How To Invest a Large Sum of Inherited Money

Summary

Ramsey Everyday Millionaires: Episode Summary
Title: How To Invest a Large Sum of Inherited Money
Host/Author: Ramsey Network
Release Date: December 6, 2024

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Introduction

In this episode of Ramsey Everyday Millionaires, the hosts from the Ramsey Network—Dave Ramsey, Ken Coleman, and others—delve into the intricate journey of managing and investing a substantial inheritance. The focus lies on empowering ordinary individuals to handle extraordinary wealth responsibly, emphasizing disciplined financial strategies and long-term planning.

Guest Introduction: Anson's Story

The episode welcomes Anson, a 20-year-old diesel mechanic from Wichita, Kansas, who has recently inherited a significant sum from his late grandfather:

• Anson shares, “[00:26] Anson: How's it going? [...] “When his will is read out, he left me, my two older brothers, a very hefty sum of $3 million in his will, along with equal shares of his estate in Miami.”
• Anson elaborates on the inheritance, stating, “[00:26] Anson: Three million each, yes.”

Feeling overwhelmed by this newfound wealth, Anson seeks guidance on the best strategies to manage his inheritance effectively.

Understanding Anson’s Current Financial Landscape

Anson provides a comprehensive overview of his current financial and personal situation:

• At 20 years old (just turned 21 in May), Anson is a full-time diesel mechanic managing a local diesel shop.
• He owns his living arrangements outright, with minimal monthly expenses:
  • “[01:27] Anson: I have no other payments other than, you know, my Internet and my phone bill and my rent. And I think my total monthly expenses is maybe under $2,000.”
• Anson has been diligently saving, accumulating approximately $25,000 - $26,000 over five years prior to his inheritance.
• Future aspirations include pursuing further education, potentially a degree in diesel mechanics with a minor in business, and eventually opening his own mechanic shop.

Host and Co-Host Insights and Advice

Dave Ramsey and Ken Coleman engage deeply with Anson, offering structured advice tailored to his circumstances:

Dave Ramsey’s Guidance:

• Prudent Management:
  “[01:54] Dave Ramsey: ...I would make sure this sets you up well for success. That might mean, you know, buying a reasonable house in cash and investing the rest.”

• Investment Growth Potential:
  “[05:46] Dave Ramsey: ...if it's growth stock, mutual funds, whether it's retirement or not, at a 10% rate of return, which has been the average we've seen in the stock market. That would be 134 million at 61 years old.”

• Philanthropic Vision:
  “[06:33] Anson: ...you could become what's known as a philanthropist with that kind of money.”

• Holistic Financial Planning:
  “[05:47] Dave Ramsey: ...connect with a SmartVestor Pro, Ramsaysolutions.com you need a trusted team to walk with you...”

Ken Coleman’s Insights:

• Reinforcing Stability:
  “[03:56] Ken Coleman: I'm not telling you this right now, Anson. I'm not worried about you squandering this money...”

• Educational Pursuits:
  “[04:29] Ken Coleman: ...put some away for retirement, but put some away for benefactor.”

• Philanthropic Encouragement:
  “[07:11] Ken Coleman: ...invest some money in about 15, 20 years from now, it's a pretty large number and all of a sudden you start some type of a school...”

Strategic Financial Planning

Anson is encouraged to adopt a multifaceted approach to managing his inheritance:

1. Education Investment:
   Pursuing a degree with a minor in business to enhance his entrepreneurial skills for future business ventures.

2. Real Estate Consideration:
   Buying a reasonable home in cash to avoid debt and provide stability.

3. Diversified Investments:
   Allocating a significant portion of the inheritance into growth stocks, mutual funds, and possibly retirement accounts to leverage compound interest, as highlighted by Dave Ramsey.

4. Philanthropic Planning:
   Setting aside funds for future charitable endeavors, such as establishing training programs for underprivileged youth interested in mechanics, aligning with Anson’s personal values and community engagement.

5. Professional Support:
   Connecting with financial professionals through SmartVestor Pro to ensure informed and strategic investment decisions.

Future Aspirations and Community Impact

Anson envisions not only personal financial growth but also significant community contributions:

• Business Ownership:
  Aspiring to open his own diesel mechanic shop, leveraging his skills and potentially creating job opportunities.

• Community Programs:
  Implementing training programs for special needs kids and underprivileged youth, fostering skill development and providing hands-on experience in mechanics.

• Long-Term Philanthropy:
  With strategic investments, Anson could amass substantial wealth, enabling large-scale philanthropic initiatives that benefit his community and beyond.

Personal Relationships and Financial Transparency

Anson touches upon the delicate balance between personal relationships and financial transparency:

• He has been in a long-term relationship and has chosen to withhold the specifics of his inheritance from his girlfriend to prevent potential strain, stating, “[08:49] Anson: ...I inherited some money, but I didn't tell her how much.”

