Where Should We Be Investing?

Summary

Ramsey Everyday Millionaires: "Where Should We Be Investing?" Released on December 23, 2024 | Host: Ramsey Network

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Introduction

In the December 23, 2024 episode of Ramsey Everyday Millionaires, the Ramsey Network delves into strategic investment avenues tailored for young entrepreneurs. Hosted by notable experts including Dave Ramsey, Ken Coleman, Rachel Cruze, George Kamel, Jade Warshaw, and Dr. John Delony, the episode titled "Where Should We Be Investing?" offers actionable insights on retirement planning, mutual funds, and real estate investments. The discussion centers around guiding ordinary individuals to build and sustain extraordinary wealth through disciplined and informed investment choices.

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Guest Introduction: Amy from Savannah, Georgia

The episode features Amy, an entrepreneur from Savannah, Georgia, who seeks personalized investment advice to optimize her financial growth.

• Amy's Background:
  • Occupation: Runs a digital marketing online business focusing on collaborating with influencers.
  • Business Structure: Operates alongside her spouse, with a household income of $75K, which they both actively draw from the business.
  • Team: Employs four contractors, expanding her business operations beyond the two primary operators.
  • Financial Status: Currently on step four of Ramsey’s financial plan, having established an emergency fund and cleared all debts except for the mortgage.

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Investment Recommendations

1. Retirement Accounts: Building a Solid Foundation

Ken Coleman emphasizes the importance of prioritizing retirement savings, especially for young entrepreneurs like Amy.

• 15% Income Allocation:

  • Ken Coleman [02:12]: "I think the goal, Amy, for you guys is to invest 15% of your income into retirement."

• Account Options:

  • Solo 401(k): Ideal for self-employed individuals without employees.
  • SEP IRA: Suitable for those with a spouse working in the business.
  • Simple IRA: An option if there are more employees or specific business structures.
  • Roth IRA: Allows each spouse to contribute up to $7,000 annually, fostering tax-free growth.

• Maximizing Tax Advantages:

  • George Kamel [03:47]: "Once you have money in there, you have to actually purchase funds, and that's where we talk about those growth stock mutual funds."

2. Real Estate Investment: Strategic Growth Post-Debt Clearance

George Kamel provides nuanced insights into real estate investments, cautioning against premature property acquisitions.

• Primary Residence Focus:

  • George Kamel [05:24]: "I would just sell the house and use all of the equity toward the next one. Until you have that house paid off, then you can focus on cash flowing that next purchase."

• Challenges of Rental Properties:

  • Ken Coleman [05:35]: "You're dealing with stuff breaking. You have this massive asset and if you don't have a lot of cash flow to cover some of those things, it just ends up being a headache."

• Equity Reinvestment Strategy:

  • Reinvesting equity from the primary residence into subsequent properties ensures manageable growth and reduces financial strain.

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Q&A Highlights

A. Diversifying with Mutual Funds

Amy inquires about the viability of investing in mutual funds outside of retirement accounts.

• Ken Coleman [04:01]: "I wouldn't worry about that. The wisest thing to do is to take advantage of these tax advantage accounts first, like the Roth."

• Dave Ramsey [04:21]: "If I was in your shoes, Amy, I would just open up two Roth IRAs. Both of you put 15% in there."

B. Transitioning from Primary Residence to Rental Property

Amy seeks advice on when to transition her primary residence into a rental property to facilitate purchasing additional real estate.

• George Kamel [05:06]: "I wouldn't. I mean, I would get to a point that you would be able to cash flow the next purchase because... the rental payments are going to eventually be paying the mortgage of your primary house."

• Ken Coleman [06:33]: "Roll all your equity into the next house. And... it's not as passive as you think. It's a lot of work."

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Key Insights & Advice

1. Prioritize Retirement Savings: Allocating 15% of income to retirement accounts such as Roth IRAs, Solo 401(k)s, or SEP IRAs lays a robust foundation for long-term financial security.

2. Leverage Tax Advantages: Utilizing tax-advantaged accounts maximizes investment growth and minimizes tax liabilities, essential for wealth accumulation.

