The Ramsey Show - App - You Have to Believe You Can Win (Hour 2)

Episode Date: July 29, 2019

 Home Buying, Debt, 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 gone, 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. Scott is with us in Sioux Falls, South Dakota.

Hi, Scott. How are you? Good. How are you doing, Dave? Better than I deserve. What's up? I had a question. I was wondering if it was worth it for me to buy a house or not anytime soon. I'm a truck driver. I'm single. I don't have any kids. And right now I live in the truck.

I'm working on getting out of debt. I'll be out of debt in about two years. And then I'm just trying to make a plan for what to do after that. Okay. Well, that's a good idea. That's good thinking. Long term, over the scope of your life, owning a home is a good idea because rents go up and so do values in real estate.

You're locking in what it costs you to live. A large portion of what you spend to live is your housing. And when you lock that in and it doesn't go up anymore, plus then the value of it goes up, it's a double hit in the good direction, meaning your expense of housing doesn't go up because you locked it in. And the value of the house goes up, which obviously is a wonderful investment. So long term, yes, you want to own. Is it okay to wait until it fits your lifestyle? Yeah.

I mean, if I'm on the road and I'm living in my truck, I don't have any need to have a house sitting somewhere collecting dust. That's just kind of, you know, and pipes bust while I'm out of town or something. No thanks. I mean, I think you're cool. You're a single guy living in the truck, paying off debt. That's what I would do right now. And like you said, you get your debts paid off in two years.

Then we're going to look up. How old are you? I'm 32. Okay. So, you know, when you're 42, I suspect your life's going to be different, wouldn't you? Yeah, I was kind of thinking about putting money, like you say sometimes, in like a S&P 500 for a house. Yeah, that'd be fun. Ten years, I can just go write a check for a house.

That'd be cool. But, I mean, you know, you might not be an over-road truck driver the rest of your life. You might be doing something different. You might have a family. You might have a lot of different things, right? And so we don't know what ten years is going to bring. But the first goal is get the debt cleared and build your emergency fund. We do that before you buy a house anyway with everyone.

And then, yeah, let's start building a house fund so that then you've got choices that you can make to decide, you know, when I get ready to buy. But over the scope of your life, yes, you want to own. But is it okay in a period of time right now where you are to not own? Sure, sure, absolutely. I think you're wise to not own today. Good question. Mark's in Portland, Oregon.

Hey, Mark, how are you? Thank you, Dave. Good. How can I help? How are you doing? Better than I deserve. What's up? Well, we are looking at buying a new-to-us vehicle for our family,

and we're wondering, in all the research that we've done, it's hard to find good advice on when you should go ahead and make that purchase. Okay. In terms of what kind of a measure are you looking for? Well, for example, they say, you know, once the repairs pass a certain, like, you know, once they equal your payment, you should probably stop doing that and get a new car. Well, we don't have payments on it, and we're going to pay cash for it. Gotcha. So what's the car worth you're driving?

Oh, probably about $3,000. Okay. And what are we talking about moving up to? Probably something around $15,000. And. And what are we talking about moving up to? Probably something around $15,000. And you've got the cash to do that? Yeah. And your household income is what? Between $85,000 and $90,000.

Cool. And your other car is worth what? Probably the same, about $3,000 or $4,000. Okay. Yeah, it's time to move up. Okay. Here's the thing that I look at, and let me tell you what the measures that i use number one cars go down in value you and i know that and anything with wheels and motors loses value so if you have any if you add up all

the stuff with wheels and motors in your life and if it's more than half your annual income you have too much tied up in things that are going down you were're trying to go up in wealth, not down in wealth. And so we don't want to buy a bunch of depreciating assets and then scratch our head and wonder why we're broke. So you wouldn't buy two $30,000 cars making $90,000, in other words. Dumb people do that, but you're not going to do that. Okay? So, I mean, I've been that dumb person too, but we're not doing it today. Okay?

So you're not that guy. So that's rule number one then as far as repairs what happens is this your quality of life as a ratio to your income starts to be a problem about where you are so you make 90 000 bucks year, you're driving a piece of crap. And it starts to be just screwing around with the car has a cost on you emotionally, has a cost on, you know, I don't want my wife driving out there in the snow in that thing or whatever, right? I mean, it reaches a point that you've got the money. It's not a good investment, but it's a lifestyle expenditure that's reasonable given your income and given that you have the cash to pay for it.

