The Rachel Cruze Show - Overlooked Expenses That Are Stealing Your Paycheck

Episode Date: January 22, 2024

You know that anxious feeling you get every time you open your bank app to check your balance? If you do, it’s probably because you’re living paycheck to paycheck. This week, I’ll show you how to get to the end of your month and still have money in the bank. Plus, we’ll talk about five expenses that will wreck your car budget and how to spend your money with your future in mind. What you get in this episode: How to Stop Living Paycheck to Paycheck 5 Sneaky Expenses People Overlook When Buying a Car Appreciating vs. Depreciating Assets for Beginners Helpful Resources:  Start budgeting for free with EveryDollar. Get the Ramsey Car Guide. Discover your earning potential with our Investment Calculator (it’s free!). Learn more about Christian Healthcare Ministries. Sponsors pay the producer of this show, The Lampo Group, LLC, advertising fees for mentioning their services or products during programming. Advertising fees are not based upon or otherwise tied to any product sale or business transacted between any consumer or sponsor. The following sponsors have paid for the programming you are viewing: Christian Healthcare Ministries. Learn more about your ad choices: https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy: https://www.ramseysolutions.com/company/policies/privacy- policy Learn more about your ad choices. Visit megaphone.fm/adchoices

Something not enough people talk about or really understand is the importance of investing and appreciating assets instead of depreciating assets. Some of you might fall into this trap by throwing money away on things that have no long-term value. Hey guys, welcome to this episode of the Rachel Crew Show podcast. I'm so glad that you're here. In this episode, we'll go over what expenses might be stealing your paycheck without you even realizing it. I'll share five expenses that people tend to overlook when purchasing a car. And then I'll explain the difference between appreciating and depreciating assets. But first, let's talk about how you can finally stop living paycheck to paycheck in the new year.

Take a listen. So whether you've been following the Ramsey plan for a while, or maybe you're brand new to this channel, you've probably heard the saying living paycheck to paycheck. But have you ever stopped to think, what does that actually mean? Well, it's that feeling that all of us have had at one point or another where we're desperately looking ahead for the next paycheck to be able to get through current bills. And this usually happens for one of two reasons, sometimes both. Number one, either you're not making enough money to cover your essential expenses, like your four walls, food, shelter, utilities, and transportation.

Or number two, you're spending too much and you need to cut back. So there are four simple ways that you can prevent this, and that's what I want to share with you today. All right, first things first. So I want to clarify, having a low balance in your checking account is always a bad thing. Okay? So zero-based budgeting or in every dollar budget we talk about is what I recommend. But zero-based budgeting does not mean there's going to be zero dollars in your account. But in the beginning, you might be cutting it close, which is why I recommend always having a small miscellaneous category as cushion until you can get the hang of it and can build a larger

margin over time. But still, I stand by the fact that your goal should be to intentionally use every dollar you bring in designated for a purpose. And if you're getting anxiety every single time you open your bank app to check your balance, you might be on a paycheck to paycheck cycle that you're trying to break. So here are some simple ways that you can make this change. My first tip for doing this is to cut down and even eliminate monthly payments. So this is everything from massive car payments to student loan payments to credit card bills and subscriptions and memberships that you no longer use. It's always a good idea to go through your subscriptions and make sure that you're not.

that you're paying for what you actually need. Sometimes they can get in there and you don't use it anymore. But I would also challenge you to take a step further and commit to paying off all of your consumer debt. Because once you eliminate the money that you owe for past purchases, you free up so much income in the present and for the future. And it's absolutely incredible. So again, when you pay off debt, always pay off the smallest amount first,

say current on everything. So pay minimum payments on everything, but pay off that smallest debt first. And then once that's paid off, roll everything over to the second. and small a set and you work your way through. And again, it is powerful when you are used to a $600 card payment and, you know, a few hundred dollars going out for student loans and for a credit card belt and it's all moving

hundreds of dollars, if not thousands every month. But all of that is back in your pocket. You can do so much with it. And it's amazing. Okay, my second tip to stop living paycheck to paycheck is to check on your lifestyle creep. So I talk about lifestyle creep a lot because it is so real, you guys. It's so easy to blame excess spending on things. Like, you know, oh, it's inflation and it's the housing market and interest rates, all these things that are out of our control.

But the reality is that you have full control over your financial choices. And even during stretches where you may not have all the best options available, you can still do what is best for you and have control over your paycheck. So maybe you look at cutting back on unnecessary expenses that maybe once you decided, like, that's a non-negotiable back in the day. And now where you are, you may, you may, you know, nick some of that stuff. Think about workout class memberships or regular pedicures or manicures or shopping at really nice grocery stores or streaming services you never use, paying for food delivery services multiple times a week, or just browsing the aisles at Target when you're bored. So just imagine if you put three of those things on hold, I bet you could find some margin

and some cushion until your next paycheck arrives. All right, the third thing you need to do to stop living paycheck to paycheck is to get your income up. So this is another factor that a lot of people feel like is completely out of their control and that's their income, which maybe in some cases it's true, but also it's not true because you can always get a side hustle. And I'm not saying you should go and quit your job today by any means. But just think about it. Okay, with your main job, are there areas of growth that you could have within the company that you're in for maybe a raise or maybe a different position? Or maybe, again, you grab a side hustle or two, you know, maybe on Saturdays for four months. you do this and you just get some extra dollars in. Maybe you drive for a ride share company or send

