Start Telling Your Money Where To Go

24:13Dave Ramsey:So you're right on target. The way you fix it is you develop a detailed game plan before the month begins. Okay? And so download the EveryDollar app, and we'll give you a year free on it, okay? Okay. And I want you to start with saying, okay, this is my monthly budget. Now, your budget is erratic because your income is. Sure. It's also cyclical, which is why this is important now. Exactly. But we also need to set a baseline of what it takes to operate survival per month. So if you're making$300 ,000 and we said, okay, we're going to spend$10 ,000 a month, that's$120 ,000, to operate the household.

25:01Dave Ramsey:That's about what it is right now with mortgages, and I do say that plural. Not a bad guess then. Okay, so if it's a little bit more, a little bit less, I don't care. But set that baseline and lay that out and say, okay, where does this$10 ,000 per month go? Or$12 ,000 per month. Give every one of those dollars a name. And then beyond that, I would do one of two things is I would have a list, forced-ranked, of where extra money goes. Forced-ranked meaning the first dollar beyond$12 ,000 this month that comes in goes to this number one thing. Until it is completed. Then the number two thing until it's completed.

25:45Dave Ramsey:Then the number three thing. And so you've got a prioritized spending list beyond your operating monthly budget. Does that make sense? It does. That spending could be generosity. It could be buying a shop in the backyard. It could be investing. It could be paying off the mortgage. pitch but you know i'm if i get an extra 10 grand the first 4 000 is going to this and the next 6 000 is going to this and have that done before you get the money you know it's laid out and you're just gonna like doing a to-do list the most important thing i'm going to do first and then i mark through it and only then do i move on to number two and i mark through it and then only then do i move into number four and mark through it and i've lived off of that system for 30 years because I've always had an irregular income because I've always been self-employed.

26:38Yeah. I think one of the hard things for me, which I say hard, it's not, I mean, it's very doable, and I know it is, but so I've been in real estate for seven years. The first year I made$12 ,000. Second year I made$24 ,000. Third year I made$76 ,000. And it wasn't until the fourth or maybe fifth year where it really started to pick up. So, I mean, I was really scrapping, not scrapping, but I was really, you know, having to somewhat pinch pennies and fortunate enough to have a supportive family. But like putting this amount of money in this spot when they're big numbers like this mentally is really tough for me.

27:19I know it's the right thing. Like I completely agree with everything you're saying. I'd be dumb if I didn't. But like I tithe 10 % of all money that I – let me rephrase that. But I donate, instead of using the word tithe, I donate. I actually have a question on that a few times, but I donate 10 % of all the money that I make. And when that goes away, and then I have taxes, and then after that, it's like that number just shrinks, just shrivels up so quick that it makes me nervous that I don't have cash.

27:47Dave Ramsey:Yeah. Well, I mean, think about it. I get a royalty check-in from a publisher that's a substantial number. And I'm a tither. I'm an evangelical Christian. I give a tenth of my income to my local church. And so 10 % is gone and 40 % is gone for taxes. So 50 % of that check is gone before I even start the budget. Yep. And that's what you're saying. And that's the world. That's just reality. Yeah, you're just one of those evil rich people that you should be taxed into oblivion. Well, you just have to tell yourself that off the top. Like if you know, oh, I've got$20 ,000 coming in. And it's like you don't even let yourself feel.

28:28I don't have 20. I have 10. Yeah. That's just the way your brain needs to start working.

28:33Dave Ramsey:And that 10 is already spent on this prioritized list. Yeah. And so I don't care what you do with the money because I know if you do it on purpose, you're going to do smart things. That's right. You know, very few people say, I'm going to budget, you know, half of my income to completely blow it. No one says that. No one does that intentionally. They only accidentally do that because they don't have a plan. Well, that's what they do. And I've been guilty of it. It's the, I account for all the necessities, mortgages, car payment, you know, whatever those insurance. And then the rest is just in a pile called treat yourself.

29:09And then that's where all the money goes. Cause you think, well, I budgeted the most important things, but that's the zero based budget teaching, which is, I don't care if you treat yourself, but just write it down.

29:19Dave Ramsey:A line item. Just say, you know, and if you want to give yourself the whole thing to treat yourself, make yourself write it down and then you're going to go that isn't really what I want to do yeah yeah I really do want to treat myself but I don't really don't need ten thousand dollars for that I don't really need a hundred thousand dollars for that I need two thousand dollars and you're in control of it at that point whether you do or you don't so it's the old thing Maxwell John Maxwell says you know a budget is people telling their money what to do instead of wondering where it went and John that's really this the crux of your question you tell your money what to do instead of wondering where it went.

29:51Dave Ramsey:And, you know, you always have some fun in there. You always have some generosity in there. You always have some investing in there. And fun equals lifestyle. That's a lifestyle purchase. That's a couch, a car, a trip, a shop in the backyard, a gun, a motorcycle, nod to our last caller, right? That kind of stuff. So that's all lifestyle stuff. And that all works really well once you've gotten yourself rid of the consumer debt. Now, if you've got any money left after food, lights and water, it goes on the debt until you're out of baby step two. That's scorched earth until you're out of baby step two.

30:26Dave Ramsey:You get your, except your mortgage debt, you get everything cleaned up but that. But that's not John's question. John, the question is very simply, you have to tell your money what to do before it gets there. Some kind of a system, some kind of a plan, I gave you an example of one, or it will leave and you will wake up with this financial hangover wishing you hadn't made that much and have nothing to show for it.

31:14Dave, we got a lot of calls on this show where life happens. One day someone's healthy, they're working, providing for their family, and then a curveball hits.

31:22Dave Ramsey:You know, we hear it all the time. A car accident, a cancer diagnosis, a heart attack, and suddenly everything changes. Yeah, and that's why you've always said that having term life insurance from Xander is essential because it protects your family if the worst happens. Yeah, that's right. You need 10 to 12 times your income in coverage. No gimmicks, no whole life junk, just straightforward term life protection. But there's another piece that people often overlook, and that's long-term disability insurance. Yeah, it's important to understand the difference between them. Life insurance steps in when you die.

31:58Disability insurance steps in while you're alive but can't work. So it replaces a large part of your income so the bills still get paid while you get back on your feet.

32:07Dave Ramsey:Now, if your employer gives you free disability insurance, great, take it. If it's discounted there at a better price, take it. But if not, Xander can help you find the right plan. Whether you're single or married, it's not optional. If you're going to be out of work for a while, then you need to make sure the money's still showing up. And that's why Xander is our go-to. They make it super simple to get the right coverage at the best price, no pressure, no upselling. I've trusted Jeff Xander and Xander Insurance for over 25 years, and so has my family. So don't wait. It's fast, it's easy, and it could make all the difference.

32:41Go to Zander.com or call 800-356-4282.

32:46Dave Ramsey:Protect yourself, protect your income, protect your family.

33:04Dave Ramsey:If you have a simple tax situation, like you haven't had any major life changes or big investments, use Ramsey Smart Tax. Ramsey Smart Tax is affordable, keeps filing very simple, it's very accurate, and it has built-in support. in case you need a little help. Filing early means getting the best deals and you get that tax stress off your shoulders. So as soon as you get all your tax documents, go to RamseySolutions.com slash smart tax and start filing. Andrew is in Orlando. Hi, Andrew. How are you? Hey, guys. How are you guys? Better than we deserve. What's up? Hey, so So my wife and I just got married this last November, and we've been working ourselves through the baby steps.

33:53We're in step two right now, and we've paid off more than half of our debt so far, but we have some to go yet. How much is that? We have about$19 ,500 on a car loan and then about$4 ,000 on a credit card. That's what's left? That's what's left, yes.

34:11Dave Ramsey:Okay, so you've already paid off$25 ,000? Yes, correct. Since November. Way to go. That's great. Yeah, it's been amazing. The Lord has been so good. Huge blessings. So my wife is legally blind in her right eye. And we've been talking through how we can pay off this debt faster. We're attacking the credit card, super aggressive. But the car, the payment per month is about$420 per month. And once we pay off the card, obviously, we're going to take what we you're paying on the card and throw it at the car. But a question that we have is, should we look for something different? Should we look for a car that's maybe slightly older, maybe a little bit cheaper that we can pay off sooner?

34:56Or are we, yeah, what do we do? What's your household

35:01Dave Ramsey:income? Right now we're at about$108 ,000 per year. Tell me where the blindness plays a role in this. Is it impeding her ability to work? No, no. She works full time. She's in, in healthcare industry selling, yeah, healthcare insurance and everything. But it's mainly with like the, the distances in front of her, especially at night, it's, it's hard, harder for her to see, but she does have doctor's approval to, to drive and everything. So it's depth perception. Yes. Yeah. I've got, I've got a friend that's, yeah, same thing. And is your issue with the car, what are you trying to do? Are you trying to save money on the car or are you saying because of her blindness, she could wreck this car?

35:45Should we get a cheaper car that it's okay if it gets dinged up? Like what are you saying with all of this? Really just trying to pay off the debt. Okay. It doesn't really have anything to do with the blindness. It has nothing to do with it. Got it.

