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Chapter 1: What is the main topic discussed in this episode?
Live from the headquarters of Ramsey Solutions, broadcasting from the pods, 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. George Camel, Ramsey Personality, host of the George Camel YouTube channel and co-host of the Smart Money Happy Hour with Rachel Cruz is my co-host today.
We're answering your questions about your life and your money, and we invite them right now. The phone number is 888-825-5225. Tom's going to start off this hour in Atlanta, Georgia. Hey, Tom, welcome to the Ramsey Show. Hey, Dave, how are you? Better than I deserve, sir.
Chapter 2: How does Tom's financial situation influence his mortgage decisions?
What's up in your world?
Well, I have a question for you, and I hope all's good in your world, but I recently sold a company and finally have enough money to pay off mortgages if I wanted to, and I wanted to know should I do that or should I keep them financed?
Okay. Okay.
I have a home under construction. It's a construction loan at 3.5%, which is going to change if I close with them under a 15- or 30-year mortgage to approximately 5.5%. And I have the funds to pay it off, and I just needed to know should I pay it off.
So what is that pile of money that you got?
It's a nice chunk of change, and to pay off the house, I don't think it would affect my lifestyle.
How much did you get, Tom?
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Chapter 3: What factors should be considered when deciding to pay off a mortgage?
I'm not allowed to say those exact numbers.
Why? Your mama told you you couldn't?
No, no, no. I'm under a confidentiality agreement.
Oh, okay. Was it seven figures? What are we talking here? North of a million.
Yes.
Okay. Well, hey, the reason I was asking was congratulations. Well, thank you very much. That's incredible. Well done. Touchdown, Tom. Well done.
Hey, it was a touchdown. Very happy.
Fun.
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Chapter 4: How can reverse engineering help in financial decision-making?
20 years.
Fun. How old are you? 53. Good for you. And how much is the mortgage balance going to be?
It'll be, in June, when the house is finished, it'll be around a million, and the home will be worth about $2 million because I've already put in a chunk.
Okay. So the chunk of change under confidentiality is well north of $5 million then.
It's a good number.
Yeah, okay. All right. So you can pay this off and still have a big old pile of freaking money. That's what I wanted to make sure before I move forward in this. So here's the thing. A good way sometimes for me, and I use it a lot personally, to decide if I want to keep something or if I want to invest in something is I reverse engineer it. Okay.
Let's just pretend your pile of money was $5 million and you had a million dollar mortgage. Okay. And so if you pay off the mortgage, you know, you've got a pile of $4 million and you have a paid for $2 million house.
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Chapter 5: What insights do millionaires provide about borrowing against homes?
Okay. Is that right? I got my numbers right, didn't I? Well, yes. Assuming my assumption about the confidentiality, I was close. Okay, so anyway, that's our pretend scenario. And now, if the house, let's reverse engineer it. Let's pretend that you had a $2 million paid-for house and you had $4 million in investments.
Would you go borrow a million on your paid-for house so that you had $5 million in investments?
No.
Same difference.
Fair enough.
And that tells me what to say. See what I mean by reverse engineering it? So you can even do that with a boat that's sitting in the driveway. Okay, the boat's worth $10,000. If I sold the boat, I'd have $10,000. Let's pretend I got $10,000 piled in the middle of the table. Would I go buy a boat? Yeah, I love boats.
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Chapter 6: How does the conversation shift to real estate and market dynamics?
Okay, then don't sell your boat. But no, of course I wouldn't buy another boat. I hate the stupid boat. Well, then it's time to sell the boat. It's taking up space in the driveway. So you just reverse engineer it, and that's a sunk cost analysis.
Yeah, this is a good situation to have. But a lot of people, Dave, what they see on paper is, well, Dave, if I invested that money, I can make more than the mortgage interest. Wouldn't that be the smart thing to do?
And the interesting thing is when we did that largest study of millionaires ever done in North America, 10,167 of them, the number of them that borrowed on their house to invest and as a result built wealth was precisely zero. We couldn't find one. Not even one that said, I became a millionaire because I maximized the leverage on my personal residence and put that money in mutual funds.
Not one. Well, the millionaire guy on TikTok told me differently, Dave. Well, that's because not all those people tell the truth. Well, he had an online course that was going to show me how to do it.
I know. For $3,000.
Oh, that's how he made his money. Not through leveraging debt.
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Chapter 7: What are the implications of feeling unsafe in a neighborhood?
That makes sense.
Yeah. You know, if I... That's why we put stuff on TikTok. I mean, I was going to avoid TikTok. That whole thing brought me nuts. And we just started flooding it with Ramsey stuff to try to flush out some of the sewage. Just displace it. Yeah, just flush out some of the sewage. If you just take up the space with clean water, the sewage has to go somewhere else. You know, it's just, oh, my gosh.
So we thought, okay, we can either ignore this sewage mess or we can just put a bunch of cleanliness in there and, oh, these people. Yeah, I mean, yeah. You watch some of these guys. Honestly, most of you have good walking around sense. If you'll take a second and just watch the body language of a couple of these characters, you can 100% see they're lying.
that their scenario is, I have $25 million in mortgages, and he's got a baby on his hip. Oh, you've seen that one. Yeah, that one went viral. That one's just so – that guy's so lying.
Chapter 8: Why is communication important in estate planning?
It is not true. You just watch it. Watch his eyes. Watch his mouth. I mean, the guy is just – you don't have to be an FBI trained to figure out this guy's not telling the truth, okay? So it's just a straight-up lie. So honestly, people, the data that we did in this –
millionaire study is airtight i mean we used all of the research techniques we used an outside research firm to make sure we weren't doing confirmation bias we weren't falling for some of the other research methodology problems you can get into because we actually know a little bit about research and statistics here at remsey and so we this this data is so freaking solid that if you don't agree with the conclusions you're what's known as wrong
So, I mean, you just got to keep that in mind. It's just straight up the truth. Now, so, you know, the number of millionaires that became millionaires because they bought whole life life insurance, precisely zero. Not one! The number of them that leased their cars, because this is what wealthy people do.
Now, some of them did lease their cars, but none of them told us that it was anything but a mistake. Okay, what was the dumbest thing you ever did with money? They would say, I leased a car, bought a whole life policy. These are the things that kept me from building wealth.
Well, it's so much simpler and more boring than you ever thought. It's just put money in your 401k mutual funds. Pay off your house. It's a problem with this stuff. It's too boring, Dave. It's just really boring. We need a sexier approach. Make it real complicated. Do a lot of math on a
board real quick i need a white board and i need to be to dance around and i need to do a double backflip and get a family partnership double twist off the high board and you have to come up with all this complicated crap because that's what wealthy people do no they don't they live on less than they make they invest and they pay off their house and if you want real money it's what they really do build and sell a company that's that's the american way that's pretty cool now that's where most of your billionaires come from
Now, if you want to study the Forbes 400, they're all today billionaires, and that's $1,000 million. That's a different category. That's not a $1 to $5 million. That's $1,000 million. You're not going to get to billionaire with your 401k, boys and girls. Mathematically impossible, okay? So there's some other tricks involved, some things involved, but none of them are the stupid stuff you read.
But anyone can become a millionaire. It's so much simpler than you think. Social media is where you're getting your financial information. Even though we're on there, I'll just tell you, it's a struggle. This is The Ramsey Show. Dr. John Deloney, Ramsey personality, is my co-host today. Open phones at 888-825-5225. Ed is next in Tampa, Florida. Hey, Ed, welcome to The Ramsey Show.
Hey, gentlemen, how are you? Better than we deserve. What's up?
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