The Rachel Cruze Show - How to Love Your Home (And Afford It, Too)

Episode Date: February 18, 2019

Buying a house is the biggest financial investment most people will ever make, but your home is a big deal for other reasons too. It’s the place where you lay your head down to sleep at night, where you prepare your meals, and where you raise your kids. It’s where your life happens! So, I don’t want this to be something stressful in your life. I want it to be a place of joy.  In this episode, you’ll learn how to: make the most of the space and furniture you have decide when the time is right to buy a new home avoid red flags during the home-buying process pay off your mortgage early If you’re buying or selling a home in the near future, connect with an ELP today. And get the best mortgage or refi for you and your family with my friends at Churchill Mortgage. Get tickets to see Rachel at her Money & Marriage event here! Be prepared for your future with term life insurance from Zander here. Download the Down Payment Goal Tracker Learn more about your ad choices. Visit megaphone.fm/adchoices

We laid out all of our debt, and that's when it hit me. We have to do something about this. About long-term freedom, what you see, it may not be in the moment, but you see it's out there, you see it's possible, and that keeps you motivated. In 25 months, we've paid off $153,000. We're changing our family tree, and that is worth the weight. What you don't want to do is to be overly emotional, and then put yourself in a bad situation. It's to set you up for your house to be a blessing, not a curse.

If you hear the words, that's not a big deal. huge red flag for me. Hey, everyone, welcome to another episode of the Rachel Crewe Show podcast. I am so glad that you're here and tuning in, and I'm really pumped about this episode because we are going to talk all about how to own your home without letting it own you. And man, our homes are a pretty emotional subject in our lives, right? I mean, your home is where you do a lot of life. It's where you eat dinner and you wake up and you go to sleep and you raise your

your kids and you fight with your spouse. Like all the things happen in the home. But on the flip side, I want you to be wise financially when it comes to your home. And a lot of you are paying off consumer debt. Some of you are saving up for your emergency funds. So the idea of even just paying off your home, paying off your mortgage seems so far away. But there are some things that you can do to help you now and in the future. So in this episode, we're going to walk through how to pay off your home early because who doesn't want to do it? that, a paid for a house, heck yeah. We're going to Skype in a couple who's currently on Baby Step 2 with a mortgage, but they want a new home. And I know that's where some of you guys are, so

their story is just fantastic. And last but not least, we're going to talk about when is the right time for you to buy a house, and we're going to have a real estate agent on to give us some great tips. Now, the whole house conversation, you guys, it is so easy to compare your house with everyone else's, isn't it? Like, I'm in the season of life right now where a lot of my friends have multiple kids, and they're like busting at the seams because they're in their first house. And like, oh, we need a, you know, we need more space. And if I've heard that from one friend, I've heard it from like all of them. They're like, if I just had another room, if we just had one more, one more room, I feel like we get spread out. We're not on top of each other.

And so it's always interesting as I'm like, you know, it's not always the comparison of the size of the house, even though that might be your story. But sometimes it's like what's in the house. Like when I walk into some people's house, I'm like, oh my gosh, am I in a restoration hardware, like catalog? Like, what? Or pottery bar. I'm like, party bar and just threw up everywhere in this girl's living room because it's like perfection. And I'm like, man, because that is not my gifting. Like, I am not great at design. I'm not great at being creative. And even if those things are not from these like really nice great stores, like some of you out there are like really good at finding things on Craigslist and, like, repainting it. And it just looks all warm and

cozy. Like, my sister-in-law totally has this gifting. Like, when I walk into her house all the time, I'm like, oh, my gosh, Kristen, like, it's so warm and it's so inviting. And they didn't spend a crazy amount on their furniture, but yet she's decorated it so well. And I find myself, I'm like, oh, I wish my house felt like this. Like, it's just crazy. It's so, so easy to compare. So this is one area of our lives. We have to put the blinders on because if you get emotional about it, You're going to make some really dumb financial decisions, whether it's furnishing your home or buying a home you can't afford. So putting the blinders on, learning to love your home, and not everyone else's. Now, a lot of you guys that have a mortgage, the idea of paying it off sounds like amazing, and you want to pay off your mortgage faster.

