The Ramsey Show - App - You Don't Get a Pass on Math Just Because the Market Is Hot (Hour 2)

Episode Date: February 12, 2020

Debt, Home Selling 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. Thank you for joining us. Open phones at 888-825-5225. That's 888-825-5225. Bill is going to start off this hour in Detroit, Michigan.

Hey, Bill, how are you? I'm doing great, Dave. Thanks for taking my call. Sure. What's up? Hey, I have a question on incentive stock options. I've been receiving incentive stock options from my work for about the past 10 years, and they've matured to the amount of $16,800.

And I'm wondering, my wife and I have some debt. We have about $20,000 in cars, $6,000 in credit cards, and a little under $1,000 in medical bills. And I wanted your advice on how I should handle these incentive stock options. I'd cash them out and use them towards the debt. Okay. And the reason is real simple. If your car was paid for, you wouldn't borrow on your car to buy stock options.

Correct. And this is the same thing in reverse. Okay. And by not cashing them out and not paying on the debt, it's as if, from a financial standpoint, you borrowed on your car to buy stock options. It certainly wasn't what happened, but that's how it plays out mathematically.

And so that's how I can make that decision so quickly. Anything that is not in a retirement account where it's going to be penalized, I cash out and use to accelerate your baby step to debt snowball where you list your debts smallest to largest and pay them off in that order. Jennifer is with us in Charleston. Hi, Jennifer. How are you? How are you doing, Dave? Thank you for taking my call.

Sure. What's up? Well, I have read your Total Money Makeover, and I have also gone through financial peace. And as I was going through financial peace, I realized that I am house poor. So right now, I've put my house on the market to sell, but everyone around me is telling me that I'm doing the wrong thing, that I should hold on to my house. How much is your house payment? $2,140 a month. And what is your take-home pay?

It is $4,300 is my regular take-home pay, and I also have a part-time job that brings in an extra $1,000 a month, so about $5,300. So without the part time job your house payment is 50 of your income yes sir and people around you think that's smart then people around you are dumb they said i should hold on to it for about two more years they're dumb unless your income is going up dramatically you have a house you absolutely cannot afford i'm not even sure how you got qualified for this your house payment is 50 of your take-home pay yes sir i mean so i don't know who's who unless they're going to start paying the payment for you i don't

these people giving you advice probably don't need to be listened to well where i am is you know in charleston it's one of the fastest growing cities uh jennifer that's what the prices are here you don't get a pass on math because the real estate market's hot all of a sudden it doesn't matter math Math doesn't matter because Charleston's hot. So's Nashville. So's California. So's Dallas. So's every other city listening out there just about right now.

Real estate prices are spiking everywhere, but you cannot spend 50% of your take-home pay on a house and be anything but broke. So I don't know. I cannot fathom how somebody can tell you that this is a great idea, that you need to hold on to this. Now, is your income getting ready to double in the next few years? Nope.

What people are suggesting is that, you know, I get a roommate or Airbnb and do other things to try to help me offset the cost of the house. Because you can't afford the house. Yeah. Yeah. You do what you want to do kiddo uh people are stupid is what people are and people who suggest you keep a house with a house payment of 50 of your take-home pay are stupid i wouldn't keep it if i were you i'd be out of in a heartbeat that's ridiculous that's no life at all you don't do anything but

think about this house 24 hours a day. This house owns you. You don't own it. Bob is with us in Houston, Texas. Hey, Bob. How are you? I'm doing good. How are you, Dave? Better than I deserve. What's up? Just a quick question for you. I'm just wondering why you don't recommend

short-term disability while in Baby Steps 1, 2, and 3. Because it basically the – well, certainly when you're in Baby Step 3, you wouldn't because Baby Step 3 covers your emergency fund. Right. I mean, while you are working up to completing Baby Step 3, I mean, if it takes the average person 18 to 24 months to do so, I was just wondering why you wouldn't cover yourself during that time.

