The Ramsey Show - Change Your Mindset, Change Your Life

Starting point is 00:00:04 Brought to you by the Every Dollar app. Start budgeting for free today. Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union Studios, this is The Ramsey Show. I'm Dave Ramsey. The phone number is 3,8-2-5-225, my co-host today. Number one best-selling author, Ramsey personality, Rachel Cruz, also my daughter. Jump in and talk, folks. It's what we do here. We're here to help you. is with us in Jacksonville, Florida. Hi, Neo. How are you? Hello. I am so honored to be on the show. Thank you so much. I'm honored to have you. How can we help? All right. So I have recently had a conversation with my parents about

Starting point is 00:01:00 what they are planning to do for retirement. And I was a little concerned. They don't have any money invested at all right now. And so I was like, I didn't pick apart what they have in savings or debt or whatnot. But how can I convince or how can I have a conversation of investing even at their age. So my mom is 55 and my dad is 62. Oh, I'm surprised they're still alive. There's old as me. There's old as me. I can't believe it. Oh. Well, the thing that has always helped me sell hope, which when you say I'm too old to invest, that means I've lost hope. And so if I want to sell hope in the world that I'm in, I often use the actual math.

Starting point is 00:01:50 Okay? And so I would jump on and play with some numbers and then take the numbers to them and show them on your laptop, okay? And just go to ramsysolutions.com and look at our retirement calculator. Okay? Okay.

Starting point is 00:02:03 And say, Mom and Dad, if you put in, I don't know what their income is or whatever, but you could guess at it, and say, if you put in $500 a month, you know, when you're 72, here's what it'll be. But here's what it'll be if you put it in at 3% in a high-yield savings account because you're too old to invest. All right. And the market has done unbelievably well in the last five years, and it's not going to stay at that level forever. It doesn't average as high as it has lately.

Starting point is 00:02:34 But in the last four years, in 23, I mean, the numbers are in 23, it was 26%. in 24 it was 25% and 25 is 18%. We're already at 13% up this year. So the stock market basically, if you put money in in 23, a lump sum, it would have doubled by now. So if you put 100,000 in and didn't touch it, it would have already be 200,000 just four years later, five years later. So is there anything I need to do on my end to help them? Like, okay, if the next step is investing and I've convinced them that this is a good idea, what would be the next step? Well, the other thing that holds people back from investing, other than belief that it's not going to work, is knowledge.

Starting point is 00:03:18 And so anything that we don't understand is scary. That's human nature. Yeah, but to answer your question, though, you would reach out to a smart vester pro and sit down with an investment professional with them. If you're kind of guiding this journey with them and they want your help and you in the room and your opinions. Hey, Dad, I got in touch with a smart vester pro on the Ramsey site and I talked to him for a minute and they said they'd love to sit down and talk to you. And these people are not there to put their glasses down on the end of their nose and talk down to you. They are teachers. And if you learn, your fear goes down. And if you believe the numbers are going to work, your hope goes up. And then you invest. Yeah. And what you put your money in, you trust the system, right? Ultimately, which is the market. Like you are putting your money in and saying,

Starting point is 00:04:02 I trust that this is, it's not going to go to zero. I'm going to trust that if anything, it's going to make me more money. And so when you sit down with an investment professional, they can run those numbers, run the history. You know, you can just see and get kind of a confidence of, okay, it's not as dramatic as what everyone thinks, right? When you live in that fear bucket of the market, people, they dream up all this scenarios in their head that aren't true, you know, and so that is helpful. They repeat the mythology. I'll give you an example. I was doing Fox yesterday. I was doing an appearance on the Fox show, one of the Fox shows yesterday. And they were talking about. And they were Was it yesterday or a day before?

Starting point is 00:04:40 I don't know. The Dow has broken another record, 54,000. Okay, but does anybody remember when grandma said or your friend said, we lost all of our money in the stock market in 2008? Does anybody remember that? And that's an absolute lie. It was mathematically impossible for you to lose all your money unless you bought a single company and that company went broke.

Starting point is 00:05:05 But if you were invested in a mutual fund, the Dow, which is now 54,000, had peaked at 13,000. In 08. And then dropped in half. Oh, like that. To 6300. Yeah, yeah, yeah. And so if you had a million dollars in at 13,000 and it dropped 6300, your

Starting point is 00:05:30 million turned into a half a million. So I lost half of my money if I bought at the top and sold at the worst possible day. But if you kept it in. But if you kept it in, it went from 13,000 to 6300 to 54 freaking thousand. Right. As we sit here today.

Starting point is 00:05:49 Yeah. Our memories are so funny about remembering negatives and not positives. I read an investment psychologist that did a study one time. They said, for every dollar you lose in an investment, you have to make $3 to feel the same. we're such negative ninnies. Yep, yep.

Starting point is 00:06:09 The human nature is we have this little black cloud over the top of us. Totally. If we lose a dollar, it takes three dollars in gain to feel the same. To feel it, yeah. But I would also say to the 62-year-old dad, dad, you got to get on it. The dollar you put in now is not like the dollar you would put in when you were 30, you know. George Campbell, I was just in a, yeah, we were just in a content meeting and George was showing about, and I need to pull up the numbers maybe for next segment because it was so fascinating. but he talked about, you know, if you put in a dollar, I think it was like at 25, it actually means

Starting point is 00:06:39 $72. Yep. At, you know, retirement. And so you back it out. But you start to see how quickly, and that's not to lose hope, but there's a reality to your money and your time. So it's almost this urgency of get in now. Like, go now.

Starting point is 00:06:51 How much can you save? How much can you invest lump sum wise at 62? Because you're going to be 72 unless you die. Exactly. It's going to happen. And you're either going to be an alpo or you're going to have some more money. Why do you always say Alpo? Is that dog?

Starting point is 00:07:03 Because it was a thing. Say wrong. I say ramen. Raman news. No, no, people actually, poor people actually opened and ate dog food because they have nothing to eat. Have you not heard these stories? I have, but I always wondered, why not just ramen?

Starting point is 00:07:16 Raman's not dog food. Exactly. Why, I know. Because it's not as dramatic and not as horrible. That's what I needed. I always was like, why do we always use this example of people eating? And maybe people did. And no offense.

Starting point is 00:07:27 No, they do. I mean, I've heard the stories. I've heard the stories. Yes. But if you need to eat, eat ramen. I'm too poor. I open granny's cabinet. and there was Alpo in there and she doesn't have a dog.

Starting point is 00:07:36 Okay, so there you go. Get her ramen. Yeah, well, there you go. But still, if that's the case. I don't know. I don't know if ramen's ain't better or not, but I've never had either. The chicken flavor. You've never had ramen noodles?

Starting point is 00:07:48 No. I have managed to avoid that. I eat well. Can't you tell? Oh, my gosh. Do I look like I'm underfed? You are not a millennial that went to college during those days. You're right.

Starting point is 00:08:01 I'm not a millennial. What was your first clue? Beef. Beef, ramen noodles. So the, George's point is, and her point for her dad that you're making, all drama aside. Sorry, yeah. Is the best time, the old saying, I think it's Franklin or somebody said it, best time to plant an oak trees 30 years ago. Next best time is today.

Starting point is 00:08:21 That's right. Today. Hey, George Camel here. A few years ago, someone stole my identity. And let me tell you, that is not a quick fix. It takes hours on the phone, piles of paperwork, and a whole lot of stress trying to untangle the mess. And even after that, there's this nagging paranoia because your information is already out there. And the truth is, you can do all the right things and still become a victim.

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Starting point is 00:09:50 So go to zander.com to enroll today or call 800356-42-82. We're talking about the math giving hope. I was 22, maybe 23 years old. I have a degree in finance with specialization in real estate, a degree in real estate and urban economics, which is a finance. agree with real estate class was thrown in. And I had never sat down and looked at mutual funds. They don't teach personal finance in that. They teach corporate finance and analysis and, you know, concepts of future value and net present value, those kinds of things. And I went to this thing and the guy put up their compound interest if you do your investing in a mutual fund. And I was 23 years old. And I went, I can be rich. It'll work.

Starting point is 00:11:00 What he put up there was $100 a month invested from age 25, and I was 23, so I had a head start in my mind. $100 a month invested from age 25 to age 65 at 12%, which is a little bit more than the stock market is average, but right around there. It's average 11.8. $100 a month, and it's still true, $100 a month at 12% from age 25 to age 65 is $1,100. $176,000. And I went $100. And guys, that was 1983. $100 was a lot of money.

Starting point is 00:11:38 But I went, $100. I can do this. Now $100, if you don't do that and don't become a millionaire, is laughable. But you should be going, you put that stuff in that Ramsey calculator on the website, and it shows you that compound interest. And the compound interest gives you hope. And hope will make you act. It'll make you go do the $100.

Starting point is 00:11:59 But if you thought, well, I'm too old. If I put in $100, I want it too late. Well, if you don't put in $100, it's really going to be too late. Yeah, you won't have anything. What will make you sick is a car payment? Oh, how much you have if you paid yourself a car payment instead of staying in debt on a stupid car. And it used to be that $500 was an outlandish car payment. Now $2,000 is an outlandish car payment.

Starting point is 00:12:26 Bailey is in Lubbock, Texas. Hey, Bailey, what's up? Thanks for taking my call. I'm super excited. Sure. What's up? So my question is, my husband and I, we bought what we thought was a cosmetic fixer-upper two years ago, turned out to be a lemon, and we're trying to decide if we should sell it or keep working on it. Oh, man. What's been wrong with it? Everything from like foundation is, I mean, anything and everything? We've had to redo all of our plumbing. Oh, man, now that you're asking me, I'm kind of blanking on things.

Starting point is 00:13:03 No, no, no, no, no, did the inspector... A lot of things that are in... Did you... Yeah, that our inspector missed. Okay. And how much money have you guys put into the house already? We haven't really been keeping track of it, but we're in thinking we've put about 30 into it already. What did you pay for it?

Starting point is 00:13:22 We bought it for 163, and we still owe 150 on it. And is it in worse condition now that you've been doing it? renovation or better than when you started? No, it's been better. We have been doing, my husband's really handy, so we've just been doing all the work ourselves. So what can you sell it for? Well, that's the thing.

Starting point is 00:13:43 We don't know. Well, I mean, let's pretend you could sell it for $200. Would you not sell it? Well, that's kind of my question, because I don't really know if it makes more financial sense to sell it. Nothing about this house makes sense. When did you guys buy it, Bailey? How long ago?

Starting point is 00:14:04 Two years. It was August of 24. Okay. You've been working on for two years, you said, right? Yes. And you are emotionally over this house. We can tell by talking to you. Yes.

Starting point is 00:14:14 Yes. So it is a... Even if this house is completed and it's excellent when it's completed, you're still not going to like it because of what you've been through. Yeah. Maybe. Or maybe you fix it. I wouldn't.

Starting point is 00:14:26 And it is what you love. So do you not like the house, Bailey? Like when you're in it? Are you annoyed by it? Yes, very much, because it's a constant construction zone all the time. We've got things going on here, things going on there. And so there's never any, like, peace at the house. It's chaotic all the time because there's always something.

Starting point is 00:14:47 And whenever we start a project, it just turns into, you know. How long would it take you if you finish the projects and have a perfect house, how long is that going to take from today? We anticipated about a year and a half. More? Yes. This is a three and a half year renovation. Y'all are slow.

Starting point is 00:15:09 Well, her husband's doing it. I know. Y'all are slow. That's what's killing you. But four probably costs, they're keeping their costs down. They're taking a little bit at a time. It's what we tell people to do on the show. And you eat sawdust for breakfast.

Starting point is 00:15:20 Yeah, living in it is what that. That's fair. That's one thing. Yeah. Mm-hmm. Well, and then the other thing, too, is that it's only a two-bedroom house and we do want kids in the future. So if we stayed at this house with kids, then we would need to... I would cross that bridge when you get there, though. I wouldn't

Starting point is 00:15:36 make the decision on the future. That had nothing to do with it when you bought it two years ago. Yeah. There are kids in the future then. But what happened is this is taking three times longer than you thought it was going to. And it's costing more than you thought it was going to. And more to do. And that took all the fun out of the fixer upper. You watched too many of those fixer-upper shows on TV and thought it was going to be that easy. Oh, man. Yeah. Yeah. I hate those shows. Because they're a lie. It's not what really happens. You've lived the reality. They're a lie. Definitely.

