The Rachel Cruze Show - How to Actually Make Your Money Go Farther

Episode Date: July 10, 2023

Winning with money is not about the size of your paycheck. It's about how you spend it. Today I’ll share a few smart money tips, like how to get the best deal on a car, the difference between building wealth and being rich, and why you should always have a little “fun” in your budget.   What you get in this episode:  ·      Worst Time to Buy a New Car?  ·     This Book Changed How I Think About Money ·      I Always Keep This in My Budget    Helpful Resources:  ·      Christian Healthcare Ministries  ·      EveryDollar ·      Ramsey Car Guide 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

Once you've kind of gotten the groove of budgeting, you get to start incorporating a few more of your wants into your monthly plan rather than just needs. And this brings us to the number one must have in the cruise family budget. Hey, you guys, welcome to this episode of the Rachel Cruise Show podcast. I'm so glad that you're here. So in this episode, we're going to talk about the crazy car markets and some other mind-shifting topics. You don't want to miss it. So I'm going to go over what line item I always keep in my budget and why I recommend you do too. Then I'll talk about my top takeaways from one of the most popular money books today. But first, let's talk about the car industry.

Is it really the worst time to buy a car? Well, let's talk about it. Today, we're talking about if now is the best or worst time to buy a new car. I saw a Fox Business article recently that says, there are only three cars that you can buy new for under $20,000. Are you guys, that's a lot of money, especially for a low-end car on the low end of the spectrum. Now, at Ramsey, we believe in buying used cars

because a new car instantly loses value when you drive it off the lot and continues to depreciate in value. And paying for a vehicle in cash, it's the way to go. So whether you're buying new or use. Now, we will say you can buy a new car if you have a million dollar net worth, but everyone else used is the smartest way to buy a car. So today, I'm going to talk about what is going on in the car industry and how that could affect you and your money. Recently, Fox Business reported that new vehicle prices fell below MSRP in March for the first time in almost two years.

Now, MSRP stands for manufacturers' suggested retail price. So the recommended cost for a vehicle, according to the company that manufactures it. And even though some of the pandemic-related supply chain issues have finally eased up, overall car prices are still high, especially for new cars. According to Kelly Blue Book, the average amount people are spending on new cars as of March of 2023 is over $48,000. This article also predicts that car prices are expected to continue their downfall. trend, but are unlikely to reach pre-pandemic averages, which was around $38,000. And this is partly due to inflation, because also carmakers have been trying to build more

profitable high-end margins. So basically, they're trying to completely do away with low-price models so that you will spend more money and they can make bigger profit. So currently, the cheapest new car made by an American brand is, the 2024 Chevy Tracks, which costs more than $21,000. And like I mentioned earlier, apparently there are only three cars on the market made by Kia, Nissan, and Mishibichi, which is under $20,000 right now. All right, this car industry talk is interesting, but how does it apply to you? Well, just like you ultimately hold the power over your money when it comes to buying a house,

paying off debt, and investing, the same is true when it comes to cars. So regardless of what the interest rates look like or what the headlines are saying about inflation, you get to take control of your situation based on your specific needs and progress. So set the old ego aside for a minute and just think about what's the wisest thing for you and your family right now when it comes to a big financial purchase like a car. And if you have that purchase coming up. So for example, let's say that you're in the market for a new car, but you're also trying to pay down student loans and credit card debts.

So if that's your situation, it's not going to be wise for you to add to your existing debt a $20,000 car loan. And that's only if you were to purchase the cheapest new car for sale. So instead, I would recommend that you weigh your options. If you and your spouse can talk and figure out, okay, is it possible to share a vehicle for a period of time? Are there family members or friends who might have an extra vehicle that they don't use as much that they're willing to let you borrow for a few months?

