Transcript of Start Telling Your Money Where To Go New

Brought to you by the EveryDollar app. Start budgeting for free today. Normal is broke and common sense is weird, so we're here to help you transform your life. From the Ramsey Network and the Fairwinds Credit Union studio, this is the Ramsey Show. I'm Dave Ramsey. Jade Washall, number one bestselling author and Ramsey personality, is my co-host.

Today.

The phone number is 888-825-5225. The call is free, and some say the advice is worth exactly what you pay for it. Savannah, Georgia. Sally is calling. Hey, Sally, how are you?

Hi, thank you for taking my call.

Sure, what's up?

So, um, we found y'all through our church, through, um, FPU, about a year and a half ago, and we are on Baby Step 4, um, and my in-laws, um, kind of popped this idea to us about 6 months ago. We have— we bought our house about 2 years ago and it has a very large unfinished basement. And they have had this idea that when they retire, which is going to be my father-in-law's retiring at the end of the year, that they want to kind of put some money into our house and finish off our basement for them to kind of be snowbirds, to be here, go in the South and then go up north and then eventually kind of transition to living with us. In our basement. Um, and I'm not totally against the idea, um, because we have a good relationship. It'd be great for our kids to have grandparents close by. Um, but I'm a little bit concerned about the long-term effect of this. Um, you know, they wouldn't really have an ROI putting money into our house. Um, do they know that? Um, yes, we told them that. Um, and My concern is just, you know, like, what happens if we do this and, you know, in 5 years from now someone has a stroke and now they need more care and a lot of their money is tied up in our house, or you decide to move and take a different job.

And my husband said that to them and they kind of were like, oh well, I guess you just mean that 2 more people are moving with you.

Oh boy.

Listen, there's a difference between having grandparents close and having them in the basement. That's a major difference.

I don't know, like, I, I Yeah, we wanna be, you know, I wanna be a good steward of, you know, what we've been given and, you know, to help out how we can. It's more just the long-term, you know, we're 33 and we have—

Listen, hey, I gotta stop you. I gotta stop you because you sound like someone who knows what they wanna do, but you don't feel firm enough in it that you're talking yourself in circles about it.

Yeah.

You know, that's not a good idea, but you're afraid you're not being nice. And your classic Southern bless your heart. You know, oh, bless your heart. So no, no, no, no, no, they don't need to move in there. That's a bad idea. There's more downside than upside.

I think so.

Yeah, and I just found out too that they got an annuity, and I've got George's book, and I heard that like that is not good either. And so I'm concerned about like their financial future and their money.

I would rather them use their money to buy a nice little condo in your area and that's cheap enough that it doesn't— that they can use it and still snowbird, and they can still be around and babysit and see the grandkids, but they have their own life over there, and it's not tied into your home and your decisions.

That's what we told them, and they said that they don't think they're going to have the money to move.

But that— this is a snowbird thing. It's not their primary residence.

Yeah, but they want it to be eventually.

Right, but it's not today, which means they have a place somewhere where there's equity building, and he is retired from a job, so there should be some sort of retirement, something, some nest egg. I don't know how big or small.

Well, bottom line is, whether they've got the money or not doesn't determine whether this is a good idea. As a matter of fact, since they don't have the money, it further ensures that this is not a good idea. If I woke up in your shoes, I would say, "Mom and Dad, we love you. We'd love to have you close, but not that close." Does your husband agree?

Or is he fighting for the in-laws?

No, he, no, he does. And I think my concern is, um, you know, and we're gonna, we're actually seeing them next month to like really talk about this in more detail. Um, and they, uh, based like, I told my husband, like, if they, if I find out, you know, they have like $5 million in their next nest egg and $100 grand to drop in our basement, is it maybe a big deal?

But no, Dave is right.

The money side of this isn't the question. How much money they have. I don't care how responsible they are. This is a bad idea because it handcuffs you guys. The exit strategies on this, as you said, if something goes sideways and somebody needs help or whatever, you are stuck once you get in this and there's no way out. And that's the problem with this. And you are not being mean. By saying, "No, we have to figure out some other way that you guys have a sustainable life." That's not mean. It's not mean at all. You're not— you know, you're scared to death you're not going to be nice, because you're a sweet person. You can just smile and be kind and say no. And you don't need to have the meeting next month either. There's no reason to leave these poor people alone. Your husband needs to call his mother and say no. You need to stay out of it. He needs to tell her no, not you, because you'll be labeled the Wicked Witch of the West forever. 25 years ago, I wanted to move in her basement and she wouldn't let me. That witch, you know, that's the kind of— that's how that stuff gets started.

Yes.

And so that starts a whole narrative then, and you'll get blamed for it. So now make him have a backbone and tell his mommy no. And, and don't have a detailed meeting discussing it. I really would not do this.

I wouldn't do it either.

How does this end well?

Well, then it looks like— if you have the meeting, it looks like you're considering it.

I know, I know. And that's not fair. That's not fair at all. And so, you know, no. But if they do move in, I can't think of an exit strategy that works unless both of them died in their sleep.

No, everything becomes—

I mean, other than that, I can't think of a good exit strategy here.

No, and then everything becomes—

and they need to do that in time for you to move. Yeah, I mean, no, this is just no, no, no, no. There's going to be aging problems and disability issues and care issues and you all and boundary issues. And you guys, there's like 99 things that can go wrong and only one that can go right.

Yeah. And all the risk is on you guys. It's— there's no risk on them because they get built-in healthcare.

The risk is on them is if you sold the house after they did a bunch of improvements.

Yeah, that's true.

That's the risk that's on them, but still, they need to use their money more wisely and have a good life. It's fine to be close by, but we need good, healthy, physical boundaries. It's a good thing. Great, man. So, you know, we are now getting calls in the last 3 years that in 40 years of doing this show, I've not gotten. Much of, just this idea of multi-generational housing. The parents, we're gonna, I mean, I've had the mother-in-law question, we're gonna build a mother-in-law apartment, right? Or we wanna add on to our house and she wants to give us $200,000 to do that. And then she's gonna give us that at her death and she's gonna live over there. That question I've had, but now we're seeing this thing of the family compound. You know, and 4 families are moving onto 1 single piece of property, and there's no exit. These things, you know, and they're doing it because they think it's more affordable to do it. But you guys have gotta be real careful. You have to think through what happens in divorce? What happens in disability? What happens in death? What happens when the sister-in-law across the way starts doing cocaine?

What happens when you decide you just don't like these people?

Well, that could happen easy. You know, this is family after all.

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That's Health Trust Financial Ellah is in Dallas, Texas. Hi, Ella, how are you?

I am doing great. I hope you can hear me okay, and I hope that you guys are doing great too.

We are, better than we deserve. What's up?

Um, so I am actually calling because my husband and I are working through the Baby Steps. Um, we're on Baby Step 2 right now and, you know, we're fully aligned that we want to follow, um, the steps all the way through. Um, especially right now, he's, he just turned 40. I'm 35. We have a 4-year-old, a 2-year-old, and I'm currently pregnant right now.

Wow. Wonderful.

29 weeks.

Yay.

Yes, so it's really great, but of course, we changed our mindset because of this, understand that we really need to do a lot of planning for the future. So right now, getting out of debt is pretty important for us. So at the beginning of the month, me and my husband, I go through my spreadsheets. I'm the finance person here and the budgeter. We go through the spreadsheet together at the beginning of the month, and we are like, okay, we're gonna make sure that we're strict, we don't buy anything, just what we need so that we can put as much as we can towards our debt. But then halfway through the month, my husband kind of goes through a lull and he starts wanting to spend money. You know, he starts looking at his phone. He wants stuff for his hobbies. Um, he's very much into guns and motorcycles and things like that. Um, I am a stay-at-home mom right now. Uh, my kids go to daycare, you know, 2 to 3 times, you know, part-time just to give me a little break. He's really the sole income earner right now, and, um, he works very, very hard.

His job is mentally draining. On top of that, he's like in traffic 45 minutes there and 45 minutes back. So I feel like the spending is his stress relief.

Has he always done that? Has he always been somewhat of an impulse spender?

Uh, yeah, yeah, he's a spender of the family.

Okay, what we have to do is change the, uh, the way this is being built. Okay, okay. So I'm going to take you off of spreadsheets because he doesn't do spreadsheet. He doesn't speak spreadsheet.

Oh no, he doesn't.

And I'm going to put you on our EveryDollar budgeting app, and there's one on his phone and one on your phone for the same account. Okay? And the two of you sit down at the first of the month, and both of you get a vote. Not just you. Okay? Both of you get a vote, and both of you emotionally shoulder the weight of winning with money at your household. We have 3 little babies soon and we need to carry the weight of this on 2 adult shoulders. Okay. And based on that, I'm a man, not a little boy that is taking care of my family. And so I'm going to look at this with my wife, who's a woman, not a little princess. And we're gonna make two adult decisions that are good about our future, and we're both gonna speak into that and lay out the game plan on the EveryDollar budgeting app. And then once we've both looked at that through that lens and we both agree to it, then later in the month, if we decide to be a little boy again, we have to be reminded that we're a man. If we decide that we'd be a little princess again.

But you're not his mother. He needs to step up and say, "For the good of my family, this is what I'm going to do. For a short period of time here, we're gonna clean up the debt mess that we've made with our immaturity and impulse spending, and that means no motorcycles and no guns right now." [Speaker:GINGER] And to take it to even a more practical level, And this is for anybody who's an impulse spender.

There are practical things you can do to stop that behavior beyond just saying, "I'm not gonna do it anymore," because if that's not working for him—

The practical thing is to agree and look in your wife's eyes and make her a promise.

Yeah, but he can also do— like, if you know, you've already identified, "Hey, the temptation is," you know, guns, motorcycles, cars. You know what the temptation thing is. Now, the next thing is, okay, then you've also identified, like, what the cue is, like, what causes him to get in that mindset. Okay, it's his commute home. Stressful work.

Yeah.

So then it's up to him to go, okay, I already, I, I already know that I'm setting myself up to be in this situation. Instead, let me replace it with something that's actually helpful for me. So now his new routine needs to be, I don't come home and plop on the couch and get on my phone and start scrolling the next product I want. I go and I mow the lawn, or I go and I work on the budget, or I go— he's gotta replace that activity, uh, with something that's actually beneficial and relieves the stress that he was trying to relieve by spending. And that is just, I mean, that's psychology. That's how you change a habit.

So, yeah, I completely agree. So let me reset this one more time, Elena, because what's happening right now is the two of you have agreed on a concept and then you went and implemented the detail.

Right.

And I want the two of you to agree on the detail pinky swear and spit shake and have a contract between the two of you. This is what we are saying together that makes our household go where we want it to go, and then you go do the detail. You execute the detail. But I want him looking at every line item on every dollar and agreeing, this is what we're gonna spend on food, this is what we're gonna spend on lights, this is what we're gonna spend on whatever. And by agreeing to that, we're also agreeing that we're not doing anything else.

