Face Your Financial Challenges Head On (Don’t Let Them Sneak Up on You)

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.

Jade Washaw, number one best-selling author, Ramsey Personalities, my co-host today.

Open phones at 888-825-5225.

You jump in.

We'll talk about your life and your money.

Kurt starts us in New Jersey.

Hey, Kurt, what's up?

Hi, how's it going, Dave? Better than I deserve, man. How can I help? I have a little bit of a business question.
So I have 57K in personal debt. I started my business less than a year ago.
I've been pulling out everything that I make from the business, all my profits, in order to pay off my personal debt. I have no business debt.
I was just kind of wondering, I feel like I'm not able to grow the business because I don't have retained earnings. I don't feel comfortable hiring somebody without retained earnings.
And I was wondering, too, if I should keep some retained earnings just to maintain overhead. What would you suggest in terms of how I should go about that yeah I would I would um you know you can what how much have you pulled out of the business in a year what are you making so year to date I made about 80k well I would say my profit margin is about 80% good for you I've been pulling out everything a little bit of a tidbit too is I have a four-week-old right now.
Oh wow. That's fun.
Congratulations. What kind of business did you open? Physical therapy.
I'm a physical therapist. Oh wow.
Good for you. Yeah.
Okay what we teach in Entree Leadership is that you pay yourself a living wage or you pay yourself a salary an amount that you're comfortable with, that you can make progress on the goals at home, which would include debt. You don't have any debt at the business, so you could just say, I'm going to take a percentage of profit, 10%, 15%, 20%, something like that, every month and hold that as retained earnings and take everything else home.
And that way your retained earnings grow as fast as your – they grow as a percentage of profits. So as your profits grow, your retained earnings grow.
Okay. Yeah, that makes me feel a lot more comfortable.
I mean, if you had $8,000 laying over there because you did 10% or you had $16,000 laying over there because you did 20%, you'd be in really, really good shape. Yeah, so it's definitely more than the 1,000 that I would keep in for the security fund.
Exactly. This is the different formula because it's business that we're dealing with.
But yeah, that's what we teach Ontario leaders. It's what we do at Ramsey.
And we laughingly call it the Sharon Fund because I was draining everything out of here and then griping about cash flow problems all the time. And Sharon's like, well, you're not even doing what you teach.
You don't have an emergency fund. You goober, you're a hypocrite.
And I'm like, oh God, she's right again. So we call it the Sharon fund when we first started doing it.
And so, you know, it's, it's, we've been taking a percentage of profits from day, from the day that I discovered that my wife is brilliant, you in a home. So, yeah.
Well, when Sam and I started our business, it was a similar thing we had. We still had about $240,000 that we were paying off.
And I mean, we drained all the profit to pay it off. And the most painful part was, you know, you're taking this payroll and then you're turning around paying taxes on it.
And then you're using it to pay off all this debt. But for us, it felt a little different because it was just the two of us at the time.
We had very low overhead. There wasn't a lot of risk involved.
Yeah, and make sure whatever you're taking home that you're withholding on it so that you can do your quarterly estimates. You don't want to get behind with the KGB.
I mean the IRS. Yeah, definitely.
Yeah, okay. So as long as you're doing that, yeah, just pick a percentage.
I don't want to get behind with the KGB I mean the IRS yeah no yeah yeah definitely yeah okay so as long as you're doing that yeah I just take pick a percentage I don't care my recommendation would be 10 to 20 somewhere in that range of net profits and each month when you close your books go boop gonna set that aside over here take everything else home and attack the 57 and get done with it and you know be able to buy diapers for the four-week old everything works very cool good stuff man congratulations sound like you got it going i'm proud of you alan's in fort worth hey alan how are you oh i'm doing well sir thank you so much for taking my call sure how can we help well so uh here's the detail um so my wife and i were in baby step two and, we're just trying to figure out when does it make sense to pause baby step two in order to save for a beater car? Uh, yeah. What are you talking about? Why you don't have a car or what's the situation? So the situation is, uh, we're, I have a car now got a big, well, not a big loan on it.
It's $24,000. And, you know, we're, I guess we're trying to do the whole gazelle intense thing.
And I'm just thinking, well, Oh, if you got a beater, you'd sell the 24. Yes, sir.
Okay. What's your household? Uh, so all said, uh, so about 6,000 months for my primary job, I have a secondary job.
I get maybe $500 a month, and then VA disability.

So around $7,500 a month as my take-home.

Okay.

All right.

And so you have that car, and it's worth – is it worth around the $24,000, or what's it worth?

It is.

So it's – I looked at Kelley Blue Book, and right now it looks like it's selling for about $22,500. Okay, what's the other car? That's it.
That's all. I mean, that's my car.
You have one car? I'm sorry, we have another car. What's the other car? Honda Civic.
Okay, what's it worth? Well, that one's probably worth $8,000. Okay.
That's no other car. There's two rules of thumb we use when someone asks this question.

Number one, don't have vehicles ever in your life that have motors and wheels,

anything with a motor or wheel, added together that equal more than about half your annual income

because you have too much tied up in things going down in value.

Agreed?

You're not violating that one.

Okay.

And the second one is can we be debt-free, everything with the house, in around two we know we got 24 in debt what other debt have you got about 3 000 credit card debt that's that's all the debt you like the car it is a good car then pay it off okay you can be debt-free inside of two years easy probably about 18 about 18 months or less. You're making 90.
We need to pay off $25,000, $26,000. You can do that.
Okay. Yeah, I agree.
So you can do it inside of two years, and the total is less than half your annual income. That's the two tests that we use, the means test, if you will, to do that.
And folks, let me, I tell you, that's not a biblical thing in terms of, it's not in the Bible because, I mean, the only thing that's in the Bible is the Honda Accord because Jesus said they were all in one accord, but none of the rest of them are in the Bible. So you just add it all up.
And, uh, the problem is that we all in America love cars. Uh, some people love cars cause they're redneck like me and they want a muffler.
Some people like a battery called a Tesla. Some people like, like Rachel and George, they want to catch fire to themselves.
And, um, and then some people like my wife likes a lot, a nice car because she thinks it's a large purse.

And so but that, you know, we like cars in America and the stupid things go down in value.

And when you take 60 or 70 thousand dollars and you turn it into ten thousand dollars, this is not a wealth building methodology.

And it's the largest thing americans buy that goes down

in value because you are what you drive in america it's such an identity piece and man it's um

i never thought about that george is a battery you are what you drive yeah i'm a loud muffler

so who knew that's funny yeah but the uh um my neighbor said they go i know when you go to work

