Is It Ever Too Late To Build Wealth?
2024-03-29 01:56:06
The Ramsey Show believes you can build wealth and take control of your life—no matter what stupid mistakes you've made with money. Join as Dave Ramsey and his team of experts answer your questions on the top problems holding you back. Listen now or ask your question live by calling 888.825.5225 weekdays from 2–5 p.m. ET. Learn more at www.ramseysolutions.com
Live from the headquarters of Ramsey Solutions, it's the Ramsey Show, where we help people build wealth, do work that they love, and create actual, amazing relationships. Thank you for being with us, America. Rachel Cruz, Ramsey personality, is my co-host today, number one bestselling author, and my daughter, the phone number here is 888-825-5225.. That's 888-825-5225.. Rachel, we're going to dive in with the question of the day.
You want to take it?
Yes. Today's question comes from Randy in Virginia. I'm having my first baby next month, and my parents want to move to my town to see the baby more often. They want to buy a house, but would have to sell theirs first to make it happen, and are too lazy to go and apply for a loan. Oh man, I thought I would just buy them a house, and then they could be my renters.
I currently have $50,000 left on a $250,000 mortgage of my current home. They are in their 70s, so if they bought the home, they would pay less taxes and claim homestead. Would it be smarter for them to buy the home themselves, or is it okay for me to buy it and make them my renters? This is just easiest, so they can sell their house and slowly move into the new one, new house, new city, stress-free, because my dad has a ton of stuff. Oh man, Randy, okay, first and foremost, love the heart and the idea that you want to help your parents, but no, Randy, no.
You buying a home for them to be your renters, not a good plan, and then, on top of that, you don't have the money for it. I mean, you'd be taking out a second mortgage, so absolutely not. I think that you can invest in some plane tickets for them if they want to come see the baby a few times a year, or they can come just stay at your house, but if they want to move home, their home, full-time and live in a new city, that needs to be on their dime.
Yeah, they're like grown-ups and stuff, and so they need to do their own deal. Besides that, dude, you never rent to someone in the second paragraph, when in the first paragraph, you called them lazy.
So true. It's just a basic concept here. as a landlord. Let me help you with that, okay? So if your first description is lazy and the next description is renter, this is on you.
So no, no, they need to handle this. It's sweet that they want to come be with a grandbaby. I completely get that. If I'd have known how great grandkids are going to be, I'd have been nicer to their parents. I completely get this.
I understand. I agree with the move. So mom and dad put their house up for sale. When it sells, they can make the move and buy a house in your city. That's how, like normal people, do it and stuff, and that's what they need to do.
And if they get to your city with a pocket full of money from the sale of their house and can't find a home right away, they can rent from someone else.
Please keep the grandparents at an arm's length transaction.
Don't let the grandparents be your renters. No.
There's just so much that can go wrong with that. And the sad thing is it all will happen. It'll all go wrong. Hey folks, with debt payments and now with inflation stealing more and more of your paycheck, we know a lot of you feel like you're drowning and you're scared to death and you won't have enough to take care of your family. and, oh God, it's scary out there, I don't know what.
I'm going to do.
Or you're at the point where you say, I'm just so sick of this. If you're ready, if you say I've had it, you are ready. We can help you. Over 10 million people have been through Financial Peace University. It's our nine lesson course.
It'll teach you how to beat debt and build wealth. It's everything you wish you'd learned about money, because your number one wealth building tool is your income. When you get rid of your debt, you now have control of the thing that'll make you wealthy. And if you go through Financial Peace University, we will show you how to get in control, how to be on the same page with your spouse. It's very hard.
It's tough. It's a boot camp for money. If you want easy, you're not going to find something that works. So anything that's worth doing, you pay a price to do. There's a certain amount of pain in transformation, and that's what has to occur here.
Financial Peace University, ramsysolutions.
com slash FPU. Check it out, ramsysolutions.com slash FPU. Rachel, we can take that family discussion even a step further, and we would do that in Financial Peace University. And that is don't loan anyone money, particularly family or friends. Don't co-sign for people.
Every time you do these transactions outside of your particular household, you set yourself up. The grandmother that called here and had co-signed for her grandson's pickup truck, it's getting repoed. Because he had to have a pickup and his dad wouldn't sign it, so the grandmother did.
Yeah. And I think that with this conversation, there's the risk of it going bad, which in a lot of cases it does, which causes even more conflict. But even, I talk to people like, well, my uncle co-signed my car and I paid it off every month, and it's great. and I paid it off and it's fine. But even within that, even if mathematically it works, relationally, it changes.
It's weird. It changes the relationship. So from a financial level, a relational level, all the way down, it's just not wise. It just changes so much. and it's strange.
I mean, we had, I guess it was a call, was it a caller or someone I was talking to? And they had loaned a friend $10,000 because they needed help. And we went back in the conversation and talked about how, if you have the ability just to give it without strings attached to help someone, if that's what you feel called to do, then you do it. But the whole idea of loaning, that they're going to pay back. And then the kids showed up for a big dinner that they were all having with new iPads.
And the couple that loaned the money was like, they have two new iPads. They owe us $10,000.. And then you start nitpicking every, I mean, it just, you can't help it. And so again, all the above, people-.
You're not in too much trouble.
Yeah. It's just like, man-.
If your kids have new iPads, you're not in too much trouble. I get that. Yeah.
So it's just, it changes, it changes the relationship. And then if it goes bad and it goes south, then it really can damage relationships. So keeping them separate, is, it's the smart thing or it's a gift, right? And you want to make sure that you're not enabling, if there is a gift, that is a blessing and it's helpful.
Generosity is completely different than a banking transaction.
Yes.
Yes. And when the borrower is slave to the lender, and when you eat dinner with your father-in-law, your mother-in-law, your son-in-law, and you owe them money, Thanksgiving dinner tastes different when you eat with your master rather than when you eat with your in-laws. Because it, oh, well, they're nice. I don't, it's a spiritual principle. You cannot get away from it.
