The Rachel Cruze Show - 3 Ways to Put Money Back in Your Pocket

Episode Date: February 28, 2022

Today, we’ll be talking about how to get more of your money back in your pocket (because you deserve to hold on to your hard-earned income)! We’ll cover how to maximize your tax refund, pay off debt in unexpected ways, and crush your budget even when your income is inconsistent. You’ve got this! In this episode: How to Turn Your Tax Refund Into $1,000,000 11 Creative Ways to Pay Off Debt How to Budget With an Inconsistent Income   Helpful Resources: Ramsey SmartTax EveryDollar 5 DIY Cleaning Products to Save You Money Christian Healthcare Ministries NEW Champagne Rachel Cruze Wallet   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 sponsor has paid for the programming you are viewing: Christian Healthcare Ministries. Learn more about your ad choices. Visit megaphone.fm/adchoices

Okay, I'm going to change the way I look at my money. I'm going to change the way I view debt. And instead of saying, yeah, debt's okay. It's not that big of a deal saying, what if this was completely out of my life? What if I actually had less stress? What if I actually could sleep at night and not worry about my money? Because it's an amazing thing. When you don't live with debt and you are debt-free, you don't owe anything to anyone.

Hey guys, welcome to this episode of the Rachel Cruceau podcast. I'm so glad that you're here. In this episode, we're going to talk about how to budget on an inconsistent income, which can be tough, but it is possible. And then I'm going to go over creative ways for you to pay off debt. It's crazy the things you can do to save more money to put towards your debt. So you don't want to miss this. But first, let's talk about how your tax refund can turn you in to a million. Take a listen. All right, have you ever gone a big, fat tax refund in the mail, and you celebrated? You're like, look this free money. You went and bought some wine or went out to dinner, you bought some new clothes.

It just feels like this huge bonus. Well, guess what? It's not. A tax refund is not a bonus because it was your money to begin with. A tax refund just means that you've been loaning the government, your money, interest, the free throughout the year, and now they're returning your money to you because it's yours. In 2021, according to the IRS, 70% of taxpayers received a tax refund of $2,873 on average. So a $2,873 refund means that you could have had an additional $239 in your paycheck every single month.

So what exactly could you do with that extra cash? Well, you could turn that extra cash into a million dollars. You ready? Say you're 30 years old, okay? And you want to retire at 67, and you invest that $239 a month in a mutual fund with 10% annual return. Well, in five years, that will be worth $18,507. In 10 years, that will be worth $48,957. In 20 years, it will be worth $181,489.

And in 37 years, the year you want to retire, that now will be worth $1,113,699. From that one tax refund, you guys, is that not unbelievable? that is the magic of compound interest. So what happens when you let the government hold on to your money until July? Nothing. Nothing happens. So getting that money back in your hands is so crucial. And think about what else you could do.

You could knock out all your money goals so much faster. You could pay off debt, whether it's credit cards or car payments or student loans. You could add, again, $2,800 to your debt snowball throughout the year. That's a huge difference. You can build up your emergency fund so much sooner, your three to six months of expenses could be saved up faster so that you can start investing into retirement. You can make extra payments on your mortgage and save thousands of dollars of interest over the life of your loan. There are so many options for that money to be used for your own good versus sitting in

Washington. So how do you take control of your money in this situation? Well, if your tax refund is more than $200 a month, you want to get help from a tax pro or your HR department to adjust your withholdings. So a tax withholding is just a chunk of money your employer sets aside from each paycheck to cover your taxes. Now, if you withhold too much, then you get a tax refund, just like we talked about, not good. But if you withhold too little, then the IRS sends you a bill because you still owe the money. And that's not great either. So kind of the goal is to get to close as $0 as possible. So the first thing you want to do, step one, is calculate your expected tax withholding for the year by finding the amount of federal income tax withhold from your paycheck stub. Then let's say that's,

for example, is $350. We're going to multiply that by the number of pay periods per year. So it's $350 times $24, $8,400. You can do the same thing for your spouse if you guys are married filing jointly and just add those together. Step two, estimate your tax liability or how much you'll owe. So the IRS provides worksheets and a calculator to walk you through this whole process. It's kind of like completing a pretend tax return. And let's say you're single and your taxable income was $50,000. Well, that puts you at a 22% tax bracket and you will owe $6,860. Step three, subtract your estimated tax liability from your tax withholding.

