Don’t Let Money Drama Keep You Broke

21:03Dave Ramsey:Yeah, in the middle of all that grief. Like, it's just, it is, it's terrible. So life insurance is the one thing, especially as a mom with three little kids that I'm like, so big on for people to get because it's inexpensive. Xander is the place that Winston and I actually get all of our life insurance. And we keep re-upping it because I'm like, I just want it there. Like, there's something about that safety of knowing that you have money if something suddenly happens. And it doesn't cost much because Xander shops among a gazillion different companies. It doesn't cost much. You just have to admit that someday you're not going to be here.

21:31Dave Ramsey:You've got to say it out loud, and you've got to say, I'm going to say I love you to my family by taking care of them and taking the time to put this stuff in place. It costs those stinking pizza. It really is. So that is one thing to do to say I love you to your family. So we've used Xander for all of our family's needs for insurance for many years, including, of course, term life insurance. To get a free quote, go to 800-356-4282. That's 800-356-4282, or go to Xander.com.

22:18Dave Ramsey:If you're tired of living paycheck to paycheck and feeling like you can't get ahead, join one of our free, free, free, free every dollar trainings. New trainings every week this month. They're all hosted by one of the Ramsey personalities, either Jade or Rachel or George. And we're going to show you how to stick to a budget. You generally find thousands of dollars of margin in about 15 minutes just learning to set the thing up. And you go, oh, look at that. I got a raise. And you can get out of debt, of course. Why? So you can start building wealth. Hello. And you can ask any question during the live Q &A.

22:49Dave Ramsey:It's a cool thing. It's a free every-dollar training. Go to RamseySolutions.com slash webinar. Haley's in California. Hi, Haley. How are you? Hi, Dave and Ken. I'm good. Thank you for taking my call. Sure. What's up? Okay. So I'm going to try to be brief here. I am a single mom to a five-year-old boy. I don't receive any child support. I have a career in finance. I gross 140K a year. Look at you. Way to go, girl. Thank you. I have a pretty low net worth. It's about 50K. 15K of that is an emergency fund. My boyfriend and I have been together for three years. We love each other. We are discussing marriage.

23:43His net worth is a lot bigger than mine. he has a trust fund and he lives off the dividends of his trust the principal is about two million he doesn't work he'll he owns a business but it is not profitable he's owned it for 10 years so he's a hobby it's a hobby he doesn't pay himself a salary businesses that don't make a profit are called a hobby yeah it's kind of like a passion that's not a good indicator of

24:16Dave Ramsey:his character? He considers it like community service. Yeah, I consider it he's hiding in his trust fund money. It's a bad idea. What's the business? It's a bike shop. He has four more years of his commercial lease, and then he's planning on closing the doors. How old is he? When it's over. He's 43. Have you discussed the long-term range? And you're how old? I'm 37 okay I'm sorry let us stop peppering you what how can we help you hon so I am under the assumption that you would recommend a prenup given the dramatic difference in our net worth I apply um this program to my life and I would like to apply it to my marriage as well but Why the tears?

25:09I don't know. I just, if we have a prenup, how do we combine our finances? Okay.

25:21Dave Ramsey:The prenup does not discuss the monthly operation of the household in most cases. Most of the time, the prenup just says, what happens to the$2 million trust fund if you would get split up? In other words, a prenup would be something as simple as, if you did do it, If you did do a prenup, just be as simple as he leaves the marriage with his$2 million trust fund and you leave the marriage with$50 ,000 a net worth. Or you leave the marriage with everything else and he leaves with whatever it is. I don't care. But, I mean, most prenups kind of start with the idea we leave with at least what we came in with.

25:57Dave Ramsey:And that's it. It's only if you leave the marriage that it does come up. But it's not like the money coming off the$2 million that allows him to not be profitable or productive, gross, becomes part of your household income, even if you have a prenup. So that's how you combine your finances. But we're not – so we won't combine all of our bank accounts, though? Yeah, you combine all your bank accounts. Absolutely. Absolutely. His trust fund is not a bank account. His trust fund is an investment. does he have any control over the trust fund at all yeah okay all right so anything is my other question anything that's in and around the trust fund would would not necessarily be in your name but even if it is in your name the prenup would if you switch everything to your name the prenup would just say in the event the marriage breaks up it goes back to his name that's all it would say it's not operationally inside the marriage it's only what happens at the end of the marriage.

26:57Dave Ramsey:Most of them, I've seen a few of them that interfere in the marriage, but most of them are what happens in the event the marriage dissolves. Simple. Okay. And your second question is what? Well, how do I build wealth with somebody who already has wealth and isn't really motivated to build more wealth? Now, there's a key issue. Now you've opened up a whole nother can of worms. okay i'm gonna love you enough to tell you the truth a guy that doesn't work for a prophet and isn't productive scares me if he's marrying my daughter i'm i'm afraid man the trust fund has allowed him to not become who god intended him to be a productive citizen that goes out there leaves the cave kill something and drag it home instead it's stunted his emotional development and he runs a bike shop, a bike shop that's not profitable instead of becoming the man that God wanted him to be.

27:59Dave Ramsey:That scares me. I'm looking in from the outside and I'm being a little bit harsh, but I'm short on time and I love you and I want you to hear that. I don't want to leave this being dishonest with you. Thank you. It's greatly concerning to me and I would want you to deal with that. And if I'm you, if I'm your old ugly Uncle Dave, Dave, I would want you guys in pre-marriage counseling to get to the bottom of some of that stuff and some of that be solved to your satisfaction. Because, girl, you, on the other hand, are a warrior princess. 78 % of the – or 50 – oh, I'm sorry. 52 % of the single moms live below the poverty level.

28:35Dave Ramsey:You make$140 ,000 a year. You're self-sustaining and raising a human. You're kind of amazing.

28:46i you know i dave took the words out of my mouth i was going to play the older brother card and i went on a rant last week with a very similar situation like this on this show and i said ladies don't marry doofuses and i'm not he may not be well but hold on indicators are good i understand look at you all of a sudden mr nice guy trying to give him a break i'm not because Because we've heard enough. We've heard enough. I'm not saying he's a bad person. But being a doofus and being a bad person are two different things. You have a great heart. And I'm just telling you, I have the exact same fear here.

29:19This is a big deal. Three years you guys have been dating. He's been on this plan for 10 years. I don't think that$2 million lasts as long as he thinks. I'm concerned about that. I feel like$2 million is a lot of money. It's not. At 43. That's why I asked that question. How old is he? So I echo Dave, and I'm saying I think premarital counseling is an absolute must. And if he doesn't play ball with that, that would be the final red flag. You've got to take care of you and that five-year-old. And you can love somebody that is not the right person for you. And, again, I'm not accusing him of anything, but I have massive, massive red flags.

29:56Same ones Dave has.

29:57Dave Ramsey:So let me play something back to you that I heard, Haley, and I think everybody heard it. And you came into this conversation like you are the one that is not bringing as much to the table. He's bringing everything to the table. And what we're saying is it's actually the opposite. Yeah, that's right. This guy needs to step up and earn the right to be with Haley because she's a freaking warrior princess. Pretty incredible. Yeah. I mean, making$140K a year, a single mom, gotten into finance. you're out there swinging the machete through the jungle kiddo it's pretty awesome and uh yeah so so you know he may have two million dollars but he won't have a long if he doesn't change and so um that you just need to be careful again i all we're looking at is we've known the situation for about a minute and 48 seconds is all so you you know a lot more about it than we do We could have missed something.

30:57Dave Ramsey:The guy might not. But I'm not saying it's 100 % off, but there are some things that are concerning enough. You've got to dig into them and get solved before you go forward with this. And to encourage you, you asked, how do I build wealth with him? If there's a prenup, it probably needs to include him getting a job that's profitable. Yeah. But until we figure out if this guy's the guy I gave. In order to get married to me, you have to become profitable. You need to work the baby steps, whether or not he's in the picture or not. And you've bought into that. Keep working it. You're doing really well.

31:31You got a good income. You can build wealth. You, Y-O-U in caps, you can build wealth.

31:36Dave Ramsey:Yeah. Mm.

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33:48Dave Ramsey:Ryan is in Green Bay. Hey, Ryan, what's up? Hey, Ryan, Ryan, you're on the air. Hey, Ryan. Bye. All right. Chris is in Dayton, Ohio. Hey, Chris, what's up? hi uh i was on baby step two but then life happened and i had to dip into my step one savings okay should i replenish that yes then get back on track with my debt payments yes and also my second question i'm really not looking forward to this day but But a lot of my family members are getting older, and I stand to inherit probably about six figures when that time comes for them. And I'm disabled, so the best thing I can think to do with it is stick it into an ABLE account.

34:50Would you have any other advice as far as what to do with it? I don't have any car payment or mortgage.

