The Investing Questions Everyone Should Be Asking | The Best of The Ramsey Show

I'm looking for some investment advice. So I'm a 50-year-old homeschooling mom. I've been homeschooling for about 20 years, and we've been on a single income for a long time and budgeting and living within our means. But recently, about four or five years ago, I used to work for a major tech giant, and I had some stocks that were underwater. I didn't think much about it and totally forgot I even had them. And And lo and behold, a couple of years ago, it just went crazy. And so now all of a sudden I have a great amount of net worth, I guess. But when I log in and see my account, I have up to about 18 million right now, but I don't know what to do with it. And it's all tied up in one stock, which makes me a little nervous. Thank And, you know, I've never done a whole lot of online investing or anything like that. So I wanted to see if you have some advice for me. you Wow, that's awesome. I hate it when I log into my account and there's $18 million in there. very Way to go. Were you shocked? Like, did you wake up one day and log in and go, oh, my gosh, are those zeros real? much. No, you saw it coming. You knew. Wow. No, I didn't. My husband actually said, hey, did you see what happened to your company? I'm like, no, because I was homeschooling. I was doing my normal things, and I actually didn't even know where my stock was. So I had to log into a couple of different companies and say, well, I hope my account is there still. So yeah, so I found it eventually, and it's gone crazy still. Okay, wow. So you've held this for how long? Uh, 20 years. And you've, and it is, it was when you got it, it was a, an employee benefit. So your, your cost basis is zero. I remember paying around $14 maybe when I left, I left when my son was, when I was pregnant with my first son. What's it trading for now per share? I think it's 120-something, but it's been split four, and then it's been split 10, I guess. Oh, a lot of stock splits. But when I left, yeah, when I left, it was only three-something. I got you. So it was completely underwater, and I just filed it away somewhere, you know, didn't think about it anymore. You forgot about it, okay. Yeah, yeah, totally. That strategy worked for you. It's not one I recommend, but I'm going with it. Okay. Hey, good job. So what is your current household income? So we're still on single income about. $250-ish. Okay. So my husband also works for another tech giant. You need, okay, if your household income is over $400, your capital gains rate is 20%. If it's under $400, it's 15%. Oh, okay. Okay. So if you were to cash out enough of this that it took you up over $400, it's going to run your rate up, I think. So what you need is much better detailed advice, but I want you to sit down. I want you and your husband, who are both smart people, to learn exactly what your rates do as you move this around. It's very, very scary and unwise to leave all of your money in one thing, regardless of what the story is of how we got there. Because this thing turned right side up, but it used to be $3, and it could be that, again, hypothetically. I doubt it, but it could be. Okay. Right. I'm not predicting that. I don't even know what the company name is. I don't want to know. It doesn't matter. The concept of diversification gives you safety, not having all your eggs in one basket, as they say. And you probably heard that, right? Right, definitely. Yeah, so common sense says we need to get some of this off the table. Um, the, the faster, the better, but being wise about tax rates as you do it. Okay. Okay. But so let's say your husband makes two 50 and if I'm right, and I might not be, I'm sitting here questioning. I don't know if it affects capital gains. I've got the number here, Dave, if you want. I know it's, I know it's gone up a little bit. Is it over 20%? It is 20%, but the number, if it's married filing jointly, it's 583. Yeah. But I don't know if capital gains activates that number. That's based on your household income for the year. Your AGR? Okay. So if you only cash out $150,000 a year, what's the max she can cash out? What's the top income rate before it kicks in? $583,000 this year. They keep up with it. If you only cash out $300,000 a year, you're never going to get diversified. It would take a long time. But if you go over $300,000, you're probably going to go from 15% to 20% capital gains rate. Follow me? Yes, yes. Because the rich must be punished, including homeschool moms. Just ask the bozos in Washington, okay? So anything we can do to do that. But the first $300,000 a year is a no-brainer, but that's not really moving very much of $18 million. Exactly. You've got to live to be 300 years old to get it all moved around. So you're probably going to take some tax hit. And what your analysis is, what your consideration is, is am I willing to give up 20%? Of, say, a million dollars, am I willing to give up 200 grand out of a million in order for it not to all be in one thing? I see. I am if it's me, but I'm not going to be in a rush. I want to do some of it, but I sure wouldn't want this thing to turn upside down and you end up with half your money because you didn't move it over 20%, right? Right, right. Well, I think our whole mindset is just really different than maybe people who come on to your show or go on to your programs, because I've never lived with this kind of money. You don't need the money. I have no need for any of this money. Yeah, but you've been given the responsibility to manage it. True. So we want to be wise. We don't want to look back and say we were unwise. Not because you're going to go buy a Lamborghini. That's not the point. Okay, because you're not. That's not who you are. You just said that. But we also don't want to give up more in tax money than we have to give. And so some of these tax rate things are possibly moving in a different administration. So it could be next spring or next year Congress passes with a different president, a different tax law that could happen. I wouldn't sit around and count my chickens on that one either way, but either. So I want you to sit down with a tax professional and with one of our smart investor pros and begin to get some investment advice. If I'm you, even if it costs me some money, I would rather have the safety. ...than I would the extra 20%. So what are we talking about here? 3.6 million moves at all. So instead of 18, you've got 15 or 14. But it's all moved, and it's diversified, and it's safe. And you've reset your basis and everything higher. And then you can invest it in something less volatile and a little less risky. Yeah, if you did it all at once, that's probably what you're facing, max. Would you rather have 14 diversified or 18 undiversified? I'm probably a little of both is what I'm probably somewhere in the middle of that, uh, but I'm moving some of it and I'd learn