Women's Money Wisdom

Episode 285: Your Money Questions, Answered: Roths, Dave Ramsey, Emergency Funds & More

• Melissa Joy, CFP® • Season 4 • Episode 285

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What do Roth accounts, Dave Ramsey, and emergency funds have in common? They all came up when Melissa Joy, CFP®, opened the floor to your questions.

At the Dexter Summer Festival, Melissa asked community members to submit their burning money questions—and now she’s answering them in this special mailbag episode. From investment strategies to budgeting hacks, she covers the practical, the personal, and the myths worth busting.

💡 Topics Covered:

  • Roth IRA vs. Roth 401(k)—which makes more sense for you?
  • The pros and cons of Dave Ramsey’s advice
  • Smart strategies for building an emergency fund that lasts
  • Practical (and realistic) ways to cut expenses
  • Mistakes new investors often make—and how to avoid them
  • Whether you should pay off debt or save for retirement (spoiler: it’s not either/or)

If you’ve ever wondered what a CERTIFIED FINANCIAL PLANNER™ really thinks about these topics—or you’ve been waiting to hear your own question answered—this is the episode to tune in.

The previous presentation by PEARL PLANNING was intended for general information purposes only. No portion of the presentation serves as the receipt of, or as a substitute for, personalized investment advice from PEARL PLANNING or any other investment professional of your choosing. Different types of investments involve varying degrees of risk, and it should not be assumed that future performance of any specific investment or investment strategy, or any non-investment related or planning services, discussion or content, will be profitable, be suitable for your portfolio or individual situation, or prove successful. Neither PEARL PLANNING’s investment adviser registration status, nor any amount of prior experience or success, should be construed that a certain level of results or satisfaction will be achieved if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. PEARL PLANNING is neither a law firm nor accounting firm, and no portion of its services should be construed as legal or accounting advice. No portion of the video content should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if PEARL PLANNING is engaged, or continues to be engaged, to provide investment advisory services. A copy of PEARL PLANNING’s current written disclosure Brochure discussing our advisory services and fees is available upon request or at https:...

Speaker 1:

Welcome to the Women's Money Wisdom Podcast. I'm Melissa Joy, a certified financial planner and the founder of Pearl Planning. My goal is to help you streamline and organize your finances, navigate big money decisions with confidence and be strategic in order to grow your wealth. As a woman, you work hard for your money and I'm here to help you make the most of it. Now let's get into the show.

Speaker 1:

Welcome back to the Women's Money Wisdom Podcast. We've got a fun episode this week. We're going to do a mailbag with some community questions. We recently participated in the Dexter Summer Festival which was put on by the Chamber of Commerce, which, if you're local as I know some of you are is a great community event, a wonderful way to support the community as a business, and we had a little booth there where we did some giveaways for kids. But we also asked people to write down their money questions and we said we would be answering them in the podcast. So, as promised, we're going to talk about money questions and we said we would be answering them in the podcast. So, as promised, we're going to talk about money questions today.

Speaker 1:

But as I get started in that conversation, I am so reminded, through encouraging feedback, of you listeners who sometimes tell me that, hey, I'm listening to the podcast, I'm enjoying it how important it is for us to seek out female voices, the voices of women, when it comes to money conversations. Time and again, whether you're studying interactions of female Federal Reserve governors, or who makes money decisions in households, who talks about money in households, women just do it less, and I think, like having discussions with your friends, with your kids, with your parents and loved ones about money, encouraging other people you know, who are women, to be part of the conversation is so critical and important, and I'm just constantly reminded of how we need to make space for money conversations in order to control outcomes and possibilities for ourselves and others. So I'm constantly reminded of the power and the importance of this podcast, and I'm going to be tackling six money questions that we got from the festival, and I hope that you'll weigh in with your own money questions. Feel free to send them to me at melissapearlplancom in the future so we can have more of these Q&A sessions in future episodes. So the first question we got was should I invest in my Roth 401k or my regular Roth IRA? And, first of all, what a layup, because this question came through before we posted our episode on all about Roths. But please refer back to that episode if you want 30 minutes of conversation on what the heck is a Roth and how do they work, including Roth IRAs as well as Roth 401ks. But here's some of my top level bullet points in addition to why don't you listen to a recent episode.