So if you're in the black, then you'll get a refund. So again, our examples were $8,400 that your employers keep. keeping four taxes minus what you owe is $6,860. So that means $1,540 is being held in your taxes that didn't need to be held. Now, if you're in the red, again, you're going to have to pay the IRS. So if those numbers were switched for some reason and you owed $1,500, you have to pay that before tax time or there is a penalty. Step four, file a new W-4 with your employer to adjust your withholding.

If you're getting a big refund, then you want to withhold less. If you owe a lot of money, you may want to withhold more. All right, one last tip. File your taxes sooner than later. You'll have the opportunity to make sure that you're claiming all of your tax deductions and credits you're eligible for. And you can take this time to make sure your documentation is correct. Make sure that you're claiming the standard deduction that you need.

Early filers with a tax bill actually have time to plan and save up money that they owe the IRS. And if you are facing a bill instead of a refund, I understand the urge of just wanting to put it off. But listen, file your taxes, and you don't have to pay in full until tax day. The more time you have to come up with the money, the less likely you are to bust your budget

or to drain your emergency funds. It's hard to get a really great tax pro and get on their schedule during crunch time, and some tax pros even raise the rates as tax deadlines get closer. So watch out for that. And if you get stuck along the way, get help from a tax advisor.

Look for a Ramsey endorsed local provider. Or use Ramsey Smart Tax and let us take a little bit of the stress off your shoulders. So you can go to Ramsey Solutions.com slash smart tax to learn more. I know taxes are not the most exciting thing in the world. In fact, a lot of people dread them. But listen, doing them wisely, again,

to that zero where you don't owe a ton, but you're not getting a big refund, is going to help you. Tax refunds, it's not a bonus. It's your money that you could be putting to good use throughout the year. So you may want to change what's going on with your taxes and what's being withheld in your paycheck.

Today, we're going to dive into different ways for you to pay off debt. So we talk about debt a lot on the show, but it is really important for you guys to realize that, yes, it is so normal today. it's part of our world. We depend on it. A lot of people do. So to take yourself out of it to say, okay, I'm going to change the way I look at my money. I'm going to change the way I view debt. And instead of saying, yeah, debt's okay. It's not that big of a deal saying, what if this was

completely out of my life? What if I actually had less stress? What if I actually could sleep at night and not worry about my money? Because it's an amazing thing. When you don't live with debt and you are debt-free, you don't owe anything to anyone. There is such freedom in that. Now, it's much easier said than done, just to say, you know, go and pay off all your debt. It's going to take some time. It's a journey, okay? So there's different things that you can implement in your life to help you pay off debt that much faster.

So that's what we're going to talk about today on the show. To really walk through, here are some really creative ways, maybe thinking outside of the box of how you can earn extra money and put that extra money towards debt. So in our seven baby steps, baby step two is to pay off all of your debt. You first want to save up a starter emergency fund of $1,000, and then you're going to move on to Baby Step 2,

which is the debt snowball. So you're going to list out all of your debts, smallest to largest, regardless of the interest rate, pay minimum payments on everything, and attack the smallest one first. Focus all of your time, all of your energy, all of your effort on that smallest one. Once it's paid off,

then you roll all the payments that were going there to the second smallest. And you keep going and going until you're debt-free. And we find that people are getting out of debt in 18 to 24 months, which is awesome, on average. So it's an exciting thing. And it's one of my favorite things that I hear from people as they're walking this journey when they say, oh, they did it because it kind of feels impossible. But when you do it and you start making that progress, you realize, no, there's hope in this. You really can become debt-free.

So let's dive in to some ways that you can pay off. debt fast. Number one, create monthly challenges for yourself. So this could be making coffee at home. Maybe a challenge is that you don't go out to eat at all. Maybe a challenge is having zero dollars for entertainment and you say no to everything. Even have a no spend challenge where you literally don't spend money for an entire month. So these challenges really help you save money and it challenges you, which is a great thing and you really see these needs versus wants in your life. Next, skip the salon. This hurts my heart a little, but this will save you so much money.

If you're used to getting your nails done a lot, skip the salon, do it yourself. If you go to a hair place and it's really expensive and you could spend hundreds of dollars doing it, you know, maybe for a season, you just go somewhere cheaper. So those kind of things, again, will save you money, even though I know it hurts. It's not forever. It's not forever. You can go back. But for now, while you're paying off debt, cut some of those services.

next, barter services with your friends and neighbors or even family. So look at people that have skills that you may need and just say, hey, let's swap, right? You can even look on local Facebook groups too to find people to network with, but maybe you're great at cooking and you say, hey, I will make you five meals. You can freeze half of them if you come and organize my pantry in our toy room. Or maybe you say, hey, I'm a photographer, so I'll give your family a free photo shoot. if your husband, who's great at installing stuff, can come in and help us with some of our repairs, right?

