The Rachel Cruze Show - Money Traps to Avoid So You Can Build Wealth

Episode Date: July 25, 2022

Is financial peace in your 30s even possible? Absolutely! In this episode, I’ll show you how to face the fears that make most 30-somethings do stupid things with money. Plus, we’ll talk about whether or not credit cards are offering you a false sense of security. You may be surprised to learn how much debt actually costs you.   Here’s what’s coming up: ·      5 Money Fears People Have in Their 30s (and How to Avoid Them) ·      This Is the True Cost of Debt ·      The Credit Card Traps Everyone Falls for but You Don’t Have To   Helpful Resources: Christian Healthcare Ministries Financial Peace University EveryDollar                                                 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. Visit megaphone.fm/adchoices

And no matter where you are with your money, I don't want you to feel hopeless. Yes. Can you be stressed right now? Absolutely. But this idea that no matter what, this is going to be my story, I hate that because you actually can do something different. But you have to choose it. Hey guys, welcome to this episode of the Rachel Cruise Show podcast.

I am so glad that you're here. So in this episode, we're going to talk about some money traps to avoid in order to build wealth. I'll go over some hidden messages and credit card ads. how to avoid falling for their traps. Then I'll go over the true cost of debt and why it's so important to pay it off as quickly as possible. But first, let's talk about five money fears people have in their 30s,

but really, we all have these and how to avoid them. So take a listen. All right, I am in my 30s, just like a lot of you guys. And there are a common, common fears that us in our 30s that we have when it comes to money, A lot of you might be worried about, oh, gosh, have I made the right moves financially? Am I doing enough? Is it too late? Listen, don't stress.

We're going to talk through all of these money fears, plus some tips for how you can address them and overcome them, and start building real wealth. And if you're not in your 30s, I promise this stuff will still work for you. All right, the first one is fear number one, do I have enough saved for retirements? Yep. You know, when you get into your 30s, you think, all right. Life is like happening. I am officially an adult doing stuff, and I need to save for retirement because I don't want to work for the rest of my life. And so investing in saving, it can be kind

confusing when it comes to retirement, very overwhelming. And so people in the 30s often wonder, is it too late? I probably haven't done enough. Should I be putting more in? So there is a lot there. But let me just encourage you, number one, if you have not started investing, I want you to be out of debt, have a fully funded emergency fund, and then start investing 15% of your income into retirement. And that will be enough. You still have plenty of time to catch up. It is okay. But the important thing is actually getting on track and having a plan for your money. So if you have just been floating around and just kind of live in life, not really thinking too much and planning for the future, it's time. It's time to buckle down and say, okay, let's get rid of some debt,

let's get some savings in the bank, and start looking at retirement. So if you're number two, am I doing enough financially? This is when I hear a lot of people that are like, oh gosh, am I doing enough? Is this good? Am I making big moves? That way I can build wealth? You know, am I hitting the right milestones?

You know, it looks like everyone else is, gosh, they're getting raises at work or they're getting promoted, they're buying nice cars, they're going on these vacations. It just doesn't feel like I can do all of that. So if you are working the baby steps, okay, that is the plan you need to work

and you're going to be okay. Forget about everyone else and everything else. Because this plan is going to, again, get you out of debt, have money in the bank, be saving for retirement, looking at kids' college, paying off your home early. You're doing all of this to get a really solid financial foundation. And these are the steps you should be taking.

So if you're doing it, you're on the right track. But it can be easy to be focused on everyone else. Can I have that fear creep in that am I doing enough? And if you really are that freaked out, I would sit down with a financial advisor. I really would and say, okay, Let me look at my retirement. Let me look.

Is there things that I can do here or there? And ask, at least dive into your situation versus sitting and wondering. Part of it, too, though, you guys, is focusing on being content with where you're at. So remember, some people use debt in their lives to fund their lifestyles. They may look like they're doing better financially than what they have in the bank. So remember that. Focus on your life and your money. If you're number three, will I ever be able to afford a house?

