The Ramsey Show - App - You're Not Exempt from Math No Matter Where You Live (Hour 3)

Episode Date: October 21, 2021

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Thank you. Live from the headquarters of Ramsey Solutions, broadcasting from the Dollar Car Rental Studio, it's The Ramsey Show, where America hangs out to have a conversation about your life and your money. I'm Ramsey personality, George Camel, host of the Fine Print and Entree Leadership Podcast. Joined today by Rachel Cruz, best-selling author, host of the Rachel Cruz Show, Ramsey Personality, all the things.

She's a mother. She's a friend. She's a wife. It's great. You know what's fun, Rachel? A lot of people don't know this. Both of our spouses work here at Ramsey Solutions.

That is true. I think that's special. And you and Whitney, y'all met here, right? Solutions. That is true. I think that's special. And you and Whitney, y'all met here, right? We met here, yeah. Yes. It's a lovely tale. There's been two engagements that I've known of people that I've worked with on the team within the last six weeks that have met their spouse here.

Yeah. I have a joke. We have our endorsed local providers. I have a joke that we need an app that's endorsed love providers. I'm not getting it. And it's like a matchmaking service. Ben Hill is in the booth yelling, saying no. Ben Hill is shaking his head no. No. Hey, it's pretty great matchmaking service ben hill is in the booth saying no shaking his head no no hey it's it's pretty great it's a real thing we got a lot of young people here a lot

of young and we we say that we only hire thoroughbreds instead of donkeys and so a lot of great quality people here at ramsey solutions and so uh love has been known to be in the air that's all i'm gonna say we're throwing it out there you know so this could be the this could be the love hour you You and I could give marriage dating advice. That would be fun. Call us up with those questions. 888-825-5225 or just money questions is fine too. That would be a fun hour. You have the money and marriage event. We should do a switch with John and Ken. We need to find something. I'll do

fashion. What's your thing? What's your thing that we could stump two of the other personalities and we do a switch theme hour? They've got to answer questions of things that we know, and then we've got to answer questions. This is the future. Does that make sense? Yeah. I don't know.

I'm feeling good about that. All right, we'll pitch it. We'll pitch it today. While Dave's not here, we shall try stuff. It's so fun. Well, we are starting off this hour with Gavin in San Antonio, Texas. Gavin, welcome to The Ramsey Show. Hey, how are y'all doing?

Doing great. How can we help? Hey, so I'm going to try to put it into words, but it's going to make more sense as we go along here. But my big question as of right now is I'm a young guy, and I've saved a pretty good amount of money here, but my big question as of right now is I'm a young guy and I've saved a pretty good amount of money here and I'm looking to figure out what is the fastest and safest way to go ahead and build this wealth here. And, you know, I know we're going to get into the baby steps here, but, you know, I do have some questions about them in regards to achieving this goal.

Okay. How young are you? I'm 24 years old. What's your household income? Right now I make about $80,000 a year. Okay. And how much wealth have you amassed so far? I have about $42,000 in just Apple stock. I have another $2,000 in just Apple stock. I have another $2,000 in another individual stock. About $11,000 in my Roth IRA and about $3,000 sitting in the bank.

So I think that's roughly about $60,000. Okay. And you don't have any consumer debt? No, sir. I have no debt at all. And you've got a fully funded emergency fund. It sounds like you have $3,000 in savings. I have a small one. I have like the $1,000 emergency fund, but I wouldn't say I have an established three to six months one just yet. Is there a reason why you skipped over that

one? To be honest, I became a fan of y'all just fairly recently, so that's kind of why that worked out that way. That's my next step right now is to go ahead and build that three- to six-month fund. I'm currently using my GI Bill. I'm a veteran, and I'm going to school for computer science right now. Very cool. Thank you for your service. Well, Gavin, you've done an incredible job. I mean, you're making $80K. You have a great nest egg here. And as young as you are, no debt. I mean, you really are,