I know a coworker of mine once borrowed her friend's car for an entire semester while she was studying abroad, which is amazing. I mean, you'll be surprised how many people are willing to help you if you just ask. Or let's say that you've exhausted all of your options and you decide that you do need to purchase a vehicle. Here are three things to consider to keep your spending in check. First, buy used instead of new. A new car loses 10% of its value. The first minute you drive it off the lot. 20% after the first year.

year, and 60% in the first five years loses its value. A new car is one of those rare investments that actually decreases in value. So unless you have tens of thousands of dollars to immediately just throw at a car, a pre-owned used vehicle is the way to go. And when you just need something to get you around town, again, to and from work, $4,000 or so can get you a used car. So again, it's not a pretty car. It's not a great car. But it helps you keep on track with your money, The second thing to keep in mind is that you don't have to have every luxury feature. All the bells and whistles are awesome, but they also can cost thousands of dollars more. And granted, the heated seats are great, but not worth taking on debt for.

Plus, if you work all the baby steps one day, you will be able to buy a great car that you love and all the features that you want. So there's a time for everything. But right now, if you especially are paying off debt, buying a brand new car with everything, is not worth it. Trust me, your time will come. You can get a great car later. The third thing I would encourage you to do is to set your ego aside. This is so hard because a lot of people would rather look like they're doing well and rich and successful in their car. And then they sacrifice their future because of car payments. So ask

yourself some hard questions and figure out, okay, why is a car such a status symbol in our culture? It's wild that, again, these material possessions that we have, we feel like are tied to our value. So, listen, if you choose to buy a car when it doesn't make sense for you financially, you might feel great and cool in the moment. But the second an accident happens, or you need money for an emergency fund, or again, something impulse comes up, you're going to regret that purchase. No one's going to care about your car as much as you do. So be wise with your money and play the long game.

All right, you guys, I hope this has helped shed some light on a money decision that everyone faces at one point in their life or multiple times in their life. So if you are considering purchasing a car in the near future, make sure that you think about your present and your future and be wise. Okay. Used is a great way to go when always pay for your cars in cash. Just pull up an investment calculator online or at Ramsey Solutions.com, type in the average car payment over 30 years. And if you had invested that card payments versus sending it to the bank, it will make your stomach turn of how much money you could have in 20 years and 30 years. Now, we have a great car buying guide that will help walk you through the process if you need

more help when it comes to saving for a future car. And the every dollar budgeting app is a fantastic tool that can help you out as well. It's a budgeting app that I've used for years, and it helps you stay on track when it comes to your day-to-day spending as well. So download it today for a free. and try it out. And I'll put a link for both the card guide and the budgeting app in the description. Today I'm going to share with you some of the thoughts that I had on a book that I thought was so incredible. I love reading books in general, but especially when there's a book about money that comes out and becomes really popular,

I'm like, I want to read it. So I read The Psychology of Money by Morgan Housel a while back, and then I noticed recently it's been a trend on social media that people are talking about this book. It's come back up. So I thought, okay, well, let me take a few minutes. share with you some of my takeaways from this book, plus a few of my own takes when it comes to money mindset. Now, to give you some context, this book is all about our natural human tendencies and how they affect the way we spend money and view money. So one thing that I loved about the book is that instead of just dumping a ton of statistics and data on the reader, and focus more about our behaviors around money, which is exactly what I talk about all the time and it's about being intentional.

And I even wrote a book called Know Yourself, Know Your Money, that covers a lot of the similar topics. So I love to hear another person's perspective on it. So it doesn't always matter about how much money you make or even how much debt you have. It's more about what you choose to do with what you have. And I also enjoyed the way the book was structured because, once again, rather than throwing a bunch of numbers and information at you, the author included 19 different short stories to explain his teaching, which made it really. easy to understand. All right, my first takeaway from the book that I loved is he talks a lot about putting your ego aside. He says, less ego, more wealth. If you want to save money,

put your ego aside. But he talks about the ego a lot, which I love the way he phrases that, because on here we talk a lot about don't worry about what people think, don't compare your life, do what's best for you, put the blinders on and all of it. But what he speaks to really, is what's going on internally in us. When we find ourselves wanting, you know, that nicer car because it feels good or wanting to dress that certain way or wanting that type of house or whatever that thing is, yeah, sometimes it's because we just enjoy that kind of stuff

