My Husband & I Disagree On How To Invest

Summary

Ramsey Everyday Millionaires: Episode Summary - "My Husband & I Disagree On How To Invest"

Release Date: December 13, 2024

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Introduction

In this episode of Ramsey Everyday Millionaires, hosted by the Ramsey Network, listeners delve into real-life financial dilemmas faced by ordinary individuals striving to build extraordinary wealth. The episode titled "My Husband & I Disagree On How To Invest" features a heartfelt conversation between the hosts and a listener, Sydney, who grapples with differing financial strategies between her and her husband.

Listener's Financial Situation

Sydney calls in from Huntsville, Alabama, seeking guidance on a contentious issue with her husband regarding their retirement contributions. She outlines their current financial landscape:

• Retirement Accounts: Together, they have amassed approximately $420,000 across both of their retirement accounts.
• Non-Retirement Savings: They possess $160,000 in non-retirement savings.
• Debt: The only debt they hold is their mortgage.
• College Funds: They have initiated college funds for their children.

Sydney's primary concern revolves around her husband's proposition to reduce their retirement contributions significantly once they hit certain savings milestones.

Key Quote:

“My husband and I have about $420,000 between both of our retirement accounts right now and then $160,000 in non-retirement savings... He thinks that once we reach a certain point, about $200,000 to $250,000 per person, that we can take our contributions down to 1%. I am not for that at all.”
— Sydney (00:30)

The Disagreement: 15% vs. 1% Contributions

Sydney explains that her husband believes, upon reaching their target retirement savings per person, they can drastically reduce their contributions to a mere 1%. His rationale is anchored in the power of compound interest, anticipating that even minimal ongoing contributions will yield substantial growth over time.

Key Quote:

“He thinks that [1% contributions] in his mind is about 200, 250,000 per person, that we can take our contributions down to 1%. And I am not for that at all, of course.”
— Sydney (00:30)

Host George Kamel (Speaker A) challenges the logic behind maintaining a 1% contribution rather than reducing it to 0%, emphasizing the continued benefits of higher savings rates.

Key Quote:

“Why 1%? Why not just go to zero, man?”
— George Kamel (00:14)

Despite George's probing, Sydney clarifies her husband's rationale centered on the belief that the existing savings and minimal contributions would suffice for their retirement needs.

Balancing Career and Family Goals

Sydney reveals another layer to their disagreement: her desire to stay home with their children. This personal goal impacts their financial planning, especially concerning their household income and retirement contributions.

Key Quote:

“I like am kind of wanting to stay home with our kids.”
— Sydney (01:54)

George posits that if Sydney remains home, it becomes even more crucial to maintain robust investment contributions to secure their financial future amidst unforeseen circumstances.

Employer Contributions and Financial Strategy

Sydney details her substantial retirement contributions:

• Company Match: Her company contributes 15% of her salary (~$120,000) to her 401(k), regardless of her own contributions.
• Personal Contributions: She also contributes an additional 15% of her salary, totaling 30% of her income annually into retirement.

This high level of contribution underscores Sydney's commitment to securing their financial future, contrasting sharply with her husband's inclination to minimize contributions.

Key Quote:

“So I'm getting 30% of my salary every year into my retirement. And so I feel like I'm giving up a huge.”
— Sydney (02:05)

George questions the necessity of her extra contributions, suggesting that maintaining a 15% investment rate would be sufficient and even advocate for possibly increasing it after the mortgage is paid off.

Navigating Uncertainty and Future Planning

George emphasizes the unpredictability of the future, highlighting variables such as:

• Job Stability: Concerns about her husband's ability to continue working, especially considering his recent job changes in the mortgage industry.
• Inflation and Taxes: The impact of economic factors that could erode their savings over time.
• Life Events: Unexpected life changes, such as health issues or family expansions.

He advocates for maintaining higher investment rates to provide a financial cushion against these uncertainties.

Key Quote:

“We don't know what 30 years from now looks like... We don't know what inflation is going to do. We don't know what taxes will be.”
— George Kamel (03:13)

Advice on Mortgage and Additional Investments

Sydney contemplates using their non-retirement savings for purchasing land and eventually building a new home. George advises prioritizing paying down their current mortgage to alleviate financial pressures, especially if they plan to transition to a land purchase.

