Dave Ramsey Tells A Game Show Contestant Who Won $200,000 How To Manage The Money: 'You're Kind Of In The Middle'

Dave Ramsey has offered financial suggestions on his radio show, "The Ramsey Show," for decades. He has heard various stories and has helped people navigate their financial challenges.

However, he had a bit of a difficult time offering guidance for a recent caller. A 70-year-old woman won $200,000 from a game show and wanted advice on paying off the mortgage or saving the money. As the situation unfolded, Ramsey found himself in a tight spot.

"You're kind of in the middle," Ramsey stated during the episode. 

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That's because she has $200,000 in a high-yield savings account and no other nest egg. She also owns a home with her husband and pays $756 per month on the mortgage. The mortgage balance is $85,000. If she had a net worth of $100,000, Ramsey would tell her to not pay the mortgage or else the couple would starve. However, if she had $600,000, Ramsey would suggest paying off the mortgage right away. 

Here's what Ramsey suggested instead.

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Establish A Budget

One of the glaring issues that exposed itself in the conversation is that the caller doesn't know where her money goes. The couple does not have a budget and is unsure about how they spend their money. 

She acknowledged that it was an issue right when Ramsey asked her how much the couple spends. He wanted to know what money they had left over after their part-time job wages and Social Security checks arrived. 

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Creating a budget can help the couple discover opportunities to reduce their spending. Regardless of whether they pay off the mortgage or continue to save the money, the couple should keep a budget. However, Ramsey followed up the budget suggestion by explaining what he would do if he were in the couple's situation.

Pay Off The House With Conditions

After thinking about it for a bit, Ramsey concludes that it is a good idea to pay off the mortgage. However, he ties some conditions to paying off the mortgage early. He wants the couple to invest $1,000 to $1,500 per month in a mutual fund. It will be easier for the couple to achieve this goal since they will no longer have $756 monthly mortgage payments.

While $1,000 is the easier target, Ramsey said that the couple should tighten their budget to make $1,500 per month possible. Making higher portfolio contributions for multiple years will give the couple a bigger nest egg.

It's important for the couple to rebuild their nest egg quickly after paying off the mortgage. Ramsey estimates that it will take the couple three years to replenish the $85,000 they put toward the mortgage.

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Invest In Mutual Funds

Ramsey suggested that the couple invest in mutual funds to grow their money, although ETFs are also viable options. These funds give investors exposure to diversified portfolios and can help you earn positive returns even if you don't know much about the stock market.

Ramsey went on to say that the stock market tends to double every seven years. He used that trend to explain why the couple may want to consider putting $70,000 to $80,000 in a mutual fund and keeping the remaining money in the high-yield savings account. 

Prudent long-term investing and a tight budget can help the couple navigate their 70s and establish a nest egg for the rest of their lives. 

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