So here are three things you can do no matter what baby step you're on to pay off your mortgage faster. And side notes, if you don't know what the baby steps are, go to rachelcruise.com. and I did an entire episode of the Rachel Cruz show, the video version, all on the baby steps. And that's titled, The Seven Step Plan to Live Debt Free. So make sure to check that out. All right, number one, the first way for you to pay off your mortgage faster is to refinance for a better interest rate. So look at the current interest rate, and if it's lower than when you bought, this could be a great option for you. This could save you thousands and tens of thousands of dollars in interest over the course of your mortgage.

Number two, refinance from a 30-year to a 15-year if you haven't already. One of my mantras, and everyone here at Ramsey Solutions believes in it, to be out of debt as soon as possible, and that even includes your house. So by going on a 15-year mortgage, you are going to be paying your house off technically 15 years faster than if it was a 30-year mortgage. Now you'll usually get a better interest right with a 15-year mortgage versus a 30, but your monthly payment will be a little bit higher. But guys, it is so worth it.

The average home in America is $250,000. And if you pay off your home in 15 years versus 30 years, you'll be saving, on average, $130,000 over the course of your mortgage. Yeah, $130,000 goes back in your pocket. I mean, just imagine, what could you do with $130,000? Like, a lot of things for a really long time. a lot of money not to send to the bank and to keep in your pocket. So that 15-year mortgage, man, I'm all about it. And last but not least, look at your current situation. I mean, is your payment

taking like half of your income? Yeah, if that's the case, you guys, you have too much house. I don't want your house payment to be digging in to your income so much that it's hard for you to pay off debt and to save up for that emergency funds. You have too much house. And that's always kind of a hard pill to swallow. And I'm going to call out a few of you in the New York area in the California part of the country, maybe even Florida, where real estate prices are crazy high. Like, I'll go to California. And they say, Rachel, your mortgage payment should be no more than 25% of your take-home pay. But you can't do that. I live in San Francisco. Listen, I don't care where you live. You're not exempt from math. Okay. So if half of your payment is going

out, it is going to take you a really, really long time to get ahead financially. And I don't want your house to own you, okay? So that's what you have to remember. And I would ask yourself, like, if you are in this crazy, nice, big house that your mortgage payment is half of your income, ask yourself why? Like, why do you feel the need to live in this crazy nice house that technically really, you can't afford? Like, it's not going to help you. It's really not. And again, this episode is all about you owning your home and not letting your home own you. Because for a lot of people, their home can be a curse and not a blessing, and I don't want that for you. So, again, look at your current situation, and the answer might be that you might move.

You might sell the home and get a house that you can afford and that your income can go to things that are going to take you further in the future, like paying off debt or investing, saving up for that emergency fund, all the above. Now, most of you are in Baby Step 2, so you're paying off your consumer debt and the idea of paying off your mortgage and Baby Step 6 seems so far away, but stay motivated, you guys. you can do this. Now coming up next is an amazing couple, and they are where a lot of you are. They're paying off debt, but they want to buy a new home, but they want to be wise about it. So take a listen to their story. Thank you so much for coming on and sharing your story.

Thanks for happiness. Yes. Thank you for happiness. Absolutely. Okay. So you guys are on the debt-free journey right now. You're working your way out of debt. So I want to know how much debt did you have and how much have you paid off so far? So we started out with $169,000, and in 255 months, we've paid off $153,000. You guys, that's insane. That is absolutely insane. Okay, I want to know, like, what made you start? When you had all that debt, what made you say, okay, we want to actually get out. We want to do something proactively with our money and get out of debt. How did you, what made you start that? So initially, Dave came to our church here in Houston, and he made the pitch. for a financial peace university, the class. And Rolando was pretty much all in as soon as he heard it.