how. So get with a smart investor pro, get with a tax ELP, learn about the taxes, learn about the investing. Wow. Congratulations. I had a situation happen a couple of years ago, uh, during COVID my mother passed away. Um, she was actually, uh, killed by her, um, her new husband. Oh my gosh, man. Yeah, they were both in their late 70s, and they left me with quite a bit of money. So I had never made more than about $85,000 a year and then was left with a couple million dollars. And I hope I've been doing the right steps with what I've done with it. I just wanted to get mostly some reassurance that I've been doing the right things or what you would recommend moving forward with this. Oh, my gosh. How have you navigated the last few years with the loss of your mom? You know, the first year wasn't too well. You know, kind of went backwards probably a little bit. And then I got a couple kids, and I tried to get myself together and be better for my kids. And I think I've been doing pretty well the last two years. How old are you, Jonathan? 36. Okay. And I assume the husband's been put in jail? No, he killed himself afterwards. Oh. Yeah, in our house that we grew up in. Oh, I'm so sorry. Well, that just makes it, I mean, managing $2 million that you don't know how to manage is freaky enough, and then you put this layer on it, it just gets super freaky, right? Yeah, yeah, it's a little more than that. We were left about $2 million, $2.5 million from our parents, and then he left us another $1.1 million. Oh, wow. Which we weren't expecting. We didn't know that we were written into his will. Does that money feel weird, or are you happy to spend it? And, uh, I, I. I've spent, I haven't really, I wouldn't say I've spent it. I've used most of it to live off of the last couple years from the new husband. Mm-hmm. He left us two IRAs, a traditional IRA and a Roth IRA. All right, let me get past all the questions and just answer your question. So how much money do you have today? Today, let me just flip over here. I've got total between properties and everything. Yes. I would say about $3.5 million. Okay, and you're still working, making $80,000? No, I haven't been working since the day she died. Oh, wow. Okay. What did you do for a living? I worked in restaurants mostly, bartender, sommelier, and server. Mm-hmm. Okay. And the reason I didn't go back to work was a lot of that. The reason why I made good money was because I was always forward about my life and talking to people about things in my life, and I just felt like I couldn't do that anymore. Hmm. Hmm. Well, you can't go into this story, part of the story, anyway. Wow, okay. Are you married still or single? No, I've never been married. I'm single. You said you had kids. Okay. Yeah, two children. Thank you, Adrienne. One that I have full custody of, one that I split custody. Okay. An important part of your recovery moving forward is you're going to have to get a job. You're going to have to get a purpose, a thing to do, a thing to go to, a thing that you are a part of that the world's going to be better because you were a part of it. You got that? Yeah, I feel that as well. Okay. Yeah, it's time to go back to work, Jonathan. Yeah, I'm actually starting a business this year, a tour boat business. A what business? Tour boat? A tiki boat, tour boat. Oh, okay. All right. You're buying the boat and going to do tours. Yeah, and do trips on the boat. When? The boat's going to be delivered in April or May of this year, and we should be operating by June. Okay. What did you spend on that boat? $220,000 total. Okay. Okay. All right. Now, you're going to be... leaning in, learning how to run a business, learning how to handle and operate the boat. You're going to be leaning in on all of this. I really want you to go make a living for your sake because at 36, doing nothing is not a plan, okay? Okay, for emotion. Emotionally, spiritually. John's right about that. Now, so let's pretend that you're making a living. You don't need this money then, right? So now we just need to invest this money well. Yes. Okay. Jonathan, I buy two things for investments. Thank you very much. The first thing I tell people, and I was with a bunch of wealthy people this weekend, do not put money in something you don't understand. Don't do it because I do it. Don't do it because somebody else says to do it or you read an article once. That's a nightmare way to lose money. Put money in something you understand. Now, that may mean you need to go to school a little bit by sitting with an investment advisor and letting them teach you. But I buy real estate that I pay cash for because I like the real estate business. I've done that already. Okay. And I buy mutual funds, and that's all I buy. Okay. I've got about a total of about $1.8 million in real estate. Okay. And it's making money, right? I have one house that's going to be worth about $1.2 million, and I'm planning on renting that. Going to be? When? Why is it not worth that now? That it's about to be finished being built. And I think in March or April of this year, it'll be done. Okay. All right. So you're going to have, and then I have a, I have another rental house and then I have the house I live in. Okay. That's fine. Great. Now manage those to where they make a good return on the amount of money you have tied up in them. And then sit down with a good, uh, someone like a smart investor pro. You can find them at RamseySolutions.com and they'll help you sit down and start to understand some mutual funds and invest it. But I mean, if you make 10% on $3 million average across that, those investments, then you'd have 300,000 a year coming in. Uh, if you don't touch it. In seven years, that $3 million at 10% would be worth about $6 million. In seven more years, it would be worth about $12 million. In seven more years, it would be worth $24 million. That's 21 years from today. You're 36. That puts you at 57 with $24 million. I like that. Okay. That's you working, providing your own living, not touching these investments and letting them just grow at an average growth rate of 10% a year. And that's invested in mutual funds and real estate. Now it's a little more complicated than that, but basically that's how the math will roll out. The trick here to the thing is put money in stuff that's steady and is predictable. Not super conservative, but we're not taking any big risks here. We're not trying to reinvent the crypto world or some bull crap like that. And don't buy a tiki boat for a quarter million dollars, and then six months go and be like, well, I'm going to do this, and I'm going to buy a snow cone stand, and then you're going to small business yourself broke. Yeah, stay on track with that. And so you're now in the tiki boat business for the next decade, buddy, and you're going to make a go of it. John's right, you don't get to change. I currently have three jobs. I spend more than 12 hours