The law of gravity is the law of gravity. I mean, you can have a nice master and still be a slave. I mean, that's hypothetically, but I mean, you know what I'm saying? I mean, that's the, it doesn't have to be harsh. It doesn't have to be out of control.
It doesn't have to be rage involved to change the tone, to change the air in the room. It changes everything. So I have to be careful with this stuff, folks. Be careful with this. It's not to be mean to somebody.
It's actually to be nice. Know is, know will set you free. Good word. It's a powerful word. This is the Ramsey Show.
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Rachel Cruz, number one bestselling author, Ramsey personality, and my daughter is my co-host today here on the Ramsey Show. Open phones at 888-825-5225.. Mark's in Kansas City. Hey, Mark, welcome to the Ramsey Show.
Thank you both. Appreciate it. I'll get right to it. Okay. I've been what you call dumb about five years ago.
Five years ago, I co-signed on a mortgage from my ex-wife, and yep, she was my ex-wife at the time. Fast forward a couple of years, I've learned that she owes the IRS over $100,000, and they've since filed a lien on her property, probably in the last year and a half to two years. So, somehow she manages a little check to check, and the kids are going to start falling off from child support, and I don't know how she's going to make it and what implications it has for me in this whole scenario.
Wow. Yeah. You're right, dude. You stepped in it. Oh, man.
I'm sorry. Okay. First, I have to know, what story could possibly be told to you to make you co-sign for your ex-wife? Because, by definition, she's ex.
You're not going to make me tell you this.
The three kids and the violin was playing in the background, I think, and maybe caught me at a weak moment.
Sweet, Mark.
I'm just trying to be a good dad.
You thought you were doing good. You thought you were doing good for your kids.
You're trying to help your children.
You thought you were doing good for your kids.
And she's the mother of your children. Okay. We'll try to cut you some slack here.
I appreciate it.
But we'll still put the action in the dumb column. I agree with your opening statement. All right. Anyway, now we're there. What do we do?
No sense in throwing everybody under the bus. Let's just keep rolling. What do we do? What do we do? What do we do?
Okay. She cannot refinance and get you off because she has an IRS lien. Unless you can get the IRS to subordinate, and with it being such a large lien, there's a possibility they would subordinate. She would have to qualify for the mortgage on her own, and the IRS would have to agree to subordinate, meaning they agree to stay in second position and put a new mortgage in front of them instead of the old one. I've gotten them to do that in negotiations.
It's rather lengthy. But she's got to qualify, and that doesn't sound like she can.
Not a chance.
Now, selling the house is very, very difficult. However, the first mortgage is how much?
$460,000.
What's the house worth?
I think at best $850,000.
When do the kids age out of child support?
Over the next three years.
How much money do you have?
1.
6.
Half of that's in retirement.
Okay.
When I do something stupid and it costs me money, I call it stupid tax.
Boy, I've heard this before.
So I think you're getting ready to write a stupid tax check at some point in this equation. Now, sooner rather than later, later rather than sooner, depending on when the kids age out and all that kind of stuff. But let's pretend they aged out and there's no more need for you to have violins in the background. in terms of her having this house. I would walk over and say, I will give you $10,000 if you'll sell your house.
Hmm.
And then she sells the house. She has enough equity to pay off the IRS. And she gets rid of the mortgage that has you on it. And then she goes and gets her another house with the equity.
She gets rid of me, too. That's great.
She gets rid of you. You get rid of her. This was the original intent of the whole thing until you stepped in it. Yeah.
And you wouldn't push her to sell the house now because of the kids?
Well, I mean, she could. But I think it's going to be a harder sale. For her to do it. Plus, you did this partly to give your kids a better place to live. And they're not aged out yet, right?
That's correct. So if you do it today, you're putting the kids in the street, too.
Correct. But she could make the move today. I don't know what mindset she's in. But I'll tell you what she's probably got. She's got an IRS breathing down her neck.
She's got a house that she's wondering how she's going to be able to afford when child support drops off. She's worried about this stuff deep down. Not on top, like you are. But even she feels it in the tenseness across her shoulder blades. Because she's human.
We all can see the truck coming towards our car, right? Yes. And so she sees that. And she does not know how to get out.
Have y'all had any conversations about it, Mark? You and her?
Very little. We haven't been the greatest communicators. That probably surprises you. But no. But not very much.
Well, part of that is she's buried under stress. And it's got part of your name on it. So, you know, I would just sit down. If you can have a conversation. If it's possible.
And just say, hey, here's an idea. And I'll help you one last time. If you sell the house, you get rid of me and the IRS. And you've got enough equity to go get you another house. You can either do that now.
Or you can do it later. And I'll write a check to help you do this. Because it gets me off the mortgage. Because it's worth 10 grand. Or 20 grand if you've got 1.6..
To get rid of this contingent liability. This co-signed liability. Because if this thing goes belly up. She's going to get foreclosed on. And you're going to get to ride with her.
Because you can't stop the foreclosure. Because you can't force the sale of the house. The only good news in this whole story. Is the house has enough equity to take out the IRS.
It needs to be sold. For her sake. And it blesses you in the process.
That's right. So let's dangle some kind of a carrot. That causes that to happen now. Or when the kids age out. I don't care which.
But the sooner the better. Because I've got a feeling this is.
It will be a relief to her. If she understands the math.
Whether she is conscious of it or not. She's carrying a load of stress. Dr. John Deloney talks about that when we're in debt. This lack of agency.
This lack of autonomy. Because we're a slave.
She's carrying the weight of that.
And she's living paycheck to paycheck anyways. And then you have a lien on the house from the IRS.
The last thing you want on your list of things to do. Is to deal with the IRS.