I was more hesitant. We both have student loans. I had almost 90,000 student loans. So I figured I'm always going to be paying these loans anyway. Why would we sacrifice so much? All right. I'm going to interrupt here because I hear a reluctant spouse. Does anyone else? Yeah. This is one question I get all the time. Rachel, what if I'm on board but my wife isn't or my husband isn't? What do I do? So really quickly, and I'll probably do a whole episode on this because it's a big deal. It's a big question. A couple of things I always tell couples. Number one, if you're on board and your spouse isn't, explain your why. Why do you want to get out of debt? Why do you want to live on a budget? Like, why? Is it for your kids? Is it that you're stressed out and you feel like there's no

security when it comes to your money? And if something were to happen, gosh, it's like you don't know what you would do and you're scared. Maybe it's about retirement. And you're like, God, we're so close to retirement and just, I want to be able to go and live our dreams after retirement. But we have the money. Like, what is your why? Explain your why to your spouse. Number two, also show them visually the progress you can make, especially with paying off debt. Like if you go ahead and list out all of your debts smallest to largest and show the minimum payments and then show the time frame of like, okay, if we spent, you know, 19 months and we started with this debt and that debt and that debt, you know, we could be completely out of debt in less than two years.

And you actually see the progress. That's a huge step for a reluctant spouse because most of the time, especially with getting out of debt, one spouse is like, hey, we should get out of debt and never go out to eat and you should sell, you know, your car, and then it'll be great. And the other spouse is like, oh, I'm sorry, no thank you. But if you show them the progress and the short-term sacrifice, that sometimes wins them over. But if those don't work, I always say, last but not least, bring in a third party. That's right. That could be Rachel Cruz, me, have them listen to the podcast.

Maybe it's Dave Ramsey. Maybe it's a total money makeover book. Maybe it's a love your life, not theirs book. Like, whatever it is, bring in a third party. And that may even mean a marriage counselor if it's really bad. Seriously. But it's amazing. When someone else brings the message, sometimes the spouse is willing to hear it more

so than coming from you. So those are some ways to get a reluctant spouse on board. We laid out all of our debt when we got home and that's when it hit me that we'd have to do something about this. Dave illustrated borrower being slave to a lender with the change. Yeah. And that just that just got me whenever we laid out all of our debt. And I said, we have to do this. I'm literally working to pay my student. Yep. Totally. Okay, so how long will that debt-free journey be from start to finish?

What do you predict? From start to finish, it'll be about 28 months. Wait a minute. Okay, and you guys own a home currently. We do. And so are you guys happy there? Are you itching to move? Like, where are you at in that process?

So we're kind of on different sides of the fence there. We're both happy where we're at. However, I'm excited that once we're out of debt, we'd be able to save up, sell our home, and eventually purchase a larger home. got a different perspective on that, though. Yeah. He's the one. He, I guess I'm the more content one. I guess you could say he's already like looking at homes, you know, just for fun, he says, ready to move to a bigger house. And I'm just more content and comfortable where we are already. Yeah, so I'm curious, like, what's the biggest motivation to move? Do you feel like you're

busting at the seams for a bigger home, or you just feel like, man, we could afford it and it'll be fine. Like, like, what's that? What do you think it's both, right? So as our family grows, I'd love to grow into a bigger home. Yeah. And then again, being out of debt, not having that weighing us down, it'd be a whole lot easier to move into a bigger home because we can then afford it. Yes, totally, totally. Okay, so the fact that you kind of have that itch and together, you guys may not necessarily want the same things right this minute. Like, what keeps you from not doing it? Like, what keeps you guys paying off all your debt, saving it for a down payment? I mean, like, what keeps you on the plan when you still have that itch to move?

Well, I think starting off, it's understanding that we're so close, first of all. We're so close to being out of debt. Why jeopardize that at all right now? And then just being able to say we're free. We're debt free. We don't have any bondage now. And then again, it'll open up and free up that income. Yeah.

And I agree with that. And it's also seeing the success of focusing on this. getting out of debt, how successful you are by just focusing on one thing rather than spreading your efforts out. And then just remembering why we're doing this, we have two little ones. So knowing like Dave says, we're changing our family tree and that is worth the weight for us. So good. I mean, that's like just the classic example of like that long-term goal, like that long-term freedom, what you see. It may not be in the moment, but you see it's out there. You see it's possible. and that keeps you motivated, which I think is just so important.

So what would you say to someone watching? And maybe they have $85,000 in debt. And they're like, man, I think I'm going to start this journey. But like, oh, I hate my house. Like, I hate the carpet in it. I hate the paint. Like, I want a different floor plan. And they just want to move right now with all that consumer debt.

