I inherited over $400k and Dave Ramsey thinks the money will evaporate if I continue to make these mistakes

Money doesn’t change people. It makes them more of what they are. The messaging behind this saying has extra meaning in a recent episode on the Dave Ramsey Show. Dave received a call from a wife who recently inherited some money. Her spouse received a $115k AUD inheritance earlier, and she just got a $350k inheritance. 

The combined inheritance is a little over $400k, and she called Dave wondering how she should use the money. As the conversation continued, Dave realized that the couple was sitting on a lot of debt and had to change their money habits.

How Much Debt Does the Couple Have?

The wife briefly outlined what the couple owes. These are the highlights:

• House mortgage: $200k
• Business credit cards: $20k
• IRS repayment plan: $13k
• Auto loan: $4k

Anyone who has listened to Dave Ramsey enough knows that he immediately recommended paying off debt. He recommended starting with the IRS repayment plan, then covering the auto loan, and then tackling the business credit card debt.

While he’d normally suggest paying off the mortgage right away, Dave made an exception. He said that the couple should discuss their money to ensure they do not make the same mistakes that put them deep into debt. He was nervous about the likelihood that the couple would become financially disciplined just because they had a lot of money.

Build Your Retirement Portfolio with the Money You Would Put to the House

Once the couple has stuck with a budget for a few months and has committed to financial discipline, it then makes sense for them to pay off the mortgage. Then, the couple can invest the remaining funds into a good mutual fund or ETF. 

That’s how Dave suggested the couple approach their inheritance after paying off the other financial obligations. He then said that the couple can invest more money into their mutual fund or ETF each month since they no longer have to make monthly mortgage payments. 

It’s still possible for the couple to recover, especially with the inheritance. However, Dave encouraged the caller to make a promise that she would promise to never borrow money again and avoid repeating the same mistakes. Dave said the couple should do this to honor the people who left them money.

He also suggested the couple convert the $115k AUD into U.S. dollars. He said that he doesn’t know about the AUD. The couple also doesn’t know much about it and is only holding it, thinking that it might move favorably. They aren’t doing any research on the currency exchange rates, so with that context, Dave suggested they convert it to U.S. dollars so all of their wealth is stateside.

Don’t Fall Back into the Debt Cycle

Financial discipline is a muscle that you have to build over time. It won’t happen overnight for this couple, and that’s why Dave imposed guardrails, such as not using the money to pay off the mortgage right away.

The financial guru cautioned that if the couple pays off their debt right away, they may not learn any valuable lessons. Then, they risk falling into the same bad spending habits and falling deeper into debt. The risk of falling deeper into debt is that they won’t be saved by an inheritance next time.

The couple has been given a tremendous opportunity. Changing their mentality around money can ensure that the fruits of the opportunity last.