This is a hard one because the real estate market is insane right now. Real estate prices went up 32% in 2020, you guys. 32% like 2020 hit, pandemic and all, and it just did this because no new homes were being built. Everything stalled. People weren't working in factories. Nothing was being produced. Everything just stopped.

And when it comes to the real estate market, supply and demand is everything. So people were moving, lots of Californians, we're moving to Nashville. People were trying to get out of states or moving jobs or they're losing their jobs. They're going to move with family. I mean, they're all over the place looking for houses,

but there were no new houses being built. So what happened? Supply went way down and demand was going up. So it caused prices to shoot through the roof. And then you look and you see, you know, that it rose, I think 15% in 2021. It's going to rise a little bit. It's slowing down in 2022. But, man, it's just, it's crazy.

And so what sucks, honestly, is if you have not bought a home, right now and you're a first-time home buyer or even you wanted to move homes, you're looking at prices now in 2022 thinking, oh, if we had done this in 2019, the prices would have been so different. And we could have afforded a house that was bigger or afforded a nicer house or afforded a house closer to the city we wanted to be in. And the reality is where we sit right now, it's like, oh, what you buy in 2022 is just not the same as it was even three years ago.

So there's a part that it's like, okay. you have to lower your expectations. And there's a point that you say, do I not live in the exact geographical area that I wanted to? And I also want you to be ready to buy a house because buying a house is a really, really big deal. And so I want you out of debt, have a fully funded emergency fund.

I want you to be able to put down 5, 10, even 20% if you can, and that your mortgage payment is no more than 25% of your take-home pay on a 15-year fixed rates. You could even bump it up a little bit to that 30% but it's right around that range. I don't want to see your mortgage payment be half of your income because what ends up happening is it's hard to win financially in the long run when you don't have a lot of margin.

And the key here is to get out of debt where you owe no one anything and you have your income to be able to do things like invest, which is another fear on this list, and enjoy life, which is another fear of like everyone's doing all this great stuff, but I still am not able to. And yet it's hard not to do that when your mortgage payment is 60% of your take-home pay, right? So getting that percentage, again, I know it's conservative, but it is important. So it's tough right now because as the numbers lay out, like it doesn't look like it's this real estate bubble like it was in 2008.

And people are claiming that and they're saying, oh my gosh, it's going to be like the recession, you know, in 2008 again. Or we're going to be in a Great Depression, all of that. And again, the conspiracy theorist in me is like, hmm, what's going on behind the scenes? Something really sketchy happening. But the truth is the fact show that like what caused 2008 are a set of complete. completely different reasons than what is causing this recession and this housing market. So where that was a bubble where people took out mortgages, bad mortgages that they could not afford, and these mortgage companies were doing that, they were lending money to people that could not buy it.

And then after a while, enough of that happened and it burst. And people couldn't afford their mortgages. Where that's not the case, the lending mortgage market went so strict after that, that people that have homes right now should and do for the most part afford it more than they did in 2008. And so there's not really that bubble, but that supply and demand part of this conversation because of COVID and everything being shut down is really going to determine, okay,

what's going to happen to that housing market? But as of now, like, there doesn't seem to be enough of the demand lowering for prices to lower. So I'm saying all this to say, I don't see how else prices just taking a nosedive. I think they're going to kind of stay put. They may slow down and not go up as much

as they did the past two years. So if you are in a position that that formula, we talked about earlier, buy, I would, I would buy now because I think house prices are still going to raise, even in small percentage points, but I don't see them getting way cheaper like they were in 2019 compared to today. So it's a goal to own a home. I'm all about home ownership, but I want you to do it in a wise way. So the fear of am I ever going to own a home, yes, you will. You will. Take a breath. Don't let the fear just spin in your head. You're going to be okay. Just follow the plan and be wise

when you buy. Fear number four, will I ever get rid of my student loan? Oh man, student loans, they're such a burden, especially when it's been 10 years since you've been paying on it and you're still paying on it