35:56Dave Ramsey:Okay. Yeah. That's good. I like that. So if you paid off 25 since November, can you pay off 25 by November? that's a great question i i i think we could do you like the car yes we do like the car i would keep it and pay it off keep it and pay it off yeah yeah the the problem i see right now with it's a 2019 it's it's a newer car with you know more sensors and stuff like that i'm just thinking like man like if we do get uh repairs and stuff can can we afford some of those those repairs on a vehicle like that. Yes, you can. Yeah, you're driving a piece of junk. That's why you're, and you're a tight one.

36:39Dave Ramsey:Yeah, yeah, yeah. So here's how I'm answering the question to give you the framework. I use two pieces, or we use two pieces of information to determine if someone's car is their problem. And if the car is their problem, I'll tell you to sell it in a heartbeat, okay? Because it's often the problem. This show sometimes is called the Sell the Car Show, like the answer to every question, sell the car, right? But number one, you do not want all of your vehicles added together, anything with motors, wheels. That includes your stinking lawnmower, your seadoo, whatever, all added together, your camper that's in the backyard.

37:21Dave Ramsey:If it's got a wheel or a motor, all your value added together should not be more than half your annual income. which would in your case would be fifty six thousand dollars yeah fifty nine thousand dollars so um you know that that's what i'm looking at uh and yours is not so it does not violate that the second thing is if there's debt on the vehicle can we be a hundred percent debt free except the house within two years without selling the car. And if we can, do we like the car? Then yes, keep the car. But for instance, in your case, if the car was your rate of debt reduction, you're easily going to be within that.

38:06Dave Ramsey:And the car and your cheap car is less than half your annual. So you're in pretty good shape. The only difference was she just had a nicer car than y 'all when you just got married, and so she won that battle. But it had debt and yours didn't have debt, and so now we've got to clean that up. But I think at the end of the story, two years from today with a fully funded emergency fund and your money going into retirement, we're going to be glad she's in a pretty good car, especially if she's got some of the newer features on that car with her depth perception issues. So, yeah, I think I'm keeping it.

38:38Yeah, I think so too.

38:41Dave Ramsey:But, you know, you can sell it if you want to. You just wanted to be free very, very quickly. You wanted to be free super fast. You're not doing anything wrong by selling it. But here's what's going to happen when you do. You sell it, you get a$3 ,000 car, and you're debt free in six months, four months. And then you build an emergency fund. And then what's the first thing y 'all are going to do? You're going to start talking about upgrading these cars because they're crappy. And you're going to do that with cash. And so you're still going to end up two and a half years from now in the same place that you are now with a paid for decent car.

39:12Dave Ramsey:Yep. and so I you know it's not it's not the car is not violating anything here it's just kind of part of your old story yeah I agree Grace is in Fort Collins Colorado hi Grace how are you hi good how are you guys better than we deserve what's up so I have a question related to the gazelle intensity of peeing off a house we my husband I save anywhere from 100 to 150 ,000 a year after expenses and everything and it's hard to not kind of look at the numbers and think we've got 500 ,000 left on our house right now to think, you know, let's just try to pay this off in five years. But my husband, you know, he's kind of been looking more into the investment side of things too, as far as for whatever we make, should we do a portion of that towards the house and the rest into investments if we're already doing 15 % into retirement?

40:0315 % into retirement is all you should

40:05Dave Ramsey:be doing no more. Okay. The rest of it ought to go in the house. So there's 150 ,000 you're putting on something else. How much is in that account?

40:18Well, so that's what we get basically at the end of the year. A lot of it comes from bonuses. Yeah, but you're putting 15 % away.

40:25Dave Ramsey:And then you said in addition to that, you're investing 150 grand. Well, that's just what we have in cash saved at the end of every year. Yeah, where is it? Well, high yield savings. How much is in that account? About$70 ,000 right now. $70 ,000? How did$150 ,000 turn into$70 ,000? So at the end of every year, it'll be about$150 ,000. So you just stockpile it until the end of the year, and then you decide what you're going to do with it. Well, at the end of last year, it was$150 ,000. How's it$70 ,000 now? So we just moved last year, so we put a good chunk of money down into the house, But we just kind of accumulate and then year-end bonuses.

41:04Any money above 15 % should immediately go in the house. Okay.

41:09Dave Ramsey:Not in savings. Okay. And nothing like diversifying other types of stocks or mutual funds or anything? No. You're already investing your 15%. Now, you want to know why? Yeah. Yeah. Because the data tells us it's the fastest way for you to be a millionaire. We did the largest study of millionaires ever done at Ramsey, 10 ,167 of them. And the typical millionaire in their first$1 to$5 million of net worth sounds like this. It took them 12 to 17 years from the time they started getting serious about getting out of debt and building wealth to get there. They paid off their house in 11.2 years on average.

41:53Dave Ramsey:And here's what their portfolio looks like. Let's say they've got$1.6 million in net worth. They've got a$700 ,000 paid-for house and$900 ,000 in their 401ks and or other investments. But the paid-for house and the fully funded 15 % going into the 401k is what we found every time. Every time. We did not meet millionaires that said, oh, you know, we kept a mortgage, and that caused us to have great investing and that made us millionaires. Nope. They got rid of the mortgage like it was a cancer. Because it is.

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44:06Dave Ramsey:Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. Jade Walshaw, Ramsey personality, number one bestselling author, is my co-host. Joy is in Los Angeles. Hi, Joy. How are you? Hi, Dave. Hi, Jade. Thank you for taking my call. Sure. What's up? Yeah, we are recently debt-free, except for our mortgage. And I wonder, yeah, and I'm thinking if I could afford to go to Europe to watch Wimbledon. I really love watching tennis, and I really want to do it. But then my husband and I were talking last night, and when he saw how much we're going to spend, me and my, it's only going to be me and my son.

44:51And he's like, oh, that's a little too much. It's going to, you know, delay our, our baby step number three. So you don't have any money saved? We do. We do have money saved, but then, you know, it's going to, I will take the money from there. And so it's going to delay our. Okay.

45:12Dave Ramsey:So you have an emergency fund saved of how much? uh we have 15 000 okay and um how much do you need in your emergency fund for the trip no how much does the emergent the three to six months of expenses oh sorry oh 24 000 that's so that's the target and your household income is what target um we need about 320 000 or sometimes 350 if my husband goes in overtime Wow. How much does the Wimbledon trip cost? Well, the tickets are about$1 ,000 for my son and I. The whole trip? Oh, that's the ticket. Yeah, the whole trip, the whole trip. No, you're not going to London and buying a Wimbledon ticket for$2 ,000.

46:05I'm talking about when you price this whole deal out, the tickets, the airfare, the hotel, how much will it cost? So the total is$9 ,000. Okay.

46:14Dave Ramsey:Oh, okay. The airfare alone, because of what's happening, it's about$4 ,000. Listen, I'm not mad at the number. I just wanted to get to it. And my question is, with the$320 ,000 income, and when actually, when do you have to have the$9 ,000 by? So we have the$9 ,000 already. No, you don't. No, you don't. You have 15 of 24, so you don't have$9 ,000. Yeah, you're you're let's let's clarify real quick. The definition of the emergency fund is for emergencies. Wimbledon is not an emergency. So you can't say I have 15 ,000 for Wimbledon. You don't you have zero dollars towards Wimbledon. my question and what I'm trying to solve for you is how quickly can we get the$9 ,000 on a$320 ,000 income and still make progress towards baby step three?

47:04Because the next question I have for you is the$23 ,000 that's your goal. Is that three months of expenses or six months of expenses? That's going to be three and a half expenses. Okay. So I go back to my first question. I want you to have three months of expenses in order for this to even be something for you to consider. And then you would have to pay the 9 ,000 cash on top of that, not out of that, on top of that. Does that make sense?

47:31Dave Ramsey:Okay. So what do you guys have planned in the next two months that you can take off of your calendar and cut your budget to bare bones in order to finish the emergency fund? Because, you know, Wimbledon's in June. And so you've got time, July, you've got time. And so I think you can probably, if you went to scorched earth, Jade's point is you're You probably can do both. You can finish the emergency fund and come up with the money to go. It looks to me like you can because your income is so fabulous. So, yeah, work extras. Have you got anything you can sell that you'd like to get rid of to cause this to happen?

48:08Dave Ramsey:Have you got, you know, but I'm going to take everything out of the budget and go scorched earth to be able to live, to be able to do this trip if it's what you want to do. Here's what I won't do. I won't declare a trip to Europe an emergency. No. It's not an emergency. Okay. I wish it was, but it's not. I could declare some things I want an emergency, but they're not emergencies. And so I have to, you know, at some point I've got to categorize these things properly and say one is a wish, a want, a dream, and one is a necessity. Being ready for Murphy, if it can go wrong, it will. is paramount for families to get ahead.

48:51Dave Ramsey:And you guys have been making good money and been broke for a long time, and you've finally gotten yourself out of debt, and you're finally saving money for the first time in your lives, probably. And let's talk specifically about why it's important. Dave just hit on the part that this is your emergency fund. You need it in case emergencies arise. But I do believe that when you're in an income situation like you, it's very easy to get lazy and very kind of like, oh, it's okay. I can afford it. I can afford it. I can cover it. If something pops up, we'll just cash flow it. Nope. You've got to guard against that, especially because you have a higher income.