Finding these things that you can do to swap out will save money. Also, get a flexible side gig. So you can transcribe audio for a company like Rev.com. You could become a shopper for online retailers like Amazon Fresh or shipped. You can make extra cash by taking surveys online or playing games online, watching videos. So companies like swag bucks or inbox,

are great for that. You can also pet sit, babysit, tutor, clean houses. I mean, with all the school and daycare is still kind of like open, close, open clothes, spending on COVID, a lot of families are needing help at home. So anything like that is amazing

to earn some extra money. Even thinking about companies like Fiverr Act as a hub where companies connect freelance professionals, so writers, translators, graphic designers, website builders, social media experts, computer programmers. I mean, the list goes on and on. And if you've landed your full-time dream job, keep living like a college student. So this is great advice because your lifestyle can creep up when you

start making some money. And if this is like your first big-time job out of college, it's easy to be like, wow, look at this salary. Okay, this is great. I'm going to just spend it and joy. But listen, keep living like a college student if you have debt. I mean, talking about frozen pizzas, keep your handing down furniture. If your parents live nearby, maybe you do laundry at their house. I mean, anything that you can do to save some extra money on your lifestyle is so key. I'm putting as much of your salary towards your debt snowball will help you out. Next, opt for reusable items. So this can actually save you up to $600 a year. So instead of paper towels, maybe use a reusable dishcloth or instead of sandwich, baggies do containers.

refillable K-cup filters, dryer balls instead of dryer sheets, reusable water bottles instead of buying bottled water. You can even make your own cleaning solutions at home. Uh-huh, I did a whole video on this that I'll put in the show notes. So all of this, again, can save you close to $600, and that goes a long way in your dead snowball. You can also rent out your house. Yep, this is a possibility.

So if you have people in your life that need to come in, going to pay for a hotel room, maybe you offer your guest bedroom if you have one. Or even if you have a finished basement and you can rent it out on like VRBO or Airbnb, again, this is all if you're comfortable with that idea. But if you are, you can earn some extra cash that way. You can also get a roommate if you're single. And I've even know married couples are like, yeah, we'll rent out the bedroom to a roommate for nine months. Anything to earn extra money that you feel comfortable in, it's a go. Also, thank you. think about your car. What if you sold it? Mm-hmm. What if you have payments on it? And you're thinking,

man, instead of paying a car payment every month, what if I sell it? And you could replace it with a really, really, really, really inexpensive car, or if you're in a situation where you could walk to work or ride your bike to work, maybe you do that for a season. Now, if you can't sell your car, maybe look at your insurance. So don't skimp on your insurance, but make sure that you're not paying for anything extra that you don't need. You can ask about special offers. or discounts or bundling different opportunities, all of that could save you a lot of money on your auto insurance. There are so many ways, you guys, to pay off debt.

So many creative things in our world today, which is a great thing. Now, does some of it take some sacrifice? Yes, some of it take things that you're like, man, I don't really want to do this. It's not convenient, but I'm going to just earn some extra money. Yes, because the deeper you are willing to sacrifice, specifically your lifestyle and other things, the faster you're going to get out of debt.

that's the key, you guys. It is a short-term sacrifice for a long-term gain. Remember we said at the beginning of this, on average, people are paying off all of their debt but their house in 18 to 24 months. I mean, that, it goes so fast. It goes so fast. And to think that you could sacrifice for a short period of time to have no payments for the rest of your life. It's an amazing thing, an absolutely amazing thing. So you can be free from debt. And if you want help with that, go to ramsysolutions.com slash ramsie plus to start your free trial. It will help you pay off debt faster and save more money. It's a membership that includes Financial Peace University and our every dollar budgeting app.

