Building Wealth Requires a Long-Term Investing Mindset

19:35Dave Ramsey:Well, then he's going to have to learn because he thinks it's an awesome car. and I guess that's what, besides that, we have a law, it's federal law in America, wife gets the good car. Y 'all need to pick that up in Canada. I'm just saying, I think that's a good rule. So, no, this is weird, honestly. The fact that if you have the cash and you're just wanting to spend what he just spent on a car, but you're not, yeah, you lose the argument, my man. My man, Stephanie, she's right. You done lost. We're throwing a penalty flag on this one.

20:29Dave Ramsey:Statistics show that half of Americans don't have enough life insurance or they don't have any at all. I don't understand this, John. Why don't people want to take care of their family? They think they're going to die or something? Well, I used to be one of those guys. I didn't even think about it. And one of my buddies said, hey, the only reason to not have life insurance is if you hate your wife and kids. And I immediately went and got term life insurance. That's a gut punch. And you're telling me for decades, Dave, I've sat across people who've lost a spouse. They've lost somebody important to them.

21:00Me too.

21:01Dave Ramsey:They don't know what to do next. Me too. I mean, you're going to have a crisis here. And, you know, you got two options while you're sitting and talking to a young widow. She's concerned about how she's going to invest all this money properly and not mess this up. Or she's concerned how she's going to eat tomorrow. That's exactly the two options. And take care of your dadgum family. Term life insurance can replace income, pay off debts, cover funeral expenses. So your family can actually have the opportunity to just be sad. Yeah. To just miss you. That's exactly what it's supposed to be. It's saying I love you to your family.

21:31Dave Ramsey:Term life insurance. Jeff Zander and the team at Zander Insurance makes it easy and affordable. I've used them personally for 25 years. They're the only people I trust. Go to Zander.com or call 800-356-4282.

21:58Dave Ramsey:Keith is in Omaha. Hi, Keith. How are you? Oh, thank you. I'm fine. What's up? How are you? Good. How can we help? Okay. Yes, I'm in a situation where my sister is running without any financial conscience at all. She's running up her credit cards, and my mom is willing to bail her out, and it's at least into the hundreds of thousands of dollars over the last five or ten years. and so that's really eating away at what should be coming to my inheritance, my kid's inheritance. If there's anything I can do, I would love to know.

22:41Dave Ramsey:So your mom is wealthy? Yeah, there's money coming in. Yeah, there's a real, real significant amount of wealth in the family, yes. So what does your mom, how much does she have? a million 20 million it probably could be i don't i don't know exactly but no i mean you have an idea give me give me a guess oh it's it's um probably a million um could be two million i don't know okay one is two but it's not a hundred million all right okay and the problem is your sisters. It's just you and your sister are the only two siblings? That's right. You're still not coming into the estate, too. How old are you?

23:34I'm

23:36Dave Ramsey:approaching 59. Okay. And what do you make of your, sir?

23:43Okay, I'm having a long career as a software developer. We're in a new career now. We're We're in a basically low-income, low-expense mode here, and basically starting to get up in about$35 ,000 a year range.

24:04Dave Ramsey:So is there a plan for that to be a good income later? It's building. We acquired a new property. We are trying to turn the corner and start getting some savings from it. We've got, you know, my retirement available, especially as it's a$59.50 to help us. Yeah, and how much do you have saved in your retirement? In the neighborhood of$500 ,000. Okay, that's good. Good job on that. So the apartments, did you buy them? Yes, we own them green and clear, haven't taken any loans. And what are they worth?

24:48Um, it's, uh, three different properties, um, together. There would be probably about 800 ,000, something like that.

24:57Dave Ramsey:And you only make$35 ,000 on an$800 ,000 investment? That sucks. Uh, well, one of them is the one we live in, so we're, you know, I can't, I can't separate it exactly out because we have one, one apartment that we do in our, in our building. And what does that work? I mean, if you took your home out of it, you still don't have a good rate of return. What's wrong with the rent roll on this? Hey, the second property, so we take mine out, then we've just got the two properties, and then one is still just finishing. So we haven't really turned it around to start the income money yet. Oh, it's being renovated.

25:38Dave Ramsey:It's just almost finished being renovated. I see. So when it's renovated, what will your income be? Well, that's what I'm hoping is going to turn the corner in toward$40 ,000,$45 ,000. So you're going to be making a whole$45 ,000 on all of these apartments. That still sucks, man. Your rental rates are horrible for the money you've put into these things. So my reason for asking all of this, Keith, is very simple. Your mother has some money. It's her money. She's allowed to do with her money whatever she wants to, even if it's stupid. Yeah. And even if it's harmful to your sister. And I agree that what she's doing is harmful to your sister.

26:27Dave Ramsey:But the basis for you having an argument here is not that you are entitled to this money. I would prefer you, sir, at 59 years old, to go have a life and not be worried about your mama's income or your mother's inheritance to make your life good. I want you to go make your life good. And then we can look at this through eyes of strength and say, how can I lovingly help my sister get her act together and my mom quit being a classic serial enabler? But instead, you're worried about you getting some money because you don't have any money other than you've done a good job saving for retirement. but your income sucks especially if you've got eight hundred thousand dollars in paid for real estate and you're making a whole 45 000 bucks on it this is horrendous i mean i love real estate i own a bunch of real estate i can't imagine how mad i would be at myself if i bought into something that paid no more than that as a rate of return that's nothing horrible so um you know we've got some work to do to get our rates of return up on these rents and not$45 ,000 as your new career after you've been a software engineer and we're going to go into retirement broke and wait on mom to die.

27:42Dave Ramsey:This is not a good plan. Not a good plan. So, you know, I want you to approach this subject of dysfunction in your family, not from your rights because you don't have any. You're not entitled. Your mother could leave it all to your sister. She's allowed to do that. Would I agree with that? No. Do I agree with her paying, bailing her out on credit cards and continuing her overspending? No, I don't. But mainly because it's harmful to your sister and your mother, not because you are entitled to some of the money. You, sir, need to go have a life and then not worry about it. And that puts you in a different place.

28:24I agree.

28:25Dave Ramsey:Yeah. It's not a good look so moms and dads um rachel and i wrote about this and smart money smart kids many years ago and i was just talking about it with a content team this morning i think i'm going to do a talk out of it i haven't done it in a while i'm doing it with a bunch of wealthy people and they always ask me how do i become wealthy and not ruin my kids right and i always tell them well you can't uh your the wealth didn't ruin your kids they were already ruined the wealth exposed it that you sucked as a parent. That's what it was. And so, you know, but the wealth, money doesn't ruin people.

29:01Dave Ramsey:It exposes the fact that people suck. It makes you more of what you already are. It makes you more of what you are. So the way you break that is from the time they can talk and walk, you start with gratitude. Yes. Gratitude. Thank you. Please. In the South, we called it manners. I know that's right. Yes. Thank you, Mom, for dinner, for standing over that hot stove. Mom, I'm going to help with the dishes. Yes. Because if I don't, Dad's going to hurt me. Because you're going to learn gratitude. You're going to count your blessings, right? You're going to say, thank you, Lord, for bringing me this food.

29:48Dave Ramsey:Thank you. The world doesn't revolve around you. Thank you. And that leads to the next one, which is humility. But you can seldom be humble without first being grateful. I agree. Yes, Dave. And then if you're humble and you realize it's not all about you, the axis of the world doesn't run through the top of your head after all, then the natural thing that happens is contentment. This is where contentment comes from. Contentment doesn't just evolve as lightning in a bottle. It's a series of events that comes through gratitude and humility that says, I'm not entitled. No. It's the antidote to entitlement is gratitude, humility, and contentment.

30:25Dave Ramsey:And so, you know, I can remember one of my kids, we finally, we were driving this old piece of crap car and we were broke and finally scraped a little bit of money. Things were starting to get a little better at the Ramseys and we got the car. And, you know, at our house, we always would, and especially when I was growing up, but even when our kids, we do it too. Get a new car. Everybody gets in the car. It's not a new car, but it's a new-to-us car. Just a slight upgrade. We're all going to drive around the block in the new car. And one of them lays back in the back seat and says, We're doing pretty good.

30:57My favorite story.

30:59Dave Ramsey:And I said, We aren't doing anything. And you certainly aren't. I am doing pretty good. You got nothing. I know that's right. You are a poor child that lives with me. That's what you are. We aren't doing anything. You got a mouse in your pocket? We. We haven't done anything. All you do is consume. I know, that's right. You are not a producer at this stage. Freeloaders. Freeloaders.

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33:03Dave Ramsey:Marie is with us. Hey, Marie, welcome to the Ramsey Show. What's up? Hi, nice to meet you all. You too. How can we help? So we desperately need to buy a new house. And we are trying to become as most debt-free as we can. I don't think we're going to be able to do it all by the time we need this house. But our biggest loan is our solar panels. it's$40 ,500 and we'll pay it off by the year 2047, might as well be dead by that point What in the world? It's so long, it is so bad but the reason we did it was because we were homeless for two years before that and our budget was so tight we needed we couldn't have our bills fluctuating every month and then sometimes it would go to$400 sometimes it would go down to$80 and we never knew what we were going to get Wait a minute.