I can tell you're motivated. And so I love your question. I would say on a tactical level, I would use some of the stock that you have just to cash out some of it, just to go ahead and just get an emergency fund today. I mean, you could just go ahead and put some of that in a money market account. Along with that $3K, you have $1,000 and you have $3,000 in the bank. I mean, you can combine a little bit of this, take some of that stock out. But I'll say this, Gavin. After we've been doing this, Ramsey Solutions, for over three decades, helping people build wealth, and you are well on your way for

sure to do that. But I think a couple of things get in the way of that and that can kind of train wreck this for some people. Number one is greed and number two is impatience. And those sometimes go hand in hand. And so my encouragement to you would be that what we have found on our everyday millionaires doing this stuff is that being wealthy or getting wealthy, right, building a huge nest egg, it takes a little bit of time. And it's more like a marathon. It's not a sprint. And it's not going to be super cool. It's not going to be these little secrets and these, well, you do this and put your money here

and you're going to turn and get this investment. You're going to reinvent, all this stuff. It's actually really boring, Gavin. Like the way we teach it, because the way we do that is because there's a proven process and you want to have a long track record on something to say, hey, this is what we do.

So what we have found is people are building their wealth by just traditional investing. So you're doing your Roth IRA, which is awesome if your company doesn't match your 401k, but doing these traditional retirement routes is awesome. And then going in and saying, hey, okay, let's look at just a good growth stock mutual funds. Let's look at some other things. So instead of having these single stocks that carry more risk, because it's one thing, even though I know it's Apple, right? And you could say Walmart, but there is a level where you're saying, okay, I am putting

a lot of my eggs in one basket versus diversifying. Like a good mutual fund would have 90 to 200 stocks. Apple could be included in that, but 90 to 200 companies. And so it's a more conservative approach, but it's one that is going to be able to take lower that risk. Now we do say once you're on baby step seven, which means you have no mortgage, you have no payments, then you can take about 10% of your net worth and kind of just have a little bit of fun with that. So whatever that looks like for you. Maybe that's buying a single stock here or there. It's not something that we advise, though, on the front end by any means.

So the wealth building that we teach, it's not super glamorous. Not the sexiest. But it works is what I'm saying. It works. My husband and I, this is what we've done. We've done this for 12 years. We're on Baby Step 7, and we throw as much money. We max out everything every year, 401K, Roth IRAs.

We have another mutual fund we put. We have a Vanguard account. We have stuff spread around. We save money, and then the other turn, too, Gavin, I'll just add in. I'm sorry, you can jump in. But it's the generous piece, too, Gavin. I want you to be giving at this point, too, because there is something to be said that, yes, building wealth is fun.

Buying stuff is fun. Going on vacations is fun. All of it. But nothing changes you like writing a check for a $10,000 car and buying someone who needs a car car just because you can. I mean, there's things like that that I want you to weave into your story

and your money plan as well. Yeah. Gavin, do you own a house? Yeah. So, no. Currently, I'm living with family. And my big thing is that because I'm still in school, you know, and I have kind of a set target date here to graduate, my theory was that because I'm in San Antonio, it's not exactly the big technology hub.

Oh, yeah. I figured I wanted to be open, you know, to what I's not exactly the big technology hub. Oh, yeah. I figured I wanted to be open to what I want to do. Here's what I ask, Gavin. I want you to have a paid-for house before you jump into some fun times investing. So that would be my next goal if I'm you. That's going to be your fastest path to wealth is not having a payment, whether it's rent or a mortgage. So that would be my next goal, man. But you're doing great, but just do things in the right order to set yourself up for success. This is the Ramsey Show.

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This year, you can enjoy the holiday how it should be, stress-free and debt-free. Start budgeting with every dollar by texting the word BUDGET to 33789. That's BUDGET to 33789. Open phones this hour, 888-825-5225. I'm George Camel, joined today by Rachel Cruz. Jared joins us in Fayetteville, North Carolina.

Jared, welcome to the Ramsey Show. Hey, guys. How are y'all doing today? Doing great. How can we help? Well, I got a quick two-part question, but first I got to say, George, I think your idea for the best love provider is a fantastic idea. I don't care what Rachel says. We have one vote for my matchmaking program from Ramsey. Jared says yes.

He's actually going to buy into the idea. Thanks, Jared. You can be the first. Ben Hill is still in the booth shaking his head no. Don't encourage him. Well, Jared, that's for another day. How can we help today? Hey, yeah.

So I've got a question about some investing. So I'm on baby step four, and I'm at the stage where I should be putting 15% into my retirement investing. I'm in the Army, so I get the 5% match for my TSP. Sorry, Jared. Speak right into the phone so we can hear you. You're breaking up on us. Hey, can you hear me now?

