The Rachel Cruze Show - How to Spot Hidden Costs and Money Traps

Episode Date: October 9, 2023

Being smart with money means you have to know where to cut back and where it's actually worth it to spend top dollar—from big life events to your breakfast cereal. In this episode, learn what it really costs to have a baby today, things people commonly get wrong about money, and whether buying generic could save you big . . . but is it worth it?   What you get in this episode:  ·      What Does It Cost to Have a Baby Today? ·      5 Things People Get Wrong About Money ·      Is Buying Generic Brand Groceries Really Worth It? Helpful Resources:  ·      Christian Healthcare Ministries  ·   Better Help ·      EveryDollar ·      Financial Peace University 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 and Better Help. 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

The key is, I want you to put your hard-earned money into something that has a proven track record. To have something that I know with confidence, sure, the market goes down some, absolutely, but it also goes up a lot. Hey guys, welcome to this episode of the Rachel Crewe Show podcast. I'm so glad that you're here. Okay, one thing that helps so much to get this podcast in front of other people that may not know it even exists is your reviews. Yes, when you subscribe or leave a review, it helps with the algorithm. because we want so many people to listen to podcasts like on the Ramsey Network, because we want to help you get in control of your money and everyone else out there. So please do that for me.

Leave a review if you can. It would be so, so helpful. But in this episode, today we're going to talk about how to spot hidden costs and money traps. I'll go over buying generic brands over name brands and if it's worth it. Then we'll talk about five things people get wrong about money. But first, let's talk about a medical expense like a cost, you thousands and what to do about it. Take a listen. So there's been a lot of baby buzz at the office lately, and we've all been talking about what everyone's different experiences have been like,

and recently a coworker of mine actually called a few hospitals and asked them point blank, how much does it cost to have a baby? And nobody could give her a concrete answer. So today, I figured it'd be fun to bring a few more people into this conversation. So I asked you guys on social how much it costs to have a baby or tell me from experience how much it cost them in the past. And after we hear from you guys, I will go over all the different expenses that go into having a baby so that you can be financially prepared if this is something that you're considering now or in the future. Okay, so I asked you guys on social how much do you think it is to have a baby. And here are some of your responses. So as you can see, some people, uh, kind of close.

you know, to reality. Some people know, not at all. But again, a wide range. So I know that people have an idea, kind of a perception of what it costs to have a baby, but let's talk about some real numbers that might be helpful for you to know. So the first thing to be aware of is how much it costs on average to have a baby. So right now, the going rate is about $18,8655 or $2,854 with insurance. And that cost includes ultrasounds and check-up appointments, hospital birth, and postpartum care. Now, obviously, the exact number can be based on so many factors. For example, the cost of a C-section is around $26,280 or $3,214.14 out of pockets. And on the other hand, home births generally are cheaper than hospital births. And the estimated cost for that is about $4,650, and that includes a

midwife, prenatal, and postnatal care. Now, keep in mind, insurance coverage can vary on non-traditional birth locations. A home birth, for example, costs on average $4,650 for prenatal delivery and postpartum care as long as mom doesn't have any complications. Now, at birthing centers, which are rising in popularity, the average total cost for that is around $8,309. And again, location also matters on a large scale. So costs vary depending on which state you give birth in, along with other factors like insurance policy, length of hospital stay, or unexpected health complications for the mom or the baby. All right, the second baby expense to be prepared for are purchases that you need to make before the baby arrives. So there's certain things like health stuff that you might adjust for, like prenatal

vitamins, or maybe you're going to be eating healthier so your grocery budget may be a little higher. But then there's things like buying clothes. items for the baby. This is stocking up on baby essentials that can be very expensive like car seats and strollers, even baby clothes, a crib, a diaper bag, a baby monitor, a high chair, changing table, all the things. And there are pre-baby expenses and then there are post-baby expenses, which brings me to the third type of expense to prepare for. And that is items that you need to repurchase after baby arrives. So think about formula and wipes, baby powder, pacifiers, book, toys, blankets, and clothes, more clothes, clothes, always, always, always. And don't get me started

