Transcript of Ordinary Habits Will Build Extraordinary Wealth

Brought to you by the EveryDollar app. Start budgeting for free today. Normal is broken. Common sense is weird. So we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union studio, this is the Ramsey Show. Jade Washall, Ramsey personality, number one bestselling author, is my co-host today. Michael is in Dallas. Hey Michael, how are you?

I'm so good, how are you, sir?

Better than I deserve. What's up?

Uh, so I am $120,000 in debt. I'm about to graduate college and I'm getting married in April. Currently have not a lot of money, and I was just gonna ask how I should handle that debt and preparation for marriage.

Wow, got a lot going on.

Congratulations on graduating. What's your degree in?

It's in aviation.

Okay. Wow. So what are you gonna do, fly?

Uh, yeah, that's the plan. Currently I'm a flight instructor. I just got hired, but I haven't gotten any students yet, so the income's not really coming in yet. And then I'm building those flight hours to eventually go to the airlines. So that's the path, uh, currently.

What does a flight instructor earn?

$20 an hour for the first 30 days and then $25. So, and then with room for growth, but nothing crazy.

Are you going to be getting a full-time job out of this flight instruction that you've signed up for?

Oh yeah, for sure. That's, that's the plan. It just like, it slows down at first, and then after the 60 days, then they'll start to give you more students, and then it can become like a pretty heavy 40-hour-a-week kind of workload.

Where are you living right now until the, the marriage?

McKinney, Texas.

No, no, how are you living? Are you renting with parents, roommates?

Yeah, I'm with my father.

Okay. With your dad. So you're not paying any rent?

No, ma'am.

Okay.

What, what is your fiancée gonna be doing for a living?

She's gonna be doing esthetician. She's currently about to go to esthetician school and she's gonna be graduating in January and then hopefully finding a job. But that'll be pretty soon before marriage. So there's not gonna be a lot of income coming from her, at least before the marriage starts.

What's, what's you all's plan as far as, cuz both of you have a, a bit of a ramp up to income.

Mm-hmm.

What's, what's you all's plan? What have you said as far as living?

And currently, yeah, I mean, the plan currently is just kind of like y'all always say, just live below the means. But it's kind of hard, you know, we're young and we want to do this, that, and the other thing. So it's kind of—

this, that, and the other thing cost you $120 grand, you're done with this, that, and the other thing. Yeah, this, that, and the other thing is— that's, that's the name of your 4 new jobs, this, that, and the other thing.

Okay, I like it. I like it.

Um, yeah, that's the biggest thing that I see as an issue here, debt aside. Just getting your income up enough to where you guys can come together and have a life together is what I'm looking at. And then once you can get on some solid footing with your income coming in, of course, yeah, we need to tackle the debt. Um, does she have that?

You need 6 side hustles in the meantime, because this, your, your, uh, your, your path to aviation is a slow plan.

Yes.

Yeah.

It's gonna be a while before you make money.

Mm-hmm. That, that is true. Yeah, that is true. It's gonna be a while before I make, make some good money. I totally agree with that. But yeah, I mean, I mean, to, to really answer the question again, it's just, uh, live below the means and we've kind of planned it out.

Yeah. But you don't have any means. We don't have any means. That's my point.

The first thing we need to think about, and, and this is your homework, so let's make this easy to think about. Your homework tonight is brainstorming what you will do in between students. Because let's say you start out and you only have 2 or 3 students, you have a whole work week to do with. So let's brainstorm some ideas that are gonna bring in real money. And to Dave's point, it might be 2 or 3 different things or 5 or 6 different things, uh, that you can start applying. Applying for and doing immediately, because as much of this debt, the first thing is let's have means to live. But then if we can start attacking this debt and making some true headway before, I think you said April, that's going to be a win-win. And does she have debt that she's bringing to the equation?

No, she, she's got zero debt.

Okay, good.

So here, here's the thing. I don't want, and we, we, we love you and we want you to win. We don't want you working 5 hours a week. At $20 an hour when you first get married, that's going to become very frustrating for all of you, um, and it's going to put stress on your brand new marriage that you don't need. I would rather the stress be that you're working all the time. Yeah, doing 6 things. You need to get a bunch of income coming in on the short, short range. And then, um, the other thing you can do is check other flight instruction things in the area? Your good news is you're in the Dallas area. So, and can I pick up more and more of that in my field? Is there anything I can do in my field?

Yeah.

And because the quicker you build your book of hours, as you know, the quicker you get to get in the air and be paid for it.

And you both need to sit down and look at what it costs to live in your area. Look at some apartments, look at some rents, and get an idea of what it costs to live so you know what it looks like to actually live below your means and there's a target that you're shooting at income-wise.

Yeah, so if you graduate, folks, with a 4-year degree in supply chain logistics, you come out and the first day you're gonna be making $80,000 to $95,000 a year. If you graduate with a degree in aviation, the first day you have a part-time job making $20 an hour for the next 3 years until you get your hours up. So when you choose these career fields, you've got to choose what you're going to do in the interim while— because basically he's now left 4 years of education going into what we would all call an apprentice program. You have to get your hours, and you get those hours, oddly enough, by being a flight instructor. That's kind of irony of ironies.

Right, you're still learning, aren't you?

We're going to teach you while I get hours, and that enables me to fly, you know, in a commercial airliner. And so But yeah, that, and then she chose the same thing, right?

It's gonna take her time to get clients.

Yeah, you know, this is a client-based business, and it's not good— you don't walk in that day making any money. And so when you're, when you're looking at and considering careers, if you're gonna go one of those types of routes, you have to have the side hustle mentality until you get things going.. And then if you get things going, that's gonna be great.

Or it's almost flip-flopped. It's almost like you need another full-time job, and that thing is a side hustle until it builds up to be the main job.

Amen. There you go. I like that plan. I mean, we always talk about it around here. We're in Nashville, and you know, how do you get the next country music star's attention? Waiter. You know, that's how you— you know, because everybody— it's just like if you're in LA, how do you get the next movie star's attention? A waiter. They'll all tell you they wait tables and they do anything they can, and they write songs at night, and they're trying to get a break, get to play, but they don't make enough money playing in the early days to make it. And so you've got a ramp-up period in those types of careers until you get into the money.

Mm-hmm, and you have to be very— you have to be almost— everybody's gotta be intentional, but if you are in that sort of career, you've got to be very intentional about what your plan is and what you're doing.

Your B plan.

Yeah.

Or make that your B plan and have an A plan.

Yes. Yeah.

And I mean, the old— the legend that is actually the truth is that Kris Kristofferson was the janitor and, and the guys invited him to sit down and write some songs.

Really?

The reason he was a janitor is because he wanted to be in the building where it was happening, because he was writing songs at home.

Smart guy.

But he's going down the hall with a mop, not a guitar. And that's, you know, you got to have a B plan.

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I'm doing well, how are you?

Better than I deserve. What's up?

I am wondering if you can help me with a 401 question. Um, my financial advisor is advising me to switch from contributing to the company's Roth 401 to a traditional 401, um, due to basically my income level and the amount of tax savings that I would receive now.

Wow.

Okay.

Well, you need to get a new financial advisor that can actually do math.

That was kind of my guess, but I didn't know if there was any specific circumstance where that would be beneficial.

Yeah.

So what do you— how old are you?

I'm 40.

Okay.

And how much are you going to be putting into the 401?

I'll basically be maxing it out.

Okay, so you're gonna put in how much in dollars?

About $24,000.

Okay, we'll call it $2,000 a month. Okay, if I put that in the retirement calculator, that says that you're gonna have at 65 $3.1 million. Okay?

Okay.

And for 25 years you put in $24,000, and I'll have to add up what that is. You want to do that for me? Say 25 5 years times $24,000. And so that's going to be $200-something thousand, I believe. But, um, so the deal is this: everything above your contribution is taxable. So you're saying— what was the number?

$600,000.

Okay, $600,000. So you— he's telling you to save taxes on $600,000 of the $3.1 million, but for doing that, you get to pay taxes on $2.5 million.

Lovely.

You see what I'm doing?

Yep, I know what you're doing.

The growth would be 3 point— the total amount would be $3.1 million. Of that $600,000 you put in, which is tax— you're going to pay taxes on the whole thing eventually if it's traditional, but you save on taxes today in present value dollars on the $600,000. So to save taxes on $600,000 for a period of 25 years that you do have to pay back later, you end up paying taxes on $2.5 million. It's really bad math.

Okay.

Yeah. Now, and here's the other problem. We'll go ahead and take it a step further. If you have a Roth IRA, there's no mandatory withdrawals. I'm 65. I've got millions of dollars in Roth IRAs and 401s, okay? And I'm not going to have to draw any of it at 72.5 on required minimum distributions, RMDs.

Okay.

And when I die, it passes to my heirs with no income tax.

Got it.

If you'd leave this $3.1 million to someone and it's all taxable under the new Biden laws that came in when President Biden was— the Secure Act— they will have to pay taxes on the $3.1 million. You don't have to because you died, um, because— but you never got around to paying taxes on because you never drew out. And so an inherited IRA is all taxable if it's traditional, and they have to do it within 10 years. So they're gonna pay taxes on $300,000 a year for 10 years, which is crazy for your heirs. So it's, it's harder in retirement, it's harder in inherited, and you pay light-years more taxes. There's no case where this is not going to happen. Every one of these, any scenario. And so I'm flabbergasted that somebody could be this dumb and call themselves a financial advisor.

Yeah, I think the same thing.

We're doing an investing event. We can give you a ticket to hang out at the investment event and learn a little bit more. And maybe we ought to give one to your financial advisor as well.

No, no, no, no, no, no. I don't want them around. I'll just let— they need to stay away. I don't need to train that guy. He's already a poser. So no, hang on, Jenna, we'll give you a ticket to the Investing Essentials that George Campbell and I are doing September 1st and 2nd. It's a 2-night event on much more sophisticated investing issues than that issue. So that is a great example for you guys on why the Roth is so big. So in her case, the Roth saves on tax. She's paid taxes on the $600,000.

That's right.—

it's an after-tax investment, but you don't pay taxes on all the growth. It's tax-free. And taxes on $2.5 million would be $700,000-$800,000.

It's a no-brainer.

So it's almost a million-dollar mistake. So you guys think I'm being dramatic and saying this guy needs to be fired? No. A guy that makes a million-dollar mistake, you don't keep.

That's right.

And that's not dramatic. That's just dramatically wrong. You know, so, wow.

Wow.

You and I had one or two of those yesterday.

Yeah, the other day.

Where the financial advisor's off the rails.

Not very good. Yeah, you have to vet these guys. And we have SmartVestor Pros that we vet that you can interview them for yourself. They're trained on Ramsey principles. And you can trust that what they're telling you is based on how we teach things.

Yeah. Now, if you want to get real technical, a little bit in the guy's defense, but it won't still might be much.