Yeah, that's a little better. So you get a 5% match. Yeah. So the Army offers me the 5% match based on what I put in. Is that 5% plus if I were to put just 10% in equal to 15, or do I need to put 15 of my own in and then the 5% is just extra? Yeah, it's an age-old question and it's a good one. And there are some caveats to this, but when it's just an employer match, we like to look at that as icing on the cake.

So I still want you contributing 15% of your household income into a good retirement account and treat that match just as bonus because we don't have full control. We don't know if that's going to change. You might change your employment status down the line. And I want this to be a consistent part of your financial picture. Sure. That makes sense. And a quick second part was I'm looking at a small re-enlistment bonus in the next couple of months, and I was wondering if that should go toward my current baby step, baby step four, or paying off the house. All right. So you've got a mortgage as well? That's right. Yeah. I would put that towards the house. I mean, as long as you're contributing 15%

of your household income, if you've got a bonus coming in like that, you can allocate that and go, hey, we're going to knock down the mortgage a little bit to speed up this process. Cool. Okay. Well, that answers basically both parts of my question, so I appreciate y'all. Awesome. Jared, thanks for your service. Yes.

Thank you so much, man, and thanks for the call. Fantastic. Christina is in Los Angeles. Christina, welcome to The Ramsey Show. Hi, George. Hi, Rachel. My question is, my husband and I are debating whether to purchase a house. I love a good debate.

Yeah. What's the debate about? I don't think we can afford it. That's my issue. We live in a one-bedroom apartment. I'm pregnant, so it's a single-family income. My husband's take-home is about $5,000 a month. Okay. And we have no debt, thankfully, and we have $70,000 in savings, but the house is around here for just a two-bed, one-bath is about $380.

Yeah, I mean, you're in L.A., right? We're just outside, but it's still just as expensive as the prices are going up. Yeah, it's Southern California. So your take-home pay is $5,000 total, and that's probably not changing anytime soon? No, it doesn't seem to be changing anytime soon. Okay. Well, the parameters we recommend, and I'll tell you why we recommend them, is to stick to a 15-year fixed rate mortgage where the mortgage payment is no more than a quarter of

your take-home pay. So in this instance, you'd be looking at trying to get your payment to around $1,250 on a 15-year fixed. Now, if you do the math on that, you're going, okay, well, that means we can afford nothing in the Los Angeles area. And so what that means to me is, what that means to me is you just need to buy yourself some patience and it may mean that we need a bigger down payment. So you said you had 70, right? We had 70. We don't have enough for the 20 and to avoid the PMI. My husband wants to do a 30-year fix, but following the steps, he's barely new to them. I would want the 15-year. Sure. That means staying in our tiny apartment, which is about 450 square feet with a baby on the way. Yeah. Is there any other move that you could make that is

more lateral that could get you more room? Maybe you're further outside of the city. Where's his work in proximity to all this? Well, he was commuting in downtown LA and the commute was killing him. He works in downtown LA? He was. He found a new job closer, but it's the same pay. So we'll be saving on transportation, but we really don't want him to commute anymore. It was just too rough. Yep. And this is

one of the hard things, I feel like, depending on where you live, because there's just certain parts of the country that it's going to be more expensive. And so the reason we have these parameters and we always kind of laugh, not to poke fun of California, but we're always like, just because you live in California doesn't

mean you're exempt from math. So the formula still works no matter where you live is what George is saying. It's either going to just take more time. And how old are you guys? We're 34, 35. We're having our first child. Awesome. Well, congratulations. Unexpecting. That's very exciting. Very, very exciting. So yeah, I mean, I would always say you don't have one or two. It's not like we can buy a house, we can't buy a house and we have to stay in this one bedroom. And that's it. You have other options. So you guys, I would shop around and even if it adds an extra 15, 20 minutes to go and rent a two bedroom, give yourself a little bit more space. If it's in the

budget, you're able to spread out a little bit more if you can, especially with that baby coming. And then you guys have a game plan to say, okay, you know what? Our goal is in the next, I don't know what it is for you guys. Maybe it's five years. Maybe it's eight years that we're going to buy a home. But because of the part of the country you're in, it is more expensive. And again, you guys are making, you know, you're making $60,000, which is great. But again, equal to the standard of living and the expenses in somewhere like Southern California, it goes quickly, that money does. So you guys want this house when you decide to purchase, because I always encourage home ownership to get to a point where you guys can do this because it's just a great investment. I think it's something that's really wise to put your money towards. But you guys, it needs to be a blessing, not a curse.

