The Ramsey Show - App - You Have to Impose Your Will on Your Money (Hour 1)

Episode Date: January 28, 2020

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Music Music 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.

You jump in. We'll talk about your life and your money. Courtney is with us in Minnesota. Hi, Courtney. Welcome to the Dave Ramsey Show. Hi, Dave. Thank you so much for what you do in SPU. It's helped us so much. Sure. How can I help? We're in Baby Step 3B, and we have a

question. We want to move, and our realtor is telling us that if we update our home, we may not get all the money back on the updates, but we will get more interest and offers. How do we balance this? What's the price range of your home? It's valued at $250,000, which is a starter home in this area, and it's a really hot market. Okay. And what would the cost of the upgrades be? About $20,000. He's suggesting that we do a basement remodel and a second bathroom. Right now there's just a toilet town there but not a finished bathroom area. I'm going to talk to another realtor. Okay.

Yeah. Is that one of our ELPs you were talking to? No. Okay. Check with one of our endorsed local providers and see what they tell you, or two of them. Interview a couple people and get some opinions on that. I mean, typically a $20,000 basement on a $200,000 house, that's a 10% investment.

That's not a small investment. And that typically would raise the value more than the cost of the repair. So I'm not buying something. Something's wrong in this equation that he's giving you or she's giving you. Sure, $250,000. Yeah, I know. But, I mean, $250,000, $20,000, there's a percentage of that is 10% roughly, right? So that's a pretty substantial.

I mean, it's not like it's $2,000. If you spend $2,000 and don't get it back and it gets the house ready to sell, okay, fine. That's 1%. But throwing 10% of the value of the house down the drain? Nah. Don't think so. He said it would raise it about $10,000 to $15,000, but we might not get the full $20,000. Oh, okay.

That makes more sense. Okay. Do you have the $20,000? but we might not get the full $20,000. Oh, okay. That makes more sense. Okay. Oh. Do you have the $20,000? We do. Okay. Then it's up for discussion, and you just have to decide if it's true or not. I probably am going to talk to another realtor.

I'm going to get another opinion about this. My tendency is to sell something as is if it'll sell. If the market's hot enough and you can sell it, you're not in the rehab business. You're in the business of moving. And so let's get the house sold and get moved. I don't want to get in the rehab business. You know, you're talking about a pretty substantial renovation that you're doing here. That's not going to be something that happens in 20 seconds.

I mean, it's not like you can snap your fingers and, you know, add a basement. So you're going to find a contractor, get bids, hire a contractor, get the work done, you know, get it cleaned up, get it paid, then get it on the market. That's just going to take a while. And so my preference is to sell it as is, even if I sold it for a little less and be out of Dodge, because you're not in the rehab business. You're in the I need to sell my house business. So holler at one of our endorsed local providers. Click ELP at DaveRamsey.com and see if there's one in your area that can look at this with you. Or two, if you want to get more than one opinion, there's nothing wrong with

interviewing people in the real estate business because this is a very, very large asset, a very large transaction, and you want to make sure you got somebody that you're aligned with on it. Kathy's in California. Hi, Kathy. How are you? Hi, Dave. I'm well. Thank you. Thanks for taking my call. Sure. What's up? Well, I'm 65. I lost my husband three years ago, and we weren't quite done planning for our retirement. I feel like we were in pretty good shape, but we lost his income stream. We had a business together, and he was the broker, so that went away.

I'm done. In looking through your steps, I've completed one, three, and six, but two, I have about $30,000 in debt, and I'm on Social Security now. But your home's paid for? Yes. What's the $30,000 in debt, and I'm on Social Security now. But your home's paid for? Yes. What's the $30,000 in debt? $20,000 is credit card, and $10,000 is a timeshare we bought two months before he passed. Okay. Are you using the timeshare, or do you need to get rid of it?