34:57Dave Ramsey:Are you receiving some kind of government assistance that would be affected if you got$100K? No, not up to$100K. I've got SSI and Medicaid and food stamps, but with this ABLE account, it wouldn't count as a resource. Yeah, I know that. But I was asking why you were using the ABLE account, because you were taking food stamps and SSI. Okay. All right. And welfare, you said, too, right? Medicaid, yeah. Medicaid, Medicaid. Yeah, okay. All right. What's the nature of your disability, Chris? I was born legally blind. Okay. All right. Wow. All right. Yeah, I'm trying to think what I would do with the ABLE account.

35:41Dave Ramsey:I probably would just try to get some mutual funds and set it in that and let it create income for you from the ABLE account. And I think you can do that. I haven't dipped into those things in a while. I know what they're for, and I kind of know what they are. but I'm not an expert on it. And so I would have you sit down with, talk to one of our SmartVestor pros and the people that we have, that we endorse to help people with investing and they will know how to structure your ABLE account for that. For those of you who don't know, if you're receiving governmental assistance, if you have money in an ABLE account up to a certain amount, if you label the account as an ABLE account, It has to do with protecting, keeping you from losing your government benefits if you are disabled.

36:30Dave Ramsey:That's the purpose of it. That's how it's designed and what it is in general. It's a legal, proper way to have some assets and not, in her case, not lose the help that she's getting. So, wow. Jay's in Alabama. Hi, Jay. How are you? I'm better than I deserve, Dave. How are you, sir? Just the same. How can we help? All right. I got a lot to unpack. It's a rather happy story. My wife and I have royally kicked butt. I think we've done good, but I feel like we need to tweak it a little bit because we both have great jobs. We love them, but we don't think we're going to be able to do this until we retire in our late 60s or 70s.

37:17And we're trying to figure out how to expedite speeding up so we can retire maybe in our mid-50s.

37:23Dave Ramsey:All right. So I don't know if that involves... How much have you got in investments? $1.1 million. Okay. Good lick. Good for you. And what's your household income today?

37:40$475 ,000 a year.

37:41Dave Ramsey:Yo. And how much of that's you? How much of that's her?

37:47She is about$350 ,000 and I'm the rest. so you're 175 okay yes sir all right and what does she do for a living uh we both work in medicine i was gonna guess okay cool good for y 'all but she didn't get doctoritis well done yeah apparently

38:07Dave Ramsey:you got a good net worth and a great great income um how much of the 1.1 is in retirement accounts About$800. Okay. What's the other$300 in? I got about$120 in the brokerage account that I invest in, and then the rest is home equity. Okay. And what's your age is? I'm 45. She's 43. Okay. All right. So what you would do is to – is your home paid off? No, sir. We are paying extra on it to knock it down. Yeah, what do you owe on it? We owe about$600 on it. Okay. If you got a paid-for home and you built some money in some non-retirement mutual funds, that's what people in the financial world call a bridge fund.

39:02Dave Ramsey:It bridges from the time you want to quit to 59 1⁄2. Exactly. That's what I'm looking for. So that's okay. Well, listen, you don't need as much if the house is paid for. Yes, sir. Well, our long-term, we might have kind of a strange long-term plan, but we both are very well-traveled, and once we get to that age, we'd like to sell the house, take the equity we get from selling the house, buy a smaller house with a place that we ain't got to cut the grass and stuff like that. And we actually want to spend about half a year in Southeast Asia because we've been there many times and love the vibe. So it's much cheaper to rent a place there.

39:48Dave Ramsey:Yeah, and let me ask you this. It occurs to me that you fairly easily could sleepwalk into half of this income working part-time, even if you were doing some of it in Southeast Asia. My job currently is remote. But to be honest, I mean, I'm just being honest with you. We have no problem adjusting our lifestyle. No, no, no, that's not what I'm saying. I'm just saying you have the ability to produce an incredible income, and you could probably do that with 10 % of the strain you have now. You could probably, between the two of you, pull in a couple of hundred. It's possible. Oh, I think you do. I think you're going to have to reimagine what you do, but yeah.

40:31Right. We're just both getting – we see the writing on the wall, and we just want to – we want to do the right thing, pay off our house, or at least knock it down a lot.

40:40Dave Ramsey:I would get the house paid off, and I would build some money in bridge. Is this 10 years? Did I hear 55 you guys want to be checked out? Top 55, 56, we're looking at, you know, say 20, 36. Well, the 1.1 will be almost$3 million by then if you leave it alone. Okay. All right. And you would have bridge on top of that, and you'd have the paid-for house. And you've got the potential to do something, not nothing, the rest of your life and probably generate a couple of bills doing that. Right. So there's a lot of different ways to roll into that 54-, 55-year-old point, and you're going to be in really, really good shape.

41:23Dave Ramsey:You're right. You have kicked butt. You're doing really well. The main place you've kicked butt, though, is your income. well also i'm on our very we laughed but on our very first date i asked her i said i need to know how much student loans you got and she said no and i said all right there'll be a second date now hearing that story we all knew you out kicked your coverage when you told us about your wife but now this is a this is a woman with poor judgment good for you sir you did well you know You're a real romantic, buddy. I'm just saying. Yeah, you're a real sweeper girl off her feet. Sweeper right off her feet.

41:59Dave Ramsey:You got any student loans, baby? And then he declares there will be a second date. Okay, we'll go out again. You get the pleasure of my company one more time. I love the advice you gave there, Dave. And I think there's a bigger lesson for our audience. We know from all kinds of data, you can go research this yourself, that when a person completely stops work altogether, There's got to be some purpose beyond just retiring from a job. And in this case, I love what you recommend here, which they can travel the globe, do whatever they want, stay involved a little bit, just enough to maybe cash flow all this and not eat into that retirement.

42:37And I just think that's something to think about. This idea of I'm going to stop cold turkey and just do nothing but hang out. That's not what he was saying. The data is really scary about how many are dead in six months. It is. And so finding some purposeful work, even if it's volunteering or some type of minister. Doctors without borders, yeah.

42:54Dave Ramsey:I mean, you could go, you know, let's go. Medical doctors in Southeast Asia would be at a premium. That's exactly right. Great, great point. I mean, that's what I was thinking. A lot of stuff you can do there. Yeah, this idea that I'm going fishing for the next 45 years is probably not a plan.

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44:45Dave Ramsey:welcome back to the ramsey show in the fair winds credit union studio ken coleman ramsey personality number one best-selling author and host of the new show front row seat which is a massive hit on ramsey network he's my co-host today ryan is with us in green bay wisconsin hey ryan what's up Hey, how's it going? Better than I deserve. How can we help? So kind of similar story maybe to how you started out. Right now I got$1.8 million in debt. That rental portfolio is worth$4.4. That's a conservative estimate off of what realtors would tell me they would list for. um currently that that portfolio puts out approximately um at a low end five thousand dollars a month at a high end nineteen thousand dollars a month because we're heavily invested in commercial um so right now with uh you know post-covid we're we're a little behind on the commercial, uh, leases.

45:59Okay. Um, just trying to think of like what, but so I had a home run early on. I sold a building that I bought for 426. I sold that building for 1.6. Um, And then I did a 1031 exchange on two of the buildings that I currently hold.

46:26Dave Ramsey:Okay. How can we help? Well, I don't know. What are you asking? Well, I'm not sure. You know, I'm not sure. I guess I have$1.8 million in debt. I have a portfolio of$4.4 million. And your rate of return on that portfolio sucks. Yeah, it's not great. No, it's horrible. Do you want to get out of debt, Ryan? Do you want to get out of debt? I do. I do. Okay. Now, you're still the guy that hit the slot machine once, and so you keep putting quarters in a stupid thing. You had that one hit and did that 1031 made bank, and ever since then you've been putting quarters back in the machine trying to do it again, and none of the rest of them did that.

47:18Well, no, yes. Yes, more or less, yes, I will agree with you. But I have hit more than once. How old are you? I'm 38 years old. Where do you want to be when you're 58?

47:34Dave Ramsey:You want 10x this or you want, what do you want? Yeah, I want to 10X this, man. I want to pay off my home that is worth a million dollars, but I have a$360 note. Okay, but I'm just telling you, I don't want to 10X your portfolio. Your rate of return is awful, sir. When you tell me you're getting an NOI of$60 ,000 to$19 ,000 on an asset base this high, your rate of return, your ROI, straight up mathematics, it's horrible. 3.8. It's 3.8. I know, but when you make$60 ,000 as a return on 3.8, I mean, that's horrendously bad. You should be making a half million dollars on that. Cracked. Yeah, absolutely I'm cracked.

48:28Dave Ramsey:Yeah, no, I know. So you've got to figure out why these properties are not giving ROI and shed yourself of the properties that are not giving you a return and build a model portfolio where you're getting – in real estate, you need a cash -on-cash and residential of 8 to 10 net, NOI, net operating income, 8 to 10 % cash-on-cash annually. Okay? And in addition to that, the thing needs to be going up in value. And in addition to that, you need to be taking the tax depreciation that the depreciation schedules with the IRS allows. All of those things together give you north of 15 % to 20%. On a commercial, you ought to be making 10 % to 12 % cash on cash.