Starting point is 00:16:10 Yeah. So I used to do historic rehabs, and I did a bunch of rehabs of all kinds, but we would buy houses in the historic end. And I bought several houses from like 1898. They're beautiful, old gingerbread-looking houses when you get them done. but they you know the construction techniques in 1898 and in 1905 were substantially sucky compared to today's construction techniques they don't build them like they used to thank god it was crap okay and we would open up a wall one of these plaster walls which once you open it up you got to do the whole stinking wall it's not like draw wall where you just open up one little piece and then put it back we'd open up a wall and then we'd end up taking the whole stinking room down to the studs and hadn't anticipated that. It was a freaking nightmare and we were doing

Starting point is 00:16:57 it for investment. It was crazy. I bought one house for 13,000 and spent 78,000 fixing it. In today's dollars just out of zero or two. Like buying it for 130 and spending 780,000 on it. So when's the break even? So for someone like Bailey who's asking. I would move if I'm Bailey. You're done. I put it on the market. If you can get if you can get your money. If you can get your money out of it and get out of there today get out of there this is lost its clamor there's no romance in this relationship and it just keeps going yeah it's just not fun it's not fun and by the way her husband bless his heart he's been working his butt off and he's got you know he's got a black fingernail from hitting his hand with a hammer and all this stuff the pipe wrench slipped and busted his you know he's sick of this thing too he's sick of it too

Starting point is 00:17:43 I've been that guy too you know like honey would you do the problem with knowing how to fix stuff is you've got to fixed stuff. That's true. Yeah. Man, man. Okay, don't you think, though, homes, like good old ranchers from the 60s and 70s, they're built well, though. Yeah.

Starting point is 00:17:58 When you say, like, there's a period of time. A 19602 is different than a 1902. No, that is true. Yes. Way different. 1962, in most areas, the construction technique is very similar to what it is today. Yeah. Or even better than some of these pop-up houses that go quick, too, you know?

Starting point is 00:18:15 Yeah. Yeah. Be good. That's how it works. Okay. It is, I will say, though. So recommendation, I would never buy a fixer-upper that I'm going to live in. Unless I'm in the construction business and unless I've already owned a home before that, never do that as your first home.

Starting point is 00:18:31 And if it is, if it is their intention, I think when she said was cosmetic, right? Like if you want to, like, change out cabinetry and, like, those kind of things, you can do, you wouldn't do that? Paint and bushes and roof. And carpet. Well, our floors. Yeah. But I'm not touching the plumbing of the electrical. Right, right.

Starting point is 00:18:51 And once you pull the cabinets out, you just got in the plumbing. And you just got into all the appliances. And so here we go. Paint the cabinets. Just paint the cabinets. Well, there you go. From a distance. Spray them.

Starting point is 00:19:02 I mean, it's just don't touch them. The romanticized idea. The stupid TV shows. And I'm going to keep going back around, though, is because the market is how people are buying smaller, older homes that do need some work. And so you do have to estimate that you may have to estimate that you may not be able to afford the nice new home. I'm fine with that.

Starting point is 00:19:21 Yeah. But don't get into these major rehabs and just go rent the old movie, the money pit from the 1980s or 90s or whenever that movie came out. And you'll just see all the humor around it. And it's not funny, really. A lot of people think buying a home starts with going to an open house and falling in love with a kitchen. But if you're buying a home the right way, that's not where you start.

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Starting point is 00:20:53 Start with a trusted guide. Go to churchillmortgage.com and get started today. That's churchillmortgage.com. This is a paid advertisement in MLSID 1591 in the MLS Consumer Access.org, Eagle Housing Lender. You know, there's some things people don't realize about wills. wills are not about your age they're not about your net worth wills are about being an adult 30-year-olds die and 70-year-olds die everyone needs a will if you're an adult with people you love kids pets anything you want handled in a certain way and you don't want the government or a judge to decide

Starting point is 00:21:50 and you don't want a judge to decide because all a judge is is a frustrated lawyer you don't want them deciding anything. And there's nothing worse than a lawyer except a frustrated lawyer. So if you're ready to create a will, go to mama bearlegal.com. If you're not sure where to start, text quiz to 33.789, and we'll help you figure out which option fits your situation. Nick is with us in Detroit. Hi, Nick. How are you? Hey, good. How are you? I've been shaking my call. Sure. What's up? Sure. So my wife and I, we manage most of our investments ourselves, and we just sort of follow the broad strategy of index funds or other broad mutual funds. But recently as our network has been

Starting point is 00:22:36 increasing, Fidelity has been calling, and they're trying to sell us on FMAs or separately managed accounts. And come from reading, we've got some reservations, but curious what you guys are. Well, it's basically an individualized mutual fund without as much. diversification, but it's really appealing to you DIYers. There's nothing wrong with it, except it's just not as efficient as a good mutual fund. I can buy good mutual funds and whip your butt with it. I see. So one of the things that they were pushing is that they do like tax harvesting and try and

Starting point is 00:23:16 offset all their games by, you know, taking the losses. Yeah, that's fine. You can actually do that with the mutual fund too. You don't have to have single stocks to do that. That makes sense. The one thing that concerned me, though, is like with buying mutual funds, we typically just buying a hold for a long time. So everything sort of turns to long-term gains pretty reliably.

Starting point is 00:23:39 And with this, like, they'd be sort of buying and selling stocks frequently, and so we wouldn't sort of have that, and we'd have some short-term. And if we ever need that money, we'd be paying essentially income. If you the only way, if you don't pay any taxes with this, it's because your tax harvesting outdid your gains, which means you're not making any money. You have to lose as much money as you make to have no taxes. with tax harvesting.

Starting point is 00:24:05 It's the only way it works. And so tax harvesting is smart because we're going to take the losses and offset some of our gains, and we're getting out of the stupid stock that we're losing money on. That's tax harvesting. Yeah. And with the Fidelity account, Nick, is somebody going to be doing that for you, managing that? Or with this, SMA, will it be you doing that? That's a lot of work.

Starting point is 00:24:26 It would be them. Okay, okay. Okay. It's good. Yeah. I mean, Fidelity is a good company. I own some of their funds. I do not use them to manage my money.

Starting point is 00:24:36 I have a professional broker who is not dialed in on one brand, a smart vester pro. They're not brand loyal, and they're going to do what's best for Dave, not for fidelity. And that broker is going to manage that in such a way that if there's tax harvesting to be done, fine. But I don't want to set up my portfolio to go rushing towards tax harvesting. that means I'm losing money. I would rather have no taxes to harvest, meaning no losses. It's not possible. Right, right, right.

Starting point is 00:25:06 But I would rather have that to be my goal rather than, ooh, tax harvesting. You know, it's kind of cool, but let's just take an advantage of something that went bad. That's all it is. So, no, I, you know, Charles, you've chosen to do this this way. I've got, Nick. I'm sorry, Nick. You know, Rachel and Winston have substantial money in mutual funds. even sharing of substantial money in the stock market and neither one of us use either of the processes

Starting point is 00:25:34 you've been used. And index funds are easy too, just the S&P. I mean, yeah. If you want to do, anything under that umbrella. Yeah. Index funds, you know, it's a Boglehead. Bogel invented the Vanguard brand and he started the push on the index funds because the indexes outperforms a lot of the mutual funds. And that's true, but there's a lot of mutual funds that still outperform the indexes. You find them, yeah. You just got to go find them. They're not, it's not rocket sense. SmartVestor Pro in your corner is great because they know those accounts inside and out, which is great. My SmartVestor Pro is never going to bring me a mutual fund that has not outperformed the index. Because he knows immediately, the first thing I'm going to ask is this is outperform the index, right?

Starting point is 00:26:11 And that's kind of a Ramsey thing, you know? Yeah. So for people out there investing, have those high standards. That's not just for you to be pushing to, if you have a mutual fund for it to be outperforming. Yeah. Like, those are very valid. You know, do I understand that. Okay, so let's talk about it.

Starting point is 00:26:28 But be very valid. You know what I mean? Like, that's a valid question. That's not just a statement to make if you have an investment professional in your life. Push them on that. So, Nick, back to your original question. Fidelity is a good company. I don't have a problem with them.

Starting point is 00:26:42 They're not like a whole life company that's ripping people off that I tell people to stay away from. They're a good company. They've got, I guess Fidelity, Magellan is probably still the largest or one of the largest, one of the two largest mutual funds in the world. It's the first one to go over a billion dollars years ago. when I was first getting in the business. It was like, ooh, Fidelity Magellan, it was the thing. And it was the hot chick, you know.

Starting point is 00:27:03 And so it's a good company. The concept that they're talking about is not a bad concept. Tax harvesting is not a bad thing. It is a bad goal, but it's not a bad thing to do as a minor goal. Take advantage of the things that went wrong. That's all it is. But we don't want things to go wrong very often. It's not thick.

Starting point is 00:27:23 But overall, whether we're doing your DIY approach or whether you're doing your modified DIY approach with them, the research says you're going to underperform a portfolio of actively managed people looking at good growth stock mutual funds with long track records and you ride the ups and downs of the market and you don't sit and chew your fingernails off looking at your computer screen all the time talking about this. And so the research says getting in the market in a good, steady fund that has good performance ratios, good expense ratios, and staying, and don't screw around with it all the time, outperforms all the stuff you're talking about. That's what the research says. And also, it has a lot less anxiety. So that's what we do, and it's also what we recommend. But I would not throw you under the bus or what you're talking about under the bus. I just think if you click to the right two better notches, you would do what we're doing. But if you want to stay where you are, you're not over in the dumb side, okay?

Starting point is 00:28:27 You're not over in the crazy you're getting ripped off side. You're not buying whole life or indexed universal life or something where your insurance agents acting like a investment professional and they're not really. They're just a stupid insurance agent. And so, you know, that kind of stuff. You're not anywhere near that end of the spectrum. You're over on our side of the boat. Okay. So we love you.

Starting point is 00:28:46 and we hope it works for you. And you apparently get some joy out of tinkering with all this in your nerdiness. And that's fun too. I don't get joy from messing with it. That's the other thing. I don't want to screw with it. I was going to say, for the average person out there, that's, to me, the parts of money. If you can outsource, once you understand it all, right?

Starting point is 00:29:05 You're not turning a blind eye. But you have someone else helping you with this. I mean, it's almost like an automatic out of your checking that you pay bill. Like, there's something about outsourcing some of this button clicking in the financial space. is it takes the brain calories out for you that are all juggling a thousand different things in your life. This is one less thing that you feel like you need to check in on all the time. I know how to cut my grass. I know how to cut my grass and I know how to make it look perfect, but it's a lot more fun for someone else to do it.

Starting point is 00:29:33 Yeah. The outsourcing. I know how to change my disc brakes, but I don't want to bust my knuckles with a wrench. Yeah. It's a lot more fun for somebody else to do it that knows how to do it. And they're going to be faster at it, more efficient. And it's the net, net, net. I'm not saving that much after I pay myself a dollar an hour for changing my own breaks or mowing my own grass.

Starting point is 00:29:52 Yeah. And when you try to DIY all financial stuff, you guys, you miss out on these professionals, whether it's real estate, you know, trying to sell your home yourself versus having a real estate agent. You know, your taxes could be either way. But you find these. The data on that one's there. Yes, I know. For sale by owners, on average, get 12% less in price than a professional high octane real estate agent. Yep.