You could if you want. I just don't. It's just gimmick insurance, and I just don't buy gimmick insurance. And so, you know, I don't buy a car extended warranty during that time either. Okay. You know, I'm just going to self-insure through that and gut my way through it is what it amounts to. Okay.

Yeah. Thanks, sir. No, I'm just not, you know, we're limiting expenses during this time to try to clear the debts as fast as possible. So, hey, thanks for the call. Open phones at 888-825-5225. Caitlin is on Twitter.

When in the baby steps would it be okay to start using your money for things that you want, such as a vacation or new clothes? After baby step three, once you're debt-free and you have your emergency fund in place, you've laid a foundation in your life, and that's when you buy a couch or go on vacation or buy clothes or whatever you want to do. I mean, you buy basic clothing when you're in the first three baby steps, but this idea that I'm going to enjoy my life, I'm going to live my life. Children do what feels good. Adults devise a plan and follow it. I'm not saying you're not going to have a great life. You're going to have a great life. As a matter of fact, I'm trying to show you exactly how to have a great life. And so, you know, we step on that as hard as we can step on it,

and we live like no one else so that later we can live and give like no one else. And so, you know, you have to sacrifice to win. You never win at anything unless you pay a price to get there. Tammy's on Facebook. Can I call my credit card company and ask for a lower interest rate? Sure. They may or may not do it. And you can threaten to move the card to another company and see if you can negotiate with them and get them to drop the rate. But interest rate usually is not your problem on your credit card. Now, if you've got a $30,000 debt with one company and it's 18%, and you can get that dropped to 10%, that would be valuable, right?

But most of the time, that's not the case. Most of the time, it's a $3,000 or $5,000 debt or whatever with that particular company, and you're going to be paying it off and your debt will snowball so fast that the interest rate really is not your problem. Your problem is cutting your budget so deeply that you can't breathe and increasing your income and throwing all of those differences at this debt and knocking it out as fast as you possibly can. This is the Dave Ramsey Show. Business leaders, I'm not going to lie. Finding the right people to make an impact at your company for years to come is hard work. But I can tell you from personal experience, you can find them when you use LinkedIn Jobs.

LinkedIn Jobs reaches candidates you just can't find anywhere else. And not only are they able to reach these candidates, they're able to get the right people for the right jobs. It's no wonder a hire is made every eight seconds on LinkedIn. And when you consider that over 600 million members visit LinkedIn to make connections, learn and grow as professionals, and discover new job opportunities, it's easy to understand why my team loves LinkedIn Jobs. They make it incredibly easy. Get started today with LinkedIn Jobs and get $50 off your first job post. Visit LinkedIn.com slash ramsey that's linkedin.com slash ramsey terms and conditions apply This is the Dave Ramsey Show. Your number to call is 888-825-5225.

Brett is with us in Baton Rouge, Louisiana. Hi, Brett. How are you? I'm not doing as good as Dave Ramsey yet, but I'm on my way. How are you, Dave? I'm better than I deserve. How can I help? I had some questions about some debt that I have, my wife and I, with a car loan and also student loans. So we heard about Dave Ramsey a while back, and after starting kind of listening to some of the teachings, I realized I'm kind of working the baby steps a little backwards as far as the way I'm saving for retirement and also my son's college fund.

We have our emergency fund in place and i was wondering if maybe i just need to shift back in retirement a little bit and use the emergency fund that we set in place to try and pay off most of the debt and then work the debt snowball from there or if we should just start working the debt snowball from where we're at now and leave the emergency fund in place. Right. Okay. Well, how much debt do you have, not counting your home? Right now we have $14,000 in a student loan and $17,000 in a car loan. $31,000. How much is in your emergency fund? We have right at $20,000 in a car loan. $31,000. How much is in your emergency fund? We have right at $20,000 saved up.

All right. And what's your household income? This year I made $130,000. I don't know if I'll quite make that much next year. Well done. And then my wife makes about $35,000. And how much money? Oh, she makes how much? She makes right about $ right about 35 a year okay she got like a 165 household income all right and the uh do you have

any money invested non-retirement other than this emergency fund any other savings uh no other than other than this um no just okay just my two uh retirement right yeah non-retirement so i'm talking okay good all right here's what we have discovered in 30 years of doing this brett people win most often with money when they get control of their most powerful wealth building tool which is their income instead of sending it to other people. Right.