And when you stretch yourself so thin, it starts to be that curse. So set yourself up and just have patience. And listen, if you're renting again, even if it's for five more years, you're not throwing money down the drain. You're setting yourself up to be wise, but it's going to take a lot of patience, Christina. And I know starting a family and all that, it's going to make you want to have a home even that much more. But listen, let the money and the numbers be there.

And again, I hate to say it, you guys aren't exempt from math, but it does kind of stink when you talk to someone who's in Miami or up in the Northeast or Southern California because it is what it is. The real estate is just more expensive. Christina, pop over to RamseySolutions.com and click on Mortgage Calculator. That's what I was doing over here just to try to see where you guys would need to be at. And it looks like you just need to keep saving up that down payment.

I know $70,000 is amazing. You might need $120,000. You might need $130,000 in order to get a house in your area that's within your budget. You can also have your husband listen to our Fine Print episode, Is Now the Worst Time to Buy a House? Rachel Cruz was featured on there, and she talks through the green lights of what it would take to get into that house. So it's the perfect episode for him to check out. You can go to fineprintpodcast.com and search for that episode. Listen to it with him, and maybe it will slow him down and go, all right, you're right. We've got to do things the right way so the house is a blessing, not a curse.

This is The Ramsey Show. I'm George Camel, host of the Fine Print and Entree Leadership Podcast, joined today by Ramsey personality and bestselling author Rachel Cruz. Rachel, we've had a good show so far. We have. It's been great. It's been fun hosting with you, George. You know, we have a special product benefit here at Ramsey Solutions where each team member, this is pretty cool, gets $200. I'm going to call them Ramsey bucks that we can use to get our products at a discount. And I just saw, I was so excited

about this. My wife probably isn't listening, so I can say this. I want to get her a Rachel Cruz wallet, and it's finally on there. The team has been waiting. So our team can now get the, we get no discount. We're not special, but I'm so excited because you just released a new flavor, if you will. You have the tan, the camel, and then we have the black, and now a brand new one. Yes, the classic brown of the Rachel Cruz wallet, which inside has the envelopes for your cash to do the envelope system. It has great places to put your cards, membership, debit cards. There's an area to put your change if you need that. And it's genuine leather,

brown. It's the classic brown, the timeless brown that all of you have been asking for. This is the one color people are like, will you do a brown? In 50 years, this color will still be in. That's right. You can count on that. We released it earlier this week. It'll ship beginning of November, first week of November.

So if you want it for the holidays, make sure you buy it. It's a great of November, first week of November. So if you want it for the holidays, make sure you buy it. It's a great gift to help people get on track and to work the plan, but it's beautiful. It really is.

Make your budget beautiful. You know what? I'm going to get one for my mom too because I just realized she has the old school Rachel Cruz wallet and I think she deserves

an upgrade. She does. Yes, these are much better. We had some launch a few years ago and well, there was some issues with the zipper. But these are beautiful. They're made by our friends at Join, a beautiful

organization doing incredible work. They're fabulous. Yep, they're wonderful. Well, Mama Camel, she's probably listening. She listens to every show I'm on. Does she? She does. It's so cute. She'll text me during the breaks, comment on my wardrobe and how I'm doing. It's great. Great to have a fan out there. George, I love that. So, Mom, if you're listening, your Christmas present.

You're amazing. What would she make us? Baklava. Baklava. She would make... Homemade baklava. And give it to the team. Oh, it was so good. Man, I miss those days. We would travel. Remember those days? We would be gone, I feel like, all the time.

Traveling to cities, doing events, hanging out with Mrs. Campbell. We would do seven city money to cities doing events we would do like seven city like money and marriage tours and we do smart conference and smart money man i hope we get back to that 2022 we're looking for you can you believe it's almost 2022 no it hurts my brain 2021 it still feels like 2020 like i feel like 2021 didn't happen remember like the year 2000 like we were we were basically kids and we were like, it's going to be 2022 one year, and now it is. We're getting old. I know. Man, it's been a while, y'all. It's been a lot. Well, open phones this hour, 888-825-5225. Laura joins us in Miami, Florida. Laura,

welcome to The Ramsey Show. Thank you. I'm so excited to talk to you both. And speaking of getting older, that ties into my question. Perfect. What a segue. Right? In my early 50s, I started saving for retirement a little late, about 10 years ago. And I recently left a job where I was contributing 18% plus a 5% match. And then I had my Roth on the side that I was contributing to, to follow my passion, which I did and I love. But now I work for the state, and I can only contribute 3% to my retirement.