Right, not veering off halfway through.

And he's not doing that in advance. Instead, he's way up above it in the clouds going, "I think it'd be good to get out of debt. We got babies, but I really want a gun." Because he's not gotten involved yet.

That's right.

And I want to get him more involved in the detail, not in the execution of it. You can do the execution. You're the nerd. You're good at it. But I do want him to be involved in feeling the emotional weight of the plan that is going to be executed, the detail of the plan that's going to be executed.

That's right. And even in EveryDollar, when you can see that roadmap in front of you and you know it's gonna take X amount of months and something that you think is small, $300 or $400 a month, that adds up to time that this is gonna take to finish this, so.

So, we're having a kitchen put in one of the houses that we own. And obviously, my wife's gonna be real involved in that design.

You think?

And so, she's real involved in the design. I'm real involved in the design because I wanna oversee it. The builder is understanding the design. And the three of us have gotten in-depth, detailed agreement with the kitchen designer of what is going to happen on paper. Then they build the cabinets. We don't get halfway through the cabinets, and then I walk in and go, "Well, that wasn't really what I was thinking." Yeah, you know what it's gonna be. And that's the proper way to build a house too, by the way. Build it on paper before you break ground, every detail. And if you have 42 change orders as you go up because you didn't think this through, it's the most expensive and slow way to build a house, and you'll end up hating your builder. And he'll end up hating you. So instead, you got a stinking plan, and you stick to the stinking plan, with rare exceptions. And everyone is aligned in the detail of what the plan looks like, and then someone can go execute the plan. But we all three aren't gonna build the cabinets. Matter of fact, none of the three of us, the builder, me, or Sharon, are gonna build the cabinets.

A cabinet builder's gonna build them. But it's the same thing, right? We're getting aligned on the idea ahead of time, both strategically and tactically. Strategically is a lot alignment and the philosophy of debt-free. Tactically is the alignment of we're not spending this, we are spending that. And then she can write the checks.

Yeah, well, then you can also both, all three have accountability. And in their case, all two have accountability to be able to say when something's going off plan.

Yeah. And I appreciate you honoring him for him working so hard. But that does not give him a pass on being a man. Lots of people work hard, call the wham-bulance. I work hard. Shut up, okay? Seriously, that doesn't mean, "I work so hard, so I get to be stupid." That's not a line that anybody should ever say, you know? But we do. We say, "Well, I work hard. I feel like I earned it." Earned what? Stupidity? Earned not being rich? Earned being deeply in debt? What did you earn with this hard work, you know? No, I want to get somewhere with this hard work. I want some dadgum traction. I want to be a millionaire, multimillionaire. I want to be outrageously generous, blow people's minds. I want to be torn up with this whole thing, guys. And that's what hard work should do, not give me permission to go, I worked so hard, so now I get to be a little boy and be irresponsible. No, no. And by the way, buying a motorcycle or a gun is not irresponsible, but it is while you're trying to get out of debt. If you run a business, you already know this.

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I'm doing good. How are y'all?

Better than we deserve. What's up?

I steal that line, so I hope you don't have it trademarked.

Nah, um, I stole it somewhere, I just forgot where.

That's funny. Um, so it's an interesting predicament. It's not really a predicament. I'm really fortunate to be in the position that I'm in, and Lord has treated me, uh, treated me great, but Essentially the last 2 years I've made about, about $300,000 plus or minus.

Good for you. Um, thank you.

Um, and it kind of seems like the money just disappears. I'm not a big spender. I mean, I've bought big things, but I'm not a big spender. Um, but I just, I don't have as much money left over from that as I should. And where the change is, is Yesterday I made a pretty big amount of money and I'm, I mean, the first thing I did was log on and talk to people on how to build a shop on my property. And I kind of stopped myself. I was like, all right, this isn't what I'm supposed to be doing. So I'm 28 with this much money. I'm trying to take a step back and be like, all right, how do I turn this into more without spending? Um, and just wanted some insight on it.

And good for you. Are you single?

I am, yes, sir.

Okay, cool. All right, well, the good news is you don't have anybody to control but you. The bad news is there's nobody to gripe at you. I mean, you have no accountability, right? Right.

How do you make the money? What kind of business is it?

So I'm a land broker, so I sell like farm, ranch, and hunting and fishing.

Good for you. That's fun. I've got a friend of mine that does that. He makes that kind of money and more. Yeah, well done. That's great.

I'm really fortunate to have a job that I love.

Yeah, yeah. I get to walk around on beautiful land all day long. That's neat. All right, or drive on it. So here's the thing. The emotion that you're having is that it's regret, it's disgust that says, "I make too much money to have nothing to show for it. Yuck." It's a bad taste in the back of your mouth, right?

I would say yes.

Yeah, and I want to use that and say, okay, I'm gonna lean into that and use that to say that's gonna force me to fix this. Because you don't want to wake up 10 years from now and have made $4 million over the last decade and have zero except a new shop in the backyard, you know. And that's what you're saying. You're saying that out loud. So the first First step to solving a problem is recognize there is one, so you're right on target. The way you fix it is you develop a detailed game plan before the month begins. Okay? And so download the EveryDollar app and we'll give you a year free on it, okay? And I want you to start with saying, okay, this is my monthly budget. Now, your budget is erratic because your income is.

Sure, it's also cyclical, which is why this is important now.

Exactly. But we also need to set a baseline of what it takes to operate survival per month. Okay, so if you're making $300,000 and we said, okay, we're gonna spend $10,000 a month, that's $120,000 to operate the household.

That's about what it is right now with mortgages, and I do say that plural, and Not a bad guess then.

Okay, so if it's a little bit more, a little bit less, I don't care, but set that baseline and lay that out and say, okay, where does this $10,000 per month go? Or $12,000 per month? Give every one of those dollars a name, and then beyond that, I would do one of two things. I would have a list, forced ranked, of where extra money goes. Force-ranked meaning the first dollar beyond $12,000 this month that comes in goes to this number 1 thing until it is completed, then the number 2 thing until it is completed, then the number 3 thing. And so you've got a prioritized spending list beyond your operating monthly budget. Does that make sense?

It does.

That spending could be generosity, It could be buying a shop in the backyard. It could be investing. It could be paying off the mortgage. But, you know, if I get an extra $10,000, the first $4,000 is going to this and the next $6,000 is going to this. And have that done before you get the money. You know, it's laid out and you're just gonna— like doing a to-do list. The most important thing I'm gonna do first, and then I mark through it, and only then do I move on to number 2 and I mark through it, and then only then do I move into number 4 and mark through it. And I've lived off of that system for 30 years because I've always had an irregular income because I've always been self-employed.

Yeah, I think one of the hard things for me, which I say hard, it's not, I mean, it's very doable and I know it is, but so I've been in real estate for 7 years. The first year I made $12,000, second year I made $24,000, third year I made $76,000, and it wasn't until the 4th or maybe 5th year where it really started to pick up. So I mean, I was really scrapping— not scrapping, but I was really, you know, having to somewhat pinch pennies. And, um, fortunate enough to have a supportive family, but, um, like, putting this amount of money in this spot when they're big numbers like this mentally is really tough for me. I know it's the right— like, I completely agree with everything you're saying. I'd be dumb if I didn't, but I tithe 10% of all money that I, let me rephrase that. I donate, instead of using the word tithe, I donate. I actually have a question on that if we have time, but I donate 10% of all the money that I make. And when that goes away, and then I have taxes, and then after that, it's like that number just shrinks, just shrivels up so quick that it makes me nervous that I don't have cash.

00:27:47

Yeah, well, I mean, think about, I get a, a royalty check in from a publisher that's a substantial number, and I'm a tither, I'm an evangelical Christian, I give a tenth of my income to my local church, and so 10% is gone and 40% is gone for taxes. So 50% of that check is gone before I even start the budget. That's what you're saying. And that's the world we live in.

That's just reality.

Yeah, you're just one of those evil rich people that you should be taxed into oblivion.

Well, you just have to tell yourself that all off the top. Like, if you know, "Oh, I've got $20,000 coming in," it's like you don't even let yourself feel—

"I don't have $20,000.

I got $10,000." Yeah, that's just the way your brain needs to start working.

And that $10,000 is already spent on this prioritized list. And so, I don't care what you do with the money, because I know if you do it on purpose, you're gonna do smart things. That's right. You know, very few people say, "I'm gonna budget." I'm going to budget, you know, half of my income to completely blow it. No one says that. No one does that intentionally. They only accidentally do that because they don't have a plan.

Well, that's what they do. And I've been guilty of it. It's the— I account for all the necessities, mortgages, car payment, you know, whatever those— insurance. And then the rest is just in a pile called treat yourself. And then that's where all the money goes because you think, well, I budgeted the most important things, but that's the zero-based budget teaching, which is—

I don't care if you treat yourself. But just write it down.

A line item.

Just say, you know, and if you want to give yourself the whole thing to treat yourself, make yourself write it down, and then you're going to go, "That isn't really what I want to do. I really do want to treat myself, but I really don't need $10,000 for that. I don't really need $100,000 for that.

I need $2,000." And you're in control of it at that point, whether you do or you don't.

So, it's the old thing Maxwell, John Maxwell says, you know, "A budget is people telling their money what to do instead of wondering where it went." And John, that's really the crux of your question. You tell your money what to do instead of wondering where it went. And you know, you always have some fun in there. You always have some generosity in there. You always have some investing in there. And fun equals lifestyle. That's a lifestyle purchase. That's a couch, a car, a trip, a shop in the backyard, a gun, a motorcycle, nod to our last caller, right? That kind of stuff. So that's all lifestyle stuff. And that all works really well once you've gotten yourself rid of the consumer debt. Now, No, if you got any money left after food, lights, and water, it goes on the debt until you're out of Baby Step 2. That's scorched earth until you're out of Baby Step 2. You get your, except your mortgage debt, you get everything cleaned up but that. But that's not John's question. John, the question is very simply, you have to tell your money what to do before it gets there.

Some kind of a system, some kind of a plan. I gave you an example of one. Or it will leave and you will wake up with this financial hangover wishing you hadn't made that much and have nothing to show for it.

Dave, we got a lot of calls on this show where life happens. One day someone's healthy, they're working, providing for their family, and then a curveball hits.

You know, we hear it all the time. A car accident, a cancer diagnosis, a heart attack, and suddenly everything changes.

Yeah, and that's why you've always said that having term life insurance from Zander is essential, because it protects your family if the worst happens.

Yeah, that's right. You need 10 to 12 times your income in coverage. No gimmicks, no whole life junk, just straightforward term life protection. But there's another piece that people often overlook, and that's long-term disability insurance.