Thank you. a loud muffler.
So who knew? That's funny. Yeah.
But the, um, my neighbor said, they goes, I know when you go to work. So how do you know when I go to work? He goes, I can hear it.
So that's who I'm hearing driving, driving down the road. Oh my gosh.
Good to know. Once a redneck, always a redneck.
This is The Ramsey Show. So if you feel like the system is working against you, try a biblically-based alternative to health insurance, Christian Healthcare Ministries.
CHM is a health cost-sharing ministry that's helped hundreds of thousands of families like yours take care of over $11 billion in medical bills since 1981. And CHM has also helped them stay true to their values and avoid miles of red tape.
And CHM support goes far beyond meeting financial needs. They'll also help meet spiritual needs.
Members become part of a family who will pray with them and for them when they experience a medical event. So listen, y'all, there's no better way to take care of healthcare costs.
CHM programs start as low as $98 a month. So learn more today and join at chministries.org slash budget.
That's chministries.org slash budget. Jade Walshaw, Ramsey Personality, is my co-host today.
Thank you for joining us, guys. We appreciate you being with us.
Hey, the best way to get a sense of power, a sense of dignity, a sense of sustainability with your money is by telling it what to do instead of wondering where it went. It's called a budget.
When you write down or you use every dollar of the budgeting app and have a plan for your money every month, you will feel like you got a raise because you've been wasting so much with disorganization and chaos. Me too.
I used to do that too. I know exactly how it feels.
And I've done financial coaching and counseling for 35 years and almost, and Jade has too, not for 35 years, but she's done a bunch of it. And almost every time we sit down with someone, Jade, and they do their budget, they have this aha moment like, wow, I've got some money.
It's a big deal. So check out the EveryDollar app for your budgeting.
It's the world's best budgeting app for sure. It's free in the App Store or Google Play, and you can go to EveryDollar.com and get it there as well.
So check it out. We've got tens of millions of people, tens of millions of people using this every day.
It's pretty cool. So thank you guys that are using it.
We're glad it's helpful to you. That's what we want to be is helpful.
And, uh, just man, pretty incredible. Andrew is with us in Lexington, Kentuckyentucky hi andrew how are you hi dave how are you better than i deserve what's up hey uh so how do i pay off my day if a good portion over half of my income uh goes to child support and taxes um how many kids do you have? I have three total.
Two are on child support. Well, if you have kids, you do have to pay for them.
And so that's just part of, I think that's part of normal life if you have kids in a family. Same thing with the taxes.
And so in this case, it's really just about the math, right? If you want to go faster, usually the solution is you got to bring in more income and more money. So what are you bringing in right now? I average about gross, probably about over three, but I only bring in probably um maybe 12 to 15 a month yes 1500 a month okay something is wrong with that because in kentucky two children child supports 25 percent well i have two from two separate moms okay oh so you got 20 each uh the my daughter uh when we went to court and stuff uh they did not properly send me paperwork and the lawyer i had at the time before i found a different lawyer was not in contact with the child support office so i ended up missing that court date um so they went for max of what they could even with my other custody or child support that i have okay um well i mean there's two things we can do here to work on this um understanding that what jade said is proper and i assume you agree with that that you need to pay for your kids there's no question about that but how am i how can i mathematically make this work so there is a legal amount in every state i do not know if it's two children from two different people,

if it changes it, but the max in Kentucky is 25% for two kids. Okay.
And if you're being charged

more than that, um, you can go back before child services back before the judge and have it set up

properly. And so make sure you're getting charged the right amount and that you're doing that willingly and gladly because you're a good man and you want to take care of your kids.
Okay. But if you've got, if you're being overcharged because of a screw up, we'll go back and have the screw up fixed.
It's not, it's not ever, it's not chiseled in stone. You just got to get back before the judge and go, your honor, here's what I've got.
Here's my budget. Help me with this.
Tell me what I'm supposed to do. I'm not trying to dodge here, but I'm also can't breathe.
And so I, you know, I want to sit down and look at that. And so you've got to get back and reset this to what it should legally.
And for that matter, morally be, then the other side of the equation is what Jade said. And let's start talking about how we can increase your income.
What can you do instead of making $3,000 a month to make $6,000 a month? And that may be side hustles. It may be career change.
It may be something different. But one of the things we see, Andrew, often, it's almost every single debt-free scream that comes in here and is on the stage had an increase in income during the time they're getting out of debt? It's vital because the two things that you can do is you can cut expenses or, or, and you can increase your income.
So there comes a point where you can only cut expenses so much. And then you say, okay, what else can I do? And then it's, okay, I'm increasing my income.
I'm picking up a side hustle. I'm taking overtime.
Anything that will pay me that is legal and moral, I'm going to do that to get money. Serious money.
Yeah. I mean,

we, I'm picking up a side hustle. I'm taking overtime.
Anything that will pay me that is legal and moral, I'm going to do that to get money. Serious money.
Yeah. I mean, we had a young lady in her 20s that paid off doing a debt-free scream just the other day.
Yeah. Were you on with me? Yes.
I will never forget. Attended bar.
$9,000 a month. Single mom.
Yep. Bartending.
Beending beating alcohol ism yeah and doing 75 hard at the same time yeah and you know nine thousand dollars a month wait but she's working 12 hour days yeah you know yeah um and uh that's hard work by the way if you didn't know so um wow so i'm not i don't know andrew but jade's right there two ends of the equation. I'd work both of them, and that's be paying the proper amount of child support by the law.
And if you need to do an appearance before the judge in order to get that fixed, there's nothing wrong with that. And then increase your income.
You know, lower your expenses, increase your income. And that's what we're doing.

So good question, sir.

We appreciate you joining us.

Open phones at 888-825-5225.

You jump in.

We'll talk about your life and your money.

I will tell you this.

Something he brought up, we hear a lot.

And not necessarily exactly the way that he said it, and I don't know his exact situation, but here's the thing. If you know there is a thing out there coming at you, you have a former landlord that says you owe them money.
That's a thing that's laying out there. You have a repossessed car.
It's a thing that's laying out there. They're going to come at you.
You've got an old credit card from five years ago. You've not paid it.
They've not called you, but you've done nothing about it. It's coming at you.
You're going through a divorce. Um, and you know, when you go through a divorce and you have children, 100% of the time there's a child support meeting.

That's coming at you.

When you know these things are coming at you, one of the things I've observed is that if you don't go headlong into it and face it and handle it before it comes to you it costs you twice as much if you wait till the former landlord sues you if you wait till the old credit card pops up it's going to pop up right about the time you're trying to buy a house or something or about the time you're getting engaged or some other kind of crap these things have a high rate of resurrection they come back to life these are debt zombies yeah you gotta be proactive and you you know if you don't go find the debt zombie and handle it so don't don't tell me well they didn't tell me about child support dude you knew about child support you'd go down there and fix it 100 instead instead they they jacked you up because you weren't there yeah you can't wait for somebody else to tell you make sure it was taken care of yeah you've got to wander down there and take care of this stuff boys and girls you know and it's like well i didn't know i didn't know i had a yes you knew you had a credit card debt you did know that you know you weren't that drunk for that long eventually you sobered uped up and go, yeah, I ran the balance up on that thing.

You know, I mean, you've got, you do know it happened. And so this stuff, it comes back to life, and it's 10x worse than if you had gone and found it and taken care of it yourself.
don't let these things lay out there in the muck

because when they come back to life

they're the swamp monster, and they're three times more powerful. Just, you know, you've got to face these things head on.
So when you don't take care of business, business will take care of your butt. That's what I'm saying.
This is The Ramsey Show.

As an investor and a person of faith,

when your mutual funds and ETFs put your money into the dark side,

you might feel a disturbance.

Well, good news.

Timothy Plan offers investments for people who want to be intentional about where their money goes.

As a pioneering force in biblically responsible investing,

Timothy Plan entered the investment space to offer clean alternatives to secular funds that invest in stuff you'd never willingly expose your family to.