• Dave Ramsey advises that managing the disclosure of such information thoughtfully is crucial to maintaining healthy relationships:
  “[09:09] Dave Ramsey: ...I think it's wise to wait even until you're married, to go, hey, I just inherited $3 million...”

Conclusion

The episode "How To Invest a Large Sum of Inherited Money" offers a profound exploration of responsible wealth management through Anson's personal narrative. The hosts emphasize the importance of strategic planning, professional guidance, and maintaining personal integrity while navigating newfound wealth. Anson’s journey underscores the potential for long-term financial prosperity and meaningful community impact when wealth is managed with care and foresight.

Notable Quotes:

• “[05:46] Dave Ramsey: ...if it's growth stock, mutual funds... that would be 134 million at 61 years old. Wow. Does that not blow your mind?”

• “[07:11] Ken Coleman: ...put some away for retirement, but put some away for benefactor.”

• “[09:09] Dave Ramsey: ...wait even until you're married, to go, hey, I just inherited $3 million...”

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For more insights on investing and wealth-building strategies, visit Ramsaysolutions.com/investing or explore the trusted services offered by SmartVestor Pro.

Transcript

[Dave Ramsey]

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

[Ken Coleman]

Anson is joining us in Wichita, Kansas, and San Jokawi Hill.

[Anson]

How's it going?

[Ken Coleman]

Good. How are you?

[Anson]

Oh, not too bad. So recently my grandfather passed away, and he worked for Boeing and NASA for about 35 years. He was also in the United States Army. And when he passed away, when his will is read out, he left me, my two older brothers, a very hefty sum of $3 million in his will, along with equal shares of his estate in Miami.

[Ken Coleman]

Three million each.

[Anson]

Three million each, yes.

[Ken Coleman]

Wow.

[Anson]

And I have absolutely no idea what to do with that kind of money. I think the biggest paycheck I've ever seen was like 2500 bucks for two weeks. And how long ago did you get it to do with it? I got it back in July, and I don't get to touch it until I'm 21. That was part of the agreement, was when I turned 21. Then I get full access to the fund.

[Ken Coleman]

How old are you now?

[Anson]

I. I'm 20. I turned 21 in May.

[Ken Coleman]

Okay.

[Dave Ramsey]

Wow.

[Anson]

And I want to know what to do with it. I have no idea what to do. I want to know, should I sit on it for 20 years and let it accumulate interest in a bank somewhere, Take some of it out and buy a house, not something super huge, or invest it, put it in a Roth ira? I mean, what should be the next step for somebody who's 20 years old and just became a multimillionaire?

[Dave Ramsey]

Well, number one, I would like you're doing take great pause and care with this and go, okay. I want to make sure that I manage this wisely. This was a big legacy, a big responsibility put on my shoulders, and I want to be able to do the same thing for my grandkids one day versus squandering it. And your grandfather obviously did a great job to manage his investments wisely, allow it to grow. He's in real estate. He's in mutual funds. And I would encourage you to do the same over a long period of time. So I would make sure this sets you up well for success. That might mean, you know, buying a reasonable house in cash and investing the rest.

[Ken Coleman]

What do you want to do? What's the. Let's assume that. Let's just assume for a moment that the inheritance isn't there. What were you on track to doing or at least thinking about doing with your life.

[Anson]

So right now I'm a full time diesel mechanic. I manage a diesel shop close to where I live. And about a year and a half ago, I bought a used early 2000s camper trailer that I tow behind my pickup. And I was working in the oil field. And then I switched over to being diesel mechanic just to be able to stay closer to one spot. And I've been living in the trailer. My rent's 500 bucks a month. I own the trailer outright. I have no vehicle payments. I bought a $2,500 beater pickup and I traded that for my current truck that I have now. And so I have no. I have no other payments other than, you know, my Internet and my phone bill and my rent. And I think my total monthly expenses is maybe under $2,000. And I was on track to saving up to go to welding trade school, but since about a month ago, I've been more steering down the road to just getting going to college for my degree in diesel mechanics and getting actually a piece of paper that says, yeah, I know how to do this. And that was kind of the path I was going down. I have a personal savings before I the inheritance of about 25, $26,000 that I've been for you for about the last five years.

[Ken Coleman]

I'm not telling you this right now, Anson. I'm not worried about you squandering this money, not after the care, the caricature you just kind of painted for us. That's fantastic. Let me ask you this. On the diesel mechanic thing, did you want to eventually open up your own shop and own your own business?

[Anson]

Yeah, eventually. Yeah. That would be kind of a long term goal. You know, I'd like to get some experience under somebody else's wing. You know, I've been doing it, you know, love that. I mean, I got my first job at 14 and I was on a ranch working, you know, combines and trucks and stuff like that. So it's something that I really like to do. I like working with my hands.

