The Ramsey Show - App - You Really Can Pay for Christmas Without Credit Cards (Hour 2)

Episode Date: October 1, 2018

The show about you

Live from the headquarters of Ramsey Solutions, it's the Dave Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. I'm Dave Ramsey, your host. Thank you for joining us. Open phones at 888-825-5225. Alex starts us off this hour in Chicago. Hi, Alex.

How are you? Hey, I'm well. How are you? Better than I deserve. What's up? Well, I had a question I was wondering if you could help me out with. I recently sold my condo, and I was able to walk away with $27,000. So I have that in my savings.

But I have about $26,000 in debt between scooter loans and car payment. How much of that's car? I'm sorry? How much of that's car? $17,900 is the car. Okay, so most of it's the car. Okay. Yeah.

And then $8,500 is school. And I wanted to use that savings that I made to kind of put a down payment on a new home. But after listening to your show, I'm not exactly sure kind of how I should go about it. And what's your household income? 52.5. Good for you. Okay. Well, I want you to get into another home.

I don't want you to do that with debt. So we've got two options. One is pay off everything and rent for a little while and save up a down payment and then buy. Or two is sell the car, get a beater, and use the money that you would have paid on the car as your down payment and pay off the student loan. Okay. Either one's fine with me. The car's not that abusive.

It's just the large lion's share of the problem, right? So, you know, what kind of car is it? It's a 2016 Chevy Malibu. You like it? I love it. Okay. All right. Well, I mean, do you want to rent for a year in order to keep it?

Well, I'm renting now. So, I my condo, and I'm renting now, too. And meanwhile, it's buying a home. Okay. So I'm okay with that. Okay. So if you just, you know, write a check and be debt-free today, and then pile up money really, really, really aggressively for a year, and you've got your down payment, right?

Yeah. And that's, you know, that's what we're doing but that way you're moving into the home with your emergency fund in place um and you're debt free which is how we always tell you to buy a house um you know sometimes we where you're selling and buying you have to do it a little differently but in your case it's kind of cut and dry didn't it yeah it's a pretty simple pretty simple analysis you're either going to sell the car and buy a house now or you're going to keep the car and buy a house next year so i mean in a year or 18 months or something like that however long you want to save up to do that and i i think that's

what i would do probably in your situation um yeah i think it is karen is with us in miami hi karen how are you i'm. How are you? I'm fine. How are you? Better than I deserve. What's up? Well, recently my mom lost her job in March, and ever since then she hasn't been able to find work, and I've been really worried for her, you know. And along with that, her not having that much money,

she's not really frugal with money when she actually does get it. And I'm really worried for her because i keep telling her to get a job you know and she says she's trying but i feel like she's kind of unmotivated to try and work at the moment like i've even given her business ideas and everything on things she can do at home maybe but she really hasn't done anything and i'm not sure what to do it's difficult to watch people you love misbehave when they're hurting. She's hurting, obviously. What kind of job did she have before? Well, she worked at a hospital. She was a mental health technician.

Making what kind of money? Well, she's not the main income in our household, so maybe... Oh, her husband has a job? Yes, my dad has a job what does he make oh well he makes uh i think a hundred thousand dollars a year maybe okay so she doesn't have she didn't have to work to eat yeah okay so i mean what if she just didn't want to work well uh i feel like for her type of spending that's the problem she likes to spend money and how old are you i'm 18 okay all right well there's a rule that

we have discovered in these types of conversations and it's called the powdered butt syndrome once someone has powdered your butt they don't really want your opinion about money or sex. And so your mother's not going to take an 18-year-old's input on her spending habits. You don't have standing. You don't have credibility with her to have that discussion. And that's what you're discovering. Am I wrong? No, you're not wrong at all.

Yeah, it's just difficult. Now, you know, when you're 58 and she's 96 or something yeah she may take your input those days right that's a different that's a different parent-child relationship than an 18 to whatever and so you know you have to build some credibility so the only thing i would tell you to do is a couple things. One is I would not bring up her spending again unless she brings it up. Okay. Okay. Two, I would tell her lots of stories about the times that you used to mess up.