49:26And that's the part where I think, yeah.

49:29Dave Ramsey:Agreed. You got to be extra careful. So, folks, here's the thing. If you have no money, none. Now, that's not her situation. But if you're sitting there with no money saved because you did stuff like this, you know, and not her situation, not picking on her. But have you ever noticed that when you're super broke, your life looks like a country song? Like everything that can go wrong will. It's like you have a Murphy attractor beam. You know, it's like beep, beep, beep, beep. If it can go wrong, it will. You know, it's like crap breaks. People get sick. The dog goes out in the street and gets hit.

50:10Dave Ramsey:I mean, it's like a country song. Everything that can go wrong will. It's horrible. And have you ever noticed that when you get a little money, all that stuff leaves? Like if she's got$25 ,000 and makes$320 ,000 and no debt, you ever notice that it's a different kind of song? It's like smooth jazz now. I mean, you know, all that crap leaves. I don't have anywhere near the emergencies now that I've got some wealth. My life used to be one freaking drama after another. and I don't have anywhere near those emergencies I don't I think I think an emergency fund is Murphy repellent I think well I think it keeps him away I think it does but more than that I think it changes the definition it changes like I'm the type of person I am never going to touch the emergency fund ever I don't care what I have to do not even for an emergency I will do whatever move hell and high water to make it work yeah I agree that's Sharon she we have an emergency fund for our emergency fund.

51:09Yeah.

51:09Dave Ramsey:So we never touch it. You know, I mean, it's like that. But here's the other thing is this. When you got a little margin in your budget, a flat tire, you just fix it. You just cash flow it. But when you're broke, a flat tire is an emergency. You know, the alternator goes out on the car. It's 500 bucks, 400 bucks. You just fix it. You don't think anything about it. It's not an emergency anymore. But when you're broke, every little thing like that is like, oh God, the world's coming to an end. And blah, blah, blah, blah. And the drama queen's doing a dance between your ears. I mean, it's just like, but yeah.

51:36Dave Ramsey:Now, so it's very interesting that the overarching thing of what I'm saying is when you get a little bit of money and you have a system and you're not just cold, hard, broke, your anxiety level just goes way down because the drama goes way down. But if you get a little bit of money and you don't have a system, you're going to be looking up wondering. Then you're going to be back to having no money again. That's why a third of people who make$250 ,000 or more are living paycheck to paycheck because they thought they could out-earn their stupidity. Ooh, I tried it. It doesn't work. Maybe my stupid was just bigger than my income, but I tried it.

52:12Dave Ramsey:It didn't work.

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54:11Dave Ramsey:Michael is with us in New York. Hi, Michael. How are you? Hello, Dave. Thank you so much for taking me. Sure. What's up? I appreciate it. I'm 52 years old, basically starting over. I had some major health issues, and I've been permanently disabled for the last 16 years. Whoa. Yeah, I've got the skills to rebuild a high-income trades business, but I'm also gaining traction as a published writer. If you were me, where would you put your focus for the next year?

54:41Dave Ramsey:What was the nature of your disability, and how have you overcome it? Well, I was a teacher, and I taught trades. I taught welding metal fabrication, heating, ventilating, and air conditioning, and I became environmentally ill from the welding fumes. so I had a neurological disorder basically paralysis and I've learned about juicing and things like that and that kept me alive and I had thank god a long term disability policy that paid me my salary all these years and about a year and a half ago they offered me a settlement I didn't take it and then I looked at my wife one day And I said, you know, I said, I can't live like this anymore.

55:28And I decided to call the insurance company. They offered me the same settlement. I decided to take it. And I took some radical responsibility. And I lost 40 pounds. I got off oxygen. And I got a clean bill of health from my doctor. And I'm ready to rock and roll. Yeah. So the nature of the disability is completely healed and gone. No. I mean, I'm still probably permanently disabled on paper, but it's not affecting me anymore. I can breathe at seven liters capacity, even if it's only with one lung. Okay. I feel great. I green juice every single day. I ground outside. I jump on a rebounder. I'm doing everything that I had to do to gain my health.

56:13Like I said, I dropped 40 pounds out of the whole thing.

56:15Dave Ramsey:That's awesome. That's amazing. Congratulations. That's amazing. Thank you. Thank you. I've become a published author also. So I can't imagine you going back to welding. No, I'm not. I'm actually a master electrician by trade. Oh. So, and I basically did electrical work and mechanical work. So I was planning on maybe, you know, starting there with a service business, just a high-end business, basically myself. Why wouldn't you? While I write. Yeah, good. You know, I want to be cautious because of my health. I don't want to go backwards. I still have a young, beautiful family. So I want to do it as intelligently as possible.

56:55Yes. My question was basically, you know, if it was you, like, what steps would you take not only to ensure that I don't overdo it? Because, you know, I figured I could probably do it three days a week, six to eight hours a day.

57:09Dave Ramsey:I think you are an expert at monitoring the metrics that are associated with your health. You've rattled them off to us. It's been the whole sole focus of your last decade, and I don't think you're going to overdo it because I think the instant you do, you're going to know it. That's very true. And it's not a permanent thing. It just would be fatigue, and you'd say, okay, I've got to take a week off or I've got to slow down back to two days instead of three. Or you're going to know. The metrics are going to talk to you because you're doing such a good job of managing your health so intentionally.

57:44Dave Ramsey:Congratulations. So, yes, I think the electrician thing is a very good-paying gig. It's 100 % predictable that you're going to go get some money, where the publishing is very hit or miss. And as you know, it takes a while to get it moving. And so I think your foundational underpinning is the electrician, and then the icing on the cake, the gravy on the biscuit, is the publishing stuff. and if the publishing stuff finally takes off enough that you never have to do the electrician again, so be it. That's awesome. Is the primary drive for you financial or personal fulfillment at this point? At this point, financially, I don't have to worry about money at all.

58:28I didn't think so. Everything I own for is completely paid for. My home, my cars. I have a brand new truck that's paid for, so I can use that to start work. I mean, I don't want to buy a van right away.

58:40Dave Ramsey:No. I want to build up to a van when I have the cash to buy it. Right. Good. That's just the kind of person I am. I think you can make really good money and start a day a week and then two days a week and then three days a week. And if it starts to wear on you, it would go back to two days. And if it doesn't, occasionally you can pick up four days and you can make a lot of money in the trades right now. I agree. And I would do that as a foundational thing to give you patience with the publishing thing. That is also going extremely well, I might add. How much are you making? What's extremely well?

59:17Dave Ramsey:What are you making? Well, I'm not really making any money from it yet. Then that's not extremely well. Okay. So basically— We measure this on money. Yeah. Now, 150 or so in articles, not paying any bills yet. No. No. But it's fulfilling, and that's what extremely well means. And you enjoy it, and that's what extremely well means. And you're getting some notoriety. That's awesome. But you're still working for free. I basically, yes, I am. Yeah, yeah. And so you're not ready to turn your financial destiny over to$150 articles. So the working for, as an electrician running my business, could pay for all that for pretty much.

59:56Dave Ramsey:It pays for your life, and you can continue to rebuild and build a good life. And then, again, if the income from publishing ever starts intersecting the line with the electrician, then you can start to slow down the electrician because now you're making a living publishing things. Awesome. And that's where you need to get to, not just the fulfillment piece. But that's the problem. It's so gamified. They give you feedback and make you feel like you're really winning. And then you add it up and it's like, I made$400. I didn't make any money. But to your point, right now his success is defined not monetarily.

1:00:39But that's good because he's got the other thing giving him money.

1:00:41Dave Ramsey:And what a great overcomer's story. So good. Such a great story. I mean, everything from the trampoline to the juicer, man. I mean, that's very, very cool. Congratulations. That's taking the bull by the horns. Yeah. I'm not going to be defined by this. I'm going to define it. Yeah. That's a big deal. Dustin's in Des Moines, Iowa. Hi, Dustin. How are you? I'm good. How are you? Better than I deserve. What's up? Well, I just had a quick question with the snowball method and cards that have deferred interest. I just started the snowball method about six weeks ago. I've been able to pay off about$4 ,000 worth of debt so far.

1:01:23Dave Ramsey:Good. I have a credit card that I put a washer and dryer on. It would have been 18 months ago. The deferred interest is going to be due, or it's going to hit in next month. It would take about$900 to pay that off, which I can do. Okay, so wait a minute. Are you saying deferred interest, meaning the interest has accrued, but they've just not billed you for it yet? It hasn't been applied to the purchase, correct? What if you pay it off? Is there no interest if you pay it off early? it'd be no interest yeah you want to do that okay so i can i can pay off deferred stuff versus just the smaller stuff i can kind of go out of line there i would you know just temporarily it's only 900 bucks yeah the zero that's nothing down zero percent interest until x and then they back charge you at 38 yeah that's how they screw you and 89 of those contracts people do not pay them off in time.

1:02:21Yeah, if you can get out of that, that's wonderful.

