dave says2 300KENTUCKY (2/23/14) – This week Dave discusses budgets and stock risk.

Dear Dave,

I went to medical school, and now I have $70,000 in debt. I just started a three-year residency making about $50,000 a year, while my wife makes $40,000. The student loans represent our only debt. Do you think we should be paying this off or investing in a Roth IRA?


Dear David,

If I were in your shoes, I’d work on paying down the student loans. That means you may never be in a Roth, but there are other things you can invest in and grow wealth.
I realize this may not seem right mathematically, but I don’t always make financial decisions based exclusively on math. Many times I do things based on changing money behaviors—stuff like paying off debts from smallest to largest because it actually works. Personal finance is 80 percent behavior, and only 20 percent head knowledge. So sometimes you have to go with what actually works best overall, in spite of what the technical math shows.

In your case, I think it’s going to be very valuable to have no student loans by the time you complete your residency. With three years to go, and living on a $90,000 a year income, you can do it. Then, when you come through the other side as a full-fledge doctor, you’ll have the great income and be sitting there debt-free. Not a bad place to be, right?
I understand the Roth seems like a pretty good idea right now, but my advice is to stick with becoming debt-free as quickly as possible. Once that’s done, you and your wife will be able to invest, save, and build wealth like crazy!


Dear Dave,

My wife started working at a pharmaceutical company that gave her a few thousand dollars’ worth of stock. In the last year that stock has doubled in value. We’ve considered buying more just to see how it does. What do you think about this?


Dear Robert,

I understand why you guys would be excited, but you’re still looking at a very risky proposition. Any stock that doubles its value in just one year is highly volatile. It’s very unusual when things like that happen, and the fact is, it could go down in value just a quickly.

I think you should be completely debt-free, except for your house, and have an emergency fund of three to six months of expenses in place before you start any outside investing. You should also make sure that 15 percent of your income is already going toward retirement.

I don’t mind you dabbling a little bit as long as all the other stuff is taken care of first. But I’d advise you to never put more than 10 percent of your nest egg into single stocks. If you’ve got $50,000 in a 401(k) right now, limit yourself to $5,000 in this area. That way, if the stock tanks and you lose it all, it’s only a small blip on the radar. You’ll still be financially intact and able to retire with dignity.

It would be fantastic if this stock went through the roof and you two made a ton of money. That would be awesome! But make sure you limit the potential for damage by limiting your exposure. Don’t risk the family farm, as they say, to make this play.


*Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: "Financial Peace", "More Than Enough", "The Total Money Makeover and EntreLeadership". His newest book, written with his daughter Rachel Cruze, is titled "Smart Money Smart Kids". It will be released April 22nd. The Dave Ramsey Show is heard by more than 6 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

Disclaimer: The content supplied by columnists and letters to the Editor on this site does not in any way, shape or form, implied or otherwise, necessarily express or suggest endorsement or support of any of such content, statement, or opinions therein. SurfKY News does not necessarily adhere to or endorse content provided by outside non-staff sources.

e-max.it: your social media marketing partner

LIKE SurfKY on Facebook - Click here to LIKE us now.

© Copyright 2015 SurfKY News Group, Inc. All rights reserved. This material may not be published, broadcast, or rewritten without permission. SurfKY News encourages you to share this story on social media.

Weather Sponsored by

1 DOW 16,472.37
+200.36 (1.23%)    
2 S&P 1,951.36
+27.54 (1.43%)    
3 NASDAQ 4,707.77
+80.69 (1.74%)    

In Other News...

MCCH Hosts Annual Breast Cancer Awareness Month Luncheon, Offers Mammogram Incentives in October

MURRAY, Ky. (10/4/15) — Murray-Calloway County Hospital will host its annual Breast Cancer Awareness luncheon at 11:30… Read More

Upcoming Events at Land Between the Lakes

KENTUCKY (10/2/15) — Land Between the Lakes offers a variety of fun programs for all ages and interests. Have you heard… Read More

Most Read This Week

September 30, 2015 10007

Dawson Woman Dead After Princeton Factory…

by SurfKY News
October 01, 2015 6713

UPDATE: Madisonville Woman Charged after Bank…

by Doreen Dennis, SurfKY News
September 29, 2015 5857

UPDATED: Witness Describes Crash at Dawson…

by Doreen Dennis, SurfKY News
September 28, 2015 4498

Woman Charged with Methamphetamine Possession…

by SurfKY News
September 30, 2015 4080

Four Arrested After Allegedly Exposing Children…

by SurfKY News

Most Read This Month

September 16, 2015 12056

Mining Accident Fatality - Update

by Doreen Dennis, SurfKY News
September 30, 2015 10007

Dawson Woman Dead After Princeton Factory…

by SurfKY News

Stories Trending Now

October 03, 2015 1113

Happenings, Meetings Listed for Following Week

by Tammy Holloway, SurfKY News
October 03, 2015 806

Chemotherapy: New Advances, A New Age

by KET
October 03, 2015 769

Hopkins District Court Fines Handed Down

by SurfKY News
October 04, 2015 692

Learning More About Childhood Cancer

by KET
October 03, 2015 559

Proposed Restaurant Tax Would Promote Tourism,…

by Doreen Dennis, SurfKY News
October 03, 2015 557

Weather Folklore - Persimmon Seeds, Woolly Worms

by SurfKY News
October 03, 2015 551

ColorFall Kicks off Fall Color Season in Kentucky

by SurfKY News
October 03, 2015 397

Hooked on Science - 'Singing Rod'

by SurfKY News
October 04, 2015 328

Dave Says - Oct. 4, 2015

by SurfKY News
October 04, 2015 311

Outdoor Truths - Oct. 4, 2015

by SurfKY News