and the worst is too. Maybe you're paying for a degree you're not even using. And you're thinking, man, die come in. This is the reality. But getting out of your student loan debt as fast as possible is the key. And we teach the debt snowball method here

where you list out all of your debts smallest to largest, regardless of the interest rate, pay minimum payments, and attack the smallest one first. So if your student loan is made up of multiple loans, you can keep all those separate and just map them out and pay off the smallest one and then keep going down the line. You can consolidate those loans for a lower interest rate if you want to do that. But, and again, mathematically, if you want to, that could work. But by paying off those smallest ones first, gets those quick wins, which is the best.

But more so, you guys do not wait on the government to go in and forgive. because you'll be waiting forever, okay? If you're going to take control of your money, you need to be doing it, not waiting on Washington, D.C. Fear number five, will I ever be able to enjoy life? I heard an Instagram reel,

and it was like, it just stinks when you realize you either can be financially wise or enjoy life. It was like one or the other. So yes, is there a sense that's like, man, I'm doing all the right things, you know?

Even if you're out of debt and you have a fully funded emergency fund, you're funding retirement, you have a kid or two, so you're putting money in kids' college, you're trying to pay off the house. It just seems like everything's getting more expensive and doing life is expensive. And you think, gosh, I wish I just would be able to enjoy life. But let me encourage you on this, that you're doing the things now. You're planting the seeds so that you can enjoy life still today, because I still believe you can,

but even that much more in the future. So you're doing things right now, making decisions that you're planting a really strong foundation under you. Okay, you're building that strong foundation. because the truth is you're going to be making more money in five years than you are right now. You're not going to stay stagnant with your salary. You're going to continue to grow. Your investments are going to grow.

Things are going to start happening. You're going to say, okay, I can do this. Like, I actually am building wealth and I'm seeing progress here. And it is. It's encouraging because you know that you are on the right plan and you're taking the right step. So again, put those blinders on. Don't focus on anyone else. Focus on you.

And don't forget to have fun. You can have fun. Okay? enjoy your life, enjoy what you can, but be wise about it. Be wise. All right, you guys, give yourself plenty of grace, okay? You're in your 30s, you're doing a great job. And if you're just actually thinking about your money and making decisions that are moving you towards winning with money, you're doing better than most people, okay? You're doing good job. Stay focused, and it's amazing just what some hard work can do right now for your future.

So you've heard me talk a lot about debt on this show and all the problems that it can cause financially, right? That when you make your income, your paycheck hits your checking account and you have debt, and it goes right back out to car payments and credit cards and student loans and personal loans. And it all leaves. And then what you have left is what you have left to deal with. Versus if you were debt-free and you had no payments, you have a lot more money to work with. So financially, of course, it takes a toll. but today I also want to talk about other ways that debt can affect you

and ways that you can overcome them. So there is a serious link between our money and our mental health. So according to the American Psychological Association, 60% of Americans consider money to be a significant source of stress. And debt specifically plays a huge role in this. Debt is overwhelming and it makes you feel like you don't have control. Our Ramsey Solutions research team found that more than half of Americans with consumer debt worry about their finances every single day.

And those with consumer debt are also twice as likely to say that they feel unsatisfied, worried, and stressed. My friend, Dr. John Zillone, Ramsey personality, always talks about when you have debt, you don't feel safe. Like your body doesn't feel safe. I think it's fascinating. He talks about it in his book, Own Your Past, Change, Your Future, that a person, cannot psychologically be whole or well while owing someone else money.