Speaker 1:

First, if you are offered a match in your 401k plan whether you plan to participate with a traditional contribution which gives you a tax break in real time or during the current year, or a contribution that's a Roth contribution where you don't get a tax break but you get your money to grow tax-free and you can take it out tax-free do get your match. So a lot of employers give a match between two and four percent. Some employers like the biggest employer in my neck of the woods University of Michigan, like the biggest employer in my neck of the woods University of Michigan is the biggest employer in Washington County they give a 10% match. If you put in 5%, do get that match. So I wouldn't have you give up the employer match because that's money that you would not otherwise have.

Speaker 1:

Roth 401ks are great if your income is above the limit to be able to contribute to a Roth IRA, and in 2025, that income limit for a single filer is $150,000, and it starts to go away for married filing jointly at $236,000. So if you're above that income limit, $36,000. So if you're above that income limit, putting money into your 401k in Roth form may make more sense, because there's no income limits on the Roth 401k. You may care about investment choices, so you likely have a more limited menu of investment choices in your 401k than you do in your IRA, although, I will tell you, I always consider the amount that you're allowed to save as much more important than the list of investments, because there's often low-cost investment options that give you access to things like the S&P 500. Also, though, roth IRAs have more withdrawal flexibility than 401ks, so when you put money into a Roth, you can get the money that you originally put in tax-free before age 59 and a half, as long as it's been in a certain amount of time, and that is not the case in your 401k, where there may be taxes or penalties for all aspects that you've put in. So that's another, you know, kind of food for thought.

Speaker 1:

It gets complicated when you're deciding not only where to put your money, but whether you want a tax break now or later and you're juggling other things. I think one of the things that I found as to the value of a financial planner is that as things get more complicated, then our value goes up because you're juggling and things aren't just binary. So that's something to keep in mind is, if you have that choice, you have more money that you're able to invest, but you're not sure where it should go. You're kind of getting to that tipping point where cash is piling up. That's a great time to reach out to a financial professional to help kind of sort through the mess and the chaos of a more complex financial life.

Speaker 1:

Ok, next question what do you think of Dave Ramsey? Well, I and many financial planners have a lot of thoughts about Dave Ramsey. He is, first of all, he and his brand are kind of the first rungs of building their financial lives, especially when you're challenged by debt. You know he's no nonsense and really hates things like certainly credit card debt, which most financial planners do, but all sorts of debt, student loan debt, et cetera. So I find that his advice is more approachable than you know kind of how to grow rich for people who are really in the fundamentals of building their basic foundation of their financial life. I also just happen to be on the algorithm when I'm on social media where I see some of you know kind of the interview style call in shows, where people call in with their money, questions and problems, and I find myself agreeing with the advice that is given quite a bit of the time. But there's some areas that many financial planners, including myself, don't love as much about.

Speaker 1:

Dave Ramsey general advice. Oftentimes that advice is to, in my opinion, kind of black and white and especially when it comes to debt, the advice can often be very just one-sided, like you just absolutely have to pay off debt first. I find mortgage debt to be less offensive than credit card debt. I also, you know, understand why people would choose to have and use borrowing in order to kind of leverage their financial success in some cases. So kind of there's good debt and bad debt, and one piece of advice that I heard recently or was reminded of by another financial planner, slash financial influencer, was advice to forego getting your 401k match, which I just mentioned was so important, in order to pay down debt, and I just would not give similar advice and in so many ways. The things that modern families and individuals are juggling when it comes to making financial decisions are just not as easy as get all your debt paid off and then start the rest of your life. Like the saving and investing assumptions on financial returns, dave Ramsey has what I would consider to be impractical assumptions, sometimes assuming that the stock market will go up 12, 13, 14, 15 percent, even really relying on active investment management and also withdrawal rates that are quite high. All of these things are not kind of where I would start from, based on historical data and another area that it's not uncommon for certified financial planners like myself to have some quibbles with. So there are some thoughts that I think are fit for publishing on pros and cons of advice from Dave Ramsey. I think really a lot of the most successful personal financial brands have made things more black and white than maybe customized individual advice often is Susie Orman would be another example, ramit Sethi as well where that is a brand builder that builds your audience, that having those black and white rules really helps to tell your story and spread your messaging, and so I don't find it surprising that you know I see the world in a lot more grays in many cases than some of the kind of biggest brands in personal finance.

