Don’t Let This Stupid Trend Affect Your Investing

Summary

Ramsey Everyday Millionaires: Don’t Let This Stupid Trend Affect Your Investing
Hosted by Ramsey Network
Release Date: December 20, 2024

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Introduction to the Gambling Trend and Its Impact on Investing

In the December 20, 2024 episode of Ramsey Everyday Millionaires, the hosts delve into the concerning trend of increasing gambling activities among Americans and its detrimental effect on personal investing habits. Led by Dave Ramsey, the discussion highlights how the legalization and proliferation of sports betting are diverting funds away from traditional investments, thereby undermining financial stability and wealth-building efforts.

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The Rise of Sports Betting and Its Financial Implications

Dave Ramsey opens the conversation by addressing a growing concern among listeners: the surge in gambling activities, particularly sports betting. He references recent data indicating that since the legalization of sports betting in many U.S. states, there has been a notable decline in household investments. Specifically, Ramsey points out:

Dave Ramsey [02:40]: "38 states have legalized gambling and it's become a growth industry, generating more than 120 billion in total bets."

He emphasizes that the American sports betting industry reached a record-breaking $10.9 billion in revenue in 2023 alone, a stark contrast to a 14% drop in net investments during the same period.

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Personal Anecdotes and Observations on Gambling Behavior

John Delony shares his personal perspective on gambling, contrasting it with his traditional views:

John Delony [01:29]: "As a woman, a girl, I don't understand it. Now going to Vegas and... playing some craps is so fun."

However, Delony also acknowledges the allure of gambling during winning streaks:

John Delony [01:48]: "Sometimes it doesn't always happen, but when you get on a hot streak, it's like so fun because everyone's cheering. You're making everyone money."

Dave Ramsey interjects with a humorous yet telling comment about his own experiences:

Dave Ramsey [01:43]: "The single biggest loss I've ever taken in my life was standing next to Rachel Cruz at a crab stable."

These exchanges underscore the personal and social dimensions of gambling, highlighting both its entertainment value and potential risks.

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Financial Consequences of Gambling Over Investing

The hosts discuss how the increasing ease of online sports betting, especially through mobile platforms, is leading households to allocate discretionary income towards gambling instead of investing. Dave Ramsey highlights the financial strain this behavior imposes:

Dave Ramsey [05:07]: "They know this about lottery. It impacts low income people more, right... The study says that financially constrained households are particularly noticing the negative effects here."

Delony adds that gambling often represents a misplaced hope for a quick financial fix:

John Delony [04:29]: "It's different when you're investing over a period of time because there is a proven track record that you will... your money will make money in the long term."

Ramsey further elaborates on the broader economic impact:

Dave Ramsey [05:07]: "Increase in betting and consumption drives an increase in financial instability in terms of decreased credit availability and increased credit card and a higher incidence of overdrawn accounts."

This segment underscores the shift from long-term wealth building through investments to short-term financial risks associated with gambling.

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Psychological Triggers and Addiction Risks in Gambling

A significant portion of the discussion focuses on the psychological mechanisms that make gambling addictive. Ramsey explains the biochemical responses involved:

Dave Ramsey [05:47]: "...your body's way of leveraging it is to... pain... you are in physical pain. And the only way people sometimes handle that pain is by doing it again."

He introduces the concept of the "teeter-totter" effect, where the anticipation of a win creates a cycle of highs and lows that can lead to addiction:

Dave Ramsey [06:25]: "The more on one side of the teeter totter, your body's way of leveraging it is to... pain."

Delony connects this to the broader theme of delegating financial success to chance versus deliberate investing:

John Delony [04:06]: "Anytime you are delegating out winning financially to someone else or to a system is as you're putting your hope in something that, that there's no payoff in."

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Strategies for Preventing Gambling from Undermining Financial Health

The hosts provide actionable advice for listeners to safeguard their financial well-being against the temptations of gambling. Dave Ramsey emphasizes the importance of financial security before engaging in any high-risk activities:

Dave Ramsey [07:10]: "Don't gamble unless you can set that money on fire in your living room and you can laugh about it."

John Delony concurs, stressing the necessity of a "financial barbell":

John Delony [07:37]: "Make sure you've got the other side of the barbell... you have a fully funded emergency fund, you are investing 15% of your income into retirement."

Ramsey further advises that any form of vice, including gambling, should remain purely for entertainment and not as a financial strategy:

Dave Ramsey [08:38]: "I like to say any sort of vice needs to be for fun, not for strategy."

He warns against using gambling as a means to cope with personal issues:

Dave Ramsey [08:46]: "If you have to gamble to feel alive again, go talk to somebody."

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Conclusion: Maintaining Financial Discipline Amid Gambling Trends

The episode wraps up with a reinforcement of the core message: while gambling can be a form of entertainment, it should never compromise one's financial health or long-term investment goals. The hosts advocate for disciplined financial practices, emphasizing that true wealth is built through consistent investing, avoiding debt, and maintaining a secure financial foundation.