Now there's a choice between a pension and a self-directed, but I've listened to Dave long enough to know to do the self-directed. But they won't let me contribute any more than 3%. So I do have my Roth, but that doesn't quite get me up to my 15%. So I'm wondering, is there any other tax benefit type thing where I can put some more money for my retirement? I want to dig into this 3% max. I haven't seen that where they max you out at 3% contributions.

Yeah, I called them and they said it's a Florida statute. And I said, how are people supposed to retire on 3%? Well, that's the statute. And I think they kind of want to push you towards detention. This is very interesting. That's my guess. And I've never heard it talked about. Do a lot of research on this because, I mean, the IRS laws are very different.

I would imagine federal would trump the state laws. But I would dig into it, and you can reach out. Do you have a good financial advisor in your corner? I do. Okay. I want to make sure you have that. We obviously have them, SmartVestor Pros, all around the country. But I want them to dig into this, to look into the options, because in your 50s, there are some great ways to catch up.

So the IRS lets you contribute more than the normal amount as you enter your 50s and head towards retirement. But I don't understand why a state employer would want their employees to be broke. I know. It's crazy. So you said you got the 3% into this 401k? Is that what it is? And they give me a 3% match. Okay. And then on top of that, you said you're maxing out your Roth IRA.

Yes. And I also have a non-retirement mutual fund. So I'm wondering if I should just put extra into that. Yeah, that would be the next place to go if you've maxed out all of your retirement kind of tax-sheltered investment vehicles. You can go into taxable investments and just a brokerage account, which will be obviously taxed at whatever your income tax rate is. But I want you to dig into this. I don't like this idea. I mean, if I'm you and you've still got a decade to work, I'm switching employers if

it means I can't contribute more than 3%. Laura, how much do you make? Is it an income issue because you make a certain amount? Or is it just a thing within? No, no. I actually took a pay cut. So, no, it's not that I'm, no. They always tell me it's a Florida statute.

That's what I get. And when I look it up, I see that too. But I've never heard it talked about on the show. So I had to call in. Yeah, no, I'm glad you did. Well, I would suggest for sure getting that financial advisor or one of our SmartVestor pros to dig in because they're going to know. Because, I mean, state to state, there are things that differ for sure. So they're going to know specifically what's going on for you in your area and to give you other options.

And so, you know, there's things like a backdoor Roth for when you reach a certain income. I mean, there's other variations here, again, to get that tax-sheltered plans, which I think is key, especially for your age. But if not, then yes, anything in a good just growth stock mutual fund would be another great place to put it because it just has one with a good long track record. And with the market's doing now, it's doing well. Yeah. Thanks for the call, Laura. I'm pulling for you here. I don't know what's going on in Florida. This is crazy. I'm trying to Google it over here. I'm all kinds of confused. But definitely look into that with your financial advisor. See what your options are because I want you to be able to retire with dignity. Gina joins us in Nashville, Tennessee.

Gina, welcome to The Ramsey Show. Hi, George and Rachel. How are you today? Doing great. How are you? Oh, good, thanks. So I'm employed right now, and I want to take out about $20,000 out of my 401k to pay off about $2,000 in federal back taxes and have an emergency fund

because I haven't been keeping a job very well ever since we moved out to this area from California last year. And I'm also working on paying down my student debt. So I wanted to know if you think that this is a bad idea for me to hit it this way. Yeah, if I had a giant buzzer on this desk that could go, I would hit it right now, but I don't. So I'll just make the mouth noise. Gina, it's a bad move, and I'm glad you called before you make this move. We never, ever advise anyone to pull money from the 401k because you're unplugging all of the hard work that you've put into it, that compound interest is doing for you. And there's another way to do this. You can clean up this mess and get this emergency fund in place with your income that you have.

So what is your household income? Well, right now it's pretty much my husband's, and it's about about 30,000 a year. Uh, we, we literally have no money and, uh, and this, this, these back taxes, federal back taxes over my head, I need to get them clear and cleaned up. So would you consider taking out a lesser amount, like 5,000 or so? I mean, I'm willing to take the hit. I'm 60. Um, so, you know, I don't mind just incurring the taxes as income just to get this off my back. And how much is that again, did you say? It's around $2,000. That's with penalties and interest.

