How Do the Baby Steps Apply If I’m Already a Millionaire?

Summary

Ramsey Everyday Millionaires

Episode: How Do the Baby Steps Apply If I’m Already a Millionaire?
Release Date: August 1, 2025
Host/Author: Ramsey Network

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Introduction

In this insightful episode of Ramsey Everyday Millionaires, the Ramsey Network delves into the financial journey of Jake, a self-made millionaire navigating the nuances of the Baby Steps after achieving significant wealth. Hosted by financial experts Dave Ramsey and Ken Coleman, alongside co-hosts Rachel Cruze, George Kamel, Jade Warshaw, and Dr. John Delony, the episode explores how the foundational principles of financial planning apply even when one has already amassed substantial wealth.

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Guest Profile: Jake from Knoxville

At the heart of the episode is Jake, a 42-year-old professional from Knoxville, Tennessee, who encapsulates the essence of the Everyday Millionaire. Jake shares his financial milestones and current challenges, providing a real-world scenario to discuss advanced Baby Steps application.

• Financial Snapshot:
  • 401(k): $2 million, maxed out since 2010
  • Home: $225,000 remaining on a $600,000 mortgage
  • Debt-Free Goal: $250,000
  • Household Income: $300,000 ($250,000 Jake + $50,000 from his wife, a teacher)
  • Children: Two, aged 12 and 8, with $125,000 saved for their college education through consistent monthly contributions of $1,200 since birth

Jake's Inquiry: Jake is seeking guidance on managing Baby Steps 4, 5, and 6 now that he has achieved millionaire status. Specifically, he's contemplating reducing his 401(k) contributions to match his company's 6% contribution and reallocating the excess funds into a liquid brokerage account for his children's education or accelerating his mortgage payoff.

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Ken Coleman's Financial Guidance

Ken Coleman addresses Jake's unique situation with a blend of commendation and strategic advice.

• Acknowledgment of Achievements:

  • "You've done an amazing job of saving... you've managed to get 2 million bucks by the time he was 40 something years old. That's pretty cool." (02:05)

• Strategic Advice:

  1. Rebalancing Investments: Ken suggests shifting from maxing out the 401(k) to contributing only enough to receive the full company match. This approach frees up capital to address other financial priorities.
  2. Prioritizing Mortgage Payoff: Emphasizing the importance of becoming debt-free, Ken advises Jake to focus on accelerating his mortgage payments over the next few years.
  3. Continued Support for Children's Education: Maintaining the $1,200 monthly contribution to the college fund ensures that Jake's children remain financially supported without compromising other financial goals.

• Quote:

  • "I would drop it back to Match and just keep the 1200 bucks going in the kids thing. That's not a big deal." (02:16)

Ken recognizes Jake's atypical financial path, highlighting his disciplined savings and early commitment to the Baby Steps, which have facilitated his substantial retirement savings by age 42.

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Dave Ramsey and Ken Coleman's Discussion on Financial Discipline and Growth

Following the interview, Dave Ramsey and Ken Coleman reflect on Jake's financial discipline and the broader implications of his success.

• Commendation of Discipline:

  • Dave emphasizes that Jake's achievement, particularly accumulating $2 million in his 401(k) by his early 40s, is a testament to disciplined saving and investment.
  • "That's very, very possible to, to do this... Just tremendous discipline. It can be done." (03:23)

• The Rule of 72:

  • Ken introduces the Rule of 72, a simple formula to estimate the doubling time of investments based on a fixed annual rate of return.
  • Explanation: "The rule of 72 says if you take an interest rate and divide it into the number of 72, it tells you how long it takes a lump sum to double." (03:42)
  • Application to Jake's Wealth: Using a 10% return, Jake's $2 million could potentially grow to $4 million in 7.2 years, $8 million in 14.4 years, and so on, significantly expanding his wealth over time without additional contributions.

• Wealth and Lifestyle:

  • The discussion underscores that while money isn't everything, substantial wealth provides financial security, reduces stress, and increases the ability to support family and generosity.
  • "When you have 50 million, you're not worried about the cost of Advil. If you have a headache... if you have 50 million and your car breaks, you get in one of your other cars." (04:48)

• Impact on Family Legacy:

  • Ken touches on the importance of leaving an inheritance and the ability to change one's family tree through disciplined financial management.
  • "A godly man leaves an inheritance to his children's children. Scripture says so." (06:18)

• Countering Financial Skepticism:

  • Addressing naysayers who claim the American Dream is unattainable, Dave and Ken use Jake's success as evidence to the contrary.
  • "I submit to you Jake from Knoxville. No, I don't think his dad, Ken." (06:53)

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Key Takeaways and Insights

1. Adaptation of Baby Steps Beyond Initial Milestones:

   • Even after achieving millionaire status, adhering to the Baby Steps framework—albeit with tailored adjustments—ensures continued financial health and progress toward greater wealth.

