The Rachel Cruze Show - 4 Steps That Will Secure Your Financial Future

Episode Date: March 2, 2020

This is the final episode in my series covering the Ramsey Baby Steps, and Dave Ramsey and Chris Hogan are back to help me out and make me laugh. Baby Steps 4–7 are the whole reason you make so many sacrifices in the first three steps. On this part of your money journey, you’re truly securing your financial future.   In this episode of The Rachel Cruze Show, you’ll learn:   The best way to fund your retirement 3 ways your kids can graduate college debt-free Why keeping your mortgage is a How to have the most fun you’ll ever have with money   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:   — Zander Insurance     Resources (everything mentioned in this episode):   Zander Insurance Financial Peace University Find an Investing Pro You Can Trust Learn more about your ad choices. Visit megaphone.fm/adchoices

Two of my very favorite people, Dave Ramsey and Chris Hogan. What we're trying to do is get people to think differently about owning it. And that means it's yours. This is more like the marathon. But when you run a marathon, you look up and you go, we're going to make it. All that's left is to build wealth and give. So you live like no one else so that you can give like no one else. And we say that we're blessed to be a blessing.

Hey, everyone, welcome to another episode of the Rachel Cruise Show podcast. I'm so glad that you are here. And I'm so excited to wrap up the last part of our series on Ramsey's seven baby steps today, which, by the way, has been so much fun. And in this episode, we're going to talk through the remaining four steps. Now, spoiler alert, I have two of my favorite people coming on this episode, Dave Ramsey and Chris Hogan, to show you how to build wealth and never worry about money again. So here is today's episode.

Now, in case you miss the last few episodes, let's quickly go over, baby steps one, two, and three. Baby step one is your starter emergency fund of $1,000. Baby Step two is paying off all of your debt, but your house using the debt snowball, and Baby Step three is bumping up that starter emergency fund to three to six months of expenses, saved in the bank for a fully funded emergency funds. All right, the four steps that we're going to walk through today, they're the whole reason, while you made all the crazy sacrifices you did in the first three steps. These next steps are the reason. you haven't seen the inside of a restaurant.

It's why you've eaten rice and beans. You picked up the extra jobs you have. You've had hard conversations with your spouse. You've told your kids no. It's all for this next season right here. So you took care of your past with Baby Steps 1 and 2. You took care of your right now with Baby Step 3. And now it's time to set yourself up for success in the future with Babyseps 4 through 7.

Have you guys ever done that face app where you're like, you look really old? Well, this next step is about your old wrinkled selfie thanking you for your current self. Yes. Because guess what? 65-year-old you? Yeah, she didn't want to work. She's raised babies. She's worked hard now.

She can do whatever she dang well pleases. That's right. Baby Set 4 is all about retirement investing. So you want to invest 15% of your income into retirement. And I'm so excited to talk to you about this baby step. Hey, are you rolling? Listen to me, I just hijacked the Rachel Cruz show. I'm so excited.

She's out getting a snack or something. I locked the door. She's barricaded out. She can't come back. I have you for just a few minutes. But I want to talk to you all about something. Baby step number four. This is a big deal.

This is your opportunity to start to fund your dreams. Have you ever thought about that? See, most people use 401Ks and 403Ds, all these fancy acronyms. But at the bottom of it, we're talking about your dreams. the things that you want to do for yourself and your family in the future. So, baby step number four is to invest 15% of your income. You have to invest. Listen to me, if you don't invest, you won't have any money to spend later.

You need to think about that. And a lot of people will say, well, Chris, Social Security will save the day. No, it's not. Okay, you have to make sure that you're providing for yourself. If Social Security is there, I want you to think of it as the icing on the cake, but not the cake. That means you've put money away for yourself and your family. So you want to be intentional. Remember, you don't do this baby step until you already got yourself out of debt.

