Wait For The Economy To Improve Before I Invest?

Summary

Podcast Summary: The Ramsey Show Highlights Episode: Wait For The Economy To Improve Before I Invest?
Release Date: December 20, 2024
Host/Author: Ramsey Network

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Introduction to the Caller’s Dilemma

In this episode of The Ramsey Show Highlights, Jason reaches out with a pressing financial dilemma. Early in the call at [00:02], he introduces his situation:

“I have a little bit of money from my inheritance and I'm wondering if right now is the right time to invest or if I should wait a little bit for the economy to do its thing.”
— Jason [00:02]

Jason is grappling with whether to invest his $100,000 inheritance immediately or hold off, anticipating potential economic fluctuations.

Breaking Down Jason’s Financial Situation

Jason provides a detailed overview of his financial landscape:

• Inheritance Allocation:

  • $40,000 used to eliminate all debt ([01:05]).
  • $20,000 allocated for his children's inheritance via a trust ([01:02]).
  • $10,000 invested in diversified portfolios with a stockbroker ([01:02]).

• Life Insurance:

  • Holds life insurance for himself, his wife, and both children to ensure financial security in unforeseen circumstances ([01:46]).

• Housing and Income:

  • Lives in a paid-off house, a gift from his father-in-law ([04:55]).
  • Household income is around $30,000 to $37,000 annually, with Jason as a stay-at-home dad and caregiver ([05:00]).
  • Runs a small business selling goods at farmers markets, generating approximately $10,000 a year ([07:12]).

Jason’s primary concern centers around securing his and his wife’s retirement, especially given their limited income and the responsibility of caring for a three-year-old son with special needs.

Expert Advice from Dave Ramsey and Rachel Cruze

Dave Ramsey and Rachel Cruze provide Jason with comprehensive financial guidance, addressing both his immediate concerns and long-term financial health.

Rachel Cruze's Reassurance and Investment Insights

Rachel begins by calming Jason’s anxieties:

“Let me just give you some facts to slow down, let you breathe when it comes to the economy.”
— Rachel [02:21]

She highlights historical stock market performance under recent presidencies to argue against timing the market:

“Under President Trump's last presidency, the stock market was up 53%. Three and a half years into his presidency, it was up 53%. Under Joe Biden's presidency, three and a half years in, it was up 50%. So basic math says over seven year period, the stock market went up 103%. It doubled. Correct.”
— Rachel [03:16]

Rachel emphasizes the power of compound growth and encourages Jason to invest now rather than waiting for a market crash:

“The sooner you invest, the more money you're going to have later, the more time compound growth has to work its magic.”
— Rachel [03:26]

She clarifies that investing in broad indexes like the S&P 500 is a sound strategy, as it represents the largest 500 companies in the U.S. economy.

Dave Ramsey's Practical Financial Strategies

Dave takes a pragmatic approach, focusing on Jason’s current financial stability:

“I want you to put it in a high yield savings account. And now you have six months. If anything ever happens, you've got six months of taxes, bills, groceries in an account that you never have to borrow money again.”
— Dave Ramsey [05:12]

He underscores the importance of building an emergency fund before considering further investments. Dave also addresses Jason's mental well-being, recognizing the emotional toll of his responsibilities:

“You have a paid for house. You have six to eight months of cash in the bank. That is peace, homie.”
— Dave Ramsey [06:56]

Dave advises Jason to cease his small business efforts temporarily, suggesting that he's exhausting himself without adequate returns:

“Let’s just stop. Let’s just put the stop putting quarters in the machine and quit playing.”
— Dave Ramsey [07:18]

He emphasizes the need for Jason to grieve and find peace amidst his financial planning:

“Your body's grieving whether you stop and do it or not. I want you to relax. You’re safe right now.”
— Dave Ramsey [08:00]

Emotional and Personal Support

Throughout the conversation, both Dave and Rachel recognize Jason's emotional strain. Dave particularly addresses the impact of Jason’s family losses and the continuous responsibilities he shoulders:

“You're in the backdrop of the pain of losing your mom, of losing your brothers, losing your dad. The one thing you have never had in your home is peace.”
— Dave Ramsey [05:03]

Rachel adds emotional support by encouraging Jason to take a moment to breathe and focus on his well-being:

“We gotta make Jason well again. And then this whole thing will take care of itself.”
— Rachel Cruze [09:02]

Dave further advises Jason to write a letter to his late mother as a means of processing his grief:

“I want you to write mom a letter tonight and I want you to tell your mom how much you miss her.”
— Dave Ramsey [08:00]

Final Recommendations and Takeaways

The experts conclude with actionable steps for Jason:

1. Establish an Emergency Fund:

   • Deposit the remaining $40,000 into a high-yield savings account to cover six months of expenses ([05:12]).

2. Pause Additional Investments:

   • Focus on securing current financial stability before making further investment decisions ([06:56]).

3. Emotional Healing:

   • Take time to grieve and process personal losses to achieve mental peace ([08:00]).