And for more than 30 years, Timothy Plan has offered mutual funds and ETFs that won't

contradict your values or sabotage your faith. So, if you're serious about investing with a

clear conscience, Timothy Plan could be just what you're searching for. Contact your financial

advisor today to see if Timothy Plan is right for you, or visit timothyplan.com for more information. Thank you.
Read carefully before investing. Mutual funds distributed by Timothy Partners LTD and ETFs distributed by Four Side Fund Services LLC.
Jade Walshaw, Ramsey Personality, is my co-host today in the lobby of Ramsey Solutions. On the debt free stage, Kevin and Siobhan are with us.
Hey, guys, how are you? Hi, Dave. Hi, Dave.
Great. Welcome, welcome.
Where do you guys live? Cincinnati, Ohio. Wow.
Welcome to Nashville. And how much debt have you two paid off? $84,000.
Wow. How long did this take? 28 months.
Good for you. And your range of income during that time? 158 to 200.
Cool. What do y'all do for a living? I'm in engineering operations.
And I am a stay-at-home mom, homeschool my kids, and I've done some side jobs with just our homeschooling group teaching. Good for you.
Well done. What kind of debt was this 84K? David was our house.
You paid off your house! Looking at weird people! And we were saying that before the political people were saying it. I'm just saying.
Hey guys way to go congratulations thank you i love it how what's the house worth 475 i love it how old are you two 43 or both 43 43 year old weirdos wow a paid for house how much in your nest egg in your retirement accounts and so forth 625 uh-oh baby steps millionaires too at 43 boom boom look at you how's that feel it's i never thought i would be here it's amazing life-changing congratulations proud of y'all excellent so tell us your story what was your i've had it moment what turned this whole thing around how'd you get connected to us i've been connected to you for about a decade. I think our story starts back in 2007.
We were just married. I was living, we were living up in Detroit area and I was working in the automotive industry.
And if you remember 2007, 2008, wasn't a real great time up in Detroit. The company that I worked for was actually sold to a leveraged buyout company.
Madeline had just been born in May 3rd. And that was the same day we decided we need to get out of here.
And we actually put our house on the market. The day she was born.
The day she was born. Oh, yeah.
That's not, yeah. We are out of here.
Yes. And the real estate market was awful.
It took us five months to sell the house, and I still remember to this day, we had to write a $20,000 check and bring it to closing just to get rid of the house. And it wiped out our life savings.
And we looked at each other and it wasn't anything we had done wrong, but we just said, we never want to feel like this again. And it was at that point, I was able to get a job in Ohio with, and my parents lived down there.
And we actually moved in with my parents and lived with our daughter, Madeline for the first year, just to, just to climb back out. Cause we, everything we everything we'd saved for was was gone everything we'd saved for was gone and and then you end up buying a house yes and said but we're going to get it paid off fast yep okay cool and and you were connected to us way back in Detroit uh I think I may have started listening to just a little bit but then really got connected once we moved moved down to I probably listened to you over a decade, so for a long time, for a long time.
Well, it worked. Your baby steps millionaires.
Thank you. From being broke and living in your daddy's basement.
Yeah, oh my God. It was actually upstairs.
It wasn't in the basement. You put him in the basement.
Okay, all right. Either way, I got you.
The attic, okay. Wow, congratulations, y'all.
Thank you. So tell us what does it look like for a lot of people don't believe that you could pay off your mortgage one day, right? That's not something people talk about every day, unless you're here on the Ramsey Network.
Right. So, so tell people, what does that look like? What, what, what do you do in order to be able to pay off your mortgage? So it was about a couple of years ago, Siobhan, I mean, Madeline is 17 now and she was about, you know, she'll be starting college next year.
And I think I was just looking at the principal, like the amount. I just started kind of doing the numbers in my math.
And I was like, if I really, if we, if we really focus on this, we can get this thing paid off. And it just, just, you had this clarity of thought, like if we really focus on this, we can get it done.
And then you start making the payments and the bonuses and just put it down. It's like, holy cow.
It's just unbelievable detraction that you can achieve when you really average three or four grand a month for 28 months and you were done. Yes.
But there's still that intentionality of taking the numbers out of the air, right? And putting them on paper, putting them in your every dollar budget. Yes.
Wow. Yeah.
So I got a feeling I know who the nerd is in the family. And so you came out of your cave with your spreadsheet, and what did your wife say? I think, fortunately, I listened to you long enough that we dreamed together.
We had the why. We have had the why conversation for a long time.
We talked about what we want our lives to be like when we're older. And so we had that discussion, the why discussion.
We dreamed in high definition, as you said. Early on, we talked about traveling and helping our kids pay for school.
And the biggest thing for Siobhan was we had a really challenging time with Madeline when she was little. She had some health issues.
And she said, I want to be able to be able to go with my grandchildren and just stay with them, whether it's a week or it's a month or whatever it is that they need. I want to have that freedom to be able to go help with my grandchildren.
That was her. That was one of her dreams.
And that's called financial independence, so to speak. You're not independent.
You're actually interdependent. But, yeah.
Wow, way to go, guys. Thank you.
Very cool. You guys are heroes.
You go from broke to millionaire in 10 years. I mean, that's pretty incredible.
It's just one day.

I would say it's also one day at a time, too, and just staying focused on that.

And the small things add up, too.

And being content and realizing that stuff doesn't make you happy.

You know, the other gift that's hidden inside this story is you've got these beautiful kids over here that are living in your home being homeschooled and they're breathing this air of contentment they're breathing this air of living on less than we make and uh they're breathing air that's not in other homes and so they can't help but be formed by that and so if they're ever in their own home and they're not it doesn't the air doesn't feel like that then they know something's wrong and so it's you've set a pattern for them more is caught than taught rachel says and she's right so i that's a pretty cool thing it's a pretty cool parenting they're gonna they're gonna do what you do they're not gonna do what you say so uh pretty impressive how do do you celebrate? What happens next? Yeah, what's the big celebration? Big celebration is actually Madeline's graduating from high school, so we're actually taking a nine-day Caribbean cruise next May. Yeah, baby! Love that.
I like it. Yes, we should do that.
Absolutely. Yeah, the year she's born, we sell our house at a loss, move into the attic,

and the year she graduates, by God, we're going on a cruise.

I like it.

That's right.

This is bookending right here, man.

It's perfect.

It's the way it should be.

Well done, you guys.

Very well done.

All right, bring up the kiddos.

Let's meet them all in their names and ages, please.

Mallon here is 17.

Right.

Nicholas is 12, And Samuel is 14.

All right.

Very good.

Good job, you guys.

Proud of y'all.

And I assume they've been practicing their debt-free scream

because their mom and dad are heroes.

Yes.

They live with weirdos in a debt-free house.

Yep.

Debt-free millionaires at 42 freaking years old.

Amazing.

Shut up.

This is great.

I'm so proud of y'all. You're just amazing amazing all right kevin and shabon madeline samuel and nicholas cincinnati ohio 84 000 paid off that's their house and everything making them baby steps millionaires in 28 months they paid off, making $158 to $200.
Count it down. Let's hear a debt-free scream.
Three, two, one. We're debt-free! Yeah! Woo-hoo-hoo-hoo! That's good.
I love it! I love it! This 10 to 15 year time span, it was 2007, so I quoted that wrong, it wasn't 10 years, so it would be 15 years or so, 16 years that took them to turn. When you say I'm'm going to become a millionaire most people think it takes

50 years your whole life yeah and it's you know it's going to take forever and i'm not going to have a life and be 80 by the time i you know i'm going to live in a cave and collect lint until i'm 92 and old paper clips and whatever else right it's just like oh god no it's not how it works they're 42 They're going on a nine-day cruise to celebrate this. Okay? So if you're 27 and you're whining about a little bit of sacrifice, shut up and do the work.
I know. Wow.
Step up. Seriously.
Because 40 is the new 30. I thought 60 was.
We could do that, too. Apparently, green is a new fashion trend.
That's right. You're on trend, Dave.
Good job. I had no idea you and I were both dressed to join the Army today.
And glasses, too. Hey, we're a real team around here.
We're more in sync than we realize. Way to go, you guys.
We're very proud of you. I gotta give you some of my hair.
No. Oh, man, I'm proud of those people.
What neat, what a neat family. This is The Ramsey Show.
Hey, listen up. Everyone is at risk of identity theft.
I don't care if you're a hermit living off the grid listening to the show on a battery-powered radio. All of your data collected by every company you've ever done business with lives online.
Your bank, your doctor's office, retailers, the apps on your phone, the gas station where you have loyalty rewards, they all store your info online, making them ripe for a cyber attack or data breach. That's why I've been telling people for almost 25 years.
They need an ID theft protection plan, and the only one I've ever recommended is from Xander Insurance. They monitor your personal and financial info, even your home title, and take over the work if you become a victim.
It's the most thorough and affordable plan out there.