He was short-sighted. He was thinking about her taxes for the year. He wasn't thinking about long-term.

Well, he could even be a total financial nerd, and so, okay, the present value of taxes on $600,000 is gonna grow to this, okay? So if you don't pay taxes on $600,000, let's call that $200,000. What would that $200,000 grow to over 25 years?

Okay.

Not enough to offset the mistake he's making.

A million-dollar mistake.

But the present value formula is, you know,— it's part of prob— so my guess is the guy got so nerded out, he got twisted up in his own fishhooks.

That's very possible.

That's my guess. Maybe he's not as dumb as I thought, but he still ended up dumb. Because these guys that— I grew up in that world, in the financial world, and they don't mean— most of the time, they're not crooks. And most of the time, they're not really intellectually just dumb. They get paralysis of the analysis, as if this stuff all happens in a vacuum instead of happening out here with flesh and blood and bruises and cuts and divorces and deaths and disabilities and job changes. And they forget that this stuff is not just a— it's not a simple linear formula because there's people involved. And so you can't do that. So another fun example, while we're being nerds for a minute, When the Roth first passed, we had the Financial Peace University class taught, and we had a retirement and insurance lesson. And then we had to go reshoot that because the Roth changed everything.

That's right.

'Cause everything was traditional before the Roth. That's how long I've been doing this. And what we kept doing was we got caught up in, me and the guy that was doing it, we got caught up in the same stupid trap of being nerds. 'Cause here was the trap. In those days, you could put $2,000 into a Roth IRA. Back then.

That was the limit?

That was the max. Wow.

Okay.

So, $2,000 into your Roth. And we kept saying, "Okay, but $2,000 after taxes is only $1,600 or $1,400 or whatever," right? And so, we were trying to compare apples to apples, the $1,400 growth with the $2,000 growth, which is accurate if you're in a test tube. But you're not living in a vacuum. You're not living in a test tube, because what happens is when you tell people to do traditional or you tell them to do Roth, in either case they put in $2,000. And so effectively, when you put in Roth, it took you almost $2,800 of income, because you had to pay taxes on it, to get to the $2,000. So it's not apples to apples to compare $2,000 Roth with $2,000 non-Roth. But nobody in the real world does that. They just max it out.

They're not thinking like that.

They just go, I'm putting— what did she say? She said, I'm putting, I'm fully funding everything my 401. Well, she didn't go, oh, I have to calculate the after-tax implications. No, she's just like, I'm gonna put in the full $2,000 or the full $8,000 or whatever they say, whatever the number is, right? And we don't calculate. But we were trying to nerd out and go, well, it's not really fair to compare $2,000 after-tax with $2,000.

But in the real world, no one's thinking like that.

People don't do that. They just fully fund the stupid thing. So in a sense, when we tell you to do Roth, we're tricking you to put more money in.

Yes, I can see that.

Because it's an after-tax investment.

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Buying or selling real estate is expensive, and making a mistake in real estate— you make a mistake on a car, it's a couple thousand bucks. You make a mistake on a piece of real estate, it's $10,000 or $15,000, $20,000. We had one the other day, the lady sold her house for $350,000. The appraisal came back at $300,000, I think it was $380,000. Yeah, she was like $30,000 off.

It's too late to fire him by then.

Yeah, you got a real estate agent that didn't know what they're doing. We listed the house too cheap, and we sold it. It's under contract. Oh my gosh. Yeah, so you want a pro if you're doing a real estate transaction. And a pro is somebody who's done a lot of transactions lately, not someone who got their license 3 weeks ago and you know them from church. Eh, eh, eh. Wrong answer. Only one good part of that, and that was church, but that was it. The rest of it is a no, okay? So that's it. So Ramsey Trusted is where we vet real estate agents for high performance and following the Ramsey Way and having the heart of a teacher. And they're going to have your best interest at heart. And you can find a Ramsey Trusted Agent for free at ramseysolutions.com/agent or click the link in the description if you're on YouTube or podcast. Hope is in Brooklyn, New York. Hi, Hope. Welcome to the Ramsey Show.

Hi, how are you?

Better than I deserve. What's up?

Yes, I am I'm getting ready for retirement, hopefully in the next 4 years, in 4 years. And I want to find out if I'm ready for it, being that I had just purchased a— I purchased a new home last year. I put down about 30% and I still owe about $220,000. But I want to find out if the $600,000 that I have in my 403, my— I have my 3 months' worth of expenses. And I'm on Baby Step 6 now, wanting to pay off that mortgage in the next 5 years. I want to find out if I'm ready for it, if I should retire.

What do you make?

I'm right now, I make about $150,000.

Good for you.

And I know my pension will be about $98,000 a year.

Wow.

And yeah, you're in great shape. I just, I don't know if I feel like that.

Okay. Is your $220,000 $600,000, that's the mortgage, and you have $600,000 invested. Is the $600,000 invested in good growth stock mutual funds? Is it growing?

Right now I have about, I have the option of putting what I invest now, which is 17% of my salary, in like a fixed.

No.

And then like, but so I do that right now.

No.

The 17%.

No, we don't do fixed.

I'm scared.

7% sucks. No. Okay, you should have some good mutual fund options of some kind in that 403.

I do. I did for a long time, and then in, you know, 2022, I got a little scared because—

2022, you got scared?

Yeah, because I lost so much during the COVID and then I—

No, you didn't.

Most of it back.

And did you pull it out?

I didn't, I didn't pull it out.

Then you didn't lose it.

You've, you've regained it and more.

Yeah, but you pulled it out in 2022.

Yeah, and then I put it into fixed. Yeah, for 7%.

Major mistake.

What I do now is—

yeah, major mistake.

Okay, okay.

I want you to be in good growth stock mutual funds, something like an S&P 500. Type of a thing. Okay, which I hope I can make you cry. You ready to cry? Okay, when you pulled that money out in 2022, if you had left it in there, it would now be $1.2 million. That's what that mistake cost you, because in the last 5 years, the stock market has doubled.

You don't lose money unless you take it out.

Yeah, that's when you lose money. So you pulled it out, and then the best 5 years in the last 20 have happened. And so you just missed the biggest wave ever.

But if you—

because you pulled it out at exactly the wrong time. Your timing is preciously horrible.

But if you do take that $600,000 and do what Dave is saying, and you've got 4 more years— you said you're looking at a 4-year horizon— if you invest your $1,800 or your $1,900 a month, that still gets you to $1,042,000.

Yeah, you're gonna be— and that's in 4 years, okay? And meanwhile, and you're— and so you're gonna have a million bucks if you move it into good growth stock mutual funds and you keep adding to good growth stock mutual funds for the next 5 years.

Don't take it out.

And don't take it out, all right? Just ride it, because you're gonna be making $100,000 a year as a pension. And in that 5 years, get the mortgage paid off, and then that house is gonna be worth a million dollars, and you're gonna have a million dollars. And by the time you get to 70, you're gonna have $4 million. So you're going to be fine. Live on your pension and let this all grow. Yeah.

It's just that, you know, I grew up very, you know, hand to mouth and my parents are not very good with financial. So I did the bankruptcy thing. I even did the debt consolidation. So to be where I'm getting, like where I am now, I think you're, I think you're in pretty good shape.

I just don't want you to be in fixed. Alright. And growing up hand-to-mouth doesn't mean be dumb.

Yeah, you've gone far beyond that at this point.

Yeah, you're way beyond hand-to-mouth. You got a $100,000 a year pension, a house that's gonna be paid for by the time you retire, and a million dollars will be in there if you go do what we tell you to do. And if we're half wrong, you're still okay.

Take it out of fixed and put it back in the stock market?

Put it back in the mutual funds.

Mutual funds, not the stock market. It is the stock market, but good growth stock mutual funds. Something like an S&P 500. That's what I would do, and I'm older than you.

Yeah, and start describing yourself based on who you are today, not who you were 50 years ago.

Yeah, I had to learn a lot, and I have learned a lot because of where I came from. That's a proper narrative, not, uh, I have to do fixed because I grew up on a dirt floor. No, you don't have to fix because you grew up on a dirt floor. Matter of fact, that's the reason to not do fixed.

Scarcity.

Yeah, exactly. And panic and fear and all those things. It's half glass full thing. Yeah, half glass empty. So yeah, that's the thing. And so, but it doesn't also— doesn't mean you need to take rash risks. I'm not telling you put it in crypto or go to Vegas, and I'm not telling you to bet on DraftKings. None of these stupid things. That's the other side of the coin, right, where you go crazy. And so no, this is a steady and boring It's just not as boring as fixed. So here's a good rule of thumb, folks. Give you a little math formula. Today's show has been a math show today so far. There's an old-fashioned thing that was taught to us years ago, us math nerds, called the rule of 72s. If you take an interest rate and you divide it into the number of 72s, it will tell you how long it takes a lump sum to double. So an example would be 7.2 years divided in— or 7.2 7.2% interest rate divided into 72 would give you 10 years for the lump sum to double. Reverse it. I'm gonna put— I'm gonna invest it at 10% instead of 7%.

Then it will double every 7.2 years, right? And so that's basically what we're telling her. Are you gonna wait 10 years for this to double or 5 years for this to double? That's kind of the formula difference between 7 and 12. That's what's gonna end up. So, and that's the $600,000 we're not touching. And if you just said, okay, I'm gonna run this thing out at 11.5, 11.8, which is the average that the S&P has done, divide that into 72. Well, there you go. Now we've got about the time she retires, it's doubled, which is what you did.

Yeah.

And you can do that in your head. You don't need a calculator to do that. It's not bad at all.. And so just divide the interest rate that you're going to invest in into 72, and it'll tell you how long it takes a lump sum to double. So you start with $100,000, then I'll be at $200,000, then I'll be at $400,000, then I'll be at $800,000, then I'll be at $1.6 million, and then I'll be at $3.2 million. And every time, every time. And so if you divide 10 into that, it's just 7-year rolls. 7, every 7 years. So take your age and 3 times 21 years from today, it's going to double 3 times. Yep. And that gives you some confidence that you're on the right track with some of this stuff. You can also use the Ramsey Calculator, which is what we're using when we're on the air. It's on our computer. It's on— you go to our website, the Ramsey Retirement Calculator, and all it is is a basic financial calculator. It's nothing super fancy, but it's just an easy way to do it. And you plug in and go, what if I put $100 a month at 12% from age 25 to age 65?

It's $1,172,000. $100,000, and the calculator will show you that. Okay, say I can be a millionaire if I invest $100 a month from age 25 to age 65 at an average of 12%. Hmm, where'd you get 12%? S&P has averaged 11.8% since it began 80 years ago. Okay.

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Jake's in New York City. Hi Jake, how are you?

I'm very well, how are you?

Better than I deserve. What's up?

I drive an older car, a little bit higher mileage. And I was wondering if it would be smart or irresponsible to buy a $45,000 car around there. Okay.