You really can't mathematically ever justify trading cars because you can fix them cheaper than you can replace them all the way down to $500 cars. You can just keep driving them. But at some point you go, this is dumb. I just need to have a reasonable vehicle as a ratio to my income, and I'm paying cash for it. And that's where you are.

The car you're proposing that you're paying cash for is very reasonable as a ratio of your income, and you can't really ever mathematically justify it because the $15,000 car is going to be worth $7,000 in about two eye blinks. Right. You know, that's just part of the deal, right? But it's part of what we consume. Vehicles are the largest thing we buy that we consume that goes down in value. And the question is, can you absorb the blow and it not do financial damage to your family? And the answer in your situation, because the ratios are proper, is yes, you can absorb this blow.

It's a reasonable thing. If I were in your shoes, I'd buy a $15,000 car, and then I'd start saving and move up that other car, too. I have a $10,000 and a $15,000 car. It's $25,000 tied up in cars. You make $90,000. You pay cash for them. That's about right. Okay.

It's less than a third of your income at that point, and you have a reasonable car. It's not opulent as a ratio to your income. So all of that. You can just fix them forever mathematically, but it just reaches a point, I don't want to be on the side of just reaches a point i don't want to be on the side of the road you know i still want to be on the side of the road yeah i drove my first car was a 1974 monte carlo two engines and three transmissions 350 000 miles before i got and it was hit on every side repaired most of the time but i i couldn't drive

apparently because i hit the car on every side i was from 16 to 20 something years old that's my first car but i ran the wheels off of it obviously just kept repairing it kept putting engines in it kept putting transmissions in you know but i was broke college kid too so you do what you gotta do to keep rolling turn a wrench on the thing you know but wow wow been there done that don't want to live like that though had used tires on it too or or retreads you know what retreads are used tires with new tires put around the outside and then they fall apart oh it's nasty. This is the Dave Ramsey Show. Are high health care costs getting you down? Are you confused trying to navigate your options? Do you wish you could find an affordable, biblical solution to your health care costs? Based new testament principles christian health care ministries or chm helps christian families churches

and ministries join together as the body of christ to share their major health care costs christian health care ministries is the original health cost sharing ministry a better business bureau accredited organization chM members share to pay each other's medical bills. It's not insurance. It's Christians financially and spiritually supporting each other. It's what Christian Healthcare Ministries has done for over 35 years, 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. Thanks for joining us, America.

We're glad you're here. Pueblo, California. Shalzi's next. Hi, Shalzi. How are you? Hi. Aloha. Hi, Dave.

How are you hi aloha hi dave how are you oh i'm i'm in need of some uh advice how you doing better than i deserve what's up in your world okay well um my question is um should i sell my land in hawaii to and'm in Pueblo, Colorado, by the way. I just moved here. Should I sell my land in Hawaii to pay off my master's degree, my school loans? How much do you owe on your master's degree? Right now, currently, about $36,000. What do you mean currently?

Are you done? No, I'm in the middle of my program. Oh. So you're already $36,000 in debt. How much more are you planning to go into debt? Well, I was, I don't know. I don't want to anymore. I recently found you.

I wish I found you a few years ago when I went through my divorce. So I got a rare disease a few years ago, and I lost my... I had to sell my house in Hilo on the Big Island. I left my husband, got a divorce. He used to put us into extreme financial debt. And after I got the disease, I realized I didn't want to live or die that way. And so I've been trying to recover from my divorce and my marriage. Okay. So do you work now? I don't. I'm actually become, this disease has caused me to become disabled. And so I don't qualify for SSDI or SSI because I own land in Hawaii that I'm not living on,

and I can't build a house, and I can no longer live that lowly because I need better health care. I got you. Okay, so what is the land worth? I can probably get about $70,000 or $80,000 for it. Okay, and where did you get it? How did you end up with this piece of ground? How did I get the land? Yeah. You just bought it or what?

Yeah, we bought it. My ex-husband and I bought it together. Okay, so it was part of your divorce settlement. Yes. Okay, all right. part of your divorce settlement. Yes. Okay, all right. So there's no big tie here. It's just a piece of dirt in Hawaii, which is sweet, but it's still, that's all it is, right? It's actually rock, yeah.

