The Rachel Cruze Show - 10 Mistakes That Keep You in Debt (PLUS How to Make Christmas Extra Special)

Episode Date: December 19, 2022

’Tis the season . . . to be smart with money. First, we’ll cover 10 mistakes that can take a huge toll on your debt payoff (avoid these at all costs), and then I’ll go over a few ideas for affordable ways to make Christmas extra special this year!   In this episode: ·      10 Mistakes That Can Derail Your Debt Payoff ·      4 Cheap Ideas I Use to Make Christmas Extra Special   Helpful Resources: Christian Healthcare Ministries Financial Peace University EveryDollar                                                 Sponsors pay the producer of this show, The Lampo Group, LLC, advertising fees for mentioning their services or products during programming. Advertising fees are not based upon or otherwise tied to any product sale or business transacted between any consumer or sponsor. The following sponsors have paid for the programming you are viewing: Christian Healthcare Ministries.   Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

I want you out of debt, stopping everything else and putting all of your money focused on one goal should be the goal. Nothing else. So people are like funding this and this and over here and here and then putting any extra they have towards their debt. Stop everything. Hey guys, welcome to this episode of The Rachel Cruz Show. I'm so glad that you're here. So in this episode, we're going to talk about mistakes that keep you in debt and how to make Christmas extra special this year. But first, let's talk about 10 mistakes that people make when paying off debt. Take a listen. So listen, I know there's a lot of buzz going around right now in, like, quick and easy ways to pay off your debt and clean up your debt.

But listen, if it sounds too good to be true, it probably is. Whether it's someone on TikTok or a commercial you see on TV, people are advertising all kinds of things. But you need to know that paying off debt, it's never going to be easy. Okay? so if someone is preaching easy to you, it's probably not true. But the great thing about paying off debt is that it does give you freedom. Freedom of not owing anyone anything. And that is so, so worth it.

Plus, your debt payoff doesn't have to take forever or be very complicated, especially if you're using what we call the debt snowball. It's a very simple way to understand how to pay off debt. Yes, it's a marathon. It's a journey. But on average, people are doing an 18 to 20. four months paying off all of their debt but their house. So in order for you to have this focused progress, I want you to steer clear of making these 10 common mistakes. All right, the first

common mistake when it comes to paying off debt is debt consolidation. Listen, this is basically getting a loan that combines all of your debts into one single payment. Now, I know that may seem like, oh my gosh, that kind of sounds like a good idea because if I have a lower interest rate, or maybe I can't keep up with everything, and so it puts it all together in one. But actually, statistically, it increases the lifespan of your loans, meaning you're going to be in debt longer. So here's the deal. Getting out of debt, it is not a math problem about, like, getting a lower interest rate or doing this or that, that, it is about behavior change. And when you pay off that smallest debt, which is what we teach, paying it off first,

and actually having them divided up and knocking them out helps the progress, because you are understanding and feeling and experiencing all of those wins. The next mistake is to avoid a debt settlement. So this is how it works. Companies out there will be like, hey, pay us a lot of money, and we can settle your debt for you and negotiate with the creditors and all of this, and it's going to be great. But most of the time, they don't end up doing the work,

and they take your money and you're done. Like it sucks. This is some of the worst companies out there. So listen, you're the one that can pay off your debt. You don't need to hire a company to do it for you or to promise that they're going to settle your debt, all this, no, you can do it. Now, you can do debt settlement,

especially if you go into collections. A lot of people do this with medical debt. So you yourself can actually go and settle sometimes pennies on the dollar, depending on what the loan is and when it was, but you don't have to pay a company to do that. You can do that. All right, next step are 401K loans. You guys never borrow money from your 401K.

Never. And people will do this to pay off their debt. They take money from their borrow from their 401k and pay off their debt. Listen, you can get hit with tons of penalties, tons of fees and taxes when you withdraw that money. And here's the deal. If you leave your job, if you quit, if you get fired, you have to pay it back. And the IRS says that you have to pay it back by tax day.

Like on April 15th of the next year, you have to have all of that loan, all that cash. So it is a huge risk. don't do it. Plus, you want your money in your 401k to be building on itself and actually making money instead of taking it out and borrowing from it. All right, another huge mistake people make when paying off their debt is they pay off the highest interest rate first. Now, again, like I said earlier, paying off debt isn't about math. If we were doing math, yeah, that does make sense. I get that, get rid of the highest interest rate first. But that's not the problem. Math isn't the issue with debt. getting out of debt and actually knowing that you have hope to live a debt-free life

and to actually work your way out of debt, that's the key. And by doing that is by using the debt snowball, if we talked about earlier, where you list out all of your debts from smallest amount to largest amount, regardless of the interest rate, pay minimum payments on everything, and you pay off that smallest one first. That is the debt snowball, and that is the best, most efficient way to pay off debt versus the highest interest rate first. The next mistake that I hear a lot of people make is getting a HELOC, a home equity line of credit

to use to pay off their debt. But here's the problem is you're borrowing money, you're going into debt, basically, because you're taking equity from your house and borrowing against your house to go and put towards other debt. And it's just not a smart idea. We're not going to go get out of debt by going into debt over here. So, not good. Nix it. And here's the deal, too.