You build up your fully funded emergency fund, and now you can do this. Most people are spending 24 to 25% of their income on debt. Well, you got your money back by getting out of debt. So now you can invest. So you want to sit down with a smart fester pro. I know Rachel's told you about them. Sit down, talk with them, have them review your 401k or your 403. and get started. Now, you also have other options where you can invest. Roth 401ks, Roth IRAs. Whenever

you hear the word Roth, I want you to get a tingling. Okay, look, I just got the goosebumps, because it means tax-free. It means the money that you put in is going to grow tax-free. Uncle Sam can't touch it. Wait, was that Rachel? Keep the door locked. I'm not done. Okay, listen to me. So you invest for your future, stay intentional, and you can do this. And remember, as you invest this money, don't ever touch it. You have an emergency fund. This is about your dreams. And don't ever let anyone tell you that you can't chase your dreams and grab it. As I tell people on my show, you stay focused because you're not finished. Well, Hogan hijacked babysept four. So it looks like I'm not going to walk you through. Baby step five. Maybe step five is the same for your kids'

college. So you do this so that your kids don't turn into another sad student loan statistic that we see all over the news. So when you do this step, again, you're going to do baby steps four, five, and six together. So 15% of your incomes going to retirement, and then you're going to be investing in your kids' college. So when you invest in your kids' college, I recommend an ESA, an educational savings account, or a 529 plan. Okay, guys, I'm going to interrupt myself for just a second really quickly and give you kind of just a high-level difference between an ESA and a 529 plan. So these are both funds that you can put your money in that save up for your kids' education, their higher education. Now, an ESA is an educational savings account. You can put up to $2,000 in there a year,

and it grows tax-free, which is amazing. But there is some income limits. So if you make too much money, you may not be eligible for an ESA. Now, a 529 plan can get a little bit more complicated because there's some really bad options out there. So things like prepaid tuition and just some 529 plans you put your money in, and basically it's like in this computer system. I mean, not really, but just go here with me, that it's based on the age of your child. It depends on what they invest the money in, and so you're not the one really in control of the money at that point. So all that to say, there are some differences.

Both can be great options for you, but go talk to a smart investor pro. Sit down with someone that has the heart of a teacher, not the heart of a salesman that is in the investing world day in and day out because they can help you decide which plan is best for you and your family. So make sure to click the link and the show notes to find one near you. Now, if you're wondering how much to invest, it's really going to depend on your situation. So I don't have a recommended percentage or dollar amount because it's a personal decision,

and there's several factors that go into this. So how old are your kids? Do they plan on going to college? Are they going to go to a two-year school or a four-year school or a trade school? What degree do they want? Are they going to have to get a master's degree? I mean, like, there's so many factors that play into this. And so I know for Winston and I, like, we've made this a priority.

We do the baby steps. I know you're shocked, but we do. and we fund the girls' ESAs every year. So obviously, the earlier you can start investing in your kids' college, the better off you're going to be. But that's not the case for everyone, again, depending on how old your kids are. Now, I've seen parents do three options

when it comes to paying for their kids' college. One option is that your kids pay for everything. And you know what? That's okay. That is not child abuse. Because if you have kids going to college soon and you don't have money saved up, that's going to be their option.

And again, it's not bad. It's just the reality. Number two, parents match what their kids put in. So their parents make them have a little skin in the game, which I kind of like. It's kind of good. Or number three, parents pay for everything.

So, again, three different options you can look at when it comes to paying for your kids' college. Now, one question I get a lot is, why don't I fund my kids college before my retirement? Because my kids are going to go to college before I retire. Listen, you can be a little selfish here, okay? Because here's the deal. You are going to retire, no matter what.

like it's going to happen. Your kids may or may not go to college, and there's a thousand and one ways that they can pay for college, but there's only one way for you to retire. So you want to put yourself first. Think about the plain analogy. When you're traveling with multiple kids,

they always say put your mask on first, and then your children's, okay? Because like if you're done, you can't help them. And just like Southwest Airlines always says, if you have two kids, make sure to choose the one with the most potential first. I love that. I always makes me laugh.