I do use it, but the fees and maintenance, as you know, are increasing, and I'd like to get rid of it. Contact Timeshare Exit Team, Timeshare Exit Team, that we endorse them for getting rid of a timeshare, and they're the best people in the business for getting rid of one. And it'll cost you some money, but it gets rid of the problem and it'll get rid of the debt. It'll get rid of the debt too in the process. So that's something to look at. Now, how much do you have in your nest egg? I have 238K in mutual funds and 131 in an annuity and about 50,000 in an annuity, and about $50,000 in the bank.

Cool. Okay. I would turn the timeshare over to timeshare exit team, and I'd write a check and pay off the credit cards out of the bank money. Really? Yeah. That leaves you $30,000 in the bank. You're okay.

You've got a half million dollars. You've got a half million dollars above that in your annuity and in your 401K. You're all right. And chop up the stupid credit cards now you got to stop using them okay i know i'm trying to get on every dollar i i i'm working on it but i'm finished filling in the blanks yeah it's 10 minutes if you just lean into it you can do it um the um what kind of a business did you all have? Mortgage lending.

Oh, he was the mortgage broker licensed in California, which is a process. Okay. And you were working in that business? Yes, and I still work part-time doing the same thing, processing, but it's nowhere near what we we were bringing in sure sure well the good news is you got you're still young you got a lot of energy you can still do a do that for a while could even do it full-time if you wanted to to beef your budget up and not touch your nest egg but your house is paid for and after

today you don't have any debt true that feels pretty good it does it felt really good when i paid off the house um sold it sold the previous house a big house and bought a smaller one so let's make sure the uh the annuity is in a uh a good variable annuity and is invested in good mutual funds and growing if it's not we need to do some work there and the same with the 401k the the other retirement section let's make sure those are in good mutual funds and growing. If it's not, we need to do some work there. And the same with the 401k, the other retirement section. Let's make sure those are in good mutual funds and they're growing. But that half a million dollars, you're 65. When it's 72, if you don't touch it, it'll be a million dollars if it's invested like we teach you to invest it. And so just let it double. It'll double about every seven years. And so jump in there with one of our SmartVestor Pros as well.

If you don't have an investment broker that's got you in some good mutual funds there, so that that money is growing and, you know, you're in pretty good shape. I mean, there's no struggle here. I'd write a check today, be down to $30,000. I wouldn't worry about the 10 on the timeshare. Let's turn that over to Timeshare Exit Team. Click on SmartVestor at DaveRamsey.com. Click on SmartVestor Pro.

And I'll tell you what, let's get you into Financial Peace University. It sounds like that this stuff is like you need to get somebody to walk with you and help you get things in order and in control to give you some peace, and I'll do that for you. You're starting over after the loss of your husband. So hold on. Kelly will pick up. We'll get you signed up as a gift. 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 healthcare costs? Based on New Testament principles, Christian Healthcare Ministries, or CHM, helps Christian families, churches, and ministries join together as the body of Christ to share their major

healthcare costs. Christian Healthcare 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. You know what causes anxiety, worry, stress, a sense of chaos, disorganization, a sense of being out of control.

You can't control enough of the variables in your life. Everything is controlling you. That is stressful. When everything is chaotic and disorganized and out of control and just barking loudly at you, that chaos is called stress. It always induces stress. It always induces anxiety. It always induces stress. It always induces anxiety. It always causes that. And so in any area of our life that we want to lower our stress, increase our peace, we have to create order out of chaos i can remember something as simple as when i was a little redneck kid we're running in and out of the house and you know running the fan in the door

letting all the air conditioning out in the middle of summer it's hotter than blazes and kids are running in screaming out little boys running in screaming out all the neighbors me everybody else my sister running around screaming everybody's screaming it was chaos and i remember my mother she was pretty patient for a long time but eventually she would say that's it i've had it the worm has turned now we didn't even know what that meant except that the beatings were getting ready to begin so turns out the worm has turned to shakespeare who knew mom knew shakespeare but um and right after that the chaos she would exalt exert her will over the chaotic mess and bring order to it and that was that you were going to straighten up and fly right you ever heard your