Yeah, it's important to understand the difference between them. Life insurance steps in when you die. Disability insurance steps in while you're alive but can't work. Work, so it replaces a large part of your income so the bills still get paid while you get back on your feet.

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Protect yourself, protect your income, protect your family. If you have a simple tax situation, like you haven't had any major life changes or big investments, use Ramsey SmartTax. Ramsey SmartTax is affordable, keeps filing very simple, it's very accurate, and it has built-in support in case you need a little help. Filing early means getting the best deals, and you get that tax stress off your shoulders. So as soon as you get all your tax documents, go to RamseySolutions.com/SmartTax and start filing. Andrew is in Orlando. Hi, Andrew, how are you?

Hey guys, how are you guys?

Better than we deserve. What's up?

Hey, so my wife and I just got married this last November, and we've been working ourselves through the Baby Steps. We're in Step 2 right now, and we've paid off more than half of our debt so far, but we have some to go yet.

How much is that?

We have about $19,500 on a car loan and then about $4,000 in a credit card.

That's what's left?

That's what's left, yes.

Okay, so you've already paid off $25,000?

Yes, correct.

Since November. Way to go.

That's great.

Yeah, yeah, it's been amazing. The Lord has been so good.

Amen.

Huge blessings. So my wife is legally blind in her right eye, and we've been talking through how we can pay off this debt faster. We're attacking the credit card super aggressive. But the car, the payment per month is about $420 per month. And once we pay off the card, obviously we're going to take what we were paying on the card and throw it at the car. But a question that we have is, should we look for something different? Should we look for a car that's maybe slightly older, maybe a little bit cheaper that we can pay off sooner?

Or are we, Yeah, what do we do?

What's your household income right now?

We're at about $108,000 per year.

Tell me where the blindness plays a role in this. Is it impeding her ability to work?

No, no, she works full-time. She's in healthcare industry selling, uh, yeah, healthcare insurance and everything. But it's mainly with like, uh, the, the distances in front of her, especially at night. It's, it's hard, harder for her to see. But she does have doctor's approval to, to drive and So it's depth perception.

Yes.

Yeah.

That's, uh, I've got, I've got a friend that's, yeah, same thing.

And is your issue with the car, uh, what are you trying to do? Are you trying to save money on the car or are you saying because of her blindness, she could wreck this car or should we get a cheaper car that it's okay if it gets dinged up? Like, what are you saying with all of this?

Really, really just trying to pay off the debt.

Okay. That's what I'm really trying to do. It has nothing to do with the blindness. Got it.

Okay.

Yeah.

That's good. I like that. So if you paid off $25,000 since November, can you pay off $25,000 by November?

That's a great question. I think we could.

Do you like the car?

Yes, we do like the car.

I would keep it and pay it off.

Keep it and pay it off. Yeah. Yeah. The problem I see right now with it, it's a 2019. It's a newer car with more sensors and stuff like that.

I'm just thinking like, man, if we do get repairs and stuff, can we afford it?

Afford some of those repairs on a vehicle like that?

Yes, you can.

Yes, you can.

Okay.

Yeah, you're driving a piece of junk. That's why you're— and you're a tightwad.

Yeah, yeah, yeah, yeah.

So if the— here's how I'm answering the question to give you the, the framework. I use two pieces, or we use two pieces of information to determine if someone's car is their problem. And if the car is their problem, I'll tell you to sell it in a heartbeat. Okay, because it's often the problem. This show sometimes is called the "Sell the Car Show," like the answer to every question is sell the car, right? But number one, you do not want all of your vehicles added together, anything with motors, wheels, that includes your stinking lawnmower, your Sea-Doo, whatever, all added together, your camper that's in the backyard, if it's got a wheel or a motor, all your value added together should not be more than half your annual income. Which would, in your case, would be $56,000. Yeah, $59,000. So, you know, that's what I'm looking at, and yours is not. So it does not violate that. The second thing is, if there's debt on the vehicle, can we be 100% debt-free except the house within 2 years without selling the car And if we can, do we like the car, then yes, keep the car.

But for instance, in your case, if the car was— your rate of debt reduction, you're easily going to be within that. And the car, and your cheap car, is less than half your annual. So you're in pretty good shape. The only difference was she just had a nicer car than y'all when you just got married, and so she won that battle. But it had debt and yours didn't have debt, and so now we got to clean that up.

Up.

But I think at the end of the story, 2 years from today, with a fully funded emergency fund and your money going into retirement, we're gonna be glad she's in a pretty good car, especially if she's got some of the newer features on that car with her depth perception issues. So yeah, I think I'm keeping it.

Yeah, I think so too.

And, but you know, you can sell it if you want to.

If you just wanted to be free very, very quickly.

If you wanted to be free super fast, you're not doing anything wrong by selling it. But here's what's gonna happen when you do. You sell it, you get $3,000 $30,000 car and you're debt-free in 6 months, 4 months, and then you build an emergency fund. And then what's the first thing y'all are gonna do? You're gonna start talking about upgrading these cars because they're crappy. And you're gonna do that with cash. And you're still gonna end up 2, 2.5 years from now in the same place that you are now with a paid-for decent car. And so, you know, it's not— the car is not violating anything here. It's just kind of part of your whole story.

Yeah, I agree.

Grace is in Fort Collins, Colorado. Hi, Grace, how are you?

Hi, good, how are you guys?

Better than we deserve. What's up?

So I have a question related to the gazelle intensity of paying off a house. We, my husband and I, save anywhere from $100,000 to $150,000 a year after expenses and everything, and it's hard to not kind of look at the numbers and think we've got $500,000 left on our house right now. To save I think, you know, let's just try to pay this off in 5 years. But my husband, you know, he's kind of been looking more into the investment side of things too, as far as, so whatever we make, should we do a portion of that towards the house and the rest into investments if we're already doing 15% into retirement?

15% into retirement is all you should be doing, no more.

Okay.

The rest of it ought to go in the house. The rest of it ought to go in the house. So this $150,000 you're putting on something else, how much is in that account?

Um, in what— well, so that's what we get basically at the end of the year. A lot of it comes from bonuses.

Yeah, but you're putting 15% away, and then you said in addition to that you're investing $150,000.

Well, that's just what we have in cash saved at the end of every year.

Where is it?

Um, well, high-yield savings.

How much is in that account?

About $70,000 right now.

$70,000. How did $150,000 turn into $70,000?

So at the end of every year, well, it'll be about $150,000.

So you just stockpile it until the end of the year and then you decide what you're going to do with it.

Well, at the end of last year it was $150,000. How's it $70,000 now?

So we just moved last year, so we put a good chunk of money down into the house, but we just kind of accumulate and then year-end bonuses.

Any money above 15% should immediately go in the house. Okay, not in savings.

Okay, and nothing like diversifying other types of stocks or mutual funds or anything?

No, no, you're already investing your 15%.

No, you want to know why? Yeah, yeah, because the data tells us it's the fastest way for you to be a millionaire. We did the largest study of millionaires ever done at Ramsey, 10,167 of of them. And the typical millionaire in their first $1 to $5 million of net worth sounds like this. They, it took them 12 to 17 years from the time they started getting serious about getting out of debt and building wealth to get there. They paid off their house in 11.2 years on average. And here's what their portfolio looks like. Let's say they've got $1.6 million in net worth, they've got a $700,000 paid-for house and $900,000 in their 401(k)s and/or other investments. But the paid-for house and the fully funded— for the 15% going into the 401(k) is what we found every time. Every time. We did not meet millionaires that said, oh, you know, we kept a mortgage and that caused us to have great investing and that made us millionaires. Nope, they got rid of the mortgage like it was a cancer, because it is.

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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. Joy is in Los Angeles. Hi Joy, how are you?

Hi Dave. Hi Jade. Thank you for taking my call.

Sure. What's up?

Yeah, we are recently debt-free, um, except our mortgage. And I wonder, yeah, and I'm thinking if I could afford to go to Europe to watch Wimbledon. I really love watching tennis and I really want to do it, but then, um, my husband and I were talking last night and when he saw like how much we're going I'm gonna spend. Me and my— it's only going to be me and my son. And he's like, oh, that's a little too much. It's gonna, you know, delay our, our baby step number 3.

So you don't have any money saved?

We do, we do have money saved, but then, you know, it's gonna— we— I will take the money from there, and so it's going to delay our—

okay, so you have an emergency fund saved of how much?

Uh, we have $15,000.

Okay. And, um, how much do you need in your emergency fund?

Uh, for the trip?

No, how much does the emergency— the 3 to 6 months of expenses?

Oh, $24,000.

That's—

so that's the target. And your household income is what?

Um, we make about $320,000 or sometimes $350,000 if my husband goes in overtime.

Wow.

How much does the Wimbledon trip cost?

Well, the tickets are about $1,000 for my son and I. And, you know, the whole trip when we were—

yeah.

Yeah. The whole trip. The whole trip.

No, you're not going to London and buying a Wimbledon ticket for $2,000.

I'm talking about when you price this whole deal out, the tickets, the airfare, the hotel, how much will it cost?

Oh, so the total is $9,000.

Okay.

Oh, okay. That's right.

So the, the airfare alone, because of what's happening, it's about $4,000.

Listen, I'm not, I'm not mad at the number. I just wanted to get to it. And my question is, with the $320,000 income, and when, when actually, when do you have to have the $9,000 by?

So we have the $9,000 already.

No, you don't.

Um, no, you don't. You have $15,000. $9,000 of $24,000. So you don't have $9,000 here.

You're, you're, let's, let's clarify real quick. The definition of the emergency fund is for emergencies. Wimbledon is not an emergency. So you can't say I have $15,000 for Wimbledon. You don't, you have $0 towards Wimbledon. My question and what I'm trying to solve for you is how quickly can we get the $9,000 on a $320,000 income and still make progress towards Baby Step 3? Because the next question I have for you is the $23,000 that's your goal, Is that 3 months of expenses or 6 months of expenses?

That's going to be 3 and a half expenses.

Okay. So I go back to my first question. I want you to have 3 months of expenses in order for this to even be something for you to consider. And then you would have to pay the $9,000 cash on top of that, not out of that, on top of that. Does that make sense?

Okay. So what do you guys have planned in the next 2 months that you can take off of your calendar and cut your budget to bare bones in order to finish the emergency fund. Because, you know, Wimbledon's in June, and so you've got time. July, you've got time. And so I think you can probably, if you went to scorched earth, Jade's point is you probably can do both. You can finish the emergency fund and come up with the money to go. It looks to me like you can because your income is so fabulous. So, yeah, work extras. Have you got anything you can sell that you'd like to get rid of to get to cause this to happen? Have you got, you know, but I'm going to take everything out of the budget and go scorched earth to be able to live, to be able to do this trip if it's what you want to do. Here's what I won't do. I won't declare a trip to Europe an emergency. No, it's not an emergency. Okay, I wish it was, but it's not. I could declare some things I want an emergency, but they're not emergencies.

