The radio host explains the “secret sauce.”
Author and personal finance personality Dave Ramsey believes in a few basic principles when it comes to strategizing about being smart with money.
Among them is that it is important to understand that it is possible that you are actually doing the right thing.
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One seeker of Ramsey’s advice, who identified himself as Brett, wondered if he was on the right track or if there was something else he should do with his money.
“Dear Dave,” he wrote, according to KTAR News in Arizona. “I plan to buy another investment property for cash in the next year or two. Currently, I have $83,000 in a high-yield savings account at 4%.”
“My goal is to save another $50,000 to $70,000 in the coming months,” Brett continued. “For now, 4% is fine, but I want to make sure I’m maximizing my returns. Should I be doing something else with the money?”
Ramsay saw this as an example of a situation where the questioner was in a really good place. As for his line of thinking, there was little reason to welcome the element of risk into the equation.
He wrote: “Dear Brett.” “I like the way you do things. Right now, you can simply allocate money in the short term to a purchase a few months later. If you invest it, you might make more, but you also take more risk. If I were you, I’d park the cash.”
Then Ramsay got right to the point of what the secret sauce in the upcoming deal might be.
“Here’s the deal,” he wrote. “The money you’ll have to buy another property isn’t going to come from the return on investment. It’s going to come from putting the money in the account. The investment isn’t the secret sauce in this scenario — neither are you.”
Ramsay then crunched the numbers, imagining a hypothetical situation where Brett would attempt an investment strategy to increase his cash amount.
“If you invest the money and make 10% instead of 4% over a couple of months, let’s say that works out to about a 3% difference,” he wrote. “This is nothing in your case.”
“You’re not two thousand dollars away from doing a deal right now,” Ramsey added. “Your deal is a $150,000 deal. A return on your investment is not going to make that happen, or stop it from happening. Do you see what I’m saying?”
The radio host offered one last piece of advice.
“Just keep doing what you’ve been doing and stop the money,” Ramsey wrote. “That’s what I would do. Math geeks like us are always looking for things to fix investing. But sometimes the thing that fixes investing is you.”
“You are the one making the investment,” he added. “You’re the one putting the money into the account. So, in this case, don’t try to fix it. Just collect the money and do it.”
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