Financial Peace Turns Emergencies Into Inconveniences (Hour 1) - Transcripts

Live from the headquarters of Ramsey Solutions, broadcasting from the pods of moving and storage studios. It's the Ramsey show where we help people build wealth, do work that they love and create actual amazing relationships. Jade Washaw, Ramsey personality is my co-host today. We're going to answer your questions. The call is free, triple eight, eight two five five two two five. And some say the advice is worth exactly what you pay for it. Lydia starts this hour in Orlando. Hi, Lydia. Welcome to the Ramsey show.

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

Sure. What's up in your world?

Well, I, uh, just wanted to share kind of a success story and, uh, maybe a little bit of hope, um, surrounding the SCB bank failure. Um, my husband actually works for a tech company, a small tech company in California. Um, he works remotely. Um, but about one year ago, took a job at one of these small tech companies and come to find out last week, his company was one of those that had their deposit at SVP, SVP bank. Um, we found out Monday that the, uh, deposits are going to be backed by, um, the FDIC and the other, um, insurances that the other banks, I guess, participate in, so his business is going to be okay, but there was a little bit of time there where we weren't sure. Um, but to give a little bit of backstory as well, my husband and I started following the baby steps, um, about nine years ago and we completely got out of debt, um, we're in baby steps four through six, and we even are going through our first FPU class as coordinators. So we've never done it before and we're going through as coordinators. Well, thank you. Um, yeah, yeah, thank you so much. So, um, we were able to kind of walk through some of the principles with our FPU class and we actually just went through the emergency fund week and we decided to beef up our emergency fund from three months to five months because my husband's job is a little bit risky. Um, as far as little did we know tried company. Um, yes.

very good why are you going proud of y'all why did it go kiddo very good why did I'm proud of y'all well that's what happens when you're smart and you and

you follow the steps you have financial peace that's right yeah I would told we're gonna tell our FPU class here this week you know we just went through the lesson about the about the emergency fund that we're really happy and dry under our large umbrella we do to to the principles that you teach very

grateful well we're grateful to you thanks for telling your story and wow I

mean that's pretty incredible that's something I love it it it will rain Dave like it's gonna rain you don't know what form it's gonna take but doing those steps and having everything in order she was able to you know even if he had

lost his job for a while they would have been just fine yeah yeah and it may take them a little while to make payroll that's right a venture capital firm funds it for three years dumps all of that funding into this bank is a venture capital bank that's what it was mainly startup tech startups and and VC money and even some hedge fund money but there wasn't much grandma CDs in there it was like regular people in this bank right this is not your local credit union this is not your your regional bank you should be doing business with but um yeah wow that's something so yeah they Lydia didn't have any money in there but her husband's company right funding was in there and boom you may keep them maybe a little while before they get that money that's true to be

able to make payroll but doesn't matter she's in good shape but there wasn't Right, this is not your local credit union thing. Yeah, this is not that you should, but, you know, I love it. That's true, yeah, that's great. I love that story.

Thanks for sharing that, Lydia. Very, very well done. So here's the thing. We talk about this all the time, and Jade and I have experienced it, a lot of you have too, that when you have a fully funded emergency fund, let's call it 10, 15, 20, 35, $40,000, whatever that is, whatever your rainy day fund is of three to six months of expenses, it turns an emergency, a drama filled, and this one was really drama filled,

emergency into an inconvenience. Oh yeah, that's right. Because you know you're ready for it. No one likes, let's be honest, no one likes to spend their emergency fund, right? It's there and you're hoping you never have to touch it. But when that moment comes and it starts raining and your job is at risk or, you know, the car breaks down, water heater goes out,

roof blows off, that's when that money comes in handy. Strange, I remember one of the first times we actually had a fully funded emergency fund was the heating and air. And you know what's weird is when you're, when it has a big impact on you,

emotionally the numbers stick in your memory. It was the heating and air.

Yeah, they do, yes.

It was $3,842. Well that ain't bad,

because mine was $5,002, $5,002. This was a long time ago.

Okay, okay, okay, okay, okay.

Long time ago, dinosaurs installed the new one.