Speaker 1:

Okay, next question what's the best way to build an emergency fund? Well, first of all, I just want to acknowledge to everybody that has the ambition to build an emergency fund how difficult it can be to get started. I've been there myself. I went through most of my 20s and some of my 30s with pretty much a bank account that went up and down based on pay periods, every other week. You know it would get filled up, but I never really walked around with enough money to, you know, handle a major car expense or home repair or something like that. So just know that. I've been there.

Speaker 1:

First of all, debt is your enemy. So, speaking of Dave Ramsey and debt, if you are just constantly, you know, kind of paying off big chunks of debt and then having it come back again because you don't have that emergency reserves, you really need a debt management plan and a plan to pay off debt in addition to a plan to build an emergency reserve. So do not ignore that aspect. I would tell you to set specific, measurable, achievable, timely goals, those smart goals, and be very realistic about them. So instead of saying I want to have $10,000 at the end of the year, say, can I get to $500 in a set-aside account? That's difficult to get to by the end of a month or two months. So start very slowly because just like there's a debt snowball where you can pay off either your smallest debt or your highest interest rate debt and then go to the next, the same goes. I really like incremental steps when it comes to goals for emergency reserves.

Speaker 1:

Make that money difficult to touch. So put it in a segregated account. Even sometimes for clients I work with, we'll put it in an account that we manage. So we're not going to judge you when you call and ask for money from that account. But it makes it more difficult to just kind of rely on, for you know your grocery bills and things like that Also pay that account first. So set aside a portion maybe five or 10%, of a paycheck. That's a direct deposit into that emergency reserves accounts. And remember, once you have that emergency reserve built, it is not untouchable. It is there for emergencies. It's not there for every week. It's not there to be emptied at the end of every month and then rebuilt, you know in your first paycheck and then you know merry-go-round. But do remember that it is kosher to use your emergency fund for emergencies, so it's not untouchable, it's just meant to not be used all the time.

Speaker 1:

Okay, next question what are some practical ways to cut expenses? Gosh, I hate budgeting. So if you're sitting there just hating budgeting yourself, I get it. But first of all, I would be frank in conversation with your entire family, because sometimes I find people that have struggles, or friend groups. I should say, when you have struggles with keeping your spending in check, it may be because of other people's expectations. Maybe you're a single mom with kids that don't know the word budget and you don't want to make them feel bad knowing that you just don't have enough to do everything that is on everyone's priority list. Or perhaps your friend group has higher expectations for spending than you do. Or you want to Be frank and share in your goals so that you aren't beholden to. You know the impacts of your relationships and hopefully people can be both supportive and on your side in terms of this challenge.

Speaker 1:

Share costs so carpool to work. I had a roommate for all of my 20s and some of my 30s as well. Look for things where you can get access to things but share in costs, meal plan and prep, so that you aren't constantly you know for the youngest generation door dashing away your savings. Reduce subscriptions in so many cases you may sign up for something that you know you're going to use, but you signed up for so many things that just at the beginning of the month you're already over committed to things that you may use less than you intended or less than you used to. And then, finally, I always encourage people to also consider that not only do you sometimes you need to focus on spending less, but also earning more can be really important. So focus on your human capital. Really consider managing both your career, your earning power, your results over time when it comes to your job and how you're compensated. That is just as important as keeping your expenses in check. And it's really difficult to beat inflation if both your control over your cash flow is both how it comes in and how it goes out. So keep that in mind as well.

