How Should I Save Money Now That the Savings Rate Is Going Down?

Summary

Ramsey Everyday Millionaires: How Should I Save Money Now That the Savings Rate Is Going Down?

Release Date: January 6, 2025

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Introduction

In the latest episode of Ramsey Everyday Millionaires, hosts from the Ramsey Network—including Dave Ramsey and Rachel Cruze—delve into the financial challenges faced by ordinary individuals striving to build extraordinary wealth. This episode, titled "How Should I Save Money Now That the Savings Rate Is Going Down?", features a heartfelt discussion with Jennifer from Phoenix, Arizona, who navigates unexpected life events while managing her substantial savings.

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Jennifer's Financial Landscape

Jennifer reaches out to the show with a complex financial situation compounded by personal challenges. She has diligently followed the Ramsey Network’s Baby Steps, reaching steps 3B and 4. Recently, Jennifer experienced significant life changes:

• Pregnancy: Announced unexpectedly, adding emotional and financial dimensions to her life.
• Medical Emergency: Five weeks post-pregnancy announcement, Jennifer encountered a major health issue requiring long-term management and financial planning.

Despite these upheavals, Jennifer has amassed considerable savings:

• Emergency Fund: $50,000 (12 months).
• House Fund: $150,000.
• Brokerage Account: $80,000.
• Sinking Fund: $30,000 (allocated for car, vacation, travel).

Total Savings: $310,000

Jennifer inquires about optimizing her savings strategy in light of declining high-yield savings rates, seeking advice on whether to maintain her current savings structure or adjust her investments to maximize returns, especially since her goal to purchase a house may now extend to a 3-5 year timeframe.

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Navigating Savings Strategies Amid Uncertainty

Jennifer’s primary concern revolves around the declining returns from high-yield savings accounts. She wonders if reallocating funds to a brokerage account would better serve her long-term goals, given the reduced timeframe for purchasing a house.

Dave Ramsey's Assessment:

• Financial Stability: Dave commends Jennifer’s robust financial foundation, highlighting her $200,000 in emergency and house funds as a strong buffer.

  “You have $200,000. So this medical procedure, what's the financial dent that this might make? [...] So now we have $310,000 to weather this. I think you're okay. Breathe. Right.” [05:29]

• Risk Evaluation: Dave emphasizes the importance of understanding the actual financial impact of her medical situation. He advises maintaining her current savings without making hasty investment moves during this uncertain period.

  “You need to put... When this is over and you take your 3B 150K, add the brokerage account to it for your down payment on the house, I want you to put 230 down on the house when this is over.” [04:37]

Rachel Cruze's Guidance:

• Calm During Crisis: Rachel advises Jennifer to halt major financial decisions until after her pregnancy and medical evaluations are complete.

  “I would just keep everything. We would tell you to pause everything anyway, since you are pregnant, there's nothing else to like majorly do.” [03:44]

• Strategic Waiting: Rachel suggests that Jennifer's savings are sufficient for the foreseeable future, reducing the need to shift funds immediately. She encourages Jennifer to wait for clearer financial circumstances post-pregnancy before considering reallocating funds.

  “I think you can take a portion of this and put it in a brokerage account.” [03:44]

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Expert Recommendations and Reassurances

Both Dave and Rachel provide reassurance to Jennifer, recognizing her disciplined saving habits while cautioning against overextending her financial strategies during a tumultuous period.

• Maintain Stability: Both experts agree that Jennifer's current savings strategy provides ample security, especially given her medical and personal circumstances.

  “You're a master saver. You're amazing saver, but you're taking it too far. But for today it's okay that it's too far until you get past this storm.” [05:00]

• Future Planning: Once Jennifer overcomes her immediate challenges, the hosts encourage her to reassess her financial plans, potentially leveraging her sizeable brokerage account to optimize her home purchase strategy.

  “Get the medical thing in your rearview mirror and then let's get the savings trim back down to where it should be.” [06:18]

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Key Takeaways

1. Robust Emergency Funds are Crucial: Jennifer's $50,000 emergency fund serves as a critical safety net during unforeseen medical and personal challenges.

2. Strategic Patience in Financial Decisions: In times of uncertainty, maintaining the status quo in savings can provide stability and peace of mind.

3. Comprehensive Financial Assessment: Understanding the full scope of financial obligations and potential risks is essential before making investment shifts.

4. Expert Guidance is Invaluable: Seeking advice from financial experts can provide clarity and tailored strategies during complex financial situations.

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Conclusion

Jennifer's story underscores the importance of disciplined saving and the value of maintaining a solid financial foundation, especially when faced with life's unexpected challenges. The Ramsey Network's hosts offer compassionate and practical advice, emphasizing patience and strategic planning. For listeners navigating similar situations, this episode provides insightful guidance on balancing savings goals with personal and financial well-being.

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Notable Quotes:

• Dave Ramsey [03:04]: “You are a savings maniac, girl. I love it. How much is in the brokerage account and how much is in the sinking fund?”

• Rachel Cruze [03:44]: “I would just keep everything. We would tell you to pause everything anyway, since you are pregnant, there's nothing else to like majorly do.”

• Dave Ramsey [05:29]: “You have $200,000. So this medical procedure, what's the financial dent that this might make? [...] So now we have $310,000 to weather this. I think you're okay. Breathe. Right.”

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For more insights and strategies on building wealth, visit RamseySolutions.com.

Transcript

[Sponsor]

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[Dave Ramsey]

Jennifer is with us in Phoenix, Arizona. Hi, Jennifer. How are you?