mama say something like that you got to straighten up and fly right. You ever heard your mama say something like that? You got to straighten up and fly right, or get out of here, go play in the traffic, something like that, right? We're going to get this house clean. We're going to get some order to this chaos, and then our stress level comes down. Does that make sense? If you've got a chaotic mess and there's no order to it, and I'm not a complete organizational freak. I'm a little bit O ocd more than a little bit

probably but i get tremendous peace from things being in order and i have to exert my will to think you know things don't naturally move from chaos to order that's a that's an act of force you have to force that to happen how do you get order in your money first step is getting a budget telling your money what to do instead of wondering where it went it's flying off everywhere you got no idea where it went all the money comes in all the money goes out just oh i just worked another month i'm another month older i feel like a rat in a wheel there's no sense of traction there's no sense of we can't even get the bills paid we got too much month left at the end of the money and you have to exert your will order out of the chaos.

And order out of chaos is not a natural function. It's a function that is an act of your will, your emotions, your spirit, your intellect. You have to force order to come from chaos. It does not naturally come from chaos. Order is not a natural state. Chaos is a natural state. And so you have to force order in your life. Order is not a natural state. Chaos is a natural state. And so you have to force order in your life.

When you do, in the area of money, that's called, people say things like, I was empowered. Yes, you were empowered. You took power over the mess. And you said, that's it, the worm has turned. You people are going to straighten up and fly right, and you're talking to your Benjamins, right? Benjamin Franklin, you're going to straighten up here and fly right. You're going to do what I tell you to do. I worked too hard for you, and you're not going to just leave,

and I don't know where you went. And that's you talking to your money. You have to impose your will and cause order to come out of chaos. And it's not a natural state. This is why most people do not win with money, why most people work their whole lives and in many cases make really decent money and have absolutely nothing to show for it. Because they took the path of least resistance and chaos ruled their life. They always had anxiety and worry and stress around the

subject of money instead of going that's it the worm has turned i've had it i'm sick and tired of being sick and tired you uncle benjamin franklin's you hundred dollar bills are going to line up and fly right you're going to straighten up and fly right and you're gonna get on the budgeting well i've got everybody's got an excuse for budgeting you know i've heard them all you know what they're a bunch of bull i don't hear your stinking excuses you're living and not you're not winning so you have to try something different try it my way way for 90 days. If I'm wrong, you can go back to your way, right? Doesn't cost you anything. Get on a budget.

You can get on a budget on a yellow pad. Get out right at the top of the page what you make this month. And then spend those dollars right down the page. So much on food, so much on lights and water, so much on house, so much going into savings, so much going on my debt. And give every one of those dollars an assignment on a yellow pad if you want. You can put it into a little spreadsheet on Excel if you wanted to. You want to do it real simple?

Jump on the EveryDollarBudget app. It's free. It takes about 10 minutes to get your EveryDollarBudget app going. And so there's just no excuse for this. And what's weird is that we human beings,'re a little bit psycho all of us we would rather sit in the middle of stress and chaos than get up off of our assumptions and go change our our life by doing a budget you know argue with me about i don't know a budget is a good idea and there you sit stressed out broke in your poop and you know the only thing you're sure of is it's warm, it smells good, and it smells bad, and it's yours.

Get up out of it and go change some stuff. Now. It's not going to change until you change it. The Democrats aren't going to change it. The Republicans aren't going to change it. The lefties aren't going to change it. The Democrats aren't going to change it. The Republicans aren't going to change it. The lefties aren't going to change it. The righties aren't going to change it. No one is coming. The Calvary is not coming. You are the answer. You are the special sauce. You will cause order to come out of chaos,

and until you do, you're going to have stress. And you're going to have inefficient use of the money, and you're going to feel like you work so hard and can't figure out why you get no traction. You have to have a plan. Winning is an intentional act. No one accidentally wins. When the Super Bowl is over Sunday, they will not

interview one of the players on the field. They will not walk out there and say, so what happened? He'll go, I don't know. I just got off the bus and it just happened. No, winning is an intentional act. He didn't accidentally end up there, didn't accidentally end up in the top one half of one percent of athletes in the world playing a game that hinges on nanoseconds he didn't accidentally end up on that field he didn't accidentally end up in that level of physical condition he didn't accidentally become the best in the world winning is an intentional act and the same is true with something as simple as making your freaking paycheck behave. No more excuses.

