The Rachel Cruze Show - 6 Expenses That Are Keeping You From Becoming a Millionaire

Starting point is 00:00:05 Recently came across an article called Dave Ramsey says these monthly expenses are destroying your retirement. So, of course, I read it. So we're going to go through it together, and I'll give you my thoughts around it. But before that, be sure to like, subscribe, and share this episode with a friend. All right, expense number one is the car payment. So we talk about this a lot on this channel. But remember, the current car payment for a used car is over $500 for a new car.

Starting point is 00:00:31 That's $700. All right. Just to put it into perspective, let's use Ramsey's Inventy's Inventy's. investment calculator to see how much our car payments are costing us. Here are the numbers. You ready for this? If you just said, let's just put $650 a month, a month, instead of paying for a car payment, you paid yourself and invested that over the next 25 years at an 11% rate of return, you would have $1,024,000. Over a million bucks for the car. That's wild to me. That is wild. So is that costing you your retirement, possibly for people that are getting close to that age and they don't have any

Starting point is 00:01:08 money saved. Yeah, if you had a car payment your whole life, like, that literally cost you millions of dollars in retirement. And so, again, this is one thing that I'm always like, buy a car you can afford. And this can be hard because it may take you, you know, some, a little bit of time to save up a couple thousand dollars, very understandably. But at least you're not sending your hard-earned money away in payments when you could be paying yourself. Now, I normally recommend paying off your car loan when you are doing the debt snowball. So that is when you list out all of your debt smallest the largest, regardless of the interest rate, pay minimum payments on everything, and pay off the smallest debt first. But here are two reasons why you would sell

Starting point is 00:01:47 your car. Number one, if all of your vehicles that you own are worth more than 50% of your annual take-home pay, meaning if you guys as a household make $64,000 and you have a car that's worth $40,000 or a payment on it alone or a car worth that. And then your husband's got a $40,000 truck. Yeah, that's $80,000. You have way more car than what you make a year. And in fact, again, 50%. So if you are making $60,000, your car should be worth no more than $30,000.

Starting point is 00:02:22 Okay? So if they are worth more than that, then sell the car. Also, if you cannot pay your car off in a year and a half to two years, you have too much car, sell it. It's not worth it. So there's something to be said about, you know, cars being underwater because that's been happening a lot, especially people that bought cars, you know, three, four years ago when they were so expensive during all the COVID stuff.

Starting point is 00:02:46 So a lot of people have negative equity, meaning that they owe more than what their car is worth. You know, they owe $24,000, but they can only sell their car for $18,000. So if you're in that predicament and you're wanting to sell it because you have too much car, you will go to the bank, get a loan for the difference and pay it off so you get the title so that you can sell it. Okay, that's the key here. Then you want to pay for a reliable car in cash like we talked about. So this takes some sacrifice.

Starting point is 00:03:13 It's not always fun, but I'm telling you the car situation is horrible. It's horrible the payments that people pay. And the loans that some of these people give people, like it's insane. It's insane. So stay away. Number two is credit card minimum payments. So a lot of people think, hey, it's okay. I have my credit card.

Starting point is 00:03:29 I'm going to pay it off every month. And then they get into a cycle. We're like, well, I'll pay the minimum because, you know, that's what I'm not going to, I don't want to get behind and they live their life like that. Which basically you're living your life in the negative. So instead of that, again, pay off your credit cards. Put it in the debt snowball like we talked about earlier. And pay it off and cut up the credit cards.

Starting point is 00:03:49 Don't use them. Even if you pay them off every month, there's still this cycle of you not using your money in the present, that you're continuing. continuing to live life in the future, meaning that you're going to get a bill at the end of the month for things that you've already done. So spend the money that you have today. That's with cash, a debit card. I don't care. But there's something empowering about spending your money in the present.

Starting point is 00:04:10 Number three is student loan payments. So this one's really hard because a lot of young people, they're 18 years old and they go sign up for a $30,000, $120,000 loan. Like it's wild to me. Absolutely crazy. and there's adults all around them that are like, it's fine, it's not a big deal, not a big deal. And then they graduate and they're like, oh my gosh, I have so much money. I'm not even going to use my degree. It's not even what I want to do in life.

Starting point is 00:04:33 And like, it's a disaster. So, listen, paying off these loans is really important because they can stay around forever. They're not bankruptible. And so you're going to have them. And sometimes they come with a low interest rate so they don't feel that painful, but getting them out and being done with them. So if you ever want to go back to school, please save up and go to a school you can afford. If you have kids, you guys, teach them and talk to them about going to an in-state public university, a community college.