Not even dirt. Yeah, just lava rock. Okay. That works. That would be Hawaii. Yeah, all right. So if you can get $70,000 for it, let me ask you this. Here's the way I always look at this stuff. Pretend I had $70,000 for it, let me ask you this. Here's the way I always look at this stuff.

Pretend I had $70,000 in cash, $100 bills. Uncle Benjamin Franklin's smiling face is piled in the middle of your kitchen table looking at you. There is zero chance today you would go buy some rocks in Hawaii with that. True. You would use it to pay off the $36,000 and to stabilize and sustain your current dreams and goals, given that you're fighting this disease. Yes. There's no reason to keep this land. I don't hear a single thing in this.

No. Sell it tomorrow. Put it on the market tomorrow. Okay. Call one of our, get in touch with one of our endorsed local providers in Hawaii. They'll help you get it on the market and get it sold. Now, what is your master's degree? What are you studying?

I went back to school for transformative social change with a social impact media specialization. And so my focus is to bring awareness to this disease. So I'm finishing, I'm writing a book, and I'm also going to create a documentary. And I've also started, I worked on the state and level for the disease that I have to try to bring awareness. Tell me why you need a master's degree in social change to write a book on social change or do a documentary on social change. I don't have either, and I did both. I don't. I don't. I, and I did both. I don't.

I don't. I thought I didn't have the skills, and after my first two semesters, my instructors told me that I'm very skilled at writing, and I have a good story. I'm not even really good, skilled at writing, but I've done a couple of New York Times bestsellers, like seven of them. But it's just because I had something to say. It's not because I'm really good at saying it.

My content team still questions whether I even speak English. But my grammar is so horrible. But anyway, it's kind of a running joke around here. I sell more books than anybody, but I can't write very well. So I'm just a good storyteller, though. I am that. So anyway, all of that to say, I want to encourage you. I'm not against education or master's degrees,

but I'm a little bit thinking this was to give you confidence that you didn't have, not actual tools that you needed. I agree with you. Because you went through a divorce and got the crud knocked out of your emotions, and you were trying to recover and believe in yourself again i got no trouble with that but i think 36 grand is enough to spend on that i'm probably going to park the masters on the side of the road for a few minutes and let's go live this dream rather than spending these precious few dollars that you have above your emergency above your student loan being paid off i'd rather you

spend it on the dream and i'm doing something that creates an income for you and makes your life better. That's what I'm hoping so that I can sort of turn this poison into medicine. Yeah. So what's the nature of your disease? It's called rat lungworm disease, and I got it from eating organic lettuce. It's basically brain-eating parasites. I knew organic food wasn't good for you. I just knew it.

It's not anymore. I've been trying to tell my wife that stuff's not good for you. Give me a cookie. It's not anymore, Dave. I'm joking. I'm sorry. I didn't mean to make light of your disease. I'm sorry.

No, I make jokes about it all the time. Organic lettuce. Who knew? Okay. Gosh, I'm so sorry. Yeah, you can get it a lot of different ways, just through water or like these floods that we're having. It's actually taking over a lot of agricultural and the wildlife areas in southern United States. Oh, wow. So i have a good story to

tell yeah yeah you do okay a little bit of a wake-up call and you know with you fighting it yourself you got a real a passion for it so yeah i'd sell the land i'd pay off my student loan and i would put park the masters on the side and let's go live the dream if you need to go back and pick the masters up and finish it you can but I just don't know of anyone who was not able to affect social change because they didn't have a master's in social change. Social change comes from passion, knowledge, drive, resilience, a story to tell, a reason. I'm going to drive the lane. I'm going to get people out of debt the rest of my life because I went broke. That's social change.

Because I was stupid and I fell for the credit card company's siren song, for the lies that the culture tells you that you'll never be anybody if you don't use other people's money and borrow your way into prosperity. I believed all of that. And so I've engaged in 30 years of social change as a result. But I didn't have to get a master's degree in social change to do it. I just got really pissed off, and it's lasted a long time. That's what it comes down to, and that's where you are.