Well, the way we determine if something's irresponsible around here is ratios and percentages. So let's play with some numbers for a minute. Number one, you paying cash?

Mm-hmm. Probably putting down and then financing. Okay.

I can answer your question then. No, it's irresponsible.

Irresponsible.

You should never have a car payment. You should ride a bicycle before you have a car payment.

How long have you been listening to The Ramsey Show, Jake?

A couple years now.

Okay.

Yeah, cars are the largest purchase that Americans make that goes down in value, and they handcuff you financially. So you'd never need to finance one under any circumstances. There's not a, not a circumstance ever in 35 years of doing the show we told somebody to buy a car and finance And if you're going to buy a car, you should measure all the things that you own that have wheels and/or motors. And if the value of the total of those things, and all of those things go down in value, if it's wheels, motors, batteries, I don't care, add it all up and it goes down in value, if the total is more than half your annual income, you have too much tied up in things going down in value. So that's boats and campers and RVs and Sea-Doos and tractors and lawnmowers that are now $12,000 and all this crap, right? And cars and cars and Teslas and cars and trucks and anything you want to add up, anything you want to have. And I've got a bunch of stuff with motors in it. I'm an old redneck. I like things with loud mufflers, and I like, I like cars, I like trucks, I love, I love all of it, but they all suck as an investment.

And so they need to be a small part of your financial picture. Otherwise, you've got too much invested in things going down in value, and then you're scratching your head and wondering why you're broke. Why you're doomed to be middle class.

Think about this, and this is something I've spent a lot of time thinking about. If you synthesize the data, you're gonna end up with about 60% of working Americans having car payments. Then you look over and say, well, that's suspiciously close to the amount of people who are living paycheck to paycheck. Check, which is also suspiciously close to the amount of Americans— around 60% would say they are concerned about retirement because they don't have enough saved. That is a very interesting correlation. It's the car payment.

That's, that's why they're concerned about their student loans for their kids. Yes, because they still have theirs.

Yes, because you have a car payment. That's what's keeping you middle class. It's what's keeping you paycheck to paycheck. That's the money that you should have been investing for your future. It's tied up in your car payment. And many of us have two. So—

And the car industry, the cars that they're building today are just fabulous. They're engineering works of art. I mean, most of the cars— there's a few of them piece of crap, but the vast majority of cars today are phenomenal. And boats, for that matter. Phenomenal vehicles. And compared to, you know, whatever, the back in the day, okay? They don't make them like they used to, thank God. They're a lot better now, you know. But the car industry has also done an excellent job of making people associate their personal worth with what they drive instead of looking at maybe your net worth.

Yeah, absolutely.

I am what I drive. Have you seen those like the jokes about if you drive this, you're this?

Yes, I have.

And some of them are funny and some of them you can't repeat. And so, but yeah, they're funny as crud.

And so, I mean, if you really look at it further, it's in direct opposition to what people say their intentions are. Because when you talk to most people, they say, "Well, what do you want for your life? What do you want for your family?" "Well, I want for my kids— I don't want my kids to live the life I lived. I want to be able to send my kids to college. I want to be able to retire. I want to be able to play golf." Right? You say all these things about what you want, but you're not showing it with your dollars if you're carrying around car payments.

You're not with your actions and your behaviors. You're exactly right. You're exactly right. So Jake, you got us off on a tangent.

Yes, you did.

We're preaching to everybody else, not just you now. But no, you don't get to buy the car if you don't do what we say. Not that one anyway. So, you know, that's the angle. And you know, you talk about that, that's a funny thing. When we started talking about this years ago, I was doing a seminar with a guy in the financial world, and he said that their company had done surveys and asked people, you know, "Do you think it's important to save for your children's college?" 97% said yes.

Yes.

"How many of you are saving for your children's college?" 3%.

Really? Wow.

They're young. 97% aren't doing what they say is important.

Yeah.

And that is very interesting, very interesting number. I don't know if it's that today, but that was a long time ago.

But people will say they're not doing it because because they can't and they leave it there, and that's not the reason.

Exactly.

They're choosing not to.

Declan is with us in Atlanta. Hi Declan, what's up?

Hey, how's it going? My question is, I was a third employee at my company. I own about 1.5% of it. I was offered to buy back my shares at a $50 million valuation, which in my opinion is low for the company, which is fine just 'cause we're trying to get, you know, clean up the cash a little bit.

Wait a minute, I misunderstood you. Did you say you own 1.5% the company, it's worth $50 million?

Yes.

Your 1.5 is worth $50 million?

No, no, the company's worth $50 million.

Oh, okay, so it's capitalized at $50 million. Can, can you sell your 1.5 for $750,000?

I could, in theory.

Well, no, it's not a theory, it's a question.

Yes, I could.

Okay, all right. And, and so, all right, now your question's what?

I mean, I think the company's worth about $250 million, so it's quite low. So that's why I prioritized—

I thought you said it was worth $50 million.

The shares are being offered to be purchased back at $50 million by the company at a $50 million valuation.

Uh-huh.

Okay.

All right.

And you're how old?

I'm 29.

And what do you make a year? $155,000. Okay, cool. All right, and your question one more time. You think it's worth a lot more than the valuation that they're offering to buy back at?

Yes.

And so your question is what?

My question is, so I, I bought or I exercised my options to purchase my shares this year, um, which cost me about 90% of my savings between the actual purchase of the shares and the AMT tax. Um, so on the surface, I would never have sold the shares at the $50 million valuation because I think the company's worth about 5 times as much. But I'm wondering if you think it's a bad idea to distill my savings by so much.

You already did it.

Well, I can still sell the shares that I purchased at the $50 million valuation.

And you bought them for what?

I mean, it varies in range from $15 per share up to—

I mean, you said you cleaned out your savings. What was the number you put to buy the whole thing?

What's the thing? Oh, uh, well, I haven't paid all the AMT tax. I don't have to pay until I actually pay taxes in 2027 for the 2026 tax year.

Honey, how much, what's the check you wrote to buy the shares?

I paid $17,000, but I'm expecting to pay another $80,000 in AMT tax.

Okay. All right. So you got $100,000 and some including tax invested and it's worth $750,000.

Yes. Okay.

So let me ask you this. If you had $750,000 in the middle of the table in cash, sitting in your kitchen table, would you go buy these shares? You would, because you think they're worth 5x that, correct? Yeah, I wouldn't. It's too big a gamble for me. Scares the crap out of me. It's a startup company, brand new, and it's not even publicly traded, I don't think, is it? No, it's just private stock.

Stock.

Yeah. And so their valuation is up to them on how they run their accounting. Yeah. Which is why it's all over the place.

And when they choose to—

are they planning to take it to an IPO at some point?

Um, I think it's more likely that we sell, which is another reason I chose to buy the shares when I did, because of the QSBS laws and the tax protections that are provided upon a QSBS liquidation.

Okay, so let me tell you, this is a— you're playing the roulette wheel in Vegas and you've got it distilled down to where you don't think there's risk here. Uh, but basically, you put $100,000 on the table, and so far, they stacked chips in front of you that we think we can get $750 for. And you're gonna push the $750 back on to another bet, hoping to get 5x that or 10x that. And sometimes you don't hit red. Sometimes you hit black and you get zippo. So you're sliding all your chips in the middle of the table, James Bond. This is a high-risk play.

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Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. Jade Washaw, Ramsey personality, number one bestselling author, is my co-host. Michelle's in Pensacola. Hi, Michelle, what's up?

Hi.

Um, so we're trying to figure out how we can get out of this constant spiral of going into the red every month. My husband has been teaching for 10 years and he only makes $50,000. And so he has a second job working at a grocery store that they can only schedule him part-time, so at most he makes $80 a week. And then he's also trying to do lawn care on the side, trying to see if he can't find somebody to sell woodworking stuff to. We've both been doing DoorDash and Uber Eats, Sparking, all the side gigs that we can. Um, and it feels like we're just spinning our wheels and we have no clue where to go to get income up. He's applied online, and I've been listening to you for a few days. I know that you have to know somebody, and so that's been hard for him to find something else with a teaching degree. He's tried going into the military, um, and one branch said no you know, your GPA isn't high enough actually for that route. And so, um, I don't know if I've heard about where you can make digital marketing stuff and sell it on Amazon and it's passive income, but I don't know how legit that is.

And it's not, um, yeah. So, uh, how much debt are you guys carrying?

So I have student loans from years ago, um, that are actually in deferment right now.

So that's not, that's not causing you a lot then. Okay.

What's—

yeah, what was your degree in?

Um, so I actually wasn't able to finish. Um, I was dumb my first year of college. They told my high school, said go to a private school, it's great. And then I made stupid choices.

Well, what'd you study? What'd you study? What were you interested in?

At first it was chemistry, then I changed to teaching, and right now we've got 3 kids 7 and under. And so to finish, I'm one semester away, but to finish I would have to work a full-time teaching, you know, student teaching job while paying for the college classes and have to pay for child care. Sure, I'm doing that. And so I can't finish until My kids are old enough to go into school or we can rank them up.

So wait a minute. What, how much debt, how much is on the student loans that you're not paying on?

It's about $60,000.

Okay.

And what, what debts do you have that you're paying on? Car payment?

The current, yeah, we have a truck that he uses for his landscaping and, um, I don't care.

What's it, how much do you owe on the truck?

Um, Um, we looked at the other day, uh, we owe $24,000 and we could sell for $21,000.

Good. And what— sell it. And what's the next one?

Um, it's a van and it's about the same. We can get it, we can get $19,000 out of it, but, um, we owe $24,000 on it too. Um, I just don't know what we would do because we can't get a loan or anything to get another car and we wouldn't clear anything to to have any vehicles after that.

What other debt?

That's it.

No credit cards?

No, we, we have a secured one, but it stays at zero. Um, we only got it because of renting a car a few years ago, and so it just— so you're just—

you're just making the payments on the two vehicles, and so it's just a struggle keeping groceries then and the lights on?

Yes.

Okay, how much are you guys— how much are you bringing in as income every month combined? The two of you?

Um, so I bring home probably at most on good months about $1,000 to $2,000 a month, but that's only during the summer while he's able to stay home with the kids, or he does.

And what's he bring home?

So he brings home the $50,000 from teaching, $80 a week from his grocery job. And is he working 4 hours a week at the grocery store? Um, he makes $16 an hour and they only schedule him from like 4 hours, 3:30 to $80 for 4 hours. Yeah, not all those schedule him.

It's not even worth doing. It's a joke.

$3,500 from the teaching and I don't know, another less than $1,000 from the grocery store, from everything.

Yeah, yeah, yeah. He brings home after insurance and everything, we actually get home $3,000 from teaching.

Okay, plus your $4,000.

Do you guys have a budget? What's your monthly payment?

The rent is $2,000.