Called debt. Okay? And so debt slows down your ability to build wealth. It is the enemy. It's the acid in your checkbook. It eats your money. It runs things the wrong direction if we're trying to build wealth. And so what we have figured out is that if you will lay the foundation of being debt-free

other than the house and put your emergency fund in place, then start your long-term investing, you will be able to do the long-term investing properly, consistently, and that would include 401K and college, then begin above that to work on your house. So that's how the baby steps that we talk about evolved. And of course, the baby steps are there. You meant you referenced them to tell you what to do in what order. A thousand dollars, say first, second is be debt free. But the house third is the emergency fund. Fourth is retirement. Fifth is college. Sixth is pay off the house early. Seven has become very wealthy and give a bunch of it away. Okay.

Enjoy, you know, live like no one else. So later you can live like no one else. Now, how does that then parlay into the technical tactical application of where you are today? What we would tell you to do because of those reasons that we just outlined, because we think it's the fastest way for you to become wealthy. And that's the goal of these discussions here, so that you can change your family tree, so that you can be more generous, so that you can do whatever the things are that you're able to do when you've got more rather than less, is we're going to use every dollar that's non-retirement to become debt-free as fast as possible.

We're going to completely focus on that in Baby Step 2 until we're debt-free then we're going to build an emergency fund and so i'm going to take uh 19,000 of your 20 and i'm going to apply it and i'm going to pay off the student loan and uh 5,000 on the car and then with your huge wonderful income i'm going to pay that car off in just a few months and then just a few months after that i will have rebuilt the emergency fund right okay yeah you're not going to be down to a thousand for very long by christmas you're going to be largely back okay if not back all the way to an emergency fund but with no debt except the house then and only then would i restart my 401. I would temporarily shut it down because what you focus on is what moves. The problem with what you've been doing and the reason you've not been getting traction

is you're trying to do six things at once and none of them are moving. Right. And you can't get down. What we focus on is what moves. And so focus on one thing, then focus on the next thing, then focus on the next thing. So shut everything down temporarily, clean out that emergency fund down to $1,000,

throw it at the pay off student loan today, then throw the rest of it at the car, and let's knock that car out really, really fast. Then that takes us to baby step three, rebuild your emergency fund. Once the emergency fund's rebuilt, then restart your 401K. My prediction is you're going to do that by Christmas. A year from today. Those numbers work with your income. And that's how you would apply what we teach and why you would apply what we teach. Not just because it's a Dave system. There's a reason we do this stuff. And that is when you don't have any payments but a house

payment, you're easily able to put 15 into your 401k you're easily able to properly fund your kids college and you're going to find even more money to throw out and pay off your house the average person listening to this show doing this stuff that follows the freaking plan and doesn't make up their own plan pays off their home in around seven eight eight years. And as we're doing this millionaire research, we're finding the typical millionaire is paying off their home in 10 to 11 years from the time they start the process. Now, that includes getting out of debt and everything else.

But, I mean, that fits right with what we're finding, that a lot of these people are tracking towards millionaire status, and certainly you are too at that point. So that's how we do it, Brett. Thanks for listening in Baton Rouge. I.J. is with us in Illinois. Hi, I.J., how are you? Hi, I'm great.

How are you, Dave? Better than I deserve. What's up? Well, I've been asked to help mentor some people at a homeless shelter and help them with their finances. Great. And it seems to me like, you know, the more I think about it, it's hard for me to relate to what their particular needs would be

versus what my needs would be. Oh, definitely different, but the principles still apply. You just apply them more primitively. We've done a bunch of stuff with the homeless shelters over the years, and it's really enjoyable. Their eyes light up when you take them this subject man i'm so glad you're doing it what a great thing to do so here's what we're doing we're just starting at real primitive basic level okay it's income it's income and it's outgo

might not even have a checking account a lot of times don't okay and so the envelope system that we talk about where you say okay you're you're going to go make some income, and then you're going to write down where the money is going to go before the month begins, how much you got coming in, and then you give every one of those dollars an assignment before it leaves. You cannot impulse with any of that money. You can buy food with it. You can buy whatever you're going to buy with it. And, of course, one of the envelopes is saving towards, you know, getting towards housing, getting a real place, right? I'm saving up for my down payment. I'm saving up for a deposit so I can get an apartment.