Starting point is 00:30:15 Now, if you've got one of those donut eaters that sells one house a year, you might beat them. But if you get a professional high-octane real estate agent that knows what the flip they're doing, they're going to kick your little for sale by owner. But you don't really save the commission because you don't know what you're doing. A lot of banks are happy to hold your money. But Fairwin's credit union helps you make progress. Most people spend years focusing on their financial goals and never stop to ask whether their bank is helping them get there or just holding onto their money. The real goal is building an emergency fund, paying cash for your next car, saving for a home,

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Starting point is 00:31:52 to tell the world you think differently about money. So look, if you're working the baby steps, your bank should be helping you move toward financial freedom, not just park your cash. Go to fairwins.org slash Ramsey to open your smart bundle and start making progress today. That's fairwins.org slash Ramsey, insured by the NCUA. Thank you for joining us, America. So, Rachel, you're seeing some people comment about the $1,000 baby step one, you said. Yeah, I just mentioned to you in the break that we're, number one, more and more new

Starting point is 00:32:37 audience is coming to Ramsey's show thanks to podcast YouTube. I feel like we're just easy to find these days or on social media. And the very first step as you are starting the baby steps is a thousand dollars. And so I see kind of two ends of the spectrum. Either some people, because we see 40% of Americans can't cover a $400 emergency in cash. So getting $1,000 for that group feels like, oh my gosh, that's a lift. I don't even know if it's worth starting because it does feel so, such like a big mountain to climb. Other people and the other spectrum, like, gosh, that's not enough. Like, $1,000 would have been fine in 1992, but in today's world, because of inflation and everything, most, you know, what it feels like, anything big that happens,

Starting point is 00:33:18 it's going to be over $1,000 very quickly, very easily. So, you know, oddly enough, it was about 1995, but that's about right when I started. I mean, I just, I just, I mean, you hit it pretty close. Yeah, yeah, yeah. It's not enough. It was never meant to be enough. Let's talk about it for a second. So what we figured out years ago, and it's, and so some of the things we teach kind of give people a head tilt and they kind of go, oh, that feels weird. It's like, stop your retirement, even if you get a match temporarily while you attack the debt, because your most powerful wealth building tool is your income and you've given it all the way in the form of debt. You have to clear the debt to bill wealth, mathematically, emotionally,

Starting point is 00:33:59 relationally, habit pattern-wise, everything. And we've proven that because now teaching this since 1995, right, that tens of millions of people have become millionaires doing what we teach. We've got baby steps, millionaires everywhere. And so when I started teaching, we didn't have the baby steps. I just said, shut up, get out of debt, and sell everything that's not retirement. All your stocks, clean out all your savings and put it all on your debts smallest to largest, get your debt snowball rolling. And what was happening then was that people would come in, and we were teaching Financial Peace University,

Starting point is 00:34:36 People would come in and say, yeah, that's all great. I just did what you said to do. I got zero money. I got $50 in my checking account. And the alternator on my car just blew and it's $400. I'm screwed. So now I've got to go back in debt or not get to work to have the money. And so I'm scru.

Starting point is 00:34:57 I was cornered. And so I started looking at that. And that was a very real thing. And it happened a lot because I'm so hardcore. I mean, can you imagine personally meeting with me? once a week and you're not getting out of debt. I pound them, man, because I want you to win. I want you to win so bad. Sometimes I wanted it more than they wanted it. But I would talk them into doing this stuff and then they were cornered. So I said, okay, we've got to have a little

Starting point is 00:35:19 baby starter emergency fund to cover the little stuff because it's, it was little stuff that was knocking people off the wagon. Yeah. And so we said, okay, $1,000. Then fast forward to today, people say, well, $1,000 is not enough. It wasn't enough in 1995. A properly funded emergency fund has always been three to six months of expenses. So in 1995, that might have been $10,000. Today it might be $20,000. But it wasn't enough.

Starting point is 00:35:51 $1,000 isn't enough. And so if you inflation adjust to say, okay, we're going to make baby step one, $2,000. It's still not enough. It's not an emergency fund. It's a starter little baby, tiny, horrible emergency fund. It's not designed to cover you if you lose your job and you're out of work for six months. It's not designed if the $14,000 heating and air system goes out. It's not designed to cover that.

Starting point is 00:36:22 It's designed to cover the little stuff, which is what most things are while you're learning to budget and you're selling everything in sight and you're cleaning off your. debt, and it's only until you work your baby step two, which if you're working your baby step two with the focused intensity, extreme intensity that we teach, you've stopped your emergency fund, you've cleaned out every bit of savings, this non-retirement, thrown it at your debt, non-mortgage debt. If you're attack, attack, attack, you're on beans and rice, rice, and beans. You're not going on vacation.

Starting point is 00:36:51 You're not whining about your $5 coffee that you have to have. You're not doing any of that. You're just totally nose down getting out of debt. your friends think you've lost your mind. You're out of debt in 18 months on average. And we've taught millions of people this. Now that's the average, meaning some people do it in 18 days

Starting point is 00:37:09 and some people do it in three years. Right. I don't know what your debt is. But 90%, the bell curve on the people that get out of debt is right around the 18 month mark. So the only 18 months, you're only living 18 months with only $1,000. And by the way, you're already broke.

Starting point is 00:37:28 So what's the big deal living like you're broke? You know, and so you're, we're only saying $1,000 is not enough, but I will cover a lot of little tiny things while you're learning to budget. Yes. Because when you don't know how to budget, everything's an emergency. You don't have, you don't have money set aside for car repair. When you don't know how to budget, the kid forgetting that they have a field trip is an emergency. You know, because you never taught the kid yet.

Starting point is 00:37:56 They got to put it in the budget or they don't get to go on the field. or you don't have a miscellaneous, you know, there's no organization. There's no organization. Everything's chaotic. And so every little thing is an emergency. But the longer you budget and the more wealth you build, the larger the event has to be to be declared an emergency. So $1,000 in the first 18 months will cover almost all your emergencies. Well, and my thing is, too, if it doesn't, if you're deep in the debt snowball and you're throwing so much of your income that used to be going to debt payments, where those debt payments are now paid off because you're rolled onto the bigger debts, you could pause it for a month and collect a

Starting point is 00:38:28 couple thousand bucks if you need if something did major happen fix the emergency and then plug back in right because that happens life does happen it goes up and down and we hear that a lot from people and so that's i think that's the important thing is to know that there's a way to finagle it to figure out how do i get through this event and it's not supposed to be enough that's right and if it is if a thousand dollars is a lot to you that means you really need to do this your new name is facebook marketplace You need to sell everything. Sell so much stuff the kids think they're next. Name the dog eBay and the cat Facebook marketplace.

Starting point is 00:39:03 I mean, everybody's got a new name. You're all for sale. We're getting out of debt. Those golf clubs are seven sets of golf clubs. eBay, baby, get rid of the crap in your house and clean out this debt. You've got to get completely dialed in and focused on this. Rachel, you were a baby, so you don't remember this. but I distinctly remember two things that were emergencies.

Starting point is 00:39:29 Okay, so I've got a wife who's been through bankruptcy and is living on the edge of terror at all times, who has a toddler and a brand new baby, and our roof started leaking. And we had started working this. We're not borrowing money. We did not have thousands of dollars to put a roof on the house. and it was dripping through the light fixture over the top of the kitchen table. So it would drip onto the kitchen table running down electricity, water and electricity. This is not good.

Starting point is 00:40:05 And so... That's what's wrong. We said, okay, this is bad. This is an emergency. Yeah. But you know what? When you decide you're not borrowing money, I got the hardware store, I got that black tar stuff. I crawled around like a redneck up on top of the roof and spread that black tar.

Starting point is 00:40:21 stuff around. It looked like white trash lived there. And it was a nice home. But white trash was there right then because we were broke people. And it stopped the leak. And 18 months later, we'd gotten out of debt and we'd save some money and we put a roof on the house. The same summer, stupid air conditioning goes out, August in Nashville where you can cut the humidity with a knife. And there's nobody happy. The dogs aren't happy. Everybody's sweaty and mad. And the air conditioner guy says, you know, it's going to be $2,000. I'm like, I didn't see $2,000. I don't know when. So we bought some box fans, little fans, and then I've talked to a guy at church who works on heat and air, and he said, if you'll buy the parts, I'll try to fix it. And they ended up fixing it

Starting point is 00:41:03 for $89. And it made it for four more months to winter. By the next summer, we saved up the money and bought an air conditioner to replace the condenser that was bad on the back of the house. Now, this was a house that was a reasonably no home. It was not a, this was not a white trash house. But it was just the air conditioner was old, the roof leaked, and we don't borrow money. But this is what you do when you change your mindset. We made the decision after filing bankruptcy. We don't borrow money. Did people think we'd lost our minds up there spreading that black stuff around on the roof?

Starting point is 00:41:37 A hundred percent of them did. I had no black stuff on the roof cheerleaders. Nobody going, you're the wisest guy I've ever met. They all looked at us like we had one eye in the center of our head. Well, welcome to being different. Normal is broke. You have to be different to win. Most people think making a will is some huge legal project they'll get around to someday. If you're working hard to get out of debt and build wealth to change your family tree, don't miss one of the most important steps that can help protect it all.

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Starting point is 00:43:41 Rachel Cruz, Ramsey Personality. my daughter is my co-host today. Lindsay is with us in Los Angeles. Hi, Lindsay. How are you? I'm drowning and on the dumb side of things, Dave. But thanks for taking my call. Ouch, I'm sorry.

Starting point is 00:43:56 What's going on, kiddo? So I will withhold my emotions as best as I can because I know this isn't a therapy session, but I'm definitely, I'm some in general leaf right now, which is $221 a month. food stamps. I've been on disability for about two years. I had temporary disability run out in February, which is why I'm on general relief right now with food stamps, and just found out I'm not allowed to pay debt off with the $221 I receive, which is, I mean, obviously, how can I survive on that

Starting point is 00:44:36 and pay off debt? I have $20,000 plus in credit card. over the last couple years. And unfortunately, this isn't my first rodeo of paying off debt and trying to continue. What's the nature of your disability? So I had a total hip replacement, and I had a, when I tried to go in for surgery last year, I had an anxiety attack, and that kind of put me in about three to four months of hot flashes. and basically palpitations and emergency room visits and medications and all that. And then I was able to finally get the surgery, which is successful.

Starting point is 00:45:25 I'm still under doctor's care, though, and I'm not allowed to get unemployment or work. So that's... How old are you, Lindsay? 49. 49. Okay. And so your hip surgery occurred. Did you do a hip replacement?

Starting point is 00:45:40 Yeah, total hip replacement. Okay. And you're up and around, and the hip replacement was how long ago? I was in March, beginning of March, so about four months out, five months out. Okay, so based on the hip replacement, you would be able to go back to work, but the anxiety and some of the mental issues, the emotional issues are keeping you from it. Is that right? Not necessarily. I just, they haven't cleared me completely.

Starting point is 00:46:04 Why? Most people that I know that I've had a hip replacements are back going within two weeks. And sadly, I've been kind of, that's. been thrown at me. Why are you special because you're six months still on disability? So I don't know, other than my expertise or my training is a medical field and the surgeon did say that because of the work that I do, he prefers to keep people six months out. So that's the only reason I have been given and that's what I tell others. Okay. The reason I'm asking you all this question.

Starting point is 00:46:42 questions is that what you have is an income crisis. Agreed? Yes, sir. Okay. Because $221 isn't going to do anything. That's not even going to feed you. By God's grace, I've been blessed to have a rent-free stay with a lady from church. So I'm only surviving. Yeah, and she's feeding you and everything. So, yeah, I mean, that's, that is grace. You're right. And that's generosity. It's wonderful. It's a wonderful thing on the short term. It's not a long-term plan, obviously. And so, you know, if we want to solve a debt problem or a situation like you're in, and it's very scary where you are because you feel overwhelmed, I'm sure.

Starting point is 00:47:31 I'm sure it's added to the anxiety problem, not subtracted from it. and so the weird thing is is that what you know I really I'm not a medical person if I were in your shoes and were as scared as you are I would go to work right even work from home I would do something I would do something starting today right and interestingly enough I do have a trade of making jewelry and like sun catchers and things so that actually just just got a free desk last week, and I just started to clean it up. Yeah, and you do that too, but also, I mean, you need a job. You need a job. Like, I would, you know, be a, be on a phone bank for a company and make 22 an hour, you know, like anything, anything. You don't necessarily be walking around or lifting things or something else. I don't care, but you need an income. Get a headset. And sun catchers are not an income. That's a nice side hustle. It's a nice side hustle. There's nobody making $60,000 a year with sun catchers. No, I, you're right.

Starting point is 00:48:34 Okay. So that's what I need you to make 60, I want you to make 60, because here's the thing. Yep. A whole bunch of your anxiety and all of your financial troubles go away when you get a $60,000 of your job. I don't even know how to spell that, but I know. I know, but I'm speaking that for you. Okay. Because I'm talking to a lady who's not unintelligent. She's had a really rough patch.