I even have it for my family and our entire team.

Visit Xander.com or call 800-356-4282.

Thanks for joining us, America.

Jade Walshaw, Ramsey Personality, is my co-host today.

Tony's in Chicago. Hi, Tony.
Welcome to The Ramsey Show. Hi my co-host today.
Tony's in Chicago.

Hi, Tony.

Welcome to the Ramsey Show.

Hi, Dave.

Thanks for having me on the show.

Sure.

What's up?

Well, my mother passed away about 18 months ago.

She left me and my brother a paid-off home, currently valued at $450,000.

I'm an executor on the house, and I'm trying to make a decision as to whether sell the house

and have to throw my brother out on the street or let him continue living there.

Okay.

Well, I assume he doesn't have the money to buy out your half?

He does not.

Okay.

I think it's a little dramatic to say throw him out on the street.

He's going to have $200,000 in his pocket when he lands on the street. I feel the same way.
Yeah. So on what planet does he think he gets to live there for free indefinitely? Well, he's been living there for free for about 15 years now.
He has an anxiety disorder, which led him to be dependent on Xanax. He does not work.
His girlfriend pays all his bills. She's been living there for about nine years.
She's a disabled vet who works part-time as a nurse. My mother couldn't have the heart to put him out on the street.
And then as a Christian, I'm struggling too. You know, what's the right decision? Okay.
I'm not sure that supporting or enabling people's inability or unwillingness to deal with their stuff is non-Christian. As a matter of fact, it's non-Christian to enable them to sit in the sewage that we call their life right now.

Loving them well would require them to deal with their stuff and build a sustainable life and dignity.

That would be an act of love.

Does that sound right?

I agree.

The definition of Christian is not wimp.

It's not doormat.

It's kind, but it's also strong, and it's acting in others' best interest. So what is best for your brother is for him to heal, to seek counsel and deal with the anxiety and get off the drugs.
and, you know, you know, because the way you stated this, you don't believe that you believe he's escaping reality rather than dealing with and getting better. That's what the way I that's what I heard you saying.
Did I miss something? No, I think you're saying it correctly. Yeah, and that's your viewpoint on it.

And so if this is my friend or my brother, loving them well would be helping them do better in their life,

not giving them a cocoon to continue to retreat down into a hole.

Right.

So that's what enabling – your mom was an enabler.

Right. And sweet, all, that's what enabling, your mom was an enabler.
Right.

And sweet, all enablers are nice people. They're all, they're the nicest people on the planet because they don't want to do anything that causes conflict or raises an eyebrow.
So, gosh, I, you know, I guess you've got two options. One is you do have to deal with this lovingly and help him get better

and sit down with him and the parasite that moved in with him

because he attracted that with his life.

That's what his life attracted.

And help them deal with it and help them see a path of what they could do

with the money from the house or just deed it to him

and we'll see a path of what they could do with the money from the house or just deed it to him and walk away. Right.
Which is honestly cowardice. Yeah.
Do you need the money? It's a lot of money. I definitely need the money.
Yes, I do. Yes.
Yeah. I mean, there is a practical nature to this as well, which is just because he lived in the house for 15 years, does it make it? It wasn't his.
It's not his house. It wasn't his house.
And now you have ownership of it and there's nothing wrong with you saying, hey, can you please, this is $200,000 that you're holding hostage and I really need access to that. And there's nothing wrong with saying that.
And to Dave's point, you're not putting him on the street. He's coming away with a couple hundred thousand dollars, which is a nice chunk of change.
Where is the house? Where's the house? In Niles? Just outside of Chicago. Oh, in Chicago area.
Okay. Yeah, Chicago area.
Are you in that area as well, right? Yes. Okay.
Well, um, are you married? No, I am divorced. Um, okay.
Um, I'm just looking at what the dynamics are. So,

um, is there anyone in you and your brother's life that could sit with the two of you while you

work on this that could help, uh, kind of navigate through all the emotion? Well, I haven't talked to my brother in probably five months. Okay.
So this makes it even more difficult. He's, he's, um, basically just cut everybody off in his life.
Okay. All right.
I would call him and I would go over there and it's half your house okay and say we need to have a cup of coffee and i love you and i want to be kind to you and we've got to talk about what we're going to do here because i can tell you this one of the options is not this is you talking to your brother if it's me you gotta love him well enough to be strong and kind. And just, honey, one of the options is not you stay here free the rest of your life.
That's not an option. I am the executor of the estate, and legally, that gives me the power to evict you.
And so you and I can do this together nicely, and we can figure out a way to get the house sold, or if you've got money that I don't know about, you can buy me out. I don't care, but I'm not going to sit here and do nothing, and you aren't either because I'm going to force you to do these other things.
I really want to do this in a way that you and I work together and we can be friends the rest of our life. But that's going to be up to you.
That's what I'm telling him. It's up to him how he reacts to this situation because his set of assumptions are completely immoral, unethical, and unreasonable.
Correct. And so he can choose to react and act like you're doing something wrong but you're not and you have to go in knowing that and and it so let me just tell you so you go over there the whole thing blows up he has a fit acts like a four-year-old says get out of here i'm going to shoot you then you say all right here's what we're going to do you're going to be getting a letter from the, and the attorney is going to be telling you that you have 30 days to move, and after that we're going to evict you, and after that I'm going to sell the house, and I will still send you your half of the house once it's sold, but you are leaving, and you chose poorly on how to react to this.
It's still going down, honey. And then just walk off and go get a lawyer.
Okay. Because that's probably what's going to happen.
Am I right? I'm really taking this to heart. The other thing in the interim, my father has gone ahead, and he's taken $1,400 a month from his future inheritance, and he's given that to me as rent.
And he says, well, as long as your brother's in there, he says you're going to keep getting $1,400 a month, and that'll go over to your inheritance. But, you know, Dave, as well as I know, we don't have the crystal ball.
That money could easily disappear down the road. We don't know.
I don't like that. So your father also is an enabler.
He's covering for him, too. Am am i understanding that right i think he was just feeling bad for me and just oh you feeling bad for you okay well it's both because he's saying i'm essentially paying your brother's rent and if you let me pay rent to you then you can let him stay in the house it's it's very twisted all of it i mean i don't have to tell you that't have to tell you that it's unhealthy dynamic.
I would rather him give your brother $1,400 to help him get counseling and go to a rehab center and get inpatient treatment and get some help with the anxiety disorder so he can become sustainable and healed. I'd rather him use the money for that and let the lady who lives there's family take care of her and your dad help take care of your brother.
And if you want to use some of the money from the house to take care of him, if he's moving in positive steps, I'd be willing to do that if I were you. But I am not willing to sit here and cause this dysfunction to happen to me.
It is not good for anyone in the story. No one in the story is winning.
Correct. No one in the story is going to have a better life because of this.
So it just requires proactivity on your part. And I'm sorry, but it's going to be, you got a year of emotional hell ahead of you.
You're going to get called everything in the book before this is over. I'm sorry.
Pick up Dr.