Every dollar is free. You got a yellow pad in their drawer right there. Pull it out. Most of you got Excel built into your stinking computer. There's no excuse. Jump on there, get the EveryDollar app loaded. It takes 10 minutes. We're the best in the world at showing you how to do this.

I'm going to make it as easy as I can, but making order out of chaos is never an easy task. But it's always worth it. Taking your marriage relationship, which is falling apart, and bringing order to it. By imposing your will on the situation, changing the way you treat each other so that your marriage prospers and survives is an intentional act. Causing your kids to behave is an intentional act that some of you need to engage in. Making your money behave is an intentional act. You're bringing order out of chaos.

Check this EveryDollarStuff out, folks. It absolutely works. If you don't use our stuff, I don't care. Use a yellow pad. But today's your day. The worm has turned. This is the Dave Ramsey Show. Okay, I need you to listen to this. When you're on Wi-Fi anywhere in public or at home, you're at risk of hackers easily seeing every site you visit and search that you're doing online. It doesn't matter if you're on your cell or laptop.

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Download it now. Just search CyberGhost on iTunes or Google Play or go to CyberGhost.com. Sam's with us in Wisconsin. Hi, Sam. Welcome to the Dave Ramsey Show. Hey, Dave. Thanks for having me. I appreciate everything that you guys are doing. Thank you.

How can I help? So, a little bit of a unique situation. My wife and I are on our second home that we purchased from her parents. And her dad so graciously allowed us to purchase it from him, and he is our bank, and it is a 0% interest land contract that he is actually covering the taxes on. So we're in a great situation, but my question for you today, as we are looking at really starting to invest, I'm trying to weigh what would be a better return on our money, whether that would be to simply pay off our zero percentage interest

mortgage as fast as we can, or to do a little bit of both of investing and while paying off our mortgage. We suggest when you're debt-free, everything but the mortgage, that your next step is to have an emergency fund of three to six months of expenses. We call that baby step three. Do you have an emergency fund? We do, but I know that it's not as much as we should have. Okay. The first thing before we talk about any of this other stuff is it should be three to six months

of household expenses in liquid cash that you don't touch for any reason this is not i'm saving up for christmas or vacation or a house or anything else this is a an emergency fund okay then once you've done that then we do baby steps four five and six at the same time but but in that order of priority. Four is 15% of your household income going into retirement, and that would be matching 401ks, Roth IRAs, you know, traditionals, whatever, along those lines, and you're filling up stuff in good mutual funds there. And what's your household income? Household income is about $75,000 combined a year. Okay. All right.

And so, you know, we're talking about about $9,000 a year, roughly, is 15% of your income. Everything above that then leaves us for baby step five, which is kids' college. Do you have any kids that you need to save for college? We have one so far. We're in the first years of building our family, so yes. Okay. I would start something. It doesn't have to be dramatic, but I would start something towards the kids' college, $100 a month or something in a good mutual fund, and that's going to be a blast. You get that rolling, and then everything else I'm going to throw towards

the mortgage until it's paid off. I do want to get this mortgage paid off as fast as possible, regardless of the 0% interest rate. And here's the reason. It's your largest payment. And as a matter of fact, it's your only payment. And all the data tells us from the 10,000 millionaires that we surveyed that one of the keys to becoming a millionaire is getting your home paid off and keeping it paid off okay and uh because it frees up cash now you are in more of a danger zone than you feel like you're in with this land contract