Starting point is 00:49:02 And we're coming out the other side of the rough patch. and no pun intended, but I want to run out of this rough patch. Yes. Okay? And so I want you to get up and go right now. And just tell your doctor, I'm sorry I would love to have laid around in rehab for seven months, like your theory of your textbook. But I had to do this thing called eat. And so me and I, we went and got a job.

Starting point is 00:49:28 Me, myself and I, all three of us went and got jobs. And so, you know, that and the, and the, you know, and the, weird thing is what I've found in working with people over the years. I'm not a psychologist. That's Dr. Gloney's field. But I have found that depression and anxiety leave with increased physical activity and increased income. Right. They are, they don't leave completely, but they're diminished to where they're not overwhelming. And you're not struggling with depression, but you should be. No, it's definitely, uh, bubbling up. Yeah, using your mind. your body, yes. I've been there when you're that broken, that's scared. It takes your breath away every morning just to get out of bed.

Starting point is 00:50:12 It becomes your God. Yeah. Ultimately. And I, I, I, I, I, you're right about the work and, uh, functioning because it gives a sense of purpose. Exactly. At the beginning of the year, I was trying to figure out who is going to take care of me. Your brain is too busy to spin out. Lindsay, what were you doing in the medical field? What was your position before? Just a caregiver. I mean, I say just because it's the, the, you know, bottom of the rung in that. Security, is that what you said? Caregiver. Caregiver.

Starting point is 00:50:43 Okay, gotcha. Oh, yes. You're not going to be lifting anybody, though. Not right now. No, no, no, no. I just was wondering, going forward, you know, two, three, four, five years from now. What's your new career going to be? Yeah.

Starting point is 00:50:53 You're only 50. Right. And I know that. What are we going to do with the other half? So I've spun out because of all the options. do I go to school? Then the other side of it, Dave, is my hand is starting to show nerve damage. And I also have like spinal stenosis.

Starting point is 00:51:14 So there are other physical ailments that could contribute. And actually when I went in for the hip doctor, he said, oh, people think it's their hip, but it's their back. And I didn't really believe him because what screams the loudest is what gets the most attention. And that was my hip. And I couldn't walk for seven years. I mean, I really was in a. You know, are you overweight? Of course.

Starting point is 00:51:38 Okay. I mean substantially. I'm on the, I'm walking up to two, three miles a day now. Oh, good. I mean. Okay. So you're doing something about that too. See, that's awesome right there.

Starting point is 00:51:51 You're walking two or three miles a day. You can go to work. This is awesome. I'm so happy. Hey, listen, we'll help you any way we can, kiddo. You have an income crisis, and it's because you've been through a hard time. I'm sorry. Sorry you've been there.

Starting point is 00:52:03 but you're going to be okay. It's an income issue. Get the income flowing. A lot of this is going to self-fix. If you're behind on your bills, doing more of the same isn't going to fix it. You need a different plan. And that's why I tell people about Guardian Litigation Group. If you've missed payments, if collectors are calling non-stop, or if you're getting letters about legal action, that's your signal. And it's where a lot of people wait too long, because the longer you wait, the fewer options you usually have. and once it turns into a lawsuit, things can get more expensive and more complicated fast. Guardian litigation is a law firm, not a call center. From day one, you are assigned an attorney who represents you. So if a creditor moves forward, you're not caught off guard and you're not hit with surprise legal fees.

Starting point is 00:53:08 Guardian litigation only gets paid when the debt is negotiated and the client accepts the settlement offer. This is about stepping in early while you still have leverage. Don't ignore the problem. Take control of it. Go to guardianlit.com slash Ramsey right now. That's guardian, l-it.com slash Ramsey. Attorney advertising, results may vary and no specific outcomes guaranteed. Hey, guys, if you like this show, we could use some help.

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Starting point is 00:54:14 The only way it gets spread out is if you tell people about it. That's how it works. Now, we put it out on social media. We put out all that stuff. We do that stuff. But I don't have, we don't like buy ads come listen to the Ramsey show. You're it. So if you like it, help us and send your friends and your family.

Starting point is 00:54:31 We would appreciate it. John is in Pittsburgh. Hey, John, what's up? Hey, Dave. Hey, appreciate you taking the call. Sure. So, yeah, just looking, you know, mostly for, I guess, some career slash life advice. Okay.

Starting point is 00:54:45 Yeah, ultimately, you know, curious, right now I'm looking at, you know, if it would be an unwise move to maybe take a job that pays a lot less to sort of get rid of the stress I have with my current job. That's ultimately at a high level what I'm asking, but I'm happy to map out anything you need for some advice here. What's the nature of the stress at your current job? So I am essentially doing a split role with this company. So I'm a renewals and growth specialist and also an account executive for one of their products. So why is that stressful? Constant firefighting on the renewals and growth and contracting side, I'm getting hit up,

Starting point is 00:55:25 you know, all the time for, you know, contracts that need out within the hour. On top of that, trying to manage a quota-carrying experience for the account executive side managing that. It's just becoming a lot mentally, for sure. What do you make? So my base is, so I have a base salary and an OTE, and the base is 85, and then if I had my own target earnings, it's another 35. So all in the 120 per year. Is it essentially two different jobs you're doing, two full-time jobs and to one? Like, could you hire someone and do something in that position be filled with just your time, half of it?

Starting point is 00:56:08 I think so, yeah. They don't necessarily look at it that way, but I certainly feel that way. How old are you? I am 27. How long have you been there? A little over four years. Okay. All right. Well, the first thing I want to do is say reset your narrative on how you're looking at this.

Starting point is 00:56:29 Somewhere along the line in human nature, we're taught and our brain goes negative. And so I get this call. It sounds like this, John. Hey, Dave, I just got laid off. And do I just take any old job to get back in the workforce and make half of what I used to make? why do we assume, why does that person assume that if they got laid off that they can't go get a job making more than they used to make? Because we all kind of have this little negative nanny in our head, you know? Everybody does. And so I'm going to have you reset your narrative. I think I want you to get a job making $150,000 a year that is less stressful than the one you have. Stress does not equal income.

Starting point is 00:57:16 Okay. So you don't have to go make less to get rid of the stress. Yeah, I mean, that's definitely true. I guess within, yeah, I guess just my concern, if I, you know, were to stay in the sales slash renewals field, you know, maybe it is company specific where, you know, it's kind of a lot on me, and that's where the stress is coming from. Well, there's always pressure to perform. Everyone has that. If there's no pressure to perform, you're a bureaucrat. You work at the DMV.

Starting point is 00:57:52 Okay? But everybody else has pressure to perform. The plumber has to stop the leak. The electrician has to get the light to turn on, or they don't get to keep their job. Okay? And you have to get enough lights to turn on so your lights stay on if you're the electrician. I mean, there's the marketplace as I always got pressure to perform. So I don't want you to think you're going to get away from that.

Starting point is 00:58:15 That's just called being a grown-up. You're going to carry some weight. You're going to carry some water in order for somebody to be willing to pay you. But it sounds like that your day has gotten extremely chaotic, and the stress is coming from the unknown. Like about the time you feel like you've got this thing on the rails, somebody comes along and hits the side of it and knocks it off the rails again. Yeah, exactly. Yeah, that's what it feels like. And there's no end inside.

Starting point is 00:58:44 It's not like it's seasonal. Right. It's every day. It's every day all day long. And it's just like, well, crap, could we just follow through one time, you know? And so what I'm going to do if I'm you is the first step is I'm going to sit down my supervisor and say, all right, the way I'm experiencing this pressure to get this job done is, is, it's really, I need some help with that.

Starting point is 00:59:11 okay and so can we restructure some of the flow in my day so that i still get the work done but so that everything's not an emergency you know it's like the old guy with the thing on his desk that says your lack of planning is not my emergency some people would follow that a little bit more to heart yeah but you're going to have to have backup from leadership you can't just do that to your fellow co-workers and not get fired right and so now and And then if an emergency does occur occasionally, you're easily going to handle that. But living life emergency to emergency is called stress. And it's emergency is not created by you or your lack of anything.

Starting point is 00:59:58 It's just stuff that keeps dumb. They just come along and throw up on your desk every so often. Yeah. No, exactly. Yeah. And so what I want to do is restructure that. Now, if you worked here, and that could happen at Ramsey. I mean, we work hard at Ramsey.

Starting point is 01:00:13 And we throw stuff around and we're moving stuff and anything that moves is shoved and everything that's friction. I mean, there's stuff going around this building. I'll just tell you. And if you came in and sat down with one of our leaders and said, help me restructure my day, we would just go, okay, there's a little bit of a system broken here, a little bit of a process broken here. And we need to set up and go, okay, all emergencies have 24 hours to be solved, not 24 minutes. Okay, that's a new system. It's a new policy. And so then what we're going to do is we're going to stack all the emergencies.

Starting point is 01:00:43 and do them from 4 p.m. to 5 p.m. before I go home. Instead of stopping in the mid-flow on being account executive and fixing somebody else's crap, right? Am I reading the mail right? Yeah, I think so. It's a system. It's a system problem. Is it a company culture that would listen to that, John? Or do you feel like it would fall on deaf ears? So I think it might be, I think it would probably be received on death ears, excuse me.

Starting point is 01:01:18 Here's what I want to do. I want to try that first. I'm going to sit down with the leader first and say, I think we have systems and a process problem. Would you help me fix it? I want to participate. I want to be a good team member. But the way we're doing it right now is killing me. Okay.

Starting point is 01:01:30 And if they say, oh, screw it, you just do your job, then I'm going to go look for a new job. But I'm going to try keeping my $120,000 of your job. first. Okay, so the first thing is one conversation, a simple short one, kind and respectful, honoring. Listen, I want to be a good team member. I'm not saying anybody's doing anything wrong. I think we just have a systems and a process flow. And the way I'm experiencing that pressure is stress. And I don't think I'm doing as good a job as I could do if we could put together a little bit of a system. Would you help me with that? And if they go, no, you just shut up and do your work, then I'd go get another job because this is a bunch that's going to run this car into the

Starting point is 01:02:04 wall. Yeah. No, that definitely makes sense. Yeah. And what I want you to get is a job that makes $150 a year. Okay. Okay. All right.

Starting point is 01:02:14 And hang on. I'm going to send you a copy of Ken Coleman's book, the proximity principle, and I want you to use it to land that job. Because obviously, you know how to juggle. Mm-hmm. You can join the circus, man. I mean, you know how to juggle. You can join anybody circus.

Starting point is 01:02:27 Hey, having a large capacity to be able to handle a bunch of things thrown at you. That is a skill set. Multitasking. And do you want to be in that forever, though, in a high stucing? stakes rate where you just, you know, you feel like you're never getting traction either? I don't mind having a bunch of tasks as long as I can get them accomplished within reasonable expectations of the people that handed them to me. Yes.

Starting point is 01:02:44 And that there's a reasonable workflow. And I don't feel like I'm being abused. Yes. Yes. The abuse of. They take advantage of the lack of respect of your space is the thing. And so like we've got a whole bunch of workstations through our thousand people here. And a lot of them just put up a little sign that says, not now.

Starting point is 01:03:02 I'm working. Send me an email. because people just walk by those workstations interrupt people, right? So it's a system state. I would never. Not you. Just chat it up with everyone. This show is sponsored by BetterHelp.

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Starting point is 01:04:46 Debbie's in Jacksonville, Florida. Hi, Debbie, how are you? I'm great. How are you? Better than I deserve. What's up? I have a question. My husband and I are looking at retirement.

Starting point is 01:04:59 He's retiring actually in a couple of months. I'm already retired. And I've been looking at our investments. I have one annuity that isn't, it's not a lot of money, it's about $120,000. It's not earning much interest at all. It's matured or actually will be fully matured next year. And I'm wondering if there's any downside. I've been thinking about trying to contribute to each of my four grown children's Roth IRA just to help encourage, they already say,

Starting point is 01:05:33 but to help encourage them if they're doing their 401ks and also to be still alive during part of the time that I, you know, during a time where I can see them enjoy it and get excited about it. And if there's any possible downside to that. It's an interesting question. Well, the two issues are separate issues. The annuity comes to you cash it out. Okay. It's a crappy product. And then we're going to invest that money into a good product, okay, into some good mutual funds, all right?