[Jennifer]

Hi. I'm doing well. Thanks for taking my call.

[Dave Ramsey]

Sure. What's up?

[Jennifer]

I wanted to see what y'all would do with a pile of money. I'm in. I'm in. Baby steps 3B and 4. But then I found myself in storm number one. Surprise. I'm pregnant.

[Rachel Cruze]

Oh, well, congratulations.

[Jennifer]

Thank you. Storm number two. Five weeks later, I suffered a major medical event. Found out I have an underlying condition that will put me at risk for more major medical events. And we can't really address the problem for a year or two until baby gets here and we can do a lot of testing and investigate it. So I had been saving a bunch of money for a house, but it had been sitting in a high yield savings account. But those rates are declining. So would you guys leave it in high yield savings or would you move it into like a brokerage account to maximize the yield? Because I feel like the that goal is now three to five years down the road.

[Dave Ramsey]

How much money in your emergency fund and how much money in this fund we're talking about?

[Jennifer]

My Emergency fund is 50,000. It's 12 months.

[Dave Ramsey]

And this money is how much?

[Jennifer]

My house fund is currently at 150,000.

[Dave Ramsey]

Okay, so you have $200,000. So this medical procedure, what's the financial dent that this might make?

[Jennifer]

That's a million dollar question. Literally, a million dollar question. I don't know.

[Dave Ramsey]

Well, you have health insurance.

[Jennifer]

Yes, I do.

[Dave Ramsey]

Okay.

[Jennifer]

And I have very good health insurance. But I'm also out of work and currently on unprotected leave because of everything going on. So all of that change, I make 140 a year.

[Dave Ramsey]

What's your husband made?

[Jennifer]

I don't have one of those.

[Dave Ramsey]

Okay. And so you're unprotected. You're not making any money. You don't have an income right now.

[Jennifer]

That is not a true statement. I had a bunch of sick time and vacation time.

[Dave Ramsey]

Oh, I thought you said unprotected leave. I thought you meant your own family leave act with no pay. Okay, so again, what you've got to ascertain not from a fear base, but just some actual analysis is, is this a $50,000 problem you're facing or a 200,000 DOL them out of pocket with your health insurance, with your potential Loss of income that'll be unpaid once you run out of these other things. And I kind of think you got a lot of savings here.

[Jennifer]

So I shouldn't tell you about my brokerage fund or my sinking fund.

[Dave Ramsey]

You are a savings maniac, girl. I love it. How much is in the brokerage account and how much is in the sinking fund?

[Jennifer]

The brokerage fund is 80,000 and the sinking fund is 30,000.

[Dave Ramsey]

What's it sinking for?

[Jennifer]

A car, vacation, travel.

[Dave Ramsey]

Okay, so now we have $310,000 to weather this. I think you're okay. Breathe. Right.

[Rachel Cruze]

Well, I think that, I think the scary thing, Jennifer, is you don't have a lot of answers. And you won't have a lot of answers till after the baby comes, Correct?

[Jennifer]

Absolutely.

[Rachel Cruze]

With the health situation. So I, I, I'm a no, there's no panic to do anything with this money. I would just keep everything. We would tell you to pause everything anyway, since you are pregnant, there's nothing else to like majorly do. And I, I would wait till baby comes. You're good. Run some tests and if, if, and if you're in the same position in 18 months, financially you're okay. And then you can make some big, you know, decisions. But I think you can take a portion of this and put it in a brokerage account. Would you tell her to go get a house right now? Dave's kind of smirking. I feel like.

[Dave Ramsey]

No, no, I wouldn't, I would sit where I am and just. You could throw it in a high yield savings and it doesn't matter what you do with this money for 18 months, but you weren't going to put this brokerage account down as the down payment on your house, were you?

[Jennifer]

No, that was, Come on, that was a retirement fund.

[Dave Ramsey]

That's not a retirement fund. It's a brokerage account.

[Jennifer]

Well, where I worked previously, they didn't offer.

[Dave Ramsey]

How much do you have in your 401k super saver, 500. Okay. Come on. Okay, you need to put. When this is over and you take your 3B 150K, add the brokerage account to it for your down payment on the house, I want you to put 230 down on the house when this is over. Right now I don't want you to do anything. I just want you to lean into the security that you've built for yourself. You are a master saver. You're amazing saver, but you're taking it too far. But for today it's okay that it's too far until you get past this storm. So when you get past this storm though, buy the house. Yeah, buy the house. And put all this money towards a stinking house.

[Rachel Cruze]

You know, Seriously, after the realization of the medical expenses and the lost income.

[Dave Ramsey]

Whatever'S left out of the brokerage account. Out of the 150. But a 12 month emergency fund. No, stop that. Plus a brokerage account. Just because I didn't have a retirement before, but I got a half million over here. You're fine. You're gonna be so rich it's unbelievable. You can't keep yourself from saving money. You're amazing. Well done.

[Rachel Cruze]

So, yeah, your challenge, Jennifer is gonna be resting in the piece of what you've created. Yeah, I mean, that's it. So lower the stress. Enjoy this pregnancy. Bre. Just like Dave was saying, like, you're good, you are good. Don't make big moves right now. Have the baby. But between now and baby, like you're, you are, you are secure and great.

[Dave Ramsey]

Let's get the medical thing in your rearview mirror and then let's get the savings trim back down to where it should be. And that's, that's what I would do if I woke up in your shoes.