land contracts are very dangerous here's why anything that happens to your father-in-law or mother-in-law whose name this property is in, and they get sued for that, could be a lien placed on the property that you feel like you own that you do not own. If they are driving down the road and hit a patch of ice and they were driving reasonably and someone gets killed in the car wreck and sues them for $500 million and wins, that lien is going to be placed on the property that you thought you owned because it's not in your name. If they screw off and go run up a big IRS debt and there's an IRS lien placed on them, it's going to be on that property that they own that you have a contract to buy. Contract for

deed is a dangerous ownership methodology. Point being, you could pay $100,000 down on this principle and 20 minutes before you pay it off, a lien gets slapped on there, and you don't end up with the property that you just paid off. Even if he wanted to. I mean, it could be something that's out of his control. I'm not suggesting he's a crook. Worst case scenario is he's a crook, but I'm not suggesting that. But, I mean, life happens here, and you can really get in a mess. So I strongly suggest that you guys get that property put into your name,

and you convert this from a land contract to a mortgage or a deed of trust, depending on how your state functions, with a lien on a piece of property that you own. So the deed transfers to you, and you still owe him, under the exact same terms, the mortgage. And if it costs a little bit of paperwork money to get the lawyer to do that, you pay the bill and get it put into your name before you start reducing this principle. And it has nothing to do with questioning Papa's integrity. Life happens, and it could be out of Papa's control, and then you'd have a really bad situation. And believe me, in 30 years, I've seen it a bunch in doing financial

counseling. That's why I'm so strong on it. I hate land contracts. Zachary is in Texas. Hi, Zachary. Welcome to the Dave Ramsey Show. Hey, Dave. How are you? Better than I deserve. What's up? So I got a question for you. So I make about $20,000 a year. I'm doing like digital marketing sales. And then I'm also working a side job just serving at a restaurant. And I have about $25,000 in debt, $21,000 of it, which is my car. And the car's only worth $17,000. and I want to sell it and get out of debt. But if I sell it, my dad said he's going to kick me out of my house because I'm still, I'm 20 years old. I'm, you know, anyway, so he's trying,

he's going to kick me out if I sell my car and cause I don't want to listen to his advice and build credit. So later on the road, I can buy a house or a car and I tried telling him that like, you know, I'll pay cash for a car, any car that I buy from here on out and all that stuff. He's just, I think he's mad that I don't want to listen to his advice, and I'm just not sure what to do here. What do you make a year? Around $20,000 or so with both my incomes. Okay.

So you have two part-time jobs? Well, I'm working full-time now, and i'm making 1500 a month but i can make more with commission it's just i'm you know still learning how to sell seo work and stuff so um yeah okay could you get a roommate and survive on twenty thousand dollars a year i i mean not right now not anyone that i know. I don't know how to find a roommate. I know that my cousin and her boyfriend want to move in in August, but he said if I sell the car, he wants me out by February. I wasn't talking about him.

I was talking about you. Oh, okay. This is a toxic. What I'm hearing is a toxic situation. Okay. Okay. Okay. I mean, your dad is trying to toss you out of the house. Yeah.

So that means it's time to leave. Regardless of the car discussion. Okay. The way he's acting means it's time for you to leave. Yeah. And so I'm going to start making plans to leave. And then I'll worry about, then let's worry about the car. Okay.

It's time for you to get out of there. Okay. Just because, I mean, somebody threatens, you know, it's like your boss walks in every day and threatens to fire you. Yeah. You know, it means you need to get a new job, you know? Yeah. I mean, I want our relationship to be good, but it's just right now.

Well, that's up to him, and that's up to you, and if your relationship with someone is dependent on you completely taking their advice, you're never going to have a relationship with someone. Yeah. Because no one takes your advice all the time. My freaking family does not take my advice all the time, okay? And I'm freaking Dave Ramsey, okay? So, I mean, you just have to have a relationship with people

in spite of the fact they don't listen to you. And if you can't have that kind of grace in your life, you're not going to have anybody in your life. Because no one does everything you say to do. I don't even do everything my wife tells me to do. No one does. That's absurd. So, the only way I can have a relationship with you is if if you if i do everything you say to do well sorry ain't gonna work out yeah so he's going to sound like

he's got some growing up to do uh i'm sorry this is bringing a lot of pain to you and i'm joking around about it too much but you do need to make some plans in the near future, aside from the car issue, to get out of there. And then make your decisions about your car. Okay. And we're not trying to be mean to your dad, but he's obviously giving you lots of signals it's time to go. So let's get your career moving. Get some income coming in and get on out of there. And then you can make your decision what to do with the car.