Mom, I used to spend and do this, and I used to do this. And, man, when I got on this budget, I got on this envelope system, I got on this plan to get out of debt. I am doing so good. And you just tell your story because your story is not condemning her. It's just holding up the idea that there's hope, right? Yeah. And so tell your story and talk about how you're winning doing these things,

and that changes everything for you. Then the second thing you can do is this. Is there anyone, like maybe your dad dad who could sit down and talk with her and the two of them actually start getting their act together well um actually yes my dad has talked to her he's actually one of the people who said we should call and we both watch your show okay well this is his job not yours is what i'm saying and so so this would be like a husband now calling. Now, that's a little different standing. And he puts his arm around his wife and says, look, we got a problem here.

You're spending like you're in Congress. I mean, we got to stop this. There's a problem here. And we need to sit down and work through this issue together. And we've got to put together some kind of a plan where we have a good life and we have a good life, meaning we spend some money now and we invest and save so that we have, you know, we live like no one else. So later we can live like no one else. But really, this is on your dad to do this. It's not on you.

Because he's got standing. He's got a position in the household to have a discussion where, as 18 year old you don't and um it's not just you obviously are very sharp and you can do all kinds of things for you i'm not saying you're not good or you're not whole or whatever i'm just saying in your mom's eyes you're still that little baby she used to diaper and it's just hard for her to take advice from you but now her husband that's a different thing and um you know he can sit down and if it was at my house i mean sharon and i would just sit down we'd have a discussion go this is this is something we're not doing here and there's a problem and we've got to work through

this and so he's put up with us a long time and it's time for him to deal with it now that that's what i'm saying hey thank you for the call. Open phones at 888-825-5225. You want to know what one of the big data points that we find when we study millionaires? Married couples are on the same page and on the same team. One of them's not dragging dead weight behind them. One guy told me, he said, I got rid of $50,000 in debt. I said, how'd you do that? I divorced her.

I'm not suggesting that, but it was funny. I don't care who you are. That's funny. This is the Dave Ramsey Show. Let me tell you a story about two families that are very much alike in a lot of ways. Both families have two working parents and a couple of young kids. Each has debt and has struggled to make ends meet. But they're starting to make headway with their budgets and smarter decisions with money.

They have dreams and plans, and the only real difference is that one family has the right amount of term life insurance and the other doesn't. Big difference. If one of the parents die, and that does happen, their well-being would be destroyed. Paying for the mortgage, utilities, food, and that does happen, their well-being would be destroyed. Paying for the mortgage, utilities, food, and other bills would be impossible, let alone saving for education

or retirement. That's why every day I talk relentlessly about getting term life insurance. Just go to ZanderInsurance.com or call 800-356-4282 and see how inexpensive it really is. Be the family that takes those deliberate steps to be different and responsible. It really does make you the hero of your story, and it puts you on course for better things ahead. Carrie is with us in Orlando, Florida. Hi, Carrie. Welcome to the Dave Ramsey Show. Hi, Dave.

What's up? We have a huge bonus coming in. Great. How much? It's about $30,000, maybe a little bit more depending on taxes. Woo-hoo! Love it. Yeah.

And we were trying to figure out what to do. We have one lessover stupid tax of a PMI. We only put 10% down on our house. We followed your baby steps. We put off debt. We got our emergency fund. We started funding retirement. We have 10 girls that are 9 years old.

So we didn't know if we should start funding their college fund or if we should pay off that other 10% on the house to get that PMI gone. How much is that, the 10%? It'll be about $30,000. So we use it all up? We would take it all, yeah. Okay. And what's your interest rate on your home?

4.25. Okay, so you're at about market there. And you are 100% sure that $30,000 will cause the PMI to be dropped? Yes, we calculated that. It was like $31,000 something. So we have the money to do it, but it would take the whole check. Yeah, and are you confirming that with the mortgage company prior to doing it, obviously? You're not going to just send them the money. Right.