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Notable Takeaways

• Shift in Financial Priorities: The legalization of sports betting has led to a significant diversion of household income from investments to gambling.

• Economic Impact: Increased gambling activities contribute to financial instability, particularly among low-income households, by reducing credit availability and increasing debt.

• Psychological Risks: The biochemical responses triggered by gambling can lead to addictive behaviors, creating a cycle of anticipation and disappointment.

• Preventive Strategies: Ensuring financial security through emergency funds, debt elimination, and consistent investing can mitigate the risks associated with gambling.

• Responsible Entertainment: Gambling should be approached strictly as a form of entertainment, never as a financial strategy or coping mechanism.

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Quotes for Inspiration

• Dave Ramsey [07:10]: "Don't gamble unless you can set that money on fire in your living room and you can laugh about it."

• John Delony [07:37]: "Make sure you've got the other side of the barbell... you have a fully funded emergency fund, you are investing 15% of your income into retirement."

• Dave Ramsey [08:38]: "Any sort of vice needs to be for fun, not for strategy."

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For more insights on building wealth and responsible investing, listeners are encouraged to connect with a SmartVestor Pro at RamseySolutions.com/invest or visit the link in the show notes.

Transcript

[Dave Ramsey]

Foreign.

[Rachel Cruz]

This episode is sponsored by SmartVestor. Connect with an investing pro for free at RamseySolutions.com invest. You're listening to Ramsey Everyday Millionaires, where we talk investing, retirement, building wealth, and outrageous generosity.

[Dave Ramsey]

So here's a trend out and if you've listened to my show, Rachel, over the last couple of years, I've taken more and more calls about people struggling with gambling, more gambling and more gambling. And now as sports betting as, as municipalities and cities and states have been wanting to get in on the gambling action, more and more places are. Are legalizing sports betting, especially on their phones. And check this out, dude, this is a. An article here just says Americans spend more money betting on sports than investing in stocks. Recent data re reveals that since sports betting has become legalized in much of the US Households are diverting their income to gambling rather than investing in the stock market. Net investments have dropped 14%. As in 2023 alone, the American sports betting industry hit a record breaking $10.9 billion in revenue. So can I say this, Wildcats?

[John Delony]

Dude, as a woman, a girl, I don't know. As a woman, I don't understand. I don't understand it. Now going to Vegas and I've admitted it on the show and, and rolling some dice and playing some craps is so fun. It is so fun.

[Dave Ramsey]

The single biggest loss I've ever taken in my life was standing next to Rachel Cruz at a crab stable.

[John Delony]

Sometimes it doesn't always happen, but when you get on a, when you get on a hot streak, it's like so fun because everyone's cheering. You're making everyone money.

[Dave Ramsey]

It's.

[John Delony]

It is a fun entertainment moment. When you bet on sports, you do nothing for the, like, you're not, you don't get to participate in it. That's what I don't understand. The fun is. It's more fun when you're betting and like, you're the one playing the game.

[Dave Ramsey]

Yeah, but you're missing out on. This is like the whole sports industry of America is an. Instead of going out like my dad, my dad, I have these vivid memories of going when I was a kid to my dad had. Was always in a softball league, always into something. We don't do that anymore. We pay men, other grown men and women, bajillions of dollars to play sports for us. Now we pay them to like, make us money. To make us money or to lose money. Right. We, we've outsourced everything.

[John Delony]

Yes. And now there's commercials for sports. What's the one I don't know, I don't know much about it, but it's.

[Dave Ramsey]

The, I don't want to give anyone, anybody publicity.

[John Delony]

Yeah, yeah, but you, but, but that's what's crazy to me is now you wouldn't, you didn't see that 10 years ago, but the commercials now for it, I'm like, oh gosh.

[Dave Ramsey]

38 states have legalized gambling and it's become a growth industry, generating more than 120 billion in total bets.

[John Delony]

Oh my gosh.

[Dave Ramsey]

And like I said, $10.81 billion. 20, 23. Yeah.

[John Delony]

In one year.

[Dave Ramsey]

No. 120 billion total bets. Yeah. And 11 billion revenue one year. Yeah. And investing has taken a hit. And so there's an average 7.7% of households made online bets of one of these studies with about $1,100 a year. And it's, it, here's, here's the challenge and, and here's the deal. They know this about lottery. It impacts low income people more, right. If you don't, if, if, if you don't owe anybody on your house, a house payment, if you don't owe anybody credit cards, if you've got a stable job, you can go to Vegas and spend a couple hundred bucks and lose it. And it's annoying. And you can go, ah, man, sure, sure. If you don't have $200 to gamble. Cause that's your light and your water bill. And yet you think, man, if I hit, this could change everything for me. It's an outsized impact on you for doing the same exact behavior. Right. This study says that financially constrained households are particularly noticing the negative effects here.

[John Delony]

And I think what's hard too, this is what I don't like about gambling the lottery. Anytime you are delegating out winning financially to someone else or to a system is as you're putting your hope in something that, that there's, there's no payoff in. Right. It's different when you're investing over a period of time because there is a proven track record that you will, your money will make money.

