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Chapter 1: What is discussed at the start of this section?
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Normal is broken. Common sense is weird. So we're here to help you transform your life from the Ramsey Network in the Fair Ones Credit Union studio. This is the Ramsey Show. I'm Jade Warshaw. Next to me, GK, George Campbell, taking your calls really for the next three hours. It's going to feel like two hours to you.
It's going to fly by. Oh, because literally the amount of show they hear.
That's right.
Ads and radio breaks.
That's right. But for us, it's three hours in the studio. And we've got Sam who is on the line in Cincinnati, Ohio. Hey, Sam, how can we help today?
Hey, can you guys hear me?
We can. Can you hear us?
I am 19 years old. Sorry. Yes, I can. I'm 19 years old. I just graduated high school. I'm heading to college about 45 minutes away. I'll be coming home on the weekends because I have a lawn and landscaping business that I like to keep up. And so I have a truck that's not good on gas mileage. I'm looking to buy a car, something small like a Honda Accord.
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Chapter 2: How does Sam approach buying a car?
That was all paid in cash. Wow. Good job.
Excellent.
So I just just I don't know if that changes the scenario.
It doesn't. It doesn't. What that tells me is you're so smart with money and you understand the power of cash. And it sounds like you understand the the power of delayed gratification. Right. And that's kind of what this car business is about. I. It sounds like you don't want to go all the way down to zero in savings. And I actually think that's very wise. And I think you understand. I'm 19.
I don't need a $20,000 car. So you understand the difference of needs versus wants. So that's what's gotten you this far. And your parents, God love them. I think that they're not trying to jack you or trying to do anything negative. They're just...
They're just, they want you to have a safe car, and they probably somewhere in their minds don't believe that you can find a $10,000 car that checks all the boxes. And I think that when you do it, they'll go, oh, that is nice. That does work.
I'm curious, do they know how well you're doing? How much cash you have?
Yeah, they do. My dad's an accountant, and I like to call him my own accountant. He runs all my numbers and does a lot.
Wow. Okay, so how much of that $20,000 would you call your emergency fund?
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Chapter 3: What financial strategies are suggested for Sam?
Right. Okay. And let's go on the low end. You said you can make 1500 bucks a week on the lower end.
Yes.
Okay. $1,500 a week, seven weeks, that's over $10,000. So you take your $10,000 you have, call that the car fund, a new $10,000 from your future income. Now you could buy a $20,000 car in cash. Do you need a $20,000 car? Absolutely not. You could find a great Honda Accord that's a 2016 for $12,000, $15,000 probably.
Sure. Okay. Yeah. Yep. Well, I appreciate you guys. Thanks.
You've got some options. I love to hear a responsible young lad handling his money with care. Love that. All right. Abby in Birmingham, Alabama is next up. Hey, Abby, how can George and I help?
Hey, so I had a question about life insurance. So I'm 27, about to be 28. I've had a $75,000 whole life since I was 22. But I just recently went through Xander from listening to y'all and got a 200,000 term policy, which, you know, you can keep it till you're 80 or whatever.
And I went to go cancel my whole life the other day and they talked me out of it because they were like, well, what happens when it gets to the point you can't pay it anymore? Like you're, cause you know, the bands are like five years. So it goes up like a percent or two every five years.
And I was like, well, I'm doing Dave Ramsey, and you're supposed to be self-insured by the time that happens anyway. That's right. They were like, you know, Dave Ramsey owns part of Zander. He makes money off of us.
That's hilarious. That's crazy town. So now you know they have no integrity because they've already lied to your face, and they're trying to convince you to keep it so they can keep their commissions. Yeah. So a little bit of a vested interest to ask them if you should keep it.
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Chapter 4: How can Sam manage his emergency fund and expenses?
Not to mention, if you pass away, your family doesn't get to keep that cash value. That goes away. That goes back to your insurance agent who sold you this, right? And so what we're suggesting is let's just pay for insurance. Let's just pay a little bit or a lot bit less per month on the term life insurance.