Starting point is 01:06:11 And move away from that insurance garbage. And so then there's a different issue of do we want to give our kids money? And if so, do we want to do it in the form that they open? You can't open a Roth IRA for someone else. They have to open it. Do they have one already, Debbie? They all have them, yes. Are they funding them every year?

Starting point is 01:06:35 As soon as, no, I haven't been, but I open. Are they funding their Roth IRAs? They are. You can't do another one on top of what they are doing. Right. No, they are, but they have slowed down. A couple of them have had some challenges. So some are funding more than others.

Starting point is 01:06:56 I feel like if I did that, they could still contribute to their 401K. But as my husband and I are looking at retirement, as you know, all I can see is, oh, my gosh, you pay so many taxes for all the savings you've done your whole life. If it's not in a Roth, you do, yeah. Right. How much do you guys have? So, Debbie, you just want to give them each $7,500 a year to just max out their Roths and as a gift is kind of what you're thinking. About that. It's $120,000 annuity.

Starting point is 01:07:26 I can give them $5,000 a year for five years. years each, which would just help them and then encourage them to put the additional funds that would max it. Okay. My husband and I are, this is not money, I think is going to be important to us. We have about, well, are you asking me? Yeah, you're what your net worth? I'm sorry.

Starting point is 01:07:50 We've got about four and a half million dollars. Okay. And you want to give a way a couple hundred thousand bucks. That's fine. No problem. Yeah. And again, though, we're going to move it out of the annuity into a good mutual fund, and then you're going to decide later if it's a separate decision from moving it out of the

Starting point is 01:08:10 annuity into a mutual fund. Now I've just got some money here, period. It doesn't have to be, the gift doesn't have to be tied to the annuity in any way. It does no good to tie it to the annuity. Okay. It's just that you, for you, it's emotionally found money and you don't need it. And so that's how you're tying it, but they're not necessarily connected. How old are your kids, Debbie?

Starting point is 01:08:31 Yeah, they're older. No, it's fine. They're between 33 and 45. Okay. Well, you just made the comments, and it made me think of the book. There's a book called Ty Was Zero, and I don't agree with everything in the book, but it's a little bit of that premise of parents who have done well, and their adult kids are there, and they're in a time of life.

Starting point is 01:08:51 Maybe they're buying a house. They need to upgrade a car, fund retirement, I guess could be anything. Whatever. And you help them while you're alive. What you said were your words. I want to see them enjoy it. So I would just throw out that, you know, if you... You're actually not going to see the Roth.

Starting point is 01:09:07 If you put in the Roth, they're going to be 59 and a half. And you're going to be dead. Well, we'll hope for longevity for Debbie. But I'm just saying if you want... I'll get to see them enjoy it as it grows. Yeah, you'll get to see the growth. They'll save well. None of them have any debt.

Starting point is 01:09:22 Well, I have one child that has dead. No, that's okay. But Debbie, I'm just saying if that's your heart, you know, there could be, if you wanted, you don't have to. I think this is a great, a loving thing to do for sure. What a nice kind gift. Yes, yes. But if you wanted to see it, you know, I don't know if the kids are having babies and you're like, listen, we just want to upgrade the minivan for you.

Starting point is 01:09:40 I mean, like, I don't know, there's another way to help it. I want to put money in a college fund for a grandkid. Or is like, yes, or that. 529. But a Roth would be a beautiful legacy. There's nothing wrong with the Roth. There's nothing special about the Roth either, is Rachel's point. And so if you want to give, you can give an individual can give an individual up to $19,000.

Starting point is 01:09:57 without any gift tax. And if you're married and your kid is married, you can do four times that. So you get 19 to each kid and spouse. Your husband gives 19 to each kid and spouse. So each family unit could get, you know, almost $80,000 if you wanted to do that in one fell swoop. And if you wanted to do that, and it sounds like you have good relationships and respect for them. You could just say, what I would like to see you do with this. is put some in the 529 and make sure your IRAs are maxed out because I just discovered taxes on our IRAs

Starting point is 01:10:34 and I don't like it. And I want you to do some Roth IRAs. Make sure your Roths are maxed out. But you do what you want to with it. Here's our gift. I mean, you can do that. That's another way of getting at this because you're going to have to get their permission anyway. You can't just write a check into someone else's Roth. Yeah, you're going to be giving them the money and then it'll be up to them to put it in if that's what you wanted. You can be very controlling about. You can be very controlling about them putting it in there, but it doesn't sound like that's your relationship. No, but it is a, it is a really creative way to think through, you know, I haven't really thought about that funding your kids Roth, because that is something that's going to grow versus

Starting point is 01:11:13 your adult children's real. Yeah, versus a depreciating asset like a van. I throw out the van as an example. That's going to go down. Like this will be something that builds forever and ever and amen, which is, that's a pretty cool way too to build that legacy. There's nothing wrong with any of that. Well done, Debbie, for $4.5 million for you and your husband.

Starting point is 01:11:33 We probably at Ramsey would say, Ramsey's would say, use it for wherever you are on the baby steps. That's what we would do. That's a good point, too. That's what we would do with it and what we would tell our kids to do with it. But we say, hey, we suggest that you finish up that debt and that you get yourself clear on that budget and then you make sure you're putting 15% away and you're, throw the rest at the mortgage. And that's what we suggest. And we would walk right up that with

Starting point is 01:12:00 whatever the size of the gift is if we did it with our kids. And in this situation, but there's nothing wrong. There's nothing dysfunctional or wrong. There's no advantage to it being a Roth for you or them tax wise today. There's no tax write-off for you contributing to a Roth or them contributing to a Roth. A Roth is all after tax, as you know. It does grow. tax-free, but that's the whole thing. So, yeah, that's an interesting question. Thank you for calling with it. Charles is in Charlotte, North Carolina.

Starting point is 01:12:34 Hey, Charles, what's up? Hey, Dave and Rachel, thanks for taking my call. Sure. How can we help? Yeah, so I'm under contract on a new house, supposed to be closing at the end of the month here, and I'm starting to have some reservations. Just want to make sure I'm making the right move for my family here. I don't think you have a choice.

Starting point is 01:12:53 You signed a contract. Yeah, I mean, my realtor, I've talked to him a little bit about it, and he said, you know, you haven't, you're not closed yet. So if you, you know, if you're not sure, it's not done. What I mean it's not done? Is there a contingency in the contract that if you get cold feet, you can walk away? Yeah, that's, well, that's what I've been told. Really? Yeah.

Starting point is 01:13:16 What makes you uneasy? Well, I have only 10 years left in my current home, and to give you a little context, I have a baby and an one on the way. So we're just outgrowing the house right now. We've talked about doing renovations, but either way, the current home, I have 10 years left on it, $110,000. I'm at a two and a quarter interest rate. The new home, I'd be taking a $210,000 loan out.

Starting point is 01:13:44 It's going to be $1,800 a month. What's your income? I make $100,000 right now. And my wife has not been working, but she's actively trying to get a job now. So she should be back to work. Is there anything wrong with the home at all? Is it just the move up in money that's bothering you? Yes, the cash flow and then starting over the 30 years when I'm...

Starting point is 01:14:07 Well, you're not starting over. You can attack it at whatever rate you want to attack it at. I'd close on the deal. You gave your word. When I wrote my first book and launched the radio show, things looked a lot different. I was out selling books out of the trunk of my car. If you wanted to build a business, you had to figure out distribution, inventory, payments, and

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Starting point is 01:15:40 Shopify.com slash Ramsey. That's Shopify. com slash Ramsey. Folks, our every dollar app, the number of you that are now using it and using it almost every day is exploding. Thank you so much for the number of you that are learning how to handle your money properly, working together with your spouse, and working the baby steps, working the Ramsey plant. The every dollar app helps you do every bit of that. And one lady wrote in, I love this app.

Starting point is 01:16:33 It makes it super easy to budget with my husband. We've implemented this practice since our wedding day, and we've had zero money fights. You know, that's pretty cool. And what's even more cool is the traction that you're going to get and getting out of debt and into wealth. Every dollar is free to download in the app store or Google Play. Free, every dollar. Check it out in the app store or Google Play. Phil is in Phoenix.

Starting point is 01:16:58 Hi, Phil. How are you? Hi, Dave. I'm good. Thank you so much. Sure. What's up? Okay.

Starting point is 01:17:05 So I have about a combined debt between business and personal of $55,000. I'm liquidating the business. I'm going to get out of it. I just took on a new commission's job. And it's slow going right now. I've only been doing it three months. My take home pay is about $2,450 right now. But I could expect with a little ramping up to be about 7 to 10 a month.

Starting point is 01:17:31 My question is primarily, I want to avoid bankruptcy at all costs. So I'm trying to figure out if that's the only option I have or if there's a way to deal with the creditors by settling and what that process looks like. What kind of debt is the $55,000? It's all credit lines. Credit lines. Yeah.

Starting point is 01:17:54 With a bank or credit cards? I apologize. It's credit cards. I apologize. Credit cards. It's 100% credit card debt. Yes, sir. How many different ones?

Starting point is 01:18:04 How many different cards? There's eight cards, four personal, four business. Well, they're all personal. You signed for them. Okay. Your business did not, that was not big enough for them to loan your business money without your personal signature. So they're all personal. They're all going to sue you eventually if you don't take care of it.

Starting point is 01:18:23 But that's, that's okay. How long has it been since you've paid on them? I've been keeping up. I've been making minimum payment. Oh, you're making minimum payments now. How? Yeah, I'm trying to... Well, it's...

Starting point is 01:18:37 The business was winding down, but as I realized, I had to get out of it and give a new job. So you're still making a little bit of revenue? I mean, minimal. I got you. I don't have the time to... I don't have time to commit to that job. And when you said liquidate, is there anything being sold except just selling off the inventory and closing it? That's exactly it, yeah.

Starting point is 01:18:57 Okay. How much inventory you got left? Oh, gosh. It's probably less than $1,000. Okay. So you're just about done with that. So there's no real asset as far as the business goes. Correct. You got equipment or anything that you're going to sell off furnishings or anything left over from the business that's going to bring any money? No, sir. It was e-commerce. So it was pretty much just, it was inventory that just went into the various platforms. Gotcha. Okay. All right. That makes sense. Okay. You're nowhere near bankrupt. Not even close.

Starting point is 01:19:27 Okay. Okay. You're going to be able to work through this. And actually, I mean, there's a couple of ways you can do it. They are not going to settle with you for less than 100 cents when you call them as an individual while you're making payments. Okay. Okay. But if you're six months behind, which I'm not going to recommend, okay, then you could call them up and say, okay, I owe you $10,000. And I have $3,000 and I will offer you that as settlement in full. and after a bunch of haggling and whining and spit and all that other stuff going on,

Starting point is 01:20:03 then eventually you'll get them about to do that. Okay. The other thing in your situation you could do, we have a sponsor called Guardian Litigation. And they specialize in working with people where you are, not people that are six months behind, but people that are worried that they're going to get there because their income is not able to maintain the payments on these. Because at $2,450, you're not going to. eat and pay all these payments. Correct. And that's what you're already seeing and you're saying this is coming to a screeching halt and then these people are going to get mean and nasty and you're

Starting point is 01:20:37 right. They are. So I'm going to put you on holding. Christian's going to hook you up with guardian litigation. Again, it's a sponsor of ours. They have attorneys on staff and they will start the negotiation process while you're current. They don't require you to get behind in order to put you into a plan. with the companies all the time and are able to pull things off that the individual can't. And so that's why we brought them on as a sponsor. I generally, there's a lot of people in that bucket that I don't recommend debt consolidation people. We don't recommend.

Starting point is 01:21:12 But Guardian does a great job. And so we'll send you that direction and see if you can't get some help. You're not going to file bankruptcy. No, and as quickly as you can get to that 7 to 10,000, that changed your life. Yeah, absolutely. And in the meantime, I mean, probably working extra, working side jobs on the weekends just to keep something afloat because $2,400 in general is... In Phoenix. Yeah.

Starting point is 01:21:38 I don't think you can live on that. That's tough, yeah. All right. Grace is in Raleigh. Hi, Grace. How are you? Hi, Dave and Rachel. I'm doing great.