a day working. And I save and invest about half of my income, so I'm saving about $100,000 a year. So financially, we're sound, but it comes at a cost. So I'm not spending enough time with my children, and my health is deteriorating. Well, I'm not dying, but it's impacting negatively. How much do you have in savings and your investments? Yeah, so I, so with, I've been doing this, I've been having three jobs for about five years now or going into six years. So you put a half million dollars away. Yeah, exactly. Well, yeah, exactly. So with that money, I've bought four homes, one primary residence and three single family homes and I'm renting it all out right now. Okay. And what are the three single family homes worth? Roughly on average, about 600 K. Each? And I bought it for about, yeah, correct. Okay, so the three rental properties are worth $1.8 million, and they're paid for? No, no, no, no, no, no. About, like, 40, I have about 40% equity on each house. Oh, so you still have debt on them. Okay. Correct. Okay, so when it comes to equity, I have about 1.3 in all those four houses, and I have about $350,000 in savings. So what's your question? in IOA combined. Yeah, so I just turned 40, and I've been happy so far. I just turned 40 this year, and since then, I've been thinking about a lot of stuff, like, am I doing a good thing? And initially, I thought I'm doing the right thing for the family, but I'm starting to think about myself, too. I think I'm just kind of going through the midlife crisis. But also, so when I think about quitting those two jobs, the thought of living paycheck to paycheck terrifies me. Honey, you're not living paycheck to paycheck. You're putting $100,000 away. Quitting two jobs is not going to make you paycheck to paycheck. You're so exaggerating that. Well, if I, after I put all the like max out on 401k and IRA, I'm not going to be saving any money at all on a monthly basis. So back off of your investing. You only got $2 million. You're not living paycheck to paycheck. That's a bogus emotional response. Why are you afraid to just sit at home with your family, dude? Yeah. Why? Why? Well, initially, I was part of, like, fire movement, but I'm thinking a lot of things can happen in the future, so... Yeah, FIRE movement burned down. Did you notice? It burned to the ground. It burned around people's ears because they were trying to do something that wasn't sustainable. What you're doing is not sustainable. What you're doing is not sustainable. You didn't build a life, you built a financial portfolio. And now your brain is waking up and saying, go build a life. And we're saying, yes, go build a life. Here's what I promise you, dude. I agree with your brain. When you're 50, you can hand the kids a key to a rental house. I promise you they would have exchanged it for time with their dad. By the way, that's a false dichotomy because you work hard. You're still going to be able to offer your kids a pretty extraordinary life financially, and you get to spend time with your kids. I think you're scared to go home and be with your family. Am I wrong? Well, are you afraid to admit that the fire thing you bought into sucked? And also, I think it has to do with my ego. Like, I just feel like I'm successful and superior. And you have four houses worth $1.3 million. Your net worth is $2 million, and you're 40 years old. Ding, ding, you got the bell. You rang the bell. You're done. You're done. If you don't do anything else, you're going to be worth $20 million at 65. If you just let the investments that you have grow, that's all. There's no need to panic here. And by the way, people working and enjoying their work and going to work and having meaning as long as they're able is not bad. I intend to be on this microphone until I don't make sense. Now, I don't want to be one of those guys that doesn't make sense. We've seen those, and they're dangerous. But, yeah, so anyway, yeah, we need to get off at that point. But, no, dude, yeah, your brain is telling you what to do. You already know what to do. All I'm telling you is is your emotions are exaggerating that you're, like, going to be starving to death or something and living paycheck to paycheck. Not even close. How much of a... Oh, here's an idea. Quit. And if a year from now. You think you're going to be homeless or something? Go back to work. Three different jobs. You can get those jobs right back. Those kinds of jobs are always waiting. How much of this stress, Dave, because I've never lived this life, you keep telling yourself with your... Neocortex, your thinking part of your brain, I'm worth $1.3 million. I'm worth $1.3 million. But your amygdala, the threat detection part of your brain says, you still owe $900,000 on these four houses. You still owe money. You still owe money. And every month, no matter what your net worth is or how much money you have coming in, Your brain knows you're still on the hook for all these properties. That's got to weigh you down, doesn't it? That's probably part of it. But I think he's been running at breakneck speed. He didn't even notice that part. That's my opinion, just talking to him. He's just exhausted. I think he's just... No, he was trying to run. He thought there was an end game. Tell me about FIRE. FIRE is... The Retire Young. The Retire at 40. Okay. Not have to work again. Yeah. And the numbers don't work. Gotcha. It doesn't, you people. And because... The problem with money, when you view money that way, is money is a bully in the schoolyard. As soon as you say, hit me in the nose, you step back. If you cross this line, I'm going to hit you. You step across the line, he steps back and draws another line. He says, if you cross this line, then I'm going to hit you. And that's what money does. Because there's always another one. There's always a bigger thing. There's always a different thing. There's always a reason. There's always inflation. There's always a better car. There's always a, oh, mama wanted a house in the mountains. Oh, there's always, it doesn't matter where you get to, there's always another one, and a bigger one and a shinier one and a different. So you just can't get away from it. Once you get on that treadmill, you can't catch that carrot. It's impossible to catch. And so if you could maintain godliness with contentment, And say, okay, I'm going to live a lifestyle of $50,000 a year income. Then you can build a big enough nest egg to quit. But something about our psychology won't let us do it. We start out with that, and that's the math. But then by the time we get used to living on a $150,000 lifestyle, then I've got to go back to a $50,000 lifestyle to quit, which is exactly what he's saying. He's saying, I'm going to be paycheck to paycheck. He's not even close to paycheck to paycheck. But he's going to have to cut his lifestyle. He's going to have to drop his investing from $100,000 a year contribution. Now, that was