3. Strategic Real Estate Investments: Focus on fully paying off primary residences before venturing into rental properties to ensure financial stability and reduce risk.

4. Manageable Growth Through Equity Reinvestment: Reinvesting equity from existing properties into new investments facilitates steady and sustainable wealth growth.

5. Understand the Commitment of Real Estate: Recognize that rental properties require active management and can present unforeseen challenges, thus necessitating thorough preparation and risk assessment.

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Notable Quotes

• Ken Coleman [02:12]: "Invest 15% of your income into retirement."

• George Kamel [03:47]: "Real estate's another great option down the road... paid for real estate."

• Ken Coleman [05:35]: "It's a lot of work. It's a lot of work."

• Dave Ramsey [04:21]: "Open up two Roth IRAs. Both of you put 15% in there."

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Conclusion

The episode "Where Should We Be Investing?" provides a comprehensive roadmap for young entrepreneurs navigating the complexities of investment planning. By prioritizing retirement savings, leveraging tax-advantaged accounts, and adopting a strategic approach to real estate investments, listeners are equipped with practical strategies to build and sustain wealth. The collective wisdom of the Ramsey Network underscores the importance of disciplined investing, informed decision-making, and proactive financial management in the journey toward financial independence.

For further guidance and resources, listeners are encouraged to visit ramseysolutions.com/investing or access the free Complete Guide to Investing available through Ramsey Solutions.

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Note: This summary excludes advertisements, intros, outros, and non-content sections to focus solely on the valuable investment discussions presented in the episode.

Transcript

[A]

Foreign.

[B]

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. All right, Amy's up next in Savannah, Georgia. What's going on, Amy?

[A]

Hey, guys. How's it going?

[B]

Pretty good. How are you?

[A]

Good, thank you. Thanks for having me.

[B]

Absolutely.

[A]

I am looking for your top investment recommendations to a entrepreneur in her 20s.

[C]

Oh, nice. What do you do?

[A]

I have an online business. It's digital marketing based, but we work with influencers.

[C]

Oh, that's great.

[A]

And have multiple other online business ideas as well as a brick and mortar. And want to get into real estate investment. So just looking to set myself up well while we're young.

[B]

Fantastic. Are you married?

[A]

Yes.

[B]

Okay. And what is the household income between what you take home from the business?

[A]

75.

[B]

75?

[A]

Yes.

[B]

Okay. What part of that is yours from the business?

[A]

So we both work full time for our business, so that's what we take home together from the business.

[B]

Is it just you two working in the business or do you have other employees?

[A]

We have four other contractors.

[B]

Cool. And so what is your next goal? Do you guys have debt you're trying to clean up? Do you have savings you're working on or are you in that investment phase where you've already got those two?

[A]

Yeah, we're on step four. So we've got the emergency fund, We've got all the debt covered except for the mortgage. And so I really, you know, you hear all the advice. Retirement accounts, life insurance, stock market, real estate. And I just, I just want some narrow direction on where we should be investing.

[B]

Yeah, well, we have very simple instruction when it comes to investing, and that's mutual funds and real estate. That's pretty much all Dave Ramsey does. That's the only thing I've done. Rachel may be fancier than me. I don't know.

[C]

No, not fanciers.

[A]

For the requirement. No retirement account needed.

[B]

No, no.

[C]

You do need a retirement.

[B]

That's what's within the retirement accounts. Yeah. You have options as a self employed person that I want everyone to know. If you're self employed, you're a freelancer, contractor. You don't just get to say, well, I don't have a 401k so I guess I'll never invest. You have the option of a solo for 1K. If it's just you and your spouse, you have the option of a simple IRA or a sep. Sep ira. So those are some options. You can look into. And I'd be working with a financial advisor to figure out which one you can legally do for your situation.

