really three basic money skills that you have. Spending, properly, reasonably.

Learning to enjoy money falls under spending. Learning to enjoy life with your money, which is kind of what your question's about. The second one's saving. You've got to learn to save money for emergencies, for college, for retirement, to change your family tree, to build wealth. You've got to learn to save money for emergencies, for college, for retirement, to change your family tree, to build wealth. You got to learn to invest. You got to learn to ride the investment waves, right? And giving. The power of generosity to completely change you when you learn to give as the natural rhythm of your life. It changes everything.

So giving, saving, and spending. Everyone has at least one of those that they struggle with. Mine is saving. I'm a spender. No trouble for me to enjoy money. There's. No trouble for me to enjoy money. There's also no trouble for me to give money. A lot of spenders, it's easy for them to be generous. Because the release of money doesn't bother us as much as it does a saver.

But I'm weak at saving. And that's why God makes me teach this every day. I'm no longer weak at saving, but it why god makes me teach this every day i'm no longer weak at saving but it wasn't my natural default i had to intellectually decide to have an act of my will to save and invest and really what drove me to do that as a spender giver is that i would have more to spend and give if i built more wealth i can spend more and give more and that's my only reason for saving it's not because i just love saving money i still don't to this day it's not so you're on the other side of this ricky is what we're saying you you know you you don't enjoy spending we don't know about giving you didn't address that in the in your thing Sometimes I can get spenders or savers like this to turn loose of their money

first by increasing their giving. And then that kind of gives them permission to also enjoy the money themselves. But it would be a shame to save and work and not enjoy some of your money. And one of the things you should enjoy is a reliable vehicle and you don't have a reliable vehicle you've been doing you know you've been doing beaters and so um you you know you you need to go buy the car you already knew that you weren't asking about that but you already knew that but maybe also take a little bit of that money and give it find some place to be generous at your church or find a couple that's struggling or a single mom that pay her light bill for a year or whatever but find something to do

because there's something about giving that kind of then gives you permission down inside your spirit to also enjoy money. Because money's fun if you got some. You ought to enjoy it. You ought to enjoy some nice things. Now, if that's all you do and you don't save and you don't give, then you're just a shallow twerp, right? But, you know, to assume that just because someone has the ability to enjoy money means that they're greedy or shallow, that's just bogus. And the way you can tell is what percentage of their financial situation is going towards stuff for them.

And if all the money you make is going to buy you crap, then you're out of balance, you know? But if you're giving a percentage of your income and you're investing a good percentage of your income and you're enjoying some of your income on lifestyle purchases, travel, cars, clothes, whatever it is, then that's in balance once you're at baby step three and beyond and and that's where ricky is but it's a really good question ricky it's a good question for me to stop and just kind of rant on or vent on for a second here teach on for a second because

sometimes people think well you know you no one should ever have a car like that. What would anyone need a house like that for? I've got a friend that's worth about $3 billion. Now, a billion is $1,000 million. He has $3,000 million. He has $3,000 million. He spent 6 million on his house, and people sent him hate mail.

No, why did you ever have a house like that? His house, as a percentage of his net worth and his income, is like you going through the drive-thru at Chick-fil-A and buying a biscuit. It didn't affect his life one iota to spend $6 million on a house. As a matter of fact, that's a very conservative house for someone who has $3 billion. But see, that's where people get out of whack, right? And of course, that's where people, you of whack right and of course that's where people

you know in our culture today it's like this it's a it's an art form to judge other people to get in other people's business now it's called twitter and and what's intriguing is is that people are so stupid that this you know i need to tweet this out because i'll stir up some people. This younger generation that is so technologically savvy, if I don't know how to work my iPhone, I can hand it to one of you in your 20s and you can fix it in a heartbeat. You're so technologically savvy, and when it comes to understanding human nature, you're just stupid. Because the number of you on the internet that believe

everything you read on the internet that's just absolutely stupid i have a keyboard i can type up whatever i want to type up and put it on the internet and you'll believe it and so you automatically assume when you read something that it's true. On the Internet, Abe Lincoln said everything on the Internet was true. I mean, and they believe it. Hello. Abe Lincoln was not. Okay.