I'm looking for a job. You get the income side of the equation going. You get, you know, just food, shelter, clothing, transportation, and utilities are your main things. And, you know, you're usually not even dealing with most of those. So I just assign envelopes, hand them a handful of envelopes, and say, write on this what you're going to spend the money on. And do five different categories and whatever the category is. I don't care what you're going to spend it on. Just do it on purpose because you have to be intentional with money, and you have to stay out of debt,

and you have to live on a budget and live on less than you make to make progress, regardless of where you start. And starting, you know, rock bottom like that, you know, really. But if they start to see, man, I'm putting $20 a week back towards getting an apartment with a deposit, the hope just lights up, and the sense of control. In their world, there's so much out of control, and the sense of control is so empowering. It's so good. What you're doing is absolutely wonderful.

You let us know if we can help you, man. Very well done. This is the Dave Ramsey Show. At Ram. Thank you for joining us, America. Pat and Amanda are with us in Albuquerque, New Mexico. Hey, guys, how are you? Hi, Dave. We're doing great. How are you?

Better than I deserve. Welcome. I see on my screen you're debt-free. How much have you paid off? We paid off $35,000 in eight months. Okay, very cool. And making what kind of income during that eight months? $120,000 to $130,000.

Great. Very cool. And what kind of debt was the $35,000? Credit cards, student loan, and a loan. You know, we're normal. Not anymore. Normal people. Not anymore. Now you're weird. Not anymore. That's right.

Very cool. What happened eight months ago? Well, it started, like, after the holidays, you know, monthly bills came in, and, you know, we're like looking at bills. It was like, ah, we're still paycheck to paycheck. And we're just like sick, you know, sick and tired of just being in debt and wondering where all our money was going. And then, uh, one day when I was in on my lunch break, I found your show on the radio over here in Albuquerque. And so I started listening to it. Uh, then we read the total money makeover.

We got that. And then, uh, we decided to do the baby steps, talk to Amanda, and she was fully on board with it. And then, yeah, we logged on to every, you know, we went to every dollar. And then we created our first budget. And then after that, you know, we realized, golly, you know, we noticed where all the money was going to. It was just like on just, you know, stuff that was just stuff that we really didn't need. So after we applied it to the debt, we were like, ah, this is actually working. Gotcha.

Very cool. How long have you guys been married? 15 years. All right. And so the wake-up call just sneaks up on you after 15 years and says, I'm tired of not knowing where all my money's going. Exactly. We always wanted to get out of debt. We just didn't know how to start.

And once we did your baby steps and saw it visually, it just came to light. And it was actually not that hard as we thought it was going to be. You figure out it's possible that there's a light at the end of the tunnel that's not an oncoming train. Mm-hmm. Yeah, good for you guys. Well done. Did you have people cheering you on or making fun of you? A little of both.

You know, I talked to some friends, and they're like, oh, well, you know, you'll never do it. You know, you're always going to be in debt. And just, you know, just live with it. And, you know, that's all part of life. And, you know, I had other people saying, oh, that's great. You should, you know, and they keep asking us, you know, asking us how we're doing. And we keep telling them, we're almost done. We're almost done.