They are not. This is not a creditor. you want to have. The penalties. The interest.
It's just out of control. Their power is virtually unlimited. In this case. I've seen a few times. Not often.
That they'll actually come in and force the sale of the house. To get their money. And if she doesn't do something with this lien. Eventually they'll get around to that. Now they're not exactly efficient.
But eventually they'll get around to it. But the stress of this is just on everybody. So here's an interesting thing. We poked at Mark a little bit. We also gave him a little bit of a break.
And we kind of laughed with him. And at him, both. In his presence. So it's all okay. Because we've all done stupid stuff.
But the thing is this. There's a couple of things here. That you can take away as a money principle. Sometimes, doing what it feels like. Is.
You're trying to help someone. But you're doing it in such an illegitimate way. You end up actually hurting. The person you're trying to help. Co-signing does that.
Every time. There's actually a proverb in the Bible. That says. Only a fool co-signs for another. The contemporary English version says.
If you co-sign for someone else, you're stupid. It's in the Bible. Okay. And so co-signing is an illegitimate way. To help someone.
Meaning if you don't have the money. For Junior to get a car. And you co-sign for Junior to get a car. You are stepping in it. For sure.
When it's your ex-wife. You're stepping in it up to your knees. You need boots for this walk. Unbelievable man. You know.
For sure. And sometimes when you give someone. Some money, even. Without a debt. Or without a co-signing involved.
And it's enabling them to buy something. They can't afford.
The behavior. Right.
Well, my daughter needed a house. And I gave her the down payment. And now she's got a house payment. That she can't afford. How many times does that happen?
Like every week on this show. A well-meaning parent. So you've got to be careful. What you're participating in. Because enablers are the nicest people in the world.
They're sweet people. That don't know how to say no. And then they enable bad behavior. And so, while you were trying to be a help. You end up being a curse in their life.
With money. You had dollar signs on it too.
A curse with dollar signs. And, Mark, that's not aimed at you. That's just aimed at all the things all of us have done. Like what you did. This is the Ramsey Show.
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Rachel Cruz. Ramsey, Personality. Number one best selling author, is my co-host today. Open phones at 888-825-5225.. In the lobby of Ramsey Solutions.
On the debt free stage. Tim is with us. Hey, Tim, how are you?
Hi, Dave, this is awesome.
Thank you so much. It's an honor to have you, sir. Where do you live?
I live in Cameron Park, California. About 30 minutes east of Sacramento.
Very cool. Welcome to Nashville. And how much debt have you paid off, sir?
$180,500.
Way to go. And how long did this take you?
7 years, 3 months.
Very good. And your range of income during that 7 years?
My take home pay was $48,000 to $68,000.
Cool. What do you do for a living?
I work at a hazardous waste facility. Basically we take household paints, cleaners, paints, that kind of stuff. That's kind of what I do. I do it for a local government agency down there.
Cool. What kind of debt was your $181,000??
All mortgage.
You paid off your house! Looking at weird people. A paid for house. Zero debt in the entire world.
Totally free.
Way to go. man. 7 years, you did that.
And in California. Most people in California are like this is impossible.
What's this house worth?
About $3.
25.
Way to go. man. How's that feel to not have a payment in the world?
Dave, I did it in August. It's so freeing. You don't owe anybody anything. Last month my washer broke. I'm like I'm going to go buy a new washer.
It'll be fun to do. Little things. There's freedom in not having to owe anybody money. It's just amazing.
I love the t-shirt. Ramen. Ramsey approved meal every night. Good old ramen noodles.
I just thought I'd have a little fun with it.
Well done. What started you on this journey 7 years ago? Doing this Ramsey stuff.
My story started about 15 years ago. I mean I had the old.
About 15 years ago. I had what was known as house fever. And what happened for me. Is that I wanted a house fast. Fast, fast, fast.
And so I didn't just do a 30 year loan. I did a 35 year loan. With the first 5 years being interest only. And that was dumb. Dumb, da dum, dum, dum.
Wow. It was amazing, because right then I switched to a new job. And I didn't realize that I didn't really own the house. The house owned me. Because my paycheck was only $2400 a month.
And between my mortgage and my HOA was $17,000.
. And it was tough.
What was the wake up call?
I took your class in 2009.
. And I was so grateful. But back in 2008 and 2009.. The mortgages tanked. And I just couldn't refinance.
And I'm just like what am I going to do about this? So I prayed about it. And I'm like you know what? This is what I'm going to do. A lot of people in my neighborhood were just walking away from their houses.
I said you know what? I signed up for this deal. I'm going to keep with it. But I just wish I could get it refinanced. So finally, in 2015..
I looked back at refinancing. I was able to refinance to a decent loan. I said thank you, God. I was able to get out of that. And so once I did.
I said okay. It's game on now. I said I'm going to put everything I got on this darn thing. Excuse my language. And so basically, at that time.
My average between the last seven years has been about $4,000.
. I was putting about $2,500 of that on the mortgage.
You wanted out.
I wanted it done. I just no more. And for seven years. You just kept chipping away.
Every month. Every month. What was the hardest part for you? The hardest part, I'd say for me, was just. The daily grind.
Just keeping to the budget. Writing it down. I had this big old, huge poster board. That's like that big. That I looked at every time I went to sleep.
I don't know if you see it on the screen. But it shows. $180,000.. It was a lot of money for me. But you did it.
And it was worth it. It's so much more freeing now. I have freedom. And it's just amazing how that feels. Great job, Tim.
Thank you so much.
You're going to do a lot now that you don't have any payments. What's your first big thing? you're going to do with money now that you don't have any payments?
Well, I paid it off last August. So I went to Australia with my brother. That was fun.
There you go. Ding ding.
That was a lot of fun. Paid for perfectly in cash. And so I took care of that. That was wonderful. And then I did this.