49:16Dave Ramsey:Ours does that. And it's not rocket surgery to do it. But you've just been buying crap, man. And you didn't think anything about the debt aspect. And so the debt on some of these is eating your lunch because the rents are not commensurate with the values and with the debt service you're carrying. And that's what's destroying your ROI. So you need to get down inside of that and figure out which of these things you want to and create an ideal portfolio that's going to be 8 to 10 on residential and 10 to 12 on commercial. Cash on cash and in properties that are going up in value, those are the ones you want to expand owning and the others you want to get rid of.

49:55Dave Ramsey:And so there's the playbook right there. And you adjust it. And that's what's going on. But you've fallen backward into this thinking that all real estate's good. All real estate's not good. Some of it sucks. And you've got some that sucks. And some of it's leverage too high. Some of it you've got too much debt on and it's pulling you down. And so, yeah, if I'm you, that's what I'm looking for. And in the process of doing that over the next five years, I'm going to sell off enough of it and use enough of my income to become 100 % debt free. That's where I would be going. But I don't think you're going to do that because I think you like borrowing money.

50:28Dave Ramsey:So I'm not sure where you're going to end up exactly. I hope you make it. Hope you do, for your sake. In this case, would you – I mean, because he's got enough. If we take him face value,$4.4 million. He said conservative in all that property,$1.8 million debt. Would you get out of the rental game altogether and have him invest that? He's a young guy. He's like 37. Yeah. I mean, he'd be better off. That's what I think. If you did 100 % slate clean and dropped it all on mutual funds, you'd make more money than you're making now. That's where my head was going. Yeah, because you got$2 million in mutual funds in and you're making$200 ,000 a year.

51:01Dave Ramsey:Right. And you're not doing anything to do that. You don't have to collect rent. You don't have to replace water heaters. The roof doesn't leak. You know, all that. It's a really healthy reset for a guy his age with kids. I'm not sure I would go that far. Instead, I'd probably cherry pick it and take about three years and clean up most of it. Clean it all up in about a three-year period of time, but clean it up by getting rid of the properties that aren't. Right. cash flowing but have equities and then get out of the debt business because that's what's part of what's bringing you down here the other part is you're you're still trying to replicate that one deal so hit those numbers again for people because too many people watching tiktoks and reels so what is the roi you're looking for on commercial versus residential the stuff that you own or else you say it's not worth having i pay cash right and so i want to make if i put a half million dollars in a house we don't buy houses anymore but when we're by i got a bunch of them not still i ain't got rid of all of them but um but on the houses that we own the residential single families that we own um we look at what we paid for it what it's worth in the market and we want an eight to ten percent cash on cash after all expenses are paid rent minus expenses is net operating income we want to see a cash on cash of eight to ten percent if you get that and you have appreciation in value and you take the depreciation those three things together are called the internal rate of return the irr and those will be north of 15 17 on your residentials which is a lot better return than a mutual fund absolutely but it's a lot more hassle right then on our commercial stuff we're making uh anywhere from 10 to 14 cash on cash and so we're seeing most of our ro our irrs our internal rates return up in the 20s on those so we're making serious money on those commercials because commercial property does that.

52:47Dave Ramsey:But it's a lot bigger property, and again, it's a lot more cash tied up in them. So those are the processes you've got to go through to get there. You've got to just decide what you're doing. Because if I can't make 8 to 10 when I can make 12 on a mutual fund, why am I going through all this hassle? Exactly.

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55:17Dave Ramsey:Reed is with us in New Jersey. Hi, Reed. How are you? I'm good. Thank you for taking my call. Sure. What's up? So I'm getting married in April, and I have about$15 ,000 worth of student loan debt. And I've saved up about$17 ,000, and that's not including my 401K in my investments. How much is in your non-401K investments? I have$17 ,000 in a high-yield savings account, not including the 401K. Okay, and not including the other$17 ,000? No, there's just one$17 ,000 savings account. Okay, I'm sorry. So you have savings of$17 ,000, you have$15 ,000 in a student loan. And then you said, I have investments and a 401k.

56:06Yes.

56:06Dave Ramsey:Okay. The 401k, I understand. What are the investments that are not in the 401k? I have about$5 ,000 in an IRA. Okay. All right. Do you have any investments that are not in a retirement account other than the 17 and the high-yield savings? No. Okay. All right. Trying to make sure I had the clear picture. Okay. Because if I heard$20 ,000 laying in a mutual fund over there that wasn't retirement, that changes the picture. You follow me? Right. That's what I was looking for. Okay. Yeah, yeah, yeah, yeah, yeah, yeah. All right. What do you make? $120 ,000 before taxes. Good for you. Thank you. What have you been spending it all on?

56:55Living expenses in New Jersey. and I travel back and forth a lot between New Jersey and Atlanta to help take care of my mom. She has MS, so it's a little bit difficult to save, but I'm putting away at least$500 a month.

57:07Dave Ramsey:Which is$6 ,000 a year out of$120 ,000. That's not much. No, it's not. Okay. So you've not been very intentional and careful and controlling with this great income that you have until now when you start focusing on it recently. Correct. Okay. I'm not trying to blame you. I'm just trying to make sure I get the picture of what the story arc of your behavior is because that affects my answer. So the good news is you kind of just started all this stuff, and you probably can do a lot better than$500 a month. So if you took the 15 of the 17, paid off the student loan, and really bear down on the budget, you probably could put the 15 back pretty quick.

57:50Yes, we are planning a wedding. Okay.

57:53Dave Ramsey:Are you paying for part of that? Yes, for about half of it. How much? $10 ,000 total is our budget for that. Okay, so you need five. No, I'm sorry. It's my budget, so that's 50 % of the wedding. Oh, okay, 10. Okay, all right. So that changes the discussion again. Okay. And does he have debt? What's his financial condition? My fiancé has no debt other than the condo that we live in. Okay. All right, cool. All right. Well, so number one, as long as you do it between now and April or as soon as you get back from the honeymoon, I don't care. You're still going to get to where you need to go. More than anything, what I'm wanting to do is create a behavior pattern that's realistic that you can lean into and take all the way into your marriage.

58:45Dave Ramsey:That's a positive behavior pattern. Because you make good money and you don't have much to show for it. So that's why you're asking these wonderful questions, because you want to do something better. You want to have something to show for it. Am I reading you correctly? Yes. Okay. It just becomes pretty challenging with the amount I have to fly and helping my parents out. Yeah.

59:11Dave Ramsey:And that also is not the only reason. Yeah, for sure. Okay. All right. All right. Yeah, yeah, yeah, yeah, yeah. When is the wedding? April.

59:26Okay.

59:27Dave Ramsey:To the extent that you can be confident that you can build the$10 ,000 and then rebuild the other$15 ,000, I need$25 ,000 by April. Okay. To the extent you can be confident of that. Can't be confident of that because you're just starting. All right, so I was going to give you an answer that I'm not liking now. Yeah, I saw you crunching those numbers. So, no, I'm going to take$10 ,000 of your$17 ,000 and move it to a separate savings account, and the wedding is now funded. Pressure's off. Okay. Yep. Okay? And then I'm going to take$5 ,000 and throw it at the debt, leaving you$6 ,000, and throw it at the debt, leaving you$1 ,000 in the account, and then I'm going to get on a tight beans and rice, rice and beans budget, and you have no debt at that point, correct?

1:00:29Correct.

1:00:30Dave Ramsey:No, no, you still have the student loan debt because we only put six towards the 15th. You've got nine loans. So we've got$9 ,000. We've got to tear into that nine, and then we've got to rebuild the emergency fund by the wedding. But the wedding pressure's off. We've got the$10 ,000 sitting there to do that. We're throwing$6 ,000. I need$9 ,000, and I need to rebuild my emergency fund by April. You can do that making$120 ,000 if you get on the every-dollar budget and you really start pounding it and you say, I'm not going out to eat, I'm not spending money, we're not going over this wedding budget.

1:01:00Dave Ramsey:That's it. That's a whole budget, not a dime more. We're picking out a dress that fits within that, a videographer and a reception that fits within the$20 budget, and, buddy, you're putting up the$10 ,000. He can put up the$10 ,000. He's going to be able to do that. Sounds like you guys got a good match here. Um, so that, yeah, that's what I'm doing. Now, let me, let me recap. What I'm trying to do is I'm trying to get not too many things coming at you to put pressure on you. The only pressure is getting out of the debt now because we got the wedding financed. You see what I did? Right. Yes. But then you've got to create the people, uh, read that change their lives doing this stuff are the ones that create this internal, uh, positive anger.

1:01:42Dave Ramsey:It's like, I've had it. I'm sick of making this much money, and I got nothing. Yeah, I got this expenses running back forth to Atlanta, but I got nothing, and I'm sick of this, and I'm going to do whatever it takes that's moral and legal to change that in the person in my mirror, and I'm freaking changing. I mean, you've got to get this thing going, right? And when you get that going, then you're going to be okay. But you can wander into debt. You can't wander out. You've got to get passionate about it. and that causes you to sacrifice deeply to hit the goals. So$10 ,000 in an account,$6 ,000, leaving$1 ,000 in your savings account.