Oh wow. That's true though. Yeah, you remember, you remember what you spent. That's for sure.

That's for sure. It locks in and yet it was only an inconvenience. That's right. Because every other time we had an emergency, there was a lot of drama.

Takes the drama out when you got financial peace.

Amen. This is the Ramsey Show. You could be a great driver, but if you never check under the hood, your car won't last very long. The same principle goes for your business. NetSuite by Oracle gives you the visibility under the hood. In business, that means knowing your numbers. NetSuite gives you access to the real time data you need to make smart decisions. Plan for the future and move fast. Set up a free product tour today at netsuite.com slash Ramsey. That's netsuite.com slash Ramsey. Jade Washaw, Ramsey personality is my co-host today. Thank you for being with us, America.

So I'm sorry, my allergies are bad.

I know that's right.

You guys are overwhelmed. Been there myself. I know how it feels. And if that's where you are listening, it's time to do something different. You have to try something new. What you're doing isn't working, been there myself. I'm picking on you just time for something new. If you don't like the cake, change the recipe, baby. Hey, you got to rethink it. And we'll show you how in Financial Peace University, our nine week, nine lesson course, that's helped nearly 10 million people, how to get out, how to get out of debt, build wealth, become outrageously generous. And we're going to do something right now that we haven't done before in a while. Been a long time.

Kind of like those cool snacks at Costco.

That's what I was just thinking, Dave. See, it's lunchtime, but there's that. So don't go another day with being out of control or scared. Take back control and get a free sample. Go to ramzysolutions.com slash peace, P-E-A-C-E, ramzysolutions.com slash, when you like to have some peace. Everybody can use some more peace. Financial Peace, two words that don't go together like airline service. There we go. Jade Washaw, Ramsey Personalities, my co-host today.

Cecilia is, or Cecily, how do you say it? Cecily.

Cecily. Cecily. Cecily is in Philadelphia.

Hi, Cecily, how can we help? Hi, so it turns out my grandparents are kind of weird people. And I just discovered that they left me, or they're still alive, but they helped me pay for school. And I'm currently a student, but they have like a lot of money in the 529 account. And I have 10 grand in student loans, just because I didn't know how much was in it. And now I'm wondering what to do, how to pay it off.

And-

How much is in the 529? I think after I finished school in a year, they'll still be like $130,000. So my parents helped pay for college, except for that. I had 20 grand in student loans, and I rolled 10 grand from my 529

over onto the student loans, so I still have 10 grand.

How did you roll 529 money into a student loan? There's a new policy where you can take out 10 grand

to pay for student loan debt from a 529.

One time or per year?

One time, it was a new Biden policy. Then you're going to also get a penalty on the rest of it that you removed to pay off the other student loan. The only other thing you can do is under the new secure act, which is probably where that fell, but I didn't see that provision in it, under the new secure act, if you leave it alone for 15 years, you can roll it to a Roth IRA and just let it sit there. It's gonna grow, put it in good mutual funds and let it grow for 15 years. And then roll it to a Roth IRA, which is exactly what I would do with it, other than I would take enough out to pay off the student loan once you're out of school.

The only other thing you can do is-

So it's 15 years from when the secure act passed?

Yep. No, no, from, um, uh, 2024, I guess it's from your graduation.

Okay. I don't know. I don't know what the start date is on that. I don't know whether it's when the, uh, five 29 was formed or from when you graduate, but it's, uh, basically, if you keep an old five 29 around long time, it can be rolled to a Roth IRA. And it effectively is a Roth IRA anyway, cause it grows tax free. So you could put it in good mutual funds, just like it was a Roth, let it grow and just pretend like it's Roth money. Uh, and then roll it to a Roth whenever the appropriate date is, and you'd have to get a little more research on it.

Would I be able to put it in like kids' names?

You can use it for kids. You can use it for siblings. You can use it for spouses and use it for anybody, anybody, anything you want to do. And it's 15 years from the date it was opened. James just looked it up and said that in my head, in my ear, in my ears, it is 29 years old. So I think you, I think you can roll it to a Roth now then. Uh, so what I would do with it is, um, what,

what's your degree going to be in then? What I would social work masters of

social work. Okay. What are you planning to do? Medical social work. Okay. What is it? What is it? What does that pay?