[C]

Yes, I think the goal, Amy, for you guys is to invest 15% of your income into retirement. And so that's going to look like from a business side what, what George is saying. Yeah, there's seps, there's solo IRAs, there's different options for entrepreneurs when it comes to investing for retirement. Then there's also just your traditional, like just a Roth ira and anyone can open up that you can put in, I think $7,000 a year per person. So you can do that as well. So those are two great avenues to be putting that 15% and then anything above that. Once you guys are at a point that the house is paid off and all of it, that's when you can get a little bit more expanded when it comes to investing. So that's when you'd max, still max out those retirement accounts, because those are just great from a tax perspective. A lot of those grow tax free, which is fantastic. Or. Yeah. Or real estate's another great option down the road. And we, we always talk about paid for real estate. So it's not starting big and fancy. You're actually starting pretty slow because it's at the speed of cash and it's.

[B]

Only after you've got your primary house paid off.

[C]

Yeah, this is after. Yeah, this is a baby seven. Yeah. But for right now, Amy, that shooting for that 15% of your income going into retirement specifically is going to be the best bet for you.

[A]

Perfect. So what about like a separate mutual fund through Fidelity or something like that?

[B]

Just like a taxable brokerage account. Yeah, I wouldn't worry about that. I, you know, the wisest thing to do is to take advantage of these tax advantage accounts first, like the Roth.

[C]

Ira, and then put extra money towards the house. Do you guys own a house?

[A]

Yes.

[C]

Okay. So I would put extra money to pay that off first before I opened up just like a mutual fund account. And then again, once the house is paid off. That's one thing Winston and I did. We opened up just a separate mutual fund account that we just kind of had in there just to put extra money in, you know, if we had it. So, yeah, so there's definitely those other.

[B]

Options that's more of a baby step 7 item. Once you get the house paid off, then you can increase your investing and then those taxable accounts become part of your wealth building plan to maximize it. But for. If I was in your shoes, Amy, I would just open up two Roth IRAs. Both of you put 15% in there. That's a little over 11 grand between the two accounts. And within the Roth IRA, once you have money in there, you have to actually purchase funds, and that's where we talk about those growth stock mutual funds.

[A]

Got it. Okay. And I'm going to ask you a real estate question.

[B]

Sure.

[C]

Yeah.

[A]

So we've, we've purchased our first home in the forethought of turning it into a rental after the fact. So what is your advice on how long to live in it? Can we move out of it before it's paid off to buy something else? Like, what would your recommendation be there?

[C]

I wouldn't. I mean, I would, I would get to a point that you would be able to cash flow the next purchase because. Yeah, I mean, because if anything, it's. If you went and got another mortgage and had a rental, then the rental payments, you know, is, is paying the. Is going to eventually be paying the mortgage of your primary house.

[B]

And so just adding another layer of risk and headache. And yeah, I'll tell you what I did. I just sold the house and used all of the equity toward the next one. Until you have that house paid off, then you can focus on cash flowing that next purchase. So that's the simplest, most peaceful way to go about it. But again, if you scroll TikTok, you're gonna see a lot of people going, oh my gosh, no, keep it as a rental every time. Why would you let go of it?

[C]

Yeah, and I, and I love the question, though, Amy, because I think again, we're all for real estate investing, but I do think there is this, like, romanticized idea of having rental property. And it's not that passive. I mean, there, there is so much that goes into it. You have to deal with people. You're dealing with stuff breaking. I. You have this massive asset and if you don't have a lot of cash flow to cover some of those things, it just ends up being a real headache. And so again, the most peaceful thing to do is, what I would do is, yeah, roll all your equity into the next house. And like Winston and I, which I know this is. These years aren't here anymore, but this was about a decade ago, but we got a condo, George, for $44,000 in foreclosure. And this, like, cross far out of Nashville, crappy, crappy condo. We went and redid it and all of it and we kept it for about a decade and then sold it.

[B]

So, like, and I appreciate it.

[C]

You can really small start small. Don't feel like you have to go big. And again, it's not as passive as you think. It's a lot of work. It's a lot of work.

[B]

Good reminder. And if you want free Guide Complete Guide to investing, go to ramseysolutions.com guide. Anyone listening out there? It's our free guide for investing. Ramseysolutions.com guide thanks for tuning in to Ramsey Everyday Millionaires. To learn more about investing, visit ramseysolutions.com investing or click the link in the show notes. Ramsey Solutions is a paid non client promoter of participating pros. Learn [e-mail] SmartVestor.