1:02:21Dave Ramsey:No more money going into your 401k. Stop it temporarily. Stop everything temporarily. Your life is now on hold until you get the other$9 ,000 student loans paid off, and your life is not on hold until you finish that emergency fund, rebuilding it to$10 ,000 or$15 ,000. So when you come home from the honeymoon, you have$15 ,000 cash, no debt on the wedding and no debt and you make 120 that feels good that's worth pushing for yeah and that's a burn the ships mentality which is what you need at this point it's now i have no margin but instead of stressing out over the wedding we're just hey i don't like the fact that i don't have an emergency fund that's a very different vibe and that motivates you very clearly.

1:03:05I love that. All conviction at this point.

1:03:07Dave Ramsey:Yeah. I create systems that push me to do what I want me to do. Yes. Right. I put myself in those positions. Right. It's one of the reasons I love stuff like automatic draft on your checking account going into your investments. One of the reasons the 401k has caused more people to build wealth than just about anything else because it's automatic. Anything I can do to put a system around me that automates my discipline. Well, tell everybody why you, I know what you did, but what's the psychology behind saying, all right, we're going to fund the wedding. Why'd you tell her to do that? Because that's, I know what you did.

1:03:42It's brilliant, but explain the psychology behind having her do that.

1:03:46Dave Ramsey:Can't focus on two things at once. Yeah. And one of them is going to suffer. Yeah. The wedding is so important to her. It's such a huge deal that if Dave didn't have her do that, what happens is She starts to go, well, the wedding is super important, super important. I can't do both. And it kills any momentum on getting rid of the debt. This way, you give her a full runway. Instead, I've got a light at the end of the tunnel that's not an oncoming train. Brilliant. Even if it's a pin light. That's right. There's a light there. That's right. And it's a singular focus point. Yeah. And when you're trying to modify behaviors, you look for a singular focus point and lean in on that with visceral passion and craziness.

1:04:23Dave Ramsey:And then you can create this permanent change in your brain. and you rock on then. You reset who you are is what you're doing. Folks, when we get you out of debt, the getting out of debt is not the important thing that happened. It's what you became while you were getting out of debt. That's the important thing that happened.

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1:06:46Dave Ramsey:Our question of the day is brought to you by Y-Refi. You've tried budgeting. You've tried making minimum payments, but those defaulted private loans are still weighing you down. YReFi might be able to help. Learn more at YReFi.com slash Ramsey. That's the letter Y-R-E-F-Y dot com slash Ramsey. Not available in all states. Today's question comes from David in Massachusetts. My father suddenly passed away recently and did not make the will he always planned to create. He owned five properties and only two have mortgages. He also owned a business with a partner which brings in close to$1 million in residuals annually.

1:07:26My mother is not in the picture, and I have an older brother who has a substance abuse problem. My father did not inherit any money from his parents and built all this from the ground up, so I want to honor him by making sure none of this goes to waste. My brother will waste away his half of the inheritance on drugs if he gets access to it. My name will be the only one on the death certificate, and our attorney will file for me to be the head of his estate. Is there anything I can legally do to prevent my brother from getting a lump sum?

1:07:59Dave Ramsey:You need to seek legal counsel that really knows what they're doing. No, I doubt it. I think he's going to get his lump sum unless he's declared incompetent by the court, unable to take care of his own affairs. And just being stupid or doing drugs is not going to cause that to happen. Stupid, immature drug person is not going to. That's not incompetent by legal terms. Um, my mother's not in the picture. Uh, she is now if you're, if they were married, uh, or if they are, if they were married at the time of his death, she's very much in the picture, whether you want her to be or not. Um, so I, again, we're not attorneys in Massachusetts, so you need legal advice in Massachusetts where you are.

1:08:44Dave Ramsey:and my suspicion is Massachusetts has some wicked, crazy probate laws because there's some other stuff on the books there that's wild. And so it wouldn't surprise me a bit. But you need to find out what you're dealing with, okay? So in most states, if your mother is alive and they're still married, she's going to get at least half of these assets, whether you wanted her to or anybody else wanted her to. and your brother, if not, if she's dead or they're divorced and gone or whatever, and she's really not in the picture legally, then you and your brother are going to get half each, and I'm not aware of anything you can do to legally prevent your brother from getting his half.

1:09:29Dave Ramsey:Now, what I would do, if that's the case, when you sit down with your attorney, is I would sit down with your brother and say, look, I love you. Dad loved you. I don't want you to use this to OD. I don't want you to use this and have nothing to show for it later. If you would allow me to manage your half for you until you get through this part of your life, I will do that as a favor to you because I'm very afraid that you're going to end up with nothing. What do you think? And see what he says. And again, what percentage of guys in this situation are going to go, oh, yeah, why don't you take care?

1:10:11Dave Ramsey:None. But it's worth asking. But that's probably persuasion is probably your only technique.

1:10:21Dave Ramsey:Yeah, tough situation. So sorry for your loss. Yeah. What does this illustrate? Illustrates everyone needs a will. Period. And here's why. what this guy did when he died suddenly is he has put a curse on his two sons. He left them with a mess because he didn't do a will. And so now you've got one son trying to navigate, the older brother trying to navigate the prodigal and try to do what dad wanted and try to think through. and there's no direction and there's no legal binding anything. If your dad had simply left half of this in a trust for your brother, it would have taken an hour and a half to do that will maximum.

1:11:13Dave Ramsey:And if he'd left half of it in trust for your brother with you as the trustee to manage it and upon such time as your brother exemplified positive behaviors, you released the trust to his control, which would be a fairly normal thing where you've got an immature kid or a kid doing drugs or whatever, you're going to hold it for him but not let him have it.

1:11:33Dave Ramsey:So those of you that are out there, do your freaking will if you love the people that you're going to leave behind. Because you just screw up everything for the people you leave behind by not doing it. It is an act of love to do your estate planning. Because now this poor guy, David, has got this whole thing is sitting on his shoulders. He's the only adult in the story. Yeah. Just aggravates the pee out of me. So this is millions of dollars we're dealing with here. Yeah. And by the way, there's a partner in a business he was running with him that doesn't know what to do, too. And I'm sure there's no freaking plan there either.

1:12:14Dave Ramsey:So you guys, I don't care if you've got two nickels and a kid. You need a will because the kid is going to be controlled by the state if you don't have a will that dictates who's going to take care of your kid. You're going to leave that up to the DMV people? The people that run the DMV. That's the level of competence you have when you're dealing with the state. No, I'm not leaving that up to them. No, I'm not leaving anything up to the government to decide anything because I was too trifling to get my dadgum work done. And getting your will done is being an adult and getting your work done. Oh, man.

1:12:46Dave Ramsey:Poor David. I'm so sorry, David. But I tell you what, if you have a bunch of people, a bunch of kids that you don't like, and you want to really mess up the next 10 years of their life, leave about$2 million with no instructions and a bunch of scraps of paper laying around of what they thought you wanted and watch them fight through it and all the lawyers get the$2 million over the next 10 years and nobody in the family talks to each other the rest of their lives. It's almost a guaranteed formula. That's right. Yeah. It's like dropping a bomb off in the middle of a family. Yeah. that's exactly what it does so just aggravating david i'm sorry you're facing that um but i i wouldn't burn a ton of calories on your brother it's not his fault it's not his problem he's his problem he's what's known as an adult and i wouldn't burn a ton of calories on anything except just getting this thing settled and and moving your part over to the side and you go live your life like a responsible human being and oh by the way get a will did i mention that Rebecca's in San Diego.

1:13:53Dave Ramsey:Hi, Rebecca. What's up? Hello. How are you? Better than I deserve. How can I help? So my mother inherited my great-grandmother's property that has two houses. Unfortunately, both of them need significant amount of work that my mother cannot afford to do. If we were to move there, it would be five generations on this land. And so we are trying to do what we can to not have to sell it off. My husband and I do have a down payment saved to buy a house. But we were thinking instead that we could move into the bigger house. We've got two kids and another one on the way. Use our down payment to fix up that house and live in it and have no debt, you know, no house payment.

1:14:40And my mom would take on the smaller house that needs less work and better suitable for just her by herself single. She recently decided she wanted to only be the sole landowner. We wouldn't be put on the deed or anything legally. That settles it. I'm not going. She wants us to pay$800 on top of about$100 ,000 we would be putting into repairs of the house and the property.

1:15:06Dave Ramsey:I'm not going. That's what I said. You don't put$100 ,000 in somebody else's house. Let's pretend, Rebecca, that you were my renter and you were my tenant. and I said, hey, why don't you renovate my house? You would look at me like, you're an idiot. I'm not putting$100 ,000 in your house, Dave. Why would a renter do that? Yes. Don't do this. Sorry, Mom. This isn't going to work out. We're going to have to just go buy a house somewhere else. And I hope this all works out for you. Yeah, family said that because one day I would possibly inherit my siblings. I don't care. Children should take care of the parents.