And so, I have to, you know, at some point, I've gotta categorize these things properly and say, one is a wish, a want, a dream, and one is a necessity. Being ready for Murphy, if it can go wrong, it will, is paramount for families to get ahead. And you guys have been making good money and been broke for a long time, and you've finally gotten yourself out of debt, and you're finally saving money, money for the first time in your lives, probably.

And let's talk specifically about why it's important. Dave just hit on the part that this is your emergency fund. You need it in case, you know, emergencies arise. But I do believe that when you're in an income situation like you, it's very easy to get lazy and very kind of like, oh, it's okay, I can afford it, I can afford it, I can cover it. If something pops up, we'll just cash flow it. You've got to guard against that, especially because you have a higher income.

Them.

And that's the part where I think, yeah, you got it, you got to be extra careful.

So folks, here's the thing. If you have no money, none, now not— shit, that's not her situation. But if you're sitting there with no money saved because you did stuff like this, you know, and not her situation, not picking on her, but have you ever noticed that when you're super broke, your life looks like a country song, wrong? Like everything that can go wrong will. It's like you have a Murphy attractor beam, you know, it's like beep beep beep beep, if it can go wrong it will. You know, it's like crap breaks, people get sick, the dog goes out in the street and gets hit, every— I mean, it's like a country song, everything that can go wrong will.

It's horrible.

And have you ever noticed that when you get a little money, all that stuff leaves. Like, if you got— if she's got $25,000 and makes $320,000 and no debt, you ever notice that it's a different kind of song? It's like smooth jazz now. I mean, you know, it's not— it's— all that crap leaves. I don't have anywhere near the emergencies now that I've got some wealth. My life used to be one freaking drama after another. And I don't have anywhere near those emergencies. I think an emergency fund is Murphy repellent. I think it keeps him away.

I think it does, but more than that, I think it changes the definition. It changes. Like, I'm the type of person, I am never going to touch the emergency fund ever.

I don't care what happens.

Not even for an emergency. I will do whatever, move hell and high water to make it work.

Yeah, I agree. That's Sharon. We have an emergency fund for our emergency fund. So, we never touch it. You know, I mean, it's like that. But here's the other thing is this: when you got a little margin in your budget, a flat tire, you just You just cash flow it. But when you're broke, a flat tire is an emergency. You know, the alternator goes out on the car, it's $500, $400. You just fix it, you don't think anything about it. It's not an emergency anymore. But when you're broke, every little thing like that is like, "Oh God, the world's coming to an end!" And the drama queen's doing a dance between your ears. I mean, it's just like— but yeah, so it's very interesting that The overarching thing of what I'm saying is, when you get a little bit of money and you have a system, and you're not just cold hard broke, your anxiety level just goes way down. Because the drama goes way down.

But if you get a little bit of money and you don't have a system, you're gonna be looking up wondering—

Then you're gonna be back to having no money again.

That's why a third of people who make $250,000 or more are living paycheck to paycheck. Because they thought they could outearn their stupidity.

Ooh, I tried it. It doesn't work. Maybe my stupid was just bigger than my income, but I tried it. It didn't work.

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Michael is with us in New York. Hi Michael, how are you?

Hello Dave, thank you so much for taking me.

Sure, what's up?

I appreciate it. I'm 52 years old, basically starting over. I had some major health issues and I've been permanently disabled for the last 16 years. Yeah, I've got the skills to rebuild a high-income trades business, but I'm also gaining traction as a published writer. If you were me, where would you put your focus for the next year?

What was the nature of your disability and how have you overcome it?

Well, I was a teacher and I taught trades. I taught welding, metal fabrication, heating, ventilating, and air conditioning, and I I became environmentally ill from the welding fumes.

Ah, okay.

So I had a neurological disorder, basically paralysis.

Whoa.

And I, you know, I've learned about juicing and things like that, and that kept me alive. And I had, thank God, a long-term disability policy that paid me my salary all these years. And about a year and a half ago, they offered me a settlement. I didn't take it. It. And then I looked at my wife one day and I said, you know, I said, I can't live like this anymore. And I decided to call the insurance company. Um, they offered me the same settlement. I decided to take it and I took some radical responsibility and, uh, I lost 40 pounds. I got off oxygen. Um, and I got a clean bill of health from my doctor and I'm ready to rock and roll. Wow.

Yeah.

So the, the, the, the nature of the disability is completely healed and gone.

No, I mean, I'm still probably permanently disabled on paper, but it's not affecting me anymore. I can breathe at 7 liters capacity even if it's only with one lung. Okay, I feel great. I green juice every single day. I ground outside. I jump on a rebounder. I'm doing everything that I had to do to gain my health. Like I said, I dropped 40 pounds.

Yeah, the whole thing, man. That's amazing. Congratulations. That's amazing.

Thank you. Thank you, thank you. I've become a published author also.

I can't imagine you going back to welding.

No, I'm not. I'm actually a master electrician by trade. Oh, cool. And I basically did electrical work and mechanical work. So I was planning on maybe starting there with a service business, just a high-end business, basically myself.

Why wouldn't you?

While I write.

Yeah, good.

Um, you know, it's— I, I want to be cautious because of my health. I don't want to go backwards. I still have a young, beautiful family.

No.

So I wanted— I want to do it as intelligently as possible. Yes. My question was basically, you know, if it was you, like, what steps would you take not only to ensure that, that I, I don't overdo it? Because, you know, I figured I could probably do it 3 days a week, um, 6 to 8 hours a day.

I think you— I think you are an expert at monitoring the metrics that are associated related with your health. You've rattled them off to us. It's been the whole sole focus of your last decade, and I don't think you're going to overdo it because I think the instant you do, you're going to know it.

That's very true.

And it's not a permanent thing. It just would be fatigue, and you'd say, okay, I got to take a week off, or I got to slow down back to 2 days instead of 3, or you're going to know. The metrics are going to talk to you because you're doing such a good job of managing your health so intentionally. Congratulations. So yes, I think the electrician thing is a very good paying gig. It's 100% predictable that you're going to go get some money, where the publishing is very hit or miss. And as you know, it takes a while to get it moving. And so I think your foundational underpinning is the electrician, and then the icing on the cake, the gravy on the biscuit, is the publishing stuff. And if the publishing stuff finally takes off enough that you never have to do the electrician again, so be it.

That's awesome. Is the primary drive for you financial or personal fulfillment at this point?

At this point, financially, I don't have to worry about money at all. Everything I own is paid for. Everything I own is completely paid for. My home, my cars. I have a brand new truck that's paid for, so I can use that to start work. I mean, I don't want to buy a van right away.

No.

I want to build up to a van when I have the cash to buy it.

Right, good.

That's just the kind of person I am.

I think you can make really good money and start with a day a week, and then 2 days a week, and then 3 days a week. And if it starts to wear on you, go back to 2 days. And if it doesn't, occasionally you can pick up 4 days. And you can make a lot of money in the trades right now.

I agree.

And I would do that as a foundational thing to give you patience with the publishing thing.

That is also going extremely well, I might add.

How much are you making? What's extremely well? What are you making?

Well, I'm not really making any money from it yet, but—

Then that's not extremely well.

Okay, so basically we measure this on money. Yeah, yeah, no, 150 or so in articles, not paying any bills yet.

No, no, but that's— it's fulfilling, and that's what extremely well means, and you enjoy it, and that's what extremely well means, and you're getting some notoriety, and That's awesome, but you're still working for free.

I basically—

yeah, yeah. And so you're not ready to turn— you're not ready to turn your financial destiny over to $150 articles.

So the working for— as an electrician running my business could pay for all that for pretty much—

it pays for your life, and you got it. You can continue to rebuild and build a good life. And then again, if the publishing's ever— the income from publishing ever starts intersecting the line of with the electrician, then you can start to slow down the electrician, and you know, because now you're making a living publishing things.

Awesome.

And that's where you need to get to, not just the fulfillment piece. But that's the problem. It's that they give you— it's all— it's so gamified. They give you feedback and make you feel like you're really winning, and then you add it up and it's like, I made $400.

But to your point, It's, it's right now his success is defined not monetarily, but that's good because he's got the other thing giving him money.

And what a great overcomer's story.

So good.

So inspiring. I mean, everything from the trampoline to the juicer, man. I mean, that's, that's very, very cool. Congratulations. That's taking the bull by the horns.

Yeah.

I'm not going to— I'm not going to be defined by this. I'm going to define it. Yeah, that's a big deal. Dustin's in Des Moines, Iowa. Hi, Dustin. How are you? How are you?

I'm good.

How are you?

Better than I deserve. What's up?

I just had a quick question with the Snowball Method and cards that have deferred interest.

I just started the Snowball Method about 6 weeks ago. I've been able to pay off about $4,000 worth of debt so far.

Good.

I have a credit card that I put a washer and dryer on. It would have been 18 months ago. The deferred interest is going to be due, or it's going to hit in next month. It would take about $900 to pay that off, which I can do.

Okay, so wait a minute, are you saying deferred interest, meaning the interest has accrued but they've just not billed you for it yet?

It hasn't been applied to the purchase price.

What if you pay it off? Is there no interest if you pay it off early?

There'd be no interest.

Yeah, you want to do that.

Okay, so I can pay off deferred stuff versus just the smaller stuff. I can kind of go out of line there.

I would, you know, just temporarily. It's only $900. Yeah, the zero— that's nothing down, 0% interest until X, and then they backcharge you at 38%. Yeah, that's how they screw you. And 89% of those contracts, people do not pay them off in time.

Yeah, if you can get out of that, that's wonderful.

So yeah, you want to knock that in the face and And you want to do it a month and a half, 2 months early.

So there's no question.

So they don't say, "Oh, we didn't post it, and now we really are going to charge you the interest because the mail didn't get here," or bullcrap, okay? Pay it and get verification a month early that it's paid.

Okay.

Because they're going to try to screw you. It's what they do.

Yep. Nope, I agree.

And clean them up as fast as you can. I don't know how many of them you got, but yes, I want to get rid of those. And if you need to shift your debt snowball fall around just a little bit, because you're saving, you know, probably 30 or 38% interest, something like that, 20%, whatever.

Over the course of however many months you go like that.

Over the course of how many months and that kind of thing. Yeah, that's gonna, it's 100% knocked, it goes away if you pay it early. And so, and folks, that's the ripoff of those nothing down, you know, the rooms, there they went, right? And you know, you buy this couch and not pay for it for 24 months, no payments, no interest. And yeah, that 24 months goes by in an eye blink and then you get charged all that back and almost 9 out of 10 people don't do it. If you're at the point where you think bankruptcy is your only option, stop for a minute. You might have another way out. Guardian Litigation Group. Most debt relief programs sell you on the illusion of protection, but a crappy legal plan tacked on as an upsell doesn't actually defend you when you get sued. It just leaves you confused used and exposed. Guardian is different. They're not some call center, they're real attorneys. And with Guardian, you're assigned an attorney from day one. That means if your creditor sues, you're not scrambling and you're not hit with surprise legal fees. Now listen, I'm always going to tell you the best way out of debt is the old-fashioned way— clean up the mess and pay it off.

