The Rachel Cruze Show - Common Things People Overlook When Trying to Build Wealth

Starting point is 00:00:05 This one goes out to all my overachievers out there. Even if you feel confident with the basics of wealth building, there may be some areas that you're overlooking. So today we're going to unpack some of the common things that people tend to overlook when trying to build wealth. Now make sure to like, subscribe, and share this episode with a friend. All right, let's jump in. We're going to go right to the list, y'all, which I love.

Starting point is 00:00:26 Number one, you may be overlooking if you have savings but still carry debt. So this happens a lot. So people call into the Ramsey show and they're like, hey, you know, we have $13,000 of debt and we're going to start working our way out. And I'm like, great, do you have any savings? And like, yeah, we got $6,000 over here. And we're like, oh, good. Let's throw $5,000 at the debt and get this started. Because here's the thing, your debt is costing you.

Starting point is 00:00:52 And people have this mindset of like, I want to have a ton of money and savings before I start paying off debt because $1,000, which is what we teach as your start an emergency fund, it's not enough, all of us. and what we find is it takes so long to build up that savings that you never really make traction on the thing that's actually eating away your income, which is your debt. Like you are paying interest on these things when you're paying debt. So it's not only the payment, but it's everything on top of it. And when you can get that done as fast as possible, then you can start building up big savings. So that $1,000 emergency fund, it's there. It can feel very uncomfortable I get for a lot of people.

Starting point is 00:01:26 But if something big happens, pause your debt snowball and everything that you were momentally putting towards your debt, use that for the emergency that you have, right? If you need more money than $1,000, you can get to it. And usually for anything that is above $1,000, you'll get a bill, you'll have probably a month or two to pay for it so you can figure out ways around it to cash flow it. But this idea of like, oh, I just want to keep a bunch of savings, that is costing you. Number two, your emergency savings is in a regular checking account. So listen, y'all, move it. move it because when you log into your checking account you're going to feel like oh my gosh we have all this money and if we need to use the little here or there there's like it's easy it's just we're all right there

Starting point is 00:02:09 right it's the same account that you're emotionally used to spending out of so what i want you to do is i want you to move it to a high yield savings account usually an online bank is great for this fair wins is a great credit union that you can put your money there but this idea of having your money in a separate account emotionally kind of separates it so to get to it i want you to be able to, like I want you to have a card associated with that account because if you've got to use your emergency fund, you want to be able to use it. You don't want it in an investment somewhere that you can't get to. But also, you want a little bit more friction than just your everyday checking account. All right, number three, your house payment exceeds 25% of your monthly pay. So owning a home,

Starting point is 00:02:48 it is a big goal. Like, it is a massive accomplishment when you get to do that. But if you're spending up to 30, 40, 50% of your income just to maintain a mortgage, you're going to, you do not have enough money left in your budget, in your income, to do the other things in life that you need to do. And so what we find is so often people will get a house beyond that 25%. And then what's hard is, you know, you think about it, you got to, you know, invest, you want to give. Like there's other things you want to be doing with money, not just paying a massive mortgage

Starting point is 00:03:20 payment. So that either means, one, it's going to take you longer to save up for a house so that your mortgage payment is less than if you went in with not a lot of money. down. So maybe it takes a little bit longer to save. Maybe it's your expectation of the actual house or the area that you want to live. Maybe that looks different than what you want in order to get into the market. But again, I know 25% can feel really conservative for a lot of people and a lot of people complain about this with us. But again, when it is in control, and if your income's going up and it's 28%. You're like, yeah, but I'm getting a raise in the next year or two.

Starting point is 00:03:52 Like, you know, there's workarounds to it, but sticking to that 25% mentality is going to keep you in a range that is wise and safe and give you enough margin to do other things with your money that are really important. Number four, you give in to lifestyle creep with every raise. This happens all the time, you're working and working, you're used to living on this income, and then you get a bump. And you're like, oh, well, then I get this much more a month. That's great. I can spend that here. And then the next year that happens, and you spend the bump again, and you just keep moving up in lifestyle and that is the that is lifestyle creep to the T versus saying hey I'm going to stay at a lifestyle that I have now if I if I am earning more money yes can I take some of that and use it you

Starting point is 00:04:39 know for my good and for what I want absolutely but we're also going to be wise with the other part that we're not going to just continue to spend the raise we're going to invest it we're going to give it we're going to do other things that are beneficial to us and our future selves not just in the moment All right, more of this list in a minute, but first I do want to tell you about one of our sponsors, delete me. Because if you don't remove your personal data from the internet, your name, address, email, even your kids' names are out there on sketchy data broker websites.

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Starting point is 00:05:37 All right. Number five, credit card payments rob your monthly budget. Y'all, the credit card, we can go round and around with this. But here's the truth. And it has been proven that you end up spending more when you spend with a credit card because emotionally it's not your money that you're spending, and you continue to live in the past. Like, when that bill comes and you have to pay it, everything is already experienced versus in the moment, when you pay for it in the moment, it's done. You don't have to worry about a payment. You don't have to worry about a bill. Like, it's done. And then what happens is people like, well, I'll have it, but I won't go in debt. I'll pay it off every month. And then it creeps and creeps and creeps. And then we talk to people on the regular,

Starting point is 00:06:16 you know, tens of thousands of dollars of credit card debt. And then the interest rates on these y'all are insane. It's disgusting. It's horrible. it is a bad financial habit to be in, just pay in the moment with your own money. And I promise, you will love it. And if you need help, you know, creating a budget and knowing, hey, do I have money in the moment to spend? Check out every dollar. It's an amazing budgeting app. It's my favorite tool when it comes to your money. We'll put a link down below. All right, number six is invest less than 15% in retirement. So when a lot of people start off, you know, they're working, they're like really excited because, you know, they're like, maybe got their first job and they sign up for their 401

Starting point is 00:06:53 plan and their company matches 4%. And they're like, great, I'll invest 4% and get the match. And then that's all they do. And that's how they live their lives for a long time. So I want you to go beyond that. I want you investing 15% of your income. Now, this is after you are debt-free with a fully funded emergency fund, because that 15% is going to set you up for a great retirement.

Starting point is 00:07:16 And that can be through your company's 401k or a Roth IRA, but being able to invest a good amount of money, a good amount of your paycheck for the future is really important. Number seven, you don't prioritize generosity. So this is often overlooked. And it can be because you don't feel like you have a lot of money to give. It could be you're just not in the habit of it. You don't think about it. But giving is one of those crucial money principles that's not just good for the world, but it also changes who you are. And there's something about living life where money is not such this factor where we control every bit of it. And we just live our lives like. this because that doesn't bring peace. That does not bring peace to you. And so living your life

Starting point is 00:07:56 within open hands is something, again, that is going to be a blessing for people, but also for yourself and what it changes within you. And I think it's just kind of like, it's kind of the antidote. It's like the preventative side of living in a world of like stuff and consumerism and like, I just want to get this to be happy. Like all of that starts to really chip away when you're like, yeah, I'm just going to, I'm going to be a generous person and I'm going to give. And that could look like your time as well, right? There's other ways to give. But with your money, it's a big step for a lot of people.

Starting point is 00:08:28 So I always encourage people to give a little until you can give a lot. All right. This is just the beginning of all the things that you need to be aware of. So I want you to check out my episode, Six Money Hacks. You should never trust because they're trapped. So you can click right here or if you're listening on podcast, I'll put a link. below. All right, you guys, remember to take control of your money and create a life you love.

The Rachel Cruze Show - Common Things People Overlook When Trying to Build Wealth

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