Okay. Do you have a budget?

I just signed up the other day for the free trial with EveryDollar. And so we've been trying to figure that out.

Good. So we'll start there. And what you're going to find is what you've just discovered, which is obviously your rent's 50%. The rent's not the problem so much as the income is the problem.

Yeah.

But in the meantime, on that budget, The way you need to line it up is by your four walls and keep those things first and foremost right now. Obviously you gotta pay rent, right? You gotta, you gotta do that. You gotta make sure lights and water and utilities are on. You've gotta make sure you've got groceries and you've gotta make sure you've got transportation. Now, aside from that, all of my focus would be geared towards, we've got to work, work, work, work, work and find $3,000, $4,000, $5,000.

Not 4 hours a week though and call that a job. Yeah, okay, the grocery thing, you know, you— we've spent more time talking about it than he does working. I mean, he doesn't even go over there hardly. 4 hours, it's not even worth doing. Yeah, I mean, that's a joke.

He's actually talked about stopping that.

What he needs to do is— what he needs to do is start tutoring. What does he teach?

And so he— so he teaches PE, and that's actually something he's in the middle of trying to do is start like a homeschool co-op.

I don't want to start a homeschool co-op. I want to teach a kid to play basketball, $50 to $40 an hour.

Give him— why can't he be a skills coach?

Yeah.

Offer— everybody's in private sports. Why can't he do private teaching?

A buddy of mine that played D1 basketball, and he makes $50 an hour teaching 13-year-olds how to play basketball.

Yeah. Yeah, like, that's the homeschool thing. He's trying to see—

can he work with the school? Can he work with the school and do a camp? And put on a camp. That's— there's so many— the point is, there's so many ideas. I'm worried that he's lost his spark.

There's a whole bunch of things he's doing not at all, and you're listing them. An hour a week at landscaping, 4 hours a week at the grocery— none of this is anything. That's why you don't have any money. So we need something that we're working 40 hours a week at, in addition to us teaching.

Yeah, because the—

and then, by the way, if you've had— if you've got all but one semester in chemistry and teaching, you can tutor chemistry. So go over at the high school and tell people that you— that you tutor kids on chemistry, and they'll come to your house in the afternoons, and you charge $40 an hour.

Okay, yeah, I didn't think about that.

I'm a chemistry major. It's a whole lot better than freaking DoorDash or $16 an hour bagging groceries. Yeah, yeah. And these cars Cars have to go. They're insanity. You guys have bought cars like you make 6 times as much income as you make. I mean, what the crud? A $25,000 truck?

Are you crazy?

That has got to go. So keep the van, get rid of the truck, and then quickly pile up enough money to get you a dump dumb butt $4,000 van and sell this dumb butt van. Your car payments are ridiculous. As your business grows, everything becomes more complex. There was a time when Ramsey Solutions had too many disconnected systems and not enough visibility across the business. We wasted too much time chasing information instead of making decisions. That's why we got NetSuite. NetSuite brings your financials, inventory, CRM, and more together in one place. More than 43,000 businesses trust NetSuite, including Ramsey And now they're taking the next step with NetSuite Next, making it easier to put AI to work across your entire business. NetSuite Next helps you make the most of your time, automating routine work like forecasting demand and following up on overdue accounts. With NetSuite Next, AI is built into everything you do, so you can ask it questions just like when you're talking to a member of your team. And right now you can try NetSuite Next for free. If your revenue is at least 7 figures, go to netsuite.ai/ramsey. That's netsuite.ai/ramsey. Today's question of the day is brought to you by Yrefy.

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All right, today's question comes from Grant in Montana. He says, "You teach your listeners not to panic during a stock market downturn and to just hold on for the ride. Is there ever a scenario where one would consider changing their investment portfolio? For instance, if someone is getting close to retirement?" That's an interesting question. Dave, I'll let you take that. What do you think? I mean, I could tell you what I would tend to—

Well, the people say when you get close to retirement to move it, that is a theory in financial planning called asset allocation. This says, the theory says, when you're young, take more risk, and as you get old, move the assets away from risk because you need to be able to count on them.

Target date funds.

I disagree with the theory, and I certainly disagree with the implementation of the theory, and let me walk you through why. Okay, so the typical financial planner that follows that theory will tell you, okay, I'm 65. At 65, you should move your money towards bonds and growth and income mutual funds, which is largely bonds and dividend-paying stock companies, and get away from aggressive growth mutual funds, get away from growth stock mutual funds, get away from something that's an S&P, and move even into high-yield savings. Okay, so when you do that, you lower your returns from—

significantly—

10 to 12% down to 6 to, or even 5 to 8% would be your portfolio change. But you take less risk. The reason that is dumb is that when you retire, if you have saved substantial money like we teach, and you get there and you've got $2 million, you've got a million dollars, which people call here all the time that have, or have the potential to, we talk to them all the time. We show people how to do that. That. So if you have $2 million, when you retire, you don't need the whole $2 million right then. So if it goes down a little bit the next year after you retire, it's not the big deal because all you're gonna be doing is living off of a portion of the returns. You're not even gonna be taking off all the returns. So if you've got $2 million and it's invested, it's making 10%, that's $200,000 a year. You probably don't need $200,000 a year. You're probably taking off $150,000 50. So you leave 50 in there, it's growing, and you never are touching the nest egg. So the nest egg can go up and down without really affecting your life.

You don't need the safety. When you would need safety is if you have no money. Now, if you got $100,000, maybe.

Right.

But if you've got a million, it changes the whole scenario, or $500,000 to a million, or $2 million, or $5 million, or whatever it is. Is. Okay? And so I'm, you know, I've got substantial assets, millions and millions. So I've moved zero to safety. And here's the other reason that's dumb. Okay? I'm 65. I'm in good health. All right? I'm not overweight. I don't smoke. All that kind of stuff, right? So all the statistics say, once you make it to 65, average death age of a male now is 74, females is 76. But that includes infant mortality.

Okay.

So when you make it to 65, the average death age is more like 90.

You got a long ways to go is what you're saying.

Yeah, so I got 25 freaking years for that to make 6% or make 12%, and I'm not doing that. So that's just dumb. So that's why I think the asset allocation theory is just bogus, because it assumes everybody's gonna need all the money right now, which you don't, and that you're gonna die right now, which you're not.

I think you're right. I think this question is probably someone who doesn't have a lot there, and when it downturns, it probably makes them feel the significance of whatever they're pulling off of it.

Now, what I would do to his question, and it's a good question, is there ever a scenario consider changing the investment portfolio? Yes, I would change my investment portfolio when I have a mutual fund that is not keeping up with other mutual funds of its category.

Yeah, I agree with that.

And so if I've got a great, you know, the S&P 500 is the baseline of the stock market, And so if my growth stock mutual fund is not outperforming that regularly on average over a long period of time, not in one day, not in one month, not even in one year, but if I look at mine about once a year and I go, "Okay, is this thing trendlining?" It should be competing with the S&P and beating it.

Above it, yeah.

If it's coming in less than the S&P, I should just be in the S&P. Be dumber, okay? Be easier. I could just dumb it down. And so, and I've got aggressive growth stock mutual funds. I don't compare those to the S&P. I compare those to the other indexes that are measuring that market. So I want to know other aggressive growth stock, is mine underperforming them? Then I would change my portfolio.

But you're not changing your strategy, you're just changing your funds at that point.

I change the funds. I would even change the strategy, but only over a long viewpoint. When you ask this kind of question, when you change your investment portfolio, it's often people that are looking at it every day, and that'll drive you nuts. So you need to think on this, think in blocks of time of a year and 5 years and 10 years. And when you think of blocks of time like that, then is there something indicating you need to change your mix? Yeah, that'd be okay. That'd be fine. And, or if something has happened and, you know, your view of the world is different, okay? That's fine. So I'll give you an example. If I died and Sharon looked at what we were doing and said, "Okay, I understood it when Dave and I were doing it, but I don't like it. I don't like that. I'm gonna go all safe just because I want to sleep better." Uh-huh. Well, she could do that. That would be okay. And so if I talk to someone that's 78 on the air here and I'm talking to them, they just any amount of variance is going to cause them to stay awake at night, I'll just put them in high-yield savings.

That's fine. I'd rather you sleep at night than do this. But there's all kinds of evidence that says you'll be fine doing it the other way. But if your emotions can't handle it, then that's your risk tolerance, then we wouldn't do that. We wouldn't tell you to do that. But no, I— Funny thing about the financial world, and it seems like today's been the day on this.

It really has.

The last 2 days, but is that the stuff we're taught in that world, and George is studying the CFP materials right now, Certified Financial Planning materials, and he and I are having these great discussions over some of the crap they're shoveling out. And he's learning some good stuff academically, but it's also is that they present this stuff like it came from the Bible or something. Like it's absolute truth because it came from this group of nerds. And this asset allocation model that you have to move to safety as you get towards 65 years old is taught with such fervor that it's as if, if you don't believe it, you don't believe in the law of gravity or something. And so me being on the air for 30 years saying, "I don't believe it. I think it's a bad plan." All those guys, they go bananas on Dave Ramsey. Dave Ramsey doesn't know what he's doing. Oh, he's gonna cause all these people to lose everything they own. They're all gonna be poor because of Dave Ramsey. Another, another, have a lot more money. So, but—

Do you have the same philosophy for things like 529s as the child gets closer to—

Yeah, same one.

Keep the same.

Yeah, because here's the thing, you're not taking the risk. The day they go to college, some of that money is not gonna be touched for 4 years.

That's right, it still has time.

And so if the market, if Trump bombs Iran and the market drops, It has time to recover. Don't panic and take it all out and lock your losses in. You know, in 2008 when the market went in half, people talked to Warren Buffett and said, "Mr. Buffett, you lost a trillion dollars today," or, "You lost a billion dollars today." He goes, "I didn't lose anything. I unsold it." You lock your losses in when you sell it. As long as you're holding it, you're riding the roller coaster, and no one gets hurt on a roller coaster except those that jump off in the middle of the ride. And so the same thing's true there. Now, what you could do What I would do, if you're coming into college and let's say you got $200,000, I might pull the first year out and put it in high-yield savings. Put $50,000 over there.

Yeah, you know you got it.

And then that other $150,000, and then maybe the next year, you know, I start talking about that. But the chances of that statistically being down over 4 years?

Very slim.

Almost zero.

Yeah.

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Results may vary and no specific outcome is guaranteed. Well, we wish we could get to every call and question here on the show. If you've got a money question and you want an answer for your situation, head over and use Ask Ramsey. You go to ramseysolutions.com, and Ask Ramsey is our free AI tool that's built and trained only on proven Ramsey principles and answers. So we didn't put anything else in the data set, so you're not going to get anything except a Ramsey answer. If you want an answer from the internet, go the internet. But if you want an answer from Ramsey, Go Ask Ramsey. Your question today is easy at ramsysolutions.com/askramsey. It's a great AI tool. We're trying to train it to be smart aleck like me. It hadn't quite got there yet, but we'll get there. Ask your question today, ramsysolutions.com, or click the link in the description if you're on podcast or YouTube. John is in San Francisco. Hey John, what's up in your Hey, thanks for taking my call. Sure, how can we help?