And so it's just the freedom that you have of making choices. And that's just. You don't owe anybody any money. It's just amazing. I didn't realize that until I was out.
How amazing that is.
It's easy to think about what it will be like. But your body really even feels different. When you're completely free. It's hard to tell people until they're there. Yeah.
One last thing I'd like to mention. One thing I learned through this experience is that. For me, I found that the interest you pay on a debt. Is the price you pay for your own impatience. There's a cost to wanting something right now.
And for me, that cost a lot of my money. Because I wasn't willing to wait. And so, for those who are listening. Be patient. The less money.
The less money you give to the bank. Is more money for you. And that's just the simple truth.
It's a simple formula. But it works.
Yeah, it really is.
Proud of you, man.
Thank you, sir.
Who were your biggest cheerleaders?
Well, I had. My mom was really very appreciative of. A big cheerleader for me. I had the Facebook. Ramsey group that I listen to all the time.
To give me encouragement. And that was so wonderful. That's a great group.
The Baby Steps group.
It was just a wonderful group. Always positive. Always encouraging.
Very cool. Well good for you, brother. Well done man. Well done. If somebody is listening.
And maybe this is the first time they ever heard of this idea. What do you tell them? the secret to getting out of debt is?
The secret for me. Was writing it plain. Writing it on paper to pen. And writing it visual. You know, as I said.
I had that big poster board. That was very visual to me. And I had to make it a heart thing. Not just a money thing. And so, once I did that.
It was just a matter of time.
If it's going to happen. When it's going to happen.
What's interesting is. Not only are you debt free. But you've transformed. You're a different person because of the process.
It's been so amazing. The people here have been so wonderful. to me. It's been awesome.
We love having folks visit us here in the lobby. Particularly to do a debt free, scream, baby. Housing, everything. So we've got the live and give bundle for you. The Total Money Makeover book.
The Baby Steps Millionaire book. Both number one best sellers. And, of course, the Financial Peace University. Membership. If you've done or read any of those.
Those are yours to give away as well. So, live and give. Enjoy them or give them. However, you want to enjoy them. They're there for you to say thank you for coming out here.
And we're very, very proud of you.
Well, thank you, sir. Thank you so much for this.
Very, very well done. Alright Tim from Sacramento.
$181,000 paid off in 7 years and 3 months. Making $48,000 to $68,000.. House in California. Is paid off. Shut up.
I love it. Count it down, Tim. Let's hear a debt free scream.
1,2,3.
Debt free. Yeah. Woo.
That's how you do it, Tim. Yeah.
I'm free. Well, it sounds like when you get free. When you get the chains off. That's what it sounds like. Pretty stinking incredible.
It's amazing. Absolutely amazing. And I love it.
It's the grind. The day, choices that you make. 7 years. And that's long.
In a culture that can't stay with something for 7 minutes. Without picking up their phone and doom scrolling Instagram. Oh. And you stay with something for 7 years.
Consistently.
7 years. Pushing through. Pushing through. Pushing through.
And that's dedication. Because I do hear people talk about debt free screams. And I'll see some haters online. Like, well, those people. They're making half a million dollars a year.
And all this stuff. And I'm like, no. No, they're not.
48 to 68.
And it's just that diligence. Day in and day out. And it's proof that anyone can. Tim, is that example. Anyone who believes that it is possible.
And that they can work a plan. They can do it. And, Tim, he's that. He's that example.
It's amazing. I read that tortoise and the hare book a bunch of times. Every time I read it. The tortoise wins. This is the Ramsey Show.
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Thank you for joining us today. This is the Ramsey Show. Common Sense, for your dollars and cents. And for your life. Rachel Cruz.
My co-host today. Markita, is with us in Seattle. Welcome to the Ramsey Show.
Hi, Dave. Thank you for taking my call. I need some help. I need assistance. I need guidance with how to set up an estate planning.
On behalf of my mom. Diagnosed with ALS. Here are the numbers. Thank you, Dave. It's a lot.
It's a huge burden.
I'm sorry. How old is she?
My mom is turning 73 this month in February.
I'm so sorry.
Okay. Thank you.
She owns a home. It's her primary home. The land and the house is between $500,000 to $750,000.. Her income of pension and Social Security is about $33,000 or $3,500 per month. Her mortgage she owes.
$139,000 on her mortgage. She has $33,000 she owes and $33,500 in credit card debt. She has a car that she's leasing, which has a balance of $23,000.
$23,450 and her total debt is $196,599.
Including her mortgage, including the credit cards, including the lease.
Yes, sir. Her plan is to keep the house and sell it and keep in the family. I was wondering how will we go about.
Why would you keep the house in the family?
Those are her wishes.
I know, but why?
Why does it matter? Is the house family property or is it just her house?
It's family property, yes.
It's been in the family generationally.
No, since her, I was born into the house, so since she was married.
Okay.
Her medical bills are expected to be about $250,000 for ALS clinic, and we're wondering about what's the best way to go about this, because her wish is that she would like to keep the house and give it to one of the kids. So it's myself and two brothers. Yeah.
When you pass away what you own, stands good for what you owe.
Okay. So if the family wanted to keep the house, they would have $140,000 mortgage on the house. still. They can pay that mortgage and keep the house, but the clinic bills, the credit card and the car will all have to be paid. Right.
So, by asking you all to keep the house, she's asking you to take on the clinic bills, the car bill and the credit card bill.
because there's no cash around to pay those things, correct?
Well, if I was to, well as of now I've moved into a sister and if I was to absorb the mortgage payment and the annual property taxes and her income can absorb the credit card debt and pay that off. that's what we were thinking.
In 10 months and then you've got a car that you've got to deal with and then you've got $250,000 in ALS clinic bills to deal with.
Right. Am I missing something?
No. Those are the numbers. Yeah. Those are the facts.