It's so basic. That's the ultimate sarcasm right there. But, I mean, it's nuts. Because it's on the Internet doesn't make it true. And because you put out your opinion on the Internet doesn't make it true. And because you put out your opinion on the Internet doesn't make it true about what someone else purchased. Because you don't know what you're talking about. You should maybe mind your own freaking business. So that kind of comes into the same equation.

Comes into the same discussion. Your friend buys a car and you're you like got an opinion about it maybe you ought to just have an opinion about your own self because you pretty much suck right now and you got a lot of work to do on you instead of figuring out what's wrong with your friend and putting that on your little facebook instagram account jeez man and then everybody thinks it's true just because you had an opinion people believe anything that's printed on the internet it's just ridiculous just automatically assume that it's true that's just dumb this is the Dave Ramsey show I love talking about companies that know how to do business right. You've heard of Grip6 belts, right?

Well, if you haven't, it's the only belt you can get online with no holes, no flap, and no bulk. I'm talking weightless, and the buckles come in really cool designs and are interchangeable. I personally own a number of these belts, and they're so comfortable, you forget you're wearing it. Plus, these guys have a great story. B.J. Minson started Grip6 on Kickstarter from his garage in 2014, and now sells hundreds of thousands of these American-made belts to customers all over the world. As a mechanical engineer and a minimalist, B., BJ took his dislike for heavy, bulky leather belts that never fit right and created the perfect belt, a high-quality, minimalist belt

that gives the strength and support of a belt without even knowing you're wearing one. I'm really proud of these guys. Check out this month's special offers from my listeners at GRIP6.com. Mark's with us in Albany, New York. Hey, Mark, welcome to the Dave Ramsey Show. Thanks, Dave. How you doing? Better than I deserve. What's up? Well, I'm just real excited to be talking to you today because I'm here to tell you that I'm debt-free except for my house.

I love it! Way to go, man! How much you paid off? Me too. I paid off $197,400 in 31 months. Woo! Wow! What is your household income? Well, I started the journey making about $79,000 a year with my AGI, and I just filed my tax returns, and I'm at $155,000 now.

Good for you. What do you guys do for a living? I'm at $155,000 now. Good for you. What do you guys do for a living? I'm a licensed professional engineer. Wow. What caused your income to double in 31 months? Well, it was just laser beam focus, trying to pivot and make things happen here in my business. I work for myself designing HVAC systems. So you grew your business double

in 31 months? Yeah, just trying to hit the pavement to bring in revenue. I mean, things were tough in the beginning. We were actually negative for the first year, and then I needed to turn things around. Wow. What kind of debt was the $197,000? Well, business loan was $50,000. I had a business line of credit of $30,000. I had a car note of $32,000, student loans of $20,000. While things were really tight, I had to borrow money from a friend for $30,000, and the rest was paying down my mortgage over the 31 months.

So you paid off everything but your house, yeah? No, no, it was just a principal reduction. I got you, I got you. Okay. So did you sell stuff? house, yeah. No, no, it was just the principal reduction. I got you. I got you. Okay. So did you sell stuff? No, no. I just worked real hard and didn't eat much. Okay.

You're single? Well, the story begins, if I may. Sure. A few years back, I decided to make the leap when I was married to go into business for myself, and things were going really well right out of the gate. I started lining up contracts and went and parlayed some of the revenues and built an office, hired an employee, and then that's when just as I made that commitment,

my wife at the time had abandoned our marriage, took the kids down to South Florida, and any retirement and cash I had went to dividing marital property, and those contracts that I thought I had lined up never came to fruition. And I was really, the way the debt amassed was the fact that I was in negative cash flow, just trying to hang on to my house. Wow. So I had to go pretty deep.