1:02:23Dave Ramsey:So yeah, you want to knock that in the face. And you want to do it a month and a half, two months early. So there's no question. So they don't say, oh, we didn't post it and now we really are going to charge you the interest because the mail didn't get here or bullcrap, okay? Pay it and get verification a month early that it's paid. Okay. Because they're going to try to screw you. It's what they do. Yep. Nope. I agree. And clean them up as fast as you can. I don't know how many of them you got, but yes, I want to get rid of those. And if you need to shift your debt, snowball around just a little bit.

1:02:59Dave Ramsey:Because you're saving, you know, probably 30 % or 38 % interest, something like that, 20%. Over the course of however many the life of it. Over the course of how many months and that kind of thing. Yeah, that's 100 % knock. It goes away if you pay it early. And folks, that's the ripoff of the nothing down, you know, the rooms there they went. Right. And, you know, you buy this couch and not pay for it for 24 months. No payments, no interest. And that 24 months goes by and I blink and then you get charged all that back. And almost nine out of 10 people don't do it.

1:03:50.

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1:05:16Dave Ramsey:Well, I wish we could get to every call here, but we can't. The lines are always full, and I know a lot of you get a busy signal. Sorry about that. We do have an alternative, though. If you go to RamseySolutions.com, you'll find our Ask Ramsey AI tool there. And the data in the AI tool is based on three years of calls into this show, plus Financial Peace University lessons, plus the books we've written, plus the articles we've written. And so only Ramsey information was fed into this, so only Ramsey answers come out of this. That's how AI works, by the way. It's artificial, if you hadn't heard.

1:05:54Dave Ramsey:It's not real. And so it's going to produce an answer almost as snarky as you would get here on the air. And so we haven't been able to add quite the sarcasm level to it yet that we have in person, but we're working on that. So the rest of it, though, the answers are exactly what you would get here on the air. Ask Ramsey. It's a free tool. You'll get the same answer. Try it out. Ramseysolutions.com. Steve's in Green Bay. Hey, Steve, what's up? Thanks for taking my call. I'm really excited to talk to you and Jade. So I have a very simple question. I'm 62, retired. My wife is 60, and she's going to work for four more years.

1:06:32I want to know how much we should be contributing to my Roth now because my investors are telling me that I have a$500 ,000 in my investments, and I only have$150 ,000 in Roth. And the rest are 401k and IRA. and I don't want to create a tax liability for my kids or grandkids. I have two children and four grandkids, but I only have an effective tax rate last year of 10%. So I just thought I should be contributing more to Roth, and they said I'm good because of the way things are going to roll. And let's get your opinion on that.

1:07:06Dave Ramsey:Well, when I first started this stuff, when the Roths first came out, it was after we started this stuff, the Roth came about, I was so excited that I was in my 30s and 40s that I could have tax-free growth. And I was pushing everybody to get tax-free growth, and I'm pushing me to get tax-free growth. And so I had everything in Roth. And then anytime I could convert something to Roth, I would. And so I was always moving into Roth because I was getting tax-free growth. Now that I'm 65, it suddenly has occurred to me that there's two other benefits to having everything in Roth that are even more powerful than tax-free growth or add to.

1:07:44Dave Ramsey:It's not more powerful, but add to it. Number one, at 73, I don't have RMDs, Required Minimum Distributions. So all of your 401k traditional, you're going to have to begin to withdraw at 73 under the RMD rules. Whether you want to or not. And of course, the more you have in traditional, the more that check is going to be. The second thing is, and in my case, all of mines in Roth, so 100 % of mine is just going to sit there and continue to grow tax-free because I don't have required minimum distributions, right? The second thing is that Joe Biden passed the SECURE Act, and the SECURE Act says that all inherited IRAs, in other words, if you name your kid as a beneficiary on your 401k or your IRA, and it's traditional, if they inherit that, they have to withdraw that money within 10 years on a 10-year schedule.

1:08:45Dave Ramsey:So they have required minimum distribution. So they're going to pay income tax on 100 % of that, and they have to do it over a 10-year period of time from the time of your death. On Roth IRAs, none. Doesn't apply. Because there's no tax due. And that's why this came up, because my father passed five years ago, just left$50 ,000, but I'm still taking that out over time. Yeah, you're having to do the Biden withdrawals, yeah. Within 10 years. And I just don't want my grandkids or kids, because we live simple. We can live on$50 ,000 a year, have zero debt, never had. And I just want to leave a legacy.

1:09:20Dave Ramsey:Well, here's an interesting calculation. It's tempting to move the money that you have in traditional gradually to Roth to keep you from having bracket creep. that's a tempting thing and you could run those numbers out you're probably going to have to get a different investment group to help you with that because apparently your guys don't think this way but um yeah and if you want to get another opinion you can go to ramsey solutions and check with one of our smart investors and have them run those numbers out with you but you could run you know like like bump a couple of brackets but not go all the way to 40 not go all the way to 39 right um that that's one way of doing it and do a little bit a year and kind of dribble it out.

1:10:00Dave Ramsey:The other thing that's interesting, though, is you think about like the last three years, you know, we had a 26%, a 23 % rate of return and an 18 % rate of return on S &P. Now, that's not normal, but we've had a ridiculously good last three years, okay, in the market. If you had just moved it all and paid the taxes three years ago, you'd have had all of that 60 % of growth with no taxation. Sounds like you're a proponent. I mean, I agree. Well, I mean, it's interesting. But, you know, if we have normal market growth of 10 % or 12 % a year, right, it takes you a little while to get it back. But if you're healthy and you're 62 and you move$700 ,000 or$800 ,000 over and that creates taxation of, what,$200 ,000?

1:10:52Dave Ramsey:bucks, you're going to get that$200 ,000 back in tax-free growth so freaking fast. Well, I was telling them that the very least I'd like to do is while my wife is working and has earned income, I can do this for at least three or four more years. I would do Roth IRAs for sure. Absolutely. For sure. A hundred percent. Good, good. Anybody tells you to not continue to invest in Roth IRAs is only, what,$8 ,600 at your age, right, you can do. I think you agree with everything Dave is saying. I think your hang-up is that that's not what your tax – that's not what your guys are saying. That's right. I have actually two people telling me that.

1:11:27Yeah.

1:11:28Dave Ramsey:But I think you can crunch the numbers out and understand it yourself with somebody, and you'll figure out what I'm figuring out here. I actually – I took a call on this like a week ago. Maybe you and I were on the air together. It was a guy had – he had like$700 ,000 or$800 ,000. And I sat there and kind of was telling him, oh, do it – kind of do it a little bit at a time and don't get bracket creep. And then suddenly at the end of the call, it occurred to me, you're missing out on all of that opportunity cost on that tax-free growth all those years. While you screw around with dribbling it out to avoid bracket creep over five years, all that money now has been taxable.

1:12:04Dave Ramsey:All that growth is taxable. And it wouldn't have been taxable. So, I mean, I think there's something to be said to doing it all and rip the band-aid off. Yeah, that's it. Mathematically, I think you might come out ahead. You've got to run some numbers to be sure. I'm not positive, but it's something to consider and something to look at. And I would get a different set of eyes on it because you're in any time you have an investment professional in your life, their job is to teach you not to tell you. And if they don't teach you, in other words, they start saying all that stuff. You go, OK, wait a minute.

1:12:38Dave Ramsey:You're telling me I don't want to save in a tax free account. Of course, I want to save in a tax free growth account. What kind of you know? What do you think? You know? Oh, no. You know. Yes. So, yeah, I do a Roth every year and my net worth is hundreds of millions. OK, the building I'm sitting in is six hundred million. OK, so the you know, I do Roth backdoor Roth sharing and I do them every year. I'm going to keep the government's hands off of every stinking penny I can legally because I don't want them to buy a twenty two thousand dollar toilet seat with my money. And that's what they do because they're idiots up there.

1:13:13Dave Ramsey:And so I just I don't want to give them money. It's not good stewardship. Not if I don't have to legally. And so I'm going to do it's the time of year when I'm pissed off right now. It's tax time. So just just bear with me, people. But that's it. I mean, that's the thing. Yep, absolutely. You got it. But the Roth IRA moving everything to Roth people. That ain't bad. Or over time. That's the move. It gives you two things I had not considered early on. And that's no RMDs and no inherited IRA forced withdrawals. and so your kids get a Roth IRA, zero income tax on it. Now, neither one have a state tax on them.

1:13:51Dave Ramsey:That's not an estate tax issue, but it's an income tax issue for your kid because it's a taxable account that they inherited or a non-taxable account that they inherited. Something to think about. And think about what if they held, let's take a million dollars and they hold that seven years after you die because they don't have to withdraw it under the Biden rules. Wow, it's going to double. It's going to be another million dollars. The million will be two million. That's right. And then what if they hold it 14 years? It's going to be four million. Building that wealth. And all of that is without taxes.

1:14:28Dave Ramsey:Yummy, yummy, yummy, honey.

1:14:47Thank you.