4. Reassess Income Strategies:

   • Consider the sustainability of current income sources and explore opportunities to enhance household earnings ([07:12]).

Dave and Rachel stress the importance of prioritizing financial security and emotional well-being over speculative investments. By addressing immediate needs and ensuring a stable financial foundation, Jason can navigate his future with greater confidence and peace of mind.

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Notable Quotes Summary

• Jason [00:02]: “I have a little bit of money from my inheritance and I'm wondering if right now is the right time to invest...”
• Rachel [02:21]: “You've been making a lot of decisions out of fear... Let me give you some facts to slow down...”
• Rachel [03:16]: “Under President Trump's last presidency, the stock market was up 53%...”
• Dave [05:12]: “I want you to put it in a high yield savings account... six months of taxes, bills, groceries...”
• Dave [06:56]: “You have a paid for house. You have six to eight months of cash in the bank. That is peace...”
• Dave [08:00]: “Your body's grieving whether you stop and do it or not... I want you to relax. You’re safe right now.”

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Conclusion

This episode of The Ramsey Show Highlights provides a compassionate and practical approach to financial planning amidst personal and economic uncertainties. By prioritizing debt elimination, establishing an emergency fund, and addressing emotional well-being, Jason receives guidance that not only secures his financial future but also promotes personal healing and peace.

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Transcript

[Jason]

Brought to you by the EveryDollar app. Start budgeting for free today. So my question is that I have a little bit of money for my inheritance and I'm wondering if right now is the right time to invest or if I should wait a little bit for the economy to do its thing.

[Dave]

What does that mean?

[Rachel]

What does do its thing mean? It's been doing its thing.

[Jason]

It's low and right now it's starting to pick up.

[Rachel]

So what economy do you live in, brother? We're at record highs every day.

[Dave]

Are you waiting for it to crash and then get in?

[Jason]

Well, you know, I don't know what's gonna happen with the whole election and we happened with it, with this happening, but it. I'm worried that I've already invested some money for my kids, okay, for my inheritance in the trust fund. So they're taking care of as far as them. But I'm, I'm concerned about my, me and my wife's retirement.

[Dave]

How much money did you get in an inheritance?

[Jason]

I got about $100,000.

[Dave]

Who passed away and I put about.

[Jason]

I took, I used 40,000 to pay off all my debt. That was the first thing I did. I paid off all my debt.

[Rachel]

Wonderful.

[Dave]

Good for you.

[Jason]

So, and then I had, of course I took 20,000 for my kids and I put a $10,000 into diversified portfolios with a stockbroker and then tied a trust to it so that, that's their inheritance. When if something were to happen to me and my wife specifically because I have a three year old son who's special needs.

[Dave]

Do you have life insurance?

[Jason]

I wanted to make sure that he was taken care of.

[Dave]

Hey, Jason. Jason. Jason.

[Jason]

Yes?

[Dave]

Do you have life insurance?

[Jason]

I do.

[Dave]

How much?

[Jason]

I have life insurance on myself, my wife and both my kids.

[Dave]

Okay.

[Rachel]

Why do you need life insurance on your kids?

[Jason]

Just in case, I mean something happens to them. I mean it's never, it's never a bad idea that my mother had life insurance on me because my. Both of my brothers passed away. One when he was 6 and 1 when he was 25. And it hit my family hard financially. So my mother took life insurance out on me in case something were to happen to me. That way the paid for.

[Rachel]

You've had a lot, you've had a lot hit you in your lifetime. A lot of trauma.

[Jason]

I mean, I'm the last of my family. So my father, my mother, my mother died October 1st and that's why I got my inheritance.

[Dave]

I'm sorry brother, but here's the deal.

[Rachel]

You've been making a lot of decisions out of fear. I can tell there's a lot of anxiousness about. But what if it's not enough? And what I need to take care of And I want you to just breathe, slow down. You're gonna be okay. You are so far beyond what most people couldn't even spell the word, trust. And you've got it set up for your kids already. So let me just give you some facts to slow down, let you breathe when it comes to the economy. Under President Trump's last presidency, the stock market was up 53%. Three and a half years into his presidency, it was up 53%. Under Joe Biden's presidency, three and a half years in, it was up 50%. So basic math says over seven year period, the stock market went up 103%. It doubled. Correct.

[Jason]

Right.

[Rachel]

And I'm not a guru. I don't have a crystal ball. My guess is we're going to see the same thing happen over the next seven years. We're going to see about 100% return.

[Dave]

And I think it's going to go half. I think it's going to be worse than that. And you know what? What's fun about this is you still win. It doesn't matter. Like me sitting here trying to predict.

[Rachel]

It, George, like, we don't time the market. And that's what you're trying to do right now is go, well, I want to wait till the right time. I want to wait for a crash to invest. I wouldn't wait. I would invest now. And what you'll see is over time, the sooner you invest, the more money you're going to have later, the more time. Compound growth has to work its magic. And so I would. I don't know what headline you're looking at or what stock you're looking at, but I'm looking at the s and P 500, the largest 500 companies that largely represent the overall US economy. And that's, you know, when you invest in a mutual fund, that's largely what you're investing in as well. The top companies.