Because when you owe someone money, it's like handing them a pen to write your story and letting someone else write it for you. Because they're going to write it on their terms with their deadlines and their consequences. And all of that, it makes you feel unsafe, whether it's subconscious or conscious, like you're aware of it. And just like the amount of money that you owe builds up more, the more use your credit card, the more stress builds as well. And if you're stressed about being able to afford a bill and you use your credit card to pay it, the problem doesn't go away. The problem just gets dragged longer and longer down the road. So next time that bill comes around and you still owe money for it, then again, people go

deeper in debt to pay that last bill and it just keeps piling up and piling up. 13% of Americans say that they expect to be in debt for the rest of their lives. That makes me so sad. That feels hopeless to me. And no matter where you are with your money, I don't want you to feel hopeless. Yes. Can you be stressed right now? Absolutely. Does it feel like, oh, it could never be ending? Sure. But this idea that no matter what, this is going to be my story, I hate that because you actually can do something different. But you have to choose it. You really do. You have to choose it. And I know not everyone is in debt just to buy like the bigger and better things. That's one reason people go into debt.

But also they can go into debt because they just have to keep up with their bills. And so if that's you, We're going to talk about that in a second, but I just hate the cycle of going and going and going. But listen, the good news is, if you are feeling stress and you're feeling out of control, you can take back control. You really can. So feeling in control of your money is one of the best ways to fight that stress and get back to a place mentally, emotionally, and financially where you have peace. So here are a couple of things that you can do to take control of your money.

Number one, you have to stop going into debt. Like, that's not even an option anymore. Like a black and white line needs to be drawn. And you're saying, I'm not going into debt anymore. And what that does is it opens up a part of your brain and life for creativity. So if you are at a place that you're like, okay, I am not going into debt. I'm not going to do. So what does that mean?

That means I may have to make some more money right now to keep up with my bills. Maybe that means I have to cut things out of my life that I really hate to cut, but I'm going to have to in order to make my bills. It gives you this picture of, okay, what if it's not an option at all? so that black and white line needs to be drawn. And again, if you're in a really hard place financially and you don't have any savings or anything like that, and it's like, okay, I'm just trying to keep up with my bills in front of me,

again, I would say, look at the way money flows. Money flows in and money flows out. So your income, getting more money in is probably going to be an option. But the great thing is, wages are up, you can ask for a raise, you can find a job that pays more, you can take on a side hustle. There are things and ways you can bring more money in. And it's not going to be fun, but you're going to sacrifice for a short period of time, again, to get ahead on your bills. And then look at your outgo, your expenses. And this is where

the budget comes in, doing a budget, a zero-based budget, where your income minus all of your expenses should equal zero. So every dollar coming in is assigned to a category. And when you do this, you're going to look back the last month or two or three and see, okay, how much did I spend on food? How much did we spend on clothes? How much did we spend on rent or a mortgage payment? How much we spend on our water bill, on our light bill, on things that we never thought we'd have to spend money on, but things are keep coming up. Like, you list everything out. And in that, you're looking at facts on a sheet of paper. And you get to go down and say, okay, we're cutting Hulu, we're cutting Netflix, we're cutting this subscription, this. We're going to save, you know,

75 bucks here. We're going to do this and move this around. And you actually, it's like a big puzzle and you can start seeing, okay, here is actually how we can get in control. But the budget is powerful because it helps you with the expenses. side of your money. Then your next goal after doing a budget is to save $1,000. So I'm saying look around your house, sell stuff, get rid of things. Again, extra money coming in, cutting expenses, anything you can do to save that $1,000. And then you're going to start paying off debt after that. And that is where we do the debt snowball, where you list out all of your debts, smallest to largest, regardless of the interest rate, pay minimum payments

on everything and pay off that smallest one first. After that's done, you're going to save up three to six months of expenses in a fully funded emergency fund and continue working the baby steps. And this is a plan that works in good times and in bad times. And don't be afraid to ask for help. Lean on your community. Talk to a financial advisor. Go to counseling if you need to. Because if you're stuck in this cycle of debt, again, it's overwhelming and it's stressful and you want out. So talk about it. Find, you know, read books, listen to podcasts, do things that keep you motivated. Also, you can check out Financial Peace, This is our nine lesson class, and it is everything you need to know about money.