1:15:43Dave Ramsey:I'll deal with it when I inherit it. Right now, I'm not doing a thing. Yeah. You already don't like this, and you're still trying to figure this out. Your mom has set up a trick bag here. You need to run. This is a bad vibe. Bad juju, kiddo. Really bad. You need to run. This is a trick bag. She likes to mess with people, and I can see the strings from here. You need to run, run, run, run, run, run, run, run.

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1:17:28Dave Ramsey:If you died tomorrow, how much would your family need to keep the lights on? How would they pay the mortgage? How would they buy groceries? If anyone in your life depends on your income, you need life insurance. And how do you choose from all the options out there? Well, life insurance's term life is the only kind that does everything you want, which is replace your income for the lowest possible cost. And we've recommended only term life insurance for the last 35 years here on the air. You need a policy worth about 10 to 12 times your annual income. And the perfect term length, we think, is a 15 to a 20-year level term policy, meaning the premium stays the same.

1:18:08Dave Ramsey:For more info and resources, use our free term life insurance guide. You can go to RamseySolutions.com slash term life guide. It's free, or click the link in the show notes. Speaking of life insurance, Kyle is with us with a life insurance question. Look at that. Hey, Kyle and Tampa, what's up? Good. How about you? Better than I deserve. How can I help? Yeah, so I think we're doing good on our savings. for retirement. But we have like a large life and whole life that we got kind of sold on. And my wife, she doesn't agree with giving it up, but I do. And now it's kind of like a catch-22 where I think we have enough, but I just want to give it up kind of just for potential growth.

1:19:02Okay. So it's like$800 ,000 in cash value. Mm-hmm.

1:19:07Dave Ramsey:potential it could be maybe i looked into the end like you currently have cash value of 800k yes are you sure yes how much did you put into this we put a lot of money into this i don't know we just kind of got caught up into it i think it was like 10 years ago so what is What's the face value? What's the payout on death? At this moment, 1.2 for me, 2.3 for her. Okay. All right. And what do you make, sir? And we're 40 chicks. I don't make them. Together, we make about 325. What do you make? About 55. And what does she make? About 275. Okay. All right. She a doc? yes yeah that's who they go after okay um yes and that's coming she's a target she's a target they worked all her and they worked all her buddies um yeah you got screwed and you're getting screwed every day that you keep it so uh do you have you said i think we've got enough i mean what do you have a large net worth or something i mean yeah what is your net worth I mean, it's probably like$3 million.

1:20:27Dave Ramsey:Okay. Invested in what? And that's not included in that policy. It's probably like$1.5 for houses and then about$1.4 for just 401K things. Okay. And then I have$800 ,000 in this, and I'm just kind of like. I got you. All right. Well, let me kind of give you. You can play this back for her. Okay. Docs are targeted by whole life guys. They're the sweet spot for those guys that sell this crap. It is one of the worst financial products in the world. It's absolutely horrendous. No one in the entire financial world believes in whole life insurance as a good product except the people that sell it. All the rest of us, all the financial planning community, all the investment community, all the estate planning community, unless they're involved in the whole life business, they do not believe in it and they tell people not to do it.

1:21:30Dave Ramsey:All of us have abandoned this product. Because it's not just bad, it's one of the worst. It's the payday lender of the insurance world. That's how bad it is. This is not a medium product. This is a product that absolutely is horrendous. Okay? Now, let me walk you through why. And then you guys can go home and you can talk about this after you play this back because it will be on the podcast. Okay? So life insurance has one possible need in a scenario like you're in. And that is to replace lost income if one of you dies and the rest of you are dependent on that person. You do not have a large enough estate to have an estate tax problem, and so there is no – you have zero need for life insurance for that purpose.

1:22:21Dave Ramsey:You've got to get to$25 million before you have to worry about an estate tax problem, and you're a long way from$25 million. All right? So you don't have an estate tax problem at all, not even close, nor are you going to have one anytime soon. now so but what you do need life insurance for is if you wanted to replace the income now we replace her income you would need about 10 times that so you would take about two and a half to three million dollars probably three million dollar policy on her and we'd take about 10 times on you so we take a seven or fifty thousand on you just to round up okay you could do that at your age for nothing.

1:23:02Dave Ramsey:The cost of a pizza. If you don't smoke and you're not obese, if you're not fat and you don't smoke, life insurance costs almost nothing. It's ridiculously inexpensive. Like the cost of a pizza. Well, in your case, this many millions, probably three pizzas, but it's really no money compared to the 800 grand we're talking about. All right. Now, here's the problem. You put so much money into this thing, if she dies, you know what they're going to pay? $2.3 million. You know what happened to the$800 ,000? They're going to keep it. Cash value dies with you. This is a dangerous situation because you guys have gotten screwed so bad.

1:23:46Dave Ramsey:So if I were you, I would cash this out really fast. And let me say, hers is$500 ,000 and mine is$300 ,000. So we have two different policies. That's okay. I'd cash it out real fast. You would suggest get rid of them. I get both of them. I'll be done by the end of the day. Because if one of you dies without life insurance in the next 60 days, and you've got$3 million left to live on, I think you're going to be okay. Yeah, that's what I told her. All right, so you're self-insured. If you want to go buy some term insurance, price it out with Xander Insurance. It doesn't cost nothing if you want some extra insurance.

1:24:24Dave Ramsey:But right now, you've got$3 million. Oh, wait a minute. No, you've got almost$4 million, counting this$800 ,000, right? Yes. Yeah. And I think you guys, if one of you dies, the other one can make it on$4 million. Yeah. So you're self-insured. So would you suggest taking this$800 ,000 and putting it into, like, a mutual fund? You should have put it in a good investment. Yeah, absolutely. One that goes up in value. Cash value has an average rate of return nationally of 1.26%. 1 %! you're making nothing. This is costing you$100 ,000 a year in lost opportunity of what it should be growing. It's awful.

1:25:03Dave Ramsey:It's absolutely awful. So, no, she needs to tell this life insurance guy to jump off a cliff. And he screwed you guys bad, really bad. And I can name the company probably. Uh-oh. Why are doctors ground zero for this? of this product. Because they make a lot of money and they feel all fancy because they're new doctors and they have no knowledge of finances at all. They're the worst with money with the possible exception of actors and country music stars. MDs are horrendous with their money. There's a handful of country music stars do a really good job. There's a handful of doctors do a really good job.

1:25:44Dave Ramsey:There's a handful of NFL players do a really good job. And the rest of them are financial morons. And so these guys weigh in on these guys who are all puffed up because i just got my md and these gals and they're feeling all good about themselves because they just got to be a doc and they swoop in just about that time about the time you're making a little money and they go oh well you need whole life life insurance so horrible horrible horrible product yeah you're and i don't care i'll sell either one you do whatever you want to do but if i woke up in your shoes by the end of the week i'd have my 800k in my hand and i'd be sitting down with a smart investor pro and opening up a good mutual fund and making 10 12 on this money instead of one percent and when i die they don't keep it there's an idea and if you want some life insurance in addition to your four million dollar net worth at that point just call zander insurance and get you some insurance um you can get like again 46 years old if you're not obese and you don't smoke you can get some insurance it's really not that much but long ago i quit buying insurance because sharon's okay if I die.

1:26:50Dave Ramsey:Matter of fact, she's really okay if I die. I kind of need to sleep with one eye open.

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1:28:06Dave Ramsey:Welcome back to the Ramsey Show in the Fairwinds Credit Union studios. I'm Dave Ramsey, Ken Coleman, Ramsey personality, number one best-selling author, and the host of the new Ramsey runaway hit called Front Row Seat. Long-form interviewing with people who really know how to do life well. You'll learn a lot if you join him on Front Row Seat. Our phone number here is 888-825-5225. Jessica is in Birmingham. Hey, Jessica, what's up in your world? Hey, guys. I feel so blessed to talk to you today. Thank you for taking my call. Well, thank you. How can we help? Okay, so I run a solo aesthetic skincare business that grosses around$85 ,000 a year.

1:28:50But after expenses, I only bring home about$24 ,000. My husband and I are on baby step two. I do really love my business. I love my clients. But I do have a lot going on in my life right now. and I just do not have the drive to keep pushing and building my business the way that I have in the past. I'm just tired. But my question is, should I take a full-time job for a year to pay off all of our debt? And while I do that, keep the business open for like one to four days a month?

1:29:28Dave Ramsey:Yes. And then go, okay. Okay. I'm tired. I don't make any money. Yeah. As a formula, right? What would you make if you did the exact same thing you're doing, the aesthetic skin care for your clients? If you're doing that for somebody else and you were just getting paid for your time, what would you make? Easily double or triple. Yeah. That's the answer. Yeah. As long as they allow you to keep your clients. Yeah, that's the problem is if I worked for another company. You'd have to give up your client's conflict of interest. Yeah, exactly. So what I was thinking was doing something similar in the industry like working in sales for a brand or something like that, that wouldn't be directly a conflict of interest.