on the diaper situation. You go through them so fast. I mean, it was so funny. I feel like we bought some diapers. I'm like, yes, a little 12-pack will last us a little bit. And within two days, you're like, we need more diapers. You just go through them so, so quickly. Now, one thing I'll say that we did not spend money on was like the traditional baby furniture for the most part. We got like a glider, a chair, a comfy chair, which was worth it. That was a great investment. But things like a traditional changing table, all of that, we didn't. I just got a regular dresser and then put like a pad, changing pad on top. So I did kind of find ways to cut expenses. I did not spend a lot of money on the crib. I did spend a lot of money on our stroller, which we still have,

three kids later. Thank you very much. So there are some things to invest in. Again, it's the stuff. It's the utility stuff for me that you're going to be using. A good baby monitor, you know, a stroller, a car seat. It's that kind of stuff that needs to be durable. but like the crib and the furniture and all that, I think you can go less expensive on. It would be totally fine. All right, finally, along with all of the tangible and physical things that you need,

number four is the logistical expense that you need to plan for. So think about maternity or paternity leave. Is it paid? Is it not paid? Are you going to have someone help with child care? Or will that be another expense in your budget if you return to work?

And if some of you are feeling like, oh my gosh, there's a lot of numbers going on. I know. There is. There's a lot preparing for a new baby. I mean, for not just the money, but everything else. But I am a firm believer that money should never slow you down if you want to start a family. So the truth is, nobody's going to be 100% ready to have a baby. So if it's something that you guys are considering and that's something you want to do right now, do it. Have a baby. Absolutely. All right, let's talk about how to get a plan in place for your money if you are anticipating a pregnancy or a new baby in the future. So we talked about budgeting.

and budgeting is really key. So every dollar is one of my favorite budgeting apps, but understanding where your income is going is going to help you plan and let your money go further. So make sure to download every dollar to free budgeting app because it will help you in this season. And some people want to be completely debt-free before they start a family.

And that's fine if you want to be. But I think big life decisions like getting married or having a baby, all of that, you don't have to be debt-free. As much as you guys know, I want you to pay off your debt. I also don't want life to be stopped. So if that's something you want to do, that's great. Now, is it less stressful if you don't have debt and you have money saved and you bring a baby in?

Sure, absolutely. But also, don't let that stop you. If you guys still are working on your student loan debt and all that, but you want to start a family, start your family. Okay, so I know that's a lot, you guys. So there's a lot of conversations to have, but I think it's very exciting. And again, I work with some people and have some friends, and this is a constant conversation because there's babies coming and it's so exciting. So if you are expecting, congratulations,

or if you're about to start a family or want to, it's great. It's wonderful. So send this video to a friend, though, who maybe is thinking about having a baby or maybe they're expecting, and hopefully this can help them. Now, the point of this episode isn't to make you feel embarrassed or guilty if you're someone who has a history of some of these bad habits, but I do want to shine an important light on some of the common misconceptions when it comes to budgeting and spending. and there are a lot of these voices out there in the personal finance world.

And I want to make sure that you're hearing the ones that are pointing you towards a path where you can make lasting progress with your money. So first and foremost, let's talk about credit cards. So despite the U.S. hitting over a trillion dollars in consumer debt this past August, credit cards are still something that a lot of people think that they need to have to get started financially or to be successful financially. And people claim that credit cards are helpful. to build credit in order to buy a home, protecting against fraud, paying for emergencies,

and getting rewards and cash back and points, and all the things. So now, is all that true to credit cards do all those things? I mean, to a degree, sure, if you don't have money, could it be an emergency fund? Yeah. Does it help you build credits by a house? Yes, like those things do happen, but there's a better way to do all of those things versus through a credit card. So you can actually get a house, get a mortgage without a credit score called manual

underwriting. I don't want a credit card to be your emergency fund. I want you to be your emergency fund because if you have an emergency, then you have a situation and then you go into debt for it. So now you have a money situation. So now you've got two things on hand versus if you have cash saved up. So there's ways around this world of credit cards that I'm telling you it is the best. When you don't owe anyone anything, even people say, well, I pay mine off at full at the end of every month.