[Dave Ramsey]

Track record in the lottery, somebody wins, maybe it's going to be me this time.

[John Delony]

But every time you put money in the market, for the most part, over time, over the long haul, your money's going to make money. But for gambling, the lottery, all of it, it is like this quick, it's a quick win idea that my life is going to change because of this one play that I'm doing. And that's so much easier than playing the longer game financially.

[Dave Ramsey]

And Check this out. As it applies to the message that Dave's been talking about for 30 years. Increase in betting and consumption drives an increase in financial instability in terms of decreased credit availability and increased credit card and a higher incidence of overdrawn accounts. What does that mean? People are putting. Now that it's all so easy on your phone, everyone's just putting on the credit card. They're just taking out money and putting it on bets. And people are going into debt to make financial bets, which. And you lose. And I got to make it back, dude. So I'm going to take out another loan. And now I find myself way over my head.

[John Delony]

Yep. Yep. Because what is it? I mean, I think the same is true, like when you buy something, right? The. The excitement, the dopamine. But when you're betting, there's the anticipation.

[Dave Ramsey]

The anticipation, the anticipation and then the payoff.

[John Delony]

And which is what your cortisol like, what's the. Like what's going on?

[Dave Ramsey]

I mean, the nerdiness doesn't matter as much as you have a. A biochemical response in your body that begins to build that apprehension. Apprehension, apprehension. And the great Anna Lemke describes it as a teeter totter. The more on one side of the teeter totter, your body's way of leveraging it is to. Is pain. It hurts. Right. It's the next morning after a bender. You are in physical pain. And the only way people sometimes handle that pain is by doing it again. Right. Is increasing it again. And you just get on this teeter totter of. Of anticipation, anticipation. And then wham. And it drops you below baseline. And so of your dopamine falls off a cliff.

[John Delony]

Right. And is that where the addiction starts to play in? Because some people I know, it's like.

[Dave Ramsey]

They have addiction is I don't want to hurt.

[John Delony]

Yep.

[Dave Ramsey]

Right. And so I'm going to come up with a behavior. Instead of dealing with that core hurt, I'm going to come up with a behavior and my body's going to begin to automate a behavior that helps hurt less. And unfortunately, it comes to addiction. You need more and more of that behavior to cover up higher and higher amounts of pain of your body trying to equalize itself. Right. Get back to equilibrium. And it just hurts on top of hurts on top of hurts. And you find yourself. I'm putting sports gambling on a credit card. Right. It's mess, mass, mass, mass mess. What a mess we're in. What does this mean? Don't gamble unless you can set that money on fire in Your living room and you can laugh about it.

[John Delony]

Yep. Right, Totally. Yes. Yeah, we always say that. I mean, if there's anything that you're doing financially that has a big risk, gambling would be one. Playing craps when you're in Vegas once a year, I would include that. Crypto, I would put crypto in the same bucket. Like anything that does not have a long term, that has a high level of risk for you to lose that money. Even investing in a friend's business or something come to you with this idea. Hey, hey, hey.

[Dave Ramsey]

Make sure you've got the other side of the barbell.

[John Delony]

That's right. So that's the point is like anytime you're going to do any of these like risky level moves financially to your point emotionally, you have to be able to set that money on fire and you're, you're fine. Meaning you're out of debt, you have a fully funded emergency fund, you are investing 15 of your income into retirement. So instead of investing going down, the amount of people investing going down, it needs to be the opposite for you. If you're not investing, you need to get yourself in a place where you are because that is a proven track record for your money to make money in the long term. And if you have kids, you're saving for college, you know, you're, you're paying off the house. And once the house is paid off, then it's like, okay, I have disposable income. We are in a solid place financially that we're not going to harm ourselves by, you know, putting, you know, a small amount of money in this, that or that, you know, playing this, playing that. But just know what you're getting into as well and know yourself. There's a level of self awareness that like, if you do have that kind of personality that you know yourself that you're going to keep going, he going, just don't just.

[Dave Ramsey]

I like to say any sort of vice needs to be for fun, not for strategy.

[John Delony]

That's great, John.

[Dave Ramsey]

So if you, if you, if you want to have a drink with your buddies and you all laugh real loud, you tell a story, it's great. If drinking makes you feel better at the end of the day, you need to deal with that. If it's a way you can deal with. I remember this is a, gosh, this is going to get dark. I, I used to give a, a survey to my grad students and I remember every year I started stopping the conversation because one of the questions was, I need three or four drinks or two or three drinks to engage in some sort of of sexual activity. I remember saying, hey, if you have to drink to override your body's natural brake system, don't do that, right? If you have to gamble to feel alive again, go talk to somebody, right? Because I want you to feel alive in your own skin. So it can be fun, but don't use it as a strategy.

[John Delony]

That's a great point. So good.

[Rachel Cruz]

Thanks for listening to Ramsey. Everyday millionaires need help with your investments? Connect with a SmartVestor Pro at RamseySolutions.com invest or click the link in the show notes. Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.