and that's what we want. But sometimes it's because of what people are thinking and the picture we put forth of how successful we are, how well we're doing. Put your ego aside and actually say, okay, what I value in, life is so much more than just all this stuff. What you will find is that you don't go and tend to buy all this stuff. So you have money to save. You have money to build wealth. You have margin

because you're not spending money to the end degree to keep up. So I love that. The second thing that I loved from the psychology of money is the idea of rich versus wealthy. And he talks about this. You know, how rich is kind of that flashy. You see it all. And it's great and wonderful. And yep, you see it. But the more research he's done, the more he has seen that true wealth that is more stable, more secure is behind the curtain. So a lot of families that have even generational wealth, you know, maybe it's all in real estate or it's other places. That again, it's not this flashiness that you see, but it is true wealth that is behind the scenes. And I love that. because we talk about building wealth a lot.

And according to our survey, when it came to surveying millionaires, we found that people's net worth to be net worth millionaires came a lot from their home, equity in their home, and their 401K retirement plans. And I love that because it's not flashy, right? It's not this like, oh my gosh, look at me. But it is kind of the stuff behind the scenes that actually gives financial value and a level of stability.

So when we always talk about that the tortoise, wins the race, not the hair, you know, all this stuff that comes out, it's like, get rich quick. A lot of true wealth is built over time slowly, and that is the safest, most stable way to do it. And he really reiterates that in the book, and I love that. All right, my third takeaway is that managing money helps you sleep at night. So again, it's called the psychology of money, but he does talk so much about our mental states. And when you have control over your money, how you actually get a better night's sleep. and this is something we talk a lot about Ramsey.

But when people think about being successful with money, again, they so much think about the outward appearance of life and what they have versus these things of like, I value peace. I value peace over a vacation I can't afford. I value peace over buying a purse that costs so much money that I don't have the money for it. Like, I value peace over lifestyle and how important that is.

So we get into the science all about how good sleep is, for you at night and all the things. But what it goes to show is that peace is a really important part of this process, not just numbers or status of what you have. All right, my fourth takeaway is to avoid extreme financial decisions. So he talks about being wise in the day-to-day, and people that go to this extreme of doing extreme stuff to build wealth, it usually doesn't work.

And then something else he talks about, which is kind of under this point, which I love to, is that it's not just about making wealth, but it's about keeping wealth. And he parallels these two stories of when the stock market crashed and the Great Depression happened. Then one guy, really wealthy guy out of New York,

was all in the stock market. He came home the day that it crashed and his wife was so scared because a lot of people were committing suicide during that time. And he told her, no, I actually shorted the stock, which means he bet against the market. And he made an estimate

what today would be like $3 billion. something crazy. So she was all happy, he was all happy, they were living their best life. Now another wealthy guy, again, playing the stock market, all that. He was a multi-millionaire, crash, lost everything, committed suicide.

Well, the first guy, again, did great, but what he ended up doing was spending, spending, spending, leveraging, leveraging, leveraging, leveraging, to the point that he ended up with nothing, you guys, like just years later. He compares these stories to say, gosh, one guy, crash, lost everything, another guy didn't crash, actually exceeded, but then later crashed.

So building wealth and being wealthy and making decisions about your money is about saying, okay, what is the long game? What is the long game? Because when you start to get greedy and start to do stuff, that is when you can actually crash and fall. So look long-term at your decision-making. It's really important and don't make extreme decisions when it comes to your money. All right.

the fifth and final thing that I loved about this book is he talked about knowing what you value in life. And he talks about this book called 30 Lessons for Living that this man interviewed thousands of elderly Americans. And he asked them about saying, okay, over the decades of your life experience, what is important? He said, no one, not a single person out of a thousand said that to be happy, you should try to work as hard as you can and make money to buy things you want. No one, not a single person, said that it's important to be at least as wealthy as everyone around you and be as successful as everyone around you. No one, not one person said that you could choose your work based on your desired earning potential. Meaning, at the end of someone's

life, they're not talking about money and success in all of this. What they were valuing, was quality friendships, being a part of something bigger than themselves, and spending quality unstructured time with their children. Interesting, you guys. So all this conversation we have on this show about money and building wealth and all of it, like the end game is not that. The end game is not just to become rich, okay? The end game is to have a level of peace and control over your life in this topic.