So you have a harsh.
diagnosis and a harsh reality that you're going to be walking through in the next, whatever 12 to 36 months, and.
and I don't want to be the person that adds another harsh reality to your situation, but the house will be sold.
Because you can't pay the bills.
And so the equity in the home will pay the bills.
I'm sorry.
Listen, if you don't pay the clinic, they're going to sue the estate and take a lien on the house and force the sale of the house. And you don't have $250,000 and she doesn't either.
And I guess neither of your brothers do. Do they?
My brother purchased a home last year, so as of now.
Even if one of you is sitting on a $250,000 cash balance in your personal checking account, I would not suggest you use it to keep this house.
I'm sorry. The house is there and we can use it for her final days and make her comfortable, and there's nothing to keep you from doing that. That works fine and obviously the more of the credit card debt and the car you can clean up during that time with her income and you take care of the mortgage, that's all fine. Your brothers need to be aware that you're going to be reimbursed for you paying the mortgage bill.
upon her death out of the proceeds or the sale of the house before they get any inheritance. But basically, there is enough to give you all some inheritance after everything's paid, but not much.
Right. Because her net worth with the $250,000 medical bill to it is approaching zero.
Got it. So what sort of trust or estate planning would you recommend?
Just a will. Because you can't hide these things in a trust and keep this from happening. So just need a good will. You need to go see an estate planning attorney and they can help you draft a will that gives these instructions. but I don't know how to break this to your mom.
I don't know how to be kind to her with the you know, especially in this setting, but
I've never participated in things where we didn't tell everybody the whole truth, that it turned out well. Got it. And so I mean you could just choose to not tell her and just draw up a will that says that you guys get the house, but the answer is when it actually goes to probate court, you're going to find out you can't keep the house no matter what the will says. Because the will does not have the power to do away with all these debts. You follow me?
Yes.
And so you still end up with the equation what you own minus. what you owe your net worth is how it works. Now you guys don't inherit the debt. let's pretend that if the medical bills are a million dollars, then they're just not going to get paid because there's not enough money in her estate to pay them. and you guys do not inherit debt.
that's good news. but you don't inherit assets without paying all the bills associated with the estate.
That makes sense.
I'm so sorry. Oh, it's so hard. And I don't want to be the guy telling you all this stuff, but that gets to be my job today, I guess.
Right.
We'll pray for you, darling.
A living trust would not work either.
It won't cause this to go away. It just is another way to facilitate the exact same answer.
Okay.
You can't hide assets in a trust from debt. You can hide them from people and keep people's hands off of them. It's a little bit strong, a little bit more way of a strong arm to ensure an estate wishes go the way you want because it's in trust and you can't. it's harder to break a trust than it is a will, but neither one of them are that easy to break actually, assuming they're drawn up properly, but still, at the end of the day, the creditors get paid. There's not an estate planning tool, a living trust, a revocable trust.
there's not an estate planning tool that makes debt go away. Makes sense. Or the results of the debt. and the results of the debt is the person that is owed can collect their money as long as there's something to collect against. So if the house were in the trust, the equity in the house goes to the beneficial interest of an individual.
however, the trust and the beneficial interest can be sued because it's part of the estate. So I'm not an attorney. You probably do need to sit down with one and you need to spend a little bit of money getting a proper will drawn up to make sure. I'm not right, but I'm afraid you're going to find out. I'm right.
I'm sorry. Wow.
Oh my goodness. This puts this hour of the Ramsey Show in the books.
Live from the headquarters of Ramsey Solutions. it's the Ramsey Show where we help people build wealth, do work that they love and create actual, amazing relationships. Rachel Cruz, number one best-selling author, co-host of the Smart Money Happy Hour, Ramsey Personality, and my daughter is my co-host today. Open phones at 888-825-5225. Shane starts this hour in Baltimore.
Hi, Shane, welcome to the Ramsey Show.
Hey, Dave, how you doing?
Better than I deserve. What's up?
Alright, so I feel like I know the answer to this question, which I hate, but I wanted to hear from you. So I recently purchased a home from my grandmother, who passed, and I knew it was essentially a steal to buy because I was going to get it way lower than it's actually valued at. So long. story short, I have equity in the home, which is awesome, but I've been struggling internally to figure out if I should roll my credit card debt into that home, into the equity of the home, and then pay that off with Gazelle Intensity.
I have $26,000 in debt, credit card debt and.
I make $85,000 a year.
You're single?
I'm single.
What's the answer to your question? You know it.
I know what it is. But it would free up $400 a month for me if I were to roll it. but it's funny, I tell my mom, my problem is not the debt. my problem is that I'm not disciplined enough to knock it out. like why do I need to consolidate it into my equity?
So.
And that answer is what Shane?
That I feel like I'm getting to a point where.
the answer is that I shouldn't do it. I know exactly what I should do. I just, I wanted to make sure it was the right thing to do.
Let's kind of back up for a second. $400 a month is not true. That's $4,800 a year. You're not saving that on $27,000 worth of debt in interest. The only way you're saving $400 a month is if you're going to be in debt longer.
Gotcha.
Which is absolutely not your goal.
No, it's not. Okay.
So, you're just trying to dumb this down to make it easy, and it's not going to get easy. This is Band-Aid fast-off versus Band-Aid slow-off and you get gangrene.
True that.
Gross.
Hey, Shane and I are okay, Rachel. You don't have to worry about it. If you don't want in, it's okay.
It's like Google Imaging.
Oh, Shane.
Here's the deal. Get fired up and lay out the math and go, What is it you make again, by the way?
$85,000.
So, $27,000.
. So, you're by yourself. You don't have to talk anybody into this. You're how old?
$29,000.
One year.
You really think I can do it in one year?
Gosh, I knew you were going to say this.
And here's the problem, Shane. You have no life for a whole year. All you're going to do is work and eat ramen, noodles and pay debt. No, going out. No eating out.