Okay. Now, if you have kids going off to college soon and you don't have time to invest, remember, choose a school that they can afford, help them in this. Their school choices, huge, in-state tuition, community college, go to a school they can afford, apply for scholarships and grants, and then have them work. There is a way to go to college today without student loan debt. All right, coming up next, Chris Hogan is back, and without further ado, Dave Ramsey. Hey guys, Rachel Cruz here. I'm obsessed. Seriously, when I found out about Tufton Needle from Dave, I tried it out, and I'm not kidding, this is the best mattress I've slept on.

In fact, I ordered a second one for my guest room. You can get this mattress starting as low as $3.99. I've been talking about this for a while now, so try it out. You can keep it up to 100 nights risk free. Now, if I'm wrong, you can send it back. But go to tn.com to get started. That's right, tn.com. And remember, it ships free.

All right, guys, we are on Baby Step 6 now, which is pay off your house early. Now, this is an exciting step. This is so fun. But what's hard is that you watching, you're probably still paying off your student loans, your credit cards, like you're in Baby Step 2. So Baby Step 6 may seem a little far out, and it can be a little daunting, but I promise it is a great step. And it's motivation because this is where you're going.

This is the future. So when we look at Baby Step 6, Chris Hogan, Dave Ramsey, thanks y'all for being here. Thank you. You're just the experts in the whole area. So welcome. I'm glad you're here. So glad you're here.

So a few things that I hear with people when they talk about paying off their house early is that they say, okay, I don't want to pay it off early because it's just not that big of a deal. But Hogan, you see that this is huge for specifically with millionaires, people that are everyday millionaires. This is a big step for them. It really is. And Rachel, as you know, we did the largest study that's ever been done on millionaires.

We talked to over 10,000 of them. And what we found is that these millionaires are very, very focused and very intentional. And they're paying off their home in just under 11 years. So if you think about that, that's a massive move and a big step

in their overall net worth. So paying off the home is a huge step on your everyday millionaire journey. Which is huge. So with your net worth, obviously, it makes a huge dent, but also with your monthly budget,

like if you think about it, you know, if you're 50 years old and you haven't paid for house, the next 30 years of your life, you don't have a mortgage payment. What would it be like to have no payments? I mean, no mortgage. Nothing.

Now, wow. Another myth I hear is that people say, well, I want to keep my mortgage because of the tax deduction. And this is something that we combat all the time. And so what would you say? Well, how would you answer that, Dave? Well, it's just silly. I mean, the math is ridiculous. And because if you take a $200,000 mortgage at 5% interest, well, that's $10,000 a year that you're sending an interest.

Now, you can deduct that only if you itemize. And statistically, less than 10% of a tax. Americans itemize. So this is a mythological discussion among broke people is what it amounts to. So it doesn't apply. In your standard deduction, you don't take the deduction for your charitable giving. You don't take the deduction with a standard deduction for your home interest rate. But if you did, or you had $10,000 in interest going out to the mortgage company, and you're in a 22% bracket, which means you're making like $80,000 household income, that saves you not $10,000 on your taxes. It's $10,000 less income.

that you pay taxes on at 22%. That means it saves you $2,200 in taxes. So what you're effectively doing is you're sending the mortgage company $10,000 to keep from sending the government $2,200. And that's only if you itemize. And that just shows how ridiculously stupid the idea is. You're trading a dollar for a quarter

and you're not going to get ahead doing that. Right. Would you rather pay out $10,000 or $2,200? If you'd like to pay out $10,000, you can call me. We'll put my cell phone number at the bottom of the screen, and you can give me that. But yeah, it is. It's just the math. I bet you would pay 5,000 other taxes. Yeah, that's right.

That's right. That's right. I would do half. I would do half. But yeah, that's right. Okay, so baby's up six. It's a long process, right? Average was 11 years.

So people are, at this point, they're completely debt-free consumer debt. They have an emergency fund. They're funding kids, college, retirement, and then they're throwing anything extra they have at the house. And it can seem long and a little daunting as well. It kind of sneaks up on you. Well, what's your motivation? Yeah, what do you say with that?