So you guys, you can be free from debt. It is possible. I see it every single day and it can be you, but you have to have the belief, first and foremost, that you can do this. And I believe you can. You can do this. All right, we talk about budgeting a lot on here because a budget is like the number one thing that's going to help you win with money over the long term. It is your plan. It is the thing to keep you

on track. It's the thing that gives you guardrails and boundaries, and it's the thing that gives you permission to spend. So a budget is amazing. I always talk about it because it is so powerful. It puts you in control, but it can be hard specifically when you have inconsistent income. It's not a straightforward. You know, if someone's like, oh, yes, you make X amount every year. Your paycheck is pretty consistent. But when it's not, because let's say maybe you are freelancing, or maybe you're paid on commission, or your job is very seasonal, so you're either in this like feast or famine mentality, it can be very hard, very hard, but it can still be done. So we're going to walk through how to budget on an inconsistent income. First, you want to start out with your lowest income

estimate for the month. So look over the 12 months. You can even go back to maybe your pay stubs or your paychecks over the last year and say, okay, what was the least amount that I made that month? And start there, because you can always go up from there, but starting that estimate with the lowest month and then you're going to plan. So I always recommend still giving first, still saving second, especially if you're on babysubs one or three. It's so important to give and save. And then you're going to do what's called your four walls, which is your food, your shelf, your utilities and your transportation. So all of that stuff there, that's really like your needs. Those are the things that are non-negotiable in your life. Everything else, like your TV streaming,

going out to eat, maybe entertainment or personal spending, which is all great to do if you have the money. But again, we're planning for the least amount of income coming in. So again, you're going to go by priority and order. So giving, saving your four walls and everything else underneath. And then this is going to be your priority because what's a great thing about budgeting is, you know exactly where your money's going. So if you have more income that comes in that month, then what you're going to do is just trickle down that money to the other expenses. But if you have a lower month, you already have a plan that your needs are covered. What you also can do is create a budget line item for all of your expenses that you also want to track. So these are things,

all of your bills, your payments, even your groceries, that you want to make sure that you are consistent in knowing exactly what you're spending in eating. category that's going to help the budget continue on throughout the month. Also remember you can make adjustments. The key here is being flexible. So you can even adjust the budget when you get paid. So if you get paid on the 15th and you're expecting a certain amount of money and it comes in a little different, then adjust your budget from that. That's okay. Be flexible. Now if you're married, make sure you guys are on the same page. If something is changing, you're saying, hey, I'm changing this and this and this. And also remember to make a new budget every single month.

because every month is going to be different. And remember, you guys, a budget, it's going to take work on the front end, for sure, because I want you to do it before the month begins, but it is so worth it. And I use every dollar, it's our budgeting app, and it's amazing because it helps me track all my transactions, know exactly what's going on with my money, and it feels good just to be in control. But if you tend to overspins on certain categories specifically, and you're like, man, I just can't seem to get this down.

use cash. Cash is something that is going to be an instant accountability partner. Is it inconvenient at times? Sure. Much easier just to carry a debit card and swipe everything, which is not wrong. But if you tend to overspend and if you're new to budgeting, the envelope system is the way to go. And having this, it helps you manage your money better than you probably ever have before because you know exactly how much is in each category. But one of my favorite ways and places to keep your cash is the Rachel Cruz wallets. Yep, I created this because I wanted the envelope system just to be beautiful, right? And so we actually have a new wallet coming out, a new color of the Rachel Cruz wallet. And it is a beautiful metallic champagne. Just gorgeous, gorgeous. And we did a metallic blush last year. And we only did limited quantities of that color, and it sold out really fast. And I don't know, good news, bad news. The same is true for the champagne.

So it's a limited number that we have. So if you want it, make sure you order it. And if champagne is not your color, that's okay. I'm not mad. We still got black. We got brown. We got camel, some really timeless colors there. But I love this wallet as well because we partnered with Joyne, who's an amazing organization that gives jobs to people in the most vulnerable communities in India.

they're amazing and they help create this beautiful authentic wallet. So in the wallet, there are places for you to have different categories for your cash. So some built-in envelopes there. Also some places to put your cards. So whether it's your debit cards or gift cards, anything, lots of options there. There's even a wrist slit that goes with it. But all of it because, well, we want to make budgeting beautiful, don't we? So if you want to check out the new champagne color of the Rachel Cruz wallet, just go to ramsonsolutions.com

slash wallets. So listen, I know budgeting can be tough at the beginning. And when it's an inconsistent income, it can be even tougher. But you guys can do it, I promise. And thank you so much for listening to this episode. I hope that it helped you when it comes to your life and your money. If you have not subscribed to this podcast, make sure to hit that follow button. And if the spirit leads, you can leave a real.

review. As always, make sure to take control of your money and create a life you love.