Starting point is 01:21:46 How are you guys? Better than we deserve. What's up? So I was just calling my husband and I do to a series of unfortunate events. Our car got totaled, not our fault. You got insurance? Yes. We've got about $5,000 for it.

Starting point is 01:22:02 That's what the car was worth, right? Yeah, yeah, exactly. But we are currently at their contract on a house, and so obviously no buying cars yet, but looking ahead just because we've been sharing a car and it's been a little difficult with work and schedules and such. I'm sorry, you have a $5,000 check from the insurance company. The contract on the house does not prohibit you from buying a $5,000 car for cash. Yes, which leads me to my...

Starting point is 01:22:26 question, which was, do you think they would be smarter to get like a $5,000 car or wait until we're closed on the house and we have some funds coming in and get a nicer car as we're looking ahead to having kids and wanting like an SUV or minivan? You're doing fine in the $5,000 car before this happened? We were, yes. So it's a little bit earlier than we were expecting to get a nicer car. You have extra money set aside for a car already in addition to the house? Just for 5,000. We had not been planning on getting a car quite yet.

Starting point is 01:22:57 Do you have an emergency fund? We do, yes. And how much is in that? About 25,000. Okay. And what should your emergency fund be? 25,000. It's just about right for six months. Is that a six month? Do you guys have kids, Grace? No, not yet. We were kind of hoping to make the next year.

Starting point is 01:23:17 Sure, yeah, yeah, totally. Pretty stable jobs? Yes. Okay. And what's your household income? Household income is about 140. Okay. Yeah, 25 is probably pretty, that's probably about three months, yeah. That's six months, she said.

Starting point is 01:23:33 It's not. Well, I guess now with some mortgage, it might be about three. Okay. Okay, that's fair. When are you closing on the house? Next Wednesday, August 12th. Okay. And you're not using any of the 25,000 to close on the house?

Starting point is 01:23:48 No, no. We're doing it the Ramsey Way. Good. Okay. Good for you. Good for you. Well done. All right. I'd be okay throwing a couple thousand. Yeah, I mean, if you took it to 20 or something, but I'm not, it's not an emergency to move up in car.

Starting point is 01:24:03 This is more of a gyration in your budget than anything else. You make a lot of money. You don't have any debt. Yeah. And go get a $10,000 car. Don't get a minivan yet. Yeah, get a $10,000. You don't have kids. Yeah, get whatever you want. And then, you know, when life happens, you can sell a car. Put the $5,000 back in the emergency fund as soon as possible. and then start saving for the next car after you get in the house. Yeah.

Starting point is 01:24:26 But you don't need a $25,000 car when you totaled a $5,000 car. For sure. And you certainly don't need a car payment. But purchasing a car and using some of your emergency fund or some of your $5,000 from the insurance with no payments at all, no bank involved, is not going to spoil the purchase of your home in any way. That's fair. We just were wanting to be safe. It won't mess up the mortgage company if you bought a $25,000 car.

Starting point is 01:24:58 I would just call you stupid. Yes, that's fair. Okay. So don't do that. You're awesome. Thanks for the call. We appreciate you being here. A $5,000 to $10,000.

Starting point is 01:25:11 That's a big jump. That's a jump. So take it and then drive it for 18 months. And it's a car. Listen to what they did. They have a fully funded emergency fund. They're 100% debt-free. to make $140,000 a year.

Starting point is 01:25:23 They're buying a home. Nobody can buy a home! But they're buying a home. And guess what they were driving? A $5,000 car. They're doing everything right. And then some stupid person totaled their car. Somebody teaboned them at the light, you know?

Starting point is 01:25:40 Now she gets a $10,000 car, though. Blessing in disguise. Hey, guys, it's Rachel Cruz. If you're working the baby steps, every major expense deserves a second look. And health care is one of the, biggest expenses in most families' budgets. And that is why I recommend that you check out Christian healthcare ministries. CHM isn't insurance. It's a health cost-sharing ministry. That means members help

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Starting point is 01:26:54 CH Ministries.org slash budget and promo code Ramsey. Welcome back to the Ramsey show in the Fair Winds Credit Union Studio. I'm Dave Ramsey, your host. Thank you for joining us, America. Open phones at AAA 825-5-225. Rachel Cruz, Ramsey personality, number one bestselling author, My Daughter, is my co-host today. David's in Virginia Beach. Hey, David, What's up? Hey, David. How are you doing?

Starting point is 01:27:34 Better than I deserve, man. How can I help? I was wondering, I'm at in 35K of credit card debt, and I'm keeping up with minimum payments, but I'm making just a little bit over them every month. I'm wondering if I should get a personal loan to get rid of all the credit card debt. That way it's at a lower interest rate, and then I just try to tackle that loan as aggressively as I can. interest rate's not your problem the amount that you're paying on the debt is the problem yeah no for sure yeah what do you do for living Virginia Beach are you military

Starting point is 01:28:08 no I work with an ISP and internet service provider I work as a construction project engineer kind of managing fiber crews in construction got you what you make 40 hours a week around there it's like more or less it's kind of I just I work I kind of like the work I do, so I do more. I just kind of stay on top of my stuff, but I make around $84,000 a year. Okay. And how much is your car payment? Car payment is around $800.

Starting point is 01:28:40 But I've also got my own business where I do fiber spicing, and that I bring in around $2,000 to $6,000 depending on how much work is available and I can do in that month. How much? How hard is it to get more work? Just depending on Because you're not getting the 6,000 very often Or you wouldn't ever called me

Starting point is 01:29:01 Right, exactly Yeah, it's more on the 2,000 On the minimum a month Is what I'm bringing in consistently With the business But I'm going to try The way that I can get more is Stuff out of my hands, permits

Starting point is 01:29:17 And stuff, how much bill we get Okay, let's pretend for a second That we took $35,000 and we put $4,000 a month on it, it would be gone in nine months. Okay? And the interest rate doesn't matter in nine months. The interest rate only matters if you keep it nine years. Right.

Starting point is 01:29:41 What you need is $4,000 a month to put on this. You have a stupid $800 car payment that's insanity. So maybe we sell a car and get a beater, and maybe we work $6,000 worth of splicing. And gosh, that's $7,000 a month if you just lived on your other income. You freed up 800 plus 6,000 splicing. You'd be done in just a handful of months. So what I would tell you to do is work your tail end off, live on nothing, don't go to happy hour, don't go out to eat, don't go to happy hour, don't go out to eat, sell your car. And you'll be out of debt in no time, and don't go to happy hour.

Starting point is 01:30:22 you definitely don't go to Happy Hour. He's like loud and clear. You can listen to Smart Money Happy Hour on the Ramsey Network and have a mocktail with us. And watch them have a drink, but you're not going to happy out of it. Now, I'm serious, you have to focus on, if you focus on getting out of debt like your life depended on it, you would work all the time, you wouldn't have time to do anything else, and you would sell everything in sight because your life depended on it. And you'll be out of this debt in no time when you do that.

Starting point is 01:30:52 Okay. So four to $7,000 a month makes $35,000 go away really fast. Right. And I think you've got that at your fingertips, but we've just got to adjust a few things because you make good money. Exactly. And you've got a great skill set. Yes. That is very marketable.

Starting point is 01:31:16 I mean, this first time I heard of splicing as a side hustle, and I just love it, I'll tell you. Yeah, yeah. I definitely am in a good opportunity. I was just super stupid when I got into it and made a bunch of money, and then I just got out of hand. And now I'm like, well, how old are you, David? I'm 24. Perfect.

Starting point is 01:31:34 Okay. Have you cut up the credit cards? I threw them in the freezer into a giant and into a pot, and then at the bottom of the frozen pot. Well, we're not going to eat them as leftovers, so just get them out, thaw them out, and cut them up. Okay. You don't need them.

Starting point is 01:31:50 They've not been a blessing. get you a debit card, which will mean you spend your own money to buy crap. You know, that's it because that's the problem. You've been buying crap with other people's money, and that's what a credit card is. So, yeah, just thaw them out. That freezer thing has been around for 40 years. People have been putting them in freezer for 40 years, as if we were going to thaw them out and they're suddenly going to be okay.

Starting point is 01:32:12 It's like, oh, now they work good. It's still like a safety of like they're still there, but they're really hard to get to. I can get to them still. It takes work. Here's the other thing. If you cut them up, I'm sorry, I probably shouldn't say this. But if you cut them up and you call the bank. Glue them back together.

Starting point is 01:32:27 No, the bank will send you another one in the morning. Okay, there you go. I mean, it's easier than the freezer, actually. If you want to fall off the wagon, the bank will help you. They like having you in that. They're not going to be mad at you. You want another credit card. You know, I placed some scissors across someone and went, oops.

Starting point is 01:32:43 And so can you send me another card? And they're like, oh, yeah, that happens all the time. Those Dave Remsey people, we'll send you one in the morning. and they'll fix you right up, man. Sarah in Austin, Texas. What's up in your world? Better than I deserve. How can we help?

Starting point is 01:33:04 Dave, I get married in three weeks. Congratulations. How old are you? Austin, Texas. Boston. I'm 27. Awesomeness. Cool.

Starting point is 01:33:16 How can we help? How can we help? My fiance is 30, and after we get married, we are considering building, I mean, building. a home. And I'm, I'm curious of your opinion about building rather than just buying. On your first home, I would purchase an existing home. Okay. Because building is a royal pain in the butt.

Starting point is 01:33:40 And I don't want to put that strain on your old's relationship in your first year of marriage. I want you to concentrate your energies on other things in the first year of marriage. Rachel, you guys have built a home and you have bought a home before that straight up, right? Yeah, I mean, easier is to buy. And building a home is a hassle. But it's fun if you enjoy it. So later, make that your next goal. Just to say maybe in-

Starting point is 01:34:02 Number two house was you. Yeah. Yes. So, you know, you could look out and say three to four years. Let's, a dream, a goal is to build. But there's a lot of decisions. Unless, I mean, my husband is in real estate and does project management, all of it. So he was up his alley.

Starting point is 01:34:18 It was, we were fine. We loved the process. You had an excellent builder, too. And a great builder, yeah. We had a great experience, but that's, I feel like more rare. It's also because they went into it with their eyes wide open and they'd been married a while and they had a basis in the relationship to make the arguments about what kind of kitchen sink we buy. It's a lot of decisions.

Starting point is 01:34:39 Yeah, you're picking out a lot of stuff. And unless it's, I mean, there are a ton of neighborhoods going up of, you know, homes that the floor plans picked out. You may pick out a couple of fixtures. It's not a custom from the ground up. I still wouldn't do that. On your first home, they've been, they're not even married yet. They're getting married next week. Yeah, two weeks.

Starting point is 01:34:57 The first one, I just go buy a house. Go buy a house and, you know, pay for it and build later. Building is an extra level of stress. Yes, but if it is built and it's just a new house and it's like, they get to pick. It's a brand new house and it's a spec house. It's sitting there. That's what I'm saying. Or maybe you get to pick out the light fixture here or there and it's not, it's not from the ground up.

Starting point is 01:35:17 The ground up process is a, that's a mountain. Let's start with dirt. and a piece of paper called a blueprint, and then let's lay out a budget and lay out a schedule and get the builder and the subject to follow. And you're going to know, Sarah, how to build the house that you guys would want. You know what I mean? Like, you haven't lived together and created a family.

Starting point is 01:35:32 And so it takes, we always laugh and say it takes a year of being married to know how close to your mother-in-law to buy. You got to get to know each other. You work your butt off for your money, but your money's never going to return the favor if all you do is hope for the best. If you're ready to learn how to make your money work for you, check out the smart vester. program. SmartVestor can help you find advisors who specialize in retirement planning, charitable

Starting point is 01:36:11 giving, advanced investing strategies, and more. Whatever your goals, your pro will take the time to explain your options, so you never have to invest in anything you don't understand. Head to ramsysolutions.com to smartvester to get connected. Ramsey Solutions is a paid, non-client promoter of participating pros. Learn more at ramsysysolutions.com slash smartvester. Buying or selling your home is high stakes. One bad deal could cost you tens of thousands of dollars. Guy called in the other day, and his mother-in-law had sold her house for $325,000, and the appraisal came in at $379,000.