No vacation. Work, work, work, work, work, work, work, and you're done in a year. See, this is only about $2,300 a month. And you're done in one year.
Alright. Shane, what's the?
debt? Was it just life?
It's life over about eight years.
That's what's going to be hard, Shane. It's not like this is just a car loan and you made one purchase. that put you in this. These are multiple decisions over life, and you're used to living that kind of lifestyle of $26,000 above what you've been making. So it's going to feel even more sacrificial in a sense.
So just as a heads up.
Here's the thing. If you'll do this, it'll make you a multimillionaire. And here's why it'll make you a multimillionaire. Here's why. Because any time you get ready to be chaotic and sloppy and disorganized and slip back into credit card debt, you will remember the year from hell and you will not let yourself do it.
Dang. But if you wander your butt, just kind of lollygagging along out of debt, you will wander back in.
Dang.
But if you have to pay a price, I mean if you got the year from hell in your consciousness and you go, crap, no, I'm not buying that. There is no way. I'm not going a month without a budget. I remember where that put me before. And this is it's settled in your brain.
It's settled in your body. It's settled in your spirit. And that's why I'm telling you to do it. It's not just because it gets you out of debt. And it's not just because it's absolutely the highest probability you will win.
But what we're doing here is resetting the way you handle money for the rest of your life.
And that's going to make you. you're only 27.. It's going to make you $10 million. I promise you. The math says it.
Because you know how to make money and you've not been horrible with money. I mean you're not like as bad as like Congress or something. You're not.
you only got $27,000, but it's just sloppy. It's like the enemy.
It's pretty intense. This is not to shame, Shane, but like $26,000 in credit card debt from just life, though it's going to be a shift, Shane. You've got to hear that, but it needs to happen.
It wasn't like this explosion of stupidity. It was gradual. You know. like you said. That's the truth.
And so the danger of that is the enemy of excellence is not horrible. The enemy of excellence is okay.
Complacency. Yep.
This is good enough. You know, and we used to say this, Redneck saying. I don't know if they say this kind of stuff anymore. Close enough for government work. You ever heard that one?
Close enough for government work. Nope. Which means half, but do your job. Okay. That's what it means.
In the neighborhood I grew up in. And so you know it's mediocrity. Yep. You know, and so, and you know, Shane, you're fighting what all of America is fighting. The slip into mediocrity.
and you've got the ability here to completely change that. and the cool thing is, you already knew every bit of it before you called here. Now all you got to do is go do it. I'm proud of you, man. Proud of you.
Great Shane. I can't wait to do your debt free scream with you in a year when you hate the old Shane so bad that you will never go back to him. and you were breaking up with him, never going back with him. and so we're going to be organized, diligent, have money budgeted for fun, money budgeted for luxuries, and we're going to go become very wealthy and outrageously generous. and that's in your future.
You could be a millionaire in ten years. You really can be from where you're sitting right now. You're really mainly because of headspace. Your headspace is excellent.
As long as the gangrene doesn't get them.
Rip that bandaid off Shane.
So gross. Watch out for the amputation.
This is the Ramsey Show.
Every team that wins has a good offense and a good defense. Money's the same way. Offense is you get out of debt, you invest and you're generous. Defense is insurance. You need good insurance.
You need to protect your finances from the big emergencies. There's ten kinds of insurance coverage you might need, based on what your life looks like today. We built a tool called The Coverage Checkup, which shows you the types you need to add, the junk you need to drop, and the adjustments you need to make. We'll even rank your coverage list by importance, email it to you, and connect you to a Ramsey trusted insurance provider to help you get this new plan in place fast. None of it costs you a dime.
Matter of fact, you're probably going to save some money as a result. Go to RamseySolutions.com slash checkup completely free. RamseySolutions.com slash checkup. Do not let emergencies sneak up on you. Russ is with us in South Bend.
Hi, Russ. Welcome to the Ramsey Show.
Hi. Thanks so much. Dave, we are a young married couple in our early 70s.
We have.
. We're financially free. At this stage of life, we've got about $80,000 in cash. We've gone through Financial Peace University and designated the emergency fund out of that, but my question is twofold. What's the best thing to do with that money?
Obviously, sitting in the bank is probably not the best thing to do. The second question is is the goal of wealth realistic at this stage in our lives?
We have to define wealth. Extreme wealth, unless you make really, really good money, no, because time is not on your side.
Can we build a nice nest egg, a plump one? Sure. Sure. Of course, that depends on a whole host of other factors and variables that you can control, some of, and some of you can affect.
$60,000 invested in good mutual funds, if it averages, 10%, would double every 7 years. if you don't add anything to it. It would be, if you're 70, when you're 77, it would be 120, and if you're 84, it'd be 240, give or take, but that's pretty close. That's if you don't add anything to it. Now, of course, you've got income, you've got other things going on, but a quarter million dollars as a plump little nest egg in your early 80s is certainly better than a whole host of people.
Absolutely. And, you know, a neighborhood I grew up in, we called that rich, but it's probably not really rich.
No, that's great. So mutual funds would be the way to go.
If you're going to leave your hands off of it. Yeah. If you can leave your hands off of it. You have an emergency fund in addition, and you have income to live on?
Yeah, we both. we pull in about 60 grand a year, about 30 apiece. At this stage I've got a financial stream from my old insurance business. I live on residuals and occasional referrals. She also is on Social Security and she's working at an accounting firm and she does a little part-time work for that.
So this is semi-retirement for us and there is income streams for both of us along that amount of money.
Good. Perfect. Excellent. Well done. You're secure.
and so we can allow this money to grow. We might even be able to add a little bit to it as we go along, if you wanted to. There's no panic here. It's not like the house is on fire, but you've done a good job. I mean, you set yourself up to where you should be able to prosper with that.
That's great, Russ. Yeah, absolutely.
