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Build Wealth Like a Crockpot, Not a Microwave!

The Ramsey Show

Thu Sep 07 2023



Dave Ramsey's advice to not buy a house when in debt:

  • It is not recommended to buy a house while still having debts.
  • This is because there may be unexpected expenses related to home ownership that can put a strain on your finances, especially if you are already in debt.

Starting a business vs buying a house:

  • The caller was considering whether it was smarter to start a business or buy a house first.
  • Dave advised starting the business part-time and keeping other sources of income until it grows enough to replace the current job.
  • It is important for the caller to learn about running a business and acquire the necessary skills before going all-in with their own venture.

Using Roth IRA funds to pay off debt:

  • Dave strongly advised against cashing out any retirement accounts, including Roth IRAs, to pay off debts.
  • Instead, he suggested focusing on paying off debts through regular income and proper budgeting.
  • Cashing out retirement funds would result in penalties and taxes, which would likely outweigh any benefits gained from paying off the debt.

Buying a home through owner financing:

  • The caller mentioned an opportunity to purchase a home through owner financing.
  • However, given their current financial situation with remaining debt, it is advisable for them to wait before taking on more financial commitments such as homeownership.
  • Renting might be a more suitable option until they have paid off their existing debts and are able to save up for additional expenses associated with homeownership.

Scam using Dave Ramsey's voice:

  • An example of scam AI-generated audio clip has been shared where someone impersonates Dave Ramsey offering false information related to government economic recovery packages.
  • Dave clearly disapproves of this scamming activity and calls attention to unethical practices used by some individuals or organizations misrepresenting him or his advice.
  • Listeners are urged to be aware and cautious of such attempts and to always verify information directly from official sources.

Background information on Jeremy's son and whole life insurance:

  • Jeremy's son has a whole life insurance policy and wants to borrow against it.
  • Jeremy wants to convince his son to invest in something else rather than using the insurance policy.

Explanation of how whole life insurance works:

  • Cash value builds up over time with high premiums.
  • Lower rate of return compared to other investment options.
  • Ability to borrow against cash value, but not advisable for long-term wealth building.

Specific drawbacks and issues with whole life insurance:

  • Expensive monthly premiums compared to term life insurance.
  • Front-loaded commissions where the first few years go towards paying commissions and very little goes towards cash value.
  • Average rate of return around 1.2%, which is significantly lower than other investment options.
  • Penalty fees if you want to cancel or surrender the policy early.

Borrowing against investments:

  • Clarification on borrowing against a 401(k) versus another investment option like mutual funds
  • A 401(k) is not an investment itself, but a tax-sheltered account where you can hold different types of investments such as mutual funds.
  • Mutual funds are a common type of investment held within retirement accounts like a 401(k).
  • Importance of distinguishing between an investment account (e.g., 401(k), IRA) and specific investments (e.g., mutual funds).
  • Emphasize that wealthy people do not typically borrow against their investments, but rather let them grow over time.

Guidance for Jeremy's son regarding whole life insurance:

  • Encourage open and honest conversation with his son about the disadvantages of whole life insurance and alternative investment options.
  • Highlight the importance of focusing on long-term wealth-building strategies rather than short-term borrowing capabilities.
  • Suggest exploring more cost-effective alternatives such as term life insurance or investing in low-cost index funds with a diversified portfolio.
  • Recommend seeking advice from a fee-only financial advisor who can provide specific guidance based on his son's financial goals and circumstances.

The Ramsey Show:

  • Dave Ramsey and his team of experts answer questions on the top problems holding people back financially.

Topics discussed by Dave Ramsey and Ken Coleman:

  • "Should we buy a golf course?"
  • "How can I set myself up for success in my dream job?"
  • "Will closing credit cards hurt my credit score?"
  • "Can I afford to move out on my own?"
  • "I need to find a job that will pay the income I need."
  • "I can't get caught up on my savings."
  • "Should I sell my house when I move?"
  • "Should I pull from my Roth IRA to pay off debt?"
  • "How should I ask for a raise?"
  • "How do I prioritize paying off my house?
  • "What's the best way to increase my income?"

Mention of new sponsor and website, ramseysolutions.com:

  • Listeners are introduced to a new sponsor, ramseysolutions.com.

Scornful mention of whole life insurance by Dave Ramsey:

  • Blood pressure medicine is suggested when Dave goes off about whole life insurance.