in addition to maxing out everything else. Yeah. So he can still max out everything. And you can't do $100,000 extra. Extra, yeah. And that's paycheck to paycheck. That's not paycheck to paycheck. Also this, you get to be 40 and you got $2 million and you thought it was going to feel a different way. That's true. You thought it was going to be a billion. You thought you were going to do nothing and doing nothing will kill you. It's one of the things I had to outline with all these little communists that are coming out of college. Have to explain to them that a billionaire is not the same thing as a millionaire. A millionaire, a billion is 1,000 million. Billionaires have four houses, a jet, and seven cars. Millionaires have two used Camrys and one house, and it's paid for, and they have $800,000 in their 401K. That's a millionaire. But a billionaire is 1,000 million. And people emotionally have these two things confused. They think of some rap artist or whatever in a private jet. Which they don't even own. It's chartered. But, I mean, they think it's, oh, that's how, you don't live like that with a $3 million net worth. You know, stupid jet would be more than that. Much less, you know, the whole, I mean, it's just like, so that's not how it works. It's the emotions of when I get to be a millionaire, I'm going to be a billionaire. No, you're not. You're going to be a millionaire. And that's still a good thing. Two used Camrys, an $800,000 in your 401k, and a paid $400,000, $500,000 house. And a lot of laughter in your home. Ding, ding, ding, ding, ding, ding, ding, ding. You're done. I've changed positions in the company that I've been working for for the last couple of years, and I'm making a significant... amount of money over what I was making initially. And it's kind of just piling up in the bank. I haven't invested any of it aside from just the company 401k, which comes out automatically. And I'm pretty illiterate when it comes to these things. So I've been back and forth reading different things online about what I should be doing with my money. Never really done anything with it thus far because I haven't had any professional advice, just what I've read online. So I'm hoping that you can maybe guide me in a direction of where I should be putting my money to work for me as opposed to earning less than 1% interest in a bank. Good for you. Good for you. Well, the good news is it's not rocket science. It's not that hard. Um, this is not like learning a foreign language. It's much easier. Okay. And so, um, uh, it is a bit of a foreign language, but you just have to learn the vernacular and then you'll know what to do. What do you do for a living? So I'm in sales. Good. What do you make? Uh, by myself or my wife as well. Your household income. Why is this money piling up? Um, probably just north of 200 K gross between my wife and I. Good for you. Well done, sir. How much money do you have saved? Shane, you said it's just sitting in the bank and piling up. Yeah. So right now I have about $50,000 in the bank. I've only been in sales for the last six months and I probably had $10,000 when I started. So I probably have saved $40,000 in the last six months. Good for you. Okay. Well, as far as investing goes, there's two principles that if you'll follow these two principles, you'll find your way through and do just fine. Actually, there's three, but I'll give you all three of them. Principle number one, don't ever put money in something you don't understand. You have not violated that. Congratulations, you've done very well. I met with an NFL player one time, and I sat down with him and his wife, and he said, Dave, you're going to kill me. And I'm like, what'd you do? Did you blow all your money? And he said, no, I got $10 million. I'm like, well, what is it? Why am I going to kill you? You got $10 million. He said, it's all in CDs. It's horrible. That's not horrible. That's so much smarter than all the other people you play football with because they've all blown theirs or put it in their brother-in-law's pizza company that went broke, you know. So, you know, very smart. Don't put money in stuff until you understand it. So I don't care how flashy the TikTok thing is or what Dave Ramsey says or what Rachel Cruze says. You understand it before you put money in. Principle number one. Principle number two, plan to go slow. The fastest way to get rich quick is don't. Get rich quick. The tortoise wins the race over the hare every time I read the book. Okay. And I've read it a bunch, over and over. He always wins. And investing, you always win if you're slow and steady wins the race. That's the Aesop's fable, okay? And then the third thing is don't get financial people in your life of any kind, real estate, insurance, investing, tax, whatever, that sound like Charlie Brown's teacher. Wah, wah, wah, wah, wah, wah, wah, wah. I have no idea what you're saying. You might as well be speaking German to me, okay? And if they can't speak to you in such a way that they can teach you, they don't have the heart of a teacher. Then they're just a salesman. They're not a financial person. And financial people are the world's worst because a lot of us are nerds and we like being impressive with our nerd knowledge more than we are concerned that you learn. Sure. And that goes back to the first one, don't put money in stuff you don't understand. So if you sit down with a financial advisor and you're in your wife and your wife says, I got a bad feeling about him or her, don't go with them. Or if you sit down with them and you leave more confused than when you went in, don't go with them. Okay. They might be okay, but they're not okay for you. Now, now that we've established that we can start talking about some of the cool stuff you could do for investing. Now we teach a process for building wealth that we've taught for 30 years, plus called the baby steps. You probably heard of that, right? I do. I have, I actually have your Total Money Makeover book. Okay. So, you know, then that we're going to have, you have an emergency fund and have all your debts paid off except your home before we start investing. Do you have any debt other than your home? Yeah. So just my car or my truck and my wife's car. And how much is all that? Um, total probably 70,000. Okay. We're going to pay all that off before we do any investing then. Okay. That's what we call baby step two. If you remember the book and then once that's done, I want you to set aside three to six months of expenses and for an emergency fund being out of debt and having the rainy day fund is foundational to keep your investments safe. Your investments otherwise will turn. You'll pull money. I'd stop your 401k temporarily and knock those car debts out. Take all that 40k and throw it at the smallest car debt. Let's get it all cleaned up. So if you got no payments, but a house payment and you got. I don't know, in your