Upwards, uh, 85 to 10 a hundred if I'm doing well.

Okay. So medical social work's obviously a different field then.

Okay. Good. Yeah. I mean, it's the same degree,

but if you work in specialty, that's what I'm here. That's what I'm here. Yeah. The specialty is where the money is going to be. Okay. Good. So if you can roll out and make an 85, I wouldn't touch the thing at all. I would just pay off your student loans with your income. Okay. When you get out, don't, don't take out any more. Obviously use the, use the five 29 to graduate with no additional debt, pay off your debt out of your income. And then this becomes a Roth IRA when you graduate.

opened. That sounds right. That sounds, that sounds right.

That sounds like what I read. It doesn't make sense though. Cause if you have a four year old, 15 years later, they're 19. So then they can roll it to a Roth. That sounds weird, but there's, listen, it's the Biden administration. It's the IRS. It could be very weird. There's nothing here that's predictable. So all things are possible. Be sure you check all that out and make sure you've got that right. But, uh, because it's all brand new, number one, number two, we don't have the details. Um, and we're, we're Googling it as fast as we're talking here and that's about it.

There'll be a penalty on it. It's the IRS very weird. Yes. All things are possible. Yeah. But I think it might be worth getting rid of it getting rid of it as a, as opposed to the time it would take to pay it off.

Getting rid of it. Yeah. Yeah. Because that's what that money is for. It's for school, you know, I would not cash out your Roth IRA for a penalty. No way. No, I wouldn't do that. Well, it's similar mathematics is the problem, but, um, but the, the Roth IRA is that's got it.

It's got a brand on it as far as I'm concerned. Do not touch. Right. We're five 29 really is earmarked for paying for school.

So even if you took, even if you took a penalty because your weird grandparents didn't even bother to tell you you had 150,000 bucks sitting there. Yeah. Oops. I forgot to tell you, tell you $20,000.

Well, she said, she said they were weird. So she did. She meant that they were weird.

So she did. They're definitely asleep at the wheel. This is the Ramsey show. Hey folks, the days are getting longer. The weather is starting to warm up. It's finally spring and that means it's moving season. If you're planning to move soon, listen, you got to check out pods moving and storage. They've got an exclusive offer just for Ramsey listeners, up to 20% off moving and storage. When you book by March 24th, you know, pods is the only Ramsey trusted moving provider out there. They've been trusted with more than 6 million moves and their customer service team makes your move feel like you're the only one pods gives you the control with the flexibility of move dates and the ability to pack on your schedule. Basically, we trust pods to give you a great moving experience. So don't miss your chance to get that experience for up to 20% off through March 24th.

This is just US news money. Okay. Money.us news. We hope that's right. It's a good site. I use it quite a bit.

Okay. Money.us news. We hope that's right.

Okay. Well, it's talking about the new provisions from the secure act 2.0. And the last caller was talking about what can she do?

With $130,000 Roth, $130,000 529. I told her she could roll it to a Roth after.

If it was 15 years old. Yeah, what she can, the Roth, the 529 has to be more than 15 years old, but you can only roll $35,000 limited lifetime. So she can't roll the whole amount. And not only that, she can only roll up to the annual contribution limits for the Roth IRA.

So $6,000, $6,000. So it takes six years to put $36,000, $35,000 in there. Yeah.

And you're not doing your Roth while you're doing that in there.

Yeah, that's right. Because you're maxing it out. You know, so that would change my advice then. I would tell her to instead to use this for her kid. Yeah. Because you can use it for your children unlimited. And spouse is unlimited. And so since the whole roll it to the Roth IRA thing is so pinched down and bottle necked, in other words, this is Washington DC and going, look, we did something. Oh, wait, when you get into the details, it's not worth a crap. Okay. And that's kind of what that is. And she does have to wait till 24.

Yeah. And spouse, oh, wait, when you get in, you get it. And she does have to wait till 24. It's a great idea. Yeah, it is. Yeah. Well, it's making the assumption that you wouldn't contribute to a Roth IRA on your own.