Ashley's with us. Ashley's in Los Angeles. Hi, Ashley. How are you?
Hi. Thank you so much for taking my call. Huge fan. My question is my husband and I are on Baby Step 6..
We have about $450,000 left on our mortgage of just under a million dollars in equity, and my husband would like to take about $150,000 that we have in our savings to possibly invest that in real estate and investments. In my opinion is that we should $450,000 to completely being debt free, that we should continue to chip away at that mortgage payment rather than invest now. So we just aren't sure where to go from here.
Yeah, it's a good question, Ashley. It's one that I feel like a lot of people are asking these days. This comes up a lot that I see. I'm more of your line of thinking. I would throw that money at your primary home, pay it off, and then make it a goal for you guys to buy an investment property, which may be tough in Los Angeles to do it with cash, but that's how we recommend doing it.
How much do you guys make a year?
Combined income is just about $225,000.
What do you?
guys do for a living?
I'm in real estate, so that's why I love taking those commission checks and throwing them at our mortgage and just pretty much living off of his income, which he's in law enforcement.
What does he make of the $250,000?
About $150,000 to $175,000.
If you throw $100,000 a year at this, plus the $150,000, you're done in three years. How old are you?
I'm 38.
You're a whole 41 years old. You own a house. at that point that's worth $1.5 million to $2 million, and it's completely paid for, and you make $250,000 a year. That sets you up to build a lot of wealth in the future.
If you put $150,000 down on a $600,000 or $700,000 rental property, it'll barely cash flow.
Barely cash flow.
There's no blessing there.
The answer to the question is not real estate, or what can you do? The answer is the lens to look at. it is what gets us when we're 50 to the highest net worth? Which method?
I can promise you the method that does, that is, paying off your mortgage first and then paying cash for your first rental property. You can do all of that before you're 50..
There's still this myth out there, Ashley, with real estate and investment real estate. I see it everywhere. It feels higher than it has in a long time of people wanting to get in and do stuff. There's this mentality of how great. It's fun.
We have this other property and we get rental income, and it feels like this cool thing to do. In reality, it's a side business. You're going to be dealing with tenants. On top of that, the money never ends up being what people think it is, with the headache and everything. What you guys end up after fixing stuff in the house, paying the mortgage because you're taking a mortgage out on it.
If the rent isn't paid, there's just so much that goes into it. that's not as glamorous as it seems. It's great. We love real estate. We're a real estate family.
My husband does real estate. My dad, Dave, loves real estate. It's not that we're against it. In fact, it's a wonderful thing, but you want to do it the right way. If you go into it like you guys are thinking, it doesn't end up being as wonderful and great as an Instagram reel makes it out to be that you see all the time.
Yeah, for real. Nothing ends up as great as an Instagram reel in reality.
You know you're dealing, folks, with someone who doesn't know anything about real estate. when they say things like, well, the tenant will pay the bill. That means you've never had a tenant. That's what that means. That means you've never had a hot water heater.
go out the same month that the tenant moved out and broke the contract and you don't even know where they are. They just left. Oh, and this was in a nice house, not a junkie house. And they trashed it the same month. So I'm putting in heat and air.
I'm having to paint it because these morons spray-painted the wall for some reason. They decided to do this as they broke the contract and left and disappeared in the middle of the night. And I got no payment coming in. I got a lot of money going out. This is landlording.
This is landlording right here. Now, can you make money, net-net of all of that? Yeah, because you put a tenant back in. And you don't have any payments? You don't have any payments.
But if you put down $150,000, you've lost your hiney under the thing I just described. You'll look back there and it's gone. This is the Ramsey Show.
Rachel Cruz, Ramsey Personality, is my co-host. Teresa is in Little Rock, Arkansas. Hi, Teresa. How are you?
Just fine. And you?
Better than I deserve. What's up?
Well, I am knocking on the door of 61.
. I have no retirement money saved up whatsoever. I've been working the baby steps. I've got my little thousand dollars.
And hopefully Social Security will still be there when I retire at 67.
. My question is, even though I'm in the baby steps too, my company matches 4%. And I'm just wondering if I should go ahead and be putting that 4% into my 401k, even though I'm still in baby step 2.. So you're 61.
and have no money?
None.
What do you make?
I bring home roughly $67,000.
. What is your debt?
A little.
over $69,000.
. On what?
A student loan is $11,000.
. I have a car loan of $18,000.. I have a personal loan of $12,000.. And then I guess you could say another personal loan of $26,000 on a tractor.
Why do you have a tractor?
Well, we're country folks.
Where's your husband?
My husband is 75.
. He's drawing Social Security. He is basically.
disabled. I guess you could say he has COPD and emphysema. He's had three back surgeries.
So he don't need to be on a tractor?
No, I.
use the tractor. Not anymore. Broke people don't have $26,000 tractors.
Well, I have tried everything I can to try and sell this thing, other than just letting it go back and letting them sell it for whatever they can sell it for.
No, you haven't. Tractors are selling right now. What kind of tractor is this?
It's a Kubota.
That tractor will sell.
You haven't tried to sell this tractor.
Well, when people say that they'd go buy a brand new one for the same price of what my payoff on it is.
Your payoff is a personal loan. Does it have an actual lien on the tractor?
Yes.
With who? Kubota?
Yes.
Well, I would go to the credit union and borrow the $5,000 worth of difference and get this tractor sold. And you need to sell your car, too. You guys are in emergency mode, girl.
You don't buy a tractor when you're broke.
Well, this was two years ago, before I discovered Dave Frenzy this past March.
What is your land worth?
Probably about $3,000 or $4,000.
Your land is worth $3,000?
Yes. We.
bought it.
per acre?
No.
For the whole seven acres.
You have a $26,000 tractor for a $4,000 piece of land.