Wow. And that's not even the most challenging part. Three months after she had left, she called me and asked to take full custody back of my kids, which presented tremendous challenges because both of my kids have medical issues that require attention from providers. So working 80 hours a week and trying to deal with two adolescent teen boys and their medical issues was just a real burden to try to get out of this thing. So I can't tell you how excited I am to be on the phone with you right now

to tell you that we've conquered it. Wow. So the boys are still with you? Yeah, the boys are still with me, absolutely. The moms are from Florida. Wow. And you guys are you paid off almost a hundred thousand dollars a year for two years i mean really you've so most of this

time you didn't make 79 most of this time you made 155 uh yeah at the first year uh the agi was the way it was because it carried all the losses from the previous year which dropped it down yeah okay but you've because i'm trying to figure out how you cash flowed it from a standpoint of $100,000 a year, really, for two and a half years. I mean, it's not quite that, but it's $80,000 a year for two and a half years. Right. And that gets you to $197,000, and you did that on nothing, man. You guys have been living on beans and rice. I'll tell you, I don't ever want to look at another can of chicken again.

I hear you. Absolutely. I bet. How does it feel to be free now? Oh, my God. It's not just a matter of the paying down the debt, David. It's also a matter of being kind of the master of my own domain here, running a business and getting the chance to eat what I kill,

and then, of course, not having the debt and it just incentivizes you to work even harder and build up an emergency fund and build up a retirement fund and create a legacy for your kids because what you do bring in at this point is going right in the bank and in retirement and towards college and you get to see everything you actually earn. So it just motivates you even further. Something happens when the money stops leaving the account and you get to see everything you actually earn. So it just motivates you even further. Something happens when the money stops leaving the account and you get to see it going into your account for a change. Amen.

And when you've been where you've been and where I've been, you have that never again moment. I'm never going back. You and me both. I hear you. So you followed our stuff. How did you connect to us? Well, I was always a fan of your work, but couldn't quite get my partner on board at the time.

I always wanted to go down that path, but we were okay. I mean, we were, like I said, business was good, and she was working when we were together, and we were able to make ends meet. So there was real no emergency at the time. There was nothing that was on fire at the time. We were just kind of normal like everyone else. And when everything happened the way it did and the trickle-down effect of losing everything in the bank and all the retirement to pay things out, that's when I knew I had to get drastic. And of course, when it comes down to controlling

expenses and coming up with a plan, having already read the total money makeover and being a fan of yours, I knew that was going to be the process I would follow, at least on the debt reduction side. And, of course, on the income side, I had to make some adjustments in my business and do some pivoting to make things happen. Yeah, you got after it, man. Well, congratulations. I'm very proud of you.

What do you tell people the key to getting out of debt is? The key, really, it's all about planning. I mean, not only on what you're going to pay down, what you're going to do with that next dollar in terms of the debt snowball, but also how you're going to go about your expenditures and playing things smart. I mean, I had to lay things out to figure out what I wanted and how I was going to get there. And part of that process was what could I delegate.

And, you know, once I what could I delegate? And, you know, once I put it all on paper saying, okay, I could hire somebody to help me around the house. I could buy in bulk and make meals for the week so I don't have to cook every night. And once I laid out the plan and really looked at the numbers and balanced the equation from the income to the debts, I saw a way out. And that was the proof that I needed that this can be done. So the key is really developing the plan and believing in it and seeing it happen. Good for you, man.

Well done. Proud of you. Very well done. Thanks. You've got to feel great about yourself. You should. We've got a copy of Chris H hogan's book retire inspired for you signed by him number one best-selling book that's the next chapter in this story for sure

you are well on your way to being a millionaire and of course outrageously generous as we go along so well done are the boys there to scream with you no no unfortunately they had other engagements but uh but i'm here i'm sure i could hold it down for us. I got it. Mark in Albany, New York, $197,000 paid off in 31 months, making $79,000 to $155,000 all the while life is happening. Count it down. Let's hear a

debt-free scream. Well, hold on to your headphones, Dave, because I'm debt-free! I'm debt-free! That's how they play in Albany, New York. That's how they roll. Well done, sir. I love it.

Well done, well done, well done. You ever had life happen to you? If you haven't, you haven't been living very long, right? Man, I don't know anybody that goes through life and life doesn't happen to them. Stuff happens, doesn't it? Sometimes it's bad stuff. Sometimes it's good stuff. But stuff happens.

