What Happens When You Let Family Borrow Money (Hour 2)
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What should you consider before buying employer stock options?
Live from the headquarters of Ramsey Solutions, broadcasting from the pods moving and storage studio, it's the Ramsey Show, where debt is dumb, cash is king, and the paid-off home mortgage has taken the place of the BMW as the status symbol of choice. We help people build wealth, do work that they love, and create actual, real, amazing relationships. Dr. John Deloney, number one best-selling author of the book Own Your Past, Change Your Future, and host of the Dr. John Deloney Show, is my co-host today. The phone number, we'll talk about your life and your money right in front of you. The phone number is 888-825-5225. Jack is on the line. Jack is in Jacksonville, Florida. Hi, Jack, how are you?
Hey, how's it going, David? John, thanks for taking my call. Sure. What's up? Yeah, so I recently had a career change. In my previous employer, I vested about 7,800 privately held stock options to purchase. I vested $1,000 off when I purchased them at like a dollar a share.
How can converting a traditional IRA into a Roth benefit you?
Like I said, they are privately held. And so, yeah, I'm just looking for some advice as to whether we should purchase any or not. I just got married in February with my wife. And we don't have any debt. We have about $10,000 in our emergency savings. And we also have a sizable amount paid for down payment for a home we're currently renting. And, yeah, I just, like, want to know what the best option would be moving forward.
Okay. The way I answer questions on this show, Jack, after 30 years of doing this is if knowing what i know if i woke up in your shoes what i do and that's the way i look at it okay you're newly married you got 10 grand you got a house down payment and these are privately held shares uh do i invest in them okay everything in your life sounds normal except that that kind of stands out over here is weird You know? Yeah, yeah. That's an investment you would make if you had a million dollars, you'd been married 40 years, whatever, and if you wanted to have some play money, you would goof around with that. Okay? So a couple of issues I would have with it if I were in your shoes is, number one, it's single stocks.
Why is it not advisable to let family borrow money?
So you've got all of this money, basically all of your investment money at this point, tied up in a single company. So as it goes, so goes your entire portfolio. So that's called risk because you're not diversified. You're not spread out. Number one. Number two, it's probably hell, which means two things. We have no idea what's going to happen. Right. None whatsoever. It's a small operation or it's a big operation. But either way, you have very little transparency. You have very little control and you have very little liquidity. Once you own it, it's hard to get out of it a lot of times. And so even if I was going to buy single stocks, I wouldn't buy that one.
Yeah.
What are the risks of investing in single stocks?
The only reason I was concerned about it was, so we do have two Roth IRAs. I have one and my wife has one. We've maxed out the last two years. And then, yeah, I was talking to some friends and they're saying, you know, even if you buy 5,000 of them at $5,000 over the course of your entire investments for retirement, it's Yeah, I mean, it's a risk, right? So I'm not sure if that $5,000 would be a risk or if I should throw $1,000 in it. And then if they go public, the rate of return could be very lucrative.
And you could set $1,000 in the middle of the floor and set it on fire.
Yeah. That's the thing about Instagram, man, is you'll see these things roll up every once in a while. If you had invested in Tesla nine years ago, you would have $100 billion. What that kind of thinking doesn't tell you is how many people sat at their friend's brother's table with this new business idea that they invested and they lost everything. They lost $1,000, $5,000, $10,000 or whatever. There's way more of those than there are of the Teslas in the world.
So here's the thing about this situation, okay?
How can you effectively manage your emergency savings?
One of two things is going to happen. You're going to make a lot of money or you're going to lose all your money. There's probably no in-between. You're either going to put $5,000 in and get $25,000 out or you're going to put $5,000 in and say, bye.
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Chapters
8 chapters
1
What should you consider before buying employer stock options?
0:26–1:29
2
How can converting a traditional IRA into a Roth benefit you?
1:29–2:46
3
Why is it not advisable to let family borrow money?
2:46–3:32
4
What are the risks of investing in single stocks?
3:32–4:39
5
How can you effectively manage your emergency savings?
4:39–5:25
6
What factors should you consider when buying a truck after selling a home?
5:25–5:59
7
How do you create a solid financial plan as a newly married couple?
5:59–6:51
8
What are the benefits of having a budget in place?
6:51–40:11