case, $30,000 sitting there in a money market account only to be touched for emergencies. It's not a, I want to go on a trip fund. Yeah, that was one change I was going to say. Open up a high-yield savings account. Fairwinds Credit Union's amazing, but they have a great smart bundle. So put it not in a traditional savings account, but in a high-yield savings account, because it goes from negative, I mean, basically not even 1%, to at least you're getting 3% to 4% sitting there for your emergency funds. For your emergency funds, right. And then... With no payments, now you start really stacking money. You start putting 15% away in your 401k and Roth IRAs and Roth 401ks, and you can talk to one of the SmartVestor pros at RamseySolutions.com, and they can help you. They will have the heart of a teacher. They don't get the Ramsey name put on them on our website unless they have the heart of a teacher. We won't, we won't put our name beside somebody that, and if we find out someone is doing the Charlie Brown's teacher thing, we fire them and get them out of the system because we are hardcore about this. So if you do all of that, you're going to have so much stinking money. Cause I got to tell you, one of the highest paid professions in the United States today is a good salesman. Yeah, it's a, it's, it was pretty night and day. It's about three times what I was making, uh, with this same current company prior to to this position and it's just. I had a lot of nights where I didn't really know what we were going to do for certain things. Read through your book, paid off some debts, credit cards, medical bills. Well, you're on the way. And now we're just at a point where I have too much money. I don't know what to do with it based off of. uh you know my own my own ignorance with yeah with uh with finances with investing with investing you start investing in good mutual funds and they're real easy to understand it's 90 to 200 stocks you look at the track record of the fund that was mutually funded by you me and a bunch of other people together and you go okay that that group of that pile of money has been growing at an average rate of 11% or 10% or 22% or whatever it is. And you look at, oh, it's done that for 32 years. Oh, okay. I feel pretty good about that. That's like buying a house in a good neighborhood. Yeah. And Shane, when you get to that, that 15%, honestly, the investment advice, as you, if you dig into more of what we talk about, it's not going to be a lot of flashy stuff. I mean, honestly, the 15% into retirement, 401ks, Roth IRAs, you've got the standard. And anything beyond that is just mutual funds, I mean, index funds. Like it's nothing, there's no day trading, no crypto. Like there's nothing big and flashy, real estate, Airbnb, you know, Airbnb investing. Like there's, you'll find none of that because again, it's quote unquote, not exciting investing advice, but the amount of baby steps millionaires that are at it have done this and have built wealth slowly over time because it is the most stable way to build wealth versus all the flashiness. So again, it's not super exciting, but it is consistent and it works. The difference is it actually works. It works, yep. My wife and I, we recently moved in together. We're relatively recent college graduates. Household income is about $200,000, take-home is about $145,000. That's post 401k, life insurance, health insurance, and HSA deductions. We have a six-month emergency fund. We have zero debt. And now the goal is for her to become a stay-at-home mother one day. But up until that day, the discussed goal is to invest my income and live off hers. In other words, of that $145,000, that is take-home, $85,000 is mine, and $60,000 is hers. So invest 60% of her take-home income. Is that overkill? Your home is paid for? We do not have a home. We moved into an apartment together. And you're married? Yes, sir. Okay. Um, you said that, but I was just double checking the way, because usually it's kind of like automatic. You move in together once you're married. So I just making sure I got this right. Okay. Um, the, um, okay. So, so the way I would look at this, the way I look at things is based on the data that I have of the studies that we've done and the people that we have worked with over the last 30 years that have built wealth, what did they do? and what is different about what they did and what you're talking about doing, and that's how I'm going to answer the question, okay? So in other words, as we studied 10,000 millionaires, how many of them did what you did? Lived in an apartment, did not buy a house, watched their rent go up every single year, which you can 100% count on rent going up your entire life as long as you rent every year until you buy a house, and then it doesn't go up anymore. So the house goes up, but the rent doesn't go up. Um, very, very few people that we have studied or that we know of and would have tracked with that became wealthy used that plan. Instead, what they have done is, is they bought and then paid off a home by investing a little less and using the difference to save towards buying that home because the largest line item. In the math in your budget every month is the largest item is cost of housing. And when the largest line item is rent and it goes up every single year, your largest item is out of your control. And it's going up every year when you fix it by buying and then you pay that house off. What we find is that we find 15 years from today, 14, 12 years from today for you, you have a net worth of a million and a half, five or 600 of that as a paid off house and six or 700 of that is a, uh, is in your 401ks and your Roth IRAs. And so I'm going to lead you that direction. rather than this intense saving. Obviously, let me tell you what you are doing very, very well. You're actually paying attention. You're planning. You're thinking. You're scheming about how we can win this money thing. Most people just ride through life with their heads stuck up their assumptions, and they don't know what's going on. And then they wake up broke. You're quite the opposite. You're on the very other end. You're very, very intense. Thank You're on fire. And so we've just got to point you in a way that's going to be the most efficient for you to actually hit your end goal, you which is a good, stable life with a pile of wealth, right? That's our end goal. very Yes, sir. Yeah. So, no, I would not do what you're doing. I would say... I would start saving a maximum of 15% percent. of my household income into retirement. And I would stop the HSA. I would build an emergency fund of three to six months of expenses. And then I'd see how fast I can build up a fat, juicy down payment. And I'd buy a house in Texas, which is a wonderful market to own a piece of real estate in. And I'd watch that house just go zoom, zoom over the next 15 years. I mean, look back and think about the neighborhood. that