Yeah, we want to make sure that the PMI is going away. Okay. And PMI is costing you what? $58.26 a month. So annually it's $699.12. Household income? Around roughly $200,000.12. Household income? Around roughly $200,000. Okay.

Here's where you are in our baby steps, and you probably already know this, but let's review so our other listeners are caught up. You're putting 15% of your income into retirement, aren't you? Correct. That's baby step four. Five is kids' college, and six is pay off the house early. So really the question is, are we going to put this on five, or are we going to put this on six?

There's not a dumb or wrong answer here. Either one is fine. Whatever makes you feel good, whatever is a good idea. I'm probably going to take 20,000 of this and put 10 each in 529s for these girls. Okay. You're getting, college is sneaking up on you fast. And I'm going to throw the other 10 at the house, and then I'm going to set up a monthly

amount to add to the 10 beginning at the first of the year so that the 529s are kind of on autopilot. And so you're going to put, you know, 10,000 in plus $100 a month each or something like that. No, they're for a monkey wrench. The twins are nine, but I do have a four-year-old as well. Okay. Well, then, you know, then we can just spread it around. But however you want to do it.

I want to put a substantial amount towards college, and then you make enough to be able to just beat on this mortgage pretty rapidly. Okay. But a $600 a year return on a $31,000 investment is not that great. Right. That's what we thought, too. Yeah. So I'm going to start the kids' college, and then I'm going to just start paying off the house.

The natural result of working your baby step six is you're going to get down below the PMI, get that dropped, but then you're just going to keep beating on the house, too, after that, and it's going to go away completely. So, good question. It's an interesting analysis to just kind of sit with you and talk it through. Well, it's the first day of the month. Can you believe October's here? Man, oh, man, oh, man. I went into a store this weekend that's full of Halloween stuff.

I couldn't believe it. Just blink, you know? Well, you know what you do at the first of the month? Before the month begins, you give every dollar an assignment, every dollar a mission, every dollar a name. And if you've not done that, that's called your budget for October. Today, October the 1st is the day you do that. You need to download our budgeting app, EveryDollar.

It is the world's best budgeting tool on the planet. It's easy to use. It just takes a few minutes to set up your first budget. It's free. No excuses. Being good with money is not a DNA issue. It's not a gene. It doesn't happen by accident. The only way you win with money is you a dna issue it's not a gene it doesn't happen by accident the only way

you win with money is you make the dollars behave you grab hold of them and you say you straighten up and that's what a budget is you join the five million budgeters who use every dollar and you download the app for itunes or google Store or whatever, and you sign up for a free account at everydollar.com. And we'll get you going, man. This thing, it's incredible. It's elegant. It's robust. I love all those Internet terms, all those app terms.

It sounds like I know what I'm doing. It's elegant. It's robust. But it's very easy to use. It's smooth. Everydollar.com. John is with us in San use. It's smooth. Every dollar. Everydollar.com. John is with us in San Antonio.

Hi, John. How are you? Hi, Dave. Nice to talk to you. You too, sir. What's up? Well, Dave, I'm active duty military. I live in a different state from my wife and our three kids.

My question is, how do we keep a budget on track from different states and stay on the same page? Okay. Are you stationed in San Antonio? Yes, sir. Why did they not move with you? It's because I'm in a training phase, so it's part of the process. How long?

Yes, sir. How long will you be in training? Oh, until about June. Oh, sir. How long will you be in training? Oh, until about June. Oh, wow. So you're going to be separated a long time. Yes, sir. Okay. Ouch.