This topic takes people's lives and stresses them out because people are living paycheck to paycheck. they are leveraging a lifestyle they can't afford. Inflation hits and they are stressed, like all of those things. I don't want that for you. I want a level of peace in your life that you've set yourself up so that you can enjoy your life. And sure, yes, if you invest and you do these things, you are going to become wealthy. Mathematically speaking, that's what's going to happen over time.

But that's not the end goal. The end goal is to be generous. The end goal is to create a life that you love. So remember, it's always important to be learning, to be learning, to be very important. be open, to be willing to learn things about different topics in life. And for me, even though I talk about money all the time, I think it's always important to keep reading and keep learning. I wanted to talk about one thing that will never leave my budgets. And it might be a surprise to you. Now, listen, I'm not going to micromanage you because I'm all about encouraging you to take control

of your money. So I want you to do with your budget what you will because you know what is best. but I'm always willing to share tips on what has made a difference for me and my family, and this is one of them. Now, before I jump into my favorite category, let's talk about some categories that I believe should always be part of your budget no matter where you are financially. So first and foremost, giving. So this is always something that I tell people to do the very first thing is through your budget because I think it's really important to live a life where you're generous.

You're not trying to win with money just for you and to keep all the money. it is to help people. So practicing, building that muscle is really key, again, regardless of where you are financially. Next, you're going to save up for your four walls. This is food, shelter, utilities, and transportation. You want to make sure that is covered. Next will be savings. So if you're saving for Baby Step 1, your $1,000 emergency fund, or Baby Step 3, 3 to 6 months of expenses, or even retirement or whatever it is, saving will be next. Now, if you're paying off debts, if you're in Baby Step 2, then that's going to be your next step. is you're going to say, okay, I'm done saving my emergency fund. Every extra penny is going to

paying off debts. So again, all of this is around the baby step. So the Ramsey Baby Steps if you're not familiar with these, Babysep 1 is $1,000 emergency fund. Babysep 2 is getting out of debt. Babysept 3 is three to six months of expenses. Babyset 4, 5 and 6 you do together. So that's funding 15% of your income into retirement on Babyset 4. Babysep 5 is saving for kids college. Baby Step 6. is paying the house off early, and baby step seven is to build wealth and be generous. So again, your budget is going to really follow where you are financially with the baby steps so that you know what your next goal is. But once you've kind of gotten the groove of budgeting, you're paying off debt,

maybe you're building up your emergency fund or you're saving for retirement, you get to start incorporating a few more of your wants into your monthly plan rather than just needs. And this is where the fun happens, you guys. And this brings us to the number one must have in the Cruz family budget. That is fun money. Yep. Fun money. So you want to have this actually regardless of whatever baby step you're on.

Because I really think it's important to incorporate fun into your budget. You've got to find a way to do this. Now, obviously, it's going to look different depending on where you are financially. You know, if you are on Baby Step 2 and you're paying off debt, you're paying off that student loan or that credit card. You're kind of in the grind, right? more so than someone that's saving for retirement down the road. So if you are someone in babysept two, I would say find something simple to work into your budget that can be a treat.

You know, so whether it's grabbing a bag of chocolate chips and some stuff to make cookies on the back porch one night, or maybe you put $5 a week aside to go get a milkshake from Chick-fil-A or Jade, my friend, and the co-hosts of The Ramsey Show, she talks about when her and her husband Sam were paying off almost half a million dollars in debt, that she would invest a lot of time and energy and effort into making really great meals for her family on a slim budget. I mean, they weren't working with a ton, but that was something they would kind of treat themselves since I have really