So, uh, so I'm dealing with, uh, 3 pending debt collection lawsuits right now, and I have another account that's still in collections that's probably going to turn into a 4th lawsuit if I, if I don't get it resolved soon. I'm trying to negotiate settlements and it's been pretty overwhelming. Does it make sense to hire an attorney to fight them or even look into like, uh, Chapter 7 as a last resort. I don't think I'm there yet, but wanted to know all my options. What's the amount?

How much do you owe these guys?

So the 4 in total is $20,000, $21,000. Mm-hmm. $21,600. The 2 I'm trying to negotiate, um, you know, the lowest they'll come down to is $6,000. Um, you know, I tried offering $3,000, but you know, they won't budge. Uh, I do have, uh, around $8,000 in savings just to try to deal with this, but, uh, okay.

So you've got, you've got 2 in court, is that right?

Uh, so 3, 3 in court.

Okay. And the 3 in court are how much? Give me the amounts on those each.

Okay. So yeah, so one's, uh, uh, $3,100. Okay. Okay. The other is $4,300. Mm-hmm. Third one is, uh, $5,500.

Okay. And these are credit cards or what?

Uh, they were personal loans that I took out in my early 20s.

So you can't take the $8,000 and clear the top two?

Yeah, you could. Have they offered you settlements on any of these?

They offered, uh, $6,000 to take care of the first two that I mentioned. Love that.

Okay, that's $7,400 discounted to $6,000. Okay, so you could do that. I mean, you'd be down to $2,000, and then you got $5,500. Now, personal loans, are you talking about with a bank or a ripoff finance company or what?

Yeah, it was just like through the bank or through, you know, just through—

What do you make?

Uh, $95,000 a year.

Why are you behind on these little bitty loans if you make $95,000 a year?

So I only started making $95,000 for I think about a year. Before that I was making maybe $65,000 at most.

Yeah, but if you make $95,000, you could have cleared $21,000 in one year. Why haven't you?

Uh, well, I also have, uh, some, some more debt on top of that.

How much?

Um, $12,000 on credit, uh, so about $7,000 in credit cards and the rest in the student loan.

Okay, what about—

how much do you owe on your car?

Uh, no car payments.

Are you married?

Uh, yes. Well, not married, I have a girlfriend and, and one kid.

Okay, but how old are you?

I'm 31.

Okay, okay. And you're— is this family? Is this— I'm putting family in air quotes. Is everybody together? Like, you all live together?

Yes.

And you're all contributing? Okay, okay.

I mean, I— yeah, I do want to get married. He just, you know, it's like, uh, I just want to deal with the debts first before— I, I don't want her to be liable for any of this.

She's not going to be liable for it.

Yeah, that's neither here nor there. I think part of cleaning up the situation— all of this is a mess, not just the financial side. So part of cleaning up this situation is going to involve the relational side too. And I think you'll be shocked at how much peace you get from putting a nice little bow on your family situation and making it legal. And then now you can actually have real support as you go and start cleaning up this mess. And to Dave's point, you make $95,000 a year. I would—

you are not bankrupt. That's one of your answers. Okay. Yeah, you're not even—

take the money that you have, clear off the first two Now you got the $5,500 one and you never said what the fourth one was.

Well, it's, uh, the first, the fourth one was $9,292. Okay.

Okay.

And that one's not even in court yet. So you kind of have to focus on what you need to focus on. The first two that are in court, you can clear those and then you're not gonna be far away from getting the money that you need to clear the third one.

You make enough money to just pay these things.

Yeah.

Especially if you get settlement offers. So pile up, you know, you've got $8,000 now. We're gonna spend $6,000 of it and get rid of these two. Get it in writing before you give them any money. Don't give them money unless you get the settlement in writing. Did the offer, the $6,000 offer, come in writing on email?

Yeah, yeah, I can ask for it. The only thing that concerned me was that they wanted like my bank account number.

No, I'll wire you the money or I'll give you a prepaid debit card number. Go get a prepaid debit card for $6,000.

Do not give them access to your checking account.

Under any circumstances, they'll clean you out. They lie. Okay. And so, but, you know, you can clear every bit of this and there's nothing to panic about.

I think.

But here's the deal. You're going to have to get proactive and get after this.

Yeah. You're in a state of chaos.

You've been screwing around for a year.

Your life is just in chaos and you need to, you need to clean it up. Like I said, marry— go ahead and marry the girl. You need a budget and see where this $9,500 is going or $95,000 is going every, every year. You need to put some, some formation to your life. And I think that that's going to help you out a lot. And I think that this is just the kick in the pants you need to—

no more eating out, no more partying, no more happy hour, no more nothing. All you're going to do is work and pay bills and get your life back. Your life is screwed up upside down because you're not addressing these things and they're coming after your throat. And so, you know, you gotta address them. The good news is we can get rid of 2 of the 4 that are pending going towards this. Cut up the credit cards, get on a budget. You can clean every bit of your debt, all of it, everything you've told us about in a year. Everything. And what we'll do is we'll set you up on the EveryDollar account and, yeah, so our suggestion is clear those 2, get married this weekend, doesn't cost any money. She's not liable just because you got married. And then the 2 of you sit down as a husband and wife and start building a life together, involves cleaning this mess up. But y'all are just running around acting like you're freaking 16 years old, and you're getting your head taken off doing it. So this is no longer a game. We're down into adult land now, and that's what we've got to play.

You got to play serious. And no, you're not bankrupt, and no, you know, there's no— you don't need an attorney. Because if you go to court with or without an attorney, and the question the judge asks is, is this a valid debt? Yes. Have you paid it?

No.

Guilty. That's simple. You lose the case. Because it's not a question of your character. It's not a question of what happened. It's not a question you didn't have a job. It's not a question of your mama. It's not a question of nothing. Just simple. Did you pay the debt that you owe? No.

Boom.

Judgment.

Okay?

That's simple. The lawyer can't keep that from happening. The only thing a lawyer could do is be— maybe, maybe could be negotiating better than you've been negotiating. 'Cause your offer here of $6,000 is not a great offer, but given that you've got 8, I'd get rid of— I'd do it in a heartbeat.

Plus, it's been around forever, so it's time to just— case closed.

Yeah. So, these things, when we ignore them and sweep them under the rug, we not only get a lumpy rug, they have a high rate of resurrection. And now you have zombies walking all through your— they come up out of the grave and you have zombies walking through your house. And because we didn't deal with them, and so what you've got to do is take the zombies out fast, hardcore.

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Patrick's in Madison, Wisconsin. Hi, Patrick. How are you?

Hey, how's it going, Dave?

Better than I deserve. What's up?

So I'm 23 years I recently graduated college, been working for a little bit here, and I anticipate my salary over the next year being about $85,000.

Good. What'd you get your degree in?

I'm working in software. That wasn't exact. I studied business.

Okay, good. Great.

That's where life brought me right now.

Yeah, well done. Good for you. $23,000 and $85,000 is no chump change. Good job.

Good job.

Thank you. Um, and so I have, I guess my question here, I have about $25,000 in student loan debt and that's about, I think it's 4.25% right now. Um, whereas I could initially, I was trying to pay that off as aggressively as possible, but now I'm kind of doing some of the math here and my Roth 401k, I could hit the $24,500 limit there.. And that seems to be a lot more money in the long time. So I did the math. I like calculate the difference between what I would otherwise— I'd probably otherwise do about $10K towards that per year. Um, so it's really looking at $15,000 per year compound up until I retire. And it almost seems more— the math checks out to where maxing out—

you're leaving things out of your math formula. Though. The things you left out of your math formula are probability of completion and also risk, and neither one of those are mathematically factored in. And you've added risk by leaving the student loan in place. And here's what we found. We studied— we did the largest research project on millionaires in North America ever done. We studied 10,167 of them. The number of them that said Dave, we became a millionaire by not paying off my student loan and instead investing was precisely zero. No millionaires did your plan.

None.

They all said, I'm gonna get completely clear of debt, have a clean life, have a— be 23 years old making $85,000 and be investing aggressively. Aggressively. You should pay off that $24,000 in 1 year or less if you're making $85,000 and you're 23 years old. And then start your 401. And don't put a dime in investments until you get that stupid student loan cleared up. This is not a freaking pet. It's not a leverage project. You left risk out of your equation.

I guess I'm just worried about like—

Okay, you do what you want to do. I told you what to do. Now you go do what you want to do. Aaron is in Cincinnati. Hey Aaron, welcome to the Ramsey Show.

Hey, thanks for having me. Uh, yeah, so my question is, um, we're basically Baby Steps 5, I would say, somewhat. Um, my, my wife's family, they have 30 acres. They gifted the kids all an acre and, uh, Um, we sold our house last December and we moved in with them, and her uncle's gonna be the one building the house, uh, at a much better price than what we could ever buy. And so my question is, um, so we have, uh, the numbers of basically, um, $130,000 down for the house, and I'm wondering, um, if I should, depending on how the build goes, to cash in my wife's 401 $37,000 in case things go over at the end. I have $127,000 in my 401, and she's a stay-at-home mom with our two kids.

No, you should not cash in a 401 to do a build, and no, you should not be $37,000 over on your build. You need to do a budget in detail and then pick the appliances and the tile and the flooring flooring and the brick and the roof that fits the budget, right? And if your uncle does know what he's doing, the budget should be accurate, right?

I guess the concern was, uh, her sister and brother both build houses by the same guy, and, uh, I guess the— what gets thrown around is always, it's going to cost what it's going to cost, and they try to stay within budget.

But with, um, so he doesn't know what he's I guess one could—

one could assume that, right?

Yeah, I mean, because I just built a house and it was millions of dollars and it was within 1% of budget because the builder put the budget together. We went over the budget before we broke ground and I told the decorator, my wife, and the builder, this is the freaking budget. We're not spending more than this, so make it work. And guess what? We did.

Okay, all right.

Don't plan to fail.

No, I don't want to plan to fail.

Well, I mean, you're hiring a guy that fails. The last two times he failed.

And you're already thinking about cashing in on the 401.

How am I gonna cover the failure? No, we're not gonna do that. That's not, that's not an okay way of doing this. This is what happens when your uncle builds your house. The, you know, they draw the plan on a paper bag on the hood of a pickup I sure hope not! God no, no, no, no, no, don't do that. No guys, when you're building a home— The reason people screw up building homes is: You need a detailed blueprint that produces a detailed budget that produces a detailed schedule line by line by line so before you break ground in June, you should know in March we're putting in the trim the cabinets are going in in February. We know exactly when they're happening to the day, February the freaking 12th. And the cabinets are gonna cost this because we bid them out. The plumbing fixtures are gonna cost this because we bid them out. There's this many bathrooms, this many toilets, and this many sinks. And we're not buying the engraved sink, we don't have a budget for it. Or we are buying the engraved sink because we have a budget for pay for it.