So that's where it comes from. I mean, these are people that are world changers. So that's what I'd do if I were in your shoes. Certainly, it's your life. You're going to live it, but we'll talk it through together, and I'm here to help you anytime. Open phones at 888-825-5225 you jump in we'll talk about your life and your money dave how do i get my wife into gazelle intensity when she doesn't want to change our current lifestyle

read the total money makeover and i'm ready to go gazelle intense you do not walk in after the total money makeover it says it in the book chris you don't walk in after the total money makeover. It says it in the book, Chris. You don't walk in after reading the book and go, Honey, I read this book. We're going to sell your car. That does not get people on board. Dude, you talk about why we want to do this. Why was it you got excited?

What is it she wants to do? If she was rich, if you had $2 million and no debt, what is it she'd do? Oh, I want to be generous. I want to support missionaries. Good. Let's get out of debt so we can do that. I want to travel the world. Good.

Let's get out of debt so we can do that. I want to change our family tree so our kids never have to suffer like we suffered. Good. Let's get out of debt so we can do that. You need a big why, not a how. She's not going to get gazelle intense over your how, dude, or mine. You're going to turn me into a cuss word in your household. No.

Why? Why is it you want to do this? If you want to get rich just to be rich, you're just a jerk. You want to get rich so you can do something with it for other people, for your family. Enjoy something you've never enjoyed. There's nothing wrong with that. You need a big why or your total money makeover will never work. In the lobby of Ramsey Solutions, Andrew and Kelly are with us. Hi, Kelly and Andrew. How are you guys?

We're great. Thanks for having us. Welcome. Where are you guys from? Where do you live? Indianapolis, Indiana. Oh, welcome to Nashville. Thank you.

All the way down here to do a dead free scream. Yes. Very cool. How much have you paid off? We paid off $249,000 in just around four years. Good for you. Good for you. All the way down here to do a debt-free screen. Yes. Very cool. How much have you paid off? We paid off $249,000 in just around four years. Good for you. Good for you. And your range of income during that four years?

We started at just around $100,000 and finished at $144,000. Good. Very cool. So I'm going to guess, with this huge amount of money and the length of time, that either you're a doctor or you paid off your house. Well, both actually. A little of both. Okay. You paid off your house.

Good. Yes. Oh, look at the weird people. Yes. Thank you. Really cool. How old are you two? 30.

And you paid off your house. Yes. So who's the doctor? I'm a physical therapist. Okay. So doctor of physical therapy. Very cool. Very cool.

And what do you do for a living, Andrew? I do sales for my family business. Excellent. Good, good. So how much of the $249 was your home mortgage? All of it. All of it. So the whole thing was knock out the mortgage by the time we're 30.

Yes. Boom. And you did it. We did. Wow. How's it feel that I have a payment in the world? It's a wonderful feeling. Amazing.

Wow. I mean, you're making $100,500 between you and you got no payments in the world you're 30 years old you're gonna be so rich thank you unbelievable and you should be i'm so proud of you thank you very very well done good for you so how long have you two been married it'll be eight years in december okay so four years after you got married something happened about the house you said i think we can pay this off, and I think we should. Tell me the story. What happened? Well, we've always been a little weird.

We've been very fortunate to have wonderful parents who helped us with our college educations, so we didn't have any student loan to deal with. Big start. And four years ago, we bought our home, and we thought, you know, we can do this. So we listened to your podcast on a very long 12-hour drive to Florida. We listened the entire way there and the entire way back. Oh, Lord. And we've been listening ever since and just knew that that was something we really wanted to do. We wanted to be very intentional with our money and be able to get our finances in line now so that later

on in life we could be as generous as possible and make a wonderful life for our son, AJ. Yeah, amen. Very good stuff. So were both of you raised in households that were responsible then? Absolutely, yes. Wow, so you got like a generational head start that way. Yes, yes. That's not even fair.

I know. That's awesome. I love it. Way to go, Mom and Dad. Yes. Good stuff. So how did you got like a generational head start that way. Yes. That's not even fair. I know. That's awesome. I love it. Way to go, Mom and Dad. Yes. Good stuff. So how did you get connected to the podcast? When we were driving to Florida, I got an iPhone for work and found the podcast button.