1:15:19Dave Ramsey:Today's question of the day is brought to you by Y-Refi. If you've fallen behind on your private student loans and have stopped making payments, it can feel like every door is closed. But Y-Refi helps borrowers explore low, fixed rate, refinancing options that fit their budget. Go to YRefi.com slash Ramsey. that's the letter Y-R-E-F-Y dot com slash Ramsey might not be in all states. Okay, today's question comes from Nicole in Colorado. She says, my husband passed away unexpectedly in 2021. Sorry about that. Thankfully, he had a$1.5 million life insurance policy, which I tithed on when it was received.

1:16:02I was able to pay off our home and put$1 million into mutual funds and retirement investments. I pull from the non-retirement funds as needed for expenses. How do I tithe on the money I withdraw? I know I'm supposed to tithe on an increase, and I want to make sure I'm honoring God with the blessings He's provided. It sounds like you already tithed on the money when you received it. It says, I tithed on the insurance policy when it was received.

1:16:33Dave Ramsey:You'd be tithing on the growth. if the policy I mean if the investments made 120 ,000 dollars in growth then that's your income for the year and you would tithe on whatever they grew oh I see what you're saying okay you know you could do it one of two ways mathematically you could either I don't tithe on investment growth until I take it out okay because it's it's tied up in there so I've got retirement accounts that have grown and I have not paid on that growth until I use that money. Okay. I don't tithe on the increased value of real estate until I sell it. Okay. That's when I would tithe on it.

1:17:13Dave Ramsey:And so what I would tithe on in your case, Nicole, is whatever money you're taking out, if you're only taking out growth. Okay. So let's say you've got the million dollars in there and let's say it made 10%, that's a hundred thousand dollar growth, but you're only pulling out 60 ,000. Then I would tithe on the 60 ,000. If you're pulling out 120 ,000, but it only grew 100, then I would tithe on the growth, the 100. Not what you pull out, but what you pull out is the, if you don't pull out all the growth, I would only tithe on what you pull out. That's what I personally would do. Now, let's cloak this in an understanding that you can't out-give God, number one.

1:18:02Dave Ramsey:So giving never hurts. You can't overgive. Yeah, it's such a technicality. And number two, don't get caught up in legalism because God doesn't love tithers more than he loves non-tithers. He loves everyone, okay? Okay, and so if you mess this up, he's not going to like, okay, it's not a salvation issue. You're not going to get smacked around, okay? That's not that you can't, that's not, he's not, he loves you, he's got a plan for you. He has us to give not because it's a rule and not because we're trying to please him. He has us to give because we are the best version of us when we are givers.

1:18:49Dave Ramsey:We are more like Christ, Christ-like, who gave his life, right? And the Father gave his Son. We're more like them when we are giving. And that's what he wants to tap into by teaching us to be givers. And the baseline for those of us that are people of faith is a tithe, a tenth of our income. But don't get caught up in the legalism of it like you're trying to please God with this. He's already pleased, honey. You're a widow. You have a special place in the scriptures to be taken care of and loved and blessed and prospered. And that's what your father wants for you. So do this with an open hand and an open heart with no compulsion, no need to follow a rule.

1:19:41Dave Ramsey:Instead, it's I'm learning from my father how to be a giver. He's teaching me. And so I'm going to give something. Be careful not to get caught up in the details. Yeah, agree. It'll drive you nuts. You can really get what the old King James called the jot and tittle, the crossing of the T's and the dotting of the I's. Got you. The legalism. Yeah. Andrew is in Houston. Hi, Andrew. How are you? I'm doing all right. How are you? Better than I deserve. How can we help? Yes, sir. So my question is in baby step two. And when you're listing out debts and it has to do with an upside down car loan. So we just finally got real serious about debt and hating being stupid.

1:20:29Started budgeting, listed out all the debts. And one of our dumber decisions was this car that we're now underwater on. So my question is, and this is based on God has blessed us with the opportunity to learn to be mechanics on two beater vehicles. So we have those. The opportunity to learn to be. Yes. Bless your heart. With some subpar mechanical assistance from myself, they get from A to B.

1:20:59Dave Ramsey:The YouTube instruction manual. I got you. Yes, that is correct. So this car, one, it's a Turdmobile, but we owe about$11 ,300 on it, and it's worth about$72 ,000. And so my question is when I list it in the list of debts, do I list it at the$11 ,300, or do I prioritize it at the negative equity with the plan to sell it as soon as we break even on it? so put it in there as a four thousand dollar level in the debt snowball or the eleven thousand level in the debt snowball correct i'd put it at the four i would too i'm glad you said that okay yeah i'm making this up right now i don't know if i've ever had this question but um because that's the amount that you're actually going to put into it and we're trying to get out of it yeah Yeah, it's even.

1:21:54Dave Ramsey:I am dumping this thing, and we are moving on. Now, what are you doing to replace it? He's already got two beaters, right? Mm-hmm. I do. Oh, okay. So you're good. Yes, I have two old Fords that each have about 200 ,000 miles on them, and they get where we need to go. Yeah. What's your household income? Combined, after taxes and everything, it's about 77. And how much debt have you got? I'm not counting the house. $58 ,000 non-mortgage. Okay. All right. Good for you. So here's what this sounds like to me. It sounds like to me you're going to have decent cars that you paid cash for in 36 months.

1:22:36Yes, sir.

1:22:36Dave Ramsey:That's where I think you're going to be. In other words, you're going to be debt-free, have your emergency fund, save up and move up in cars. And I think that's going to take you about three years. Okay. Yeah, you're a good man. You've got this figured out. I can hear it in your voice. You've got this dialed in. If your wife is as aligned on this as you are, you guys are going to become very, very wealthy over the next 20 years. Okay. Yeah, we are 100 % in agreement. And, yeah, there was a lot of, like, shame and fear about debt, and we've sort of sat down and, like, no, we're going to get serious about it, and there's hope now.

1:23:14Dave Ramsey:Yeah, you've owned it and punched it in the face. I hear it. I love it. And the level of personal responsibility you're taking in the verbiage and even the voice tone that you're using. Uh-huh. You can hear it. We can hear that you're going there. That's pretty cool. Yeah. Because you know what causes how we can read that from being on the air for years, both of us, right? And all of you can hear it, too. You're listening. You heard he's. This guy's serious. He's not screwing around. He's thinking about. There's no excuses. Game on. That's the difference. He's thinking about ways to get this done, but they're not ways that are excusing work or excusing the process.

1:23:54It's all about how can I do my part to get this done?

1:23:58Dave Ramsey:How can I grind the most efficiently? Yeah. And here's the reason that that is so indicative, such an indicator, a metric on where his future is going to be. Because personal finance is not a math problem, it's a behavior problem. it's 80 % behavior 20 % math about 20 you the mathematics of becoming a millionaire you learn by the sixth grade you do not have to have a master's degree in business from MIT to become a millionaire there's nothing that they teach you in that that causes millionaire everything you needed to know mathematically you learn by the sixth grade the problem is the person in my mirror This guy can do some stupid stuff.

1:24:43Dave Ramsey:This guy has a PhD in DUMB. This guy likes donuts. I can be skinny and rich if I can control this guy.

1:25:19Dave Ramsey:Welcome back to the Ramsey Show in the Fairwinds Credit Union studio. Jade Washaw, number one bestselling author and Ramsey personality, is my co-host today. Sarah is in Hartford, Connecticut. Hi, Sarah. How are you? I'm doing well, thank you. How are you? Better than I deserve. What's up? um so i have been you know uh watching your show for the past uh couple years diligently and uh you know during the past six months or so i really tried to hone in on doing you know the baby steps and the debt snowball um but my my main question is today um should i decrease what i'm putting away from my retirement right now to try to combat some of this debt so i am a single mom who you You know, it's a single income household, everything.

1:26:05And, I mean, I have a car payment. I don't have a ton of debt, but I work full time and my daughter's in school. But I ran into some debt over the past six months or so. We had the government shutdown. I have a government employee. I work in an admin position. And we had the shutdown happen last year in October. So I wasn't being paid for, you know, a few months. And, you know, everything was still coming in where you have to manage a credit card, the child care costs and stuff, even though the mortgage was on hold. So when the money came in and I eventually got back paid, I started, you know, just paying down some of the credit card.

1:26:42And right now I just have credit card. That's about$18 ,000 that I owe in credit card.

1:26:49Dave Ramsey:You got$18 ,000 in debt in three months? No, no, no, no, no, no, no, no, no, no, no. I'm saying in total because I had a couple things. Oh, you acted like the shutdown caused it. That didn't cause it. Oh, gosh, no, no, no, no. No, no, no, sorry. So I took out a – I had to do a bathroom remodel on my tub shower for when I bought my house. And, you know, it had pieces of the metal kind of cracking off and stuff. So that was more of a safety issue. So I had that bathroom remodel done. Okay, so you have$18 ,000 in credit card debt. How much do you owe on your car? About$30 ,000. Any other debt? Good God.

1:27:26Dave Ramsey:And what do you make? About$75 ,000 to$78 ,000 a year. Okay. Your car is insanity. It's half your income. It's killing you. Yeah. So, yeah, my car is right around$30 ,000. What's it worth? You bought a car twice or three times what you should have. Do you know what it's worth if you were to sell it today? oh at least uh i could at least get 22 000 for it what i want you to do is double check that i want you tonight to go on kelly blue book and look at private sale and see what you would get for it not what carmax would give you not what you see what i'm saying see what it would be if you sold it yourself because that'd probably be my first order of business because to dave's point it is a huge part of your world right now and it's a huge part of your debt way too much yeah I really didn't want to get into this car debt.