2. Strategic Allocation of Resources:

   • Balancing retirement contributions with other financial goals, such as mortgage payoff and educational savings, is crucial for holistic financial well-being.

3. Power of Compound Growth:

   • Understanding and leveraging the Rule of 72 can significantly enhance long-term wealth accumulation, emphasizing the value of early and disciplined investing.

4. Financial Security vs. Wealth:

   • While immense wealth brings advantages, the foundational principles of reducing debt, saving diligently, and investing wisely remain essential for achieving and maintaining financial security.

5. Legacy and Generosity:

   • Building wealth is not solely for personal gain but also for leaving a lasting legacy and supporting future generations, aligning with broader life and faith-based values.

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Conclusion

Ramsey Everyday Millionaires effectively illustrates that the journey to financial prosperity doesn't halt at the million-dollar mark. Through Jake’s example, the Ramsey Network emphasizes the importance of consistent financial discipline, strategic planning, and the adaptability of the Baby Steps system, even for those who have already achieved significant wealth. This episode serves as both inspiration and a strategic guide for millionaires seeking to optimize their financial strategies and ensure sustained growth and security for their families.

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Notable Quotes:

• "You've done an amazing job of saving... you've managed to get 2 million bucks by the time he was 40 something years old. That's pretty cool." – Ken Coleman (02:05)

• "I would drop it back to Match and just keep the 1200 bucks going in the kids thing. That's not a big deal." – Ken Coleman (02:16)

• "That's very, very possible to, to do this... Just tremendous discipline. It can be done." – Dave Ramsey (03:23)

• "The rule of 72 says if you take an interest rate and divide it into the number of 72, it tells you how long it takes a lump sum to double." – Ken Coleman (03:42)

• "When you have 50 million, you're not worried about the cost of Advil. If you have a headache... if you have 50 million and your car breaks, you get in one of your other cars." – Ken Coleman (04:48)

• "I submit to you Jake from Knoxville. No, I don't think his dad, Ken." – Dave Ramsey (06:53)

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Disclaimer: This summary is based on a partial transcript provided for the episode and aims to capture the essential discussions and insights shared by the hosts and guest.

Transcript

[Dave Ramsey]

This episode is brought to you by SmartVestor.

[Ken Coleman]

Connect with an investing pro near you at RamseySolutions.com SmartVestor Jake is in Knoxville. Hi, Jake, how are you?

[Jake]

Hey, Dave, thanks for taking my call. And how are you guys doing today?

[Ken Coleman]

Better than we deserve, sir. How can we help?

[Jake]

Excellent. So I'm a baby steps millionaire and I'm trying to figure out how to manage steps 4, 5 and 6. Just quick rundown, I've got 2 million in the 401k. I've been contributing the max allow that the government allows to contribute since about 2010. And I'm considering dropping that down to the company match, which is 6% and putting the remainder in either a liquid brokerage account to contribute to kids, to continue contributing to kids college, or to just dump it into the house, which has 225 left on it. Debt free comes 250,000. And my wife just got a job as a teacher, so she'll be making about 50.

[Ken Coleman]

Okay, so you got $300,000 income? Yeah.

[Jake]

Yes.

[Ken Coleman]

You know, normally we say 15% of your income going into retirement so that you have some and kids college is baby step five. And then pay off your house is six. And you're how old?

[Jake]

42.

[Ken Coleman]

How old are the kids?

[Jake]

Kids are 12 and eight. And we do have 125,000 saved for them already. We've been putting $1,200 into a college fund since they were born.

[Ken Coleman]

Yeah, I probably just keep doing that and I would drop it back to the match. And let's just get this house paid off because you're sitting out of balance, way heavy on the 401k. And yet your house hadn't paid off. I want to get that balance straightened out a little bit, rebalance these accounts. So I'm going to violate the baby steps, which is something you hardly ever hear do. But your situation's very weird. You've done an amazing job of saving. And if you, if, if we'd have caught you 10 years ago, you know your house had been paid off, right?