We just started searching through it, and we happened to find your podcast pretty short into the trip. Oh, okay. And once we turned it on, we loved it. You were looking for something to make the trip go. Yes. And there we were. I think we were number four last year out of all podcasts if i remember so yes yeah that'll make you get noticed good well i'm glad good i'm glad our success led

us to you yes very good very well done you guys so what was it when you were listening for 12 hours god help you for 12 hours to this podcast, this crazy guy, for the first time ever, I guess, you turn it on, right? That made you go, okay, we're doing this. Because I guess partly it aligned

with the way you were brought up, right? Yes. And I mean, one of the first calls you had was a lady was asking about her car. And my first thought was, just sell the car. It's a stupid car. And your exact words were, just sell the stupid car. So I thought, this guy's a genius.

So we connected pretty quick, and it was pretty easy to listen from there on out. Okay, fun. What kind of business is your family in? We do, we're a beer and wine wholesaler. Oh, great. Very cool. Good for you. Well, that's awesome, you guys.

So what do you tell people? Because you are weird. I mean, you're 30 years old. Oh, great. Very cool. Good for you. Well, that's awesome, you guys. So what do you tell people? Because you are weird. I mean, you're 30 years old. Yeah, totally weird. But you paid off $250,000 in four years, too. That's impressive. And nobody even thinks to pay off their house, but you did it. What do you tell people the secret to getting out of debt is?

The secret is there's no secret. You have to really want to win. You know, a lot of people look at it and think they can't do it. But as long as you believe you can win, that's the biggest key for me is thinking you can win and knowing you can win and changing your mindset to saying, I can win, I can do this. What about you, Kelly? So a lot of really what Andrew said was what I was going to say, but I let him go first, so that's okay. So my key, of course, communication, of course, having a written budget. Those are essential, I think, right off the bat.

You know that. But putting in the work every single day. And that's hard. It's hard. It's hard work to make a commitment to yourself, to your spouse, to your future every day. But really just keeping that end goal in mind, having great family and friends around you to support you. Those are really the key there. Having a good team behind you. So you had a lot of cheerleaders, I'm sure.

Yes. I mean, the two of you seem so in sync. It's almost sickening. I mean, did two of you seem so in sync. It's almost sickening. I mean, did you not have any good fights? Oh, tears have been shed, mostly on my part. I was going to say, Andrew, how often did you cry? We're both very financially minded. Him, way more so than me. I'm definitely more emotional.

But we've really been on the same page since day one. What was the biggest one that was the biggest problem in the four years? I know one, but... Go ahead. Uh-oh. It was over maternity pants. What? You wouldn't let her buy maternity pants? Well, I would. I just

want to know how much they were first. You shouldn't have asked. Especially with hormones. Yeah, that's the dumbest thing I've ever heard. The maternity pant meltdown almost threw the whole thing off the tracks. Yes. Yeah. That's awesome.

Thanks for being real. Thank you. That's awesome. That's very cool. That's good. Because you guys were just a little too pretty there for a minute. I was worried about you. That's good. I you guys were just a little too pretty there for a minute. I was worried about you. That's good.

I like that. Because Sharon and I, we still fight. Oh, awesome. You guys are great. Very, very well done. Very well done. Oh, man. So what was the hardest part?

The hardest thing for me was we had one debt, and it was a large amount of money. There was no mark, no milestones. It was very, very tough. We kept an amortization table on the refrigerator at home, and every month we'd mark it and work it down. I love it. That's what I would do. You might be a nerd, him. Yeah.

It was looking, trying to get that one page down and move on to the next page and the next page and the next page. It was just tough to, you know, some months the progress wasn't as much as we wanted, but we just had to stick to it. That is so great. Yeah, he is a nerd. I know. He's a great one, too. That's awesome. That's exactly what I would do.

Sheriff would be going, what are you doing to my refrigerator? That's so good. So good. You guys, you're so winning. I'm so, this is really good. Thank you. That's so good. So good. You guys, you're so winning. I'm so, this is really good. Thank you. Paid four house. What's the house worth?

Probably around $350. Okay. Paid four house. 30 years old. And first baby's here. You said TJ? Or AJ. AJ.

How old is AJ? He'll be two in December. Awesome. And you brought him with you for the debt-free screen. That's good. Yes. Good. Well, this family tree has been changed because mom and dad, really, it started with the in December. Awesome. And you brought him with you for the Dead Free Scream. That's good. Good. Well, this family tree has been changed because Mom and Dad really started with the grandparents even.