Henry Cloud's book, Boundaries. You'll read it and you'll go, oh, there's my family.
This is the Ramsey Show. 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.
I'm Dave Ramsey, your host, Jade Barshaw, Ramsey Personality. Number one best-selling author is my co-host today.
Thank you for joining us, America. Open phones here at 888-825-5225.
The call is free, and some say the advice is worth exactly what you pay for it. Scott is in Baltimore.
Hi, Scott. Welcome to the Ramsey Show.
Good afternoon, Dave and Jade. How are you doing today? Better than we deserve.
What's up? So I'm a 58-year-old single guy, getting tired of working.

I'm trying to get to retirement, but I don't have really anything saved.

I need to know what I should do to get there.

Okay.

What do you make?

75.

What do you do?

I'm a trim carpenter.

I trim high-end houses and build some custom cabinets as well. Okay.
Do you have any debt? I've got about $25,000 worth of a mortgage and $20,000 auto loan. Okay.
Good. Okay.
All right. Why have you saved no money?

I was married to a spender, and at the age of 50, got divorced, and I walked away with zero dollars. That was eight years ago.
Why have you saved no money in the last eight years? um, getting back on my feet, I ended up buying a house.

That's where the mortgage comes in.

I got $25,000 left on that.

So is that where your extra money was going, paying down that mortgage?

What did it start as?

Yeah, paying down the mortgage.

And it was a bank-owned property.

I got it for a song in a great neighborhood.

I put a fair amount of money into it.

And that's where most of my money went.

So the...

All right.

So, and you bought a truck?

No.

I have a truck that's paid for. Oh's the twenty thousand dollar vehicle uh i know you're into cars dave it's not a car um it's a motorcycle it's a harley davidson oh we gotta get rid of that i knew that was the first thing you're gonna tell me to get rid of yeah it's gone if you want to if you want to save money, I mean, we can't keep doing what we've been doing.
Okay, you have a $20,000. You almost owe as much on your motorcycle as you do on your house.
That's weird. Yeah.
You know, I mean, really. So, you know, you did so good on the house and so poorly on the motorcycle.
So that was a weak moment. I'm sure it's a great bike.
it's a great bike but uh but it's gone it's gone it's somebody else's great bike now and um because we need you to and then you know what i would say is let's get on an every dollar budget and build an emergency fund first of three to six months of expenses and then pick up every extra job you can get. And let's pretend that you saved $10,000.

Let's pretend you saved $24,000, $2,000 a month,

$24,000 per year for 10 years.

That'd be $240,000 plus growth.

It'd be a half a million dollars.

Okay.

Okay.

And you're 67 and you'd have a half million dollars in a paid for house. Okay.
I do have about $23,000 in cash. Okay.
Well, then you got your emergency fund in place. That's great.
I do have the emergency fund. Right.
I also, I've got a term life insurance policy. Then it's a $100 a month for half a million dollars.
Should I keep that, or is there a way to convert that to something else? It doesn't convert. It's just like I have homeowner's insurance, and I don't have a home anymore.
Do I need it? No, you don't. Because there's no one counting on you, it sounds like, for your income.
No. Okay.
And the house is worth more than you owe on it do you have children i've got three okay so if you die they sell the house and pay the funeral right correct okay let it lapse yeah so you i would close that out because you need that extra hundred bucks a month toward our two thousand dollar a month goal so what i'm going to do is sit down and do a budget and I'm going

to come up with $2,000 a month. I'm going to sit down with a SmartVestor Pro and I'm going to fill up Roth IRAs and simple IRAs and whatever else you can do as a self-employed person.
The great news is as a trim carpenter in high-end properties, you are in great demand. You've always had more work than you could take on.

Right.

And so if you want to jack it up and make some extra money for a little while you can do that um i'm always less tired when i don't feel like a hamster in a wheel when i'm actually getting traction part part of part of what's making you tired is you feel stuck i don't know if I necessarily feel stuck. I know what stuck feels like because once I got out of my divorce and got rid of the spender and started actually saving or being able to have money and didn't have to live paycheck to paycheck and play the beat-the-bank game, I sat down one day and thought, wow, this feels really good.
Yeah, I'm tired of working is what you told me. And so if my work is going toward a goal that I'm excited about, I'm not as tired.
That's all I'm saying. Okay.
Yeah. Well, my goal is to get as much money, save as much money as I can for retirement.
And retirement for me is probably working three and four days a week instead of, you

know, five, six and seven days.

That's true.

But there always comes a time where you won't be working anymore.

And so making sure you get to the point that you're okay when that phase of life hits is

also very important.

See, if you had a half a million dollars in the bank at 67 or in a mutual fund at 67

and a paid for house, that 500,000 will throw you 50,000 a year right without forever and so you you can travel you could do whatever you want to do with 50,000 a year you work one day a week you can do whatever that what I do know having grown up in the and been in the building business real estate business my whole life is trim carpenters are artists they're the artists on the site they're very precise very detailed he makes furniture you've got an artist's eye and i need you to use your business side the science not the art side of this discussion that we're having okay you can't art your way out of this one. You got to science your way out of this one.
And so it's, it's a math thing. Um, and then you, it will build you a situation where you have enough of a nest egg that it caused you to have a good life.
That's what I'm wanting to move you towards. So you got 10 years, $2,000 a month, and you can get there.
It's very doable. And you might fool yourself.
You might get there sooner, uh, because the more you pile it up, the faster, the more you're willing to work, all that kind of stuff. So, um, you know, you can back down at whatever point, but, uh, I would sit down with a smart investor pro go to Ramsey solutions.com, pick somebody with a heart of a teacher and say, this is my situation.
I've got to do this. Dave told me to get on an every dollar budget.
He told me to jack my income up, get rid of my motorcycle. Jade told me to get rid of my motorcycle, but Dave agreed.
And just slide that in there. Just threw that through the under.
You see the bus tracks? I see the bus tracks right across her. Yeah, there we go.
And yeah, get you a game plan, man. And then execute the game plan, just like you were doing a job on a house.
You lay out the game plan. You lay out what is needed.
You get the supplies on hand, and you execute. Same thing here.
Same exact deal. This is The Ramsey Show.
in the first place. And that's what makes the EveryDollar budgeting app a game changer.
With EveryDollar,

you'll get a clear picture

of your spending.

And from there,

it's easy to see

where you can get more intentional,

cut back,

and save more money.

So how much money

are we talking here?

Well, the average

EveryDollar budgeter

frees up $395

in their first budget.

That's the hack.

And if you ask me,

I think you're way above average

and you'll save even more.

So what are you doing

still listening to me? Go download the EveryDollar app for free and start saving more money right now. Jade Walshaw, Ramsey Personality, is my co-host today.
Today's question of the day is brought to you by Why Refi? If private student loan debt is taking away your peace of mind and you don't see any way out, you need Y-Refi. Y-Refi refinances defaulted private student loans that other places won't touch.
And they give you a low fixed rate loan that's custom built for you. So go to Y-Refi.com slash Ramsey.
That's the letter Y R E F Y.com slash Ramsey might not be in all states. Today's question comes from Patty in Illinois.
My husband and I purchased a very modest home for his parents due to the rising cost of rent in our area. My father-in-law is disabled, my mother-in-law works full-time at a very modest job and they pay us a small amount of rent each month.
It's been five years now and the home has required a lot of repairs such as water, intrusion of mold. We've been able to cashflow the problems but it has cost over 15,000, not to mention our sanity.
It has also changed our relationship because they frequently contact us for issues or requests in spite of many conversations about what is, quote, nice to have versus what is, quote, needed. We're trying to honor our word, but it has been very taxing emotionally and financially.
We're in baby step six, and we need to plan for our own retirement. I keep telling