I think what's happening is your chip, chip, chip, chip, chip, and then suddenly the wall falls. And you're like, wow, that just happened. It kind of sneaks up on you because it is a little more gradual. You have all these celebration moments like, paid off the credit cards, we paid off Sally Mae, we paid off the car. When you're doing your debt snowball and then we got the dead snow. The first three are very, first three baby steps are very emotional and very visceral. And this is more like the marathon. Yeah.

But when you run a marathon, you look up and you go, you know, I'm halfway through. And look over there, there's a yellow tape, we're going to make it and not die. And, you know, these things occur, but it kind of emotionally sneaks up on you because it's incremental. What do you see, Hogan, with millionaires specifically, because I love that because it's people that have won, right? But what they do. Well, bottom line is these millionaires are very intentional. They take personal responsibility, and they have a plan for their money. And so paying off the home is not an accident.

It's a part of the plan. Our culture is so used to buying homes. What we're trying to do is get people to think differently about owning it. And that means it's yours. You've removed the risk out of your life of having a payment, and now you have an opportunity to do more with that money, like giving or doing more things for yourself and your own financial future. Yeah, so good.

All right, it's Baby Step 6, paying off the house early. And next step, we're going to talk about the last Ramsey Baby Step, which is probably the most fun. Baby Step 7, build, wealth, and give. But before we dive into that conversation, here is a really great clip from Financial Peace University that shows what this step is all about. We are here to do more than just for ourselves. We're here to do for others. Our focus has shifted from surviving to thriving.

But when I think about how much we've paid off in seven years and we tithe the whole way, it's mind-blowing that we had enough. The process sort of unlocks that part of you that's a giver. By the way, it allows you to develop the means to be able to do more of it. and you start to think of yourself as more than just a spectator in life, it's such a joyful feeling. If you hold your money like this, none can get out, but no more can get in either. You go like this to God, it just flows.

So much you can't even hold it. Here I am, I'm giving money away, and I'm richer than I've ever been. When I was working in the schools and I would see kids come in to eat breakfast, I started wanting to somehow branch out and do something to help these kids on the weekend. That's how I came at starting blessings in a backpack. You start looking at money as a tool that you use. It's an asset that the Lord has given me. And I pray, please show me how I should use your resources

because it's not me anymore. And now we have all this time to pour into ministries and people going overseas to spread the gospel. Pack food for kids, I don't even know. but I feel really great knowing that there's 24 kids that are being fed this weekend. You know, with this generous act, my parents have done for me. I really have to shift my mindset, you know, because before when you don't have enough, you're always worried about, you know,

taking care of yourself, what do I need to do to help myself? With this, it just shifts my mindset to transcending that. I have the ability to pay it forward in a way that other people maybe don't. The amount of money that we're able to give and enjoy giving, It's more than I ever would have imagined. It's just amazing. So you better be ready for the ride because it's frigging awesome. I totally love it.

All right, baby step seven, all that's left is to build wealth and give. And we cover this in Financial Peace University, and this is called Outrageous Generosity. And this is a fun step, you guys. This is like where we get people. And you always say that it's like, it's an emotional step because there's like all the hope it's accumulated, like, this is what the plan is for. We've lived like no one else. We paid the price to win.

And our definition of winning then is you become debt-free so that you're able to build wealth. So you live like no one else so that you can live like no one else. And you can give like no one else. So I talked to a friend of mine yesterday. As a matter of fact, we were having a discussion, 40 years of marriage. And he was telling me that Rich Carlton now has a cruise line. I didn't know this. but he just booked a really nice cruise

for his 40th anniversary. So he's living like no one else and this guy is unbelievably generous and you would never think he would spend money on himself in any way, but it's a very small percentage of his world because his world is very big now. I love it.

And the giving aspect, it's just, it's incredible. And we always say it really is the most fun you can have with money. There's fun parts of changing your legacy and going on a nice cruise and all of that. But when you give, there's something in your heart that's just, it's different. touches a different place in your life, giving does.