Yes. Have trained you guys up and were able to provide your education, and that sets you up for a completely different thing. Wow. Way to go. And so we've got a copy of Chris Hogan's retire-inspired book for you. That is the next chapter in your story to be millionaires. You're well on your way to doing that. We want to hear from you on your everyday millionaire hour soon.

Yes. And outrageously generous, as you said, as you go along. So well done. Andrew Kelly and A.J. Indianapolis. House and everything, baby. $249,000 paid off in four years, making $100,000 to $144,000. Count it down. Let's hear a debt-free scream.

Three, two, one. We're debt-free! Oh, man. Oh, man, oh, man, oh, man. That is so fun. So I wonder what in the world would happen if you put $2,500 a month starting at age 30. What you would have at age 70. That would be 40 years.

I'm just going to put this in here, I hope. And a decent growth start mutual fund starting from now. If they just take their house payment and save that alone from now until 70, if it's a $2,500 house payment from now until age 70, they make, that's $17 million. Oh, I know, I know, I know. What if I'm half wrong? Ha, ha, ha, ha, ha, ha, ha. Woo-hoo!

This is the Dave Ramsey Show. We'll be right back. Sam's with us in Pittsburgh. Welcome to the Dave Ramsey Show, Sam. Hi, Dave. How are you doing? Better than I deserve. What's up? Hey, so I have a question concerning a 401k and Roth IRA, my employer offers a 401k and they match dollar to dollar up to 6% of what I contribute. Great. And I can max out at 75% through this 401k if I want to. And I spoke to one of your smart investors the other day and they advised me to continue to invest in my 401k.

But I've heard you talk about Roth IRAs and mutual funds, and I just kind of wanted to get your take on whether I should just keep investing as much as possible in my 401k. Do you have good mutual funds with good track records in your 401k? What was that? Do you have good mutual funds with good track records in your 401K? What was that? Do you have good mutual funds with good track records in your 401K? Have they done very well? Yeah. As far as I know, what I'm looking at, they're pretty decent. Does the 401K offer a Roth 401K option?

And that's actually another question I had. Now, according to my 401K, I'm having a Roth contribution option. So I would assume that's the 401k Roth. Good. Okay. You've got a 401k Roth. And then what they match with is not Roth. It's traditional.

It has to be by law. Okay. So you're doing a Roth 401k. You should do that up to 6%, get that 6% match that is non-Roth. That gives you the best rate of return all the way around. And then if you've got good mutual funds and you can go ahead and just finish out and get to your 15% of your income that you are putting in, not counting the 6 match, but you're putting in 15% of your income and you want to use just the 401k to do that

and it's a pure Roth and you've got good mutual funds, there's nothing wrong with that. Okay. Here's your wrong with that. Okay. Here's your rule of thumb. Match gives you the best mathematical rate of return. Tax-free, which is Roth anything, Roth IRA, Roth 401K, whatever, gives you the second best rate of return over time. And then the last thing is a traditional, okay? And so that's the order by which you go through until you get up to 15% of your income when you're in baby step four.

We want to be putting 15% of our income away for retirement in baby step four. Charles is in Los Angeles. Hi, Charles. Welcome to the Dave Ramsey Show. Hey there, sir. How are you? Better than I deserve. What's up in your world?

Very great. Hey, so I just have a quick question. So I work in sales and I have an LLC and I have to pay taxes when tax season comes by. So every paycheck I calculate and I save a portion of the check to make sure I'm able to pay my taxes when it's time. So I have $3,000 saved to pay taxes and i owe seven thousand dollars on a car which is my only debt so should i put those three thousand dollars the car save it no that's your tax money don't mess with tax money never mess with tax money because you're gonna end up on you don't want to be behind the eight ball with the irs they are not

people you want to end your life. I don't want to pay the $3,000 and then I owe it to the IRS. No, no, no. Tax money. Once you put money in that tax account, emotionally I would pretend like I don't own it anymore. Yeah, that's what I do. I just take it out

of a percentage and just pay this. If you've been doing this more than one year, you should be doing quarterly estimates on your taxes and paying in quarterly. Are you doing that? No. Actually, what I do, every time I get paid, I go to the website and I calculate how much taxes should be taken out and I save it.