But if bankruptcy is staring you in the face, Guardian gives you a legitimate alternative. They've helped over 55,000 people settle more than $600 million in debt. So before you make a decision that follows you for years, go to guardianlit.com/ramsey. That's guardianlit.com/ramsey. Attorney advertising. Results may vary and no specific outcome is guaranteed. Well, I wish we could get to every call here, but we can't. The lines are always full, and I know a lot of you get a busy signal. Sorry about that. We do have an alternative though. If you'll go to RamseySolutions.com, you'll find our Ask Ramsey AI tool there, and it's based— the data in the AI tool is based on 3 years of calls into this show, plus Financial Peace University lessons, plus the books we've written, plus the articles we've written. And so So only Ramsey information was fed into this, so only Ramsey answers come out of this. That's how AI works, by the way. It's artificial, if you hadn't heard. It's not real. And so it's going to produce an answer almost as snarky as you would get here on the air. And so we haven't been able to add quite the sarcasm level to it yet that we have in person, but we're working on that.

So the rest of it though, the answers are exactly what you would get here on the air. Ask Ramsey. It's a free tool. You'll get the same answer. Try it out. RamseySolutions.com. Steve's in Green Bay. Hey Steve, what's up?

Um, thanks for taking my call. I'm really excited to talk to you and Jade. So I have a very simple question. Um, I'm 62, retired. My wife is 60 and she's going to work for 4 more years. I want to know how much we should be contributing to my Roth now because my investors are telling me that I have a $500,000, um, $100,000 in my investments, and there's only $150,000 in Roth, and the rest are 401(k) and IRA. And I don't want to create a tax liability for my kids or grandkids. I have 2 children and 4 grandkids, but I only have an effective tax rate last year of 10%. So I just thought I should be contributing more to Roth, and they said I'm good because of the way things are going to roll. And let's get your opinion on that.

Well, when I first started this stuff, When the Roths first came out, it was after we started this stuff, the Roth came about. I was so excited that, you know, I was in my 30s and 40s, that I could have tax-free growth. And I was pushing everybody to get tax-free growth, and I'm pushing me to get tax-free growth. And so I had everything in Roth, and then anytime I could convert something to Roth, I would. And so I was always moving into Roth because I was getting tax-free growth. Now that I'm 65, it suddenly has occurred to me that there's two other benefits to having everything in Roth. That are even more powerful than tax-free growth, or add to— it's not more powerful, but they add to it. Number 1, at 73, I don't have RMDs, required minimum distributions. So all of your 401(k) traditional, you're gonna have to begin to withdraw at 73 under the RMD rules, whether you want to or not. So, and of course, the more you have in traditional, the more that check is gonna be. The second thing is, and in my case all of mine's in Roth, so 100% of mine's just going to sit there and continue to grow tax-free because I don't have required minimum distributions, right?

The second thing is, is that Joe Biden passed the SECURE Act, and the SECURE Act says that all inherited IRAs, in other words if you name your kid as a beneficiary on your 401(k) or your IRA, and it's traditional, if they inherit that, they have to withdraw that money within 10 years on a 10-year schedule. So they have required minimum distributions. So they're going to pay income tax on 100% of that, and they have to do it over a 10-year period of time from the time of your death. On Roth IRAs, none. Doesn't apply because there's no tax due.

And that's why this came up, because my father passed 5 years ago, just left $50,000, but I'm still taking that out over time.

Yeah. You're having to do the Biden withdrawals. Yeah.

Within 10 years.

Right.

And I just don't want my grandkids or kids— because we live simple. We can live on $50,000 a year. I have zero debt, never had. And I just want to leave a legacy.

Well, here's an interesting calculation. It's tempting to move the money that you have in traditional gradually to Roth to keep you from having bracket creep.

Yeah.

That's a tempting thing. And you could run those numbers out. Out, you're probably gonna have to get a different investment group to help you with that, because apparently your guys don't think this way. But yeah, and if you want to get another opinion, you can go to Ramsey Solutions and check with one of our SmartVestors and have them run those numbers out with you. But you could run, you know, like, like bump a couple of brackets but not go all the way to 40, not go all the way to 39, right? That's one way of doing it, and do a little bit a year and kind of dribble it out. The other thing that's interesting though is you think about like the last 3 years, you know, we had a 26%, a 23% rate of return, and an 18% rate of return on the S&P. Now that's not normal, but we've had a ridiculously good last 3 years, okay, in the market. If you had just moved it all and paid the taxes 3 years ago, you'd have had all of that 60% of growth with no taxation.

Sounds like you're a proponent.

I mean, it's interesting, but you know, if we have normal market growth of 10 or 12% a year, right, it does take you a little while to get it back. But if you're healthy and you're 62 and you move $700,000 or $800,000 over and that creates taxation of what, $200,000? You're gonna get that $200,000 back in tax-free growth so freaking fast.

Well, I was telling them that the very least I'd like to do is, while my wife is working and has earned income, I can do this for at least 3 or 4 more years.

Oh, I would do Roth IRAs for sure.

Absolutely.

Absolutely, for sure. 100%. Anybody tells you to not continue to invest in Roth IRAs is only, what, $8,600 at your age, right, you can do?

I think you agree with everything Dave is saying. I think your hangup is that that's not what your tax— that's not what your income is saying.

That's right. I have actually 2 people telling me that.

Yeah, but I think you can crunch the numbers out and understand it yourself with somebody, and you'll figure out what I'm figuring out here. I actually, I took a call on this like a week ago. Maybe you and I were on the air together. It was a guy, he had like $700,000 or $800,000, and I sat there and kind of was telling him, oh, I remember, do it, you know, kind of do it a little bit at a time and don't get bracket creep. And then it suddenly, at the end of the call, it occurred to me, you're missing out on all of that opportunity cost on on that tax-free growth all those years. While you screw around with dribbling it out to avoid bracket creep over 5 years, all that money now has been taxable. All that growth's taxable, and it wouldn't have been taxable. So I mean, I think there's something to be said to doing it all and rip the Band-Aid off. Yeah, that's it. Mathematically, I think you might come out ahead. You gotta run some numbers to be sure. I'm not positive, but it's something to consider and something to look at, and I would get a different set of eyes on it 'Cause anytime you have an investment professional in your life, their job is to teach you not to tell you.

And if they don't teach you, in other words, they start saying all that stuff, you go, "Okay, wait a minute, you're telling me I don't want to save in a tax-free account? Of course I wanna save in a tax-free growth account. What do you think?" You know, "Oh no." You know, yeah. So yeah, I do a Roth every year and my net worth is hundreds of millions, okay? The building I'm sitting in is $600 million, okay? So the, you know, and I do Roth, backdoor Roth, Sharon and I do them every year. I'm gonna keep the government's hands off of every stinking penny I can legally because I don't want them to buy a $22,000 toilet seat with my money. And that's what they do because they're idiots up there. And so I just, I don't want to give them money. It's not good stewardship. Ownership. Not if I don't have to legally. And so I'm gonna do— it's the time of year when I'm pissed off right now, it's tax time. So just bear with me, people. But that's it. I mean, that's the thing.

Yep, absolutely.

You gotta— but the Roth IRA, moving everything to Roth, people, that ain't bad. Or over time, that's the move. It gives you two things I had not considered early on, and that's no RMDs and no inherited IRA forced withdrawals. And so your kids get a Roth IRA, zero income tax on it. Now neither one have estate tax on them. That's not an estate tax issue, but it's an income tax issue for your kid because it's a taxable account that they inherited or a non-taxable account that they inherited. Something to think about. And think about the— what if they held— let's take $1 million and they hold that 7 years. After you die, because they don't have to withdraw it under the Biden rule.

Wow, it's gonna double.

It's gonna be another million dollars. The million will be $2 million.

That's right.

And then what if they hold it 14 years?

Ooh!

It's gonna be $4 million.

Building that wealth.

And all of that is without taxes. Yummy, yummy, yummy, honey.

Today's question of the day is brought to you by Y-Refi. If you've fallen behind on your private student If you have student loans and have stopped making payments, it can feel like every door is closed, but Yrefy helps borrowers explore low, fixed-rate refinancing options that fit their budget. Go to yrefy.com/ramsey. That's the letter Y, R-E-F-Y,.com/ramsey. Might not be in all states.

Okay, today's question comes from Nicole in Colorado. She says, my husband passed away unexpectedly in 2021. Sorry about that. Thankfully, he had a $1.5 million life insurance policy, which I tithed on when it was received. I was able to pay off our home and put $1 million into mutual funds and retirement investments. I pull from the non-retirement funds as needed for expenses. How do I tithe on the money I withdraw? I know I'm supposed to tithe on an increase, and I want to make sure I'm honoring "with the blessings he's provided." It sounds like you already tithed on the money when you received it. It says, "I tithed on the insurance policy when it was received." You'd be tithing on the growth.

If the policy, I mean, if the investments made $120,000 in growth, then that's your income for the year. And you would tithe on whatever they grew.

Oh, I see what you're saying.

Okay, yeah. You know, you could do it one of two ways mathematically. You could either— I don't tithe on investment growth until I take it out, okay? Because it's tied up in there. So, I've got retirement accounts that have grown, and I have not paid on that growth until I use that money, okay? I don't tithe on the increased value of real estate until I sell it, okay? That's when I would tithe on it. And so, So, what I would tithe on in your case, Nicole, is whatever money you're taking out, if you're only taking out growth. Okay, so, let's say you've got the million dollars in there, and let's say it made 10%, that's $100,000 growth, but you're only pulling out $60,000. Then I would tithe on the $60,000. If you're pulling out $120,000, but it only grew $100,000, then I would tithe on the growth, the $100,000. Not what you pull out, but what you pull out is the— if you don't pull out all the growth, I would only tithe on what you pull out. That's what I personally would do. Now, let's cloak this in an understanding that you can't outgive God, number one.

So, giving never hurts. You're never gonna be— you can't overgive.

Yeah, it's such a technicality.

And number 2, don't get caught up in legalism because God doesn't love tithers more than he loves non-tithers. He loves everyone, okay? And so if you mess this up, he's not gonna like, okay, it's not a salvation issue. You're not gonna get smacked around, okay? That's not, you can't, that's not, he's not a, He loves you. He's got a plan for you. He has us to give not because it's a rule and not because we're trying to please him. He has us to give because we are the best version of us when we are givers. We are more like Christ, Christ-like, who gave his life.

Right.