34:01Dave Ramsey:Stop, please. Please tell me you know how stupid this is now. That you traded$47 ,000 for a$100 fluctuation in your utility bill. Yeah, it was like a$300 ,000. But still. Either way. There's no possible way any of this math accomplished what you wanted to accomplish. You completely surrendered major long-term debt for a tiny little movement in your monthly budget. And don't blame it on you being homeless. Tell us why you desperately need, which is a strong language to move right now, why you need a new house. We have a two-bedroom, one-bath, 900-square-foot house. We have four kids and one on the way that's coming in December.

34:47We have our three oldest kids sharing a room and the baby's sleeping with us in our room. But my boys, my oldest are boys, and they're getting to the age where they need to be. How long have you been in this house? Four years.

35:04Dave Ramsey:How old were they when you moved in this house? Well, my oldest is 11 now. So you already were the old woman in the shoe when you moved into the house. Yeah. You barely fit in there when you bought it. Wow. Yeah. You don't even know what that is. You've got to look that up after you get off the air. Okay. He's better than living in the street. Yeah, you remember being in the street, but you also bought a house that wouldn't handle your family. And now you're realizing that. It certainly wasn't a crisis when you bought it. And things have not changed except by one baby. Okay. Now, what is this house worth?

35:48This house has about$35 ,000 to$40 ,000 in equity right now.

35:52Dave Ramsey:Not counting the solar panels? No, you don't take that out. So nothing. So it doesn't have any equity when you pay off the solar panels because they're attached to the house. And what's the house worth? About$235. We're at$186 right now after all the payments we've made. Okay. Now, my screen says, should we get our solar panel loan canceled? Why would you be able to get your loan canceled? Well, you know how Facebook is. As soon as you start going in and searching something, it sends a bunch of ads your way, and you never know what's a scam. Everything on Facebook is a scam. All of it. This is not a place to get solid information.

36:41Yes. That's why I was calling because they sell a really nice story. So I keep seeing the same name of the loan, which I'm sure I've done on purpose, of the people who sold us the solar panels, saying that because they were making shady deals and things like that, that people are getting their loans forgiven. Is it a lawsuit?

37:05Dave Ramsey:Was there a, yeah. I don't, there have been some lawsuits, but it feels a little shady. You need to do some independent research on that. Don't go by Facebook if you want to know. Just research if there's a lawsuit pending against that company. Is there a class action lawsuit? Or has the Federal Trade Commission gotten a ruling? There you go. Go to the FTC.gov. Go to FTC.gov, FederalTradeCommission.gov. Have you done that? No, I was going to ask what are some good places to search because I go on Google and I get all these companies that pop up with the same stuff. So I don't want to go in the wrong direction and then go into debt because of a lawyer fee or whatever, and that was unnecessary.

37:47Dave Ramsey:What's your household income? $84 ,000. Okay. We have our three kids that are older have special needs, so we homeschool. I have several chronic illnesses as well. What's the nature of the special needs for the three kids? Well, my oldest has severe anaphylaxis too, a lot. And they have, all three of them have ADHD and anxiety, and two of them have autism. Okay. And I have Lyme disease and rheumatoid arthritis. Oh my goodness. Boy, oh boy. Okay, there's a lot going on. What are you guys paying? What do you pay for the mortgage every month? What do you pay? $1 ,400. And in November, that will go up by$300.

38:38The windows on our house were cracking, and it wasn't safe. They were single paying from 1984. So we have to get new windows for the house. So to answer your question at hand, you don't have the money today to move up in-house. You just simply don't. Absolutely not. And we don't want to add insult to injury. The best thing I could think of is if you're trying to find another place that you could rent for a while that's got an extra bedroom that's in the same range, the$1 ,700 range.

39:10Dave Ramsey:If you got your house sold. Uh-huh. If you sell this house. And that can buy you some time to save up a down payment. Yeah. Okay. Maria, I'm going to be honest with you and love you. Are you ready for me to do that? Absolutely. You sure? Brace yourself. Put your seatbelt on, okay? It's already ugly here. It's all good. Okay. All right. You guys make a lot of decisions that are large decisions that are very drama-based. Suddenly, the 1984 windows were dangerous. No, they weren't. A window salesman called. Suddenly, we couldn't afford. We were homeless, and so we bought a house that doesn't fit our family instead of going and renting something that fit our family.

40:03Dave Ramsey:And so we went from drama to drama to drama. Oh, and we bought$47 ,000 worth of solar panels to stabilize a$300,$200 utility bill with another bill that is equal to almost that. so all this stuff is you go to drama and every time i do drama and you too marie every time you've done drama you've made bad decisions anytime i get feeling desperate right after i get desperate i get stupid and most people do so if you feel this rising up anxiety inside of you that this house is a crisis this utility builds a crisis this homelessness is a crisis and you can you build that to where you justify doing something really dumb to get away from the crisis you're making things worse every time you do that you've made three large bad decisions in this phone call and they all were based on that pattern so you've got to take a step back and take a breath and you've got a lot on your plate i mean you've got all kinds of special needs in the house you're doing it all in 900 square feet you were doing it in a homeless situation before those are all real stressors but when you're in the cooker like that you got to be real careful to move carefully and slowly on the next step otherwise you're going to step on a rock and fall in the creek and that's that's what i do i get i get desperate i get a little little little little little jinky and all of a sudden i get stupid and you've done three really large bad ideas you should not have bought that house to stop being homeless you should have gone and rented something that fits your family you shouldn't have bought windows because they suddenly were a problem from 1984 crap those windows were in that house when you bought them and then you shouldn't have bought solar so i mean i'm picking on you i told you to put your seat belt on but i'm loving you well hear me because i can see this pattern real clearly and If you don't break it, it's never going to go away.

42:10Dave Ramsey:Yeah. And so I want you to stop. So, yes, I want you to investigate and see if you can get rid of the solar loan. It's possible. I'll give you a 10 % probability that this particular company has been set up by the FTC and the loans are being forgiven. You can check it out. Federal Trade Commission, FTC.gov. I would pay a lawyer$500 to research it for me and check it out. Against$47 ,000, that's a good investment. and find out if there's a class action suit or something out there or a Federal Trade Commission ruling out there to get rid of this. That'll help you get this house sold and then gently and carefully and calmly go rent something.

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44:08Dave Ramsey:Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. Andy is with us in Dayton, Ohio. Hi, Andy. How are you? I'm well, Dave. Good. How can we help? Well, before I ask my question, I just want to say, first of all, thank you so much to you and your team at Ramsey solutions for helping my family and I to be able to get out of debt and be successful financially. And then to be a, to equip your equipping of us to be able to help other people through doing FPU at our church and doing personal financial counseling. Wow. And you guys have just been such a blessing to us. Thank you. Sounds like you guys are a blessing.

44:51Dave Ramsey:We appreciate you partnering with us. Thanks. Well, it's been great. So here's my question. And this is, it's kind of a summary of experiences that we've had counseling people, but it also includes our own experience. And I'm using our numbers because it's what I have available. Okay. So I'm not trying to convince you to change your program, but I am kind of asking for help for those of us who are still, it feels like we're still in the trenches even after following your programming, being successful with it. So my wife and I started the Baby Steps in 2011. It took us seven years to finish Baby Step 2.

45:32We taught FPU several times during this period, and eventually we paid off our home in 2023. And in 2025, we paid cash for a new roof. In 2026, we paid cash for a new-to-us car. We believe in the Baby Steps, and we stick to the plan. But our problem is sometimes it just feels like there isn't enough. So here's the numbers. 17 % of my income goes to taxes. 25 % is just for groceries. We give 20%. Our utilities are 17%. Transportation is about 12%.

46:11Dave Ramsey:Wait a minute. What do you make? What's your household income? About 67%, not including overtime. Okay.

46:22So if you total all those numbers up, that leaves 9 % for retirement, insurance, and lifestyle. And we're not looking to live an extravagant lifestyle, but I guess our question is, when do we get to take a real vacation?

46:38Dave Ramsey:Well, whenever you want. I mean, you have to budget that in. I don't know how you're spending 25 % of$67 ,000 on food. Well, grocery costs went up 38 % in the last few years. I know what they did. I'm sitting here. I'm talking about$67 ,000 times 25%. I mean, do you have children? Do you have eight children? Nope. Both of my children are married and out of the house. Two people are spending$20 ,000 on food. $15 ,000 on food. Groceries are expensive. Yeah, that's the number that we have. And we're not living extravagantly. Now, we try to stick to a carnivore diet, but that's not exclusive. Okay, so back to your original question then.

47:32Dave Ramsey:I just got sidetracked on that number. It was throwing me. All right, anyway, well, you have a below average household income. Household income in America is 78. And yours is slightly below average. And you have zero debt, but all of your bills don't go away when you have zero debt. So I don't think you're going to live a millionaire lifestyle on that income.

48:08But your income taxes shouldn't be 17 % either.