Starting point is 01:36:55 Well, she sold her house. It's over. She made a huge mistake because she heard a realtor didn't know what they were doing. A real estate agent didn't know what they were doing. And so you don't want to make a big mistake in real estate business. You don't want to make a small mistake. It's tens of thousands. So that's why Ramsey, Trellor.

Starting point is 01:37:09 that connects you with vetted real estate agents who we have checked out and they are pros and they have the experience to guide you step by step to make smart decisions and don't sell your $380,000 house for $325. Connecting's easy. Just compare agent profiles, interview your top choices, pick the right one for you. Find a local Ramsey trusted real estate agent that we have vetted who has your best interest at heart for free at Ramsey Solutions. dot com slash agent or click the link in the description if you're listening on

Starting point is 01:37:42 YouTube or podcast. Folks, if your private student loans are in default, that's when you've fallen so far behind the loan is considered unpaid. Y-ReFi might be able to help. Y-ReFi helps borrowers in tough situations explore low fixed rate refinancing options that fit your budget. Go to Y-refi.com slash Ramsey. That's the letter Y-R-E-F-Y.com slash Ramsey might not be in all states.

Starting point is 01:38:09 Today's question comes from Lisa in Maryland. I have been getting paid once a month for 10 years, but my employer just changed their process, and now I'm getting paid every two weeks. Even though I am getting the same yearly salary, it's divided into 26 paychecks throughout the year instead of 12. How should this impact the logistics of the budgeting process? That's a good question, Lisa. Well, you just need to make sure that when all your bills hit that you have to, you have to be a lot of, have money in your account for it where you used to have a lump sum that you could probably pull out throughout the whole month. Now you just have to plan and make sure that there's enough

Starting point is 01:38:47 in there that's going to hit between the first and the 15th before that next paycheck. But if you're beyond baby step, I mean, I would even say beyond baby step two or three, you need at least a good amount in your checking that could cover one of those paychecks just for a buffer. It is always a great safety net from just a logistics standpoint. But yeah, it would just be maybe moving some bills around so not everything hits right between the first and the 50s. The every dollar app has the paycheck planning. That would you just lay it out which. That's right.

Starting point is 01:39:16 Yeah. Which item comes out of which check. Exactly. Yeah, that's true. So if you have every dollar, plug it into the paycheck planning and then it'll flag you. Yeah, it'll say, you know, pay your internet bill in the second check and pay your, you know, your electric bill on the first check. And it'll show you what, you know, you figure out which one comes out of which check before the month begins. That's right.

Starting point is 01:39:34 The other thing is, with every dollar, you're spending your, that month's income. on that month's bills and goals before the month begins. So two times a year, you're going to have a larger month because you have two times a year, we call them magic months, that you get an extra check. You're going to get three checks in a month. Yep. Two times a year when you get paid every two weeks. And so...

Starting point is 01:40:00 And it always confuses people sometimes because if you do get paid at least twice a month, or I guess in her case, it would be every two weeks. Every two weeks. But when that paycheck hits, for some people, the paycheck hits at the, like an October 31st. And technically that's quote unquote October money. But you're going to use that as if it is November 1st. Exactly. And you use that through November.

Starting point is 01:40:21 Some people get. That's November's the pay from October is going to be November 1st. Yep. And that's what we have to work with. And so you got that two weeks. You got the next two weeks. And then twice a month, you're going to get another one at the tail end. That's right.

Starting point is 01:40:35 Or twice a year. Yeah. Twice a year. And so you just for those two months, you're going to. budget that money. You're going to spend all that money on paper both times, and it's a little less on the 10 months and the other two months. It's a little more than it used to be. And so you're going to make a little less progress on some of your goals is all that is. And then a little more progress suddenly, some big chunk, like getting a little bonus check is kind of what it is. But you still

Starting point is 01:41:03 are going to spend that money that month, whatever the month has. And it's just going to change that around a little bit. You need to be doing a unique budget every single month anyway. These budgets are not templates. This month's income on this month's needs and goals. Yeah, and the truth is, 75% will probably stay very similar. Yeah, but it's not the same. It's just a no, it's not. Your income might change a little, in this case twice a year. And life is different. And then you get that card paid off so you have a new goal. You're moving up the baby steps. You're moving up the debt snowball or down the debt snowball. Jenna is in Des Moines.

Starting point is 01:41:42 Hi, Jenna. How are you? I'm great. Thank you. How are you? Better than I deserve. What's up? Well, I am approaching a 62-year-old Mark, Dave, and I've made some fullest decisions,

Starting point is 01:41:55 and I have zero retirement. And I also lost my hearing in 2013 and did not know that my health insurance would pay for a cochlear implant until 2022. So I went through a major income shift, and I started cleaning houses, and I have a successful quality cleaning business. Good. And I'm the only employee. Thank you. I'm proud of that.

Starting point is 01:42:21 However, my mom passed a few years ago, and I'm sitting on $150,000 in the bank, and I don't know if I should get a second job. I mean, I'm working a substantial amount five days a week, nine and a half. What are you making? How much you make? Between 30 and 40 after my expenses. How much debt have you got? Zero. Oh, good.

Starting point is 01:42:46 What about the house you live in? I rent. Okay. Cool. Cool. All right. Well, I would sit you, I want you to sit down with a professional and begin to learn how to invest the 150 so that it will grow while you're still working. instead of it sitting in the bank.

Starting point is 01:43:08 When you are putting money with the bank, you are loaning them your money at 3% on a high-yield savings. Okay? When you buy an investment, you're an owner, not a loaner. And it grows. Who should I contact for that? Just jump on Ramsey Solutions.com and click on SmartVestor, and it'll drop down on the number of different people in your particular area there in Des Moines that we have checked out and that we trust.

Starting point is 01:43:37 And the big thing they're going to have that I really, really, really want for you is I want you to go slow and I want you to learn. Do not invest money because I said to or someone else said to do it when you understand it. And the good news is it's not super complicated. Everyone can understand it. Do I want a financial fiduciary? That is who I'm talking about. That's what I'm talking about. It's financial advisor.

Starting point is 01:44:07 Thank you. Okay. And they're going to walk, they're going to help you. But the way they help you is they teach you. And then they say, okay, here's an example of a mutual fund like I'm talking about. And it's one that I might do. And you look at it. Now I, now you understand it. But people put money sometimes in investments and they can't even spell investment. Don't do that. You need to understand it because otherwise it'll rob your peace. You're not afraid of that money sitting in the bank. If you put it in the an investment that you don't understand, your anxiety level is going to go up, right? Right. Don't do that. Do I need to do it incrementally? If that helps you have peace and knowledge and understanding, yes. If you have full understanding and it's not going to steal your piece to put it all in at once, I put it all in at once.

Starting point is 01:44:56 But I would say too, easy math, Jen, if you think about it, every seven years, that money should double. If it's in a mutual fund making 10% or more. So that 150 in seven years, if you don't touch it, turns into 300. thousand right so as you continue down now you'll probably be living off some of this stuff you know some of that money eventually but that's the point you want to take as much advantage as you can with it just sitting there and so uh the compound interest it it will happen yeah yeah your your money will grow and so if you learn about this and you get comfortable and you're invested in a mutual fund that makes 10% or more in seven years

Starting point is 01:45:34 at 69, your 150 will be 300. In seven more years at 76, your 300 will be 600. And if you have earned enough through there and or living on Social Security one of the two without touching this nistig and let it alone and let it grow, that's what's going to happen to it. And that's good news. You spend hours researching before making a major purchase like a home or car, but it's also a good idea to put in the work searching for the right insurance coverage to protect your biggest I recommend using Ramsey trusted pros. Whether you're looking for car, home, or any other type of insurance, Ramsey trusted providers have been coached and vetted to serve you like we would.

Starting point is 01:47:01 Find what you need at ramsysolutions.com slash insurance. In the lobby of Ramsey Solutions, we have the famous debt-free stage. on the debt-free stage is Keith and Candice. They're now famous because they're debt-free. Congratulations, you guys. Where do you all live? Abbeville, South Carolina. Very fun.

Starting point is 01:47:35 What's that near? Greenville's about an hour south. Oh, yeah. Love it. Love that area. It's beautiful. And I see a little button on your dress. It's your anniversary.

Starting point is 01:47:43 Is that right? Yes. Yes. Today is. How many years? 32. 32. Wow.

Starting point is 01:47:48 Way to go. Look at you guys. And how much debt have you paid off? $201,555. Cool. And how long did that take? About five years. Okay.

Starting point is 01:48:01 And your range of income during that five years? 140 pretty much the whole time. Okay. What do y'all do for a living? I'm a funeral director. Mm-hmm. And I'm a nurse educator. Ah, very cool.

Starting point is 01:48:11 Good for y'all. Well done. So if it took five years and it's $200,000 and it's in small town, South Carolina. Is that your house? No. No. No. No.

Starting point is 01:48:21 What was it? Jump the gun. It was, let's see, cars, credit cards, camper, se ado. Student loan. Student loan. Y'all were normal. You had a little bit of everything. We were, yes.

Starting point is 01:48:32 And normal sucks. And you said, I don't want to suck anymore. I'm getting out of this. That's right. Look at y'all, man. Way to go. I'm so proud of you. Man, you've been scratching and clawing for a while at this.

Starting point is 01:48:42 A lot of baloney. A lot of eating at home. I like it. I like the expensive meat, ham. Yeah, there you go. Very good. Very good. Okay, five years ago, something flipped, some switch flipped, something happened because y'all

Starting point is 01:49:01 been married for 32. So at that time, you would have been married for 27. Right. So you've been doing it a long time one way, and you went, we're getting out. We're changing. What happened? Trying to figure out when to make a truck payment, what I was going to put off to make the truck payment, or, you know, if I was going to put it.

Starting point is 01:49:22 the truck payment off. And I said, I'm tired of this. It's almost 600 bucks a month, you know. And I just put the information in. I just got curious about Carvone, and I put the information in, got the offer. Two days later, the truck was gone. Whoa. Sold it, quick.

Starting point is 01:49:39 Got more than what I paid for it. You said, enough already. Okay. And then how did you find Ramsey? How did you get it with us? We failed Financial Peace University twice. We had to repeat your course. A beauty school dropout.

Starting point is 01:49:55 That's right. I told her the first time that we took it, I said, this is crazy. This will never work. We might as well not even try, you know. And so we didn't. And we stayed broke for 27 years. Oh, my gosh. So you took it a long time ago?

Starting point is 01:50:13 Yes. Back in the O's. Oh, wow. Back in the O's. Wow, I'm sorry. Wow. Wow. I wish I'd have been a bit more persuasive. Well, I mean...

Starting point is 01:50:22 We're a little bit hard-headed. A little stubborn. But you look up and you say, I'm... Trucks gone. Maybe Ramsey's not lost his mind. We're doing this. We're doing it. We did it. And you plug back. You got your old tapes back out. Your old CDs back out. Dusted off the envelopes. Did you really? I mean... Yes. Yes, we did.

Starting point is 01:50:39 Yeah. We have all the CDs from the original... Back in the day. Wow. How funny. I had hair. man, there's a long time ago. So did I. Now I have a hat. So good, you guys.

Starting point is 01:50:55 Okay, so were you both kind of at the same point to jump in and do this? Sick and tired of being sick and tired. You kind of hit the wall at the same time and you're like, all right, this is worth it. We're going to just sacrifice and eat baloney and get out of this debt. His mom passed in 2010, and his dad has always been almost squeaky with money. And my parents were the opposite of that. So we were like, we need to find somewhere in the middle where you can have joy with your money. But tell it where to go.

Starting point is 01:51:25 You know where it's going. So I don't have to figure out how to hide the $600 truck payment under a P. Just so I can look good at the red light. Mm-hmm. Right. We had one of the houses we lived in. We lived two summers with window units in it because we couldn't afford to replace the H-back. During this.

Starting point is 01:51:46 Yes. Well, you're in one of the times when we were failing, I'm sure. Yeah. Back before we did the stuff. Back before we did this, you know. Okay, so then you get on a budget and you start selling the truck and you say, what else did you sell? The camper. The camper.

Starting point is 01:51:58 The sedo. The se dew went. Wow. You know, selling spree. Yes. And we sold, there was nothing left. I mean, everything else we just took to the dump because we couldn't sell it. Yeah.