Oh, my goodness you must stay in debt or you can't live here that's so backward this is the dave ramsey show One of my favorite parts of this show is hearing your debt-free screams. You guys are our heroes. You've kicked debt to the curb and you've saved for the future. Now we want to celebrate with you. If you have lived like no one else and are currently in baby steps four through seven, well, it's time to enjoy some money. And the perfect place to do that is on board our first ever live like no one else cruise in March. That's right, just a couple of months away. But

get this, it's not too late to book your cabin. So don't miss your chance. This Caribbean cruise is going to be an incredible seven days at sea on a stunning new ship with amazing experiences. I'm talking all of our Ramsey personalities and other world-class entertainers. We're stopping in the Bahamas, Puerto Rico, St. Thomas, and Turks and Caicos. It's going to be an amazing, debt-free celebration designed just for you. Don't miss the boat. Head over to RamseyCruise.com today to reserve your room. Thank you for joining us, America. We're so glad you're here. Open phones at 888-825-5225.

Michael is with us. Michael's in Indiana. Hey, Michael. Welcome to The Dave Ramsey Show. Hi, Dave. Thanks for letting me on. Sure. How can I help?

So I'm a freshman college student, and I have about $20,000 saved up in the bank, and I'm not looking at paying too many large expenses throughout college. So I don't want that money just sitting there. So what's the best thing that I can do so that benefits me in the bank, and I'm not looking at paying too many large expenses throughout college. So I don't want that money just sitting there. So what's the best thing that I can do so that benefits me in the future? How much do you have left in college? I'm a freshman right now, so I have about four years left. Oh, okay. All right.

I do want it sitting there. And here's why. Okay. It is an insurance policy that is more valuable than the investment that it could create it ensures that michael is going to finish school debt free and that michael's going to finish school at least unless he gets kicked out for some reason other than money okay what are you studying aerospace engineering phenomenal would you agree with me that your value in the marketplace the What are you studying? Aerospace engineering. Phenomenal. Would you agree with me that your value in the marketplace,

the income that you could earn, is going to be dramatically increased over what it is today when you graduate? Yes, that's definitely true. Okay. So mathematically, the best investment that Michael can make while studying aerospace engineering is to make sure he completes that degree. That's a much greater rate of return than any mutual fund will pay. You are a better investment than a mutual fund is. Yes.

As well, I will be working at a co-op this summer and fall that will be paying in total about $25,000. Awesome. Do you still recommend holding on to all of that or yes i'm going to put some of that forward i don't care if you got a hundred thousand dollars piled up i want to ensure you get out of there with your skin intact and graduated and no debt and because listen here's the thing any ground you lose on that money in the next two years or so, which is really what we're really talking about, you will make up very quickly when you get out with a sizable income and taking that money then and using it for your transition when you get out.

Because here's what happens typically. Now, it doesn't always happen, but if you're in, let's say you're sitting on 50 grand, okay? You graduate with an aerospace engineering degree in three years. It's not unusual at all for you to take a new job and move. That costs money. And it's not unusual at all that in the next 36 months that you're married. It's not required. I'm just saying statistically it's not unusual at all that in the next 36 months that you're married, it's not required. I'm just saying statistically it's not unusual.

And, oh, by the way, there's probably a car that needs to be purchased about that time. So you're going to need some money to set your life up when you come out if everything goes perfectly. And this money sets you in there. then from there on you're in a position and my prediction is uh you're gonna be making six figures and my prediction is is that you'll be a millionaire by the time you're 30 that's the goal yeah if you follow the stuff i'm talking about that's where you should be Even though we did not get really sophisticated with our investing of this money while you were in school, because we're going to make sure that Michael gets this degree without debt, and that is worth more than any mutual fund will pay.