Yeah, but you're only paying your taxes once a year? Once a year, yeah. Okay. Have you been doing your taxes once a year? Once a year, yeah. Okay. Have you been doing this more than one year? Yeah. Okay, you need to get to a tax professional, somebody to help you file taxes, because you're supposed to file a piece of paper

called a quarterly estimate on your taxes once every three months, and you're supposed to pay that portion of your taxes once every three months. Oh, okay, so once a year, do it every three months? and you are self-employed, then you get penalized. So jump online at DaveRamsey.com and click on ELP for taxes. It's an endorsed local provider. It's someone we endorse for taxes in your area there, and they can help you do that quarterly estimate. And their charge for their professional services will not be anything big. It's not a lot of money because it's one piece of paper. I mean, it's what your net profit is.

It's basically what you're doing already, but you just need to file the paperwork. And, you know, since you've never done it before, I really would get somebody that knows what they're doing to help you do it and make sure you're doing it properly so you don't get penalized. But no, I would not use income tax money that is set aside for that to do anything except pay income taxes. You do not want the IRS in your life. Believe me.

Tony is in Idaho. Hi, Tony. How are you? Good. How are you? Better than I deserve. What's up? Perfect.

I have a property that I own outright that I purchased through a pension trust account that I started with my company. And I have the opportunity to sell it and cash out and roll that into account, which would be close to kind of hitting that million-dollar mark. But my quandary is I own that property outright. It makes an income of about $2,000 a month, and I own it. It's real. When I put that money into 401K, I mean, I've seen my investments go up and down.

But I know an 8% return over 10 years is going to make a lot more than that property. So just top level what your gut tells me to do. So what's the property worth? We're going through the process of getting it assessed for development, and it's going to be worth probably around $400,000. Okay. So $400,000. Okay. So $24,000. I paid $125,000 for it and put about $20,000 in improvements to make it livable.

Yeah, but it's the value that we're looking at, okay? And so basically you're making about a 6% cash-on-cash gross before taxes. Correct. Okay, and before vacancy and whatever else. So you're making about 6% on your money, plus the value of the property is going up. So, and are you depreciating the capital improvements, or is it raw ground? Yeah, I haven't made any in a while. My yearly output between taxes and improvements is maybe $3,500 a year, $4,000 max.

Your yearly output? Yeah, like for taxes, improvements that I put into the property. Okay, now what I'm asking is are you depreciating? Is there a structure on it that you're depreciating on your taxes? Well, no, because the property is usually worth more every year. No, that doesn't keep you from being able to depreciate it. You're allowed to write off. I mean, you have a tax person helping you?

Yep, yep, I do. Okay, you're probably depreciating this and don't even realize it. So I don't mean it's going down in value. I mean, you're allowed to write off a portion of the value of the improvements once a year as a part of your taxes, and that saves you on taxes as well. Well, it's inside that pension plan, so I doubt it. Maybe you're not writing it off. You may have left your basis alone since you're in that, but either way, it doesn't matter.

Okay, so my point is, it's going up in value. That gives you a rate of return, and you've got a 6% cash-on-cash rate of return, give or take. Right. So you're probably making, say, 12% on your money. Give or take, yeah. That's pretty close. Yeah, and if you like the property and you think it's going to continue to do that, especially if you could get those rents up a little bit. They're a little low.

If you get the rents up a little bit and it's going to continue to go up in value, I don't see any reason not to hold it. I might hold it for the very same reasons I bought it in the first place. Right. But if you think it's peaked out and if you think it's time to tap out and take that money, leave it in that pension fund, you could roll it and buy some other real estate inside that pension fund if you think it's time to tap out and, you know, take that money, leave it in that pension fund, you could roll it and buy some other real estate inside that pension fund if you wanted to. You just can't do anything with the money yourself.

It all has to stay inside that. Exactly. Yeah, that's my quandary. Well, the only quandary is you can get it out later, but you're going to pay taxes on it as you do that. So, hey, good question. Thank you for joining us. Good job, by the way, too. Congratulations.

Nice hit. That puts this hour of the Dave Ramsey Show in the books. Our thanks to James Childs, our producer. Kelly Daniels, our associate producer. I am Dave Ramsey Show. Did you know you can now listen to The Dave Ramsey Show on Pandora and Spotify? For all the ways to watch and listen, check out our show page at DaveRamsey.com slash show.