Sure, that's the case for some people. But still, there's that idea that when you pay in the moment, percentage-wise, statistically, you pay less because you spend less because you know the money's coming right out of your account. Now, in reality, I see it so much more harm than good when people choose to go into debt for their purchases. And the truth is, again, that credit card debt is a huge burden to millions of people every single day. So, in my opinion, I would just avoid it altogether. And I've never had a credit card, and I've been able to do all the things that we just talked about. And I'm still living. I'm still alive.

So, listen, just say no. Use a debit card or use cash. The second misconception is the 50, 20, 30 budget rule. So I did a recent episode on this. So if you're interested in a deeper dive, then I will leave a link in the description below. But at a high level, there are some flaws that I see with this type of budgeting. Number one, it's just, it's too broad, right? So someone earning $40,000 and someone earning $100,000, you have to be able to say specifically

where that money's going and that broad streak of saying, regardless of what you make or what financial situation that you're in, these are the only numbers to go by. That's why I love the idea of budgeting is zero-based budget because you're telling your income where to go. Because with this other form of budgeting, the 50, 20, 30 rule is that there's no goal setting, there's no strategy. It's just the same thing no matter where you are because there's no adjusting. But what I love about a zero-based budget is that you're able to be very specific about your situation. So if you're saving for an emergency fund, you're able to look at your budget and you're going to cut expenses. You're going to have less of a lifestyle for a season to get to your next goal. Again, zero-based budgeting is the way that I

budgets. And if you haven't checked out every dollar a budgeting app, make sure to do that. All right, the third thing that people tend to get wrong when it comes to money is choosing whole life insurance versus term life. So whole life insurance is extremely expensive compared to term life. And whole life is for your whole life versus if you do the Ramsey Baby steps and you get to a point in your life where everything's paid off, including your house, you have lots of money in your 401k and Roth IRA, you have cash available. So if something were to happen to you, and if you still have people dependent upon your income at that time,

they're going to be taken care of. You're going to be self-insured at some point during the Ramsey Baby Steps. But before that, I would say to get term life insurance, it's very inexpensive, and it's just life insurance. Because with whole life, they charge you more, and they mix this idea of investing and your insurance. So they take some of your money and they invest it at a terrible rate versus if you just took that money and put it on your own,

you know, in a vanguard account or a mutual phone, funds, then you're going to get a better rate of return that way. So again, term life insurance is what I recommend. It's what Winston and I have. And we use Xander insurance. So you guys, check out Xander. It's great. You just put in your information, hit a button, and you can see what your policy could be. They make it so easy. And everyone needs life insurance. Okay, remember that. If someone is dependent upon your income, you need term life insurance. All right. The fourth thing that people get wrong about money is that risky investments like crypto or day trading are smart moves. This is so difficult because a lot of these

things have such a short-term track record or people that have been doing it, the track record shows that you end up losing money in these risky investments. So I understand that when I say, hey, fund your Roth IRA, fund your 401K, pay off your house, do these other things. It's not exciting and like risky and like, oh my gosh, let's see what this is doing. And like, we're going to get big wins and oh my gosh, look what's happening and pull out of there. Like, it's all this, like, this huge game. The way I teach it, it is boring. It's not going to be that exciting. But the key is, I want you to put your hard-earned money into something that has a proven track record. To have something that I know with confidence, sure, the market goes down some, absolutely,

but it also goes up a lot. But over time, we can see a proven track record. And so retirement plans, like a Roth IRA and a 401K, these are great smart places for long-term investing. So if you're going to do risky investing like crypto or day trading or something else, if you want to do it, I want you out of debt with a fully funded emergency funds, doing everything else, like your 401k and all the things that are pretty much guaranteed and then taking a small percentage and doing what you want over here. But I would not go and bet everything. I knew people you guys that cashed out their 401k to buy crypto. And it's just not smart. It doesn't have a long proven