1:30:17Dave Ramsey:Would you make as much as if you did your actual craft? Yeah, I'm sure I could probably. If I got into sales and worked for like a skincare brand, I could probably bring anywhere from 70 to 100 in a year. Then do it. Okay. Yeah, it's a no-brainer. And meanwhile, begin to read and study business. Yes, sir. Because you're a classic accidental entrepreneur. Here's what we find when we're working with our entrepreneurial clients in Entree Leadership, and we coach about 10 ,000 small businesses. There's a vast difference between being good at your skill and running a business that accomplishes your skill.

1:31:12Yeah.

1:31:13Dave Ramsey:You are good at your craft of helping people with their skin. You suck at running a business. That's okay. You can do it. You can learn how, though. It's a learned skill. business acumen because you're not making any profit. We know this because you should, just talking to you for a few minutes, you're obviously bright. You're articulate. I think you're right. I think you could go make 100K selling just after talking to you. I actually believe you. All right? Now, if you're all of those things and you're not making at least that doing this craft that you're good at, it's a business problem. Yeah.

1:31:48Dave Ramsey:And so learn the business part. Let me recommend a couple books to you. I'm going to send you a copy of Building a Business You Love, my latest number one bestseller. I'll give you a copy of it. Another book I'm going to recommend is by a friend of mine named Michael Gerber. It's called The E-Myth, The Entrepreneurial Myth. And it is learning to work on your business, not just in your business. Okay. So what we run into all the time, Jessica, and I tell them exactly the same thing I just told you. A guy who knows how to work on heating and air, and he's doing a really good job fixing people's heating and air, replacing their broken heating and air, all that kind of stuff, an HVAC guy and he decides I'm going to open my own thing and he gets a truck and he leaves his job and he goes into business fixing heating and air now he's really good heating and air technician but he knows nothing about running a business and he ends up exactly where you are instead of making 80 ,000 working for somebody else fixing heating and air he ends up making 20 ,000 with his own truck and he's miserable.

1:32:49Dave Ramsey:And so, but the only difference there is pricing and marketing and accounting and growing the business, understanding the parts of a business and growing a business. And you can reset, relaunch four years from now with some knowledge that you don't have now on how to run a business, hire three people that do skincare and you do some skincare and you could make 150. but you've got to have those pieces you got to have those other tools in your belt you don't have right now and right now you just need some money and you're tired yes sir do you want to run a business long term after dave gave you that pep talk it's a great one by the way and he's right do you want to run a business on the other side of this debt elimination and how tired you are no i really do i absolutely love entrepreneurship that we just have a lot going on in our family right now so that's the reason i'm tired but i i love i love i mean if you go to work every day and you make 24 000 you're tired yeah that's right work every day you make 240 000 you're not as tired that's true that's true it's just it's hard i mean you're just in a slog yeah and we call it the treadmill stage of business you feel like you're on a treadmill and you when you're on a treadmill it's more tiring than running down the road because you're not getting anywhere it's just tiring and it's emotionally exhausting because the scenery does not change and that's part of the thing and i've been there myself running hours over the years in years past so i think you're amazing and i think you this is not a permanent solution it's a solution for three to five years go make you some money that's right get not tired that's right and you're going to come back on the other side of this and you're still an entrepreneur, so don't let the doubting voices kind of win the day here as you take a break.

1:34:38Because a lot of entrepreneurs refuse to do what you're actually doing, which is, A, you raise your hand and said, Dave, Ken, I need some help, number one. Number two, you've taken it and said, okay, it doesn't mean I'm a big giant failure, because you're not. And you're going to pause, and you're going to learn during the pause. And I think you come back and you're way more successful. I'm very excited for you. This is not the end of the story.

1:35:00Dave Ramsey:It's just another chapter. Yeah, absolutely. Kelly, I don't know if we've got E-Myth in stock. If we do send her one, if we don't, you'll have to get it yourself, Jessica. But, I mean, there's this thing called Amazon. They'll put one on your front porch before I can get it there anyway. But E-Myth by Michael Gerber. It's a short book. You'll like it. And it's a classic in the business literature realm. And we'll send you a copy of mine as a gift, Building a Business You Love. And read it and begin to learn. But start becoming – I'm going to read 12 business books on small business, running a small business this year.

1:35:32Dave Ramsey:While you're doing the other stuff. Yep. And turn off Netflix. Yep. And learn how to run a business. I'm going to add one more homework assignment. There's got to be somebody in your neck of the woods who's winning in this area. Yeah, go learn from them. And just go buy their lunch and just ask them, like a book report. Keep it simple. I think you're doing a sixth grade book report on their business. You'd be surprised what you'll learn. Yep. Yep. You could, you know, I would imagine there's about four levers if we had time to get into it. into an in-depth coaching session that you could pull and go from 24 to 50 quick.

1:36:03Dave Ramsey:That's right. You could probably double the nets on this because it's probably just some stupid – I mean, it's just – when I look back on some of the stuff I've done, I go, God, man, that one little thing, it was so stupid, and it changed a million dollars. It's just nuts. Yeah, you can do this, and you're very capable. I don't hear someone that's lacking in capability. I think you got it.

1:36:56Dave Ramsey:We've all done dumb things with money. I've done them with zeros on the end. One of the biggest mistakes I see people make with money is not having a plan for it. You've got to have a plan. You've got to be intentional, and you need to get a budget. You have to tell your money where to go so you're not wondering where it went. Our budgeting app, EveryDollar, helps you do just that. It's the easiest and fastest way to make a monthly plan for every dollar you've got coming in and going out. Now's the best time to get started before the ridiculous holiday spending season gets here and sucks you in because you didn't have a plan.

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1:38:31Dave Ramsey:So RamseySolutions.com. slash store. The Ramsey Gold Planner for 2026 is here, and you can click the link in the description if you want to go that way, too. We'll help you out. Sam's with us in Connecticut. Hey, Sam, how are you? I'm good. How are you doing? Better than I deserve. How can I help? So I wanted to get your advice. My wife and I have a very different risk tolerance when it comes to investing in debt, specifically when it pertains to a single family home that we currently live in that I would like to rent and get a different home for us to live in. And my wife would like to sell it.

1:39:10She has the mentality of being completely debt free. And we're conflicted because of some of the variables underneath. I wanted to kind of walk it through and see what you thought.

1:39:22Dave Ramsey:Okay. What are your underneath variables? Yeah, so for me, I have more in cash on hand than I owe on the mortgage. We have about$330, I'm sorry,$330K in equity on the house. And the only debt that we currently have are my wife's student loans, which she has 30K in student loans, 20K of that being at about 5 % to 6 % interest, 10K at 3.5 % or lower. So my thought process was between the two of us, we have about 190K in cash. And what's your mortgage balance? The mortgage balance, we have 97K left on the mortgage. It's a fixed 15 years at 2.4%. Okay. And what's your household income? Household income between the two of us before taxes is$285 ,000.

1:40:27Dave Ramsey:Okay. All right. Cool. Good for you. Well, well done. And how old are you two? 34. Okay. All right. And so that's the variables you were talking about, the underneath, right? In other words, that's your story, your financial story, your math story. Yes. For me, I'm thinking we have a very low mortgage. So her vote is to pay cash for the next house and sell this one and pay off the student loans today out of the cash that you have. Your vote is keep the rental house and keep the student loans because they're low interest rate and stay leveraged. Yeah, so what I said was let's pay off the 5 % or higher, the 20K.

1:41:12The 3.5 % is about the same as what we can get in a high-yield savings. It's low.

1:41:17Dave Ramsey:So leave them. If the rates change, then let's pay them off. But I would like to stay leveraged and make money on the spread because my mortgage is about 1.7%. One more time, tell me how old you guys are again. 34. Okay, I'm sorry. And what do you do for a living, Sam? I work in corporate finance. Ah, okay. Sounded like it. Okay, good. All right. Do you have a finance degree? Yeah. You have an MBA? No. Okay. All right, cool. All right. So I've got a finance degree, too, by the way. And with a specialization in real estate, that's the world I grew up in, which is the king of leverage, right? Real estate.

1:41:58So obviously, you two are smart people and you make really good money and you're going to be OK if you watch what you're doing.

1:42:09Dave Ramsey:You're not in bankruptcy zone or anything like that. Do you remember looking at the case studies back in college when we used to do case studies on companies? And when the bond, when a publicly traded company, when the bond, when they were putting out too many bonds, they were issuing so many bonds and they were carrying a load of bank debt, that we looked at that as risk and we would run a formula and lower the value of the stock because they were carrying too much debt, that debt equaled risk. Do you remember those case studies? At a high level, yeah. Yeah, okay. And then when I got out of school, I got my securities license, and I was selling investments in the investment world.

1:42:55Dave Ramsey:And there's a thing when you're comparing an aggressive growth stock mutual fund, which has high volatility, and the measure statistically of the high volatility is called a beta. It's a math number that the more volatility, the higher the beta. And a low volatility smooth curve versus a high mountain and valley curve is a low beta. And what we were taught to do in that world on a sophisticated level was to say, all right, we're going to adjust for risk by adjusting with the beta. We're going to use the beta as the mathematical way to adjust for risk because you can't really compare a 20 % rate of return high volatility mutual fund with a 11 % rate of return low volatility mutual fund and compare them apples to apples.