Then the extra money that you're not paying in that premium, you could take that and invest that at 10%. Or if you don't want to invest it, you could apply it to your budget, right? Whatever baby step you're on. So you're saving yourself money by simply buying insurance. And if you believe what we teach about the baby steps, there is a time to pay off debt. There's a time to save money.
There's a time to have insurance. There's a time, right? There's a time to invest. And so that's a great way to think of it is right now is a time to buy insurance. When you're ready to invest, you'll be doing that at 15% and you'll be doing that earning probably 10 to 11% in the market.
What's your current payment you're making for that whole life insurance policy?
I think it's $51.87 a month. So go on and say $52.
$51.87, like $51.87? Yes, sir. Okay. And the death benefit is real small, $75,000. That's not going to get you very far if something were to happen to you. What is your household income, or your personal income, sorry?
About... Probably right at 30. I clean houses right now. I'm actually a nurse, but I had a baby and been doing what I can do to keep cash flow while my husband's working as well.
Cool. So we recommend having 10 to 12 times your income. So you're actually a little low on that 200 side for Xander. I would up it to 300. You can also get another policy versus just trying to swap it out if you already have it. But surrender that policy. Don't trust them. Run far, far away from any kind of permanent life. You might as well light your money on fire.
Yeah, just remember the purpose of life insurance is for anybody who's dependent on your income. If something were to happen to you, this is to replace that. It's to make sure that they're okay. And $75,000 is maybe going to get them a year of life, but you want to set them up for life, which is why you want 10 to 12 times your income.
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Chapter 5: What should I do with my precious metals to pay off my mortgage?
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Chapter 6: How can I manage my daughter's college expenses without going into debt?
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Today's question comes from Isaac in Indiana. I have roughly $400,000 in mutual funds and a little over $300,000 invested in precious metals. Should I sell my metals and put the funds towards my primary mortgage? I know what you're going to say, but it's a big struggle for me.
My initial investment in them was only $150,000 and my gut says to wait until there's enough to pay off the mortgage completely and cover capital gains. But waiting is slowing down our investing more for retirement. Kick me in the pants with your wisdom. Wow.
Chapter 7: What is the ideal size for an emergency fund during a health crisis?
Wow. Well, that's the first time I've heard that. I like that line though. I might use that. Gladly. Wow.
Gladly, sir.
So he's got, I don't know if the, it sounds like the mutual funds are non-retirement, the 400,000. Right. On top of the 300,000 in precious metals.
Chapter 8: How can I balance my investments while supporting my child's education?
I don't know why it's sentimental to him, but he said his initial, it's more about the taxes. I think he's scared of the tax hit more than anything else.
And I think he knows what we'd say about like commodities. I think that's why he's also looking there and not looking at the mutual funds.
Yeah, if you're going, should I use the mutual funds or the precious metals? I would personally use the precious metals. I don't know what apocalypse is going to help you survive with your bars of gold Scrooge McDuck style. But a paid-for house, that's what you're really trading for. Would I rather have a paid-for house or would I rather have $300,000 in gold and silver?
I would rather have a paid for house personally. Indeed. And so, yes, you'll have $150,000. That was the growth. You'll have capital gains tax at your rate. It may be 15% of that. And so you're talking about really to pay off the house, you're going to have a tax of 22 grand to pay. Now, if you are debt free with an emergency fund and savings, you could cover that.
Or what I would do is just pull from the mutual funds. Yeah, I agree. Pull $22,000 from mutual funds to cover the taxes when tax time comes due and enjoy your freed up mortgage payment.
Small price to pay to have a paid for mortgage, I think, $22,000.
Do the math on this. Take that mortgage payment, the principal and interest, pop it into an investment calculator for the rest of your life and say, if I invested that... Now we're talking. There's a million bucks on the other side of paying off this mortgage. I'll take it. I like it.
Yeah. Or just thinking about if you didn't pay off the mortgage, what you're paying in interest all of that time, you're going to pay well over $22,000. Any way you slice it.
We can do the math all day long, but this is more emotional than anything. It's just a big, big chunk of money. It is. And there's something physical that you're letting go of to get rid of these precious metals.
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