1:28:21You know, when I did, I wanted to, I tried to, you know, wait almost another year or so to get a new car. But you bought a$30 ,000 car.

1:28:29Dave Ramsey:You should have bought a$10 ,000 car. Yeah. Let's get back to your first question, which is, do you stop investing in order to attack this debt? The short answer is yes. My question is, how much have you been putting aside? So they take it out of my paycheck every two weeks. So$500 goes towards my employer matches that. Okay, so$500. Yeah, I would stop investing. It's a total of$2 ,000 a month because that's biweekly. Right. I would stop investing immediately because you need your hands on that money to clean up this mess. Now let's talk about why a little bit because you're doing this. You're doing good things.

1:29:08You're just doing them out of order. So let's get you back on the right track. Yeah. If you're familiar at all, have you heard the terminology of the baby steps? Yes. And I had the emergency fund put away. You know, I had the$1 ,000 put away. Good. Within the last year and a half, you know, I just, I got divorced two years ago and I was taking on a lot of the debt myself where I bought a new house, not a new house, but, you know, a new place to live. I handled the fees, like the lawyer fees and everything, paying for childcare and now managing the mortgage and everything by myself. So you're feeling behind, you're feeling behind, and you're feeling like I need to get caught up.

1:29:45You're not behind. Yes. You're fine. You're doing fine. You need that$1 ,000 at your disposal.

1:29:51Dave Ramsey:Temporarily. It's just, it's a short-term sacrifice. Why you clean up the$18 ,000 debt and why you clean up the new$10 ,000 car debt? Because we're getting rid of the$30 ,000 car. Because I, it's like, it's a total of$18 ,000 in debt because the bathroom remodel, I owe about$10 ,000 on that. Okay. Yeah. So you need to get rid of the car and pay off$18 ,000, and then you're debt-free, right? Yeah. And get a$10 ,000 car, and then you've got to pay that off. So it's going to take you a little while to do this, but it's not going to take you 10 years. It's going to take you one or two years. Yeah.

1:30:25Dave Ramsey:Okay. And you're going to be totally focused on cleaning up all the debt. Because if you didn't have any payments right now but your house payment, you'd be okay. Yeah. And you could put 15%. The interest rate on the credit card, it's killing me. No, the interest rate on the credit card is not killing you. What's killing you is you're out of control and you're not pounding this debt. You need to be pounding this debt. List your debts, smallest to largest. Stop all investing temporarily. Stop all lifestyle temporarily. Get rid of the$30 ,000 car and knock these debts out. And that's when this is going to work.

1:31:01Let's talk about why it's in that order. baby step two being paying off all of your debt besides your house and then going to baby step three, three to six months of expenses, and then getting to the 15 % of retirement. Because I think that's the hardest part for people is just temporarily pause investing. If it was a permanent pause, it would be the wrong answer.

1:31:21Dave Ramsey:Right. But it's not a permanent pause. It's temporary. But a lot of people would say, oh, well, it's just a little bit, I can get the match. But there really is a lot of thought behind that. And for me, the biggest thing is you want to make sure that you're setting your habits up the right way. Because if you're investing in a situation like this lady here, she's putting money aside. Let's say she does finish, you know, get a little bit closer to paying off debt, but something pops up and she's like, oh, I need the money for this. She's going to look over at that retirement and go, well, there's some money over there.

1:31:55I don't have three to six months of expenses. Maybe that's some money that I can pull from. So it's not setting the foundation properly. Whereas if you say, okay, if I have all this money, I can get out of debt even faster, which means I can set up my three to six months even faster. It just puts you on a light warp speed that allows you to accomplish those goals so that when you finally start investing, you never have to touch it. You can set it and forget it. You never think about it because the money that you need is there in your emergency fund. It's there in your budget because you've paid off all your debt.

1:32:27Dave Ramsey:Yeah, if you don't have an emergency fund, you'll use your 401k or a credit card for an emergency. Because you're going to have emergencies. A hundred percent chance. Dave, you need to be positive. I'm positive you're going to have emergencies. It's going to happen. A hundred percent of the time. The only question is how are you going to cover them? Are you going to have a plan and have a rainy day fund when it rains? It's going to rain. Have an umbrella. It's going to rain. Have an umbrella. Quit walking around. This is not about Skittles and unicorns. It's going to rain. You need an emergency fund.

1:33:09Dave Ramsey:Because if not, you're going to put it on a stupid credit card, and then you're going to go, why am I so broke? Right? Or you're going to clean out your 401k for your emergency, and guess what they do? They charge you a 10 % penalty plus your tax rate. So you just borrowed the money at about 35 % interest in taxes and penalties is the way it works out. Well, that was dumb. Oh, you need an emergency fund.

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1:35:04Dave Ramsey:The right insurance acts as a shield around your loved ones and your wallet when disaster strikes. Our free insurance coverage checkup helps you figure out if you have the right coverage by giving you a personalized action plan with clear next steps. It's free. Did I mention it's free? Go to RamseySolutions.com slash checkup to take the coverage checkup and find out if you have the protections that you need. Donna is in Columbus, Ohio. Hi, Donna. How are you? Hello. I'm good. Good. What's up? Question about indexed universal life policies. My husband and I are going to stop, I know, contributing.

1:35:46now that we know better. But we have a little bit of a balance. Each of us have about$28 ,000 that we're going to be withdrawing. I would like to put it on the house or maybe into a Roth IRA and wondering what you would suggest.

1:36:02Dave Ramsey:Cool. Where are you out on debt? Do you have any debt left at all? Mortgage. Just your mortgage. So you're doing baby steps four, five, and six, right? Mm-hmm. Yes. So you're putting 15 % away in retirement already? Yes. Good. I'd put it on the house then. Yeah, that's a big chunk. What is that,$56 ,000 you'll take away from this? Yes. I love that. Oh, you both have$28 ,000. Uh-huh. Oh, wow. What do you owe on the house? $250 ,000. $250 ,000. Oh, wow. Very good. Okay, so down to$200 ,000. And your household income's what? About$320 ,000. Oh, cool. You're going to knock this house out in no time.

1:36:45Dave Ramsey:Very good. Yeah, that's the plan. We want to get it out in about a year and a half. Yeah, you're on the way. Definitely throw it at the house. Now I'm getting real excited. That's fun. I know, me too. That's fun. How old are you guys? All right, 54, 57. Yeah, your millionaires are getting ready to be. Well done. Very good job. Jesse's in Ann Arbor, Michigan. Hi, Jesse. What's up? Hey, how are you? Praise God. Yes, sir. How can we help? Well, I got a question for you. So I'm 58. My wife's 56. Retirement's coming. I'm probably around my age, 62. She won't quite be there yet. But the question is, is when we go both to retire from the companies and I want to transfer the 401k that I have and then what she has into an IRA, roll it over, I don't understand why can't we combine.

1:37:40Dave Ramsey:IRAs and 401ks, retirement plans do not have a marital component to them. They're all for individuals only. I don't know why you would need to combine them, because if you both have access to the money, because, you know, you're working together. Well, I'm just... Yeah, but you can't put both names on. Yeah, what I'm thinking is when we retire, just combine them into an IRA to get more of a compounding effect. Yeah. No, it doesn't. It's not going to change it. It doesn't change the compounding at all. Two accounts of$100 ,000 each compound at exactly the same rate as one account of$200 ,000. I gotcha.

1:38:21Dave Ramsey:You get no compounding advantage by combining them. Zero. I gotcha. Yeah. So no loss there. No problem. It's just a legality, a technicality. And so your 401k rolls over into an IRA in your name, and you name your wife as a beneficiary. Hers rolls over into her name. She names you as a beneficiary. And as you pull money out of either one or both, you're sharing the money because you're married, and we're talking about this, and we have a combined approach to life, and that's how people prosper the most. Correct. Yeah, yeah. You're right on track with all that. But, you know, but my wife has been a full time mom since she was 40.

1:39:05Dave Ramsey:So the retirement accounts are 90 some odd percent in my name. I mean, we've got we've done Roth, I spousal Roth IRAs for her every year, but they've not added up to nowhere near what I can put in my 401k here at Ramsey. Right. And so I've got the vast majority would be in my name. But, you know, she's got legal access to that in the event of a divorce. She's got beneficiary access in the event of death. She's got practical access in the event of life because I'm obviously going to share it with her. She's my wife. If we need any of that money, we'll probably never touch it. But that's neither here nor there.

1:39:45So that's how you get at it.

1:39:49Dave Ramsey:But that's a good question. And, you know, that's a common misconception mathematically. And the way you can run it off in your head is let's say that you had$100 ,000 at 10%. that means you'd have a$10 ,000 growth. And you got another account that has$100 ,000 at 10%. That's another$10 ,000 in growth. Or you had a$200 ,000 account at 10%. That's$20 ,000 in growth. And the other two are 10 each. So it's exactly the same. And the next year when it compounds, it's exactly the same. It's just in one pile versus two piles. Our brain likes to see a big pile. The total is still the same. The aggregate is still the same.