Well, the easiest way to do it is EveryDollarPlus. And EveryDollarPlus, what that does, the app, it connects to your, you put it on your phone and it connects to your bank account. And the two of you both have access to it. Both of you put it on your phone you put it on your phone, and it connects to your bank account, and the two of you both have access to it. Both of you put it on your phone or put it on your desktop, whatever. And no matter where you are in the world, she can look at the budget and you can look at the budget as long as you've got Internet access. And then you can obviously discuss it by phone or email or whatever else you want to do. But you've got to just lay out a game plan that encompasses your expenses there in San Antonio,

which should be very minimal because I'm guessing you're on base housing, right? Yes, sir. You're on base food, right? Yes, sir. So you shouldn't have any expenses. If your family's back home trying to get out of debt, you know, you're shipping all the money home, right? Yes, sir.

And so are most of it. I mean, you're just basically going to get a small miscellaneous allowance, and then the rest of it's going home for the kids and for the get-out-of-debt plan or whatever you're working back there. But every dollar plus allows you to follow exactly any expenditures that she makes and vice versa, because you're dealing off of one bank account, and we push that through that way. So that'll work one of the well i'm sorry sir that's okay go ahead just one of the issues that i'm having with is uh you know it's just kind of explaining kind of the small details

of the plan so like like from you know uh she doesn't feel secure in stopping her investments to her 401k or or towards taxes or anything like that. Well, that's not an issue of how to budget apart. That's an issue of we're in disagreement on what we're going to do. Right. These are different issues. So, I mean, the budgeting apart thing is much easier to solve than that one. The two of you deciding you're going to get on that plan and agreeing on what that plan is

is the only way you're going to succeed financially. Whether you agree on my plan or her plan, you've got to be on the same plan. But where you're just arguing about what's first, what's second. Let's do this. I'll just sign you guys up for a one-year membership to Financial Peace University. And she can go to the local class or you can go to the local class. Both of you can in your area. But the big class or you can go to the local class, both of you can in your area. But the big deal is you can follow along.

You can watch the exact same lesson online that she watched in class last night. And so you'll be taking the class together with the online aspect of the class, and she can even go to the local class and take the nine lessons there at her local church or whatever. But let's get you two on the same page, and then you can talk about, okay, well, this is what Dave said. Are we going to do it? Right. And if you can get her to go through this with you, I'll show her how to do it, and she'll become convinced.

Awesome. Because I'm really good at this. It's all I do. And I want to give it to you just to say thank you for serving your country. We appreciate you. And you separated from your family there for a year doing this training. And, man, I tell you, the sacrifice you guys go through is unbelievable. I can't be separated from my wife and my dog for more than 20 minutes before I get just sick.

So it doesn't work good. I appreciate who you are, it doesn't work good. I appreciate who you are, man. You hang on. We'll get you signed up for Financial Peace University membership for the year. That'll put you in the EveryDollar Plus. That'll put you in the online access to the videos and the audios. And you go to the local group for nine of the lessons. In addition to that, it's all in the one-year package. It's an incredible, incredible deal. If you can get her to do this, I'll give it to you for free, but you got to get her to do it. You can't do it by yourself. This is the Dave Ramsey Show. Can you believe this real estate market?

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You can close two to three weeks faster than your competition. So call Churchill Mortgage today and get certified. They've helped thousands of listeners and team members here at my office win the bidding war without having to bust their budget. Call 888-LOAN-200 or visit churchillmortgage.com. This is a paid advertisement. NMLS ID 1591. NMLSconsumeraccess.org. Equal housing lender. 761 Old Hickory Boulevard, Brentwood, Tennessee, 37027. In the lobby of Ramsey Solutions, Chris and Morgan are with us. Hey, guys, how are you? Hi. Fantastic. Good to have you guys. I can't believe I'm here. Well, we're glad you're here. Where do you guys

live? Oklahoma City. And all the way to Nashville to do a debt-free screen. For sure. Now, Kelly was telling me at the break that you guys are like media stars now. We are. No. We're a big deal. We're a big deal. Yeah, right. And like Good Morning America to do the debt-free free screen, well you didn't get to do the debt free screen but they talked about your debt free story yeah they reached out to us and we just thought if we can just inspire people to do it and that you're not hopeless and it's possible and average people

like us can do it, anyone can do it well good, well done I remember seeing that, I think I retweeted the hit or something on there yeah you did, I was trending for a while. It was wild. Very cool. Very cool.