48:14Dave Ramsey:They shouldn't be that high. so I'm you're a detail guy so I'm I'm struggling with to be the guy to question all of your numbers but I'm questioning some of them already um so I don't know the answer to your question philosophically except to back up and say if I had that I'd be screwed in this scenario if you had a house payment and two car payments I don't know how you'd make it in the scenario where you've locked this down so tight that you only have 9 % left to save for retirement, and you don't have a stinking payment in the world, including a house payment. And somehow from 2011 to 2023, wasn't it, like 12 years, you found enough margin in your budget to become completely debt-free and pay off your house.

49:11Dave Ramsey:and now there's no margin. That's weird. Yeah, that is weird. I mean, I think my guess is there probably is margin. It's just not what you thought it was going to feel like. And there's something to that. You made the point about the income, which is true. And there's something to that. If we talk to a teacher who makes a lower income because they love teaching and they love that, then we say, well, you're going to have a Camry lifestyle. That's just part of it. You're going to drive a used Camry. You're not going to have a ton of margin because that's the income. That's the life that your income is affording you.

49:48And I think that there is just part of that, that the cost of living is high. And because of that, your income doesn't go as far. It doesn't mean you're not free.

49:54Dave Ramsey:Did he say 20 % on giving? He said 20 % on giving, 17 % on taxes. That doesn't make sense. Neither one of those makes sense. Yeah. 20 % giving is a choice. I would be doing my tithe at 10 % until I got my retirement funded. I agree. I agree with that. Until I got my retirement funded. Biblically speaking, the tithe is off the top before anything. Offerings are from surplus. Regardless of whether some preacher tells you he wants the widow's mite to build his building. I can argue about that teaching all day long. But the offerings come from surplus. All through scripture. And the tithe is baseline off the top before you do anything.

50:39Dave Ramsey:So, and that's how Sharon and I have given our whole lives. And so, yeah, I'm going to, I'm going to check in on a bunch of these percentages if I'm you. Yes, his tax should be 12%. I got three of them written down. I have 17 % income tax, 25 % grocery, and 20 % on giving that I question all three of them. So anyway, check in on all that and dial it in and then redistribute. And let's make sure we're getting 15 % of our income into retirement. because you said you only had 9 % left over to do that with and to upgrade a car and so on. Now, there is something to be said. He said he put a new roof on, he did new cars, things like that.

51:13Where did that money come from? You saved it up and you did it.

51:16Dave Ramsey:With what? There's not enough margin here. He explained a budget that was gone, went down to 9%. And 9 % won't do those things if you did nothing. You know, I mean, so it didn't get him out of debt. It didn't get his house paid off. So that's the other thing. So something's changed and it's gotten some of these percentages have fattened up a little. Yeah. Since everything got paid off and since we did these other things. But you're always going to have stuff come up and you're never going. People get confused. I wrote about this in Baby Steps Millionaires, too. We get emotionally confused because when the word millionaire kind of came out was the 1920s, 1910, 20, right in there.

52:03Dave Ramsey:And in those days, a million was a lot like a billion today. Yeah. And so when you're a millionaire, you drive a two-year-old Toyota. You don't have three houses. No. And you don't have a private jet. Those are all billionaire things. And a billion is a thousand million. So it's not going to feel like you're rich. Yeah. Yeah, absolutely. Like unlimited funds for something. So A, your income's low. So B, lower, low-ish. B, you did this before somehow, made these other things accomplished. C, look at your percentages again because some of them are a little wonky.

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54:17Dave Ramsey:Continuing that discussion for just a second, there is something I have observed as you go through the baby steps and as you go through your wealth building process.

54:32Dave Ramsey:that gradually shifts, and it's so gradual it's almost imperceptible. And that is that as you build wealth and as you get more and more margin in your budget because you don't have any payments and because you start to have a pile of money in your retirement 401K, you've got a good, strong emergency fund. And the further down that you move, and it makes sense when I say it out loud, but you don't realize it's happening. The further down that you move, the bigger the event has to be before it financially, the dollar amount has to be larger to emotionally strain you. Yes. Yes. So, like, if I had a flat tire when I was broke, my life looked like a country song.

55:30Dave Ramsey:Everything that could go wrong did go wrong, you know? And so a flat tire was the national debt. It was drama, drama, drama, drama, drama, because it was yet one more thing, and I was so broke I couldn't pay attention. Now, I would have to total a car. Yeah, to have the same with no insurance to have the same feeling, you know, or bigger, you know, even. But and it's not just because I'm older or I get it. But your perception is different. The more wealth you have built in the fewer, the more margin you have in your monthly budget. And so what used to be a crisis is no longer a crisis. You will experience that.

56:14Dave Ramsey:but it is so subtle and incremental that you don't feel like you've arrived people have a perception this is one of the things he was asking about that i didn't properly address that's why i wanted to continue the conversation into his defense um was that when you people have a perception that when you hit baby step seven you're going to feel like you hit the lottery but your income is going to be like a who moment yeah there's not a who moment there's a i it takes a lot bigger problem now to be a problem moment and it snuck up on you so you don't even realize it so you don't feel like you got there you don't you don't have this um uh um top of the mountain put the flag in or something uh celebration moment when you get to baby step seven, it's kind of a yawn.

57:07Yeah, I could see that.

57:09Dave Ramsey:And so I, you know, I do want you to go there because it's the, you know, it's, it's a better yawn than the nightmares you're living in before you get there. So, you know, let's, let's have a yawn for sure, but you're not going to have the suddenly I have unlimited funds feeling. I think that's, I think that's the difference. You, you become a baby steps millionaire. Maybe you have a million bucks in the bank between all your assets in your home, but you don't earn a million dollars a year. You still earn 60 or 70 or$80 ,000 a year. The only difference is instead of the$800 a month going to the debt, now it stays in your pocket.

57:49And most people say, okay, we're going to bump up giving a little bit. Maybe now you increase the grocery budget a little bit, but it's not these major -

57:56Dave Ramsey:But$800 is not two weeks on Santorini and Mykonos in the Greek islands. And that's my point. That's$800. Yeah. You know, it's it's the ability to have freedom in the the day to day, the small things in life that you used to. You used to go to the grocery store and the budget strings had to be ultra tight. Now it's OK to loosen it up a little bit. You used to. You see what I'm saying? It's these little things. We can upgrade a car. Yes. And pay cash. We can put a roof on and pay cash. And by the way, those are the celebrations, but they feel so mundane that you don't feel like the celebration is there that you should have felt it should feel better than this.

58:37Dave Ramsey:When you get his point was, it should feel better than this. But you're still doesn't because you still have to have delayed gratification. I think that's why you still have limited dollars. You're still not in Congress. That's right. Yeah. You know, it's still that's it. You still have to say no. It still takes time to save. Yeah. What you're buying and everything else. Julia is with us in St. Louis. Hi, Julia. How are you? Good. How about you guys? Better than I deserve. What's up? All right. So I started listening to the Ramsey Show probably about six, seven months ago. I recently got married, and I had a virtual job that was in my hometown, and it was great.

59:15I had full-time hours. I moved here about two hours north of where I'm from in St. Louis here, and my work downgraded my hours. It's a smaller startup company and there was a bad business venture on their part. And long story short, I'm only getting 10 hours per week, which really sucks comparison to like 25 or even 30 at this point. So I had to bootstrap up and I say, what can I do in my community to make myself make money? And I started a small cleaning business. Good, that's great. Now I'm cleaning up to four or five different houses, and they're big square footage houses. So I'm getting about anywhere from$250, that's the smallest range, all the way up to maybe$1 ,000 per week when it comes to just cleaning houses on the side.

1:00:05You are a grind and hustle girl.

1:00:08Dave Ramsey:Way to go. Great. Thank you. Yeah, long story short, that has become my main source of revenue at this point. You make it more than you ever made in your life. Yeah, are you making more from the houses than you made full-time doing the other gig? Yeah. I mean, whenever I was full-time, I thought it was a smaller doctor's office. Like, it was a virtual. That wasn't what she asked, honey. You're making more money now than you used to make at a J-O-B. Right. That's what I said. Okay. Good, good. Now, all right, so what's the problem? If anything, when should I decide to make this an LLC? because when I...

1:00:50You don't need an LLC.

1:00:51Dave Ramsey:Do you have a separate checking account that you run your business on? Correct. You do? You have a DBA account doing business as? Yes. As a sole proprietor. And you run all of your income from the business into that account and only expenses out of the account. And then when you take money home from that account, you set money aside for your quarterly estimates. One-fourth of what you take out of the business to take home you set aside for taxes, okay? Yes, definitely. When you do all of that, the LLC does not save you a dime on taxes. The sole proprietorship has exactly the same write-offs an LLC does.

1:01:30Dave Ramsey:Exactly. Okay. The only thing you need an LLC for is risk. If you're a multimillionaire and you start a business and you think somebody might sue you because of the business and try to get your multi-million dollars, then you would start an LLC. If you're in a business that is high risk, where you could get sued inside the business and you're not, you would start an LLC. Or if your company starts making over a million dollars a year, you would do it for risk. But the LLC is only for risk, meaning that if you're doing business as an LLC, everything's in the LLC name. It's Julius House Cleaning LLC, right?