1:40:31Dave Ramsey:And oftentimes people run into that. So John's in San Francisco. Hey, John, what's up? Not much. How are you? Better than I deserve. How can I help? So I have a pretty weird kind of situation. I'm 28. My partner and I are looking about possibly buying a home. We don't know. We're currently renting. I have about a million dollars in assets tied to some watches that I've been collecting and buying and selling since I was 18. And I don't know if I should possibly sell some of them or all of them to either put a down payment on a house or to buy a house. Wow. Wow. Yeah. Are any of them heirlooms or like legacy pieces?

1:41:13No. I have been really fortunate. I've built great relationships with a bunch of watch dealers and boutiques. So I bought all of them at retail with the exception of like one or two.

1:41:25Dave Ramsey:Okay. And I'm curious, have you tracked how they've appreciated? Yes. Oh, my gosh, have I? Some of them, I've been really fortunate. I have a couple of Pateks. I have an Aquanaut and a Nautilus. Those have both doubled in value. I bought them for a bit under$100 ,000. I'm really fortunate. Combined, they make about$400 ,000 a year. How long ago did you buy them at$100 ,000 and then they doubled? That was 2018, I believe. It was 2017, so this was before the kind of watch boom sort of happened. I didn't know a watch thing happened. I was going to say, I didn't know there was a watch boom. Yeah, a lot of people started buying and selling on COVID.

1:42:08I've been really fortunate to have gotten a bit earlier, and a lot of my watches have appreciated in value.

1:42:13Dave Ramsey:Well, in general, collectibles, which watches would be, guns would be, art would be, wine would be, in general, collectibles do not outperform the market in appreciation. The exception to that is if you add in some expertise. So an art dealer will make more on art than he would make in a mutual fund. you will make more on watches because you're completely freaking nerded out about them. It's bad. Yeah, it's like OCD. Yeah, it's awesome. I love it. And it's fun. It's amazing that you have this. But overall, you just ask yourself, 10 years from now, what would I rather own? And not just mathematically, emotionally, relationally.

1:43:05Dave Ramsey:and so what do I want to own with my wife 10 years from now uh I personally want to own a house more than I do a collectible now I've got a bunch of cars I've got a bunch of guns and I would if I didn't have a home I would in a heartbeat get rid of those and move into move that money into houses it's hobby for me it's not anywhere near like you've got that's crazy John that's me I've never had a call from somebody had a million dollars in watches I mean I'd play urgency into it as well. If it's not an urgent thing to buy a house, if you hold on to them a little while longer, you have a really nice income, you could start to cash flow more of that house and have to sell less of the watches.

1:43:43So I think that there's probably a play where you could keep some of these, the ones that mean the most to you and still cash flow of the house if the home is not urgent. Yeah.

1:43:54Dave Ramsey:I have noticed that sometimes when people are doing something like this, and I've done this a couple of times with me, that I'm real enthused about it for a while. and then it's like fate fizzles out yeah yeah just dump them I'm done fizzles out on to the next thing

1:44:50Dave Ramsey:Hey, guys. Dave Ramsey here. Every day on this show, we help people work through real money problems and figure out what to do next. Now, you can get that same kind of help anytime with Ask Ramsey. Ask your money question and get answers built on Ramsey principles we use on the show. Whether you're making a decision or just want something explained, Ask Ramsey is here to help. It's fast, simple, and free to use. Go to RamseySolutions.com and try Ask Ramsey today. That's RamseySolutions.com.

1:45:40Dave Ramsey:So here's an interesting thing. You guys have heard me quote this a hundred times, some of you, but I'm going to do it again anyway. We did, several years ago, the largest study on millionaires ever done in North America, detailed, airtight research to where if you disagree with the conclusions of this study, you're what's known as wrong. The data is that tight. and it's the largest study by far that anybody's ever done on millionaires. And so there's somewhere around 24 million millionaires at any given moment in America. And a millionaire is someone whose net worth is greater than a million dollars.

1:46:20Dave Ramsey:Now, that's the definition of a millionaire. It's an accounting thing. And your net worth is determined by your assets minus your liabilities, what you own minus what you owe. So if you have no debt, it's simply what you own. And so when you have a million dollars worth of things, money, 401ks, house, that kind of stuff, then you are a millionaire. Well, no one should have a million. Well, it's not a moral construct. It's an accounting function. It's not enough. That's not what we're debating. What we're saying is there's a simple thing. You either is or you isn't. It's an accounting thing. And it's not a million dollars of income, and it's not a million dollars of cash, and it's not a million dollars of liquid assets.

1:47:04Dave Ramsey:It's simply assets minus liabilities. That's how you define it, period. And if you don't define it that way, you're wrong. This is the definition. A billionaire is the same thing when assets minus liabilities equals a billion, which, by the way, is$1 ,000 million. It's a lot. so if you have a hundred thousand dollars you're a lot closer to be a millionaire than a millionaire is to being a billionaire like a bazillion times closer say a thousand versus a tenth right one thousandth versus a tenth that that's a difference that's a big difference so all of that to say we've studied these things one of the things we figured out was we wanted to track I can say, okay, what careers caused people to be millionaires most often?

1:47:54Dave Ramsey:The number one career field that became a millionaire, that appeared most often in the 10 ,000 that we studied, was engineer. Number two was accountant. Number three was teacher. Hmm, didn't see that one coming. Number four, business person, business executive, someone in business of some kind. And number five was attorney. Medical doctor didn't even make the top five. They're number six. So you always think of the doctor and the lawyer being the millionaire, right? But they are, but medical doctors are notoriously bad with money. They're stereotypically bad with money. They're like artists or something.

1:48:40It's like a music star is notoriously bad with money.

1:48:45Dave Ramsey:Football player, notoriously bad with money, same thing. But they're still number six. But what we couldn't figure out is how teacher lands in the middle of those things, because all of those are highly paid professions except teacher. Right. So how does teacher land in there? And what we figured out was, after studying it a little bit more, was that all of those lawyer, accountant, engineer, teacher, business professional, they all have a process that they have to submit to and have to follow the process to do their career. So when you're an engineer, if you don't follow the process, the bridge falls down.

1:49:23Dave Ramsey:When you're an accountant, there's generally accepted accounting principles. There's not three ways to do accounting. There's one. It's not art. You don't get to make it up. When you're an attorney and you're in court, there's a process to do litigation, and you have to follow the process or you'll be held in contempt. and so on. Teachers have to follow a process. They use a detailed lesson plan. So these are all process people. So they simply took that process mindset and applied it to building wealth. And that's how teacher ends up in there. Fun fact is Scott's on the phone in Spokane, Washington.

1:49:56Dave Ramsey:Scott is a Baby Steps millionaire, and he's a teacher that teaches the Ramsey Foundation's high school curriculum. Is that right, Scott? That is 100 % correct, Dave. I wish I had a high school teacher that was a millionaire because he followed the principles that he was teaching me in his class. I would have sat there with rapt attention. It is fascinating to watch my students when I walk into class because I teach the Y. and when I walk in and you watch those light bulb moments with those kids because I tell them on day one I don't want you to have to live the life that I had to live because I learned the lessons the same way you learned them Dave that I was in debt and I don't want you to be in debt I want you to live your life the way I'm living it right now in your 30s not in your 50s Yeah.

1:50:53Dave Ramsey:So how old are you? I'm 56. And what is your net worth? My net worth right now is$1.83 million. Good for you. And give me a little breakdown on that. How much of that's house and retirement and so on? So about$700 ,000 is in my house, and we just recently paid that off within the last year. Good for you. Thank you. And then the majority of it, I would say another probably$700 ,000,$800 ,000 is in my retirement and my 401K. Then I have a pension attached with that as a teacher. And then we have other investments, IRAs, investment accounts, things like that. And then small portions in savings and checking accounts as well.

1:51:39Dave Ramsey:Wow, way to go, Scott. So how much of this did you inherit? it? None. Zero. Okay. We have a small, a very small amount that we inherited that helped us pay off that last little bit of my student loans, but a very insignificant amount. Yeah. It did not mathematically cause you to be a millionaire. Oh, no. So you didn't inherit your money. You got the old fashioned way. You earned it. Yeah. Yes. As you say, you know, when you're broke, you go to work. I hear you. That's it. So you've been a teacher for how long? Over 20 years. So it's funny that you had mentioned engineer as well. I was a computer engineer and an actual engineer in the military.

1:52:20So yeah, I built those processes and applied them, obviously. But the main thing is right when when you are um teaching the the foundations um it the kids they just kind of glom on it's interesting to watch those light bulb moments with the kids because they really do start to process that information and uh you just kind of watch them you know day one they're like yeah whatever but um you you tell them in in the curriculum you tell you tell them on the show uh What we're teaching you is what grandma taught you. This is common sense information. They look at you like, whatever. But as they go through, they learn and they start to process and begin to just kind of grind at it.

1:53:11And they're like, yeah, you're right. You're right. You're right. And they kind of just figure it out. And it becomes very hard. It's almost second nature. And they figure out really quickly that we need to avoid debt. This is not something. Do they ever say, well, Mr.