Starting point is 01:52:11 And so you just cleaned house and how much did that reduce the debt? Well, the truck went 35,000. Boom. The camper, I think it was another 10 or so. And then the seed do was actually paid for. I had paid it off already, but I sold it anyway. So that was another 5,000. Just to throw at it.

Starting point is 01:52:29 Right. Because 201 of consumer debt, that's a big, yeah, y'all did it. That's a lot. You plow through a bunch. That's a big mountain. 76,000 was a student loan. Ah, okay. Yeah.

Starting point is 01:52:40 Yeah. Yep. The educator. Yeah. Right. All right. Wow. Well, congratulations, John.

Starting point is 01:52:47 Well, done, you guys. How does it feel? Feels great. I mean, we're here. Yeah. On your anniversary. On our anniversary. He chose to come here to this romantic spot.

Starting point is 01:52:58 I chose to get on an airplane for the first time in my life. No way. Yeah. And I was a little anxious because when I got here, I didn't have a car. I couldn't just, you know, so we're ride sharing and that kind of thing. Good for you guys. Well, all kinds of no experiences. You're on a trip.

Starting point is 01:53:13 We're on a trip. Yeah. On a trip. Love it. Love it. It felt so good to see that. It's you on where it says zero. That was it.

Starting point is 01:53:22 That was April 28th. Okay. So tell us, tell the audience two things. One, tell them what we always ask, which is, what's the secret to paying off $200,000 worth of debt in, you know, 50-something months? Paying it off. Actually, paying it. Do it. Yeah.

Starting point is 01:53:42 It's not a theory. You got to make the decision. Okay. I can keep having fun and keep being broke and living paycheck to paycheck, or I can just not worry about when the paycheck comes because there's already money there. That's the way we are now. And we love it. How connected were you all through this time?

Starting point is 01:54:03 I mean, were you a lot of communication or not? Oh, yeah. Yeah. Good. I hate the budget meetings, but I know it has to be done. I am the nerd. Ah, look at that. Guess what I am then.

Starting point is 01:54:15 Yeah, girl, free spirit. I like you, Kansas. I like you. But from a relationship standpoint, does it feel different on having the stress of money in the marriage? There's a freedom there. The only money arguments we have are where we're going to eat dinner. Yeah, where we're going to actually go to the restaurant. Right, yeah, yeah, yeah.

Starting point is 01:54:33 Now that we can go to one. That's right. Good for you. I actually had a conversation with my boss at the school, the dean. She said in a meeting the other day, said, I'm probably going to die with my student loans. I said, well, if I can have this, you can too. I could tell, teach you how. And she said, what's that like?

Starting point is 01:54:50 I said, freedom. I like it. It's great. So the next question I got then is you took it years ago and we laughed and said you flunked it. But basically what happened was you didn't believe it would work enough to go do it. Right. That means we failed you and I apologize for that because we didn't sell it to you hard enough. I think it was laziness.

Starting point is 01:55:09 It's okay. But if you got somebody that's been listening to the show, maybe they didn't go to financial peace, but maybe they've been listening to show. And they're kind of going to that same conclusion. Yeah, but that won't work for me. That's it. What advice do you have for that person that's listening that was you many years ago? You're crazy for the thoughts.

Starting point is 01:55:28 It's a crazy way of thinking. It does work. And we're living proof that it does work. And we're not, we're not, you know, we're on that, we're not on any Forbes list or anything. We just have a normal everyday average income. and we were able to pay off a lot of debt just by working hard at it and not worrying about well, we're going on this cruise or we're going on this vacation.

Starting point is 01:55:57 We're not. We're not going with you. Panging off debt. We're going to pay off some stuff. And now you can. And now we can. And now that you flew to Nashville for the first time. By the way, I'm amazingly honored that your first airline flight is to

Starting point is 01:56:13 come do this. Well, I take that as a great, I take that as a badge of honor. That's very cool. It's a very big honor you pay us with that. Thank you. You're welcome. You guys are incredible. Keith and Candice from South Carolina, 202,000 paid off in five years, making $1404.

Starting point is 01:56:31 Count it down. Let's hear a debt-free scream. Three, two, one, we're dead free. What's up, guys? It's Jade Warshot. Listen, summer spending adds up so fast. between vacations and road trips and camp fees and events and all the extra gas and grocery runs, money can get tight before you know it.

Starting point is 01:57:24 To really get your money under control and keep it that way, you're going to need a plan. And that's what you'll get with the Every Dollar Budget app. It helps you track your spending, free up cash to put toward debt and savings, and it's the simplest way to make a plan for your money before the month begins. So no more wondering where your money's going. You're telling it where to go. Download every dollar in the app store or Google Play and start for free today. Our scripture of the day, Galatians 6.9, let us not grow weary of doing good.

Starting point is 01:58:11 For in due season, we will reap if we do not give up. T. Harve Ecker said it's simple arithmetic. Your income can grow only to the extent that you do. True, true, true. Joe is with us in Phoenix. Hi, Joe. How are you? Hi, Dave and Rachel. It's an honor to talk to you today.

Starting point is 01:58:30 You too. How can we help? Thank you. So I'm a, I'm a trustee for my, my parents' estate. My father passed earlier this year and my mother, the year before. I'm sorry. But thank you for that. As a trustee, though, you know, you probably know what that job entails, but I'm consolidating assets. And I'm almost done with everything. And I was wondering if you could tell me, The best way to distribute this inheritance that the beneficiaries are going to receive, I'm one of them. I take it is all actually in a trust. Yes.

Starting point is 01:59:10 Okay, because you are using the proper terminology for a trust, which is you're the trustee and the heirs are the beneficiaries, and that's the proper words. What's the size of the estate? By the time everything is consolidated and liquidated and consolidated, it'll be a little over 300. a thousand. Okay. There will be no estate taxes on it on the federal level. No federal estate taxes. Is there anything that was in a 401k that's traditional or a traditional IRA? No. Okay. Because that would be taxable income tax when it comes out in traditional. But any other investments, what was the money in? They had a, they have just a yes. standard investment type of portfolio. It wasn't a lot. And then they had a couple of bank accounts

Starting point is 02:00:06 and the house. And that's really... Okay. There'll be no taxes. There'll be no taxes. There's no federal estate tax and no federal income tax on anything you've described. That's a general statement. And if you want to check me out, that wouldn't be a bad idea to sit down with one of our tax ELPs and comb through the details to be 100% sure. But in general, the type of account you're laying out there should not have any taxes. If there's an inherited IRA that is a traditional, it's going to have income tax on the entire amount because it's never been paid income tax because it's stuck in an IRA, okay, or in a 401K.

Starting point is 02:00:44 If there was, if the estate was over 20 million, you might have some federal estate taxes, depending on how it was laid out. but we don't have either one of those concerns. Any capital asset you sell, like stocks or bonds or stuff in that investment account or that home, is considered to be sold at market value if it's done within six months of death or so, and the IRS won't question. That's pretty much what it's worth. It's sold for what it's worth.

Starting point is 02:01:17 And the basis in something like that is market value at the time of death. so there's no tax, there's no gain, there's no taxable gain. Now, if you took that house and held it, and it's worth $200,000 and you held it 10 years, and it's worth $200,000 at the time of death, and you sold it 10 years later for $500,000, you'd have taxes on that 300 gain since death. But because you're selling it within six months of death, it's considered sold at market value, so zero gain. Okay.

Starting point is 02:01:49 You see what I'm saying? I'm saying. Okay. Yeah, yeah, I do. And so you're perfectly clean. And the stuff you're describing is very easy, very clean. And thank you for loving your mom and dad well by honoring their wishes and executing this in a business-like and thoughtful manner. And, wow, that's very, very big of you and very good of them.

Starting point is 02:02:10 They pick the right person to be the trustee. Yep, very thorough. And, again, to be 100% sure if you want to spend 200 bucks and sit down and have a tax professional, not a guy on the radio, go, through your stuff and be sure I'm right. That's not a bad idea because I'm not that great at Texas. I do know what I'm talking about on what we just talked about, obviously, but there might be something down inside this that I missed because it's a simple three-minute conversation.

Starting point is 02:02:35 So just go to Ramsey Solutions.com and click on tax preparers for ELPs, endorsed local providers. And there are people in each market. We definitely got them in Phoenix that in each major city that do those things that we have vetted. and they're people we believe in and we endorse and they're local and they provide help endorsed local providers. That's where that comes from. Garretts in Los Angeles. Hi, Garrett. How are you? Good. How are you, sir? Better than I deserve. What's up? So, and hi, Ms. Cruz. Thank you for taking my call. So the short version of my question is the following.

Starting point is 02:03:12 And I know I'm blessed to be in the situation, but in a nutshell, I'm trying to figure out with our current amount of money saved in our current income, what is the right amount to continue to save, which we will, versus how much we can safely spend that and travel and, yeah, and, you know, let's say my buying my wife beautiful purses and nice things like that. Yeah, how do I come up with those numbers? And I'm happy to tell you, you know, tell me where you're like to start. Yeah, for sure. Well, how much, how much do you guys make a year? So the average over the last three years is about around 800 to 900,000. Nice. What do you do?

Starting point is 02:04:00 So I own a small company and my wife's a doctor. Okay. Good for you guys. You have any debt? So our house is paid off. Our cars were paid off. We have no consumer debt, nothing like that. We do own a rental property of home that we share with some friends. it's fully rented long-term rental. It's cash flow positive. What do you all own it?

Starting point is 02:04:27 We owe $5.50 between the two of us. Okay, got you. And how much do you have in investments right now? I also own an industrial property that my business also uses, and that one we also can't prepay because it was an SBA loan, so there's a prepayment penalty, and that I share with a business partner, and that's a million and a half, and we owe about a million on it.

Starting point is 02:04:53 Okay. And how much do you have in investments? In Liquid, we have about $3.2.3.3 million. Okay. And the first thing, before we go back to your question, I'm going to stop where, because I got stuck on this, I don't run into any SBA loans that actually have prepayment penalties on them. So I think you've gotten some kind of tangled information.

Starting point is 02:05:17 Either this is not an SBA loan or it is some kind of other loan or it's an SBA loan and someone misunderstood. I don't think there's a prepayment penalty on an SBA loan. So it's a 504 and I'm double and triple checkness around the. Okay. When does the repayment penalty run out? Ten years. I would consider how much the prepayment penalty is and look at it very carefully. I might pay it off anyway.

Starting point is 02:05:44 I don't know. I don't want to get into that on this call because you ask a different question. So you make a gob of money. How much do we save and how much do we enjoy? Yeah. Well, I think the balance of giving, saving, and spending has to be there. So I would be maxing out all that you can investment-wise with retirement. So, you know, the backdoor Roth, I guess you own your company, you own your business. But all of that I would do. And then you're going to be surpassed that with that 15%. So I would for sure be hitting that 15% in retirement. And then I would have external goals of we make this,

Starting point is 02:06:17 amount, what feels reasonable to set aside for these other goals that we have long term in the next two, three, four, five years. Have a goal out there. Be putting money aside for those goals. And then beyond that, lifestyle-wise, I mean. Enjoy some of it. Yeah, for sure. I would set a percentage, I'd say a percentage of my income that the two of you agree to

Starting point is 02:06:41 that we are going to spend on excess lifestyle, wonderful travel, wonderful cars, wonderful purses, wonderful whatever's. Okay. And then beyond that amount, we're going to invest and be generous because it's really the only three things you can do. You can invest, you can be generous, and you can enjoy it. And so set a percentage of your income that you're going to do that with. And so if you put, if you said, I'm going to enjoy 20%, that's $180,000 a year. you're still going to be unbelievably wealthy. Yes. Or if you want to join 30%, give 20, say 50.

Starting point is 02:07:21 Anything you want to drive, traveling anywhere you want to travel, and carrying any purse you want to carry. But you would keep you from accidentally being one of those morons that spends 900,000. Yeah, I was going to say, but be intentional about it because being sloppy is, that starts to feel gross spiritually. I feel like in the financial space. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace,

Starting point is 02:07:42 and that's to walk daily. the Prince of Peace, Christ Jesus.

The Ramsey Show - Change Your Mindset, Change Your Life

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