During the latest episode of The Ramsey Show (1), Diane, 57, told host Dave Ramsey that after selling the business with her husband for $1.2 million, she’s sitting on a whopping $600,000 nest egg.
On paper, Diane looks like she’s in good financial shape. Without a personal loan and an additional $250,000 in retirement savings, he has approximately $850,000 in assets under his name. For someone nearing retirement, this is a solid cushion.
But despite her considerable savings, Diane admits it’s not all roses. After selling the business her husband ran, the couple was given “a huge sum” – half of which was to pay off “some unexpected unknown debts”.
“You’re hiding,” replied Coast Jade Warshaw.
With some prodding from the host, it was revealed that her husband had a gambling problem that was draining him of about $3,600 a month in extra income from rent and Social Security. As a result, the said $850,000 Diane is now in her name for safekeeping.
So with that in mind, Diane is looking for the best way to invest her money for a comfortable retirement. As a start, she hoped to invest $125,000 in a new franchise, despite having no business experience.
“I’m very confident and excited about it and I expect it to be very successful and I have a family that will stand behind me and support me,” she shared.
But Ramsey and Warshaw had some wise words about how to make the most of her remaining funds.
While it is not clear why Diane’s husband gambles, sometimes the source of income can affect how a person spends.
According to a holistic view of finance (2), when people experience a financial loss – whether from selling a business, an inheritance, or another large payment – it can motivate the recipient of the funds to spend differently than the income received. “The way we organize money also affects behavior: We save more when something feels like a ‘win’ and spend more when it feels like a bonus,” says the financial planning and investment management firm. And sometimes it brings with it a high risk of forced costs.
According to FINRA’s Investor Education Foundation (3), people between the ages of 58 and 101 can also be especially confident when it comes to making big financial decisions, such as investing. “Financial literacy rates among all Americans are alarmingly low, but among older investors, our research suggests the challenges are even greater,” Gary Walsh, director of the FINRA Foundation, said in the report.
And Dave Ramsey didn’t believe the real threat to her future was her husband’s gambling habit and the temptation to cash in on a new business he had no experience running.
“It’s hard to fill a hole while someone is digging down,” he said. She warned her that even strong savings can quickly disappear under the pressures of a new job and addiction.
Ramsey urged Diane to save her money and suggested putting most of her savings into diversified mutual funds, aiming for a long-term average return of about 10%.
Ramsey recommends letting Diane do the heavy lifting on time and consistency. And thanks to compound growth, her money could double roughly every seven years, making Diane’s $850,000 in cash significantly more, according to Ramsey.
As for Diane’s business idea, Ramsay advised that optimism was not enough to sustain the business, especially since she had no previous experience.
The Business Institute (4) backs up how risky such investments can be with 2024 data from the US Bureau of Labor Statistics (5), showing that 49% of new businesses do not survive their first five years. This failure rate rises to 65% when looking at the first 10 years, highlighting how high the risks can be.
And for Diane, the stakes are even higher. With no track record, Ramsey warned that overconfidence could turn the $125,000 experiment into a huge financial drain.
Read more: 5 Essential Money Moves to Make When You Save $50,000
Ramsey created a framework to protect Diane from the two biggest dangers in her life: overconfidence and instability at home. Here’s what he recommends:
The bulk of Diane’s savings should remain in long-term, diversified investments and be completely separate from business and her husband’s expenses.
This advice is consistent with guidance from the US Securities and Exchange Commission (6), which emphasizes that money set aside for retirement should be put into carefully researched investments. Once that capital is lost, there is little time to rebuild, especially for older investors. In other words, this is not the time for risky bets – in business or elsewhere.
If the franchise costs $125,000, Ramsey told Diane, that should be her limit.
Ramsey’s warning refers to the broad guideline outlined by the Commodity Futures Trading Commission (7) that you should not tempt yourself to lose more money than you can afford to lose.
One of the most important factors in Diane’s situation is to keep everything separate because when gambling is in the picture, money needs keepers.
Experts, including the Council on Responsible Gambling (8), say to protect your assets by setting up separate bank accounts and consider changing access to mortgages and other assets so that those who gamble do not have access to them.
Diane’s situation may seem extreme, but it’s not unusual for people who come into money unexpectedly to struggle with what to do. Smart moves are slow, protecting funds and limiting risk to help preserve and build wealth.
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The Ramsay Show (1); Full View Finance (2); FINRA Investor Education Foundation (3); Business Institute (4); US Bureau of Labor Statistics (5); United States Securities and Exchange Commission (6); Commodity Futures Trading Commission (7); Responsible Gambling Council (8)
This article provides information only and should not be used as advice. It is provided without warranty of any kind.
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