1:02:17Dave Ramsey:and that's the name of it, and everything's billed to that. All the workers are working from that. If somebody falls while they're working on the job and they want to sue the company, they have to sue the LLC, and all they can get is the LLC's assets. They couldn't take your home. They couldn't take your cars. They couldn't take other stuff because your LLC is the one doing business as a standalone entity. That is what it's for. It's for risk management, but it does not save on taxes. If she started hiring on other house cleaners to clean as a part of her business. Yeah, we're five or six weeks into this.

1:02:51I'm just saying.

1:02:52Dave Ramsey:Yeah, I mean, if she's been running this thing six months or a year, it starts making bank. It starts getting really complicated. There's a whole bunch of players involved. You're in rich people's houses or you're in a high risk environment, like some kind of sensitive office situation where somebody misbehaving in that situation is a risk. and you're sending employees into that, not yourself, then yeah. That would be a good time. Where you start perceiving risk is what an LLC, but there's all this crap on the internet that, we're getting an LLC, you'll save on taxes. And that's what happens when you're so stupid you listen to TikTok.

1:03:30Dave Ramsey:But yeah, oh my gosh. And I'm on there, I know, I know, I know. Shut up, but anyway.

1:03:46Thank you.

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1:05:29Dave Ramsey:One of our favorite things is when people send us notes saying they love every dollar. Recent quote, love this app, makes it super easy to budget with my husband. We've implemented this practice since our wedding day. Zero money fights because there's full transparency. We're on the same page. See, that is a key to winning right there. That'll cause you to be able to build wealth and to win in your relationships. Every dollar, the budgeting app, it'll help you work the Ramsey plan exactly like you had us in your back pocket. It's in the App Store for free and Google Play for free. Donna is in Dallas.

1:06:06Dave Ramsey:Hi, Donna. How are you? I'm fine, thank you. How are you? Better than I deserve. What's up? Okay, so my husband and I are older. I'm 71. He's 84. During COVID, we had our 401ks, our retirement accounts, and the stock market took a dive, and we went down like$26 ,000 in a week, and we got nervous. So we took it out real quick. And our thought was, I know, our thought was that we don't have time to recover. Oh, no. We lose everything. And you've been out since then? We tried it one more time, the same thing happened, and we just couldn't do it again. We just couldn't do it. It went up 25 % three years in a row, and you missed that.

1:06:50I know, but I keep thinking it can't stay like that. It's going to be gone. Oh, God. Am I going to feel worse if I lose it or go up? But Donna, the problem is the first dive when you said you lost the$26 ,000.

1:07:05Dave Ramsey:It recovered in like 50 days. The moment you took it out, you just locked in that loss. You 100 % lost the$26 ,000. You do not need to be investing in the stock market. Yeah, that's kind of like my thought. Because you don't have the backbone to stand the volatility. Yeah, the stock market's not the problem. No, the history of the stock market, you lost your butt. You got out at exactly the wrong time. like the worst possible you did it the worst possible way you could have done it and so if you're going to do that again you need to stay away meanwhile i made a hundred percent on my money while you did that because i just rode the roller coaster up and down and enjoyed the ride got off got on it again and rode never never got off i just stayed on said take me around again yeah take me around again i think there's a bigger issue at hand how much did you have in the stock market?

1:08:05We had about 190 ,000. I think that's the issue. I think that the bigger problem is you're worried that you don't have enough to live on throughout the entirety of your retirement. And so that's what's causing you to be very like trigger happy with this and very like quick to move.

1:08:23Dave Ramsey:Now what's causing that is a lack of knowledge of the market. And you're not familiar enough with the history of the market to be comfortable. so you think all bad news is the only news. And so if you can't get past that, you're going to do this again and again, and I would recommend you don't do it again and again because you're taking a beating. Yeah. And at 71 and 84, you don't want to take a beating. More than anything, you're taking a beating emotionally. Your 200 would be 400 if you'd have left it alone. Yeah. Yeah. That's what I'm saying. My sister-in-law, back, I think it was in the 80s or something, when the stock market went bad, or the 90s.

1:09:03Hers was the 91. And she lost almost everything. No, she did not. No, no, no, no, no, no.

1:09:09Dave Ramsey:She didn't get the money. There's no time in the stock market's history it went to zero. Well, it was such a small amount, and I don't know. I mean, she's my sister. But she only would have lost it. She emotionally lost everything, but she did not lose. That's like in 2008, okay, the stock market dropped in half. The Dow Jones went from$13 ,000 to$6 ,500. And people said, I lost everything. No, you lost half. And the only way you lost it is if you took it out. If you took it out at the bottom perfectly. Meanwhile... And how long does it take to recover? One year. Okay. And it's not 13 ,000 now where it started down to 6 ,500.

1:09:48Dave Ramsey:It's now 36 ,000. And that's since 2008. Okay. And so in the last year, the market has made 13%. Since the first of the year, we started bombing Iran, and the market went down and then back up, and it's currently from January to today down 1%. 1%. That's not losing everything. That's losing$19. Okay. Okay? But you've got to get your head around this, both of you, because if you're going to believe sister-in-law's mythology, and you guys are going to sit and watch the news every night and freak out, then you're going to do this again and again and again, and I don't want that for you. I think you're better off making too little money and not being awake all night.

1:10:40Okay. Right now we have it in CDs. Put it in a high-yield savings account.

1:10:46Dave Ramsey:Go to Fairwinds Credit Union, dump it in a high-yield savings account, and let it ride, and you're going to make 3 % or 4%. You're going to break even with inflation, but you're not going to lose anything, and you're going to sleep beautifully. But I've got to make fun of you, okay? Because I love you. Meanwhile, my money is going to be doubling while you're making 3%. If I can convince myself to suck it up. You would have to read enough. Sit down with one of our SmartVestor pros and read enough and look at the market. So here's the numbers. 97 % of the five-year periods, if you leave it alone five years, since the stock market began have made money.

1:11:27Dave Ramsey:That's all of them. Okay. So if you had left it alone five years in any scenario that we're talking about, you would have made some money. Even in a weird, crashy, weird thing like COVID or Iran war or 2008. Okay. All of those, actually, you can look at it. It's about the same time. It's COVID hit in March and so did Iran war. And so Trump starts bombing Iran, the market dives. All right. And so because it always does that with geopolitical stuff. And so if you understand that every time it does that, it returns very quickly. Then you start getting the opposite mindset that like, oh, he bombed Iran.

1:12:11Dave Ramsey:Great. I'm going to get to buy this on sale. The stock market's now on sale because I know it's going to go up instead of, oh, God, I'm going to lose everything. because my sister-in-law told me a mythology. Gave me a lesson in mythology. And so, you know, that's – but if you're going to invest – so here's what I would do. Let me get back up. If I'm 71, I'm 66. I'm 65, getting ready to be 66. So we're close to the same age. I would put this money in a high-yield savings account and let it ride and sleep at night. Meanwhile, I'm going to challenge you intellectually to sit down with a smart investor pro and start learning.

1:12:55Dave Ramsey:Because knowledge of how these markets return, how they go down, how often they come back, what the bounce back period is and all that, will cause you to ride out the waves. Yeah, let me go over it because this is so cool to see. So what I'm going to tell you is a major market crash that we all know and how long it took to recover the losses. So you could go back to 1987. 1987, you were there for that. Black Monday. Black Monday, yeah. All right. It dove. It dove 34%. 34%. And it took 22 months to recover. In one day. 22 months. That's less than two years to recover. 1990, Gulf War recession, it dove 20%.

1:13:32It took four months to get back. Just four months. Let's go to the dot-com crash. You said 49%, half. It took less than seven years to completely recover. Half. That's one of the big, that's crazy. Look at this one. 2008, the Great Recession, I remember that, 57 % it dove. It took less than four years to recover. 2018, federal rate sell-off, 20 % crash, less than four months to recover. 2020, COVID crash, we remember that. 34 % dive, it took less than five months to recover. And then most recently, the 2022 inflation bear market that we all experienced, 25 % dip, it took less than 22 two months to recover.

1:14:17You just have to ride it out. If you can sit tight for two years, you get back.

1:14:22Dave Ramsey:Well, that one's wrong. Because we had a 25%, a 24%, 3%, a 26 % market three years in a row. We did. And so that last one's wrong. But the others are correct. Others are correct. All right. Here you go, the internet. I remember the others. So, yeah. Okay. Interesting. That's interesting. So studying this stuff and going, how fast does it bounce back after the towers get bombed? Right over the top of Wall Street. Yep. 57 days. Wow. That one came back.

1:15:34Dave Ramsey:New to the Ramsey Show? Well, don't worry. We'll help you figure out your next step. Take our free Get Started assessment to see where you are in the baby steps and get a custom game plan for getting out of debt and building wealth. It's all free. Tap the link in the show notes and take the assessment. Our question of the day is brought to you by Y-Refi. When people get buried under private student loan payments they can't keep up with, they might think there's no way out. Well, Y-Refi does help borrowers explore solutions with fixed-rate refinancing and a payment plan tailored to that situation.