you might buy in and what you could have bought that house for 15 years ago. That just kind of makes you a little smiley. Wow, 15 years ago, I could have bought this house for, oh, that's what it's going to be 15 years from now. And so, yeah, that's what you want to do. Me and my husband last year had about $250,000, and we invested in a CD at a credit union, and it has matured. And we're wondering if we should go back to the same thing, invested in a CD, and are to look elsewhere. And we really don't want to take a risk. With the money, so we're both 80 years old, and we didn't feel like we wanted to take a risk in the stock market, but we wanted your opinion of what you thought we should do. I would go right back and renew that CD. You would? Yeah. Okay. It doesn't pay very much. It's not a very good long-term investment, but it gives you a lot of peace, and you told me three times you didn't want risk. And I heard you. And I heard you. Okay. Okay. So I'm 63, and I don't have any CDs. All of mine is invested in mutual funds in the stock market. But I'm comfortable with that risk. And I can tell by talking to you that if you did that with your $250,000, you would be awake at night scared. You're probably exactly right. And the last thing I want to cause is a sweet 80-year-old person to be awake at night. Okay. Now let me ask you the second question. Do you think that any of these investment companies, would their CDs pay more than the credit union? They might, but it's not enough to fool with. In other words, what are you getting on this CD? What are they offering you when you renew it? Well, I think she said 5.5. That's not bad at all. Okay. If you got six, but you were dealing with people you didn't know and trust, like your credit union, again, this is about sleeping well at night. And I wouldn't go jumping around and get a half a percent more and lose sleep. Right. Because you're very comfortable with this credit union, and the NCUA does have a $250,000 guarantee on this, so you're covered on your guarantee. And if the credit union failed, in other words, like an FDIC, but with a credit union, it's not FDIC. It's called the NCUA. But anyway, yeah, you're fine there. I personally would just tell you to stay right there. Okay, that's what I wanted your opinion. Yeah, but I'll say it again for the sake of our listeners. That's not because it's that 5.5% is a great long-term investment, because it's really not. It's because I want you to be able to sleep, and 5.5% is a good CD, and we're talking about your comfort here, not about a 20-year investment horizon. That's right. Right, okay, so if... Juliet called. She's 80 years old. And she says, Dave, we got $250,000. We just cashed out the CD. What's the best? What would you do if you were us? And she wasn't fearful of the risk. Juliet was. Again, I appreciated you taking care of her because, yes, we don't want her to be stressed out. But if somebody is 80 years old with $250,000 and they're not worried about it as much, what would you do at 80 years old? Well, with some of my investments at 63, it would also be more true at 80. I'm already realizing that some of the investing I'm doing is not for me because I'll never touch it. Yeah. It's really for the next generation. Yeah. And so, uh, you guys, the Ramsey, you know, the Ramsey kids are going to be getting this stuff. And so when I make an investment decision now, unless it's a five or a 10 year horizon, if I'm buying something out there long-term, I'm obviously thinking about, you know, the next generation after I'm gone. And so. Uh, you know, if we're to superimpose that on her situation, if you've got 250,000, you're putting it into a CD that tells me you're not living on it because that CD is not paying you monthly. So you don't need a return on that. So they've got other money that they're living on. So they very likely, unless something comes up and they need this money, but they very likely are doing their investing for the next generation at 80 years old. And so if you took that mindset, it'd be easy to put it in mutual funds. Because you might not be here five years, but the next generation will be. Sure, yeah. And they could leave it alone. We're going to dump $250,000 in mutual funds, and then when we pass, it'll pass to the kids. Yeah, yeah. And you never touch it. You're not really investing for yourself at that point. Yes. Okay, so here's what's funny. I was telling you during the break, Winston and I sat with our SmartVestor Pro this morning. We do it once a year and kind of look at all the investments. And I was actually telling... Someone in the lobby, Avery, she's 15, and she was talking about her Roth IRA. And I told her that I looked at when I started mine and when I started working for you guys, even in high school and all of it. And as we're talking through all the numbers and looking at everything, our investment pro, he was like, okay, this is good. I'm here and here and here. And he's like, and what's crazy is what you guys are investing here, you probably won't touch. It'll be for your kids. And so, as you're saying this to me, your daughter, you're investing money that you won't touch. I'm investing money I probably won't touch. And that, you guys, is a family tree change. Like, when we say that what you're doing today... When you don't need the money to live or to do the things you want to do. Yeah, to pass that on. And when you give... dignity to your kids parents out there with little ones and teach them to work and and you know be able for them to live out the principles on their own regardless of what their parents are doing and then they teach it to their kids right it's just this big big legacy snowball effect that just keeps turning over and over when everyone does their part in each generation it just keeps it going down the line I mean it's pretty it's pretty remarkable and it's really encouraging to you out there that are on baby steps. One, two, and three, and you're really grinding it out. Well, and if you blink. You start to do this. If you blink, it'll be 20 years, because that Roth IRA you did as a teenager is 20 years old. Mm-hmm. And that money that you were working and, you know, I filed a tax return. I paid the taxes on it. And it was an $800 initial investment. And that's funny. He pulled it up. It was $800. That was what your earned income was that year. Yeah. And that's what you're allowed to report. And I put that in into a Roth. And then the next year, I think it was probably 1500 or something or whatever. I mean, several years in a row, we did that with each of you as you worked. And, um, but I mean, 20 years later. Yeah. It's amazing what that becomes. It's great. It's great. I've been listening to you for a little while now, and you seem to favor a Roth IRA over a traditional IRA quite frequently. I know the differences. I'm wondering why you tend to favor the Roth, and I could tell