You know, and the Father gave his son. We're more like them when we are giving. And that's what he wants to tap into by teaching us to be givers. And the baseline for those of us that are people of faith is a tithe, a tenth of our income. But don't get caught up in the legalism of it like you're trying to please God with this. He's already pleased, honey. You're a widow. You have a special place in the scriptures to be taken care of. Of and loved and blessed and prospered. And that's what your Father wants for you. So do this with an open hand and an open heart with no compulsion, no need to follow a rule. Instead, it's, I'm learning from my Father how to be a giver. He's teaching me. And so I'm going to give something. Be careful not to get caught up in the details.

Yeah, agree.

It'll drive you nuts. You can really get in what the old King James called the jot and tittle, the crossing of the T's and the dotting of the I's. Got you. The legalism. Andrew is in Houston. Hi, Andrew, how are you?

I'm doing all right, how are you?

Better than I deserve. How can we help?

Yes, sir. So my question is in Baby Step 2, and when you're listing out debts, and it has to do with an upside-down car loan. So we just finally got real serious about debt and hating being stupid, started budgeting, listed out all the debts. And one of our dumber decisions was this car that we're now underwater on. So my question is, and this is based on God has blessed us with the opportunity to learn to be mechanics on two beater vehicles.

Manuals.

So we have those.

The opportunity to learn to be one.

Yes.

Bless your heart.

With some subpar mechanical assistance from myself, they get from A to B. Yeah.

The YouTube instruction manual. I got you.

Yes, that is correct. So this car, one, it's a turd mobile, but we owe about $11,300 on it and it's worth about $72,000. And so my question is, when I, when I list it in the list of debts, do I list it at the $11,300 or do I prioritize it at the negative equity with the plan to sell it as soon as we break even on it?

Hmm, so put it in there as a $4,000 level in the debt snowball or the $11,000 level in the debt snowball?

Correct.

Hmm, I'd put it at the $4,000.

I would too.

I'm glad you said —of that.

Okay.

Yeah, I'm making this up right now. I don't know if I've ever had this question, but—

Well, because that's the amount that you're actually gonna put into it.

And we're trying to get out of it. Yeah. Yes, even I am dumping this thing and we are moving on.

Now, what are you doing to replace it?

He's already got two beaters, right?

Mm-hmm, I do. Oh, okay, so you're good. Yes, I have two old Fords that each have about 200,000 miles on them, they get where we need to go.

Yeah, what's your household income?

Combined, after taxes and everything, it's about $77,000.

And how much debt have you got, not counting the house?

$58,000 non-mortgage.

Okay, all right. Good for you. So here's what this sounds like to me. It sounds like to me you're gonna have decent cars that you paid cash for in 36 months. Yes, sir. That's where I think you're gonna be. In other words, you're gonna be debt-free, have your emergency fund, save up and move up in cars. And I think that's gonna take you about 3 years. Okay. Yeah, you're a good man. You've got this figured out. I can hear it in your voice. You've got this dialed in. If your voice— if your wife is as aligned on this as you are, you guys are gonna become very, very wealthy over the next 20 years. Okay, yeah, we are 100% in agreement.

And yeah, there was a lot of like shame and fear about debt, and we've sort of sat down and like, no, we're gonna get serious about it, and there's hope now.

So yeah, you've owned it and punched it in the face. I hear it. I love it. And the level of personal responsibility you're taking in the verbiage and even the voice tone that you're using, we can hear that you're going in there. That's pretty cool. Yeah, 'cause you know what causes— how we can read that from being on the air for years, both of us, right? And all of you can hear it too. You're listening, you heard he's— this guy's serious. He's not screwing around. He's thinking about— No excuses, game on.

That's the difference. He's thinking about ways to get this done, but they're not ways that are excusing work or excusing the process. It's all about how can I do my part to get this done?

How can I grind the most efficiently? Yeah, and here's the reason that that is so indicative, such an indicator, a metric on where his future's gonna be. Because personal finance is not a math problem, it's a behavior problem. It's 80% behavior, 20% math. About 20, the mathematics of becoming a millionaire, you learn by the 6th grade. You do not have to have a master's degree in business from MIT to become a millionaire. There's nothing that they teach you in that that causes a millionaire. Everything you needed to know mathematically you learned by the 6th grade. The problem is the person in my mirror. This guy can do some stupid stuff. This guy has a PhD in DUMB. This guy likes donuts. I can be skinny and rich if I can control this guy. Welcome back to the Ramsey Show and the Fairwinds Credit Union studio. Jade Washaw, number one bestselling author and Ramsey personality, is my co-host today. Sarah is in Hartford, Connecticut. Hi Sarah, how are you?

I'm doing well, thank you. How are you? Better than I deserve.

What's up?

So I have been, you know, watching the show for the past couple of years diligently. And, you know, during the past 6 months or so, I really tried to hone in on doing, you know, the Baby Steps and the Debt Snowball. Good. But my main question is today, Should I decrease what I'm putting away for my retirement right now to try to combat some of this debt? So, I am a single mom who is a single-income household, everything. And I mean, I have a car payment. I don't have a ton of debt, but I work full-time and my daughter is in school, but I ran into some debt over the past 6 months or so. We had the government shutdown. I am a government employee. I work in an admin position, and we had the shutdown happen last year in October. So I wasn't being paid for, you know, a few months, and, you know, everything was still coming in where you have to manage the credit card, the childcare costs, and stuff, even though the mortgage was on hold. So when the money came in and I eventually got back paid, I started, you know, just paying down some of the credit card, and right now I just have credit card, should I decrease what I'm putting away from my retirement right now to try to combat some of this debt?

So I am a single mom who is a single income household everything. And I mean I have a car payment. I don't have a ton debt, but I work full time and my daughter's in school. But I ran into some debt over the past six months or so.

We had the government shut down. I have a government employee, pieces of the metal kind of cracking off and stuff. So that was more of a safety issue. So I had that.

Okay, so you have $18,000 in credit card debt. How much do you owe on your car?

Uh, about $30,000.

Any other debt? And what do you make?

Uh, about $75,000 to $78,000 a year.

Okay. Your car is insanity.

It's half your income.

It's killing you. Yeah, so yeah, my car is, it's right around, uh, $30,000.

Yeah, you bought a car twice or 3 times what you should have.

Do you know what it's worth if you were to sell it today?

Oh, at least, uh, I could at least get $22,000 for it.

What I want you to do is double-check that. I want you tonight to go on Kelley Blue Book and look at private sale and see what you would get for it, not what CarMax would give you, not what— you see what seeing what it would be if you sold it yourself, because that'd probably be my first order of business. Because to Dave's point, it is a huge part of your world right now, and it's a huge part of your debt.

Way too much.

Yeah. I really didn't want to get into this car debt. You know, when I did, I wanted to— I tried to, you know, wait almost another year or so to get a new car.

But you bought a $30,000 car. You should have bought a $10,000 car. Yeah.

Let's get back to your first question, which is, do you stop investing? In order to attack this debt? The short answer is yes. My question is, how much have you been putting aside?

Um, so they take it out of my paycheck every, every 2 weeks. Um, so $500 goes towards— oh wow, yeah.

And then my employer matches that. Okay, so $500.

Yeah, I would stop investing $2,000 a month. Okay, because that's, that's biweekly, right?

I would stop investing immediately because you need your hands on that money to clean this mess. Now let's talk about why a little bit, because you're doing this, you're doing good things, you're just doing them out of order. So let's get you back on the right track. Yeah. If you're familiar at all, have you heard the terminology of the Baby Steps? Yes.

And I had the emergency fund put away. You know, I had the $1,000 put away and I was good within the last year and a half. You know, I just, I got divorced 2 years ago and I was taking on a lot of the debt myself where I bought a new house, a new house, you know, a new place to live. I handled the fees, like the lawyer fees and everything, um, paying for childcare and now managing the mortgage and everything by myself.

So you're feeling behind, you're feeling behind and you're feeling like I need to get caught up. You're not behind. Yes, you're, you're fine. You're doing fine. You need that $1,000 at your disposal temporarily.

It's just, it's a short-term sacrifice while you clean up the $18,000 debt and while you clean up the new $10,000 car debt because we're getting rid of the $30,000 car.

It's like, it's a total of $18,000 in debt because, uh, the bathroom model, I owe about $10,000 on that.

So you need to get rid of the car and pay off $18,000, and then you're debt-free, right? And get a $10,000 car, and then you got to pay that off. So it's gonna take you a little while to do this, but it's not gonna take you 10 years. It's gonna take you 1 or 2 years. Yeah. And you're gonna be totally focused on cleaning up all the debt, because if you didn't have any payments right now but your house payment, you'd be okay. Yeah, and you could put 15—

the interest rate on the credit card, it's killing me.

No, the interest rate on the credit card is not killing you. What's killing you is you're out of control and you're not pounding this debt. You need to be pounding this debt. List your debts smallest to largest. Stop all investing temporarily. Stop all lifestyle temporarily. Get rid of the $30,000 car and knock these debts out. And that's when this is gonna work.

Let's talk about why it's in that order. Baby Step 2 being paying off all of your debt besides your house, and then going to Baby Step 3, 3 to 6 months of expenses, and then getting to the 15% of retirement. Because I think that's the hardest part for people is to temporarily pause investing.

If it was a permanent pause, it would be the wrong answer. Right. But it's not a permanent pause. It's temporary.

But a lot of people would say, oh, well, it's just a little bit. I can get the match. But there really is a lot of thought behind that. And for me, the biggest thing is you want to make sure that you're setting your habits up the right way. Because if you're investing in a situation like this lady here, she's putting money aside. Let's say she does finish, you know, get a little bit closer to paying off debt, but something pops up and she's like, oh, I need the money for this. She's gonna look over at that retirement and go, well, there's some money over there. I don't have 3 to 6 months of expenses. Maybe that's some money that I can pull phone. So it's not setting the foundation properly. Whereas if you say, okay, if I have all this money, I can get out of debt even faster, which means I can set up my 3 to 6 months even faster. It just puts you on a light warp speed that allows you to accomplish those goals so that when you finally start investing, you never have to touch it. You can set it and forget it.

You never think about it because the money that you need is there in your emergency fund. It's there in your budget because you've paid off all your debt.

Yeah, if you don't have an emergency fund, you'll use your 401k or a credit card for an emergency because you're gonna have emergencies. 100% chance. Dave, you need to be positive. I'm positive you're gonna have emergencies. It's gonna happen 100% of the time. The only question is how you gonna cover them. Are you gonna have a plan and have a rainy day fund when it rains? It's gonna rain. Have an umbrella. It's gonna rain. Have an umbrella. Quit walking around. This is not about Skittles and unicorns. Yeah, this is— it's gonna rain. You need an emergency fund, because if not, you're gonna put it on a stupid credit card, and then you're gonna go, why am I so broke? Right? Or you're gonna clean out your 401(k) for your emergency, and guess what they do? They charge you a 10% penalty plus your tax rate. So you just borrowed the money at about 35% interest in taxes and penalties is what it works out. Well, that was dumb. Oh, you need an emergency fund.

