The Rachel Cruze Show - If You Feel Like You’re Trapped in Debt, This Is for You

Starting point is 00:00:05 Listen, guys, debt may be normal, but it's not your only option. So if you are feeling stressed out way down by payments and you have no idea where to start, keep watching because we are going to talk about it. So be sure to like, subscribe, and share this episode with a friend. Okay, like I said, debt has become so normal today. I mean, when you think about your money or you think about purchasing something, debt is usually the avenue that a lot of people take. For example, right now, the average car payment hovers anywhere between $500.

Starting point is 00:00:35 and $800, depending on if you have a new vehicle or a used vehicle. You guys, isn't that crazy? Up to $800 is the average. And then when you look at student loan debt, it's over $39,000 per borrower. $40,000. Now, that feels a little bit small to me because I feel like I hear a lot of people on the six figures of student loan debt. But on average, you guys, these 21, 22-year-old kids, I'll call them,

Starting point is 00:01:01 are graduating with $40,000 on average of student loan debt. 49% of Americans are living paycheck to paycheck. I mean, we could go on and on personal loans, helots, credit card debt. Like, there is so much. And the weight that people are feeling when it comes to their payments is so real. And it is one of the parts of money that is so stressful. There is something to be said when you owe money to someone. Because it not only takes your income, it takes your peace of mind.

Starting point is 00:01:29 And that's the problem with debt, is it steals from you. Again, not only your paycheck and your income, but it steals. It steals your options, it steals your choices, it steals your sleep at night. Now you want to start working the debt snowball. So the debt snowball method is listing out all of your debt, smallest to largest, the total amount of debt, regardless of the interest rates, pay minimum payments on everything, and pay off the smallest debt first. So much about winning with money and getting out of debt is the motivation. You need to have hope that you can do this.

Starting point is 00:01:58 A lot of people starting this don't have a lot of hope with their money. They're exhausted, their paycheck to paycheck, and they feel like this is the life that they're always going to live. But when you actually get a quick win, you're like, oh, even if it's a $600 credit card bill, but you paid off, you're like, oh, I did that. It's gone. And then whatever minimum payment you're paying on that, you roll it over to the second smallest debt, and you pay that off. Then you've freed up two minimum payments, and you're excited because the debt snowball is working. So the debt snowball method is amazing. That's the most efficient way to get out of debt. Now, there are four things you can do as you are using the debt snowball to make this process so much

Starting point is 00:02:33 faster. Number one, you want to make a budget. Making a budget is so key. If you haven't before, check out every dollar. I'll leave a link down below. But knowing where your income is going, is going to be really important because you're going to want to find margin within your income to throw to get out of debt as quickly as possible. Number two, you're going to cut expenses. For a period of time, people get mad sometimes at Ramsey because they're like, oh my gosh, they don't even let you buy coffee out. No, that's not true. But for a period of time, yes, there will be sacrifices. Because if you keep living at your same level, of lifestyle and expect to have a ton of margin, mathematically, it's probably not going to happen,

Starting point is 00:03:08 which means you're going to have to cut things. You're going to cut eating out. You are going to have to cut the lattes. You're going to have to cut subscriptions, cut things for a period of time, not forever. Hear me say that. Not forever, okay? On average, it's anywhere from 18 to 24 months, but you've got to buckle down, but this is a place to find margin is when you say, I'm going to cut anything in my lifestyle that I do not need. We really do need food, shelter, shelter, utilities, transportation, insurance, child care. Like, there are things we need. There are a lot of things that we really don't. So for a period of time, cut it, get that extra money to throw at your debt. Number three, earn extra income. This is going to be so helpful. Even if you can get a side hustle

Starting point is 00:03:45 and you're making one to two grand extra a month to throw at your debt, you're going to speed up the process. If you can work overtime in your job, that's a great option. If you can use skills that you have today and go straight to the consumer, that's an even better option, right? If you think if you play piano, you can teach piano lessons. Like, I don't know, whatever it is for you, find something that you can do to earn extra money. That is going to make this go so much faster. Number four, be intense. Okay, again, this is not forever, but for a period of time. Like, when you are focused on this and you are, again, not making it like an idol, money is like the thing I'm going to worship. It's not that. But it's that, I have a goal in life,

Starting point is 00:04:25 and when I have a singular goal, and you're looking at it and you're like, this is what I'm going to do. It's like people that run marathons. I think they're crazy. if you're on a marathon. But they have their running plan. They stay consistent on it because they know at the end of the day, this is when the race is and I have to be up to par when race day comes. That's like getting out of debt. Your whole life has to revolve around it. It really does, which sounds, again, insane. But the more focused intense you are on it, the faster you're going to get out. If you're just like, oh, I'm going to kind of throw some money here and there and it's going to be fine. We'll just kind of figure it out. You're going to have debt for longer. You will with that attitude.

Starting point is 00:04:57 So the more intense, the better. And remember, the majority of people are out of debt. in 18 to 24 months, so it's not forever. But there are some things you don't have to wait 24 months for, and one of those is getting the right coverage for your family's health. So you might be looking for a more budget-friendly way to handle medical costs, and if that's you, check out Christian healthcare ministries. CHM has no enrollment deadlines, and you can choose any doctor or hospital you want. And that kind of freedom is big, especially if you're self-employed between jobs, or you just want. margin in your budget. Right now, CHM is offering new members a 50% credit towards their first month of membership. So get started at chmistries.org slash budget and use promo code Ramsey. That's

Starting point is 00:05:44 CHministries.org slash budget with promo code Ramsey. Now, when I said earlier that debt costs you and it costs you your income, it does. And it costs you your future wealth building opportunity. So let's use Ramsey's investment calculator to look at this. Let's say you invested $700,000. $130 a month from age 35 to 65. Now, again, that's average a new car payment a month. With a 12% return, you will have more than $2.5 million at 65. Isn't that crazy? Like $2.5 million. That's what your debt is costing you. And that's if you never increased your investments over that 30 years. So the power of compound interest is something that is so big. So stop paying interest and start earning it. Getting out of debt is so powerful.

Starting point is 00:06:31 Now, once you've broken up with debt for good and you've said, I'm not going to live a life with debt, then some things in your life may have to shift. Number one, you're going to have to save up and pay for things in cash. Yeah. Cars, vacations, Christmas, which means a lot of planning, maybe setting some money aside every single month so that you know that you're on track for those things. But when debt is not an option, saving is going to be your best friend. Number two, never stop budgeting.

Starting point is 00:06:57 Even though you're debt-free and you're saving money and investing all the things, you still need to budget. You still need to be able to have a plan for where your income's going. So it doesn't have to be as strict as a budget. Maybe you could have more general categories at that point, but still being intentional with your income is really powerful. Number three, always live below your means. So yes, even though you get approved for like this credit card or, you know, this thing over here, when you just say, I'm going to not spend everything I make, that margin is going to give you peace of mind. and that's easier when you don't have payments. It really is.

Starting point is 00:07:32 But when that's your mindset, that you're never going to exceed what you make a month, that pattern is going to help you in the long term. Now, there are a few more things that you need to know about the debt-free life. So be sure to check out my episode, five most common questions I get on saving and investing

Starting point is 00:07:47 to understand the basics of saving and investing. So you can click right here, or I'll link it down below if you're listening on podcast. All right, you guys, remember to take control of your money and create a life you love. Thank you.

The Rachel Cruze Show - If You Feel Like You’re Trapped in Debt, This Is for You

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