1:16:08Dave Ramsey:Go to Y-Refi.com slash Ramsey. That's the letter Y-R-E-F-Y dot com slash Ramsey might not be in all states. OK, today's question comes from Zach in New Hampshire. He says, my wife and I have two hundred fifty thousand dollars in various savings accounts. My wife wants to use the money as a down payment to buy a home. I think it would be a waste to use it that way. I would rather keep investing the money and eventually live off of the interest in dividends. Our rent is affordable and has not increased since we moved in. We have one child and a combined income of about$200 ,000. We're debt-free and our monthly expenses are very minimal.

1:16:46If you were in my position, what would you do? Well, I'd buy the house. I would because, number one, you're stabilizing one of the largest line items on most people's budget, which is their housing. And your rent may not have gone up yet, but it will eventually. So I would do that. And I also just think there's a peace of mind with having a place that you can call home that's yours, that is gaining equity. And I think, Dave, what I sense in this conversation, and we've had this with many people who've called in, is it's almost like people forget that purchasing a home is a form of investing. It's like, I just want to invest my money in the stock market.

1:17:25I'm like, well, I love the idea of investing. Can you do both? Can you do 15 % in the stock market? And can you invest in real estate, which is your primary home? I think they're both very good to do.

1:17:37Dave Ramsey:Agreed. So the premise that the person writing the email bases this on is that he's got cheap rent and it hadn't gone up. But everyone listening knows that's going to be false. It will change. So you can't extrapolate that out 40 years. Okay. Again, I'm 65 years old. So when I was 25, if I had been renting, can you imagine how much my rent would have gone up during that 40 years of my working lifetime? Absolutely. Even if I had a good deal initially with the first landlord who didn't go up on me for three years or something. Right. But that's going to come to an end at some point. That guy's going to die and the next investor is going to go way up or whatever.

1:18:22Dave Ramsey:It's going to 100 % of rent goes up. Yeah. And while that's happening, by the way, the real estate market's going up. Exactly. As well. And so during that time, you know, again, you've heard us say this before. We've done the largest study of millionaires ever done in North America. Detailed airtight research. research and what we have found is is that 89 percent of america's millionaires started with nothing did not inherit the money to become a millionaire and became millionaires so then you have to ask the question what did they do if you want to be one you do what they do you study best practices and you emulate it right so what did they do almost all of them like an 85 90 percentile looked like this.

1:19:10Dave Ramsey:I mean, they all kind of fit the same mold. They were boring. And what we found is they worked and got their home paid off and it was six or$800 ,000 and it took them 10 or 12 years to get the home paid off. And then during that time, they've been investing steadily in their 401ks and in their Roth IRAs and they had another 800 or 900 ,000 or a million in that. And it took them 16 years to do that. So you got a$800 ,000 house and you got 1.2 million in your retirement or less anywhere in there. And you got a$1 to$2 million net worth. So those are the two components of the first$1 to$5 million of net worth that we see people build.

1:19:55Dave Ramsey:And that's normative among them. They bought a house and paid it off. They steadily invested in 401ks. That's what I mean by it's not sexy, it's boring. It's just like, buy a house and pay it off and put money in the 401k and go to work and come home and eat your meatloaf. I mean, this is what you're doing, right? And you become a millionaire. It's not like you somehow invented applesauce. I mean, you didn't do anything that was that brilliant. You were just steady. And so that's why his idea is flawed. I agree. Because that house becomes one of the two components of wealth building, to your point, of investing that causes people to become wealthy.

1:20:37Dave Ramsey:And during that time, 100 % of the time, rent's going up. Yes, it is. 100%. There's very few things you can predict with 100 % probability. But you can predict 100 % of the time in the last 100 years, rent has gone up. Yeah, that's right. And so, I mean, the house that I sold when I was 18 years old, my first house was a real estate agent. I got my real estate license when I was 18. I sold the house two weeks later. I sold it on East Ridge Drive in Antioch, Tennessee for$42 ,500. That house sells for$600 ,000 now.

1:21:14Dave Ramsey:Don't be a renter. Yeah, that's the moral of the story. I mean, hello. If you were renting that house the entire time. Rent is going. You would have been paying. Let me think what the rent would have been. The rent would have been$150 probably in those days. Wow. Maybe$200. We rented an apartment a couple years later, a one-bedroom apartment for$235. Oh, my gosh. Wow. And so right after we got married. And that was 1982. So this would have been 78. So four years later. So, yeah, it would have probably been$150,$200 for the rent on that$42 ,500. $500 brick ranch built in 1948, a thousand square feet with an unfinished basement.

1:21:59And yeah,

1:22:00Dave Ramsey:and that house would go for 600 K right now. Oh my goodness. And that rent, which means the rent would probably be, you'd probably be renting that for 2 ,500 bucks. Oh my goodness. So that's the problem with this theory. And that's, that's, that's everywhere in America, right? That's not in Antioch, Tennessee. That's everywhere. That's all over America. And so, So, yeah, not ashamed I sold that guy that house, by the way. I mean, I think I did him good. I was an 18-year-old idiot, but I still did him good, you know. I didn't know what I was doing, but I thought I knew what I was doing. But it turned out I knew what I was doing.

1:22:35Dave Ramsey:There we go. So, yeah. So real estate's a great investment when it's a part of your plan, when you're out of debt, you have an emergency fund, your payment's no more than a fourth of your take-home pay on a 15-year fixed. if you can put down, and this guy has$250 ,000 to put down, if you can put down 20%, you can avoid PMI, which is private mortgage insurance. And that is a good thing if you can avoid that. First-time homebuyers often can't get a whole 20 % down. I understand that. In this market, though, you're putting down more if you want the payment to be less than 25 % of your take-home. So you got to get there.

1:23:11Dave Ramsey:Depends on the house, yeah, and where you're living and all that. But yeah, you're exactly right. It's all numbers. It's all math. You know, one thing I find on the show a lot is people are always willing to sacrifice their personal residence, whether they haven't bought it yet and they want to put their margin towards investing. Or maybe they have bought the house and they don't want to put the margin towards paying it off. They want to invest instead. They're always willing to put their personal mortgage and the piece of that on the line. And I find that to be interesting because the truth is there's more tied up in that than I think people realize in their day to day life.

1:23:43But all you have to do is be in a situation where you're up against the wall and you realize how much it matters to you. Anybody who's had a diagnosis, anybody who went through COVID-19, anybody who's been laid off or lost a job, the number one thing that you start thinking about is your home. And you want your home safe and you don't want to lose your home and you want to make sure you can make the payment. So don't forget that. Don't forget that.

1:24:09Dave Ramsey:There's something very primal. Yes. About that. Yes. And a different kind of anxiety than I can't get the coffee that I want today. Right. That's a different kind of anxiety. So when you're in - I'm going to lose my home. Yes. That's different than having the lights cut off. That's right. I've had both, and I don't want either again. And I don't recommend it as a method of learning. Yeah. So protect it. Protect it before your backup is up again. So, and I hope it never is, but protect it when you have the ability to and pay it off when you have the ability to. So circling back on that guy just for a second, if he keeps investing steadily, his investments will not be enough to cover the difference in rent going up.

1:24:53Dave Ramsey:So he's going to end up going backward. That's a good point. You're saying percentage-wise? Yeah, he's going to end up going backward in that scenario. Your investments won't do well enough for you to stay ahead of that. And if they are, you're playing in stuff you shouldn't be playing in.

1:25:39Dave Ramsey:Welcome back to the Ramsey Show. in the Fairwinds Credit Union studio. I'm Dave Ramsey, your host. Jade Wachaw, Ramsey personality, is with me. We were talking about stock market returns earlier, and during that break we actually got to play with the actual app a little bit and look at it, and I misquoted some stuff, so I need to clean up my mess. If some of you are still listening before you're bitching on the comments that Dave Ramsey's an idiot because he was, he messed up. So anyway, the thing to remember about the S &P, it recovered in about 90 days from the high. It was up in February. Trump bombed in Iran.

1:26:20Dave Ramsey:It dove. It came back in, I think it's 92 days. It recovered to where it was, and it's well beyond that now. And I said the rate of return for the year was down 1%. I was wrong. It's up 10 % for the year. So if you've been in the stock market, invested in S &P, which is the stock market, from January 1 to today, you know, then June 1, then you have made 10 % on your money. Meanwhile, it went down and back up. And so you rode a roller coaster down and you rode it back up 10%. Now, in 2024, the stock market made 23%. Yeah. The S &P did. Then 25 and then 26 and then 17. And so those are the returns for the last several, four or five years.

1:27:18Dave Ramsey:Under different administrations and all kinds of different situations and different volatility and gone up and gone down and back and forth. but you can go back and just pull up an S &P app and look at it online. You can see the thing going up and down and you say, okay, there's a dip. What was going on at that time? And you go back and look at the news stories of the day. And so you'll see it comes back in 57 days or whatever like that. Just like we just did on the about 90 days on the Iran war or 60 days. So anyway, that the moral of the story is you do not put money in the stock market unless you're going to leave it alone at least three years and preferably five.