Well, congratulations, y'all. Thank you. Thanks. It's a great story. Great story. I'm glad we had a part in it and guiding you along. Good morning, America. I left that part out.

Yeah, I was really disappointed. I was like, I'm letting Dave down. I'm really disappointed. Who knew that they had editors up there? For sure. That's funny. It's okay. We're proud for y'all.

Well done. How much have you paid off? We paid off almost $123,742 in one penny. One cent. Got it. And how long did this take? Well, it took six years, but three years when we really started following your plan. We were finally on the same page at that point, so we are a little faster then.

Yeah. I was dragging my feet. Got it. And your range of income during that time? Well, we were broke. 20. Yeah, like 25. 25,000, and we just accepted new jobs, and right now we're making 125.

Woo! Yeah. What do you all do for a living? I work for an advertising agency in Oklahoma City. And then I'm the store manager at the Coach Store in Oklahoma City. Very cool. I know your wife likes handbags, so tell her to come see me. Yeah, she's got a pretty good collection.

She deserves anything she gets after putting up with me. Well done, you guys. Thank you. You're killing it. How long have you two been married? Seven years. All right. So a year into marriage, you start.

But then three years later, you kick it into high gear. For sure. Tell me about the journey. What happened? And show other people how it's done. Right after we graduated, we had so much in school debt. And we just said, we need to get rid of this. And I grew up in a single family home.

And my mom worked really, really hard. And so I wanted to say, I want to take every advantage that we have and get everything in line and be successful early on. And I felt entitled, like I deserved a Jeep Wrangler, and I worked too hard. And so we really were fighting, and I just felt entitled. I was acting like a little boy, and I needed to become a man. And I just, she deserved better. And I just had to, you know, let my pride down.

So what happened? What was the breaking point? What kicked it into gear? Because obviously you flipped, and obviously the way she looked at you just then when you said that was admiration and respect. And it was really the way every man wants his wife to look at them. What she just did was incredible. So tell me about that. What happened?

Well, I mean, we just argued a lot. And we wanted to have a very healthy and happy marriage. And I just remember standing in the kitchen three years ago, and he held my face in his hands, and he was like, we are going to get rid of this. And I think we just finally got on the same page and felt like we were connecting. Because you mentioned a lot that when your priorities aren't aligned in your budget, your priorities aren't aligned in your marriage. And so for us, that was kind of just something that was really important. Yeah.

And I didn't have any hope. I didn't think we could do it. What flipped, Chris? Because you grabbed her face. We got this. We're going to do this. What happened? think we could do it what flipped chris because you grab her you grab her face we got this we're gonna do this what happened um i just i i think i just didn't want to hurt her anymore i was hurting her i love her so much i just don't want to it just wasn't fair to her and i was the one

who was spending money and going out to eat doing whatever i want to do and so and i was hearing you're not important yeah but we finally were like, you're the most important thing and I'm the most. And we need to get our finances in line and be on the same page in our life moving forward. And so at that point, it's game on. Yeah. And what kind of income were you making at that point three years ago? I think between. About 80.

Okay. So you still come up from 80 to 125 during that three years. Yeah. Very impressive. Very cool. So then, okay, you've made up from 80 to 125 during that three years. Yeah. Very impressive. Very cool. So then, okay, you've made the decision. We're on the same page. Then what happened?

Make a budget. And it kind of, it was, I felt constricted at first, and then I kept listening to your radio show, and it's like, it almost like gave me permission to spend money. And I felt safe to spend money. It wasn't like, oh, this is going to cost me a night on the couch or whatever. It just felt like, okay, we're on to cost me a night on the couch or whatever. It just felt like, okay, we're on the same page. And I felt us connecting more. I found us happier and I was like,

you know what? Stuff doesn't make me happy anymore. And I don't need a Jeep Wrangler. I don't need new clothes and I don't need to go out to eat. I'm just happy. This is more important than anything else. And winning. Yeah. And getting traction. Yeah. And then I could see the light at the end of the tunnel. You can get adrenaline rush off the traction. For sure. We did. I was like, we can do this. And I'm like, okay, and then I could see the light at the end of the tunnel. You can get adrenaline rush off the traction. For sure.