you why my financial advisor originally put all my money into a traditional, if you want to hear that. Well, it's possible that your financial advisor fell in the same hole that other financial advisors fell in and couldn't get out. And that hole was, in order for the traditional to work out ahead of the Roth mathematically, you have to be in a lower tax bracket dramatically at retirement than you are now. A dramatically lower tax bracket, which, by the way, means you haven't got any money. Because if you've got $5 million, your required minimum distributions at 70 and a half are going to put you in the same tax bracket you're in now. So you're not going to be in a lower tax bracket. And so the Roth absolutely mathematically kicks the traditionals, but. Here's why. If you take $200 a month from age 25 to age 65, 40 years, and you invest that in a decent growth stock mutual fund, you're going to have $2.5 million in there. However, only $96,000 of the $2.5 million is actual. principal that you put in. So if you did a traditional in that, you would have gotten a tax break on $96,000. You would have not paid taxes yet on $96,000, but you'll pay taxes on the entire $2.5 million as you pull it out. If instead you did this with a Roth, you would pay taxes on the $96,000 and zero taxes on the rest of the $2.5 million. So there's no way that the traditional Even comes close to the Roth mathematically. Does that help you? Well, that's what my, it must be why my financial advisor went that route because yes, when I was, I'm retired now, but when I was making a decent salary, He... I was obviously in a higher tax bracket than I am now that I'm retired. And so he's moving. Slowly, every year, a certain amount from the traditional into the Roth to still keep me in a very low tax bracket. That's good. That is a smart move. But he assumed that you weren't going to have enough at your required minimum distribution. In my example, you got a tax write-off on $96,000, and then you still end up paying the taxes on it when you pull it out later. And so it just doesn't make sense at all. Now, when Roths first came out, they really took the nerd population of financial planners and blew their brains out. I mean, their minds, they just were in a hurricane. They didn't know what to do. And I was one of them. I spent numerous hours crunching numbers trying to figure out this thing. And here's the other interesting thing, George, is when you compare apples to apples, what we would all do in those days is we were trying to do the proper math calculation. So if you're going to say, all right, $100 going into a Roth. 100 requires, because you've got to pay taxes, that's net of taxes. So to put 100 into a Roth, you actually have to make 130, right? Yes. So we would say, all right, 130 going into a traditional or 100 going into a Roth, because that's a correct set of mathematical assumptions for a math nerd. And if you're a financial planner, you usually are a super math nerd, right? Now, here's the problem with that. That's not what people do. They put in the same amount, end up putting the same amount in regardless of the tax situation that they forget that taxes have already come out. I've already got the taxes out of my Roth, but I'm still going to fully fund the $8,000 to $6,000, right? I'm going to still max the thing out. I'm still going to put the exact same percentage of my income into the Roth 401k at my work, even though there's net of taxes. It's, it's, I mean, it took more money to get that in Yeah. Than it did to do that in traditional. But no one ever goes, you know, I'm going to put 80 into my Roth instead of 100 into my traditional. They don't reduce it. They just put the same amount in. Yeah. And so you end up with a Roth. We cheat you. We trick you into saving more. By accident. You didn't even know it. We trick you. And no one's called in saying, Dave, I did Roth like you told me to. I got too much money in retirement. What do I do? I've never had anybody. Good problem. You know, I followed your plan on getting a match first. And then getting all the Roth I could get, and then doing traditional, and I ended up on millions of dollars, and I hate Dave Ramsey. I have never had that complaint, never. And on top of that, there's no required minimum distributions on the Roth IRA. So that's a big bonus as well. And when I get to retirement, I don't want to be worried about tax brackets and how much income I can withdraw. I just want to live and give like no one else and not have to worry about that. So Jane, where you have ended up today, you're getting good advice on the gradual move so as not to bump your tax bracket, because whatever you pull out from under the traditional, move it to the Roth is not going to be subject to required minimum. And it's going to grow from this point forward tax-free, but you're moving it gradually so as not to bump up a tax bracket. And that's good advice. The advice that got you here, however, is a bad advice. I wish you were all in Roth right now. You'd be in much better shape. You wouldn't have any of this discussion going on. And you'd probably have more money. But it's not the end of the world. You did good, and you've retired, and you got a chunk of money. So you and I got the opportunity to talk theory. And that's awesome. I love it. I love it, I love it, I love it. So the rule is, rock, paper, scissors, but except there's only one way to go. Okay? Match beats Roth. 100% match before you get started, you can't beat that math, right? Beats Roth. Roth beats traditional. So do all the match you can, all the Roth you can, and only then do you do traditional. Why do you recommend mutual funds over index funds? Great question, man. How old are you? 21. Lovely. And are you investing right now? Yeah, I've been investing since I was 15. Oh my goodness. Dude, that's amazing. Who taught you that? My dad taught me a little bit and I read about it. Nice. What have you been investing in for the past six years? Um, so I, I was doing like, um, mostly, mostly index funds, but, um, I like to play around, do some stock picks, but you know, obviously not a lot of, not a big portion of my, uh, portfolio goes towards that. Okay. Are you working full time? Uh, yeah, I'm in marketing. Nice. That's amazing. Okay. And how much are you investing as a percentage of your gross household income? Uh, probably like, Oh my goodness. Okay. So you're going to be a multimillionaire regardless of this conversation that happens next. Can we agree on that? Yeah. Okay. Where do you live, Matt? Right outside of Charlotte. No, no, no. Do you have your own house? Your own apartment? You're living with mom? Where are you living? No. I still live with my mom at home. Okay. All right. Cool. How much do you make a year? Yeah. Oh my goodness, dude, you're crushing it. So you're, we're talking, you're investing like 18,000 a year and you've got a 401k through your