1:28:00Dave Ramsey:If you don't have that mindset, you're going to panic every time you read a news story or see a news story on, and Fox and CNN are going to tell you the chicken little, the sky's falling every day. It's what they do. It's fear porn. And they're going to tell you every day that the world's coming to an end. The world's coming to an end. They always report when the market is down. They never report when it's up. Ever. They never say record stock market returns. Now, a business channel like a Fox Business might, or in the old days, the old CNBC back in the day, not there anymore. But if it was a pure business channel with stock market reports, they might say the market's up at a record level.

1:28:41Dave Ramsey:And I think I did say the Dow was at 36. It's like at 50 ,000, so I'm not even close on that. So I screwed up two things in one of those other segments pretty dramatically. But the moral of the story still is no one gets hurt on a roller coaster except those that jump off in the middle of the ride. I do not take my money out of the market based on any singular event because I think the market's going down. Every time the market goes down, instead, I am tempted to scrape the nickels out of the corner of the couch and put more in because it's on sale. when I was a kid there was a store called Kmart it's gone now and when you went in Kmart they had these little things that own rollers with a blue light on top and they would roll this thing over to the whatever aisle the tool aisle or the socks aisle or the underwear aisle and they turn the blue light on and there would be a blue light special and you could get a bargain and so the rednecks would flock to the blue lights, right?

1:29:45Dave Ramsey:Like a moth towards a flame. And so I remember my mama running down the aisle at Kmart to the blue light. That's what you should do when the stock market goes down. The blue light is on. It's on sale. Get a bargain. Run down the aisle, you redneck. Get you some money. Okay. That's what we did. And so there's nothing wrong with that. But if you've got the mindset of it has always come back and the only game is how long it takes it then when it dives on one of these anything news items or geopolitical events whether it's covet or you know fires in australia or whatever it is it causes you know the russians launch a satellite uh somebody invades ukraine somebody doesn't invade ukraine uh somebody's oil barrel goes up whatever it is whoever you know whatever it is whatever mess trump is making this week ends up in the stock market, right?

1:30:40Dave Ramsey:Or whatever victorious thing he does this week ends up in the stock market. And so for a short period of time, overall, you just make money. Yes. So that's the moral of that story. I'll get off my soapbox. All right, let's go to Jay in Richmond, Virginia. Hi, Jay, how are you? I'm good, how are you? Better than I deserve. What's up? so uh me and my wife just had a baby in january yay what'd you have a girl awesome you're ruined yeah i know right um and so doing the doing the current bills uh we're trying to pay off debt but she just had a school payment come up and that kind of threw everything off and then daycare coming up in September, and right now we don't have enough to cover daycare.

1:31:31So we're trying to figure out what can we do to get to at least where we can afford daycare and then also pay off debt.

1:31:38Dave Ramsey:What kind of school payment? The school payment itself right now is$360, but that's just one. That's the private Sally Mayer in the town right now. Oh, a student loan. It's a student loan. student loan? Yes, that's my wife's student loan. Oh, I thought she meant she was in school. Okay. Got it. And how much is daycare? She's in a break right now. Daycare is going to be$1 ,600 a month. And when you say your wife is in a break, when does she go back to school? Or when did you plan for her to go back? That's up in the air. She finds out by tomorrow whether she's allowed to go back. Right now, the school is not being very kind with her having a baby.

1:32:20So she plans on going back in the fall. Can you afford for her to go back in the fall? It doesn't sound like it. She's on grants for school, so that is, her school's covered, and if the grants don't work, her work pays for it. So they do like a, they pay for her college. I'm sorry, so she works also? She does, yes, full-time. And the$360 is for an old student loan. It's not an ongoing tuition payment.

1:32:47Dave Ramsey:Correct. Got it. Okay. Why are you paying? Is that a federally insured student loan or a private student loan? It's a private. Oh, okay. All right. All right. So what does she make at work? She brings in$2 ,000 a month. And$1 ,600 is the daycare? Yes. Well, that doesn't work. No. And, of course, our money is combined, so together we make$7 ,600 a month. I know, but her working, if she's not working, you don't have a$1 ,600 daycare, right? Correct. Well, she's not making$400. I mean, we're not working full-time to make$400. Right. That doesn't work. So we've got to figure out a different job that she does from home or makes twice as much money because her working and making$2 ,000 and paying$1 ,600 for the privilege is not logical.

1:33:44Dave Ramsey:Yeah. No, I would work part-time from home and make more money net of daycare and be home with a baby. That's step one. Then step two is you look at what you can do to pick up extra jobs and sell the car. I didn't even ask about it. I don't even know if it's there, but probably sell the car.

1:34:15Dave Ramsey:All right, let's cut to the chase. It's easy to get discouraged about crazy house prices and interest rates. But when you have the right real estate agent to help you buy and sell the right way, you'll have confidence to make smart decisions. Ramsey Trusted Agents aren't just experts who guide you through buying or selling. They're people you can trust to have your back from the first call to closing day. Find a Ramsey Trusted Agent near you at RamseySolutions.com slash agent. That's RamseySolutions.com.

1:35:15Dave Ramsey:Faith is in Boise. Hi, Faith. How are you? Hi. Thanks so much for taking my call. Sure. What's up? I just want to start off with saying I just know that this is a first-world problem, and I'm grateful to have it. But I really need your advice. I'll try. Okay, so we need to know if we should pay capital gains at the number of$50 ,000 to the IRS, or if we should reinvest using a 1031 exchange. So you're selling a piece of investment real estate? Yes, we are. For how much? Probably, we're listing it at$499. So you've depreciated it. Your adjusted basis is approaching zero?

1:36:09No, but we will probably make about$300 ,000 equity on it. Yeah, that would be$45 ,000.

1:36:20Dave Ramsey:But equity is not equity. Equity is not your basis or your tax basis. Right. Right. And let me tell you, we've gone over this with all kinds of tax people and investment people. Okay, so the tax people are saying you have a$300 ,000 gain. At 15%, that'd be$45 ,000. Right. Okay. That's what you're hearing, correct? And then with all of the money we've invested into the rental, they're saying we'll probably walk away with a$50 ,000 capital gains tax. So we can pay that or we can take that money and reinvest it into something else. Okay, let me stop you a second because I'm concerned that the number you're giving me is where it's coming from.

1:37:09Dave Ramsey:And I want you to go back and double check that. Let's walk through the basics of that and then we'll go back to your question, okay? Okay, gosh. This is all gobbledygook to me, but I'll try. That's okay. When you bought the property, you're selling it for approximately$500 ,000, and you're thinking you have about a$300 ,000 gain. So when you bought it, you probably paid$300 ,000 for it, let's call it, okay? And then you've been depreciating it, which lowers your basis, and you've been doing capital improvements to the property, which increases your basis. Yep. Okay. That adjusted basis, down by depreciation and up by capital improvements, subtracted from your sale price, and that number subtracted from your expenses for selling, is your gain.

1:38:03Dave Ramsey:And I can't tell from the way you're wording this if that gain is$50 ,000 or if your tax is$50 ,000. The tax, I was told, is$50 ,000 after someone else worked out all those numbers. And the property, what kind of property is it you're selling? It's a single dwelling. Okay, so it's a rental house. Okay. And you sold it why? Well, we want to sell it because where we're living now and we're renting right now is so extremely expensive. So our ultimate goal is to lower our monthly housing costs. And take this equity and buy a home. Yeah, either buy a home or we thought buy a duplex so we don't have to pay capital gains tax.

1:38:50Dave Ramsey:If you live in it, you have to— Which is a whole other thing. Yeah, that's a mess. Pardon? That's a hot mess. Can she do that and live in the other side of the duplex? Yeah, but you've got to try to figure out a way to bifurcate the duplex, and that's really troubling. And in the area that we're wanting to live, a duplex, even if it was only like 1 ,400 on each side, square feet on each side, would be close to a million. I would pay the gains and use the money and buy the home that you need to buy. You're forcing yourself all into a duplex. You wouldn't have bought a duplex anyway. The only reason you're doing that is to save this gain and to try to play some kind of shell game with this money.

1:39:33Dave Ramsey:And so, no, I'm going to pay the tax, get clean, and just buy the home that you're supposed to buy, that you need to buy, that fits your budget with the money that you guys have from the sale of this and from what other money you've stacked up. Put as much down as you can put down and don't get caught up because you're forcing yourself into a duplex. And if you're living in one side of it, you can't 1031 that side, and yet there's not two sides to a duplex. in terms of there's no line down the middle that you can say one side's investment and one side's not unless it's a zero lot line and it's not it's a duplex so you're getting yourself into a real potential barrel of fish hooks if you get audited and i'm not sure how you'd come out on that i wouldn't screw with it for all that and you wouldn't be buying a duplex if it wasn't for this one simple issue and so i just ignore the issue and go do the house you're supposed to do not let taxes force you into a decision you wouldn't have made otherwise.

1:40:32I like that. I like that.

