Transcription
I'm gonna get in at least a little bit of trouble for making this video, but I think it's important that I share with you my views on why I think you should stop listening to Dave Ramsey and Susie Orman. And I'm going to read you a quote that we're going to go over.
"If you're poor, you listen to Suzie Orman. If you're middle class, you listen to Dave Ramsey. But the rich think differently." This is from a Forbes article. We're going to get to that in a second.
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Okay. The article is from Forbes. It's called "The Rich Don't Listen to Susie Orman and Dave Ramsey." The author starts off saying the whole idea is that if you save, scrimp, and avoid spending your entire life, you can die a millionaire. And that didn't sit well with the author. He goes on to say, "The thought of handling handing the money I'd worked my entire life over to my children and grandchildren who'd likely blow it because they don't they didn't work hard to earn it. Sounded like a recipe uh for life for a life of misery to this person."
He goes on to say, "Dave Ramsey's advice is to live debt-free and debt in Dave's world is a bad thing. It means owing any on on any loan." In addition to thinking differently about money, the rich build all-star teams around themselves. And that was a game-piecing uh piece of advice for this author and his journey. I'm going to come back to that.
But in general, his point here is the aversion to debt. And that's kind of my um pushback on Dave Ramsey as well is I think he gives a lot of great advice. I think he I'm a fan of Dave's. Uh I think he really helps people save their first maybe $250,000, but I think his aversion to debt is maybe a little too extreme and it can it can steal from us the joy of enjoying the journey. Once you've learned how to save, once you've learned how to spend less than what you earn every year, once you've proven to yourself you can be responsible with debt, I think it's okay to have debt for something like a mortgage.
Um, I do agree with Dave on on new cars. The average new car is like $45,000 now, which is just an incredible increase since before the pandemic. The average new car loan is $750. And uh almost 20% of new car loans are for $1,000 a month or more. That's a lot a lot of money. So So Dave has a companion in his views on uh avoiding new car loans if you can.
But just avoiding debt in general and not having a credit card. You know what? If you've earned the discipline of paying off that credit card every month, it's nice to get the points. It's nice to get the cash back. Just make sure you're paying it off every month, which unfortunately many of us do not. And you know, full disclosure, there have been short periods of time in my life where I carried a a credit card balance.
Okay. Now, let's talk about uh Susie Orman. Um and for this, we're going to turn to a different article and that is uh by the Motley Fool and the title is "Susie Orman Says a $10 Million Nest Egg Is Chump Change. Is She Right?" And and here's the quote from Susie Orman: "2 million is nothing. It's nothing. It's pennies in in today's world to tell you the truth."
So, is she right? Is $2 million nothing? Let's let's look at the numbers because I you and I know $2 million is a heck of a lot more than nothing and it's a heck of a lot more than the vast majority of Americans have. This is according to the Survey of Consumer Finances from the Federal Reserve. And this shows how much Americans have saved for retirement. And you can see almost half of all Americans have zero dollars saved for retirement. Another 9% have have less than $10,000. From $10,000 to $50,000, it's another 13%. And from $50,000 to $100,000, it's another 7%. So in aggregate that's about 80% of America has less than $100,000 saved for retirement and they would love that $2 million that Zuzie Orman says is nothing.
Okay. Now it's important to note that there's a difference between how much you have saved for retirement. Those are 401(k)s, IRAs and what your net worth is. Your net worth is the value of all of your assets, including accounts that are in taxable accounts, and it's also the value of your home equity. And importantly, about 80% of us over the age of 60 own our own home, and about half of our net worth is in our home.
So, let's look at the net worth numbers. This again is from the Federal Reserve Survey of Consumer Finances, and let's look at the median net worth. Half of the people have more, half of the people have less. And you can see here 45 to 54 year olds have about $250,000 total net worth. 55 to 64, so this is when people are starting to think about retiring, have about $365,000. 65 to 74 year olds have about $410,000. And then in retirement, that goes down to about 1/3 of $1 million. So you can see somewhere between $365,000 and let's call it $410,000 is what people have their median net worth when they decide to pull the trigger and retire.
And the challenge I have with Suz's quote that $2 million is nothing. You know, yes, of course we we'd rather have $5 million instead of $500,000, but we do the best that we can. And I think Suz's quote about two million being nothing unfortunately and unnecessarily stokes fear in people. And this is from a Goldman Sachs survey and they say that 58% of people are worried that they're going to outlive their savings and and that causes people to to work years longer than they might have to and give up what I call the youth of their senior years. And that's really from the time you hit 55 until the age that you lose your health and you can easily go do things. You have health, you have energy, you have vitality, you have your mental acuity. And for some people, they need to continue working hard uh working more years. I'm not saying to retire before you have enough money to retire. But what I am saying is be thoughtful and deliberate about do you have enough money to retire?
And so how do you get there? How do you make sure that you have enough money to retire? One of the best ways is come up with a financial plan. This is uh again by Goldman Sachs and it shows that retired people uh that Goldman Sachs survey had about 25% more money if they had a written financial plan than their counterparts that did not have a written financial plan. That's a big big difference. Not only does it help you save more, but I think it gives you peace of mind because when you retire, what I saw is a lot of people unnecessarily sacrificed. They could have been spending more money or maybe retired sooner. So that was about three-quarters of my clients, but about 1/4 of my clients, probably not that much, less than that, but were unknowingly before they started working with me, putting their financial future at risk because they were spending too much. And if you don't have a written financial plan, those two feel real close to each other.
So work with a financial advisor to come up with a financial plan or uh if you want to do it yourself, use software designed to help you do that and to do a good job of that. The software I like is called Bolden. I like it because it's powerful, it's easy to use, and it's affordable. You can sign up for it at the link showing up on screen. If you use that link, you'll get a two-week free trial to the full Balden package and you'll be supporting the channel because I'm an affiliate of of Baldens.
Now, let's talk about that team aspect that the first Forbes article was talking about how the author of that said working on a team. And what this person meant was, you know, having somebody to make sure that they they had an estate plan, at least a will in place, some common trusts. There are there are things that you can do that are really a gift to your heirs that will make things go smoothly and make sure that the people and the causes that you care and love about make sure that all of that goes smoothly for them with as few headaches as possible. The reality is most of us are not going to have an estate tax issue. The current exemption, you can pass away with about $15 million per person uh and owe zero federal estate tax. So that's pretty high, but there's still good reasons to have that person.
I think there's also good reasons to have that confidant, uh the financial advisor by your side and also a good accountant because there are things that happen um when you're in retirement that that if you plan ahead can save you thousands of dollars, maybe tens of thousands of dollars in taxes and for some people even more than that. Again, work with an accountant, work with a financial advisor, or use software like Bolden. And also be thoughtful and deliberate about the age that you decide to retire. And that's why I made this video here, why waiting to 65 to retire might be a big mistake. Thanks for watching this video. Bye-bye.