Gina, you can do this. Go drive Uber Eats. Work. I mean, do anything you can to make money. Do not take money out of that 401k. It's $2,000. You can do it. But it does need to be the very first thing.

Whenever you have IRS debt, that's the very first thing you pay off. But Gina, you guys can do this. You need to get this income up. And it is possible. People are hiring everywhere right now. There's a shortage of labor. So go work. Swallow your pride.

Get any job you can. And get yourself in a good financial situation Our scripture of the day comes from Jeremiah 29 11 For I know the plans I have for you declares the Lord Plans to prosper you and not to harm you Plans to give you hope and a future Lily Tomlin said the road to success is always under construction. I like that. I like that. Rachel Cruz joins me this hour. I'm George Camel. This is The Ramsey Show and we are taking your calls. Anne joins us in New York City. Anne, welcome to The Ramsey Show.

Thank you. How are you both doing? Doing great. How can we help? I called you guys because I just wanted to know, I'm a little confused whether I should buy a car with cash or using a car loan. Where's the confusion coming from? So the confusion is because of the COVID situation and everything. My husband had lost his job. And for like at least 10 years, he managed to ride with one car. But now the new job that he got is going to be requiring to travel to his workplace, which is going to be, it doesn't need to be right now, but in the coming months, maybe in the next two or three months. So

we were trying to buy a car, but just confused what to do. How much is this car going to cost? The one that I have right now is an old one so we were trying to buy a new one oh brand new car because yes just because uh the one that i have is kind of like on a glass leg how much do you have in savings ann um right now a hundred thousand a hundred thousand savings that's great okay do you have any debt? Except for mortgage, nothing. Amazing, Ann. Wow, you guys have done really well.

We got a real easy answer for you, Ann. Are you ready? Yeah. Pay with cash. And I would say that whether you have $100,000 or $1,000. That's what I wanted to do, but just the confusion part came up because of the previous situations we had where the job was lost and everything. Yes, which I understand, absolutely.

So you're saying, hey, I want to keep liquid cash in case something happens. Right, right. Ah, but you guys have plenty of money. I mean, what is three to six months of expenses for you guys that up to? With the mortgage and everything, it would come up to, I would say, like $30,000. Okay. So that means you have $70,000 to play with here. And the other side, you said brand new car,

and I don't like that because we don't recommend you get a brand new car unless you're a millionaire where you can take the hit on depreciation. Are you guys millionaires? No. Okay. So if I'm you, I'm going to go look for maybe a three-year-old car, four-year-old car in that same range. I mean, you guys can still afford a good car. What's your household income?

The household income right now, the new job, everything is going to be almost $9,000. $9,000 a month? Mm-hmm. Okay. That's great. This is great. Yeah, and you're in a great position. I mean, you just, yeah.

I mean, and you think about it, the car, it's to get you to point A to point B. A great used car will do that. It's totally fine. You have a good amount of money. You don't have to get a $5,000 car. I mean, you can spend a little bit there and get a new car for you and even look to look at, and I don't want you to spend all $70,000 on two cars by any means, but you have enough to cash flow.

Because here's where I would go in your mind. I understand the mindset, okay, I could take out a loan and have more cash available in case something happens. But here's the deal. If something happens like a job loss again, you're going to have a car payment. And if you go get two new cars, I mean, the average car payments around $556 a month on a new car. So if you guys just theoretically went out and got two brand new cars, you have $1,000. Yeah, I know you wouldn't, but just go there. $1,000 payment for cars with no income,

and then you're having to dip into the emergency fund anyways, that fund to go and pay off debt. So when you don't have debt, you have no bills, you have no risk. So if you go and use some of this money to go and buy a new car or two new cars, and buy a new car, new car to you, used, and if something happens with the job, you have no bills and you have six months worth of an emergency fund in the bank.

Does that make sense? That should all give you more peace of mind than having a car payments, which ups the risk. But it's a great question, Anne, especially if you're new to this, but we will never recommend, again, even if you have $1,000 in the bank, we're not going to recommend taking out a car loan

because also when you look at just the math too, and for me, other debt people, they justify whether it's like student loans, well, I'm investing in myself, like you hear all these things, but for a car loan, it is so hard for me just mathematically when people take out a car loan

because I'm like, you are taking out a loan. You are paying interest on an asset that is going down in value. And so by the end of the car loan, the car is worth less than half of what you bought it. And you paid, I think on average, I think it's close to $8,000 or $9,000 on top of what the original was. So just the math of it, I want you to look at it. It should just kind of make you go, whoa. You'd rather just pay for it, be done. And there's something about it.