And then finally, you know, we're like, we're done. We got it going. And,, oh man, it's amazing. What do you tell people the key to getting out of debt is? You pay off $35,000 in eight months. Well, for us, it was and still is making choices, what we need versus what we want, and the biggest sacrifice was not being able to meet you, Dave. So if you and your wife are ever in albuquerque new mexico we would like to invite you to dinner and i'll make my famous green chili

chicken enchiladas oh my mouth just watered oh man that's great well done well thank you thank you very not much well congratulations you guys very proud of ourselves. So what do you tell people the key is, Pat? I say is, again, communication. You've got to communicate with your partner and, you know, show where your money is going. Because, you know, we talk to other people. They have their own accounts, this and that, and they don't really share. And for us, you know, we share everything. So we want, you know, we know where our money's going now.

We know how much we're going to spend. We don't keep any secrets with each other. And that just keeps, you know, the communication flowing and the stress level down. And, you know, where every dollar is going, you know, hiding any money from each other, you know, I think that helps out a lot. Quit treating your spouse like a roommate. Exactly. This is your dadgum spouse.

I mean, it's one. We are one. Unto thee all my worldly goods I pledge, the old marriage vows used to say. Some people still use those. And so for better, for worse, for richer, for poorer, unto thee all my worldly goods I pledge. Now, that unity is a big deal. Well, congratulations, you guys. I'm proud of you.

Thank you so much. Thank you. Well done. We got a copy of Chris Hogan's retire-inspired book for you signed by him. That's the next chapter in your story. Be millionaires now and outrageously generous along the way, okay? Okay. wonderful. Thank you.

Thank you for that. Pat and Amanda, Albuquerque, New Mexico. $35,000 paid off in eight months, making $120,000 to $130,000. Let's hear it. Three, two, one. We are debt-free! Yeah! That's how it's done right there.

Well done. Very well done. J.B. Onn is in Memphis. Hi, J.B. Onn. How are you? I'm doing good, Mr. Ramsey. How are you? Better than I deserve, sir.

How can I help? I just want to say it's great just talking to the Dave Ramsey first. That and $5 will get you a cup of coffee, man. What's up? I'm 17. I'm a senior in high school. I'm going to college in aerospace engineering, and I'm supposed to make a decent amount of money doing that.

And I wanted to invest in real estate and everything, and I wanted to know, because you don't like debt, I wanted to know if I should work really, really hard and save up a large lump sum and then start off buying houses outright, or what should I do? As you said, you know I don't borrow money, and I don't teach people to borrow money, particularly for investments. So what I would have you to do as you graduate from college is let's walk right through the baby steps.

Make sure you're debt-free, got everything paid off if you had any loans or anything at that point, and you build your emergency fund and start your retirement. And then I would start saving aggressively in cash in just like a little mutual fund of some kind, maybe a little S&P 500 for your real estate fund and save up and pay cash for your first rental. And then you can fix it up and, you know, either flip it and make some money on it and move up in rental with those profits because then you'd have more cash to do it. Or you can hold that one and let those cash flows uh you know help you buy the next one that's

what i did the second time around after i went broke doing it wrong with debt the first time and so uh i just saved up it took forever to get the first one jv on and as soon as i got the first one though i got all that rent money with no payments well that helps you build up the money for the next one once you got two of them, now you got a lot of rent money with no payments. And the third one's easier to buy. And the fourth one's even easier because every time you do that, you got all this money coming off these properties and you got no payments. I mean, these things cash flow like a bandit when you got no payments on them. And so you can pile up money and buy your next one faster and faster and faster and faster and faster. And then it gets out of control.

It gets wonderful. And so, you know, at some point we, you know, moved on and we love houses. We've got a lot of rental properties that are residential homes, single-family homes. But we started buying commercial properties then, too. And so we've got office buildings and strip centers and other properties that we own that we've, again, saved up and paid cash for as we went but every time you pay cash for one the more expensive it is the more rent it throws off well the faster you buy the next thing and so it really turns into a ridiculously good scenario it takes longer it's it takes longer in that you start slower but But overall, it doesn't take as long.

Because here's the other thing I've discovered. I grew up in the real estate business, and there's a lot of these guys out there talking about nothing down real estate. And you can go to a seminar and pay $3,000 for the weekend and learn how to buy real estate with nothing down. And I know thousands of people that have invested in real estate personally and i know their personal situation i don't know a single nothing down guy that made it past a decade before he went broke when you buy with nothing down you don't have any cash flow you have no money the property's not making money because their payments are higher a lot of times than your rent is. And so I do not.