When you borrow against your house, you're risking your house. that if you can't pay the loan on time, no, no, no, no, no. All right, the next mistake that keeps coming up when you're paying off your debt is pretty simple. People don't change their lifestyle. They just stay where they are. They make no other changes. So listen, if you want to get out of debt, you have to change up what you've been doing. As Dave Ramsey always says, you can wander your way into debt, but you cannot wonder your way out.

You have to really, really sacrifice you guys. is where you're going to see a lot of movement. So if you've been living the life, you've always been living, and then trying to get on debt on top of that, the margin that you have or may not have right now is the only thing extra going towards your debt. But if you cut your lifestyle, that's going to give you more money. It's going to free up money within the month

to throw out your debt to get out of debt that much faster. So cutting lifestyle is really important. And then also how you make money, your income is important too. So getting your income up, whether that's taking a different job, asking for a raise, taking on some side hustles, anything around there that's going to bring in more money is going to help you get out of debt that much faster. Another mistake that people make when getting out of debt is that they keep investing. Yes, you heard me right. It is a mistake. People are like, wait, no, what? You should be investing

and getting out of debt. But listen, I want you out of debt so bad, like so, so bad, that stopping everything else and putting all of your money focused on one goal should be the goal. Nothing else. So people are like funding this and this and over here and here. And then putting any extra they have towards their debt. Stop everything, okay? And you're going to pause it. I'm not saying to never fund your 401K.

I want you to get to that very quickly and soon. But taking a few years to pause is not going to be detrimental, okay? Because when you get out of debt, you're going to free up your income to have even more to invest. So not only you're going to have peace of mind. by not owing anyone anything, but you're actually have more income to use to invest and make up that money. So once you're out of debt, then you can invest 15% of your income into retirement,

which will include your 401K. All right, this next mistake may kind of sound strange, but it is a mistake. The mistake is that people stop giving when paying off debt. Giving needs to be a part of your financial journey regardless of where you're at, you guys. And I always tell people, give a little until you can give a lot.

Giving does something to you even in this process, okay? So living with an open hand creates this habit within you that when you're out of debt and you build wealth and you start winning with money, that habit is just going to extend.

So I get where it's counterintuitive and you're like, I'm trying to take as much money as possible to get out of debt when I'm giving. That's not going towards my debt. But the character of who you are is the process as well.

Okay? And so I don't want you to miss out. on that giving, not just for you and for the other people, but again, it does something to your heart and to your soul when you give. All right, you guys, this mistake is a no-brainer, but I've got to say it, credit card balance transfers. So this is, again, where your credit cards, you go and transfer all your credit card to a lower interest rate credit card. So moving your debt around, it's not going to do anything. Okay, so sure, mathematically, I understand. You're like, yeah, it's a lower interest rate. and if you do that, like, it's not going to keep you from getting out of debt.

But I don't want you to think these things are a solution, okay? The solution is you. You're the one that's going to be able to do it, which leads me into the last mistake, is waiting on someone else to pay off your debt. Oh, yeah, I hear you, student loan forgiveness. I hear you. So listen, waiting around and letting other people,

especially people in D.C. to clean up, you know, your situation and your money and your debt, you're going to be waiting a really long time. You're going to be waiting a really long time. Now, can all that go through and can it help you if you apply for it and all of it? Yeah, absolutely. So it's not a moral thing. But the other part is like, listen, you can do it.

And I would not wait around because we don't know. We don't know what's going to happen. We don't know if people are going to actually pay off the debt for you. We don't know. But what we do know is that you can do it. That's what we know, is that you can do it. When you have that belief in yourself and you, you actually know and start making progress towards paying it off, it's like, oh, you put the destiny

back in your hands versus someone else. So there's something powerful about being proactive and taking initiative and saying, I'm going to do with this myself because it puts you in control of your life versus someone else. Now, you can avoid making all of these mistakes while paying off your debt, but without the right plan, it can be hard to make progress and even harder to get yourself from going back into debt. So with Financial Peace University, you're going to learn the proven plan to getting out of debt. And this is a course that has helped millions of people take control of their money and say goodbye to debt for good. And so it's an incredible course to go through. It gives you the roadmap, basically, of how to deal with your money. And it gives you

the roadmap to debt freedom, which again can be tough. And sometimes it's just that encouragement you need to say, hey, I can do this. Check out Financial Beach University. Make sure to click the link in the description. All right, if you have a friend who is paying off debt, make sure to send them to encourage them and to show them the right way to do it. That is fastest and most efficient.