What would you say? I'd say just wait. It'll be worth the weight. And again, because you'll be able to use the income that instead of paying towards debt, you'll be able to throw it at a house. You'll be able to possibly afford the home of your dreams instead of having to settle for something less.

I agree that it's worth, it would be worth the way. And you have to learn to, I guess my big word is just being content and be happy for what you do have, work at this current goal, and know that in the future, those all will be possibilities if you don't have this debt, weighing you down. And like you said,

you'll have even more options available to you. Oh, I love that. Right, because it's not like you're never going to be able to have the nice home, right? It just may be putting things in place for you to enjoy that home so much more than right now. So I think that's such good advice, you guys, and you're killing it. I mean, you guys are like doing like crazy stuff right now, paying off all that debt. You're sacrificing, putting some of your wants aside for the moment. But absolutely, absolutely incredible.

And you're exactly right when you said earlier, Emma, you are changing your family tree. Thank you for having us. Appreciate it. Couples like that, to me, they are just so inspiring. They really are. I mean, they are doing what's best for their family in the long term, even though it might be sacrificing some things that they want in the present. But gosh, it is. Like we said earlier, it's so worth it. It really is, you guys. In the house, whole conversation, it's a huge conversation to have. Financially, it's one of the biggest purchases most of you are ever going to make in your lifetime. And so you want to be really, really wise with it. And the important thing is to be able to be at. of debt, have that emergency funds, because that gives you such a solid foundation financially to go then and save up for a down payment on a home. It can get really, really tough if you go and add on a mortgage to more debt that you have and if you don't have savings because houses are expensive and things break. So it is important to be in a good spot financially before you purchase that home. All right. Next up is a real estate agent here locally in Nashville.

His name is Alex, and he came on the show to give us some really great tips when I comes to home buying, some things to think about, some red flags, all the above. So here's our conversation. Well, thanks, Alex so much for coming on. Thanks, Rachel. Glad to be here. So appreciate it. All right, you guys, so when you're looking to buy a home, here are three things to remember when it comes to your money to know that you are ready to buy that home. First and foremost, I want you completely out of debt in a fully funded emergency fund of three to six months of expenses in the bank. So this is great because this sets you up for your house to be a blessing, not a curse.

And Alex, you know that, but it is. It's so key. So key to be out of debt and have that emergency fund. That's right. If you're broke, you guys, and you buy a house, you become broker is what ends up happening. So getting that solid foundation is so, so key. And then next, I want to make sure that you have a good down payment on your home. So, Alex, I always tell people 10 to 20% down payment is like the ideal world.

Would you agree with that? For sure. So we recommend putting 10% down. By doing that, you are, keep in mind, these folks are working towards ultimately getting the home paid off. Yes. Right. And so if somebody says,

hey, can I get a loan and put nothing down? They are out there. Those are options. It's just not consistent with where we're trying to go. And so the other thing is, too, is that nobody plans to lose their job. Nobody plans to buy a home and have to relocate 30 days later. Yep.

And it doesn't happen often, but it does happen. It happens, guys. Yes. When you put 10% down, you're in a position so that if you need it to sell quickly, you have enough equity in it, that you can do that. So good. It's not going to be this big thing. You can move on with what you need to do. Yes, I think that that is great advice.

And you guys, if you are saving up for a down payment, you can click the link in the show notes and get my free down payment goal tracker to help you stay encouraged while you're saving up for that down payments. And then last but not least, when you're taking out your mortgage, make sure to get a 15-year fixed rate and that your payment is no more than 25% of your take-home pay. So that's key. All right, Alex, you've been doing this for how long? How long have you been selling homes and how do you buy homes? Six weeks now. I literally was like, you're really good at this. 12 years. 12 years. Okay. So what are some things that people should be looking for when they're going

to buy a home? There's a couple of assumptions. I'm assuming they've gone through the first three baby steps. They're set up with their emergency fund. Yeah. The first thing I would do was be encouraged them to remember what got them here, right? So, patience, they're working a plan, and they've had discipline. Yes. And so what you don't want to do is throw all those things out, get into the process, be overly emotional, and then put yourself in a bad situation. So now that we have the right mindset, then we're going to work on three things before we go shopping. The first thing is getting really clear on a budget. We know what you all recommend with, you know,