great food at home. Now, another thing I've seen that people do while they're paying off debt is to celebrate each individual debt payoff. So even if it was, you know, $6,000 on a credit card, like once it was paid off, it was like, okay, let's celebrate that, or $12,000. on a car loan. Once it's paid off, let's celebrate that. Instead of waiting to the very end to celebrate really big, have some of those celebrations along the way. Now, we have a debt savings tracker on Ramsey Solutions.com that you can actually print off for free. And it's really fun because it lets you list out your debts. You can color in your progress. And even on that, sheet of paper, you know, you can put stars next to like once we get here, let's go do something. Let's, you know,

you can write a little reward or something that you could do to go and celebrate throughout your debt journey. Or let's say that you're saving up for your fully funded emergency fund of three to six months of expenses. Or maybe you're saving it for retirement, then it's like, okay, let's find some more fun that we can put into our budget. Because one thing I hear from a lot of friends who've gotten out of debt is that it can be hard to kind of shift out of that gazelle intensity mindset. So when you are sacrificing and like all that money is going to get out of debt and to save up that emergency fund. Once you're out of that, it's like, okay, I can actually enjoy my money. And it's difficult to. I find that a lot of people have a hard time again shutting off that

intensity to actually relax and have some fun and start enjoying your money. And remember you guys, like, that's the whole point of this. Like, you are implementing discipline and boundaries to bring freedom later on where your income is freed up that you get to do things that you want to do. So maybe you incorporate, you know, a monthly date night or a weekly date night into the budget. Or maybe you say, like, let's do one date night at a restaurant that, like, we've never would have eaten at on baby steps, you know, one, two, or three. And we want to do it. And we're going to go big and it's going to be awesome. Like, make that reservation a month from now or two months from now and start saving up for that, right? Because if you're going to drop, you know, 200 bucks,

300 bucks or something, just go crazy on a big dinner, then start saving for it and say, yeah, we're going to get there and actually enjoy it. So when you save up a little bit of money per month, that's called a sinking fund. And this is also very handy for saving it for big purchases, like replacing a car or even a vacation. So start thinking about your family vacation, maybe for spring break this upcoming year or next summer, and start saving a little bit per month towards that. So when you're packing for that beach trip or that mountain getaway, you know that you've cash flowed everything when you get to that point. So I do love a good sinking fund. It's really, really helpful. Now, if you're not drawn to any of those options, then just make some smaller changes.

Like, even just have a category for self-care and put 40, 50 bucks a month in it to make yourself, because some of you, you have to make yourself spend money. Make yourself go get a pedicure or like, go get a facial or do something in your budgets that you can actually enjoy. That's fun. And for some of you, you're actually putting back into your budget things that you cut out while you're paying off debt and saving for your emergency funds. So maybe you used to go to Starbucks every week to get that bougie Rappuccino or you went to a workout class every week that you loved and you paid for, but you cut that stuff out to sacrifice to pay off debt. Well, bring some of those things back. Because don't forget about the fact that you've already accomplished your money goals. And at that point, it's like, dream, have fun.

spend some money. This is the reward of all the hard work that you've been doing. So again, there's a time and a place for this fun money to get even bigger or smaller, depending on where you are, but I want you to also be incorporating it. And something else I want you to incorporate. We talked about it at the beginning, but it is fun, and that's giving. In 2021, a study from the Journal of Positive Psychology found that spending money on others brought people even more joy than spending on themselves. And it's so true, you guys. I mean, once you take control of your money

and not only can you finally create a life that you enjoy and that you love, but you're going to have margin for good, you're going to have margins to be able to help other people. So I would even encourage you to make a list of two to three causes that you really are passionate about, and even just donate, maybe $25, $50 a month to them and just start looking for opportunities throughout your life where you can give or you can love someone really well that's in your life or in your community

with a financial gifts. So start practicing giving because it is. It's actually a gift to you. All right, you guys, well, thanks so much for listening to this episode. I would love for you to review this podcast. If you will leave a review, it will be so, so helpful. It helps with the algorithm and even for our team to know what you guys are loving. We just love hearing from you. And share this podcast with a friend. If you know someone that you've been talking to, about money, it's so great to just spread the word. So send them this podcast. So thanks, you guys again for listening. And remember to take control of your money and create a life you love.