Just saying, dude. You asked my opinion. You're an analytical guy. You're a guy that's good with numbers, so it's easy to get caught up in the math theory here. But what I'm giving you is kind of horse sense here. But it actually works out mathematically, by the way, which horse sense usually does. All right. Common sense, we call it some places. Josh is with us in Virginia. Hey, Josh, how are you?

Good. How are you doing? Better than I deserve. How can I help? We've got twins on the way right now. Woo! Yeah. On top of three boys, actually, so there'll be five kids in the house.

Do you know what you're having? Yep. We'll have two girls. Oh, this is wonderful. I love it. Congratulations. Thank you. But our predicament, I guess you'd say, is, well, it's actually a blessing.

Our mother-in-law has a house that she doesn't live in, doesn't use, and we're in debt on our house and on two cars. And she said, basically, you got two more kids coming. Why don't you just take this house, sell your house, and hopefully that'll be enough to pay off your cars and you can beat that free and just move into the house at home but my question is how do we do that if and transfer them to our name and then maybe here in 10 years we decide to move we go to sell the house we don't want to pay a ton of taxes on capital gain taxes.

Okay, so she's going to give you the house free. Yeah, she just said she just signed it. And what is the house worth? It's probably 30 acres, so I'd say it's probably worth probably $400,000 probably. Good gracious. So she's wealthy yeah she's well it was her

she was inherited to her so okay but all right here's the thing uh two things that you need to know one is she needs to see a tax attorney or an estate planning attorney to do this properly otherwise she's going to have to pay gift tax on $400,000, which could be as much as $100,000. Okay. So if she does this wrong, it's going to really screw her up. Now, you may want to write this down. What she needs to ask the attorney about is the unified estate tax credit.

And what that means, unified, like the preacher said in Now You Are One, Unified Estate Tax Credit. Okay. And what that means is that you're using up, she would be using up some of her federal estate that passes tax-free at her death. She can use up some of it while she's alive. Okay. And that way she could pass this to you without any taxes.

But you've got to file the paperwork, otherwise the IRS is going to come back. She's got to file it. They're going to come back around and hammer her in an audit. So you can't just hand somebody the keys to a $400,000 house without getting screwed by your government, okay? Right. So get some tax advice, one. Number two, to answer your question, your basis for tax purposes becomes her basis.

Her basis was the value of the property at the time she inherited it. How long has she had it? She's had it, her parents died probably 10 years ago. Okay, let's just make up a number, okay? Let's pretend the property was worth $200,000 when she got it. Right. Then that's what your basis is. It's as if you paid $200,000 for it when she gifts it to you.

When someone gifts you something, what they paid for it becomes your basis. Now, you can, after you've lived there two years, it's your primary residence, and a married couple filing jointly can earn up to $500,000 above what they paid for the property and have no taxes. Okay. And so if our example is right, of $200,000 is her basis, you could sell the property up to $700,000 with zero taxes. Okay.

So you're probably never going to pay taxes on this. Okay. So we're not in as much trouble as what I was thinking we were going to be in. And if you did, let's say $100,000 of it was taxable or something, that you went $100,000 over that or something, it's at 15%, so it would be $15,000. It's not going to kill you. It's not going to kill you. So you're okay.

She is not unless she files this paperwork properly that I was talking about a while ago. Right. But a wonderfully generous thing. Now, here's the thing, dude. When she does all this and you get your butt out of debt, you get on a budget. And don't you go back in debt. And don't you walk on a car lot unless you got the money. You hear me?

I hear you. All right, dude. You got too many miles to feed to screw this up a second time. I'm so proud for you guys. Well done. I love it. Well done. This is cool.

That puts this hour of the Dave Ramsey Show in the books. This is James Childs, producer of the 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.