Ramsey Everyday Millionaires: Episode Summary

Title: Can I Use Budgeted “Fun Money” To Do Day Trading?
Host/Author: Ramsey Network
Release Date: February 17, 2025

Introduction

In this episode of Ramsey Everyday Millionaires, the hosts tackle a pertinent question from listeners: Is it wise to allocate budgeted "fun money" towards day trading or cryptocurrency investments? Featuring insights from the Ramsey Network team, including Dave Ramsey, Ken Coleman, Rachel Cruze, George Kamel, Jade Warshaw, and Dr. John Delony, the discussion delves into the balance between disciplined financial management and the allure of high-risk investments.

Listener's Inquiry

Ryan from Baltimore initiates the conversation:

Ryan (00:21): "So my wife and I, we use the Every Dollar app. We follow it very strictly. And my question is whether it would be to use my fun money to invest in crypto and day trade on an app like Robinhood."

Ryan and his wife are diligently following the EveryDollar budgeting system and are currently on Baby Step Six. They are contemplating diverting a portion of their "fun money"—specifically $50 to $75 monthly—toward more speculative investments such as cryptocurrency and day trading.

Hosts’ Perspectives

Dave Ramsey (Host A) responds encouragingly:

Dave Ramsey (00:44): "Go for it."

He acknowledges Ryan's disciplined approach and supports the idea of experimenting with a small portion of discretionary funds. However, Ramsey emphasizes the importance of maintaining financial discipline:

Dave Ramsey (01:08): "If you want to spend some money and have fun with this app, that's fine... my one warning to you is that it takes up a lot of brain space... it might be living rent free in your head."

Ramsey warns that day trading and crypto can become mentally taxing and potentially addictive, consuming significant mental energy and impacting one's well-being and relationships.

Ken Coleman (Speaker C) adds to the discussion:

Ken Coleman (00:52): "Honestly? Yeah, just Robin Hood... my thought is, you know, I'm going to lose it one way or the other with my fun money paying for food or coffee. So why not try to make a little bit of fun money off it?"

Coleman supports the idea of using fun money for investing but advises focusing on one platform (Robinhood) rather than spreading efforts across multiple avenues like crypto.

He further elaborates on the importance of discipline:

Ken Coleman (02:13): "As long as you've got discipline, that's the key, is to control your money, to know where your money's going."

Rachel Cruze (Speaker C) concurs, emphasizing the structured use of "fun money":

Rachel Cruze (02:13): "It's what do you want to spend it on?... as long as you've got discipline, that's the key..."

Deep Dive: Risks of Day Trading and Crypto

Dave Ramsey references his book Breaking Free from Debt to underscore the hazards associated with day trading:

Dave Ramsey (02:12): "Day trading is a great way to decrease your wealth and increase your anxiety."

He categorizes day trading as an investing trap, highlighting how the volatile nature of the markets can exacerbate anxiety and potentially lead to financial losses. Ramsey draws parallels between day trading and gambling, pointing out the addictive dopamine-driven behaviors that can ensue:

Dave Ramsey (02:39): "It's kind of a sister to gambling. There's definitely the dopamine with that..."

The hosts collectively caution that while experimenting with fun money can be harmless if approached correctly, it is crucial to remain vigilant against the potential for financial and psychological pitfalls.

Key Insights and Takeaways

1. Discipline is Paramount: Allocating a small, budgeted portion of discretionary funds (fun money) to speculative investments is acceptable, provided it does not interfere with overall financial stability and goals.

2. Mindful Engagement: Day trading and cryptocurrency investments require constant attention and can be mentally draining. It's essential to assess one's ability to handle the stress and potential addiction associated with these activities.

3. Financial Hierarchy: Before venturing into high-risk investments, ensure foundational financial steps are secured—being debt-free, maintaining an emergency fund, and investing consistently in retirement and other low-risk vehicles.

4. Avoid Overextension: Stick to one investment platform or method to minimize confusion and reduce the cognitive load associated with managing multiple speculative investments simultaneously.

5. Mental Health Matters: Be aware of the impact that constant monitoring of volatile investments can have on mental well-being and personal relationships. Prioritize activities that align with long-term financial health and personal happiness.

Conclusion

The episode underscores a balanced approach to personal finance—encouraging listeners to maintain disciplined budgeting while allowing room for calculated risks within designated fun money. The Ramsey Network hosts advocate for mindfulness and restraint, ensuring that the pursuit of additional income through day trading or cryptocurrency does not undermine overall financial security and personal well-being.

For those considering similar ventures, the key is to remain disciplined, set clear boundaries, and prioritize mental health alongside financial aspirations.

Notable Quotes:

• Dave Ramsey (01:08): "Why not try to make a little bit of fun money off it?"
• Dave Ramsey (02:12): "Day trading is a great way to decrease your wealth and increase your anxiety."
• Ken Coleman (00:52): "Why not try to make a little bit of fun money off it?"
• Rachel Cruze (02:13): "As long as you've got discipline, that's the key, is to control your money, to know where your money's going."