The one thing you can count on is change. The one thing you can count on is the unexpected. The unexpected blessing or the unexpected tragedy. You can count on is the unexpected. The unexpected blessing or the unexpected tragedy. You can count on it. Chaos is just around the corner. You can't control that part. You can control the variables you can control. And the variables you can control are the person in your mirror.

You can make a decision to live on less than you make, a concept Congress can't grasp. You can make a decision to live on a plan, act like you're going to be a responsible adult. Adults devise a plan and follow it. Children do what feels good. You see, folks, you can do this stuff. I know you can do it. Because I've talked to 10 or 15 million of you a week for many years now. I know you can do it. Because I've talked to 10 or 15 million of you a week for many years now.

I know you can do it. I've seen you do it. I've seen people of every background, every income, every strata make a decision. I'm going to be the master of my ship. This is the Dave Ramsey Show. thank you for joining us america this is the dave ramsey show justin is in detroit michigan how are you justin i'm doing pretty good dave how about yourself better than i deserve what's up I have a question for you. I've paid off half my debt over probably the last eight months and working on the rest for this upcoming year.

Good. And my question comes for you. I like your opinion on step four versus investing the 15% into Roth IRAs, I had kind of a different mindset for retirement in which I'd put the money into my plan I was thinking about was putting money into rental properties. And that would be kind of sidestepped me and put me over into retirement eventually versus my current job. And I was going to find out from you your opinion on investing in the investment properties versus the Roth IRAs. I wouldn't do it versus, but I would definitely do both. What's your household income?

Let's see. I think last I checked it was about $105,000. Okay. So $15,000 a year is 15% of your income going into baby step four in Roth IRAs and 401Ks and good growth stock mutual funds. $15,000 a year will not put you in the real estate business. Yeah, I didn't think so. I figured it'd be one or the other.

No, you're missing a point. It's not one or the other. Because you're suggesting that $15,000 a year, baby step four, should be done in your real estate, and I'm saying it's not enough to get you into real estate. You can't buy anything with $15,000. Yeah, to buy properties.

The properties I was looking at are between $30,000 and $60,000. They'd bring in some okay rent. I figured that'd be a starting point. I would do that in addition to 15% into your roth irasian 401 case the 15 000 going into those things is not going to keep you out of the real estate business nor is it gonna is it enough to get you into the real estate business and so you know i'm just going to do my real estate over and above baby step four if i'm in your shoes it's what i've done by the way and i'll

tell you the net result all these years later justin i'm 57 years old um i've got millions and millions and millions of dollars worth of real estate my and it has i have i dumped just about i jumped the majority of my investment dollars above my personal 401ks and personal, you know, basic mutual fund investing stuff into real estate. And so it has ended up that probably my mutual funds are a fairly small percentage of my net worth, less than a fourth of my net worth. Most of my net worth would be composed of this company and the real estate that I own. And so that's where I've ended up making my wealth is in those two areas.

Now, the mutual funds have made me – I've got tens of millions of dollars in mutual funds, and in good growth stock mutual funds and 401ks, just like I teach. I do it every month, just like I teach. But what my point is, is that you keep doing 15% of your income into that, and as your income comes up, and as you buy paid-for rentals, and as you get more money from those, you buy more paid-for rentals, and you buy more paid-for rentals, you're going to end up owning 75% of your net worth being in real estate. paid for rentals and you buy more paid for rentals, you're going to end up owning, you know, 75% of your net worth being in real estate. And it's going to be good that you don't have it all

in real estate. And it's good that I don't have it all in real estate, even though I'm a lover of real estate. So calm down, take your time, do this right. Be the tortoise, not the hare. Don't try to find a shortcut. There's not one. And do your 15% into good mutual funds, maybe step four. Above that, save and pay cash for your rental real estate. And that's what I've done. That's what I would tell you to do. Thank you, sir. Open phones at 888-825-5225. Amanda is in Cincinnati. Hi, Amanda. How are you? Hi, Dave. I'm better than I deserve. Thank you so much for taking my call. Sure. What's up? So my husband and I, thanks to you, were able to pay off $105,000

in 14 months just over a year ago. And since that time, we've been able to save our emergency fund, save our down payment, and buy a house. Wow And now we're starting to look back into our retirement. Wow. Good for you. Well, thank you. So my husband and I, well, my husband has a Roth IRA that he started when he was 18 years old that has $64,000 in it. He has a IRA, a regular IRA from a previous that has $7,400 in it. And we were just wondering if we should roll that into a regular IRA or into his Roth IRA. It won't go into his Roth.