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Hello, I'm good. Good. What's up? I have a question about indexed universal life policies. My husband and I are going to stop, I know, contributing now that we know better, but we have a little bit of a balance. Each of us have about $28,000 that we're going to be withdrawing. I would like to put it on the house or maybe into a Roth IRA and wondering what you would suggest.

Cool. Where are you out on debt? Do you have any debt left at all?

Mortgage.

Just your mortgage. So you're doing Baby Steps 4, 5, and 6, right? Mm-hmm, yes. So you're putting 15% away in retirement already? Yes. Good. I'd put it on the house then. Yeah, that's—

okay, it's a big chunk. That's— what is that, $56,000 you'll take away from this? Yes.

I love that. Oh, you both have 28? Uh-huh. Oh wow. What do you owe on the house? $250,000? Uh, $250,000. Oh wow, very good. Okay, so down to $200,000, and your household income's what? About $320,000. Oh cool, you're gonna knock this house out in no time. Very good.

We want to get it out in about a year and a half.

Yeah, you're on the way. Definitely throw it at the house. Now I'm getting real excited. That's fun. I want me to That's fun. How old are you guys? All right, 54, 57. Yeah, you're millionaires or getting ready to be. Well done, very good job. Jesse's in Ann Arbor, Michigan. Hi Jesse, what's up?

Hey, how are you? Praise God.

Yes sir, how can we help?

Well, I got a question for you. So I'm 58, my wife's 56, retirement's coming, um, probably around my age, 62. She won't quite be there yet. But the question is, is when we go both to retire from the companies and I want to transfer the 401(k) that I have and then what she has into an IRA, roll it over, I don't understand why can't we combine?

IRAs and 401(k)s, retirement plans do not have marital component to them. They're all for individuals only. I don't know why you would need to combine them because if you both have access to the money because, you know, you're working together. Yeah, but you can't put both things in.

What I'm thinking is when we retire, to combine them into an IRA to get more of a compounding effect.

Yeah. No, it doesn't change it. It doesn't change the compounding at all. Two accounts of $100,000 each compound at exactly the same rate as one account of $200,000. $1,200. I gotcha. You get no compounding advantage by combining them. Zero. I gotcha. Yeah, so no loss there, no problem. It's just a legality, a technicality. And so your 401(k) rolls over into an IRA in your name, and you name your wife as a beneficiary. Hers rolls over into her name, she names you as a beneficiary. And as you pull money out of either one, or both. You're sharing the money because you're married, and we're talking about this, and we have a combined approach to life, and that's how people prosper the most. So yeah, yeah, you're, you know, so you're right on track with all that. But, um, you know, but my wife has been a full-time mom since she was 40, so the retirement accounts are 90-some-odd percent in my name. I mean, we've got— we've done Roth, spousal Roth IRAs for her every year, but they've not added up to nowhere near what I can put in my 401(k) here at Ramsey, right? And so I've got— the vast majority would be in my name, but you know, she's got legal access to that in the event of a divorce.

She's got, you know, beneficiary access in the event of death. She's got practical access in the event of life because I'm obviously going to share with her. She's my wife. If we need any of that money, we're probably never I wouldn't touch it, but that's neither here nor there. So that's how, yeah, how you get at it. But that's a good question. And you know, that's a common misconception mathematically. So, and the way you can run it off in your head is, let's say that you had $100,000 at 10%, that means you'd have a $10,000 growth. And you got another account that has $100,000 at 10%, that's another $10,000 in growth. Or you had a $200,000 account at 10%. That's $20,000 in growth. And the other two are 10 each. So it's exactly the same. And the next year when it compounds, it's exactly the same. It's just in one pile versus two piles. Our brain likes to see a big pile. The total is still the same. The aggregate is still the same. And oftentimes people run into that. So John's in San Francisco. Hey, John, Hey, what's up? Not much. How are you?

Better than I deserve.

How can I help? So I have a pretty weird kind of situation. Um, I'm 28. My partner and I, um, are looking at possibly buying a home. We don't know. We're currently renting. Um, I have about $1 million in assets tied to some watches that I've been collecting and buying and selling since I was 18. And I don't know if I should possibly sell some of them or all of them to have to put a down payment on a house or to buy a house.

Wow. Wow. Yeah.

Are, are any of them heirlooms or like legacy pieces?

Uh, no, I, I have been really fortunate. I've built great relationships with a bunch of watch dealers and boutiques, so I bought all of them at retail with the exception of like one or two.

Okay. And, um, I'm curious, have you tracked how they've appreciated?

Traded? Yes. Oh my gosh, have I. I've— some of them, I've been really fortunate. I have a couple of Pateks. I have an Aquanaut and a Nautilus. Those have both doubled in value. I bought them for a bit under $100,000. I'm really fortunate. Combined, they make about $400,000 a year. So how long ago did you buy them at $100,000 and then they doubled? That was 2018, I believe. 2017. So this is before the kind of watch boom sort of I didn't know a watch thing happened.

I was gonna say, I didn't know there was a watch boom.

Yeah, a lot of people started buying and selling on COVID. I've been really fortunate, I got in a bit earlier, and a lot of my watches have appreciated in value.

Well, in general, collectibles, which watches would be, guns would be, art would be, wine would be, in general, collectibles do not outperform the market. Market in appreciation. The exception to that is if you add in some expertise. So an art dealer will make more on art than he would make in a mutual fund. You will make more on watches because you're completely freaking nerded out about them. It's bad. Yeah, it's like OCD. Yeah, it's awesome. I love it. And it's fun. It's amazing that you did— that you I have this. But overall, you just ask yourself, where 10 years from now, what would I rather own? And not just mathematically, emotionally, relationally. And so what do I want to own with my wife 10 years from now? I personally want to own a house more than I do a collectible. Now I've got a bunch of cars, I've got a bunch of guns, and I would If I didn't have a home, I would, in a heartbeat, get rid of those and move into, move that money into houses. It's a hobby for me. It's not anywhere near like you've got. That's crazy, Jon. That's me.

I've never had a call from somebody who had $1 million in watches.

I mean, I'd play urgency into it as well. If it's not an urgent thing to buy a house, if you hold on to them a little while longer, you have a really nice income, you could start to cash flow more of that house and have to sell less of the watches. So, I think that there's probably a play where you could keep some of these, the ones that mean the most to you, and still cash flow the house if the home is not urgent. Yeah.

I have noticed that sometimes when people are doing something like this, and I've noticed a couple times with me, that, you know, I'm real enthused about it for a while. And then it's like—

Fizzles out. Yeah. Yeah.

Just dump them. I'm done. Fizzles out. On to the next thing.

Hey guys, Dave Ramsey here. Every day on this show, we help people work through real money problems and figure out what to do next. Now you can get that same kind of help anytime with Ask Ramsey. Ask Your Money Question and get answers built on Ramsey principles we use on the show. Whether you're making a decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to ramsaysolutions.com and try Ask Ramsey today. That's ramsaysolutions.com. So here's an interesting thing. You guys have heard me quote this 100 times, some of you, but I'm going to do it again anyway. We did several years ago the largest study on millionaires ever done in North America. Detailed, airtight research to where if you disagree with the conclusions of this study, you're what's known as wrong. The data is that Tight. And it's the largest study by far that anybody's ever done on millionaires. And so there's somewhere around 24 million millionaires at any given moment in America. And a millionaire is someone whose net worth is greater than $1 million. Now, that's the definition of a millionaire. It's an accounting thing.

And your net worth is determined by your assets minus your liabilities— what you own minus what you owe. So if you have no debt, it's simply what you own. And so when you have $1 million worth of things— money, 401(k)s, house, that kind of stuff— then you are a millionaire. Well, no one should have $1 million. Well, that's— that's— it's not a moral construct, it's an accounting function. It's not enough, that's not— that's not what we're debating. What we're saying is there's a simple thing: you either is or you isn't. It's an accounting thing, and it's not $1 million of income, and it's not $1 million of cash, and it's not a million dollars of liquid assets, and it's not— it's simply assets minus liabilities. That's how you define it, period. And if you don't define it that way, you're wrong. This is the definition. A billionaire is the same thing— when assets minus liabilities equals a billion, which by the way is a thousand million. It's a lot. So if you have $100,000, you're a lot closer to be a millionaire than a millionaire is to being a billionaire. A bazillion times closer. Say 1,000 versus 1/10, right?

1,000 versus 1/10. That's a big difference. So all of that to say, we've studied these things. One of the things we figured out was we wanted to track and say, okay, what careers caused people to be millionaires most often? The number one career field that became a millionaire, the most that appeared most often in the 10,000 that we studied, studied was engineer. Number 2 was accountant. Number 3 was teacher. Hmm, didn't see that one coming. Number 4, businessperson, business executive, someone in business of some kind. And number 5 was attorney. Medical doctor didn't even make the top 5. They're number 6. So you always think of the doctor and the lawyer being the millionaire, right? But they are, but medical doctors are notoriously bad with money. They're stereotypically bad with money. They're like artists or something, you know. It's like, you know, a music star is notoriously bad with money. Football player, notoriously bad with money, same thing. But they're still number 6. But what we couldn't figure out is how teacher lands in the middle of those things, because all of those are highly paid professions except a teacher. So how does teacher land in there?

And what we figured out was, after studying it a little bit more, was that all of those—lawyer, accountant, engineer, teacher, business professional—they all have a process that they have to submit to and have to follow the process to do their career. So when you're an engineer, if you don't follow the process, the bridge falls down. When you're an accountant, there's generally accepted accounting principles. There's not 3 ways to do accounting, there's one. It's not art. You don't get to make it up. When you're an attorney and you're in court, there's a process to do litigation and you have to follow the process or you'll be held in contempt. And so on. Teachers have to follow a process. They use a detailed lesson plan. So these are all process people. So they simply took that process mindset and applied it to building building wealth. And that's how teacher ends up in there. Fun fact is, Scott's on the phone in Spokane, Washington. Scott is a Baby Steps millionaire, and he's a teacher that teaches the Ramsey Foundation's high school curriculum. Is that right, Scott?

That is 100% correct, Dave.

I wish I had a high school teacher that was a millionaire because he followed the principles that he was teaching me in his class. I would have sat there with rapt attention.

It is, it is fascinating to watch my students when I walk into class because I teach the why. And when I, when I walk in, right, and you watch those, those light bulb moments with those kids, because I tell them on day one, I, I don't want you to have to live the life that I had to live because I learned the lessons the same way you learned them, Dave, that I was in debt, and I don't want you to be in debt. I want you to live your life the way I'm living it right now, in your 30s, not in your 50s.