track record. So wait until something proves out over time. And I would rather do that and get in at the end of it than risking all of my money on something that does not have a proven track record. All right. Finally, the fifth thing that people get wrong about money is believing the myth of good debt. So I'm a firm believer that debt of any kind is never ideal. It's really tough. A mortgage is the one type of debt we won't yell at you for. But everything else, you guys, I mean, when you look at scripture, when you look at common sense, when you look at people who have done this stuff, when you don't have risk in your life, when you don't have Toyota Motor Company taking your paycheck and Sally Mae and MasterCard and you're taking your income and your paycheck and paying out all these

people versus paying yourself and investing and doing wise things with your money. Over time, you just lose out on so much opportunity. So instead of making all those people rich, I want you to make yourself rich, right? And to build wealth over time for you and your family. And so this idea of good debt, I just don't see it existing. I think card debt, mathematically speaking, is not wise.

Credit cards, I hate playing the game. Percentage-wise, you spend more like we talked about earlier. Student loan debt, well, we can see where that's gotten us. Obviously, the ROI there has not happened. And yes, it sucks that tuition is what it is. and it's still this idea that the schools can charge whatever they want, but we have to be smart consumers too. So all of it together, there's just not, you know, this idea of debt that is good.

And a lot of people will use debt for real estate. And you'll see a lot of TikTokers or people on Instagram Reels or influencers doing this. And you know what? If that's the path that they choose, it's just very risky. And you can see over time that not just mathematically is it risky, but it does something to you. And John Deloney talks about this. When you don't have autonomy, when someone else owns

a part of you, there's not true peace. Like your heart rate, your body knows when stuff is happening. So for you to have complete freedom, it really is one of the best ways to go about it. And if you're someone who has a history of some of these money mistakes that we've been talking about, I just want to encourage you, you can change your mindset. You can make a different choice. And so you can actually choose, hey, if I don't like where I am right now financially, you have to make other decisions.

You can say, I want to make different decisions with money. But I would recommend making those changes as soon as possible. And if you need help, I really would encourage you to check out Financial Peace University. It's a great place to start. FPU is a personal finance course that consists of nine individual lessons that walk you through exactly how to take control of your money. So you can go to Ramsey Solutions.com to learn more and get signed up there. And send this video to a friend who maybe is kind of on that good debt train. Today I'm letting you in on a little experiment that I tried at my house recently.

So I wanted to compare a few name brand items. so their generic store brand version. So I secretly swapped out four of my kids' favorite snacks without telling them to see if they could see a difference or tell a difference, taste a difference. So I'll share all the details with you. Plus, we'll calculate what the price difference would be if you were to do this for a full year.

So I know this sounds really simple, but you'll be shocked about how big of an impact this one little adjustment can make to your overall budget. So just FYI, I usually shop at Publix for my groceries. So my swaps were, again, the name brand to the Publix brand version of these snacks. So the first snack that I swapped out was raisins. My kids love raisins. I don't know why I'm not a big raisin fan, but somehow they were into it.

So I normally, you know, get those like classic red, sunmade raisin packs or like get the big container. But this time I got the Publix version. So it's really not as cute or nostalgic. In their design, it's just white. But it's fine. It's fine. And it was almost $3 cheaper. So the name brand for a pack of six of the little boxes for $4.99.

The Publix was $2.6. So a difference of $2.93. And did the kids notice? No. Raisins are raisins. They had no idea. Didn't know. So I put them out and I was like, okay.

And I would ask them like, so does this taste like, you know, like you're normal? You know, this one, no thoughts. They had some thoughts about the other ones I'll tell you about. But no, nothing here. So raisins, check. The second product I switched out was Triscuits. Okay, some people have a lot of feelings about Triscuits. Some people hate Triscuits.

Some people prefer wheat thins or something else. But I love Triscuits. I always have. So I got the Publix brand of woven wheat, which I guess is a really creative name. So a little shout out to the Publix who name their snacks. So the name brand Triscuits box is $4.79. The Publix brand is $3.31. It's a difference of $1.48.