1:40:33Dave Ramsey:And that's the way I would go at it. So, yeah, but if you live in one side, does it become your personal residence? Oh, but the other side is rented, so that's a rental property. Yeah, but it's one property. It's very confusing. It's a singular property. It's not a dual property. If you bought two properties attached, two condos that were attached at the wall, then one of them would be an investment. You could 1031 into that. You could not 1031 into the other because you can't 1031 into a personal residence as she's already discovered. But I also, Faith, want you to go back. Unless you guys have owned that property a very long time, I'm not sure the numbers you're getting.

1:41:13Dave Ramsey:That's an unusual. If you've spent money on the property doing capital improvements, that's an unusual gain. so but i would look at it and try to just make sure that your adjusted basis that you understand that and that the difference is times 0.15 15 for your capital gains tax is the 50 000 it might be it might be i might be wrong but i really want to understand it before i move forward just to be double sure triple sure but no i would not do a 1031 in this case because it's forcing you into a purchase you would not otherwise make it's a good question interesting discussion thank you Zach's in Lubbock, Texas.

1:41:48Dave Ramsey:Hi, Zach. How are you? Hey, I'm great. How are y 'all? Better than I deserve. What's up? Well, doing well until your lady volunteers beat my lady Raiders in softball, but all things considered, I'm pretty well. But my question is, I'm a 1099 employee, or 1099, here in Lubbock, and I have recently done better and better in our career field. Good for you. Thank you. And I've been definitely trying to I've been maxing out my Roth IRA and that's gone well. And well, even maxing that out, I'm not hitting my 15 percent and the baby step that I'm in where I'm debt free and everything with my home. But my question revolves around I have a tax professional with the heart of a teacher that is telling me, hey, you might consider a traditional IRA with your S-Corp as a 1099 tax bracket.

1:42:46Dave Ramsey:You have an S-Corp? I do, yes. Hmm. Okay. Yes. Well, cheaper than that, do you have employees in your S-Corp other than you? No, it's just me. Okay. Yeah, you can set up what's called a simple IRA, which is a 401k for small businesses. And you're the only employee. Yes, sir. And you can max it out. Okay. And just hit your SmartVestor Pro up. And the good news is it's basically 401k for small business. They call it a simple IRA. And the good news is it's$15 a year administration cost. It costs nothing. Oh, it's nothing, yeah. Yeah, like a big 401k, like our company, you know, we pay tens of thousands of dollars a year to administer it for 1 ,000 employees, right?

1:43:34Dave Ramsey:And then we have to pay another$40 ,000 and have it audited and all that stuff. You don't have to do any of that with a simple. It's all just$15. It's like setting up another Roth IRA. And you can do a simple Roth. So you can just make it more Roth, more good, and put it in there. If you did have employees, you have to match 3%. Yes, sir. if you ever hire someone for your S Corp other than yourself you'd have to match three percent but the weird thing is you can actually match yourself so which really serves absolutely no purpose unless you're well if you're maxed out it would serve a purpose if you're going to put all the full amount in that would get you there

1:44:49Hey, what's up guys? It's Jade Warshaw. Listen, summer spending adds up so fast between vacations and road trips and camp fees and events and all the extra gas and grocery runs. Money can get tight before you know it. To really get your money under control and keep it that way, you're going to need a plan. And that's what you'll get with the Every Dollar Budget app. It helps you track your spending, free up cash to put toward debt and savings, and it's the simplest way to make a plan for your money before the month begins. So no more wondering where your money's going. you're telling it where to go.

1:45:22Download EveryDollar in the App Store or Google Play and start for free today.

1:45:39Dave Ramsey:So Jade's just teaching me something at the break that goes to our last caller. So the simple IRA for small business is what I said it was. It is an inexpensive way to set up a 401k for a small business. If you have employees, you have to match 3%. All that was correct that I told him. You cannot put as much into a simple IRA as you can a solo 401k. But, Jade, the solo can only be if you have only yourself and your spouse. That's right. Only the owner and the spouse. But you can't have any employees with solo, but you can put more in it. That's right. So if you're a high, ultra high income earner on self-employed 1099, no employees, and you max out your, both of you match out your Roth IRAs, you can also do the solo, which will get you way up there then.

1:46:30Dave Ramsey:I mean, you can put like. Up to 72 ,000 is the contribution limit. With matching yourself and doing all kinds of other gyrations in there to get it to work. Yeah. Okay. So there's two types that'll work for you. Solo and simple. They are a little different product, but you can learn about both of them from a SmartVestor Pro, and you can find your SmartVestor Pro at RamseySolutions.com. Gregory and Kimberly are on the debt-free stage in the lobby of Ramsey Solutions, which can only mean one thing. Where are you guys from? Bay City, Michigan. I love it. And how much debt have you two paid off? About$300 ,000.

1:47:09Dave Ramsey:I love it. How long did it take you? 72 months. 72 months. and your range of income during that time? About$180 ,000. Okay, cool. What do you all do for a living? I'm an occupational therapist, rehab director. Awesome. I'm an electrical manager at a pickle plant. Great. Very cool. And I'm guessing with that length of time and that amount of money, where are you all from again? Bay City, Michigan. Which is near what? Two hours north of Detroit. Okay, cool. Alright, I have something in mind here when I'm thinking about$300 ,000 of debt. What was it? Must be your house. Well, we had about$70 ,000 in consumer debt.

1:47:50Student loans, credit cards, leased cars. Wow. Silly things. And our house. I knew it. And the house. And the house. Save them for last. And the house. Baby steps seven.

1:48:01Dave Ramsey:You are debt-free everything. I'm looking at weird people. Yes. Look at you guys. Way to go, y 'all. Excellent. So what's this house worth? $275 ,000. I love it. And how much have you guys saved in your nest egg so far? About$688 ,000. All right. We're creeping. You are almost millionaires. Well, if you consider that we also have about$46 ,000 in liquid assets. You do. You are. Baby Steps millionaires. Way to go, you guys. I'm so proud of you. So, wow. How old are you two? I'm 58. 54. And you're millionaires. And you started with nothing. Surreal. How long have you been married? 33 years. Wow.

1:48:44Dave Ramsey:Congratulations. That is so cool. So very well done. So tell us your story. How did you get started on all this Ramsey stuff 72 months ago? Well, it actually started in 2014 when we moved to a town in Ohio and wanted to start working on my retirement. And went to a financial advisor, and they said, well, you can't really invest until you get out of debt. And it was at that point where I felt like I was going to die at my desk. And in 2018, I met a guy where I worked named Jeff. I called him 1F Jeff because I messed up. He's only 1F and it's Jeff. I told him about my situation and he says, you need Dave.

1:49:27I said, who's this Dave? Dave Ramsey. He says, I was like, who is this, some snake oil salesman? What's up? Yeah. So I started listening to your show, and I listened to it for about a year. And it took me a while to get on board.

1:49:41Dave Ramsey:Yeah, because a snake oil salesman takes a while. I understand. I've got no issue with that at all. What changed your mind, Kimberly? We were just drowning in debt, living paycheck to paycheck, and just tired of being stressed out all the time. So I'll try anything. Yeah. Even Dave, yeah. I understand. That's how it happens a lot. I like it. I like it. Very cool. Okay, so at that point, sometime you all had to have a sit-down and go, all right, let's do something. Tell me about that moment. Do you remember it? We started selling everything. Her and I, we did agree to it's time to do something because, like you keep saying, we're sick and tired of being sick and tired.

1:50:22And so we, I think it was April of 2019, we said, it's time. Let's do it. And we started selling everything. as you said the kids were about concerned about they were next and and uh just started pouring money we had spreadsheets we used the every dollar app we just did everything we could to get out of debt and december of 2019 i turned in a stupid car a lease and it was at that point where we're like holy smokes we're out of debt everything with the house just in time for covid

1:50:55Dave Ramsey:Yeah, yeah. And then last year, we decided to move out of Ohio and move back to Michigan. And we sold our house down there. It took a while, but it was about December 9th when we closed on our house in Bay City. And we paid cash for the house. Wow. Wow. We walked out of the title office, which blew my mind. It only took a half hour. Yeah. Yeah, I bet. I looked at her. It's like, we're debt free. Completely debt-free. It was just, we're baby step seven. What is this? And who pays cash for the house? You do. It was amazing. Wow. It was insane. Exhilarating. Free. Congratulations. How does it feel to have no payments in the freaking world?

1:51:40It's awesome. It makes the monthly budget a lot easier. Let's put it that way.

1:51:44Dave Ramsey:Yeah, it's pretty simple now. So what big thing, Kimberly, are you guys going to do to celebrate that you have no payments in the world in your meeting? millionaires oh we came here to do this y 'all are people of simple taste

1:52:04Dave Ramsey:no seriously you're gonna go on a trip buy a car what are you gonna do you need to do something look for another sailboat yeah a sailboat bay city okay all right so you have a little one you need a bigger one no no we sold you sold it so you gotta replace it yeah we sold it and when we moved out of Ohio. Okay. So what's the budget on this sailboat? About$16 ,000 maybe. Okay. All right. That's nice. Very nice. I love that for you guys. Good for you. Congratulations. And I got to tell you, it will glide on the water better than that one with payments. Even the one we sold didn't have payments. Okay.