Speaker 1:

Okay, next question what are some common mistakes for new investors? Well, first of all, just kudos for those young investors who are getting started or not so young investors who are just getting started. Easier than ever For younger people, there's so many people using kind of small investor apps like Robinhood or other easy apps to use on their phone. Even my kids have a Greenlight app which has an investing component. But with those apps comes gamification. So I would say one of the most difficult lessons is that investing is a long-term game, not a short-term game, but when things have kind of been gamified to be like how much money did you make today? Or you know how easy is it is to take a swing at an investment that maybe is a meme stock or something like that, you know, crypto exchanges trade 24-7.

Speaker 1:

I would encourage people to keep in mind that you know saving for retirement and long-term goals is a much less perhaps rewarding and more boring investment strategy. But do not think of investing like it's gambling. Don't think of it as what you made this week. Think about what you're going to make this year and or over time. I often find that people invest without a knowledge of taxes and how taxes work, and also they kind of invest in what they understand or know. So you know they may buy Roblox because they were familiar with it playing games recently, or the retail store where they go shopping most frequently or love to shop and I think, like you know, kind of boring. More diversified passive index strategies have better investing legs and are better to learn about more quickly. Although there's absolutely no shame in kind of stubbing your toe as an early investor and oftentimes you know the risks are somewhat mitigated because you are starting out with, you know, just a little excess fund money I would encourage people to not feel like they need the most exotic perfect stock pick, but just go the old boring route and participate in your company's retirement plan and, like I said, invest in those strategies that may have low cost and high diversification, like index investing.

Speaker 1:

Okay, last question Hopefully you've enjoyed this Q&A session and we'd love to do more mailbag in the future. Should I pay off debt or should I save for retirement? Well, neither is a bad thing and both are so important. I think you can pay off bad debt and build an emergency reserve kind of at the same time. It becomes really important when you have that bad either credit card debt or buy now, pay later debt to both get your house in order so you don't have to go into another loan cycle, as well as get rid of the bad stuff. Do not lose your employer match, as I've already mentioned in this episode and don't think of things as only black and white.

Speaker 1:

You do not have to, for example, have your house paid off on the day that you retire. I know that that is a common myth and certainly there are some people. If you are only on a fixed income and you didn't have any retirement assets saved, then, yes, that might be the case that you need to just go bare bones in terms of other bills. But there are so many people where having a mortgage especially if you got that mortgage when there were very, very low interest rates absolutely makes sense, even into retirement, because you've created an income that's sustainable, that can help you pay for things. Certainly, this isn't blanket advice, because my whole mantra is let's talk more about money, but everything is very personal and specific to your approach, your perspective, and if you said, to my dying day, I do not want a mortgage on the day I retire, I would say cool, that's good, we can work with that.

Speaker 1:

I just know there's so many people that just take you know, kind of blanket binary internet advice and apply it to their lives without some consideration, context for where you sit and what your personal circumstances are. So should you pay off debt or save for retirement. In many, if not most, cases, the answer is yes to both, but do, if you find yourself really struggling with these challenges, acknowledge that you're not alone and look for some personalized advice so that you can find what's the best fit for yourself, your personality and your circumstances. Thank you, guys, so much for listening. I always appreciate feedback and would love to hear from more of you about the questions that you have. Let's keep it fresh and keep the communication lines open and until our next episode, have a great week.

Speaker 2:

Thank you for listening to the Women's Money Wisdom Podcast. If you found value in this episode, the best way that you can support the podcast is to forward an episode to a friend or leave a review. Go to proplancom and the podcast link to get all the resources and links mentioned. This presentation by Pro Planning is intended for general information purposes only. No portion of this presentation serves as a receipt of or a substitute for personal investment advice from Pearl Planning or any other investment professional of your choosing.

Speaker 2:

Copies of Pearl Planning's current rent and disclosure brochure and form CRS discussing our advisory services and fees are available upon request or on our website platform at pearlplancom. The information that we share is meant to educate and inspire, not serve as personalized financial advice. Everyone's situation is unique, so be sure to consult with your own financial professional for guidance that fits your life. And just so you know, the opinions shared in this podcast are Melissa's own and those of her guests. They don't necessarily represent any organizations with which Melissa is affiliated. For more important disclosures, please go to our webpage at proplancom.

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