Starting point is 00:04:59 If you don't have a lot of money, right? If you're not able to help contribute, that's okay. But they can take a gap year if they need to. They can work while in school and make a smart college choice. Now, if you have little ones, you can look to invest. You know, a 529 is a great option. And ESA is another fabulous route to go for saving for your kids college. But there's something about the student loan crisis that's really real because it's been so normalized.

Starting point is 00:05:21 And again, it just stays around forever and ever. So get rid of the student loans, pay it off, and save up if you have kids to help them if they're wanting to go and do schooling beyond high school. Now, one of the easiest things that you can do to protect your financial progress is delete me. And it's there to safeguard your personal information online. You may not realize it, but scammers and spammers are constantly buying and selling your data online. And the last thing you want is for your name, address, and other important information to be left exposed. just waiting on internet creeps to find it and use it without your knowledge.

Starting point is 00:05:56 So Delete Me steps in and wipes those sites clean so you don't have to, and it gives you peace of mind. So you can get 20% off an annual plan at joindeletme.com slash Rachel, which checks out to be about $9 a month. It is so worth it. So go to join deleteme.com slash Rachel. Number four is the mortgage payments. Okay, listen, this is the one type of debt that we are okay with, though, right?

Starting point is 00:06:21 A mortgage, it is, it's the largest purchase, right? When you're buying a home, largest purchase you're ever going to make, and rarely are you going to have enough money to pay for it in cash? Some people do, which sounds crazy. But for most people, this is something that's like, okay, you want to be able to do it because it's an appreciating asset, and it's a part of your life. But listen, your mortgage payment or rent payment usually is the largest line item in your budget.

Starting point is 00:06:45 And so when you keep it around, if you took out a 30-year mortgage and you really keep it around for 30 years, you are paying so much an interest, so much an interest with that, versus rushing and paying it off quickly. So people that are actually doing the baby steps are paying their homes off in nine years, which is insane. So instead of keeping a 30-year mortgage payment around for as long as possible, pay it off quickly, if you're going to get a mortgage, get a 15-year mortgage where your payment is no more than 25% of your take-home pay. That's kind of the rules around home buying. but if you have a mortgage, be paying it off quickly, right?

Starting point is 00:07:20 Get out of consumer debt. I have an emergency fund and do these things because when you can go into retirement with no mortgage payment, your largest item is freed up, and that's money back in your pocket. All right, number five is subscriptions and lifestyle creep expenses. So, subscriptions, man, they have been, they are part of the game, aren't they? And I've just become numb to them, honestly. Winston and I are watching the show, and it was like Paramount Plus. And I was like, just get the subscription.

Starting point is 00:07:46 I feel like on a principal, no. We have so many. I know, but I want to watch this show. It's like they trap us, y'all. They trap us. But we have to make decisions about our life and our money because is $9, $8 a month going to, like, destroy your retirement? No.

Starting point is 00:08:01 But it's this idea of not really keeping track and not knowing what's happening. And you slowly create this new lifestyle that is bigger and better without you even realizing it. And that's lifestyle creep, right? As your income goes up, you slowly start to spend that amount of money that you've gotten a raise on. And so instead of doing that, focus in on, hey, what are my needs? What does it need to be to create a life that I enjoy and that I like?

Starting point is 00:08:24 And instead of every time, you know, you get a financial windfall, whether it's a raise or something else, you don't go and just spend up to that. No, no, no. Look to see, okay, can I use that money to invest to give, you know, what can I do with these things? So it's actually just being intentional. So when it comes to subscriptions, do an audit and just eliminate the subscriptions or the stuff that you don't need. It's the non-essentials that you're not even using. So go ahead and just nix those. And by the way, if you're not using every dollar, Ramsey's budgeting app, do that because

Starting point is 00:08:54 that's going to expose a lot of where you're spending is, which is very helpful. All right, last but not least is medical bill payments. And this is a hard one because usually these are unexpected expenses that are not under your control. And sometimes this is an area, though, where you can negotiate. So insurance companies and hospitals can be guilty of overcharging sometimes or making mistakes on bills. And so if you're not careful, you really need to look through and see, okay, what is on here? And if there is a charge for you to dispute, make it your part-time job,

Starting point is 00:09:23 because that is money that can be back in your pocket. But regardless, always have an emergency fund so that you're not caught off guard by these medical bills. So there's something to be said about, again, having that $1,000 emergency fund. So if something happens, that's there to catch your slack while you're getting out of debt. And then once you're debt-free, bump that up to three to six months of expenses. So that account is there on the side waiting for when life happens, especially something like medical bills. Now for more frugal hacks, make sure to check out my episode at seven places frugal people never spend their money. You can click right here if you're listening on podcasts, I'll leave a link below. All right, you guys, remember to take control of your money

Starting point is 00:10:00 and create a life you love.

The Rachel Cruze Show - 6 Expenses That Are Keeping You From Becoming a Millionaire

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