having a mortgage with HOAs and taxes, no more than 25% of your take home. But that doesn't mean they're clear on their budget. So they need to get clear on their budget first. It's good. The second thing would be a wish list, and not just a wish list, but prioritizing your wish list. So a lot of us can come up with, you know,

maybe the top 10 things. And we think that every home or the right home is going to have all these things. And the truth is, there's a little bit of give and take, right? And so that is going to be kind of our self-guide to say, hey, these are the things that are most meaningful to me. And some of those may be non-negotiable and others may be strong preferences. But that's going to be really helpful for somebody starting out. I don't know that I've ever seen a couple buying a home that started out on the same page.

We're talking about life. Of what they wanted in a house. Yes. Right, right. The guy's like, give me a big old grill in the back. And she's like, I just need a good closet. Like, yeah, yeah, yeah, I'm sure two totally different priorities. That's right. And so just using that exercise also helps them to move towards getting on the same page. And so that's a natural process. It's also helpful to the agent to just know those priorities. Let's not look at, you know, these homes over here that don't have the things that are most meaningful to you.

Yes. And those non-negotiables, I think, are so important because, I mean, I think about, like, you know, for instance, it could be a yard. Right? Like you're like, I don't want a zero lot line. Like, we want a yard. And what it does is it just starts narrowing down what you want. And those big priorities, those non-negotiables, you're still going to have options, but it's not like this whole world of houses and it's so overwhelming.

It does narrow it down and it helps you be wise in those decisions. I think that's so smart. Yep. The third thing is going to be choosing an agent, hiring an agent. You know, we recommend reaching out to an endorsed local provider in your area for real estate services. And when you're looking for an agent, when you're interviewing those agents, we recommend interviewing, you know, anywhere from two, three, however many it takes to be comfortable. That's the key. And so what you're looking for, we recommend connecting with somebody.

We're all different. You're spending a lot of time with this person, and so you want to connect with them. You want to find somebody with the heart of a teacher. EOPs should have that. And that's going to come in really handy. And the third thing is going to be finding somebody that you're comfortable with, and you're probably going to be comfortable with them because you trust them. Yes. And not a blind trust.

Not a blind trust. Like, you're the expert. I don't know what I'm doing. But a, we're partnering together. And I'm trusting you to guide me. I'm trusting that you're going to be patient with me to answer questions that I have, right? If red flags pop up or whatever it may be, I'm trusting that you're looking out for me and that you're giving me really good advice. Nice. So after all that, you're ready to go shopping.

So good. Such good tips. Okay. So I want to know some red flags. Okay. Some things when someone walks in her home that they have to just like run out the back door and you're like, get out of there. Don't do it. Like what are the big red flags to look like? Yeah. Just throughout the process. Okay. So we're assuming that you're working with an agent that is an ELP and that you trust them and that you're comfortable with them. But if you hear the words, I was thinking about this, if you hear the words coming out of like anybody, all right? I can't wait. Of like, that's not a big deal. And then they want to keep moving on. Huge red flag for me. So good.

And it may or may not be. Yes. But they're not taking the time to explain it. And these folks should expect that they take the time to explain it to the point that they are comfortable making their own decision to move forward or not. So good. Oh, I love that. Guys, there's so much in this. Yeah.

For real, though. Such great advice, Al. Thank you. I know you guys probably learned a ton. So seriously, thanks so much for coming on. Yeah, my pleasure. All right. So if you're getting ready to buy or sell home, seriously, check out one of our endorsed local providers. You can click the link in the show notes and get an agent in your area that you can trust. Oh, what a fun episode. I wish we were like all in a house together listening to this because, again, your home is a huge part of your life. And I want you guys

just to be wise about it when it comes to your finances and your heart about being content with where you are such important stuff. Well, I hope you enjoyed listening. Make sure to hit that subscribe button. I'm learning in this podcast world. That's a big deal. It is. So you can do that. If you feel led to leave a review, you're welcome to do that as well. And make sure to check out the video version of the Rachel Cruz show that's on YouTube and Facebook. Well, thanks again, you guys, for listening. And as always, remember to take control of your money and create a life you love.