Well, we hunt and I use it to clear deer leases in our hunting area and food plots. Yeah, I told you I was a country girl.
I'm not criticizing country. I love country. I was over bush hogging last weekend on my farm. I got that.
just because it's therapy.
I admit it was a stupid purchase. It was a spur of the moment purchase.
It gives you joy, but not as much joy as being broke as stealing from you. And you're starting to look up and go, I need something to eat other than social insecurity when I get to 66, 67..
If I'm in your mode, I am so scared. I'm going crazy and I'm selling tractor. I'm selling car. I'm going to get a $2,000 car. I'm going to work like a crazy person.
Are you leasing the land? Did you say deer hunting lease? Are you leasing it out to people?
No. It's land that other people own that has given us permission to hunt. We're not having to physically pay for a lease.
You don't have to pay a lease, but you're not receiving any lease money on your 7 acres? No. You have 7 acres and literally the only value of it is $4,000 or $5,000?. Yes. Is it mountain land or something?
No. It's in between a bunch of heirs.
It's hard for me to imagine land that's that cheap. $500 an acre of land in Arkansas.
You must be piping sunlight in. there. We are. I got you, girl. I love it.
I've got a feeling it's beautiful. I really do.
Selling car. Selling tractor. What's the student loan? Teresa, why do you have a $11,000 student loan?
I've been paying on it since 1999.
and did not take advantage of paying the last 3 years.
You've got to get in high gear mode, because if you'll get this mess cleaned off, you'll have plenty of money to save and invest. You've got so many payments coming out, you ain't got any room in your budget to invest. That's why we tell people to clean their debt before they take advantage of the match.
Don't do the match right now.
I want you debt free in a year by selling everything in sight. I want your husband afraid he's going to be sold next.
Every deer in the area needs to be afraid you're going to sell him because you're going to shoot him and put him on something and sell him.
You've got to scratch up every dollar. you can, clean everything up and knock this out as fast as you possibly can, because you don't have any money to invest. You don't have any room in your budget with what you described to me.
As you said, you've got 6 years, so we've got to make hay while the sun shines and you've got to get with it.
It's going to be extremely uncomfortable. just know that going in.
It's going to be really uncomfortable being 82 and have zero money.
and a rusty tractor. You know what I mean? After decades of living a certain way, untangling that is much more difficult, I think, than when you're living some way for 5 years. You're taking a life and you're turning it on its head. You're going to be doing some really newer ways of thinking that are going to feel very uncomfortable, but keep pressing through even though it's hard.
Every time you do something smart, I want you to say I'm doing this because I'm a country girl. I don't want you to do anything else dumb and say I'm doing this because I'm a country girl. Quit blaming dumb stuff on country girl. Blame smart stuff on country girl, because country girls do smart stuff.
This is what you're about to do. You're about to do some really difficult things, and people in your life are going to think you've lost your dadgum mind, but what you're doing is you're trying to secure a reasonable last 3 decades 2 decades of your life.
That's very important to fight for. Very important to fight for.
It's possible, Teresa. We've talked to people 5 years down from where you are, and it's a completely different situation. It's never too late. We always get that question. Is it too late?
It's not too late. It's not too late, but you're trading a $26,000 tractor for $150,000 in your retirement. You're trading an $18,000 car for another $100,000 in your retirement. You could have a quarter of a million dollars set aside with match. if you'll get your butt out of debt now, by the time you hit 67, 68 years old.
You can get there. If not, maybe $200,000.. Maybe not $250,000, but you can get to where you don't have this sense of being broke. and then, if you want to go buy a $6,000 tractor to play with out of your $200,000 and your $70,000 fine, go do that, but otherwise don't. No.
No. No. And blame all smart things on being a country girl. Don't blame dumb things on being a country girl. This is the Ramsey Show.
It's way too easy to put off making a will and believe me, I've heard every excuse in the book, but not having the time is one excuse. we can kick to the curb right now, because these days most folks can make a legally binding will on their laptop between loads of laundry. If you're wondering if you can make your will online or if you need a lawyer, we have a quiz to help you figure that out in less than 5 minutes. Just go to ramseysolutions.com slash wills quiz. ramseysolutions.com slash wills quiz.
Rachel Cruz, Ramsey, Personality. Taylor Swift Song Quoter is my co-host today. You giggled all the way through it and nobody knew what you said.
I had a dream. my daughter-in-law kills me for the money. She thinks I left them in the will. Is it? And then they all have the reading and they realize they're not in it.
and then the last line is they're all screaming. She's laughing up at us from hell. Can I say that? Yes.
We don't get fined for hell. I don't know. As far as I know.
Remember when you thought asinine was a cuss word?
There's that. Michelle is in Rochester, New York. Hey, Michelle, how are you?
Hi, thanks for taking.
my call. Sure, what's up?
So my husband and I are trying to decide if we should move in with our mother-in-law. We are going to be seniors in college. We've been married two years now and there's too many reasons why we would move. The first is we would save money. probably.
We'd still pay her rent, but we'd probably save $400 a month. And the second reason is because she's a single mom and her son is moving out to get married. so now she'll be in the house alone and she doesn't like to be alone.
Is her son, your husband? The one that's getting married?
No. What? It's my husband's twin brother.
Oh, okay.
Yeah, so.
Michelle, a reason to move in with an in-law under the motivation because she doesn't like to be alone. that starts to really entangle a relationship, because it sounds like you're being kind, but it actually ends up being extremely dysfunctional that she's depending it upon you guys.
If the only way she's not alone is her grown children stay home with her, that's dysfunctional. I'll just say it that way. Yeah. I'm sorry. It's a normal thing to cry when your grown kids leave and cheer 20 minutes later.
It's a normal thing to do that. You do both, okay? And to just cry, and I don't want to... She needs to have a life outside of her children.
Okay, I will say she is very self-sufficient. She still works full-time. No, she's not.
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