[Jake]

Yeah, yeah, probably so.

[Ken Coleman]

Yeah. Because you'd only been putting 15% away and you've been maxing this stuff. You're a savings animal. Way to go. Congratulations. So what's your homework?

[Jake]

My home's worth about $600,000.

[Ken Coleman]

Okay, cool.

[Jake]

Yeah. And we don't plan on leaving there anytime soon.

[Ken Coleman]

Yeah. So. So you're going to be worth three or four million dollars. And when you're 45 years old and congratulations. That's pretty stinking cool. But yeah, you do want to get this house paid off. And I would lean into it hard for the next couple years and. And I would back down to Match and just keep the 1200 bucks going in the kids thing. That's not a big deal. But that's your case is highly unusual. Yeah, but I love that you've done it. I'm proud for you. I'm certainly not going to argue with a guy that managed to get 2 million bucks by the time he was 40 something years old. That's pretty cool, Ken.

[Dave Ramsey]

It's incredible. You know, and I just want to make this point. There are a lot of people that are new to the show, and you're listening, you're watching this. This is a young guy who's already achieved that. And the income is not insane. 250 is great. 250,000 is a great income.

[Ken Coleman]

He's not making 750.

[Dave Ramsey]

Right. But he has really been diligent to save. It is very, very possible to, to do this. And here's a guy that committed early on $1200. I think it was a He seen.

[Ken Coleman]

A month of the kids. Yeah.

[Dave Ramsey]

For the kids.

[Ken Coleman]

What I'm saying is it's just 125,000 in that account. Yeah.

[Dave Ramsey]

Just tremendous discipline. It can be done. But you have. If we'd have kept him on, we could have learned all the things they said no to over the years to get to those numbers. But to have 2 million in your retirement account at that age.

[Ken Coleman]

Yeah. You reach the point you're going to be able to do anything you want to do.

[Dave Ramsey]

Oh, for sure.

[Ken Coleman]

Pretty quick. Okay. Let's just kind of talk about something for a minute. It's good to remind you guys, here's how math thing works. There's an old math trick that's accurate called the rule of 72s. The rule of 72 says if you take an interest rate and divide it into the number of 72, it tells you how long it takes a lump sum to double. So if your interest rate was 7.2, divide that into 72, it would tell you in 10 years, a lump sum would double. Invest it at 7.2. Invested at 10% every 7.2 years, it'll double. Okay. It's an easy one, too. So if we take $2 million at 42 years old and he never adds anything to it when he's 49, if it's invested in decent mutual funds averaging less than market returns, down around 10% when he's 49, he's got 4 million when he's 56, he's got 8 million. Keep going, boys and girls. When he's 63, he's got 16 million. When he's 70, he's got 32 million. This guy's changed his family tree. Yeah, okay, that's. If he doesn't add anything to it. If it just sits there and he doesn't touch it. That just. That 2 million, that's not his house. That's not his additional investing. And so I'm talking to a young man there that if he lives into his 70s, is probably going to be worth north of $50 million in Knoxville, Tennessee, at 42 years old, he's got this started. So that's when I say I'm proud of him. I mean, that's pretty impressive when you think about how these numbers work. This is how you change your family tree. Now, do you, you know, is money everything? No, money's not everything. But when you have 50 million, you're not worried about the cost of Advil. If you have a headache. Okay, if you have 50 million and your car breaks, you get in one of your other cars.

[Dave Ramsey]

That's a good point. Well, that's a real nuisance.

[Ken Coleman]

That's a problem. That's an inconvenience. Yeah, yeah. The tires are worn out. Oh, that's an inconvenience. I'll drive the other car this week.

[Dave Ramsey]

Yes, it's the blue one.

[Ken Coleman]

Yeah. We'll just have to select a different vehicle today. And so, again, we're not saying money is everything, but what it does do is it gives you margin and it gives you. It lowers your stress level because you're able to do things for you and your family. You're able to help others. Your generosity factor can go through the roof on this stuff and still have an incredible life and still, you know, change your family tree. A godly man lives in inheritance to his children's children. Scripture says so. You know, these are. These are real things that people do out here. And so when I hear these communist socialist types that are out there going, well, American dream is dead. I submit to you Jake from Knoxville. No, I don't think his dad, Ken.

[Dave Ramsey]

No. Nor, by the way, did he mention any. Any inheritance. This is just discipline.

[Ken Coleman]

Oh, I'm positive. He had no inheritance. Yeah, 100% sure.