If you feel overwhelmed, this will help you step by step. I'll leave a link in the description below. So listen, I know these times are difficult right now, especially with inflation. Things feel out of control, expensive. But listen, there is a plan. There is hope, no matter where you are. You may have to make shifts in your life right now. Sacrifice things you don't want to sacrifice.

But it is so worth it to do those sacrifices in the present. to set yourself up for a better future. All right, today we're going to talk about credit card companies and just how sneaky they are. Yep, a lot of people are just convinced that, oh, yeah, having credit card, it's no big deal because they can beat the system. They pay it off every month.

It's the credit card companies that have taken advantage of them. Not true, you guys. Based on our research here, Ramsey Solutions, one in five Americans have maxed out a credit card before. And studies show that people spend up to 80, 83% more using a credit card. Yep, 83%. So again, you think, oh, I'm going to outsmarts these companies and get the reward points and really stick it to the man. But reality is, you guys, they have billions and billions of dollars, very smart and trained professionals, and they are using you. They're presenting credit cards as a way that you can do good with your money. Look at all this great stuff and we're helping you and we can partner together and win with money. But it's a trap. They're not trying to help you. They're doing everything to convince you to borrow money, crossing their fingers that you won't pay it back in full

so they can charge you interest and make money off of you. And the truth is about interest, you end up paying a whole lot more money in the long run versus spending your money using your debit card or cash. And again, these companies, they want you to fall behind on payments because that is how they get rich. It's how they make their money. Yeah, those big buildings, you know, that are bank buildings.

Yeah, guess how they made it? that money. Off of you guys, off of interest, off of people not paying off their debt. They want you to play the game. And let's talk about how, where we are right now with interest rates going up, 20 to 25 percent on some credit cards, you guys. Like, it's no joke. It's a big deal. And they're not after to help you. And they're just wanting to make money off of you. And again, not to mention the hidden fees and the loopholes that they hit you with. It's a crazy game. It's a crazy game. They try to get you to play. And again, they want to trick you. because a lot of their ads even, when you look at their marketing, it's sleek and it looks,

it looks like, oh, they're trying to help me financially. They want me to benefit and to be helped in the world if I just use their credit cards. And when you look at credit card ads, even the wording that they use make it sound like they want to help you. And it's weird because it's some of the wording that we use at Ramsey, other people that are in our space trying to help you get out of debt. The words that those companies use even, yeah, it matches these credit card companies and these banks. And it's like, they're so sneaky. They are so sneaky.

So in a minute, I'm going to go over a few of those ads and just how they use the wording. And you can see it, how they're trying to get you in. Like, oh, we're the ones that are here to help you and bring peace. When in fact, again, they just want you to charge up your credit card so they can make money off of you. All right, let's look at some ads, you guys.

Look at this one first up. Pay your way with confidence. Take control of your finances. with flexible payment options. And there are two friends sipping coffee and just laughing, laughing about all the confidence they have and all the flexibility of their payment options. Again, take control of your finances.

No, you don't take control of your finances by using the bank. You take control of your finances by using your money, okay? Remember that. Oh, so sneaky. And that was for American Express. Mm-hmm. All right, the next one, it's a man and a woman. hugging with this vintage motorcycle and this mountains and the clouds in the fog and the blue

mountains in the back. Beautiful, beautiful picture. And the ad says, it's inner peace in the great outdoors. Don't live without American Express. Yeah, peace. I don't think that's what you give American Express. Nope, according to a lot of studies, psychologically people become very, very, very stressed when they're in debt. Yep, not much peace there, not much inner piece. But now financial peace is when you don't owe anyone anything. American Express is nowhere in your future. All right, up next, this is a debit card from the future. We rebuild your credit safely and earn points with the extra debit card. No interest rate here. So this is from MasterCard. And their whole ad is to get you with this to build your credit. Build your credit. Build your credit. But listen,

The only reason you need a credit score is what? To go into more debts. Yeah, and you can get a mortgage without a credit score. But man, they know what they're doing. All right. Up next is this ad says, how much debt could you pay off with a personal loan from $1,000 to $50,000?

