5/23/2005

Advice from Nashville's leading Financial Aid Advisor Dave Ramsey

 
Dave Says
By Dave Ramsey
Author of:
Financial Peace and
The Total Money Makeover

"Savings for a small business?"

Dear Dave,

I’ve owned my own sales business for the last 10-12 years; selling to retailers. That business is fast evolving with retailers dropping like flies. I’ve been very fortunate. My wife and I are in our mid-forties, have our home and cars paid off and saved up about $750,000 in investments and cash. I see my business changing over the coming five years or so. I don’t expect my income to continue the way it has been.

Other than CDs, do you have any ideas of where I should leave my cash investments? I might like to pull some of that money to get into a different kind of business when this one has played out.

Charles in Nashville, TN



Dear Charles,

For any money you plan to leave there for fewer than five years, you don’t have many more options than regular savings, CDs or money market accounts. They don’t pay much in interest, but they’re safe.

If you’re going to leave the money alone for five years or more, I’d definitely put it into mutual funds. I’d split it between Growth, Growth & Income, International and a little bit of Aggressive Growth. You might even mix in a few index funds. A decent mutual fund can pay you an average return of 12-13%. Not necessarily in a one or two year period, but over a longer period, they’re a great investment tool.

Then, if you want to start using some of that money to get into a different type of business in five years or more down the road, you’ll have more money to work with and more to leave in your investments. You’ve asked what I would do if I were in your shoes, and this is it.

-Dave

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