So you have to use this to move it over, move it over. I mean, but why not just let the whole thing roll over? I know. If you were going to do it. That's what we thought it was. Yeah. That was a good idea. But I don't know. I don't know. Yeah, I don't know. All right. In the lobby of Ramsey Solutions on the debt free stage, Christian and Christine are with us.

I know.

$156,936.

Yeah. Yeah. And how long did this take?

About four and a half years.

Good for you. And your range of income during that time? $83,000 to $138,000. Excellent.

What do you all do for a living? So I'm the director of operations for a Christian nonprofit.

And I'm a professor of nursing at a local university.

Ah, cool.

Which one? Liberty. Liberty. Oddly enough.

Strangely enough. Strangely enough. Okay, cool. Well, good. Good. Well, we're big fans of Liberty around here. And so, $157,000, director of nursing. Was that a student loan? Yes. Okay. Yes, yeah. Okay.

Was that a student? Okay. Yes. Yeah. Okay. Not so bad. So three of it was cars. That was about $20,000. The rest was our student loans, mostly mine.

But how long have you guys been married? It'll be 10 years in January.

What happened after five years that gave you the wake-up call

and said, we're getting out of debt? Yeah. So, I was on maternity leave with our oldest. And Murphy hit the house and everything started breaking. Like our car, our HVAC, and our fridge. The fridge was the last one. And I remember sitting there with her on my chest, and they had just called and said it'd be $250 to fix the fridge. And I pulled up my bank account to see if I had enough money because we had no emergency fund. Like, we were both working full-time, but it still like had nothing and. But we literally had nothing. We had $30 in our bank account. And it was the moment.

that. So we didn't want to do it. Well, and she, as she said, we, you know, we both had full time jobs. We were working hard and it felt like you had nothing at, you know, you, you go, you work your 40 hours a week, you come home and all the money's going to someone else.

So how did you actually find out about, you know, baby steps, Dave Ramsey financial piece,

which one was it? It was a church we were attending at the time. Um, and now the church were, we're coordinating at the church we go to now. Cool. Yeah. Very good. Lots of fun. Very

very cool. Very cool. Thomas rotor. No, no. They did a church wide financial piece university. John pastor Johnson, a friend of mine, and I went up there and spoke when they did that. And so a lot of the major churches have done church wide FPUs. And so anyway, cool. Very good guys. So the church comes along with FPU at just the time you guys needed it. Yes, exactly. And now

you're the coordinator to do that for somebody else. No. Okay. Yes. Yes, exactly. Yeah. Yeah.

Exactly. Yeah. Wow. Having a great time with it. Um, and our, our FPU classes really excited that we're here and we, we let them know we'd be coming over to, to do our screen.

Love it. Love it. That's fun. So what was the big catalyst? Did you start, was it that you

started budgeting? Did you have to do any side work? Like how did you broke it loose, broke it loose? Yeah. So thankfully we didn't, I mean, we considered side work, but we didn't have to, we just figured ways to one grow our career. But before that, it was definitely a budget. Like we sat down that first budget meeting probably was like three hours long and we were not happy with each other at the end of it. Um, but yeah, but I mean, it's true. It was not fun to like figure out, you know, but after doing it just several months, we had more money than we realized when we finally told it where to go. And so just keeping that budget, like every single month. And now it's like, I'm the nerd of it. So I do the budget and it's a couple times.

I love that. That's how it goes. The budget, the budget reveals all. Yes. So very, very cool.

Yeah. It's not actually doing the budget that's hard. It's all the stuff it reveals. Yeah. When you first start, it's like, God, I'm stupid. God, you're stupid. We are stupid. It just wears you out, man. It's just, it's like a horrible, very clear mirror. It is a mirror. Yep. And then you feel like you got a race.