Yeah. So how old are you? I'm 56. And what is your net worth?

My net worth right now is $1.83 million. Good for you.

And give me a little breakdown on that. How much of that's house and retirement and so on?

So about $700,000 is in my house and we just recently paid that off within the last year. Good for you. And then, thank you. And then, uh, the majority of it, I would say another probably $700,000 is probably $700,000, $800,000 is in my retirement and my 401(k). Then I have a pension attached with that as a teacher. And then we have other investments, um, IRAs, investment accounts, things like that. And then, uh, small, small portions in savings and checking accounts. Gotcha.

Wow, way to go, Scott. So how much of this did you inherit? None. Zero, okay.

We have a small, a very small amount that we inherited that helped us pay off that last little bit of my student loans, but a very insignificant amount.

Yeah, it did not mathematically cause you to be a millionaire. Oh no, no, not by any means. So you didn't inherit your money, you got the old-fashioned way, you earned it, yeah.

Yes, yes, as you say, you know, when you're broke, go to work.

I hear you.

That's it. So, uh, so you've been a teacher for how long?

Uh, over 20 years. So, um, it's funny that you had mentioned engineer as well. I was a computer engineer and an actual engineer in the military. So, um, uh, yeah, I built those processes and applied them, obviously. But the, the, the main thing is, right, when, when you are teaching the, the foundations The kids, they just kind of glom on. It is interesting to watch those lightbulb moments with the kids because they really do start to process that information. And you just kind of watch them. You know, day one they are like, yeah, whatever. But you tell them in the curriculum, you tell them on the show, what we are teaching you is what grandma taught you. This is common sense information. They look at you like, whatever. But as they go through, they learn learn, and they start to process and begin to just kind of grind at it. And they're like, yeah, you're right, you're right, you're right. And they, they, they kind of just figure it out, and it becomes very hard. It's almost second nature. And they, they figure out really quickly that we, we need to avoid debt. This is not something—

do they ever say, well, Mr. Scott avoided debt and he's a teacher and he's got $1.83 million?

I mean, do they ever look at you and go, my gosh, I got a walking social proof right Well, it's interesting because I am very, very honest and open with the kids. And when I tell them, tell them my stories, because I, I open up, and when I tell them I had to work 3 jobs and my kids are like, Dad, why are you never home? And they, I mean, some of the kids break down.

Yeah, they probably relate to it. Yeah.

And they relate to it. And they, I have kids crying. I have kids. I had one student come into class the first day of school and go, it's easy for Dave to I say, you know, you don't need a credit card. He has millions of dollars. 4 weeks into class, she was like, I have a, I have a friend that wants to get a credit card. How do I talk him out of it? Wow.

Love it. Love it. Very cool. Well, how long have you been teaching the curriculum?

14 years. I taught it before it was digital. Wow. I taught it out of a book.

Wow. I remember that. Oh my gosh. That's amazing. Very cool. Well, thank you for teaching it and congratulations on being a Baby Steps Millionaire. Another hero in the American story right here. Absolutely incredible. If you didn't know, we have a high school curriculum called Foundations in Personal Finance that's been taught now in 48% of America's high schools. 6 million kids have graduated from it. So, uh, if you can help us get it into your local school, that'd be awesome. And sometimes you need to knock a noggin on the school board, but you know, hey, whatever it takes, baby. That's what we're gonna do.

When I talk to people on The Ramsey Show, 90% of the problems I hear come down to one thing: not having a plan. They're not living on a budget. They have no idea where their money's going. Money is just happening to them instead of them happening to their money. And guys, that is so normal, but it doesn't have to be normal for you. And that's why I want you to go download our EveryDollar budget app. EveryDollar not only helps you tell your money where to go with a budget, budget, it also builds a plan to free up extra money so you can pay debt off faster and start building wealth. And the best part, your plan is completely personalized to your life. It's the same advice that you would get if you called the show, and it's right in your pocket. So, don't keep living normal. Go download the EveryDollar app, answer a few questions, and get your plan today.

Our Scripture today, John 1:14, and the Word became flesh and dwelt among us, and we've seen his glory, glory as of the only Son from the Father, full of grace and truth. Bill Murray said, people are like music. Some speak the truth and others are just noise. Oh, Mia is in Seattle.

Hi, Mia, how are you? I'm great. How are you guys? And thanks for taking my call. Sure. What's up? Um, my question basically in a nutshell is 2 weeks ago for my 62nd birthday, I paid my mortgage off 16 years early. Good for you. Well, all my friends, I mean, all my friends are telling me I made the biggest mistake of my life. And now I'm really terrified that they're correct to given the current market situation. And things. So, I— my question was to try to get some guidance from you based on my current situation.

You need new friends.

Well, let me give you just the quick contents. I'm 62. I'm single. I'm in the midst of an 8-year cancer battle, and my doctor said I won't be able to return to work for the foreseeable future. So, based on that, you know, my friends are telling me I I took my liquid assets that I had to pay it off 16 years early. And that was a big mistake because my interest rate was 3.5% and I could have been making more. All the things you hear. But now I'm afraid maybe they were right.

Do you still have a nest egg?

So what I basically, um, I have is I'm currently— my income, I have a disability benefit from my former employer that separated me last June for disability. Of $7,070 a month, and that will end by 3 years the way the policy is set up when I turn 65, but it could end previous. I get a $3,000 monthly SSDI payment after the taxes and the Medicare are deducted. And then I've got my assets, I have an $80,000 emergency fund in cash, and I have $23,000 in cash for insurance premiums. That are going to be changing November. And then my investments, I've got, um, $1,430,000 in a traditional IRA.

You're okay.

Your friends are morons.

And I'll go, I'll go a bit further. They're, they're talking about a stratosphere that they've not yet entered. So how can they know? You're the only— stop for a minute. You're the only one who's actually done it. So don't you think you have a better frame of reference than they do. They've only had debt, right?

So I'm debt-free. I've got— you're a debt-free multimillionaire.

You're okay. Calm down.

Okay, I'm just, you know, with the current situation— current situations—

what are you— if you're not in Iran and being bombed, I think you're okay. You are in Seattle.

At all, but because I can't, I can't go back to work.

Like I'm going to be under $10,000 a month income and $1 million. That's the current situation. Okay. Um, you're okay.

Okay. Well, I was worried that I'm really not okay. What do you think is going to happen?

How would you not be okay? What current situation are you referring to?

Well, so for example, my, my medical, um, is going to change in November because my secondary is— my premiums are going to go up really high.

$1 million.

But the million dollars really doesn't, they tell me, go very far.

Yes, it does.

It goes a long way. 'Cause it's making $100,000. Is it invested in good mutual funds?

Well, yeah, so the traditional IRA is that, and then I've got $218,000 in a Roth. I've got $170,000—

Is all of that invested in good mutual funds? Yes, yes. Okay, so it's all gonna make around $100,000 a year. $100,000 a year that you're not even touching.

Right. So I basically structured, you know, how you, the 4 buckets that you advise, they're in the traditional and the Roth because I have to protect against IRMAA. So any capital gains I make stays in the retirement. And then, and then I've got $440,000 in municipal bonds and $342,000 in some core equities that's managed. So, um, but I'm trying not to touch any of that.

You want— you're not touching any of it. You have a $10,000 a month income without touching it, and you're going to have that for the—

for sure for the foreseeable next 3 years.

Well, the, the long-term disability benefit, the way my employer wrote the policy, it could go away before 3 years, but the max I have left on it is 3 years.

Yeah, and depending on whether you remain disabled or not. Yeah, right.

Even if, even if it went away, you'd still be Okay, okay. You did not make a mistake.

The only mistake you made was in choosing your friends. Okay. Or listening to them. I have some friends that I actually like that are also not smart, but that's okay. Okay. Do you need help?

I, I just looked up how long it would take to wire the money and have it clear so that I got my letter saying the write-off was closed on my birthday, because for my present for myself, I wanted a debt-free scream. Good. So I told my— I told my friend And then they just— I was in tears because they were like, that's ridiculous.

And I just think that's jealousy. I do.

Well, or idiocy, or both.

Yeah, who in their right mind, when somebody has done something incredible like that, would not celebrate them? Even if it's not your personal choice, that you wouldn't celebrate what somebody else views as a personal accomplishment, and it's zero detriment to them.

Okay, so, but I still have like a $600 a month HOA, so I have, you know, a lot of expenses.

I guess, Mia, your worries and your math don't add up. Okay, okay. Your worries are a 10 and your math is a 1.

Or let's, let's be as logical as humanly possible right now. Who do you think knows more about this situation, Dave Ramsey or your 3 little buddies at home?

No, I, I get it.

Okay, there you go. You need to breathe. You need to breathe. You're okay. You are in "Shape. You have done a wonderful job. I don't know what the house is worth. If it's worth a million, you're in Seattle, it probably is, and you got a million dollars, you're a multi-millionaire at 62. I want you to concentrate on fighting cancer, not arguing about whether you should have paid off your house or not. I want you to go beat it. Go beat the big C and live your life, kiddo." Wow. Matthew's in Phoenix. Hey, Matthew, I How are you?

Good. How you doing today?

Better than I deserve.

What's up? So my question for you is, um, I'm recently going out on my own business-wise. I'm in home remodels. Um, I've been doing it for a long time.

I'm just trying to do it on my own now.

My question is, I've been cash flowing everything. Our house is bought and paid for, our vehicle, our truck, everything's bought and paid for. Absolutely no debt. No credit card. My question is, would it be a bad decision to take out a small business loan, maybe $2,500 to $5,000, just to help, um, back fund this?

You know, I'm doing it. What does back fund mean?

I'm trying to think of the right word. Just, you know, when tools come up that need bought, stuff like that.

You've cash flowed everything.

Just continue cash flow. Don't stop now.

Don't stop now. Don't fall into the debt trap, because when you fall into the debt trap, you have to take jobs from customers that are unreasonable to pay the debt payments. And then you get an unreasonable, no-fun business to operate because you have to put up with the butts. You don't want to have to deal with the butts. You want to deal with the good people. And you don't have to— you can send the butts to your competitor if you don't have debt payments. Say, I think you need to go— I've got— here's my competitor's business card. You need to go talk to him. That's so good. And let them worry someone else's ears off. Instead, you go work with the good people, make some good money, and do a good job and help those people and make you some money. And you're in a great line of work. Please continue to organically fund it with cash flow, no debt. Please, Matthew, please do that. Just swing that hammer, turn that wrench, baby. You got a great thing going. You're sitting on a gold mine if you don't screw it up by going into debt.

Absolutely. I know lots of remodel guys and repair guys that are running businesses that are half a million dollars a year right now, and that's the profit. Hello, you can really do good at this. That puts this hour of the Ramsey Show in the books. Folks, 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.