A rollover has to be a separate account, but you can roll it to a Roth as long as you have the cash above your emergency fund to pay the taxes created by that. We do. Currently we have just over $47,000. Okay. So there's not going to be a lot of tax. I mean, $2,000 or something tax on $7,400 when you do that.

So, you know, roll it, but when you roll it, you're going to roll it to a Roth in good growth stock mutual funds, just like we all talk about all the time, right? Yeah. And then you're going to have taxes due on that when you file your tax bill next year not this year when you file your tax return next year and then what you'll do there is of course uh just pay the taxes and effectively what you've done is mathematically it's as if you've invested another two grand

because because then we wouldn't have to pay the tax on it exactly later on because you've already paid the taxes on it now and okay and the whole thing the whole account in a roth is tax free what you've put in because it's after tax now and all the growth is tax free so and you guys sound like you're young how old are you uh we're 27 and 28 i I love it. You guys are going to have so much money. You are doing so good. Keep it up. Well done. Vivian is with us in Orange County.

Hi, Vivian. How are you? Hi, I'm good. You know what? I have a 2017 Ford Fusion, and it's financed at 0%. So I was thinking, should I just return it, a voluntary repo? No. And take that hit on my credit because the goal is to cash flow everything, right? Right.

So what do you owe on the car? $25,300, something like that. All right. And my payments are $478 a month with car insurance at $132. So I figure that's like a total savings if I got rid of it, $600, so that I can start my emergency fund. Yeah, and so you owe $25,300. Have you looked up what the car is worth?

Yes, like $17,000. On what? What do you mean on what? Well is worth? Yes, like $17,000. On what? What do you mean on what? Well, as a trade-in, a retail, a Kelley Blue Book personal private sale. The Kelley Blue Book and also a trade-in. Kelley Blue Book what? Trade-in or private sale?

Trade-in. Okay. Trade-in. Okay. Trade-in is wholesale. So you would never sell a car for wholesale unless you were about to be repossessed or something, and you're not. You're talking about a voluntary repossession, which is really dangerous. So that car is probably worth $20,000, $21,000 were you to sell it to an individual on private sale. Look that up on Kelley Blue Book, and you'll find I'm right. Who do you have the car loan with? Ford Credit.

Okay. Do you have any credit? Is your credit destroyed or bad or what? It's like in the 600 range. Okay. All right. Do you have any money? No.

No. Okay. So that's why you're calling me. Well, I got it because it was convenient. My other car broke down. Yeah, you impulsed it. Okay. So that's why you're calling me. Well, I got it because it was convenient. My other car broke down. You impulsed it. Yeah. And so you do need to get rid of it,

but what we need to do is find a way to borrow from the local credit union or the bank about $5,000 or $4,000, which will get you out of this car, and you sell it to an individual. Here's the problem. If it is private sale 20 or 21, if it's wholesale 17, if you toss them the keys and hand it over on a voluntary repossession, they're going to sell the car for 10, and they're going to come after you for the difference. Right. And so what you do by selling it yourself is you control the size of the hole you're in,

not to mention not destroy your credit. Not destroying your credit is a secondary issue for me, but you need to control the variables here. When you hand that car off to somebody else and just walk away, not only do you destroy your credit, but mainly the big problem is you lose control of what the car sells for, and then they're going to come after you for the difference. I'd rather you be $5,000 in the hole than $15,000 in the hole.

So you control this. Hey, it's Kelly, associate producer and phone screener for The Dave Ramsey Show. If you would like to do your debt-free scream live on the show, make sure you visit DaveRamsey.com slash show and register. We would love for you to come to Nashville and tell Dave your story.