Whatever. I've done both. But yeah, the gold inlay crap or whatever that goes in the formal powder bath, shoot me. But I did buy it.

I was gonna say, I know you got it though.

Yeah, you know I got it. You know, it's SWI, Sharon Wants It. But we didn't make it up after we started.

You didn't go over budget.

That was in the deal when we started. The powder bath gets extra upgrade, right?

But when you set your budget, surely a portion of it is that contingency, that 1% or whatever, that it'll go over.

Like, take 2 years to round numbers.

Well, I mean, you can have in your mind a contingency.

Yeah, but—

Or whatever.

If you say I'm gonna—

You just have the money to cover it.

Yeah.

But don't plan on, well, we just don't know, we're making this crap up as we go.

That's, yeah, you can't do that.

You know, no, 'cause I mean, I built a house one time and a country music star built a house across the street and it took them 2 years longer and they spent literally twice as much money.

Unbelievable.

To build the exact same square footage. And both of them massive houses. Both of them massive. But 'cause the country music star and her decorator used the "I'm gonna build by change order" method. "I'm gonna make it up as I go." "I'm gonna look at it and then decide I don't want it and change it." Yeah, and they would put stuff in, tear stuff out, put stuff in, tear stuff out, reorder stuff. The builder was ready to shoot them both. It was like a career house. He couldn't get away from it. It was like the worst nightmare of next door to the best possible scenario. So you don't have to do that. And if your relative is incompetent, don't use your relative.

Yeah, because he knew that going in.

Yeah. And, you know, "Well, he's giving us a good deal." He's not giving you a good deal if he's gonna be $37,000 over. That's not a good deal. That's not— that's not— that's— you have to have a predictable environment in these things and control the controllables. It's project management. Management. And when you do that, then you're going to be fine. And be careful about building on family land where we're all in a compound. What happens when you want to sell it?

Yeah, that's a good point.

Who's gonna be pissed? All of them, because you broke up the commune. Yeah, but Daddy gave me a free acre. Yeah, but it comes with you're stuck there forever.. And the number of times you want to live there forever is pretty close to zero. So be careful with that part too. Nope, we don't cash out 401s to go cover overages that shouldn't have occurred because we should have had a good budget. Moral of the story. And that's how you do it. So my builder and I were laughing about this. He's become a good friend. The last 3 guys that built houses for me are all good friends. Friends because we simply developed a plan and executed the plan.

You didn't give them a headache.

And I'm the easiest guy. I wrote checks exactly when I was supposed to because I had the money. And nobody— there's no bank involved, there's no appraiser involved. Yeah, that's great for that. There's no bullcrap involved. And so we just write a check, build the house, and write a check, you know, take a monthly draw. They get their money, they stay on track, they don't have any issue with me as long as they're on track. And if something's wrong, we We come over here, we look at it, we fix it, and we keep going. We stay on track. So he said, "You need to write a book on how to build a house." But it really wouldn't be that long. I just covered it in that segment. Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. Jade Washaw, Ramsey personality, number one best-selling author, is my co-host today. Katrina is with us in Minneapolis. Hi Katrina, how are you?

Hi, great. Thanks for taking my call. So my husband and I are new to your show. I recently just finished your book and we have an entirely different view of our situation than we did I did a little while ago.

Um, thank you.

You're gonna cringe really bad when I read these, by the way, so I'm sorry in advance.

Um, okay.

All right, so we have $620,000 in debt outside of our mortgage.

Whoa.

Yep. My, uh, house is worth $800,000. My husband makes $880,000. I make about $70K. K. Um, bulk of this is medical school debt. Um, I guess what I'm interested to hear your opinion on is just how fast or what level of gazelle-like intensity that you say, do we need to go over or do we need to shovel ourselves out of this at? Um, I'm wondering, I, after finishing your book, you know, I'm like, we need to eat beans and rice. We need to sell our house. We need to sell our vehicle. And I've just kind of got this overwhelming, you know, weight.

I don't think you need to sell your house, but I am going to recommend you get really, really serious about this. Now let me make sure I got my numbers right here, okay? Because these are wild numbers.

Yes.

Yeah, he makes $880,000 and you make $70,000.

Correct, yes.

For a total of $950,000 a year income.

Yes.

That is so cool. It is.

Congratulations.

Working really hard.

He's a hospitalist. Okay.

Um, he's a—

when he's working, he's a hospitalist. Hospitalist. Yeah.

Wow.

Way to go.

Okay. And you have $610,000 in non-mortgage debt. That's all your debt except your house.

Yep.

And okay, let me just ask a simple question then. So $610,000 from $950,000. $950,000 still leaves $300,000.

Okay.

Why could you not just pay this off in one year and have a— still have a pretty decent life?

Yeah, I think we can do it at a pretty intense rate. Our expenses— we have 4 kids. We— his student loans are astronomical.

The student loans are what we're talking about.

Yeah.

$950,000. $650 minus $610 is $340.

Yeah, what are the expenses that you got taxes out of that would stop you from doing what Dave is saying? I mean, I'm thinking about your mortgage.

That's right, your mortgage.

I think we pay easily over $7,500 a month.

Okay, okay.

Um, we have a suburban payment.

No, the suburban payment is part of the $610.

That'll be gone.

Yeah.

Yes!

Yeah—

yeah...

So you know what? As of right now my husband kind of told me he thinks we could get the car and some additional things taken care of immediately.

No no no no no no no no this is the guy that borrowed $610,000 okay his vote doing it gradually's not a good vote I want to hear from him: "I want you guys to pay your house payment each month." eat, live on $150,000 or $200,000 a year, and put $60,000 a month on this debt, and you will be done in 1 year.

Tell us about the list of smallest to largest.

What's—

tell us what's included in this $620,000. Obviously, you said medical. Obviously, you said student loan. But give us some real numbers, and we're gonna show you just how quickly this is gonna go.

Okay, so we have $70,000 in car, $30,000— again, you're gonna cringe— in a jet ski, $20,000 in an RV. So, um, okay.

Yeah, and then the other ones are medical, and then everything else is your student loans.

Yes.

Okay, so if you're paying $60 a month, you would pay off the RV and the Sea-Doo and a portion of the car the first month, and the next month you'd pay off the car, and then we would be down to just $60,000 a month going on the student loans.

Yeah, and you'd have all those payments back, by the way. Yeah, yeah, because what's the total of payments between the car, jet ski, and RV?

Yeah, that's several thousand.

Uh, $120,000, I think.

No, no, no, no, no, no, that's the balance. That's not the payment. Yeah, yeah. So I go back, I go back to the simple math, and I want to just stay there, okay? Because you guys are— you guys, you guys have ridiculous numbers. So $950,000 $150 minus taxes minus $610, and that means you have zero debt at the end of the year. And that also pays all the payments on all that debt because all of that's going towards the debt. Okay? So, the only thing that has to come out of the balance is your house payment and food. And that's not too beans and ricey. You still got $150.

That's what I'm saying.

Or so income to live on after I did all that. All that.

And beans and rice, by the way, let me just say this because I know there's somebody out there, you said cringing, but let me just remind you, beans and rice while living in a, you know, million-dollar house and driving a new Suburban, that doesn't feel too bad. And keeping the RV, you know what I'm saying? Right. So your life is not changing that much. You're just reallocating, you're redirecting the money. That's it. Yeah.

And think about at the end of that year where you'll be $950,000 income and no debt at all except a house.

Yeah. Wow. That's what I'm really looking forward to.

Wow.

Your biggest battle here is the husband.

Don't do this.

Yeah, you don't have to convince me right now.

Yeah, don't do this gradually. Do it in one year. Mathematically, with the numbers you gave me, there's no excuse for this taking longer than a year.

Okay.

And you guys, you may— you're gonna have to— you probably have a ridiculous lifestyle. And, you know, it's probably okay once you get all this debt paid off because you make $1 million a year. Geez, it's pretty incredible. So I'm thrilled with your income, but I will tell you what normally happens in these situations. Doctors, people in the medical field, they have spent their whole lives in school, and they finally get out of school, and they finally get some income. Come, and then they just go bankrupt like this everywhere. And then they kick the can down the road and they keep their student loan around.

Because they're comfortable. It's comfortable.

You're comfortable in your— When you're making $1 million a year, you can do a whole lot of stupid and get away with it. You really can be stupid for a long time and get away with it.

That's right. It's different.

$1 million a year covers a lot of sins. It really does. But it doesn't mean it's a smart thing to do. So, I call it Doc-itis, is what I I call it, because docs come out of school with a unique thing. They've been holding their breath. You know, other people went to school for 12 years of undergrad, or 12 years, and then they went to 4 years of undergrad, but add another 5 or 6 or 7 or 8 or 10 years for a doc, depending on their specialty, right? And they've been holding their breath all that time. They've been delaying pleasure.

They're ready to live.

Delaying pleasure, and then along comes Dave and says delay pleasure one more year. Like, "Huh-uh, huh-uh." "Nuh-uh, that's Doc-itis, nuh-uh." That's what it sounds like. If you hear "nuh-uh," that's Doc-itis. That's it. It's, "I don't want to, I've held my breath long enough, I've delayed pleasure long enough, I'm gonna reward myself, and I'll put my hands over my ears and go la la la la la, and act like there's not $600,000 worth of debt." But he went and bought toy toy toy toy, and didn't pay off the student loans. He had Doc-itis. It's straight up. Straight up case. You can see the symptoms are all right there, Doc. So I got your prognosis for you, and I got your prescription for you. One year, no life. Clear up your mess, then go have an awesome life.

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Isabella is in Houston. Hi, Isabella, how are you?

I'm doing well, Dave. How are you?

Better than I deserve. What's up?

So my question is, um, what order I should tackle my debt. I have $170,000 in student loans. It's broken up into 12, um, smaller loans. There's, uh, $27,000 that's in a debt relief program, $4,000 on, um, my engagement ring, and then $10,000 in a home water system. And so the issue is that the $27,000 in the debt relief program is not accruing interest. We came to an agreement with the creditors and I have, there's like a final deadline. So the end of my payments would be June 7th, 2028. I pay $1,200 a month on that.

Okay.

Well, then we're still going to work what we call the debt snowball, where you list all of your debts— individual debts, not categories— smallest to largest, pay minimum payments on everything but the little one, and attack the little one. Are any of the 12 student loans smaller than the engagement ring?

Yes.

Okay, then that's your smallest smallest debt.

Okay.