[Ken Coleman]

Yeah. So let me ask you this end.

[Anson]

Goal is to, yeah, have a shop.

[Ken Coleman]

You've got plenty of money if you want to go to college. But I just got to believe that there's a shorter way for you to get that certification that, hey, I know how to do this. Am I right? I'm assuming there's a trade school for diesel mechanics. It's not a college.

[Anson]

Yeah, and there is, but along with, and the only reason I were away from an actual trade school is along with, you know, getting a degree in, you know, I could take a major in diesel mechanics or whatever, but I can also take a minor in business.

[Ken Coleman]

Great. Go for it.

[Anson]

So I can kind of knock out two.

[Ken Coleman]

So there's some of your money right there. So based on the school that you want to go to and, and you get into and whatever that cost, there's a chunk of change right there, George. So we now know kind of where he wants to go. I was trying to dig that out for you.

[Dave Ramsey]

I mean, education is a great next goal. And like Ken said, what's the best way to do that and the most cost effective way, we don't need to go blow the money just because we have it. And then beyond that, you're going to have future goals. You don't need to go out and buy real estate just because you're 21 with a bunch of money. But when the time is right and you want to buy a home for yourself or maybe for you and, and someone you meet and you get married, that's a great next goal. And to do that with cash. And even if you spend 500,000, let's say, between education and the home and you get your life set up, that still leaves you with two and a half million, Right?

[Anson]

Right. Yeah, exactly.

[Dave Ramsey]

And so if you connect with a SmartVestor Pro, Ramsaysolutions.com you need a trusted team to walk with you. One person is going to be that investment pro. Another one would be a trusted real estate agent. Another one would be a tax pro. And you can get connected with all three of [e-mail] and click on trusted services. But I crunched the numbers for you, Anson, to show you what this could turn into. From 21 to 61, you put two and a half million in an account. Let's say it's growth stock, mutual funds, whether it's retirement or not, at a 10% rate of return, which has been the average we've seen in the stock market. That would be 134 million at 61 years old. Wow. Does that not blow your mind?

[Anson]

Wow. Wow. I didn't even think about that. That's crazy.

[Dave Ramsey]

I feel like that's putting a smile on grandpa's face. And it's not because you're storing treasures.

[Anson]

On earth for the right reason.

[Dave Ramsey]

Think about the impact you could have in your lifetime on your family, your community, the country. With 134 million, you would become what's known as a philanthropist with that kind of money. And so I want you, the part that's going to be difficult is starting to change your mindset while also keeping the same life you have. Like Ken mentioned, we're not going to go retire tomorrow. I want you to sink your teeth into something that really puts some pep in your step. And that might mean the job that pays you 80 grand, that's great. And let this money cook and let it do its thing. And when the time is right and as you mature and get older, you're going to have different goals for generosity and for spending well.

[Ken Coleman]

And I, and I would say too, if you talk with a smartvestor pro, put some away for retirement, but put some away for benefactor. Being a benefactor, for instance, let's say because you came into all this money that you invest some money in about 15, 20 years from now, it's a pretty large number and all of a sudden you start some type of a school for maybe underprivileged kids to, who are good with their hands and like weather hands to go straight from high school right into the workforce. And you have a local training program that is attached to your business. And I'm not trying to hang that on you, I'm just saying like that.

[Anson]

You say that it's, it's funny that you say that actually because the place that I work for actually does that. We take about five special needs kids a week from one of the local school districts and we bring them in and we let them wrench on stuff and you know, we have a whole toolbox for them and they, you know, they just do. We have a junk car or whatever and they just tear it apart. We don't really care, you know, and they just have a blast doing it. And that's funny that you said that because that was actually part of my, you know, if I ever did have a mechanic shop, I'd want to have a separate, you know, places like connect with one of the school districts, get some kids out here, you know, they're wanting to be mechanics or that just a great idea on the car for an afternoon. And I, that, that was kind of, you know, in the back of my mind and kind of go back on the whole spouse thing too. I've been dating the same woman for going on four years now, since we were 16 and we met in high school. And I, I told her that I inherited some money, but I didn't tell her how much. And I'm holding out on that only for the sheer reason because, you know, I want to kind of have it and be sure that I have it, you know, before.

[Dave Ramsey]

I think that's nice. Yeah, that'll, that'll skew the relationship when you go, oh, and by the way, I just inherited $3 million, so I think it's wise to wait even until you're married, to go, hey, I told you I inherited some money. I wanted to do this the right way. Here's what this is. Here's what my plan is to do with this. I'm managing this, you know, on behalf of someone else.

[Anson]

Really?

[Ken Coleman]

Yeah. Love that.

[Dave Ramsey]

Thanks for tuning in to Ramsey Everyday Millionaires. To learn more about investing, visit Ramsaysolutions.com investing or click the link in the show notes. Ramsay Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.