Do you find that with the everyday millionaires? It really does. And these everyday millionaires were very intentional in setting aside money each and every month to be able to give. So this wasn't an accident. This isn't a fiber of who they are. And we say that we're blessed to be a blessing.

And so these millionaires have that same kind of mindset. Yes, they want to take care of their own financial future, but they're also trying to help others in all kinds of ways, at their church, at charities. And so it's just fantastic to be able to see that these people have the right kind of heart and the right kind of motivation. Yeah, that's so great.

Yeah. All right, it's fun. The Ramsey Baby Steps. They're complete. You end with living and giving like no one else. So before you guys leave, a question I always ask my guests are, what is something that you're doing with your money right now that's creating a life that you love?

I can't wait to hear your answers. Because if yours is buying a new play set for your grandkids, I'd be okay with that. We need one. She did not be? Is she lobbying right now? Live on camera. I decided to go there.

Full time. I need proof. She's doing. This goes on all the time. My goodness. But really, what are you doing right now? People are interested. This is interesting.

Well, I mean, what I'm doing is I'm obviously preparing a legacy for my own boys, but being able to give. I mean, being involved in some areas out front, but also behind the scenes. I have to tell you, when you're able to give behind the scenes, no one knows, but I know. And so it's awesome to be able to see the impact of that. And so absolutely, it's fun. That's a lot of fun.

What are you doing? Again, the giving, it's just, it is the most fun you'll ever have with money. And it's not just to pat ourselves on the back and say we're generous or something like that. It's just you work your tail end off and we work. I mean, all three of us work hard. And we make good money and we've gotten there. We've gotten to the point that we're, you know, don't have house payments. We don't have this.

We don't have that. And so we're able, there's margin in there to enjoy our money, but also to just catch somebody. And just, you know, we were in a little Mexican restaurant the other night. The food was amazing. And the lady, you know, busing the tables didn't speak English. And it was really fun to just pop a $100 bill on her on the way out. Just completely made her cry.

It's just, you know, let's have some fun like that. So good. Because she's the one that doesn't get noticed, you know. The waiter that's all dancing in front of you, they're the one gets the tip, right? but she's the one carrying the dishes and her back, you know, and that kind of stuff. And nobody even knows she's there. She doesn't speak a lick of English,

and I don't speak as well as Spanish. But you know what? We both spoke C-note. That's cool. That is cool. She knows what that is. That's awesome. So, so great.

Well, you guys, it's just been an amazing series, and I'm so glad that we've touched on every single baby step. But if you really want to dive into this, we've got a community of people, just like you, who are changing their lives, and they're just waiting for you. So you're able to connect with them, dive in deeper, make sure to sign up for a financial peace university class

and see your legacy start changing. Thank you guys. Both for being here. So fun. Thank you. Oh, they're just the best. So thanks to Dave Ramsey, old Papa Dave and Chris Hogan for joining me. And you guys, we teach this stuff every day,

and it's always great to bring in the big guns for the baby step. So I hope this episode helps you see what's possible when you stick to a plan. And I have loved walking through the baby steps in this series with you to thank you so much for listening. Now, if you want more information on how to start a financial peace university class or anything we talked about in this episode, make sure to click the link in the show notes. And if you've not subscribed to this podcast, make sure you do that. And if the spirit leads, you can leave a review. All right, thank you guys so much for listening. And as always, make sure to take control of your money and create a life you love. So if you guys,

enjoyed this podcast, we have more from the Ramsey Network, like the Entree Leadership Podcast. This is Alex Judd, host of the Entree Leadership podcast. We're a community of leaders by leaders for leaders committed to bringing you practical ways to grow yourself, your team, and your profits. Join us every week as we talk to entrepreneurs, CEOs, thought leaders, bestselling authors, and more to help you with your life and your business. You can learn more at entreeleadership.com slash podcast, and you can follow us on social media at Entre Leadership. To hear full episodes, just search Entree Leadership wherever you listen to podcasts, or go to Entreeleadership.com slash podcast.