Weird. Yeah. When you first start, it's like, it is a mirror. Yup. Yeah. Exactly. Weird. Yeah. It's awesome. It's awesome. We were talking to someone earlier and we were saying how the month after we paid off our debt, you know, we looked and we were just like, oh, we don't have to give this money to anyone. Like it's our money just to now start putting

into baby step three and start saving. It's no one else's money. So it's weird. Yeah. Very cool. It does. It's a little bit surreal, almost. It's like you come to the side of it

and you're like, uh, I feel like there's something I'm missing. Yeah. Yeah. I feel lighter. Yeah. Feel lighter. And I will say because it was four and a half years, it felt like such a long time. Like you hear people getting out of debt in like 18 months and two years and like just with our incomes at the time, our incomes didn't grow to what they are now till about a year and a half to two years ago, which really was kind of the driving force to finish it. Accelerated. Yeah. Exactly. But like in the middle is when it was the hardest.

so worth it and you will get there. It is possible then it's accelerated. Yeah. That's a good point. Cause you got enthusiasm when you first start. I'm going to get this and then you get in the middle of it's a slog. And then when you get to where you can see the light at the end of the tunnel, this is not an oncoming train. Now we can sprint to it.

Yeah, exactly. Exactly. That's a good analogy. Well, now we can sprint to it. Yeah, exactly. I think we did a, we did a good job of, you know, some months it was harder for her and I would be there to encourage and know it's worth it. Let's get this done. And vice versa. There were times where I'd want to, you're in that slog and you're like, you know, what if we don't do it for a couple months and we go do this instead and we, you know, we're be you know, we're able to

keep one another in check and

work together on it. Well, we had like a chain countdown he made, um you know, like the chains that connect out. He put that in our kitchen. Perfect. Yeah. And I, I like in Like my place and I was like, It's so

ugly, He was like, Well, the

debt is terrible. I picked the worst color That, you know, like

the chains that connect out. He

put that in our kitchen. Perfect. And I, I like debt is terrible. I picked the worst colors. I picked the worst colors. Let's bring the kids I want to make sure what other names and ages I pick the worst for you guys we got the live and give box for you with the baby steps millionaires book total money makeover book another Financial Peace University membership for you to give away congratulations heroes well done thank you very well done Christian and Christine from Lynchburg Virginia 157,000 paid off in four and a half

years make an 83 to 138 count it down let's hear a debt-free scream yes three

two one that's how it's done yeah this is the Ramsey show when you finally find the ride home you want to be ready to move fast get a head start by getting pre-approved with Churchill mortgage the only Ramsey trusted mortgage provider Churchill's team will work with you on a plan to make your home a blessing and not a financial burden go to Churchill mortgage.com today that's Churchill

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Tennessee 37027 jade washaw Ramsey personality is my co-host today thank you for joining us America this is the Ramsey show hey if you're new to us and a bunch of you are because our ratings and our listenership numbers are going way up quickly thank you for that if you're new to us and you're just trying to figure out what all this baby steps stuff means and where do you fit in and it's all this debt snowball stuff go to Ramsey solutions.com click on the get started button it's completely free we're not gonna charge you anything and you can figure out where you are now and what your next step is and we'll start explaining it all to you and customize it for you so again Ramsey solutions.com click on get started Christian is with us in Greensboro North Carolina hi

Christian welcome to the Ramsey show hey Dave yes so I was calling because I had a question I have six million dollars worth of property here in the area and I owe almost 3 million dollars about 2.8 million and in loans my question was do you think it's wise to sell some of my portfolio to pay off the loans and be debt-free or should I utilize the monthly cash flow to pay off the loans