[Dave]

Can I give you some, a different perspective, Jason?

[Jason]

I mean, what I was worried about was rather than putting it in the stock market, should I go into CDs that are a little bit more secure but with less interest?

[Rachel]

If you want to lose money, yeah.

[Dave]

You'Ll lose money against inflation. Let me, let me. Can I throw something else at you, Jason? Something totally different. You had $100,000 and you paid 40 grand of your debt off, which left you with 60. You took $20,000 and created a trust for your kids, especially a special needs Trust for your three year old. Right. So that leaves you with 40 grand. Do you and your wife have a house?

[Jason]

Our house was a gift from my father in law. It's paid off.

[Dave]

Okay, so you have a paid off home?

[Jason]

Yes.

[Rachel]

You have an emergency fund?

[Dave]

Is this, you have an emergency fund where you are now your own bank?

[Jason]

I don't, No, I, I, we only make about 30, $37,000 a year because I'm a stay at home dad. I'm a caregiver for my son.

[Dave]

Well, listen to me.

[Jason]

So I don't really work.

[Dave]

You now have $40,000. I want you to put it in a high yield savings account. And now you have six months. If anything ever happens, you've got six months of, of taxes, bills, groceries in an account that you never have to borrow money again. And I want you to look at what you're actually solving for. What you are trying to solve for is you're trying to look at a crystal ball and see what's going to happen in 35 years. Because you're still in the backdrop of the pain of losing your mom, of losing your brothers, losing your dad. The one thing you have never had in your home is peace. And instead of trying to solve for the next calamity coming, which by the way, they're going to keep coming. That's just life. And it sucks. It is. I want you to solve for peace so that when those things come.

[Jason]

You.

[Dave]

Don'T have a care in the world. You can just focus on being sad, on grieving. Because right now you have, you are in a financial position that very, very few Americans are in. And that is you don't owe anybody anything. You have a paid for house. You now have six to eight months of cash in the bank. That's just yours, period. Nobody can take your house away. Nobody can take food off your table. You see, you see what kind of position you're in, right? That is peace, homie. I would solve for peace. And your, your main breadwinner in your house makes 37,000 bucks. That's not going to be enough money over the long term. You're gonna have to figure that out. But right now, y'all are safe. Okay? Do you get what I'm, you get what I'm getting at?

[Jason]

Yeah.

[Dave]

I would not invest any of this extra money. That's just me.

[Jason]

My, my, my, the main breadware isn't making enough. And I, I run my own small Business selling stuff at farmers markets to try to make extra money. But in three and a half years, I'm only at. I only make about $10,000 a year.

[Dave]

Okay, so let's quit that job.

[Jason]

That's literally just dumping it into. Re. Into the company. I don't even pay myself. Yeah.

[Dave]

So it's been a hobby. And we're going to stop that now. You're tired. I can hear it on you. You're exhausted. You're playing whack a mole with the next anxious thing that pops up. Let's just stop. Let's just put the. Stop putting quarters in the machine and quit playing. Does that sound. Can you hear my voice? Does that sound good?

[Jason]

We. Yeah, I mean, I'm just. I'm. It's. It's. It's. I do a lot. I know. I mean, I haven't. Be honest with you. I haven't grieved for my mother because I know you have too much to do.

[Dave]

I know you.

[Jason]

I have too much to do.

[Dave]

I know. But here's the thing. Your body's grieving whether you stop and do it or not.

[Jason]

So I'm just. I've never. I've never stopped. I never stop, man. I'm going non stop. I know what to do.

[Dave]

And as my friend in Simpkin says, if busyness is your drug, rest will feel like stress. And right now you're medicating with whack a mole. You're medicating with busy stop tonight. It's the weekend. I want you to. You're about to come up on Thanksgiving for the first time without your mom. I want you to write mom a letter tonight and I want you to tell your mom how much you miss her. And I want you to tell your mom in that letter what kind of dad you're going to be, what kind of provider you're going to be, and how you're going to give peace to her grandkids that. That she'll never get to meet. Okay, you're burning your hole through your home right now with your anxiousness. I want you to relax. You're safe right now. Dude, you got a paid for house. You got 40 grand in the bank. You have a small account set up for your kids future. Man, you got life insurance on everybody. You're so far ahead of the game, my man. Now you gotta turn and sit and just exhale in the sadness. And that's part of the. Part of the deal.

[Rachel]

We gotta make Jason well again. And then this whole thing will take care of itself.

[Dave]

And then we gotta. We'll have to deal with the money. We'll have to deal with, you know, how are we gonna. Like we don't make enough money to eat and what job am I gonna do? Am I gonna go back to school? We figure all that out. But right now, we're going to exhale. We're safe. We're going to grieve, Mom. Then when the new year rolls around, we're going to figure out what comes next for our family. Thanks for the call, brother.

[Rachel]

Create your free every dollar budget today.

[Jason]

The simplest way to budget for your life.