And then your next smallest debt, and then the engagement ring. And when you get to the debt relief, I don't care what the plan is, just pay it off.

Okay.

Pay it off early.

Okay, got it.

Is it just you?

No, so my husband and I both combined. So we pulled together, our annual income is between $230,000 to $270,000. Great. And so we are really just, we kind of woke up, saw where our finances were, and we were like, okay, we need to figure out how to get rid of this. So we're on the same page. We just really wanted to know like order of operation. I do have baby number 2 on the way right now. I'm due in December. And so we were trying to figure out what can we knock out now? We do have, we were doing the EveryDollar, like trying to assign everything. And we do see that we have an excess of like around $4,500 a month. So what we were thinking about was applying all of that to the, um, the debt relief program, because once we're done with that one, I could probably pay it off in maybe like 5 months. Um, and that's $1,200 back that I was thinking that we could reapply somewhere else.

Now let's just pay off smallest to largest. Do you have any money in savings?

Um, we have about $7,000 in savings.

What's your deductible?

Deductible for insurance? Yeah, for the delivery, um, it's like, uh, like $2,000.

Okay, okay. I might feather that $7,000 nest a little bit until baby comes, put $3,000 or $4,000 more in there. And, uh, $4,000 a month, you haven't cut your budget yet, you're just getting started, right? No eating out, no vacation. You're broke. No, no $20,000 nurseries for new babies. You're broke.

Got it.

You're $100,000 and— I mean, you're $200,000 and something in debt. But no, we don't— we have learned that people have a higher probability of finishing when they have a positive feedback loop. And we've been doing this for 30 years, and the positive feedback loop is pay off the smallest to largest largest. And the $27,000 is a single payment now that it is all combined in the debt consolidation thing. And so, when you get to that, your water softener will be gone. Several of your student loans will be gone. Your other stuff will be gone. But you're gonna get to it pretty quick.

You are.

And this is coming from somebody who's had the types of student loans that you have more. And let me tell you, it does feel good. When you have a list of 17 or 22 debts, and you go through smallest to largest, and because you did it that way, you're able to check off 5 or 6 of them off the list.

Yeah, you leave them on the refrigerator with big red lines drawn through them.

Ooh, that feels good.

You done, you done, you done, you done. And you just keep attacking it. Yeah, there is a positive thing to that. And what it does is it actually— we figured out that personal finance is 80% behavior, it's only about 20% math. And so feedback loops are more important for behavior modification than the actual math is. And the math that you're using is not interest rate math. In your case, you're using cash flow math, which is not a bad— it's not an unintelligent way of looking at it. It's just— it's about doing math didn't get you into this mess. If you'd have done math, you wouldn't have done any of this.

And when you start looking— we're looking at the probability of you completing it. And if you start looking at it, well, if I could just get $500 back in my pocket, for a lot of people that's enough to make them go, well, that was all I needed.

Yep. Renee's in San Diego. Hi, Renee.

Hi, how are you?

Better than I deserve. What's up?

Well, the reason I'm calling today is because a couple of years ago my husband and I went into partnership with my brother and sister-in-law. We bought a storage unit with some warehousing and some other commercial uses, office primarily. Um, long story short, my brother-in-law wanted to scale and buy additional ones, found out it's a lot more difficult to find those because people don't generally sell them. And then he and my sister-in-law decided they really didn't want to participate in running it anymore, which left that to my husband and I. We're also retired, and we had just wanted a place to park some additional money we had so that we could spread out our Not officially.

Officially put it up for sale.

Well, we, we started down that road and, um, contacted, uh, my brother-in-law contacted a REIT that had been interested in it when we purchased it. I contacted another group that owns property in, uh, those kind of properties in the same city, and we contacted, uh, someone who buys storage units kind of as a collective.

So you talked to 4 people?

Of course. 3. And those 3 were, were interested, but they, they were trying to purchase it like fire sale.

List it with a real estate agent by the end of the week.

Local, because we also looked at, uh, you know what, there was a 4th one and that was a, a large, um, commercial brokerage that specializes in that. And they use a formula that didn't work because they were using a big metro area instead of the area that was storage units in, which is Scarcity of land, surrounded by Indian reservations, and no opportunity to expand. Central location. So their algorithm did not provide for, um, that kind of—

they obviously don't need to list it.

So how—

get a real estate agent that's a commercial real estate agent that knows how to crunch numbers on storage units. Is the thing full? Is it full? Is it rented?

Um, well, we, we upped the rents because it was—

is it rented?

Oh, some of it is. All the industrial—

what's your vacancy right now?

It's 75% because we upped the rents.

And 75% vacant?

75 units or 75%?

75% occupancy.

Oh, occupancy.

Okay.

All right. So yeah, yeah, you, you've got a pretty heavy vacancy then at 25%, and that is going to devalue it because the valuation is not based on scarcity of land. The valuation's based on cash flow. How much money does this create? And then you use a cap rate on it. That's how commercial brokerage is done. And so it doesn't matter where it is. What matters is not an algorithm. It's a simple thing. If I'm gonna put $1 million in it, I want a return on my $1 million. If I'm gonna put $10 million in it, I want a return on my $10 million. And I don't care about the Indian Reservation, except to the extent it creates money for the bottom line of this project. And so you guys need to get your occupancy up, probably, because it's pretty devalued right now. See if you can get it filled back up and get— and then raise your rents a little bit, not so much. And you're gonna spend some effort on it, and then you're gonna get it up for sale. And what you're looking for is a commercial real estate agent that knows this.

They don't have to be a large national firm, but they probably need a CCIM, which is the designation in that, or something like that. That so that they actually know how to run the cash flow analysis on it and put it up for sale and get it sold. But you call 4 people, you've talked to 4 people, that doesn't solve your problem. You know, you got it, you gotta get the thing on the market and get it gone. This thing's run its course, you're out of here, you're done. And don't, don't play around with it and talk big, call me 5 years from now and go, we're still stuck. Well, list it and sell it. Sell it. If you have to sell it at a pretty good deal. That's fine. Get rid of it. Put some money in your pocket and wave bye to the brother-in-law.

Our summer Black Friday sale starts now. For 5 days only, a new deal drops each day. Listen, you work too hard to be broke. Car payments, surprise bills, another overdraft notice— it's stressful. But you don't have to stay stuck. Get the book books, assessments, and more that have helped millions take control of their money, get out of debt, and finally breathe again. Deals change daily, and once they're gone, they're gone. Visit RamseySolutions.com/store before these deals disappear. If you're ever in Nashville area, drop by. We do this show from 1 to 4 every day Central Time, 1 to 4 PM Monday through Friday. We're on the glass in the lobby of Ramsey Solutions. So folks come by, we have free homemade chocolate chip cookies and coffee and wonderful bookstore, museum, all kinds of stuff for you to see when you're here. And we usually have 50 to 200 folks sitting out here watching the show. People dropping in from every state in the union and even a couple from Canada today. So there you go. So check it out. Come out and do that. Also in the lobby there is the Debt Free Stage where people come to do their debt-free scream.

And that's where Toby and Jamie are standing. Welcome, guys. Hi, Dave.

Hi, Jade.

Hi, Jade.

Where do you guys live?

We're from Casper, Wyoming.

Awesomeness. Well, welcome to Nashville.

Thank you.

And how much debt have you two you paid?

We've paid off $176,000.

I love it. How long did that take?

5 years and 9 months.

Wow. And your range of income during that time?

We started about $120,000 and currently up to $160,000.

Cool.

Good job.

What do y'all do for a living?

We are both teachers.

Awesome.

I teach middle school band.

And I'm a 5th grade teacher.

Awesome.

What kind of debt was the $176,000?

It was our house.

I knew it.

I knew it.

Looking at a couple of weirdos.

That's right.

Way to go, you guys. Excellent job. So what's this house worth?

Uh, about $400,000 at this point.

Yeah, I love it. And your, uh, your nest egg is up to what these days?

Uh, retirement accounts are just north of $700,000.

A couple of millionaires, a couple of Baby Steps millionaires standing here that are teachers.

You look young.

How old are you?

We are both 43.

Come on now. Wow, excellent. Excellent. You know, when we did our study of Baby Steps Millionaires and Millionaires, we found that the third most likely to become a millionaire is a teacher. Mm-hmm, that's wild. In the career field, it's engineer, accountant, teacher. That's the order. And people always question us on that, and yet here stands two of them.

Yes, in the flesh.

Well done!

Thank you.

Thank you.

I love it, I love it. Congratulations. Okay, so 5 years and 9 months ago, you decided to concentrate on paying off your house.

Why?

So we first found Ramsey Solutions in 2008 after reading The Total Money Makeover. Immediately paid off all of our consumer debt. Since then, we've cash flowed 2 basement remodels, 2 master's degrees, 3 car upgrades, and a boat. In 2012, we took Financial Peace University, and I've since taught the class 3 times to the staff at my school.

Wow, thank you.

My pleasure. It's so much fun. And then in 2020, we decided to finally just start aggressively pounding on the mortgage using all the margin on our monthly budget. It would have been paid off even faster had I not had a car accident, which caused us to dip into our emergency fund and find a different used vehicle.

Yeah, okay. Wow, wow, wow.

Do you do voiceover work or something?

You—

we, we practiced this a lot to make sure that we were ready.

You got this on lock.

Good job.

He speaks in front of audiences all the time. He's a natural.

I can tell. Good job.

Well, way to go. You guys, it's incredible. So, you've taught the class. How much consumer debt did you knock out back in the old days?

Oh, we had a little $3,000 loan on the car.

Okay, nothing.

Nothing.

No, it was very, very small.

We just knocked it out. We just realized after reading the book, "Oh, this makes sense.

Let's do that." And just lived a cash lifestyle after that.

That's right.

Yes. Wow.

And staying on a budget, living on a plan.

Absolutely.

Couple of teachers' salaries and doing great. Way to go, you guys.

Thank you. Thank you.

You're 43 years old and you're millionaires. Casper, Wyoming. Wow, very nice, very nice. How does it feel to not have a payment in the world?

It's freeing. Incredible. We can just do what we want, and we're very goal-oriented people, so we set goals and then we work towards that. And we're also very visual, and so a funny story is that Toby came to me in 2020, and he wanted to build a paper chain to represent our mortgage. And so, each link on that paper chain was $1,000, $1,000. And then so the kids got involved during budget time, and each budget month they would get to tear off a paper chain. And then that—

Wow.

That chain hung in our kitchen all across through my dining room.

For 5 years?

For 5 years.

Well, until it didn't.

Until it didn't. And so it's just, it's very freeing.

Yeah, so at which point you look at him and said, "I thought I taught 5th grade." Exactly.

Yes.