1:43:47Dave Ramsey:You have to adjust for risk. And mathematically, the way you do that is to use a beta in an inverse math formula. Does any of that sound familiar? Yeah, a little bit. Okay. That's how it's done. The point of all of that gobbledygook academic talk was, because you approached this from an academic intellectual viewpoint, and so that's the way I'm approaching your question. The point being that mathematically we are 100 % sure in business, and it's proven in every area, more debt equals more risk, period. Lots of debt equals lots of risk. No debt equals almost no risk. So risk is associated with levels of debt.

1:44:26Dave Ramsey:Would you agree with that? Yeah. So to compare your zero risk of being debt-free by paying off the 3 % loan and say, no, I don't want to pay that off because I'm going to invest that money at 3%, to say that you're actually, or 4%, to say that you're actually making money on that transaction, you're not after you mathematically adjust for risk. Got it. Do you follow that? I do, yeah. So your initial formula is a formula most people use, but it's a naive, unsophisticated formula because you're not mathematically including risk in the discussion. That's all I'm bringing up. So all of that to say debt and leverage equals risk.

1:45:07Dave Ramsey:Now, does that prove out in the data over long periods of time? Well, it does, because when we interviewed 10 ,167 millionaires, and I'll send you a copy of the book Baby Steps Millionaires, which has the white paper of the research in the back of it, and you can go through it. When we interviewed 10 ,000 millionaires, the number of them that said, I became a millionaire by borrowing money at my house, on my house, or not paying off a student loan at a low interest rate and investing the difference, the number of people that said that caused me to become a millionaire, Sam, it was precisely zero.

1:45:45Dave Ramsey:None of them did it. They all said what your wife said. They all said, I'm getting out of debt. And with the lowered risk and the increased cash flow, because I don't have debt payments, I'm going to use the increased cash flow to build wealth. And the sustainability of this is very high because I've lowered my risk quotients. And this is a real fancy long diatribe to say, Sam, your wife's right. It's true. Yeah, she's right. Sorry, bud. You lose. If I woke up in your shoes, I'd sell your house, and I'd pay off your student loans today, and I'd buy me another house with cash, and I'd kiss my wife on the lips and say, thank you, Jesus, I married a good woman.

1:46:29Dave Ramsey:That's so true. Yeah, because the$190 ,000 cash. Oh, you're in such a good position. You've done so many things right. And this is almost an esoteric philosophical argument. It's really not really a big... But you've got to work this through, because the problem is you're going to extrapolate. you're going to magnify whatever your value system is here. So if your value system is Sam's and you're going to continue to borrow money into it, all of that crap I just laid out there that's all true is going to take you down eventually. That's right. Because you'll keep doing it. And if you go her way, which is grandma's way, it doesn't feel as sophisticated to a finance major, but it's actually technically more sophisticated.

1:47:09Dave Ramsey:Hmm. Isn't that interesting? Yeah. Yeah. then you end up with a high sustainability, high cash flow, low risk environment. And it's not about risk tolerance. It's about what works in the end.

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1:48:33Dave Ramsey:Elijah is in Oklahoma. Hi, Elijah. How are you? I'm good. How are you guys? Better than we deserve. What's up, sir? Hey, so me and my wife, not too long ago, decided to go ahead and start doing the baby steps um we're still in baby step one hasn't been that long since we decided um but the reason i was calling today is because we did lease a car about a year ago i've been listening to for a little while and i know that's a no-no but we did do it and um we're upside down on it about ten thousand dollars and so we're kind of in a pickle and i was just calling you guys to see if i should just ride the lease out and and you know see how you know figure it out when it ends or if there's something I can do in the meantime to kind of get us in a better position.

1:49:21Okay.

1:49:22Dave Ramsey:What kind of car is it? It's a 2025 Chevy Equinox.

1:49:31Dave Ramsey:Okay. How long is the lease? I believe it's three years. So coming up October will be one year. So we'll still have a couple years on it. And how much is your monthly payment? $645. Okay. So it takes$14 ,000 to ride the lease out. $15 ,000? Yeah, give or take. Okay.

1:50:00Dave Ramsey:I'm not sure. I want you to double check your numbers on the$10 ,000 upside down. That sounds wrong after one year. okay well we had i had another vehicle that i had leased previously and again i know i shouldn't have done it you rolled you rolled the negative into this one yes okay so when you call that did you call you called to get a payoff did they give you the early buyout number on the lease or the total number on the lease um i believe it was a total number okay i didn't ask you need the You need the early buyout. If I wrote you a check today to pay the car off and own it, what is the number today?

1:50:48Dave Ramsey:Because I think that's going to be less than$10 ,000 with the numbers you're giving me. Okay. Might not be, but it could be. Okay? That's the first thing I want to do. All right? So here's the thing. We know if you write a check for$15 ,000, you can drive the car for two years. that's your numbers today we know that number okay 645 times 24 okay and so we know that's where that's going to take us now uh and so that's our worst case scenario and then you turn it in at the end of the lease like you said ride the lease out okay that's our worst case now if we sell the car and in order to sell the car we have to write a ten thousand dollar check then we could have driven the car for two more years for only five thousand dollars difference okay i'd probably ride the lease out if that's the case so if your 10 number is correct i'm going to ride the lease out because you're not making enough headway on this versus you get the full use of the car if you pay the 15 yeah if i only if i write a check for 10 i don't have the car for two years and so really i get the use of the car for the difference which is five in that scenario Now, I think you're going to find it to be less.

1:52:05Dave Ramsey:Let's call it seven. If you could get out of it for seven, would I get out of it? Yeah, I probably would. That's like 10 months' payments. And then I'm free from the other months' payments. So, yeah, if you could get out of it for seven or anything less, I'm probably going to write a check and get out of it or borrow the money of the 7 ,000 at the credit union and get out of it. But I don't know how much negative equity you rolled, and I don't know which numbers you're getting. and of course you've got to compare this to the actual value of the car. How did you value the car? Well, I called some dealerships and gave them all the information.

1:52:40They told you what they would pay for it.

1:52:43Dave Ramsey:Oh, yeah. Yeah, exactly. See, that's the wholesale number. You could sell the Equinox to an individual. Yes, yeah. And if you did that, is it seven or is it five difference? Yeah, probably because that's a wholesale number you got. So the second – so first thing you've got to do to figure out your real numbers is you've got to call the finance department. That's your 1-800 number on your payment book, okay, on your website for payments. And talk to them and say, I need the early buyout. If I write a check today, what's the payoff today? I need that number. I think it's less than 10, okay? Then the second number, you need to go to Kelly Blue Book, kbb.com, or Edmunds Car Guide, either one, and look up the private sale value of your car, not the trade-in value.

1:53:33Dave Ramsey:Because when a dealer buys a car from you, Elijah, they buy it to resell at a profit. Okay. And so if they buy that car for$20, that means they plan to sell it for$25. Okay, got that. Which means you could have sold it to an individual for$23, if that's the case. And that's probably your difference, something like that with that equinox, somewhere in there. Yeah, I'm sitting here listening to this, and it's just a reminder to not get sucked into whatever the decision was. There was an emotion there because here's a young guy who's going, man, we messed up, and now you've got to try to wade through this.

1:54:12Yeah, and as you were laying this out, I feel legit compassion. And there is such an emotional pull. it seems like such a good idea the lease idea and then when you actually get stuck with it and the pit in your stomach or your chest of that 600 and what i think i wrote 645 a month payment yeah that's a lot that's that's a heavy weight and now he doesn't have a ton of options because i don't i mean i'd love for him to try to sell it on on the open market to somebody but not a lot of people in today's economy are looking for a 2025 chevy equinox you try it but you may have to just bite the bullet on this.

1:54:48Dave Ramsey:There's a guy named Elijah that bought one. Yeah, that's right. Somebody buying them. He leased it, right? You know, I think you bring up a good point too, that when you're excited about buying something or you're in what feels like a desperate situation and you're buying something, you need to push pause in both cases and wait overnight. And here's the lens i think ken you're bringing up this very smart here's the lens to look at it say all right is this a good decision 10 years from now yeah if i'm 26 years old will the 36 year old version of me be pissed at the 26 year old way of looking at it if that if that 36 year old version of me is going to look back and go i'm going to choke you you little you know and um because you're just being impulsive and excited and you like that new car leather smell yeah all that stuff and um you know you got stuck in it or you're feeling scared and you're scared about nothing you're acting like this is a big deal it's not a big deal and that's what perspective gives you when you pan back that's right and you say out there 10 years 15 years 30 years one of the things we found i found this study like god man when i first started on this show like 30 something years ago, that wealthy people, when you talk to them and interview them, their planning window, when they're getting ready to do something, they ask themselves, how's this going to affect me 10 or 20 or 30 years from now?