We did. I was like, we can do this. And I'm like, okay, we're going to throw the kitchen sink. I'm selling stuff. I don't care what kind of car I drive. Whoa. Yeah. Is Wrangler gone?

Oh, we never got it. I was just begging for it. Oh, you wanted it. You didn't have it. Oh, okay. No, I drive a piece of crap now. You deserved it, but you never got it. I got you. We'll pay for cash for it.

Absolutely. You'll get one. No question about it. Well done, you. I got you. We'll pay for cash for it. Absolutely. You'll get one. No question about it. Well done, you guys. Thank you. So what is the key to getting out of debt? Say no. Oh, man.

Yeah. Say no. I mean, it was hard to say no to our friends, you know, to go out and eat or to go do fun things, go to concerts or whatever. And we just had to say no a lot. And, you know, that was hard. I mean, and for me, it was like we just had to say no a lot. And that was hard. And for me, I was like, I have to believe we can do this. I mean, once I did, I was like, oh, we're going to knock this out.

Oh, and the main thing, too, is I got angry at our dad. I was so mad. I was like, I'm so tired of Sally Mae living in our living room. I'm tired of talking about it. We don't talk about student loans unless we laugh at them now. That was a thing of the past. Wave at her. She's sitting on the curb.

You kicked her out. Yeah. It's wild. That's very cool. Yeah, and it feels like we've got a raise. I mean, even more of a raise than we just got. There is something about getting angry about it. There really is.

Yeah, I'm just so tired. And Morgan, you said it was what? What was the key you said? I was saying no. You were saying no. So I was going to ask you the person that comes on Twitter probably at y'all even because after the story that was done on you, but certainly

comes at me and says, well, I want to live my life now. I need to say yes. I'm young. I might die tomorrow. I need to say yes now because I might not be able to say yes later. And your response to that, how do you answer that? How do you answer that voice'd you answer that that voice in your own head that says the same thing well it's really i mean you feel like you're saying no but

you're saying yes or you know like you're saying yes to early retirement you're saying yes to a successful future so it's not restricting yourself you're it's it's a good thing to do i don't know i tried to you're living like no one else so later you can live and give like no one else. I'm driving like no one else so I can drive like no one else later. What are you driving right now? Oh man, I'm embarrassed to say but I'm okay with it. It's a 2003 Honda Element with hail damage, a busted bumper,

broken windshield. Oh, the back doesn't work. Yeah, I can't open the back tailgate but it gets me there. I don't mean to. I love this car. Have you named it? Ellie. Ellie. Poor Elle. poor Elle's gotta go she won't die poor Elle's gotta go we're gonna have to save up some money and then get Elle get Elle replaced yeah you can see you can give her to Sally May and tell

her to drive off oh my gosh poor Elle a busted tailgate it's that's something that's fun you guys are you guys are great. So how did you connect to us? A radio show? Oh, I actually took your class in high school, and I was like, he's crazy. I hate Dave. I'm not doing that. I'm not doing that.

I'm even mad at the teacher that played the video. It was one of the only classes that stuck. I don't remember anything else. I remember how much I hated him, but I remember everything he said. Yeah, I was like, oh, he's right. I don't want him to be right. But your parents did it in their 40s. Yeah, they learned late, and they're like, oh, my gosh,

if you guys can do this now, you're going to be set for life. And I just remember thinking, okay, this is just so I can create a legacy. And now I'm starting to think of legacy like changing my family tree forever and being a man or grandpa or husband, dad. We don't have any kids, but that's just the plan now. You're the guy that changed it all. Yeah. That's fun.