Unbelievable. So, you know, this is interesting because very few people that I know that are teachers went into the teaching profession saying, "Oh, I'm going to be a millionaire." That's usually not like how the— that's not the way the wiring works, right? But once you start seeing this, you said we're goal-oriented, and you can see how if you followed a system, like if you follow a lesson plan or, you know, if you follow whatever, any kind of a process that's proven, that we could we get there, then the hope kicks in, doesn't it? Yes.

Absolutely.

We could see the eventual progress. And at that point, it's not even a question of whether or not we're going to accumulate wealth. It's how soon can we get there? This process works, just follow it.

Yeah.

So, when you teach folks this strategy, what's the number one piece of advice? Like, what do you tell folks who are maybe not in the same situation as you, but they're teachers and they're thinking, "Man, there's, how am I supposed to do this?" I think for us, the biggest thing was communication with each other.

As I said before, We're very goal-oriented, so we would discuss what is our next goal, what is our next big achievement that we wanna reach, and then how are we gonna get there? But for us, it was that communication between each other and agreeing on where we wanted to go.

Wow, love it. Well, we appreciate you coming all the way to Nashville to testify that this works. That's pretty cool.

Wouldn't have missed it for the world.

What's the first big thing you're gonna do to enjoy some money now that you did this?

Well, the kids don't know this yet, but we are going to take an upcoming vacation to Disney World.

Yay!

The mouse! Yay! Just announced it to them right now.

Oh, wow.

That's pretty cool. We should have had some Mickey ears here for them or something. Wow, that'll be fun.

Wow, they're excited.

That's cool. Very cool, very cool. And how old are the kids and what are their names? Bring them up.

Come on up, guys.

We have Riley, and she's 12.

Riley's 12.

And Mr. Kellan is 8.

That's right, 12 and 8. And this has happened over the last 6 years. So, Kellen doesn't— I mean, when it all started, he didn't know much. But Riley's been there for the whole ride.

Yes, all the way to Disney.

Yeah, all the way from paper chains all over Mama's dining room to Disney. Yes, exactly. And the day that I heard Mom and Dad were millionaires. Wow, very, very cool. You know, when your kids are growing up while you're doing this and they see what Mom and Dad are doing, they see goal-oriented, they see communication between the two of you, they see a budget, they see we're sticking to this, we're sacrificing to win, and then they hear that you win, those guys, you really did change your family tree because more is caught than taught, as Rachel says. And you can teach 'em all day long, but when they watch you and see this example and they live, their body takes this in, and they can't unlearn it. It even changes who they'll date in the future, thank God.

Yeah.

They truly do understand when it's, when it's budget time, and they understand what that means, um, to make a budget and, and how to spend your money appropriately.

Yeah.

And more money comes, then you get to go to Disney. I like it. Well done.

Excellent. No notes. Very cool.

Excellent.

Very cool. Life is good. Life is good. Well, way to go, y'all. I'm very proud of you. You did everything the right way. You, you've executed, executed, executed, and now you've You've reminded some 30 million people with this debt-free scream right now that this can be done, and teachers can do it too. For those of you that are doubters out there and Debbie Downers, you're looking at two of them that at 43 became Baby Steps millionaires. $700,000 in investments, a $400,000 paid-for house. The last step was Baby Step 6, paying off the house, 5 years and 9 months, making $120,000 up to $161,160. All right, Toby, Jamie, Riley, and Kellen, Disneybound, count it down. Let's hear a debt-free scream!

3, 2, 1, we're debt-free!

Woo!

Hahaha!

Wow, wow!

That's how it's done.

Wow, that's impressive.

It is impressive. It never gets old.

I mean, you can't argue. Two teachers, all the things he said, they cash flowed. They just locked in, locked in.

See, when I've got guys like that that I'm talking to, that's why I'm not going to talk to you if you want to argue. This works.

It works.

Don't argue. Just do it. Just do it. When are you going to start? When are you going to start? Start now. Yeah, I'm talking to you. Just do it.

Hey, George Campbell here. So you're thinking about buying or selling your home. It's exciting, but there's a lot to think about, and all those decisions can feel overwhelming. Well, here's the good news. You don't have to tackle the process alone. Ramsey's Real Estate Home Base is the place to find all of your free tools and resources for help to get prepared to buy or sell your home with confidence. You'll find calculators, start-to-finish guides, a podcast, and even an in-depth video course hosted by yours truly. What's not to love? So if you're ready to take the next steps toward your home goals, go to ramseysolutions.com/realestate. That's ramseysolutions.com/realestate.

.com/real-estate. Our Scripture of the Day, Ecclesiastes 7:8: The end of something is better than its beginning. Patience is better than arrogance. Bill Bradley said, ambition is the path to success. Persistence is the vehicle you arrive in. Okay, there we go. Amy is in Louisville, Kentucky.

Hi, Amy, how are How are you? I'm doing good, Dave. Uh, I've got a couple questions for you.

My income is $2,100 a month. I'm on disability. My savings is $6,000, and on my debt side, I have credit cards for $650. My monthly bills are $688. My yearly property taxes and insurance are $1,700.

$1,200.

Now here's where the twist comes in. I got a construction loan to build a tiny home on my property for $112,000. Esery Construction got $30,000 of that. Fees are $4,700, which is a total of $34,000. So I have around $78,000 left. This is at a 6.75% interest. But he has bailed on me and I can't find any assets under his name. So I'm not even sure if I'm going to be able to recoup that.

I'm sorry, who bailed on you?

The contractor that was supposed to build my tiny home for $120,000. Well, it was $112,000, but they've only gotten $29,165 so far.

Have they done any work?

Nothing.

They have applied for permits incorrectly.

And why did you give them money before they did work?

The bank did.

I have a mortgage for this.

I know, but you have to approve it.

Yeah, and the bank said this was standard practice, so now I'm on the hook for $34,000 with nothing to show for it.

Did the permits not get approved?

No.

Why?

Incomplete or inconsistent. They keep getting rejected, rejected, rejected, and now all communications has opped.

So the permits were denied because they were filed incorrectly, not because you can't build the tiny house?

Yes, yes, correct.

Why does a tiny house cost $112,000?

That's what I've been wondering.

Well, I mean, why didn't you wonder that before you signed up for it?

Because of like pouring concrete, putting it on a foundation. Where I live, it has to be done a certain way.

It has to be like stick built.

I thought tiny houses were more like 60.

They are, but then when you put them inside a city limit, they have to be up on a foundation, and then the plumbing and the electric and the sewer and all that good stuff, which is not another 60.

Okay, um, I don't know exactly what to tell you. Um, uh, obviously the— you've informed the bank not to let any more draws happen right?

Absolutely, yes.

Okay.

And, um, but you have a $31,000 loan with a possibility of going to $112,000, and you're hunting for a new contractor that can execute this deal. Um, but what you're, what you're saying isn't, uh, it is not standard practice to issue checks to a builder, uh, draws to a builder on a construction loan except as work is complete feet. That's not standard practice. And so, no, we don't issue $31,000 to pull a permit on a tiny home. That's asinine. And so, you know, I don't know who's over there at the bank that doesn't know what they're doing, but I probably am going to just shut the whole thing down and I'm not going to deal with that bank anymore because I think they're incompetent. And, and I think you've been— you've bought into some kind of an idea here with this tiny home construction that this is somehow going to be the best thing for you. And the numbers you're giving us, they don't, they don't pass the smell test, okay? Because the purpose of a tiny home is this is a small square footage thing. They're typically not not stick-built. They're typically rolled in on a trailer and sat there, and you're pouring a slab the size of a deck.

This is not an expensive process. And yeah, you got to hook into sewer, and you probably got some tap fees, and you got to run a water line to it, but none of this is rocket science, and none of this should cost, you know, $50,000. Not even close. So I don't know, this whole thing sounds like it just smells And so when I run into something that I get into, like you've gotten into here, where the whole thing stinks, I just start pulling back and pulling back and resetting what I'm going to do and how I'm going to do it. And, and that may be that you do a tiny house, but you do it the proper way rather than the way you were trying to do it. And just because it's in a city limit doesn't mean it costs $50,000 to build a slab. That's just not true. True in Louisville, Kentucky. It's not that— it's not that onerous. You're not in California where they've got regulations out their butt. Um, this is Louisville, and so they've got regulations but not like that. So, um, now I, I, I think you've, um, gonna have to gather a whole lot more information to decide what your next steps are, and You know, if you have a contract with someone that has taken $31,000 from you and they've done that fraudulently, then I guess you need to see an attorney for that.

But as if you've discovered the person has no assets, then you're probably gonna have a hard time getting any of that money back, because you can sue somebody and win that has no assets and you get nothing. It's not worth the trouble. But I would look into to the legal side of it as well. Christina is in San Jose, California. Hi Christina, how are you?

Hi Christina, hi Randy, thank you for taking my call.

Sure, you're a little bit muffled. Can you speak directly into your phone please?

I'm speaking directly into my phone.

Okay, thank you. How can we help?

Well, my husband, I'm 62 years old, and my husband wants to get a HELOC loan.

For what?

So, so we've owned our home since 2004 and—

say that again.

So we have owned our home since 2004 and he wants to upgrade the bathroom, the master bath and the hallway bath.

Mhm.

What's it going to cost?

Roughly around maybe $60,000 to $80,000 to do.

Oh wow, okay, that feels steep.

Yes, cuz he wants to enlarge the shower, um, pull out, put new tile, and you obviously don't have the money to do that? No, we don't have the money.

Okay, um, what's the size of your— do you have any money in savings?

We do have money in savings, um, we have, uh, probably around $300,000 in savings.

Is that retirement savings?

No, it's not retirement savings.

Well, why don't you just use some of your $300,000 to build your bathroom?

I— that's what I told him.

Otherwise, what's the point of it?

I know he wants to get a HELOC now alone, so I mean, that's why I'm calling, because I, I don't— I don't want to create more debt.

No, you already have debt. You already have some. You said you don't want to create more. You have— you have some already?

No, we don't have any debt.

Okay, the house is paid for, and you said you're how old?

No, I'm 62 years old. The house is not paid for. Oh, it's worth $1 million and we still owe about $300,000 on this home.

Well, I mean, I, you in California, you'll have to sign for the HELOC and if you refuse to sign for it, it won't happen.

Yeah.

Oh, yes. Thank you so much.

Yeah. So just tell him no.

Wow.

Just tell him I'm not going to sign for the HELOC.

You gave her the ultimate legal loophole. Good job, Dave.

She—

I've never heard someone cheer like that after a— but by the way, you know, you also have $300,000 sitting in savings.

You also have a husband that you got to deal with. I mean, this is not— I don't know if I'm cheering about anything here.

I know. I'm just looking at the fact that what you have in savings is what you owe on the house, but good luck convincing him to pay I don't know what your household income is.

I'd consider paying off the house and building your nest egg and building your bathrooms with cash. And by the way, when you end up building them with cash, they probably won't be 60 to 80. You'll probably do it differently. That puts this hour of the Ramsey Show in the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus. Jesus.