I have some friends, and they've always just done car loans. That's what they've done, and they had to get a new SUV. And she was like, Rachel, we're going to just pay for it. And I was like, that's great. You should. Just pay cash. And so a few months ago, we were talking about it, and she was like, that's great. You should just pay for cash. And so a few months ago, we were talking about it and she was like, I can't tell you how good it feels to just have no payments on a car. She was like, I mean, it's unbelievable. She's like, I never would have

thought it would have felt that great. Cause they always had the money to pay for a car. She was just like, she had the money, but they just chose to get a car. But there is something about at the end of the month, you're not paying to something sitting in your car. Like, it's done. It is done. And you get to look in the windshield versus the rearview mirror with your money. And with that new car situation, everyone's always like, well, it's a new car. It's just way safer. I'm like, well, when you drive it off the lot, it's a used car and it's just as safe. So let's, I mean, a three-year-old car is going to do just fine.

I have an 09 and I've had no problems. Yes. It's very old. And I'll tell you, I'm like, you know, especially those of you on Baby Step 2, and we take this call a lot on the show of having to replace a car. Because there's a truth that, yeah, if you have, you know, we call it a hoopty around here, but you have a car and it keeps breaking and, you know, there is a point that you're spending more on the repairs than what it's worth.

Like, there is a point, yes, you need a new car, a new car to you. But I'm like, you can go on Craigslist right now. I mean, you can do anything and you can get a great $5 need a new car um a new car to you but i'm like you can go on you can go on craigslist right now i mean you can do anything and you can get a great five six thousand dollar car oh yeah you don't have my car was six grand yes i'm very happy with it still drive it today yes i mean and even less than that you can do but i'm like there are there are great options out there and cars it is that thing it takes you to point a to point b but we've gotten in this thing of like we just love cars in our country. We love it.

And they're not bad. New cars aren't bad, but you just want to be in a financial situation where you can take the hit. Let's take one quick one here from David. David, let's get right to it. What's your question? Hey, y'all.

It's a privilege. I'm wondering about rolling over an old 401k to start a Roth. And right now, my wife and I have life insurance through Primerica, and we've been talking with them about opening a Roth with them. Is that a whole life policy? It's term. Okay, cool.

Yep. And just, you know, stuff I've seen digging, it's back and forth, like Primerica is an MLM, or they say they have no management fee, they just have an upfront fee. Kind of unsure if I should invest with that kind of company or if I should do my own thing through Vanguard or, you know, maybe I'll say SmartVestor with Ramsey. Just kind of where to start to open a Roth. Yeah, it's a great question. Yeah, I mean, for sure, my first step would just sit down with a SmartVestor pro. And there's someone that we just recommend. They don't work for us, but they are investment professionals in areas all over the country that follow the baby steps, follow what we do. Because here's the rub always when it comes to insurance,

investing, all of that, is you never want them so close, right? I know that's not a wholesale, or I'm sorry, a whole life policy, but to have those separate, and I would get a second, third opinion for sure, and talk to a smart smart investor pro because if you're able to pay the taxes, you'll be able to roll some of that over to a traditional IRA. But if you can pay the taxes, then the Roth is great to do. But you do want someone, I think, in your corner to help because there's a lot of intricacies when it comes to doing all of that. I took one yesterday. A financial advisor was trying to get him to switch from term to whole life. And I was like, oh, well, does he sell whole life?

The answer was yes. And I was like, dude, drop him. Drop him now. Yeah, good question, David. Definitely connect with a Smart Investor Pro at RamseySolutions.com, and they can help you do things the right way. That's what I did when I rolled over an old 401K, and they set me up real nice and helped me understand what I was doing. That puts this hour of The Ramsey Show in the books. My thanks to Ben Hill, operating the board, Kelly Daniel, Rachel Cruz, my co-host, and you, America.

It's been a fun show. Thank you for listening. We'll be back with you before you know it. This is The Ramsey Show. This is James Childs, a producer of The Ramsey Show. You can listen to all our shows with the Ramsey Network app on your smartphone. Browse by topic or even send clips to your friends. Download the Ramsey Network app in your favorite app store today.