And did the kids notice? They didn't really, I'll be honest. kids don't like dive into Triscuits like I do, so I was a little bit of like the sampler here. And yes, there's a little bit of a difference. I'm not going to lie. It was not as clear as the raisins. The raisins, there was like no difference. This, yeah, there was a little bit, but it wasn't terrible. It wasn't one that you were like, oh, that's an obvious change. Now, Triscuits does have some great flavors and the public's brand doesn't. It was just plain. But if you had to do it, if that's what you had, like, to me, the swap was fine. A little different, but not bad.

Right. The third item I swapped out was Honey Nut Cheerios. So another classic. My kids love Honeynut Cheerios. They'll eat a bowl for breakfast, even like if we're going on a road trip or something that's one of the snacks. I'll pack. I'll put it like in a Ziploc bag or something. So they love it. So the name brands, Honey Nut Cheerios is $5.11. The public's brand is $3.65. The difference of $1.46. And my kids noticed, yep. It wasn't like terrible Amelia. And I quote, I mean, if I have to eat a mom, I will. I was like, okay. So they're not like gagging when they're eating it. They're not like terrible. but they definitely knew the difference. This was one that they were like, yeah, they much prefer Honey Nut Cheeros. And I get it. I was the same way. Skipping on cereal, it's hard.

It's hard to get the store brands, but you can do it to save some money. So if you wanted to, you could. But that was the one, I think that was the toughest. All right, the fourth product that I switched out was Animal Crackers. So I bought Animal Crackers years ago

and one of these big tubs of like the name brand one. I mean, I hadn't had them since, like, the nursery at church. Like back when I was a kid. But my kids loved them. I mean, they loved them. So this was something that I thought, okay, I wanted to kind of just switch out and see what they think.

So the name brand is $4.99. The Publix brand was $3.31 difference of $1.68. And they didn't fully notice, but I could tell and I tasted it. Yeah, there's a little bit of a texture difference, but it's not terrible. Because let's be honest, they're animal crackers. Like, they're not the most wonderful thing, in my opinion, in the world. So even a nice little swap to, you know, have, you know, a little bit cheaper, I think is fine. So this one, I feel confident you could pull off.

All right, now that I've shared some examples of my family's grocery budget, let's do some math and calculate how much money this could save of just swapping these items. So if you add up the difference of the four items, there was a difference of $7.55. So typically I shop about once a week to get our groceries. So you multiply that by four, and then by 12. And that comes out almost $362 a year. And that's just on four things, you guys. Four things.

So you could save hundreds of dollars a year by applying this method to things like toiletries, paper products, cleaning supplies. I mean, it's pretty wild. So it sounds like a really simple, no-brainer, but I'll admit, I even didn't realize the factor of like four items and what that could save me in a year. So when I'm in a rush, I am way more likely to grab a package that just looks familiar, you know, from what I'm used to. But part of taking control of your money is being aware of unconscious money habits like these and just being intentional with some changes. and making small adjustments like this day-to-day really does add up in the long run. And no, I'm not saying that buying generic brands of everything will make you a millionaire,

okay? We're reasonable here. But it can free up some space in your budget if you're looking for that margin. So, in my opinion, the secret to creating even more margin over time is just keeping track of your spending. And one of the best places to do that is the every dollar app. It's the budgeting app that my family and I use to keep track of our spending every single month with every purchase. And I highly recommend it. So if you are a pro-budgeter, or maybe you're

brand new to budgeting, or maybe you're just curious, give it a try, you guys. Check out every dollar. I'd also love to know what your favorite generic swaps are. And comment below, because I want to see, because we're all about saving some money around here. So send this video to a friend who loves a good bargain hunt. So again, I was pretty shocked that the kids, you know, they like some of the generic stuff, just the same. And I just couldn't believe how much money that would have saved me. So again, these little choices you guys can help so much in the long run. So thanks again for listening to this episode. I always hope that this content and this podcast is helpful to you guys. I'm so thankful that you listen and that we're on this journey together.

So remember to take control of your money and create a life you love.