employer. Okay. So what happens after you max that out? I just put in a regular brokerage. Okay. Great. So let's talk about index funds versus mutual funds. And for the listener's sake, if they're like, what are these goober nerds talking about? Index funds are basically passively managed mutual funds. So still a giant group of stocks, but it's tracking an index, basically a set list of companies. Whereas the mutual funds that are actively managed has an investment manager that is selecting the funds that make the list. Let's go even simpler for guys like me. When you say index, they're indexed and they're passively managed. So Index, there's no one running the show. It's just a set list. So they pick, I'm making these up, they pick. The S&P 500. There's 500 companies, the largest U.S. companies. And if they go up, then the Index Fund goes up. And if they just all go down, then the Index Fund kind of goes down. And over time, we hope these companies just keep getting bigger and growing. And then can companies fall off the S&P 500 and new ones pop in? Yes. So the whole thing should be just going up over time. Exactly. And so index funds means nobody's driving. It's just following whatever. It's the autonomous vehicle of the investing world. You like that? You just ruined it for people. John, like, I know. There we go. Excellent. Okay. Okay. Is that a good summary, Matt? Because you know about this stuff just as much as we do. Yeah. I mean, one thing that's sort of important to note is that mutual funds sort of have built-in fees, right? You know what I mean? Correct. There's built-in fees. There's an investment manager, there's people to pay because this is their job to run these. Exactly. So they do have fees. The perks of the index funds, as you know, diversification, which mutual funds have, low expense ratios, which index funds have, and predictability. And you know, every investing rose has its thorn. For starters, your index funds won't beat the market because it represents the market. Does that make sense? So you'll settle for the average of the market. You can never beat it. The goal of the mutual fund is that that investment manager is picking, is hand-selecting funds based on tons and tons of research that they're doing every day, day in and day out, in order to attempt to beat it. So let's say the market does 10%. Well, the goal of the mutual fund is to do 12% or 14%. Now, as we know, they won't hit that goal every year. We don't have a crystal ball. We can agree on that. Do you look for specifics in a mutual fund to try to hit those funds? Because I know 80% of mutual funds don't beat the market. No, that's actually factually incorrect. Morningstar did this article, and they said nearly 57% of mutual funds, these active U.S. equity funds, they beat the average index fund peer over the 12 months through June 2023. So that means six out of 10 mutual funds beat the index. Wait, over how long? Over a 12-month period. One year. They looked at, here's what mutual funds did. Here's what the peer index fund did. Six out of 10 beat the index fund. Right. But why are you looking at a 12-month period versus like, you know, decades? You can look at decades and it's going to change depending on the decade you look at. And the truth is there's going to be mutual funds that don't beat the index and there's going to be years the index beats the mutual funds. And so the goal here is to slightly beat the copycat of the stock market, which is the index fund. And so the index funds also do have a fee. You'll see it listed as a 12b-1 fee. And so that kind of makes up for the fact that the mutual fund fees there. So it's not exactly free. And here's the thing. We're not anti-index funds. There's a time and place. In fact, Dave Ramsey invests in index funds outside of retirement. You have that taxable brokerage account, right? Yeah. Dave would say index funds are the smart play there because of the low turnover. They're not moving things around as much, which makes the fees less. But in retirement, you're not having to pay those fees because you're not worried about turnover because this is a long-term play. And therefore he invests in mutual funds for his retirement accounts, index funds outside of retirement. So there's a time and place for both. What do you look for in a mutual fund though? Well, there's a lot of pieces of it, including rate of return, the expense ratio, what the fund is made up of, who the fund manager is, have they switched the investment team recently. If it's been doing great for 30 years and all of a sudden they switched the crew, well, that's something you want to look out for because things might change. And we actually covered this in depth, Matt, in our Investing Essentials live stream. And it's not currently available, but just for you, I'm going to send you a link to watch that for free. How's that sound? Good. But isn't that sort of inevitable? I mean, if a mutual fund has a 30-year history with one manager, and I'm 21, and I want to invest for another 30 years, you know, Isn't there pretty much a guarantee that the fund manager is going to change, the fund management team? Sure, over time, you know, things may change. But what we're looking for is that longer-term track record. And so we're not going to choose a fund that's been around for a year. We prefer the one that has a track record of 10 or 15 that's had the same team with the same record of success. But, dude, that's like saying, I don't want to... Root for the Yankees or the Astros because they're going to have different players in a few years. The goal is you hope that they have guiding principles and they have the same desire to win and they have the same integrity over time. Some teams are better at integrity than others with the teams I just labeled. I know. Kelly's looking at me. Kelly's upset. But you see what I'm saying? Yeah, the fund managers are going to roll over, but it will change over time. Matt, here's the deal. We can argue all day and I can tell you like this, but You can be a multimillionaire just from your index funds. You don't have to ever touch a mutual fund if you don't want, or are going to still be friends. You're doing great. The key is your savings rate. That's the key. That's what's holding people back from having money. It's not the discussion of index versus mutual. That's for another time. But for everyone else listening, just freaking invest. Be like Matt. At 21 years old, invest 18 grand a year. You're going to have money in retirement, regardless of where you put it. And for what it's worth, George and I both put our money in mutual funds. Call me a dummy. And me too. They do, George. They call us dumb. We covered a lot of dollars, decisions, and dubious financial math in this one. So thanks for hanging out with us. And if you're ready for more, check out another compilation right here. Trust me, you're going to want to watch this one.