Exactly. That's a real legacy. Well done, you guys. We've got a copy of Chris Hogan's book for you. Oh, thank you. Retire Inspired. Who was your biggest cheerleader? Honestly, you.

I know. I listen to your radio show like, you've got this. You can do it. That's the answer. No, I mean in your life. Who was in your life? Our parents. Okay.

They just kept saying how proud they were of us. That's so cool. That's the way it should be. We're proud of you, too. Thank you. And thanks for going on Good Morning America and Inspiring America. Very well done. Chris and Morgan, Oklahoma City.

124,000 paid off in six years. Most of it in the last three. Making 25 up to $125,000. But real transformation. Good stuff. Count it down. Let's hear a debt-free scream. Three, two, one.

We're debt-free! And now it's official. Well done, you two. Wow. How great is that? This is the Dave Ramsey Show. Christy's with us in Asheville, North Carolina. Hi, Christy. Welcome to the Dave Ramsey Show.

Thank you, Dave. Thanks for everything you do, you and your team. Thank you. How can I help? My new job offers a dependent care flexible spending account cool is it worth it for paying for daycare yes yes yes yes yes yes because what you're doing is anything you put in there is pre-tax so let's say a thousand dollars let's take a thousand dollars if you put a thousand dollars in there there's no tax on it. And if you take that $1,000 and you bring it home, it turns into $700. Correct.

Okay. And so if that were true, that means every time that you pay the daycare $1,000, you paid $700 of it and the government gave you $300 to put with it. Great. Okay. I was thinking that, but that kind of... It's a pre-tax way to pay for daycare. It's an excellent benefit for an employer to put in,

an excellent, excellent benefit. Great. Thank you very much. Flexible spending accounts. The only negative is anything that's left in there at the end of the year, they keep, so do not overfund it. Okay. Slightly underfunded.

So what is your daycare budget a month? A month is $565,000, so that would make it $6,780,000 for the year, and the max I can do in the FSA is $5,000,000. Well, there you go. You're underfunding it automatically then, so that's perfect. Yeah, I would put the whole $5,000 through there, which is going to save you about fifteen hundred dollars a year that's a nice benefit definitely thanks thanks appreciate the call andrew's next in canada hey andrew how are you i'm good how are you better than i deserve what's up okay so we have just recently paid off our house yay and yeah so we are completely debt free and

just wanted to ask you a question about next steps okay okay so we live in a two-bedroom townhouse it's pretty tight we have a family of four and one on the way. So we're okay here for a little while, but in the next few years, we want to save up and pay cash for a larger place. Good. Okay, so my income is roughly $100,000 a year. My wife, now that she is on maternity leave, really isn't making anything. Is she going back to work? She won't be, no. Okay, so you have $100,000 household income.

What's your townhouse worth? $240,000, $250,000. And when you move up, what price would you move up to? Roughly $400,000. Okay, so you need $160,000. It's gone up in,000. Okay, so you need $160,000. It's gone up in value during that time, so you need $100,000. How long is it going to take you to save $100,000? Well, our question is, I am putting away the 15% a month, and my employer matches 4%. So we have 19% of my income that's going into retirement.

My question is, would it make sense to go back to baby step 3B? No. And no? No. What is your age? I'm 30, and my wife is 29. Okay. Well, you've got plenty of time.

You're going to be okay. And two, here's what's going to happen. During the next three years, five years, whatever it is, your income is going to go up, and the value of your townhouse is going to go up. Of course, the value of what you're trying to buy is going to go up, too. Right? your townhouse is going to go up. Of course, the value of what you're trying to buy is going to go up too, right? So we're not dealing with a fixed item to do forecasting with. The fixed item, your income is not fixed.