This is from the company Upstart. So they're wanting you to go into debt, take out a loan to pay off your debts. Yep. The stupidity. just rains. It does. Look at that. But y'all, no, you can't get out of debt by going into debt, okay? Makes no sense. Makes no sense. All right. The next ad is from Capital One,

going to the grocery store, get 3% cash back with the Capital One saver card. All right, this one really makes me angry because they are just praying on the idea of groceries being so expensive, which they are. But they're using this credit card as an out to be like, hey, go into debt here with this credit card, because we're going to help you out with 3%. Yeah, you know what 3% of 300 is? $3. Remember the math here, people. It sounds, oh, they're trying to help me with my groceries.

No, they're trying to get you deeper in debt, and they're just piggybacking off the idea that groceries are so expensive. But they don't know you. They don't know that your guys are budgeting. They don't know that your guys are meal planning, and you're being smart with your money. You don't eat that credit card.

All right, next is from SO-5. and the ad reads, we've helped our members in a big way. 22 plus billion dollars paid off in debt and, get ready for those, $59 billion in funded loans. Ha-ha, getting people out of debt, getting more people in debt. Like, wait, that makes...

Man, come on. Now, if you got people out of $22 billion of debt, I would applaud you. But that second one so far, $59 billion in debt? Yeah, it's not really what we're looking for. Not really what we're looking for. All right, another one from our sweet, sweet sofai over there.

Mm-hmm. The ad reads, cheers to the work you did to raise that credit score. And it's a birthday cake. You'd think there at least be like champagne glasses. I don't really understand the birthday cake, but we are cheersing to all the work you did to raise that credit score. They love this because it's like, yeah, get a better credit score

so you can go more in debt, go more in debt, go more in debt, going more in debt. And it's, it's what they want, guys, all these companies, all these banks, all these credit card companies, that's what they're doing. And remember, they're not your friends, okay? I so wish,

I so wish that they were there to help you get out of debt, but they're not. They're trying to get you in debt to make a lot of money on interest and keep you in debt. And listen, debt doesn't help. We go over this a lot on the show.

It doesn't. Not only steals your income, but it steals your peace at night. It steals your sleep at night. It steals so much from you. So going without debt, even without a credit card and saying, I'm not going to owe anyone anything. And you just pay your way with the money you have through life. It gives you a sense of peace that is so deep and it is so worth the work.

So share this with someone that you want to protect from all those sneaky credit card companies. And for more helpful info on how they're working against you, check out the episode on the Fine Prince podcast with George Camel called The True Costs. of credit card rewards. I hope this helps you, gives you a little insight on how smart these people are, but I think you're smarter. I think you're going to see right through them. All right, one thing that I am loving right now, there is this spatula. I don't even know how to explain it. I think it's from pampered chef, but I'm sure there's knockoffs other places. But it is for ground beef and you take this little thing and you just turn it and turn it and turn it and turn it and turn it,

your ground beef becomes so fine, which is so great. So for tacos, we do Mexican all the time, it's just the dandiest little thing. So you need to check it out. I don't know what's called, so it's not very helpful, but just it's great. Okay, one thing I am learning right now, y'all, we are in the middle of summer,

and I created a toy car wash. Yes, I did. I got some plastic tapware, put some dish soap, some water, and I let all the kids pick out their toys. Amelia did all her My Little Pony's. Charles got all of his trucks and cars. Caroline did Barbies. And you just get all these Tupperware's out with like bubbles and then some without.

And they just like literally put the toys in the bubbles, play with it. And then they rent some and they just keep going, keep on. I mean, for a solid hour. It was fantastic. And did I sit in a camping chair in the garage by a fan while they just had a heyday in the driveway? Yes, I did. So you are welcome parents. That can be a fun new game for your kids.

All right, you guys, thank you so much for listening to this episode. And if you have not hit that fellow button to subscribe, make sure to do that. And if the spirit leads, you can leave a review. And as always, make sure to take control of your money and create a life you love.