1:53:27Dave Ramsey:Scott avoided debt, and he's a teacher, and he's got$1.83 million. I mean, do they ever look at you and go, my gosh, I've got a walking social proof right in front of me? Well, it's interesting because I am very, very honest and open with the kids. And when I tell them my stories, because I open up, and when I tell them I had to work three jobs, and my kids are like, Dad, why are you never home? and they I mean some of the kids break down yeah they probably relate to it yeah and they relate to it and they I have kids crying I have kids I had one student come into class the first day of school and go it's easy for Dave to say you know you don't need a credit card he has millions of dollars four weeks into class she was like I have a I have a friend that wants to get a credit card How do I talk them out of it?

1:54:17Wow. Love it.

1:54:19Dave Ramsey:Love it. Very cool. Well, how long have you been teaching the curriculum? 14 years. I taught it before it was digital. Wow. I taught it out of a book. Wow. I remember that. Oh, my gosh. That's amazing. Very cool. Well, thank you for teaching it, and congratulations on being a Baby Steps millionaire and another hero in the American story right here. Absolutely incredible. If you didn't know, we have a high school curriculum called Foundations in Personal Finance that's been taught now in 48 % of America's high schools. Six million kids have graduated from it. So if you can help us get it into your local school, that'd be awesome.

1:54:58Dave Ramsey:And sometimes you need to knock a noggin on the school board. But, you know, hey, whatever it takes, baby, that's what we're going to do.

1:55:12Thank you.

1:55:30When I talk to people on The Ramsey Show, 90 % of the problems I hear come down to one thing, not having a plan. They're not living on a budget. They have no idea where their money's going. Money is just happening to them instead of them happening to their money. And guys, that is so normal, but it doesn't have to be normal for you. And that's why I want you to go download our EveryDollar budget app. EveryDollar not only helps you tell your money where to go with a budget, It also builds a plan to free up extra money so you can pay debt off faster and start building wealth. And the best part, your plan is completely personalized to your life.

1:56:09It's the same advice that you would get if you called the show. And it's right in your pocket. So don't keep living normal. Go download the EveryDollar app, answer a few questions, and get your plan today.

1:56:38Dave Ramsey:Our scripture of the day, John 1, 14, and the word became flesh and dwelt among us. And we've seen his glory, glory as of the only son from the father, full of grace and truth. Bill Murray said, people are like music. Some speak the truth and others are just noise. Oh, Mia is in Seattle. Hi, Mia. How are you? I'm great. How are you guys? And thanks for taking my call. Sure. What's up? My question basically in a nutshell is two weeks ago for my 62nd birthday, I paid my mortgage off 16 years early. Good for you. Well, all my friends, I mean, all my friends are telling me I made the biggest mistake of my life.

1:57:22And now I'm really terrified that they're correct, given the current market situations and things. So my question was to try to get some guidance from you based on my current situation. You need new friends. Well, let me give you just a quick content. I'm 62. I'm single. I'm in the midst of an eight-year canceled battle. And my doctor said I won't be able to return to work for the foreseeable future. so based on that you know my friends are telling me i took my liquid assets that i had to pay it off 16 years early and that was a big mistake because my interest rate was 3.5 percent and i could have been making more all the things you hear but now i'm afraid maybe they were right do you still have a nest egg so what i basically um i have is i'm currently my income i have a disability benefit from my former employer that separated me last June for disability of$7 ,070 a month.

1:58:25And that will end by three years, the way the policy set up when I turned 65, but it could end previous. I get a$3 ,000 monthly SSDI payment after the taxes and the Medicare are And then I've got my assets. I have an$80 ,000 emergency fund in cash, and I have$23 ,000 in cash for insurance premiums that are going to be changed in November. And then my investments, I've got$1 ,430 ,000 in the traditional IRA.

1:59:03Dave Ramsey:You're okay. Your friends are morons. And I'll go a bit further. they're talking about a stratosphere that they've not yet entered. So how can they know? Stop for a minute. You're the only one who's actually done it. So don't you think you have a better frame of reference than they do? They've only had debt. Right. So I'm debt-free. I've got 218 in a rock. You're a debt-free multimillionaire. You're okay. Calm down. Okay. I'm just, you know, with the current situation. Current situation is what? If you're not in Iran and being bombed, I think you're okay. You are in Seattle, but. Because I can't go back to work like I'm going to be in.

1:59:52Dave Ramsey:Honey, you have a$10 ,000 a month income and a million dollars. That's your current situation. Okay. You're okay. Okay. Well, I was worried that I'm really not okay. What do you think is going to happen? How would you not be okay? What current situation are you referring to? Well, so, for example, my medical is going to change in November because my secondary is – my premiums are going to go up really high. To what? A million dollars. But the million dollars really doesn't – they tell me go very far. Yes, it does. It goes a long way because it's making$100 ,000. Is it invested in good mutual funds?

2:00:33Well, yeah. So the traditional IRA is that, and then I've got$218 ,000 in a Roth. I've got$172.

2:00:41Dave Ramsey:Is all of that invested in good mutual funds? Yes. Okay, so it's all going to make around$100 ,000 a year that you're not even touching. Right. So I basically structured the four buckets that you advise. They're in the traditional and the Roth because I have to protect against IRMA. So any capital gains I make stays in the retirement. And then I've got$440 ,000 in municipal bonds and$342 ,000 in some core equities that's managed. But I'm trying not to touch any of that. You're not touching any of it. You have a$10 ,000 a month income without touching it. And you're going to have that for sure for the foreseeable next three years.

2:01:31Well, the long-term disability benefit, the way my employer wrote the policy, it could go away before three years. But the max I have left on it is three years.

2:01:40Dave Ramsey:Yeah, and depending on whether you remain disabled or not. Right. Even if it went away, you'd still be okay. Okay. You did not make a mistake. The only mistake you made was in choosing your friends. Okay. Or in listening to them. I have some friends that I actually like that are also not smart, but that's okay. Okay. They're all over me. I just looked up how long it would take to wire the money and have it clear so that I got my letter saying the write-off was closed on my birthday. Because for my present for myself, I wanted a free scream. Good. So I told my friends, and then I was in tears because they were like, that's ridiculous.

2:02:22I just think that's jealousy. I do. Well, or idiocy or both. Who in their right mind, when somebody has done something incredible like that, would not celebrate them? Even if it's not your personal choice, that you wouldn't celebrate what somebody else views as a personal accomplishment. And it's zero detriment to them. Okay. So, but I still have like a 600 a month HOA. So I have, you know, a lot of expenses. Hey, Mia. I guess.

2:02:48Dave Ramsey:Mia, your worries and your math don't add up. Okay. Okay. Your worries are a 10 and your math is a 1. Or let's be as logical as humanly possible right now. Who do you think knows more about this situation? Dave Ramsey or your three little buddies at home? No, I get it. Okay. There you go. That's it. Hi. You need to breathe. You need to breathe. You're okay. You are in great shape. You have done a wonderful job. I don't know what the house is worth. If it's worth a million. She's fine. If you're in Seattle, it probably is. And you've got a million dollars. You're a multimillionaire. Well done. I want you to concentrate on fighting cancer, not arguing about whether you should have paid off your house or not.

2:03:35Dave Ramsey:I want you to go beat it. Go beat the big C. Yes. And live your life, kiddo. Wow. Matthew's in Phoenix. Hey, Matthew, how are you? Good. How are you doing today? Better than I deserve. What's up? So my question for you is, I'm recently going out on my own business-wise. I'm in home emodels. I've been doing it for a long time. I'm just trying to do it on my own now. My question is, I've been cash flowing everything. Good. All this is bought and paid for. A vehicle, a truck, everything's bought and paid for. Good. Absolutely no debt, no credit card. My question is, would it be a bad decision to take out a small business loan, maybe$2 ,500 to$5 ,000, just to help backfund this?

2:04:27You know, I'm doing it. Backfund it?

2:04:29Dave Ramsey:What does backfund mean? I'm trying to think of the right word. Just, you know, when tools come up that need bought, stuff like that. You've cash flowed everything. Just continue cash flow. Don't stop now. Don't stop now. Don't stop now. Don't fall into the debt trap because when you fall into the debt trap, you have to take jobs from customers that are unreasonable to pay the debt payments. And then you get an unreasonable, no-fund business to operate because you have to put up with the butts. You don't want to have to deal with the butts. You want to deal with the good people. And you don't have to – you can send the butts to your competitor if you don't have debt payments.

2:05:05Dave Ramsey:Say, I think you need to – I've got – here's my competitor's business card. You need to go talk to him. That's so good. And let them worry someone else's ears off. Instead, you go work with the good people, make some good money, and do a good job, and help those people, and make you some money, and you're in a great line of work. Please continue to organically fund it with cash flow. No debt. Please, Matthew. Please do that. Just swing that hammer, turn that wrench, baby. You got a great thing going. And you're sitting on a gold mine if you don't screw it up by going into debt. Absolutely. I know lots of remodel guys and repair guys that are running businesses that are half million dollars a year right now.

2:05:48Dave Ramsey:And that's the profit. Hello. You can really do good at this. That puts us our 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. Thank you.