You're going to see some increases. And the value of the townhouse is not fixed. And, of course, your target is not fixed. And so we don't know exactly where you're going to end up there. But, no, I would stay at 15% if I were in your shoes, and then I would just save aggressively. I would take extra jobs. Any other money that comes your way, inheritances, bonuses, anything else,

throw that in the house fund. Don't consume it. Anytime you can get your hands on anything, just throw it in the house fund. Throw it in the house fund. Throw it in the house fund throw it in the house fund throw it in the house fund and um but we know if you save thirty thousand dollars a year that in three years and some change you'd have another hundred thousand to put with this townhouse you'd almost be there so i think you're three i think you've got a three-year plan you might have a four-year plan something like that while doing the 15%. But it's going to be tight.

It's going to be a tight budget to do that. But you got your house paid off. I'm not going to send you back into debt. You know that. And you didn't have to go back into debt either. You're a smart man. Cindy's in Mobile, Mississippi. Hi, Cindy.

How are you? Hi. I'm from Mobile, Alabama. I would think so. I'm looking at Kelly going, where are you from, woman? Okay, how can I help? Well, we're new to the Financial Peace University. We're entering our third week.

And my husband is the fiduciary for his brother who passed away. He was a 100% disabled veteran, and he left quite a large estate. My husband has an attorney in mobile who is um taking it to the court uh it'll be six months and then it'll be distributed and um my husband i'm just concerned that the veterans administration will come around and in any day or maybe three years from now and say no we need that money back because it wasn't used for Mike. And I don't know if that will happen or not. I'm sorry, the money that came from the VA is in the huge estate? Yes.

So they gave him a lump sum due to his disability? No, he was 100% disabled, and every month he received money from the Veterans Administration, and my husband paid all his care bills and everything like that. But because Mike would give it away on the first day he got it, the Veterans Administration said we need a family member to watch over his estate. And so my husband's been doing that for 20 years. Oh, my goodness. So the estate grew.

No, it's not. They're not going to come after that. They paid a disabled veteran for being disabled, and a family member managed it well for the good of the veteran who has now passed. They've got no standing whatsoever to come after that. Okay. All right. No, I think you're fine. Is your husband the sole heir?

No, no. He had written a will with my brother. Mike had written a will with my husband's help to give some to his nieces and then distribute it amongst his surviving brothers and sisters. Okay. So how much was the size of the estate? I think it's around $250,000. I think each of the three surviving siblings are going to get $70,000, and the five or six nieces will get $10,000 each. So I'm not really sure. There's also some gold coins. Your husband's a good man, isn't he?

He was, very much. And we ended up taking Mike to all his Veterans Administration appointments that he last years of his life because the VA health care was not sufficient unless Mike had a representative there because Mike was 100% disabled. So we miss him. We'd rather have him back than the money. Oh, definitely, definitely.

But your husband took good care of him. That's what I'm saying. Yeah, Mike is doing better than we are or was. But we're going to get there because we have Financial Peace University on our side. You've got a $70,000 jump start now, so life is good. Cindy, thank you for calling, and I appreciate you taking care of it. Open phones at 888-825-5225. You jump in.

We'll talk about your life and your money. It's common sense for your dollars and cents. Dave, can you please explain the difference between Roth 401k and Roth IRA regarding limits, taxes, et cetera? Can you have both? You can have both. Does the $5,500 a year limit still apply? It applies to the IRA.

You can fully fund a Roth IRA and a Roth 401k in the same year you have fifty five hundred dollar limit for your uh roth ira unless you're over age 50 then you have a sixty five hundred dollar limit your maximums for 401ks are eighteen thousand five hundred uh that you can put into a 401k plus whatever your company matches if they do they They cannot match. You can put in a Roth. The match will be in a traditional, and you can roll that to a Roth and pay taxes on it, the matching portion if there is a matching portion.

So they're excellent. They grow tax-free, all of the above. We always suggest you put it in good mutual funds across four types, growth, growth and income, aggressive growth, and international. Always pick mutual funds with long track records that have outperformed the S&P, and they do exist, lots of them. That puts this hour of The Dave Ramsey Show in the books. Hey, it's Blake, Chief Production Officer for the show, and here's a little tip for 2018.

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