myself to suck it up, but we are losing tons of money with no end in sight. I've listened to the

show long enough to know we probably shouldn't have done this, but at the time it felt like the

right thing to do. What would you do if you were in our shoes? Well, first off, I wish I had more

information, Dave. I want to know how old these parents are.
I want to know more. I want to know

the value of the house because I'm thinking if you bought a house in 2019, like the value's probably gone up a good deal. So they're, she, they might not be losing money in the way that she thinks.
Now the actual idea of doing this, I think was a really bad idea. Um, I think there was just a lack of foresight here and I don't know what the promise was.
Did say hey we're doing this house you're gonna live here and you know until you die and we're covering it i don't know what the promise was but i think that they may have you know brought promised more than what they could deliver on and i think that's probably what she's feeling some type of way about so she's got a lot of drama in her words uh-huh she does and it's her in-laws uh-huh i i the piece of information i would like is i'd like to talk to her husband and see if he feels the same way uh-huh and if it was everybody's idea bothering him to the same degree or if this is in-law drama that you are now molding or laying over on this house yes uh-huh i think it's a little bit of both she does use the word we a lot which makes me think that there is some unity no i i think you know i don't think it was a hidden thing uh but i think he went into it and went i bought mom and dad a house and dad's disabled mom got a you know not not much of a job and they pay us what they can pay us and we fix the stuff that breaks and yeah and she's going oh god i'm dying yeah you know it's like um so i don't i you know fifteen thousand dollars is not uh we are losing tons of money for five years no it's nothing if you own a house you're going to spend more than fifteen thousand dollars over over five years on a house. And they're getting some rent, which is good.

And it's going up in value. Uh-huh.
Going up in value. Mom and dad are going to pass someday, and you're going to have a nice asset that's going up in value that you can sell.
And probably pay off your house and more if you haven't already. So I think I would, first thing I would want to do is get to the bottom and say, what is, where is all this resentment really coming from? Is it really coming from the house? I kind of don't think it is.
I don't think so. I, now there is part of it where they may have bitten off more than they realized they were going to be chewing.
Do you know what I'm saying? Like in, in theory, it sounded good. And then when you start walking it out, you're like, oh my goodness.
But to your point, if she's writing into our show, there's something that they're not talking about. If your mother-in-law is calling you and asking you to fix something at a house that you gave to her at a deal, um, and you already had, you know, mother-in-law itis, then that would just make it worse.
Right. I mean, that's like, well, you know, the difference in what is needed and what's nice to have, but, you know, it's a modest home.
They're modest people. She makes a modest income.
There wasn't anything in here lavish. There's also, though, Dave- I didn't hear a jacuzzi being installed.
I think, to quote myself, I think there's also a vocab rehab that needs to happen. Because here she's saying, my husband and I purchased a very modest home for his parents.
They don't own the home. They're renters.
You guys bought a house for yourself. It's your asset.
It's your home. And I think if you start viewing it as an asset that we have, it's going to change your thoughts.
I have a rental house and it had a water leak and I had to fix them all. That's right.
As opposed guess what i've had to do that a bunch of times right so that'll help zero drama about it that's right i just fixed it and it's going up in value tree fell on the back porch i just fixed it it's just you know it's just you own a house and crap happens right i mean it's like um the other question that i don't i'm with you i don't think we have enough information because it's very interesting question it is and i'm impugning a lot on you patty i apologize for that but i'm trying to figure out what's really happening here and therefore to what to do with this because also their age might play into it if if they're 87 suck it up if they're 57 out. You know, sell it and give them the money that it brings.
Whatever it brings, give them the money from it. Because you didn't buy it for money.
You bought it to help them. And, you know, if you want to give them whatever proceeds are.
Because you're going to have made some money, to your point, from 2019. So, yeah, that's part of it and um yeah yeah and and i think then i would want to just really ask i don't know um well walk that out what would you do so let's say let's say she's listening she goes yeah you know what they are in their 50s they need to get out of this house they've been paying us a small amount of rent what would you suggest in that situation to fairly i mean i don't care if you give them the money really i mean you sell the house and whatever whatever i don't i don't know if there's a mortgage here or not but pay off all the expenses and then whatever money you've made on the house give it to them i don't care um oh i'll tell you the other piece i don't know right here is i don't know patty's income yeah that's right patty makes $300 a year stop whining and deal with it that's another good point if Patty makes fifty five thousand dollars a year then you were you did something you couldn't afford to do here that's true and that's where some of this drama is coming from is the pinch um because it's like oh it's we're we're're, uh, it's been very taxing emotionally and financially.
Yeah. Okay.
I don't understand. It's, um, 15 grand is not taxing emotion.
I mean, it's not, but so, uh, that's, yeah. It's a lot of details.
Maybe call in sometime, Patty. Yeah.
Yeah. We, we'd do that.
So you can contact them back off the email if you want to, James, we take the call. Cause I don't know what to do.
But if, yeah, I think we could give a couple of scenarios if then, okay, kind of flow charted. If they're super old and you make a lot of money, then this drama is in your head, calm down and suck it up.
If they're super young and you don't make a lot of money, maybe you need to move them out and sell the house. I think those are the two variables that could be there i i don't hear a lot of mother-in-law drama but i just think it's it does it did it was curious to me how much drama she had and i wondered if her husband would feel exactly the same way i bet he doesn't now if they're only paying uh you know the mortgage is two thousand and she said they're paying a small amount of rent, so they're paying $1,000.
The proceeds, I'd split. Okay.
I don't care. The thing is, you're not selling it because you need money.
That's true. She did not bring that up.
You're right. She did not bring it up.
Selling it to get rid of an emotionally and financially draining situation, to quote her. That's true, but she she did say we're in baby step six and need to plan for our own retirement.
So that made me think they might want some money. Could be, and it could just be that.
The drama. I'm tired of giving them anything.
And I'd rather put it in my account. In lost situations, they get, they get salty really quick.
Not going there. Not going to do that.
You're right to, you started the whole thing right when you said you shouldn't have done it. Foresight.
You have to play these things out in your mind years and years to see where it will land and all of the different variations of the plan. When you're trying to help your parents, you're trying to help your own kids, you do not enter into a process that does not bring them to sustainability on their own.

And so you get them up where they're standing on their own feet and you let them go.

So whatever you're doing, create a situation that gets them up on their own feet instead

of a continuous drain.

And so you people pay in your 28-year-olds private schools for their kids.

That's not sustainable. You shouldn't have entered into that.
This is the Ramsey Show. Let's be honest, shopping for health insurance can be confusing.
With high costs, complicated terms, and customer service that doesn't really serve you, most folks just pick a plan and hope for the best. See, insurance companies don't work for you.
They work for themselves, meaning they love it when you overpay. So you need a guide on your team to help you make the best choices.
Health Trust Financial Works for you. They're not salespeople.
They help you find the health insurance option that makes sense and saves you money. The fact is health insurance is one of the biggest expenses in your budget, but most people who work with Health Trust Financial end up saving $500 a month.
Imagine putting that kind of money toward the baby steps. My team has worked with them for over 20 years, and they've served thousands of people just like you.
They're the only health insurance broker that's Ramsey trusted to help you. So stop throwing money away and get the health insurance that's right for you at healthtrustfinancial.com.
That's healthtrustfinancial.com. Listen, I know a lot of you would rather watch paint dry in slow motion than file your taxes.
But thankfully, you don't have to dread filing when you've got Ramsey Smart Tax. It comes packed with everything you need to file online before the big deadline.
That means all major federal forms and deductions are covered with no hidden fees. Plus, with Ramsey Smart Tax, you can save up to 70% compared to other tax software out there.
It's a no-brainer. Just go to RamseySolutions.com slash SmartTax and see how simple tax filing can be.
That's RamseySolutions.com slash SmartTax. The $12 sale is here through August 31st.
We've got $12 books to help you raise money smart kids. The book Smart Money Smart Kids, number one bestseller by Rachel Cruz and me.
$12 books to help you get out of debt and build wealth, including our number one bestseller, Baby Steps Millionaires, including Jade's book. $12 books to help you build a peaceful and joyful life.
Dr. John Deloney walks you through the six daily choices in building a non-anxious life.
Ken Coleman's From Paycheck to Purpose will help you do work that really matters. All $12.
Check them out, RamseySolutions.com. Barbara is in Santa Barbara.
Hi, Barbara. How are you? Oh, good.
Thank you so much for taking my call. It's a pleasure to talk to you both.
You too. I've been listening to you for quite a while.
I know how you love a whole life insurance policy. Yeah, my husband took one out literally in college in the 60s because a friend of his, you know, got their first job and sold everybody in the fraternity house a whole life policy.
So it is now 2024. We still have this policy, but I've never heard you address this issue if we terminate this