Key Quote:

“I would be focused on getting rid of the mortgage, which is only going to make your life staying home even easier.”
— George Kamel (04:20)

He also suggests consulting with a financial advisor to objectively assess their financial situation and bridge the gap between their conflicting strategies.

Host C's Perspective: Consistency Over Conjecture

Host C shares a personal anecdote to illustrate the importance of consistent financial habits over attempting to "hack" one's way to wealth. He emphasizes sticking to proven principles, such as regular investing and prudent financial management, rather than relying on unpredictable life changes or speculative ventures.

Key Quote:

“Just keep playing the chords in a 4, 4 time. Just keep doing the things that you know are right... And then suddenly 10 years later, you're a millionaire.”
— Host C (06:22)

He highlights the pitfalls of reducing investment contributions based on optimistic but uncertain future plans, stressing that maintaining a disciplined investment approach is more reliable.

Conclusion and Takeaways

The episode underscores the delicate balance between differing financial philosophies within a marriage. Key takeaways include:

• Importance of Communication: Open discussions about financial goals and strategies are vital for marital harmony.
• Long-Term Planning: Maintaining robust retirement contributions can safeguard against future uncertainties.
• Professional Guidance: Consulting with financial advisors can provide objective insights and facilitate consensus.
• Consistency is Key: Adhering to established financial principles often yields better results than speculative adjustments based on potential future events.

Key Quote:

“Keep just showing up, keep showing up. And I know he's smart and wants to hack his way to it, but it's just not possible.”
— Host C (07:15)

Listeners are encouraged to evaluate their financial strategies critically, ensuring that their actions align with long-term security and family goals.

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For more insights on planning for retirement and building wealth, visit Ramsaysolutions.com/retire or explore the show notes for additional resources.

Transcript

[A]

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. Sydney is going to kick us off in Huntsville, Alabama. What is going on, Sydney?

[B]

Hey, guys, thanks for taking my call.

[A]

Absolutely.

[B]

So I think this is right up George's alley. My husband and I are in a disagreement about how much to contribute to retirement for a little background. We have about 420,000 between both of our retirement accounts right now and then 160,000 in non retirement savings. We don't have any debt besides our mortgage. And then we also have started college funds for our children. He thinks that once we reach a certain point, and that number in his mind is about 200, 250,000 per person, that we can take our contributions down to 1%. And I am not for that at all, of course. But yeah, I'm just trying to.

[A]

Why 1%? Why not just go to zero, man?

[B]

Well, I guess his thought is that he can. He's still contributing something, but when he does, like the compound interest calculator in 30 years, it's still like 4 million or something like that.

[A]

Okay.

[B]

And he thinks that's going to be enough.

[A]

Wow. Well, it sounds like 15% is not going to damper your lifestyle at this point. If you just invest 15% until the house is paid off, then you can invest even more beyond that or give more. What's the harm in that? It sounds like you guys have a great income.

[B]

Well, that's another factor is I like am kind of wanting to stay home with our kids.

[A]

So all the more reason to invest, is it not?

[B]

In my opinion, yes. So I'm trying to win the argument to him.

[C]

Do you kind of want to stay home or do you all the way want to stay home?

[B]

So all the way. But okay, so my company, they contribute 15% of my salary, which is about 120,000 to my 401k, regardless if I contribute anything. But I also contribute 15%. So that's a big hold up for me is I'm getting 30% of my salary every year into my retirement. And so I feel like I'm giving up a huge.

[A]

Why are you contributing an extra 15% if they're already contributing 15% of your own money? That's the same as you contributing 15% of your own money, correct?

[B]

That's correct, yes.

[A]

Yeah. So what if you dial back to 15%? It was he beyond 15% right now with his income?

[B]

No. So we are. He's probably, he just started a new company so he's actually not able to contribute yet. The past few years we've maxed out and then like just this year because so he works in the mortgage industry so obviously things have slowed down a lot. So he dialed back his contributions to that 1%.

[A]

Well, that's my, my big thing is we don't know what 30 years from now looks like. We don't know if he's going to be able to work three years from now. We don't know what life is going to throw at us. And so I like the idea of just investing 15% until we get the house paid off. We can increase it there. And we've had very few calls where someone said, man, I hate that I invested 15%. We have too much money help. That's my favorite problem to deal with. But we get a lot of calls, people saying, hey, we're 62, we have to work because we thought our retirement was going to do this, but then our account did this and we didn't realize that our funds were in the right spot. And there's too many variables that I don't like about just not investing or investing 1%. Because you feel like you can ride it out.