Christmas, it's almost here, people, days away. Can you believe it? I know we say it every year, but I just cannot believe that it's here. Just take it in for a second. take it in because usually we don't take it in and we just keep busy with our to-do list and doing this and this and this and then Christmas morning rolls around. We're exhausted, out of energy, and then we keep on moving along. So listen, I want to help you create a few

just memorable moments that are very simple, doesn't have to cost you a lot or at all, to just give a little bit of, I don't know, fun for your Christmas morning if you need some ideas. So here are four cheap ideas that I use to make Christmas morning extra special. The first one doesn't cost you anything, but it is a tradition around the cruise home, my husband's family, and the Ramses, my family. We all do it. So it was great when we got married and I was like, I want to do this. He was like, we always do that.

I'm like, that's great. And that is everyone opens up one gift at a time. I know. My kids, they think it is so annoying. But we make them do it because, number one, I want everyone else to see what everyone else gets. So it's like, okay, let's just take our time. And, you know, Amelia goes, and everyone sees what I'm not. God, that's so exciting.

And then Caroline's so excited to open hers. What does Caroline get? Charles, this is kind of the first year. He's going to semi-undersee on what's happening. So he'll get that experience. And then we all go around Winston and I don't really have much on Christmas morning. It's mostly for the kids. But we have fun doing it.

And here's the other perk. It makes Christmas morning go that much longer. because it can all be done within like eight minutes by the time they open up everything and they're done. So it extends the morning a little bit. It allows for a little bit of patience and excitement for the other kid, which I appreciate too. So that's one of my favorite things that we do. The next one is to have a special food on Christmas morning. So please don't like picture like this elaborate breakfast. I mean, if that's what you do, good for you. But like, it doesn't have to be that. It's just one or two things that your kids just love that you make.

So again, it can even be from a can, like simon rolls. That's what my kids always want. They always want, cinnamon rolls. Eggs, bacon, and cinnamon rolls. And so we always have kind of their favorite thing. You know, again, I don't want to spend a lot of time

cooking on Christmas morning, so I either pre-make stuff or do something like cinnamon rolls from a can. It makes it very easy. Or we give them a treat and let them drink hot chocolate while we sip our coffee. But again, just a little food thing I always love on Christmas morning. So whether it's peppermints, hot chocolates, a fun breakfast food, just do it, and I promise it just makes it that much more special. Okay, for those of you that have little kids, here is another way to make Christmas morning extra fun,

and that's just to create little games that help you on Christmas morning. So whether it's like, this is what I do with my kids. We're like, okay, we're set a timer and see how much wrapping paper we can pick up in three minutes. And we, you know, say, Alexa, set timer for three minutes. or maybe it's like, okay, we're going to set four minutes on the clock and let's see how many Christmas gifts we can take up and put back in everyone's room. We're in the playroom and get the living room cleaned up and like all of that. Because I don't know about you, but by like two o'clock on Christmas morning, I'm like, or Christmas afternoon, it's like, okay, there's like stuff everywhere. And I kind of more like feel a little in control.

So like, let's at least pick up the wrapping paper. And then here's like another like if you are really really great is you can take the notes. icon app on your phone and put everyone's name next to it and have a race about how much each kid can pick up more in two minutes or whatever it is like every year. Keep up with it. I don't know. Create it, but let it help you. So we're all using our brains here, people. All right, the last idea is when your kids, before they go to bed on Christmas evening on Christmas night, we always have our kids like grab a couple things from their rooms that they don't want because they're so excited about the new stuff and the old stuff. They're like, oh, yeah, yeah, they're okay with getting

rid of it, which is wonderful. So again, to have extra room for the toys that they just got. So, you know, two or three things that they can give away, two or three things to throw away, just clearing out a little bit of the clutter as the new gifts come in helps everybody. And I promise, like January 8th, you will be very happy that Christmas you did this. And, you will be very happy. because we're going to declutter while we have Christmas too. It's great. And if you have a fun tradition or idea or tip that you do that's inexpensive or even free

to make Christmas that much more magical that day, make sure to drop it in the comments because I want to know. I love getting ideas for you guys. If you have not subscribed to the podcast, make sure hit that follow button and at the Spirit Leads, you can leave a review. And I hope you and your family have a very Merry Christmas.

Oh, enjoy it, you guys. Such a fun time of year. So remember to take control of your money and create a life you love.