policy because i feel we can self-insure at this point i have a loan on this policy for 63 thousand dollars and the agent is telling me if i surrender the policy that will be taxed at my income or income level.

Is that true?

No.

No.

It's not true. will be taxed at my income or income level.
Is that true?

No.

No.

It's not true.

Because I thought my understanding was the way you talk about it,

when you borrow against the policy, you're actually borrowing your own money and paying interest to borrow it.

Exactly.

And so your cash value amount is how much?

$3,030.

Above the $63?

Yes.

Okay, so you'll get a check for $3,000.

Okay.

Okay, and you'll have a net income as a result of that of $66,000, which includes the loan, okay?

That amount is compared to the total amount you have paid into the policy since the beginning, which is way more than $63,000. Okay.
Your basis in a cash value policy for tax purposes is the total of your premiums paid in. Right.
And as long as your cash value does not exceed that number, you have zero taxes. Okay.
So I would think that since it's been paid on since really the 60s, 70s. Yeah.
How much have you paid on it? Do you know? No, I have no idea. The death benefit's $24,000.
Yeah. But I mean, if you add it up, you're going to add up and see the total premiums that you have put in is going to be more than the cash value that you get out.
Okay. How am I going to find – where do you find that? Can they tell me that? They can tell you that.
The company can tell you that. Or you could just say, you know, how much is the monthly or the annual amount and multiply it out since you got it.
Oh, okay. Okay.
so as long as and and i would think that we've paid in enough over all these years so that's more than 63 000 or exactly i mean it's been uh 60 was it been 60 years 60 years oh my gosh so if it's a thousand dollars a year if you only paid a thousand dollars a year you're still okay yeah i wish i'd found you a long time ago i would have never bought this policy but i just never knew about this loan thing because i know you say surrender them if you can self-insure self-insure but i've never heard you address if you have a loan on it yeah they keep telling me i'm paying income tax on it well that's what they like to tell you because they scare you to keep the thing in.

But the problem is most of the people in the whole life business don't even know what they're doing. So I figured that out.
Their level of expertise is so low because 80% of them are gone in a year. People that sell whole life life insurance, 80% that start selling whole life life insurance are gone in a year.
so the number of seasoned experienced expert agents that have been doing it for 30 years

it's close to zero because they look up and realize how bad they're ripping people off and they get out of the business the numbers on this are bananas yeah she's been paying into it since the 60s it only had 63 000 of cash value and only24,000 death benefit. Yeah.
Yep. I'm shooketh.
Yes. I mean, what if there was $63,000 and she hadn't borrowed on it? I know.
And she died or he died. They'd lose it.
They get $24,000. The $63,000 be gone.
The only way you insure you get it is to keep a loan on it. And then when you try to get out of this complete screw job, they lie to you or they're ignorant, one of the two, about how the tax calculation actually works.
That is crazy. Yeah, this is how bad it is.
It's a payday lender of the middle class. Remember on Sanford and Son when Red Fox, I'm coming to join you.
What what was his wife's name lily i can't yeah i think so i can't remember i'm coming i'm coming oh gosh that grab his chest and fall back yeah oh lord sheesh that's it that's how it works spencer is in austin texas hi spencer how are you dave jay thanks so much for taking my call sure what's up uh yeah so um my situation right now so i live in a house that my parents own and um they want to sell it to me and i want to buy it from them and i have the cash to pay it off good um but they want to yeah which i definitely following your plan on that for sure paying don't like that either. So, but anyway, I guess the reason I'm calling though is because, so they've owned this house for just under a decade.
And so, you know, they bought it back in 2016 for just under $100,000. And now, as you know, the housing market is crazy.
So I think this house is worth somewhere between, you know, 200 to 225. So, you know, they want to sell it to us.
We haven't negotiated a price yet, but they want to sell it to me, you know, somewhat close to what they paid for it. So I guess my question is, I know it's a good deal for sure.
But I guess my question is, you know, I guess I'm calling on their behalf too, because, you know, we're wondering about like, are there going to be capital gains taxes? How does it work with me buying it at much less than what it's worth? Like, how does all that kind of work, and what's some ways around, if there are any, like, capital gains and things like that? Okay. Well, capital gains tax is calculated on the gain-over basis.
Let me kind of walk you through that. That's a technical thing, all right? What you pay for a house is your basis, okay? So let's say they paid $100 for it, and let's be simple for a second,

and say they sold it to you for $150.

Then they would pay capital gains tax on the $50 gain.

See what I'm saying?

Yes.

Okay.

And that's a 15%, and so that would only be, what, $7,500 would be their taxes. Okay.
Okay. That's a simplified look at the thing.
Now, we'll add a couple of complications in there. If they have been renting the property and have been filling out a tax return on that and depreciating the property against their taxes, taking depreciation, then they have an adjusted basis.
So the $100,000 they paid for it minus any depreciation that they have taken becomes their basis. So let's say they had taken $20,000 worth of depreciation on their taxes over the years, then their basis is no longer $100,000.
Now it's $80,000. You following me? Yes, sir.
It's called an adjusted basis. And then your taxes are going to be on the difference between the $150,000 and the $80,000.
So they're going to pay taxes on $70,000 in that case. So that's how you calculate it out.
If they sell it to you, uh, weirdly below market, like let's say this thing is worth 300 and they sell it to you for a hundred, you probably ought to get some tax advice as to whether or not that's going to qualify as just a good deal or whether the IRS would look at that as giving you a gift and try to tax them on a gift tax. I wouldn't want them to get hit with that.

So there's kind of a gray area on the difference in a gift and a good deal.

Okay, and that was my other question, too,

because they're going to sell it to me for less than what it's currently valued at,

and so I guess they were kind of worried about that as well.