[B]

Right.

[C]

Can I ask you, what is he going to do with the rest of the money?

[B]

So if I did leave, if I quit working, like all of my benefits, all of our benefits, family benefits, everything on my side and with his company the benefits are, I mean it's like triple what we pay. So it would kind of even out to dial it back to that 1%.

[A]

What does he mean, the insurance?

[B]

It varies. I think this year will be probably.

[A]

Around 250, maybe just on his side. So if you stay home, household income is at 250.

[B]

Yep.

[A]

With just a mortgage, what's left on the mortgage?

[B]

280.

[A]

And what's the non retirement funds for the 160k we have?

[B]

So we just sold a piece of real estate and we plan to buy some land and eventually build. So we're kind of just holding it in our high yield savings right now.

[A]

Why not pay down the mortgage?

[B]

We also have a brokerage account that we may just move it there to. I don't really know yet.

[A]

Okay, well, I would be focused on getting rid of the mortgage, which is only going to make your life staying home even easier. Way more margin. And I would continue investing 15%. And one of the reasons out of many is we don't know what 30 years from now, looks like we don't know what inflation is going to do. We don't know what taxes will be. And so I would rather have a bigger pile of money. Well, it's not hurting your lifestyle here. You know, we're not talking about 60%, it's 15. And you guys have done such a great job already, so I applaud him on that. But now's not the time to let her foot off the gas.

[B]

So you would even put that towards the house, even if we plan to move in like the next two years?

[A]

Well, are you going to keep the house and buy the land? Would you sell the house when you get the land?

[B]

We would probably buy the land, build, then sell the house.

[A]

I mean, I don't like the idea of you guys having two mortgages. If you get the land, are you going to be able to pay for the land in cash and building cash?

[B]

Yes. Not building cash, no. But we would pay for the land in cash.

[A]

Okay. There might be a weird little period there where you got the mortgage still, plus you've got a new mortgage as you try to build. So I would consider that as well as part of your near future plans. But I don't know that I can convince him to invest more. He can crunch all the calculations he wants, but this is all, you know, conjecture at this point. And so I would recommend you guys sit down with a third party, like a financial advisor, and have them walk you through big picture. Here's what you're, here's where you're at, here's where you're telling me you want to go. Is there a gap right now? What's it going to take to get there? And he might say, hey, you're 110% on track, let's scale back. Or he might say, I'd continue down this path. But two knuckleheads on the radio may not be able to convince him. That's the problem.

[B]

No, I appreciate it.

[C]

Here's the biggest convincing. Six years ago, I was three jobs in two states away. And if you had told me six years ago that I would be a YouTuber or that I'd be sitting on the radio next to George and the largest call in finance show on planet Earth, I would have laughed at you. And so I think it's easy to be like, hey, I don't want to do this principle now because I got this thing that's going to happen in five years. And what's pretty cool is I didn't say, hey, I might want to be a YouTuber someday. So I'm going to quit going to college. I'm going to quit showing up to my day job. I'm going to practice YouTubing. I kept doing my the day to day principles that I knew, which is to continue to go to grad school, continue to write good papers, continue to show up in my job. And then when this opportunity came along, it was cool because I had the foundation and like George said, like, no one's ever called us and been like, man, I just put too much in retirement. I wish I hadn't done that.

[B]

Yeah.

[C]

But our show only exists because people don't. They have some scheme that in five years I'm going to buy the land and I'm going to get the goats. I'm going to do it all in cash. And so I'm not going to put anything in retirement. You don't know if you're pregnant with twins tomorrow and everything in your life changed. You see what I'm saying? So just keep playing the chords in a 4, 4 time. Just keep doing the things that you know are right. And then on top of that stuff, then opportunities show up because you just kept doing the right thing day in, day out. It's diet, nutrition, it's just the same boring thing over and over again. And then suddenly 10 years later, you're a millionaire, right? It all works out. So keep just showing up, keep showing up. And I know he's smart and wants to hack his way to it, but it's just, it's just not possible.

[A]

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