1:52:41Dave Ramsey:All right. It's just helping you get out of the other payments. Okay. A lot of people would have taken the$275 from the sale of the house and used it as a down payment on a bigger house. No. How did you walk us through your mentality there? Last kid was out of the house. We were empty nesters. So we went from four acres and a huge house down to a very simple, you know, 1 ,200 square foot, easy to take care of. Half acre house. Half acre house. That made it a lot easier. Yours, all yours. All ours, yeah. Wow, way to go. Excellent, guys. I'm proud of you. Who was cheering you on as you went? Our kids, mostly, and coworkers from time to time, you know.

1:53:26Dave Ramsey:Yeah, the guy that recommended Dave. Yeah. Jeff with one F. I wish I could find him. I would buy him a drink or something. Yeah, amen. Well, congratulations. We're very, very proud of you. Thank you. And we really appreciate you coming all the way down here and sharing your story. And I can't wait to send us pictures of the sailboat. Yeah, okay. Yeah, that's very cool. Good for you all. You get to your living the dream, man. That's how it works. Well done. Gregory and Kimberly, Bay City, Michigan. Quite a journey. $300 ,000 paid off over 72 months. Debt-free everything, house and everything. And in the process, become Baby Steps Millionaires, making$180 ,000.

1:54:05Dave Ramsey:Count it down. Let's hear a debt-free scream. Three, two, one. We're debt-free. Yeah. Yeah. I love it! Whoop, whoop, whoop, whoop, whoop, whoop, whoop! There we go. So good, so good. Oh, man. Hey, you know you're serious when you sell the sailboat. You know you're serious when you take the 275 and buy a house in cash. Mm-hmm. And move down. Go down in house to make something. Well, the kids are gone. Yeah, we don't need the... Yeah. And don't have to keep up the upkeep. She's right about that. That's true.

1:54:55We'll be right back.

1:55:31Dave Ramsey:You spend hours researching before making a major purchase like a home or car, but it's also a good idea to put in the work searching for the right insurance coverage. To protect your biggest assets, I recommend using Ramsey Trusted Pros. Whether you're looking for car, home, or any other type of insurance, Ramsey Trusted Providers have been coached and vetted to serve you like we would. Find what you need at RamseySolutions.com slash insurance.

1:56:19Dave Ramsey:buying or selling a home is a big decision last people sold their house and changed cities and moved down you gotta make decisions carefully about that that's a big one house is one of the biggest transactions you'll ever do and you need a high quality high octane high protein real estate agent. If you want a Ramsey trusted agent, go to RamseySolutions.com slash agent. If you want to learn more about the market trends, you can go to RamseySolutions.com slash market or click the link in the show notes if you're listening on the podcast or on YouTube. Our scripture of the day is Psalms 143 10. Teach me to do your will for you are my God.

1:56:59Dave Ramsey:May your good spirit lead me on level ground. Henry Ford said the only real mistake is the one from which we learn nothing. Love that. There we go. Ben is in Raleigh, North Carolina. Hi, Ben. How are you? Better than I deserve. How are you doing? Better than I deserve. What's up? I have a question. I really need some help. Really help. Any questions? I have an issue You're trying to get my wife to agree to a budget. The way things are is that she will look at money in the account and look at it as a way of, there's this amount of money, this is how much I can spend. And I've been struggling. The money in the account has always been causing problems.

1:57:55Dave Ramsey:Okay, your phone's breaking up. Can you get where you can speak directly into it and keep it clear? Hear me now? I'm sorry. That's okay. Try again. So your wife thinks there's money just because there's some in the account, and you're having trouble getting her to understand we don't have all that money because some of it's got to pay the electric bill next week. Correct. So what I've done is caused problems in the past. So what I've actually done is I've pulled money into the account, into one account to make sure the house gets paid. but we're constantly running into issues with money being left in the primary account.

1:58:32Dave Ramsey:Okay. So let me stop you for a second. How long have you all been married? We've been married for 14, just under 14 years. Oh, gosh. And how old are you guys? I'm 58. She's 42. Let me tell you. So why does a 42-year-old woman not grasp the idea that we have bills to pay? Right. she does but anything outside of that is a open invitation to spend no it's not she's a 42 year old grown woman she's not a four-year-old i agree with you completely i agree with you completely okay so why when you look at her and say i need a grown woman to join me in my marriage and join me for our household good. And that's you can't spend like you're in Congress.

1:59:22Dave Ramsey:We're going to write down together where the money's going to go, and you and I are going to stick to that. And if you can't keep that contract, we need to sit down with a marriage counselor. I agree. Let me give a little bit more of a back story. So I did lose my job probably about a year and a half ago, and that put a lot of financial burden on her. Since that time, I've got the job. You've gone through baby step one. I'm sorry. What financial burden did it put on her? She was the only one working? She was the only one working. That's correct. No, it put a financial burden on the household. Right, because her job remained the same.

2:00:01Correct.

2:00:02Dave Ramsey:So there's no financial burden other than the household had less income during the fact that one of you weren't working for richer, for poorer, in sickness and in health. That does not give you a reason to overspend. Quite the opposite. Are you back to working? I'm back to working. Are you making what you were making? I'm actually making more. Good. What do you make? Dents are stabilized. What do you make? In fact, I make roughly about 125. What does she make? She makes around about 35. Okay. So let's start fresh. Here's how the conversation needs to go. Honey, we've tried to work on this together several times.

2:00:49Dave Ramsey:I'm very concerned and I'm really worried about our relationship, our marriage, and our future. And I need desperately to get closure on our money. If we put all of our money in one account and before the month begins, we both sit down and we both have a vote and we both decide where this$150 ,000 a year,$160 ,000 a year is going to go. We're going to decide this month, here's what our take-home pay is, and every dollar is going to have an assignment. Every dollar is going to have a name. You get a vote, I get a vote. We're going to come to a conclusion that every one of those dollars is allocated.

2:01:29Dave Ramsey:We're not going to spend anything except what you and I have decided is good for our future. Can you help me and can we do that together? If she says no, you don't have a financial trouble, you have a marriage problem.

2:01:48Okay.

2:02:16Dave Ramsey:by accident, it's going to happen when we sit down, both of us have a vote, both of us have a voice, and we plan it out. What am I missing, Jade? I don't think you're missing much. I think that, I don't want to say this, but I think he's afraid to challenge her and, like, push on this. You sound like you're a little too sweet. Yeah. Too nice. I'm a Southern boy. Yeah. I have Southern boys on. Me too. I think she can take it. I think she can handle you having a very serious conversation when you're saying this can't continue. This is a detriment to both of us. It's a detriment to our relationship.

2:02:53Dave Ramsey:And I'm not asking you to do what I say. I'm asking you to do what we decide together. And I think that she can handle it. And if she can't handle that, then there's something else going on. But this thing of I just do whatever the flip I want after 14 years of marriage and I'm 42 years old. There's nothing Southern about that. That's just crazy. Yeah, because it wouldn't fly if you were doing whatever you wanted. I guarantee that. Yeah. And she'd be calling us going, how do I get my husband under control? My husband under control, right? I mean, it's like, wow. Yeah, there's, when you become an adult, you have to do the things that require adulting in your marriage, you know?

2:03:37You have bills to pay. You have to pay the bills. You have to work together. You can't just do your own thing. You can use the downloading of the EveryDollar app, and we're going to build this together as a way to do the conversation. Yep.

2:03:53Dave Ramsey:Because you're kind of starting to fret. This is a whole new way of us doing this. Instead of me being your daddy and little girl does whatever she wants, or you being my mommy, and I get an allowance from you. Do it together. I don't care what your mom and daddy did. I don't care what my mom and daddy did. I don't care what we did for the last 14 years. We're going to build a new thing going forward, starting with his EveryDollar app tonight. Let's sit down together and both be grownups and both decide on purpose what's going to happen to this money. And both of us push through. Yep. And there's some relational breakthroughs when that happens.

2:04:26I agree. Because for him, he's going to have to share something with her beyond dollars and cents. It can't just be, well, you got to stick to the budget. You're not doing the money. he's got to share something that has a greater why behind it it makes me feel scared when i see this it makes me have a hard time trusting you when you uh react like this he's gonna have to share something that's a little bit of a deeper level when talking about the money so that she understands

2:04:52Dave Ramsey:it and vice versa the breakthrough at our house was when sharon finally clicked that this was the best way she could get her voice her vote counting this is how she budget was a mechanism for her to have a vote that counted because she's dealing with Mr. Strong Personality over here, right? Who just does, you know, just does it and then you figure it out, right? But that was like, I don't know, 30 years ago, right? But that was still a breakthrough. That's how she got a vote with a strong personality. And sometimes that's how you get the princess off the couch or the irresponsible guy to plug in and be a man.

2:05:29Dave Ramsey:Yeah, that's true. Whatever analogy you want to use on this. But that's what a lot of people face, Ben. It's not just you guys. It's most people struggle in this area. But if you can solve for it, it's game-changing. That puts us out with the Ramsey Show in the books. We'll be back with you before you know it. In the meantime, remember, there's ultimately only one way to financial peace, and that's to walk daily with the Prince of Peace, Christ Jesus.

2:06:02you