Yeah, how far, how absurd, you know, if they sell it to you for a dollar and it's worth a million, then they're going to get hit with a gift tax, okay? Because that's a gift. That's not just a good deal.
Let's go over the top, okay? It's going to kind of shake everybody up that looks at it. But if you sell you a $300,000 house for $200,000, that's probably just a good deal.
So you need to talk to a tax advisor on that part of it to make sure that you're not violating anything on gift tax. At what point does the IRS look at something being a good deal or being a gift? And then they also can help you with calculation on the basis.
So good deal and pay cash for it. And it's a free, clear transaction.
It sounds like a wonderful deal. This is the Ramsey Show.
I talk to people every day who want to know how to do better in two areas, money and relationships. That's why I'm pumped to bring the Money and Relationships Tour to a city near you.
Join me and Dr. John Deloney for a night that will challenge the way you think about this stuff and possibly change how you live forever.
Starting April 21st, we'll be in Louisville, then on to Durham, Atlanta, Phoenix, Fort Worth, and Kansas City. Grab your tickets at RamseySolutions.com slash tour before they're gone.
Jade Walshaw, Ramsey Personality, is my co-host today. Thank you for joining us, America.
We're glad you val is in minneapolis hey val welcome to the ramsey show oh family family i listened to you years five years and i said it's time to stop listening and start doing okay good how can we help today so right now i've finally started with the first and second steps, but now I'm at the point where I have three kids that I know I shouldn't have, and I did it prior. I co-signed for a car loan because, you know, if you do one, you've got to do the other one.
So I'm stuck with these three car loans. One of them is about to be paid off in two months.
The other one, she's paying half on it because she said she's going to have all of it to pay the whole car loan, and I'm paying the other one. And the third one is just saying they don't have the money right now.
So my question was, I was thinking about just letting the other two cars just go because I can't afford to pay for neither one of them.

And so would it be a good idea if I just let them report

and just let it go on my credit?

Well, you're going to have repossession on your credit.

You co-signed.

And then when they sell the car and it doesn't bring what's owed,

they're going to come after you for the difference.

I know. That's why I hit them at the point.
Yeah, you're going to get sued, and you're going to have your credit screwed up. So let's talk about the one car is almost paid off, so it's not a problem, right? Right.
Okay, so the second car, the one you pay part of the payment, what is owed on that second car? One car is owed, one is $16,000 on one, and the other one is like $14,000. Okay, and what are they worth? The one for $16,000 is only worth $8,000.
Yikes. That was shot.
And the one that's worth $14,000, or the one that you owe $14,000, what's it worth? The one that's $14,000 is about, I think it's, I almost sold that one for $10,000. So I'm thinking, this guy was going to buy it for $10,000, but he never did come through, so I guess it's only worth like $9,000 or something.
Well, just because one guy didn't buy it, that doesn't establish value. But, you know, so if you can sell the $10,000 car for $10,000 and get the loan, you have to get a loan somewhere for $4,000 to cover the difference.
Who are these loans with? They're with my credit union. Good.
Go down to your credit union. Tell them you want to sign a note for the difference before these cars get repoed.
And you're going to have thousand dollars in debt you sell an eight thousand dollar car that you owe 16 on you sell a ten thousand dollar car that you owe 14 on you're going to have a debt with that credit union because otherwise they take these cars and they're not going to sell them for 10 and for eight they're going to sell them for five and for four at the repo lot of this car back to the bank. Oh, I thought you said I can sell it back to the bank.
No, I said you go down to the bank and tell them you want to sign a note for the difference of what the car won't bring. They have a $16,000 loan on a car that's worth eight.
You're going to end up with an $8,000 loan at the credit union instead of a $16,000 loan. and you sell a car that's worth eight you're going to end up with an eight thousand dollar loan at the credit union instead of a sixteen thousand dollar loan and you sell a car that's worth 10 that you owe 14 on you're going to end up with a four thousand dollar loan instead of a fourteen thousand dollar loan and your kids are going to get about the business of getting their own cars right but you get you get to pay the eight and the four difference, which is going to be 12 because they're not going to come through on that.
You and I know that. Yeah.
This is what you pay. This is called a co-signing fee.
Is that what you're calling it? I thought that was an actual thing. No, it's a stupid tax is what it is when when i do something stupid and it costs me money i call it stupid tax and you're the co-signing is stupid yeah i learned that you learned it you learned it three times over you thought you were doing something nice and you did the right thing the wrong way.
You were being kind and sweet and unwise and you knew you were unwise when you were doing it, but you were too kind and sweet to stop doing it. So next time be more wise and less sweet.
That's right. Wow.
Well, the truth is she didn't do the kids any favors either because they've been strapped to this that's right that's right you think you're doing somebody a favor and you strap them to something they can't afford and that's why the bank wouldn't loan them money in the first place everybody feels the strain yeah thanksgiving dinner tastes different so i co-signing is so universally stupid the banks are the most aggressive lenders on the planet. They love to loan money.
And if they won't loan somebody money, it really means it really means something that they can't that they can't pay it. And instead we step in and we go, oh, it's little junior.
We'll help junior. And, you know, we step up and we co-sign and Proverbs 17, 18 says one, one lacking in sense co-signs for another.
Wow. The contemporary English version, the CEV of the Bible in 17, 18 Proverbs says, if you co-sign for someone else, it's stupid.
That's what that version of the Bible says. The Bible called it stupid.
So I didn't get mad at God. And I co-signed for a guy one time, and I ended up having to pay it.
And a guy co-signed for a guy one time and i ended up having to pay it and a guy co-signed for me one time and he ended up having to pay it because i went bankrupt that time and i had to go back and pay him back later it's an awful awful mess don't get into those things it's a horrible horrible situation so poor val i feel so sorry for it's awful hey guys uh things are changing around the ramsey show here this week back on monday uh we made a move we have a network app called the ramsey network app that you can download for free you can listen to the whole show on the ramsey network app or watch the whole show on the Ramsey Network app, whichever you prefer to do. The last 40 minutes coming up is only on the Ramsey Network app or on talk radio as of this week.
And so if you're used to getting the entire show on podcast, you can still get the entire show. It's still completely free, but you can only get the last 40 minutes on the network app.
You can watch the whole thing, but you can get the last 40 minutes only on the network app. So you YouTube folks, podcast folks out there, you're expecting another 40 minutes.
It's there, but it's only over on the Ramsey network app. You can get it for free.
We're not charging for this. It's all free, and it's searchable.
You can search it by subject, and you you can even send an email, ask questions. We might answer some Ramsey app questions at some point.
So the Ramsey network app in the app store or Google play completely free, not going to cost you a thing. And Jay, this is exciting.
This is the things that we're putting in this app to help you guys and help you access the information that you're listening for um you could listen for three days and not get the answer to your question yeah but if you want to know about car repossessions you can just google it in and you'll hear val's call yeah exactly that's what's going to happen because they do come after you for the deficit like we were telling her in that case so uh two ways to get the free app you You can click the link in the show notes or you can search Ramsey Network in the App Store or Google Play. And again, we're going to be adding lots and lots of tools to this thing in the future.
Right now, we have the searchable feature. We have some audio books and some other things dropping in there.
We've got all kinds of processes because we're building stuff out where we can deliver to you on this app. It's very inexpensive for us to do, so it's going to be free or inexpensive for you to do.
So the last 40 minutes of the show, as of this week, again, on the Ramsey Network app only or if your talk radio station carries. On talk radio, it comes out as over three hours.
That's what we do. We do a three-hour talk radio show.
But in podcast world, it's going to look like something different. So that's the thing.
So you can get the full episodes to the Ramsey Show only, the Ramsey Network app. It's very convenient, very easy, and very free.
Don't miss it. And again, Jade, the features we're putting in this thing we're excited about i'm really excited i heard a little birdie talking about a show that one of us is doing that might land in there so that's really oh okay that's all i'm gonna say i'm just gonna oh i don't know which little birdie this was so i have to find out about this birdie okay cool that but that might be fun we could we could do just a show just on that yeah like a specialty show yeah that you can only watch on the network app that'd be cool certain subject or yeah that would be neat be special ah okay exclusive if you will yeah and completely free you can't argue with the free part we have no plans to make it a subscription it's just a free deal so go to ramsey Network and get the app in the App Store or Google Play,

and that way you don't miss a thing.

And did I mention that it's free?

This is The Ramsey Show. Thank you.