There may be one out there. I just don't personally know out of the thousands of real estate investors I know that one that did nothing down, borrowed all they could borrow, like those little seminars on cable TV, and made it past a decade. They all go broke. This is The Dave Ramsey Show. Todd is in Atlanta. Hey, Todd, welcome to the Dave Ramsey Show. Hey, Dave, thanks for what you and your team do. Thank you. How can I help?

Dave, I've been divorced coming up on about four years now. I've got two kids, one 17 and the other is 22. I've got a term life insurance policy worth about a million dollars. And then recently my employer decided to provide a split dollar life insurance policy that, bottom line, if I died tomorrow, we'd have about $3 million dropped in the lap of my kids. And it terrifies me to think they would have all of that at once. So I'm trying to figure out the most cost-effective way to structure things to control that flow and make sure that their behavior is where it needs to be before they have that kind of wealth put in front of them. Very cool.

Good for you. Good thinking. Yeah, you don't want money to destroy them. You want it instead to bless them. And as you and I know, when someone is given something that is too heavy for them to carry, even if it's a nice thing, it'll crush them. And so that's what your concern is, and that's being a good dad. So a simple will will suffice, and in the will, you would, at your death, form a trust.

The money, the trust should be the beneficiary of the life insurance policies. And for that matter, if you have any other wealth, you can just will it into that trust. It doesn't have to be formed prior to death. It's formed at death, okay? And this is how I did it when my children were minors, and it works whether they're minors or whether they're not. You don't have to be a minor, but you throw the money into a trust, and then you can make the terms of the trust be anything you want it to be whatever you want to dream up the trustee's job is to execute the terms of the trust okay so our trust for instance had in it in those days uh a specific declaration as to how the money was to be invested.

I didn't want the trustee going over to the bank and putting it in CDs and making 1% on it. That'd be a shame. You know, I wanted to invest it in good mutual funds across the four types I teach about. That's how I invest alive, and that's how I'm going to invest dead for the kids when they're minors and don't know what they're doing. So I dictated what it was going to be invested in. I dictated under what circumstances the money could be drawn out,

the purchase of a car, a medical need, a major medical need, a purchase of college tuition, and then whatever was left after they graduated from four years of college, which they had to do to qualify to get the rest of the money. Until they graduated, they wouldn't be qualified to get the rest of the money. That was something I did. You can do whatever you want. My point is you kind of make up your program, right?

And you can even put character things in there and say, you know, you must be attending church regularly and define regularly. You know, and you can do whatever you want. That's the kind of stuff we had in ours at the time. Ours is even more complicated now. Our kids are grown and we're, you know, everything's in trust to set up to be generation skipping and take advantage of all the, you know, the different estate planning issues that are there now.

But, and we've got a family constitution that dictates how the the the trust is to be managed generationally we've gone even deeper now but in those days we just kept it like that and so whatever you want to design that trust to say they can get control of the money by exhibiting these behaviors and at age 25 we're going to let this much out a percentage at age 30 we'll let another percentage out or age 27 26 25 i don't care and let a little bit out every year um past that they get the income off of it but they need to exhibit um one of the things that for instance in the family constitution we didn't have it in the old trust but we've got it now they have to be working um unless they're staying home with

babies uh they have to be working a full-time job, steadily, gainfully employed. I don't want them generationally using this money to live on the back of a yacht and do nothing and be useless. I want them working. There's dignity in work. So that kind of stuff, you do whatever you want. I'm just giving you ideas, okay? I appreciate that.

So that trust, the point is it's kind of whatever you make up and put in there. And you can put weird stuff in there if you want. I mean, if somebody thinks it's weird, it doesn't matter. It's your trust. And you're trying to say here's some guidelines where the kids don't get destroyed by $5 or $6 million. I don't see an attorney or a financial planner. I would see an attorney. Okay, thank you so much.

