Dave Ramsey Advises Caller With $5 Million Net Worth To Put Money Into High-Yield Savings If Flipping Houses Isn't Bringing In 20% Profit

During an April 8 call on the "Dave Ramsey Show," Trisha from Jersey Shore, a divorced mother of two, asked how to generate a $200,000 annual income by leveraging her assets, including a fully paid-off home valued between $3.6 million and $4.1 million. 

With $760,000 in savings and a background in profitable house flipping, albeit challenged by recent economic conditions, Trisha inquired whether selling her home was the most advantageous path or if alternative strategies existed.

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Ramsey questioned the impact of adjusting to an annual income of $200,000, given her high-value assets and lifestyle. Trisha revealed her annual expenses range between $170,000 and $185,000, indicating careful consideration of her target income. 

Trisha suggested downsizing to a $1 million home and investing the rest of her money. Ramsey raised a concern about the potential disruption for her son, who might need to change school districts if they moved to a less expensive home. Trisha insisted it is possible to find a home in the district in that price range.

When asked what she did for work, Trisha said she used to flip properties but the market hasn't been ideal for that. Ramsey suggested that selling the home and downsizing could generate significantly more than the desired $200,000 yearly income.

Highlighting her success in flipping 17 properties without a loss, Ramsey probed the level of risk Trisha had encountered and discussed the financial prospects of continuing in the flipping business with a $2 million budget. Trisha estimated a profit range of $200,000 to $300,000 per flip, to which Ramsey emphasized the necessity of higher margins, cautioning that anything less than a consistent 20% profit margin may not justify the risks involved. 

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“If you’re not making 20% you need to be doing something else," Ramsey said. "You can't take that risk for 7% or 8%. Put it in a stinkin' highy-ield savings and not have to go through all this trouble taking the risk.” 

As of April, high-yield savings accounts (HYSAs) offer some of the most competitive interest rates for savers, with some institutions advertising annual percentage yields (APYs) of over 5%. These accounts are designed to provide a higher return on your savings compared to traditional savings accounts, often with no minimum balance requirements and low or no monthly fees. 

The best high-yield savings accounts for April can provide APYs up to 5.27%, which signifies a substantial increase in earning potential for deposited funds compared to standard savings accounts, which typically offer lower interest rates​.

These rates are variable and can change over time, influenced by the broader economic environment and the Federal Reserve’s actions. High-yield savings accounts are a secure place to keep your money. They are insured up to $250,000 by the Federal Deposit Insurance Corp. (FDIC) or the National Credit Union Administration (NCUA), depending on whether the account is held at a bank or a credit union. They offer a significantly higher return on savings without the risk associated with other investment vehicles, making them an attractive option for someone looking to generate income from their assets with minimal risk​.

Ramsey’s guidance offers a strategic blueprint tailored to Trisha’s circumstances, but people in similar positions should seek advice from a financial adviser. A personal financial adviser can provide customized advice that considers their complete financial situation, goals and risk tolerance. This kind of individualized guidance is crucial for navigating the decisions involved in leveraging assets, investing in real estate or seeking other avenues for generating income. 

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