1:56:19Dave Ramsey:Middle class people say, how's this going to affect me three years from now? Poor people say, thank God it's Friday. That's right. That's right. Oh God, it's Monday. Yeah, that's right. And so Zig Ziglar used to say poor people have big TVs, rich people have big libraries. So it's a long-term thinking thing. And so don't think like poor people. And if you want to be rich people, start thinking like rich people, and you'll become rich people in America. That's right. By the way, here's a notion. in the 24-hour pause that Dave recommended, actually go home and run the numbers on what a$645 a month payment is going to do to your expenses.

1:57:02A lot of people don't do that. They're on the car lot, right? And there's a negative emotion or an excited emotion that drove them to the car lot. They got a salesperson. All the things, endorphins are exploding when they sit in the car, when they drive it and they wonder what it's going to feel like, what am I going to look like? And nobody sits there and goes, what's$645 a month going to feel like?

1:57:22Dave Ramsey:Well, the number of times somebody gets a$500 a month raise and celebrates it with a new$750 a month payment. Yeah, that's a great point. It's the same exact thing. What are we doing here, folks? It's the same exact thing. It falls into all of that. And point being, Elijah, you're not the only one. Most of us have done this dumb thing you did. We love you. We're proud of you for turning it around. Get those two numbers, the actual private sale value and the early buyout. Compare those to the$15 ,000 number to keep the car and then ask yourself, is it worth it to be set free? If you're only going to save$1 ,000 or$2 ,000, drive the thing through the lease.

1:57:57Dave Ramsey:If you're going to save$15 ,000 or$10 ,000, then get rid of it today.

1:58:15Thank you.

1:58:45Dave Ramsey:The truth of the just is like the shining sun that shines ever brighter into the perfect day. The way of the wicked is like darkness. They do not know what makes them stumble.

1:58:59Dave Ramsey:Theodore Roosevelt said, Knowing what's right doesn't mean much unless you do what's right. Sarah is with us in Grand Rapids. Hey, Sarah, what's up? Hi, Dave. I want to thank you for walking with me every day. I listen to on my walks and I pray. So thank you. I knew I was getting some exercise.

1:59:21I am not free, but I make about$55 ,000. And I'm just wondering at what point can I, should I help my daughter buy a car or purchase windows for my house or go on a vacation?

1:59:37Dave Ramsey:When you have the money. Yeah. Yeah. So that's what I want to figure out. I think according to you, I probably need to save more. Well, I don't know. I mean, I don't know what I told you on your walk. Yeah, give us a picture real quick. I mean, you're debt-free. You have an emergency fund of three to six months of expenses, right? I have about$12 ,000, yeah. Is that three to six months of expenses? Yeah, probably the lower end of that, yeah. All right. Then we have an emergency fund in place. And then do you have any more money saved than that? No. No, not much. When you have money saved, you buy windows or when you have money saved, we buy daughter a car.

2:00:25Dave Ramsey:By the way, it won't hurt for daughter to be working. And, you know, maybe she pays for half of this car. Maybe you put in a little helper. You put in a thousand, two thousand dollars. She puts in a thousand, two thousand dollar car. Gets her a little teenage hoopty, right? Right. Well, yeah, that's a whole issue. But yes. Why is that an issue? Well, I gave when I went through one of my divorces, my ex-husband promised both my daughters a car. Well, that's his problem. So I gave one of my daughters a car, but I made her pay half. But I gave that money to the other daughter. So I think that if that daughter was and she hasn't bought a car.

2:01:05And I'm driving her back and forth to school in Ann Arbor. So it's a lot of driving, and I have a 45-minute commute as well. You gave her cash for a car, and she didn't use it for a car? Well, she still has the cash, but she just is saving it. How much money does she have? She has about$6 ,000. Well, tell her, just go buy a dadgum car. But I only gave her$2 ,000.

2:01:35Dave Ramsey:Okay, that's fine. She can go buy a car. What's the problem? Your ex-husband hasn't got anything to do with this. That's why we call him ex. Yeah, but I gave the other daughter half the value. I made her pay half the value of that car. Well, so what? You don't have any money. Okay. $6 ,000 daughter, get a$6 ,000 car. Other daughter, that's the way it went down in the divorce. If your ex-husband wants to put some money in, that's fine, but you don't have any money. And you don't need to be commuting for a kid that's got$6 ,000 in the bank, and you're driving around half of Egypt up there. Ann Arbor's a long way from Grand Rapids.

2:02:14Dave Ramsey:That's insanity. I know. Get that kid's butt in a car. Tell her to get up and drive herself down there. Sarah, I think you've got to get to a point where you realize you are going to disappoint your daughter at some point. And when we have real reasons for the disappointment, like Dave's saying, you're just going to have to own that. I feel like you're in this crazy cycle right now, trying to please, trying to make everybody happy, and you don't have enough money to get windows in your house. Right. So start taking some initiative. I'm going to help you a whole bunch in this one call. This is even better than our walk, okay?

2:02:49Dave Ramsey:So the one call, you ready? Tell your daughter to go buy a car because you're not driving her anymore. And I'll help you go pick out a car. Okay, now that one's done. And let me tell you what you just got back. Two hours a day you just got back. And all the gas money. And all the gas. And that's going to help you save up a lot of money for your windows. This is just a miracle right here. It's a miracle. I'm so glad you called. And we also found you some overtime opportunities or a second job opportunity now that you're not driving all over Michigan. Now that you're not Ubering a kid that has the money to buy her own car.

2:03:24Yeah. Wow. I love to disappoint my kids when I'm right. you know i like you know when i'm right or it makes common sense like yeah i'm disappointing

2:03:35Dave Ramsey:you right now i used to tell them all the time like look you gotta have something to tell your therapist when you're 30 so we're just gonna go ahead and cover that now right come on everybody needs a struggle everybody needs a struggle everybody needs some some dad issues so i'm gonna give you some dad issues right now oh that's the answer is no nope nope let me give let me help you with that i'm gonna open out the big box i know so true though yeah i mean it's tough and poor little rachel survived didn't she and poor little daniel and they survived it's just amazing they're resilient little creatures they are it's amazing what they can come through yeah poor little thing mommy ain't driving her all the way to dadgum ann arbor from grand rapids good lord a lot of guilt and shame open up a big old box of nope here let me give you a present nope nope happy birthday right yeah carrie is in charlotte north carolina hey carrie what's up hi i just had a quick question for you um i recently got married and we each had a house before we got married and we're just trying to figure out what to do to maximize essentially the growth on my house, avoiding capital gains maybe.

2:04:48Dave Ramsey:You're not going to have any capital gains. You've lived in it. Well, if we rent it out. Oh, no, I'd just sell it. Which is what we're considering. I'd sell it. No details needed. Just sell it. The details are I'm making the assumption that you have mortgages on both of these. Correct. Okay. I don't need another mortgage payment. I've got a husband. So that's enough. So now we're going to combine our households, move in one of them, take the money from the other one, pay down the one you're going to live in, pay off your debts, the one you're going to live in, walk your baby steps with the one you're going to live in from the equity of the old one.

2:05:22Dave Ramsey:If you tell me I'm wrong and they're both paid for and you've got a million dollars in your 401k, I might change my answer. Not that much, but we're in a good spot. Are they both paid for? That's why we wonder about using it as an investment. Are they both paid for? No. Do you have the money to pay both of them off today? no okay then don't keep it okay because essentially you've defaulted into i borrowed money to buy a rental property that's what that's the default that you backed into and i'm going to avoid that mistake and so that that's i'm not trying to just rush the answer and say there's an answer that your your situation is not different your situation's got its nuances without a doubt but i'm not going to lead you into borrowing money to buy a rental property and if you keep of property that has debt on it, you backed into it and had the exact same effect.

2:06:14And I want to point out that when we talk to so many people like this and they think, oh, this is a great investment, and you start running through the actual numbers of what you make, there's not much there for the headache. Now, all of a sudden, you're a landlord in a new marriage, and it's just never worth the squeeze. I shouldn't say never. It's very rare. The situation you gave, then it would be worth it. With cash, you own it cash. Well, that's one thing. Well, then there's some actual cash flow. That's exactly right. But the margin are so small on a lot of these stories.

2:06:44Dave Ramsey:Very small. That's an interesting thing, and we don't have the exact numbers in this situation. But let's pretend you had a$500 house payment, a low, low house payment. Okay. And you rented it for$1 ,000. Right. You're barely breaking even. Barely. Okay. Now, I own$700 million in real estate right now. that's where i get that formula from a barely breaking even i would know what i'm talking about is what i'm saying yes we own a bunch of houses we own a bunch of commercial property we own this campus that we're sitting in and so on okay and so the deal is that in the real estate world you have your gross rent potential the maximum if it stays rented the whole time minus minus vacancy, right, minus credit loss, which is people who don't pay and you have to remove them and then you never get your money, minus repairs, the heating and air that goes out, the roof that leaks, the floor that has a creed, you know, the mold scare, whatever the nine million things are that's going to go wrong with that house in a year, minus taxes, minus insurance, minus your payment, ta-da, you didn't really make any money.

2:07:57Dave Ramsey:You did a lot of work for a hundred bucks. And you took a lot of risk for a hundred bucks. And that's where most of these things shake out to Ken's point. 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.