An estate planning attorney to do one that's that complicated, I would. It's probably going to cost you a grand or so, give or take. Perfect. Thanks so much, Dave. Hey, hold on. I'm going to send you a copy of the book, The Legacy Journey, which is the last book I did, and it's on the stuff we're talking about. It's legacy stuff, how to lay out a legacy for your family.

And it's the only book I've ever written about wealth. All the other books I wrote were about money, and there's a difference in money and wealth. So hang on. I'm going to have Kelly send you a copy of that out as my gift. Way to go. You're being a good dad. All right. Brian's with us in columbus

ohio hey brian how are you great dave how are you doing better than i deserve what's up um my wife got a statement from um hers it's a public employment retirement system um she had ceased to work with them uh last january a year, and just got a new full-time job that's not in public employment. And they're telling her that she can withdraw her money or leave it in there. The total in there right now is about $29,000, $30,000. I'm not sure how much of that she'll actually get, but it looks like they're going to withhold taxes if she withdraws that,

or they'll give her the whole amount if she rolls it to an IRA plan, qualified plan. We're in baby step two right now. So should we do that? Because if they penalize it, keep, I don't know, I think they said something about 10%. What's your household income? Right about $100,000. Okay. So you're in a 35% tax bracket.

You will be taxed on this plus a 10% penalty. So that's a 45% hit. So would I borrow money at 45% interest to pay off my debt? No. So what are we doing? We're rolling this on a direct transfer to an IRA in good growth stock mutual funds that have a long track record and roll the whole thing. And then just keep working your debt snowball over in your baby step two. Keep knocking on the debt as hard as you can. But, yeah, we don't want to give that up.

I would roll it, though, because you've got a lot more control over it by being in an IRA and what it's in. You can watch the investments. And if you die with a pension, you get nothing. If you die with an IRA, it's all there still. Okay. So I would definitely do the direct transfer rollover. If you don't have a financial person to help you do that, just click SmartVestor at DaveRamsey.com. I'm not in that business, but we have a list of people we recommend called SmartVestor Pros.

And when you click a SmartVestor, they'll put in your info. It'll drop down a list of the people in your area. You can choose which one of those you want. They should have the heart of a teacher. You should learn what you're doing. It's a pretty simple transaction. You pick a mutual fund, fill out the paperwork. They send the paperwork to the pension.

The pension sends the money directly into the mutual fund. You never see it. You never touch it. You do not want them to write a check and send it home. They're required to withhold 20% on it when they do that. But as we discussed, your taxes and penalties are going to be more like 45, so it's going to be even worse than that. So have it sent directly to the mutual fund.

A direct transfer rollover is what you're looking for, and that keeps it from having any tax hit or withholding of any kind. And that's what was indicated in the letter, actually, there, that you were telling me about. So, hey, good question. Well done. You're staying on top of things. Very well done.

Romeo is on Twitter, at Dave Ramsey. Dave, do you think the value of a tiny home would depreciate much like a trailer? I don't know what they'll do. I don't think they're going to go up much. I don't know if they'll actually go down. But here's the thing. Anytime there is a very limited number of people, not much demand, we call it an economics, a limited number of people that want to buy something, people don't care about it, then the price doesn't go up. When there's a large number of people chasing just a few things, then price goes up. There's a very limited number of people chasing tiny homes, like none, statistically.

I mean, almost none. Okay? So the tiny home movement is it's kind of a niche thing it's a very narrow market and anything that just does not have much demand is not going to appreciate pretty simple idea but uh constant you know here's an example right now a lot of real estate's going way up real fast why a lot of people trying to buy houses not a lot of houses for sale right now. It's what's known as a seller's market. It's basic econ.

You should have learned that in seventh grade if they still taught it. But that's, yeah, I'm going to avoid the tiny house movement 100% because I don't do things that don't go up in value and don't have proven track records of going up in value. Love real estate, but not tiny real estate. This is the Dave Ramsey Show. worry. We list everything that is mentioned during this episode in the podcast show notes section. Thanks for listening.