fast what do you think well congratulations you've done a good job you got a good equity position and you've obviously got a going concern and you there's a lot of different ways to attack the situation where you are you can keep doing more of what you've been doing here's what I learned when I had when I was 25 years old 24 years old I had four million dollars worth of real estate and I owed three million on it so I did not have as good an equity position as you do okay I was about about 75% loan to value you're about 50 percent all right but I ended up losing everything because the bank got sold to another bank called our notes we had a lot of flip notes out of 90-day notes and it caught me and took me out and what I learned from that going broke process in my 20s 30 years ago was that those of us that love real estate people like you and me Christian sometimes we forget to measure risk common sense tells you and actual business analysis tells you that the more debt you have the more risk you have would you agree with that yes okay and what I've discovered now over 30 years not only of teaching these things but of living a completely debt-free life and I today on several hundred million dollars worth of real estate and what I've discovered in that process building that in portfolio a different way over this 30 years is that the lack of risk with having no debt has accelerated over the long haul the amount of real estate I can own because I don't make as many mistakes I don't have setbacks I don't have cash flow problems I've always got cash can you imagine how much cash my real estate throws off with no debt it's obscene okay and so but and that I can buy another piece of real estate with just cash flow fairly often it because we've got tremendous rents coming in on these things now so all that to say what I have learned from my personal walk and from walking with others is that where where I know you will be the best off in 10 years and have the most wealth because of the lowered risk and the increased peace in your life is if you were debt-free now do we have to burn everything down and do this suddenly because you just you and I had a conversation no I think you have a gradual process and you say okay over a year two years three years whatever it is I'm gonna move in that direction because if I were in your shoes I would rather have four million dollars of paid for real estate than six million dollars of real estate with three million dollars worth of debt and that's about where you will be because your real estate will go up in value while we're doing this all right so how long you been doing this apparently you've been

doing in a while and you're good at it well I've been doing it since 2012 I actually used my w2 to help me purchase property and I was also sleeping at the

time yeah okay and in 2019 I decided to leave my job because I was able to sustain myself and so you're doing flips in

addition to this yeah I do flips maybe two three times a year okay yeah

it's good pocket money okay okay it's good pocket money okay yeah you can probably live off your flips and then your other stuff just generates income that's awesome well done good for you well here's what I figured out when I'm doing a flip I buy something differently if I'm paying cash and when it is paid for I am in no rush to sell it so my I never become a motivated seller or a motivated buyer and I get better deals on the buy and I sell for higher on the sell because I got all kinds of patience with no payments but when the payments eight in your eight in your back pocket out it makes you want to jump and get

rid of that thing you know what I'm saying exactly and I've been calling you for quite a while and I would like to be debt-free at some point that's why have you got any properties that are higher LTV that are 80 90 percent LTV no like usually when I when I borrow it's really really low I mean you're at about

50 I mean you're at about 50% on the portfolio if you don't have any that are higher than that they're all about 50% okay that would be the first ones I divest but since you don't have those what I would do is just look at the portfolio and go okay ten years from now which one of these suckers do I want to own and start going okay I'm gonna use some some cash flow and knock out a few and I'm gonna liquidate I don't know a couple million dollars worth or million dollar a half worth or whatever it comes out to be and you know between those two things have a two or three year plan to be free because again you're gonna have you're gonna be wealthier and you're gonna have a better life if you start

with four million dollars of paid for real estate three years from today I'm not arguing with that I think I think you got a I think he got the nice Dave

version of that that was great well he's he the reason is is because he's actually pulling it off yeah he's not here he could probably survive and not and do and you know ten years now you start doing this nothing down real estate crap on tic-tac mm-hmm you're not gonna survive ten years yeah cuz I all the guys that I knew doing that in any generation have gone broke including me so but he's sitting in a 50% equity position so he's gonna cash flow and if he manages the property well and he's been doing it a decade already yeah so that tells me he's really got his crap together but now we're down to the simple of philosophy is you start asking yourself is this debt-free thing really better and the actual end result of the data is yeah you end up better not just

a better feeling right you end up with more money yeah including me already yeah well yeah you laid that out really clearly I think that he has a good strategy for him and something that he can start walking towards which is

really cool yeah yeah those of you that are playing with real estate or want to play with real estate let me just tell you something you will never put in you will be less likely never you can always do something stupid you will be less likely to put a bum tenant in a property when you don't have any payments but when you got payments you're looking for somebody to pay those payments with the rent and you're living you're more desperate as a landlord to fill your vacancies and you're more likely to go, well, I know I kind of had a bad feeling. Turns out she was doing drugs. Who knew? Wow. But you know, I mean, whatever it is, right? And you, you put a tenant in there. That's a bum. And then you've got a mess. They tear up the place you go through. You still go through six months with no income. You go through an eviction, you go through all this stuff, bankruptcies on them, everything else, it's a mess, but you won't overlook that if you're going, I don't think unless you really make me feel good that I'm going to let you have the privilege of living in my property, because I don't have any problems now. And I don't need you to bring your problems to me.

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