a memo out to friends and family offering to dog sit or house sit. Maybe be a host or host to set a restaurant a couple nights a week or a bartender or a waiter or waitress. And it's amazing what you can do when you actually look to see where can I make some money. And again, things you're good at, think about that too. What things are you naturally good at that you can charge for? It's amazing. It can be really empowering just to get some extra cash. All right, my fourth and final tip to stop living paycheck to paycheck is to track your spending. Now, before you bail on this, because it kind of is a budgeting type thing, hear me out. If you do absolutely nothing else, you don't get any expenses, you don't get extra income.

One of the things that will help you the most from living paycheck to paycheck is budgeting. Just by organizing your expenses and anticipating what is coming up next, you automatically are creating more peace for yourself. A budget doesn't have to limit you. It actually gives you so much freedom. And a plan means that you always know where your paycheck is going. And it's incredible. Every dollar our budgeting app, every dollar premium has a thing called paycheck planning. And it's so great because when you enter in your paycheck, like if you get paid on the first, and then you can see what bills are due until the 15th. And you can say, is that paycheck going to last me through here? And for some people, it doesn't. And that's when you have to say, oh my gosh, I am behind. So you either have to change up some bills until you get your head above water. And you can say, but you're actually planning out where is that paycheck going. But the goal here is that you have money in your checking account that's going to be a buffer, right? That's the big goal here so that you don't have to overdraft or any of that and you have a plan. Because we're hearing so many people talk about, oh, gosh, once I get in the rhythm of this, I feel peace and control. Because guess what? You have peace and control. You know where

your money's going. Okay, have you ever planned for a big purchase? And then when you finally go to buy the thing, you realize that there's an entire list of everything. extra expenses that you totally forgot to consider. Like when you're buying your first house and then you realize, oh, there's closing costs and inspection fees and all of that too. Or maybe you take that for a trip to New York City and you totally forgot about transportation. And you're like, oh my, how are we going to get from here to there? So buying a car is one of those for me because I can do my research and go in knowing,

okay, this is the make and the model and the price point that I'm interested in and even factor in, you know, gas costs into my monthly budget. I did this for our Odyssey, our minivan. And I still forgot about the long list of other extra costs that goes into purchasing a vehicle, which is why I want to walk through five hidden expenses when buying a car so that you fully are prepared when the time is right for you. So first, if you're not familiar with Ramsey, let's talk about what kind of car you should be buying, depending on your current financial states. So buying used cars, you guys, is something we are big fans of.

and people think, oh my gosh, a used car, I need a reliable car. There are great, reliable used cars, okay? This is a place where you're like, other people can take the hit because a new car loses so much of its value the moment you drive it off the lot. And then you go two years old, three years old, four years old, and the value just tanks. So let someone else take that hit and buy a used car. It is great. Now, once you have a net worth of a million dollars is when we say, okay, you can

financially take the hit to be able to buy a brand new car. But until then, behind used cars is awesome. Okay, let's talk about some of those sneaky expenses that people always forget about. The first expense that people tend to forget about is added warranties and features. So with new cars especially, the price that is shown on the tag or online doesn't always include the fees, the warranty packages, or additional features that you might be interested in. Because of this, it can be really helpful to have a range for your overall budget rather than just a specific number. So you'll also want to decide what your answer is going to be to certain questions before you get to the dealership. For example, if you've made the choice to opt out of any of like

the add-ons, like special warranty, special waterproof pads for your floorboard, all of that, know that going in so that you can stay in your grounds when the guy in the showroom is like trying to make all the signatures happen and like get all this stuff added. Your decision is already made and you know what you're going to do. The second. The second, And the second expense people forget about when buying a car is vehicle registration fees. So you have to register all new and used cars with your state of residency. And if you buy a car at a dealership, they'll usually set this up for you for a small fee. But if you buy your car privately or transfer your title, you'll have to handle it on your

own at the DMV. And some states even require emission tests on an annual basis. This is for non-electric cars. And that usually costs less than $20. And finally, the cost of vehicle registration, which is where you go and renew your license plate tags from year to year that can range anywhere from $80 to $100, depending on your vehicle and the state you live in.

And vehicle registration fees are definitely worth budgeting for, so remember that. $100 next year and this year. Be towards your car. The third hidden car expense that you need to expect is the cost of insurance. So the cost of insurance varies based on what car you drive, driving history, your age, but also know that it is required in 49 of the 50 states.

And if you happen to know, without Googling, don't cheat, the one state that does not require car insurance, leave in the comment below. We will see if you're right. Now, as unlikely as it may seem, the last thing you want to do is find yourself in a 10-car pile-up with no coverage. And I'm not trying to scare you, but I am trying to convince you that you need to be repaired. And car insurance is one of those things. It's really boring. You've got to do it as an adult, but you got to do it. And the average insurance payments ranges from $50 to $150 per month. And shop around. You can check out Zander Insurance. They're a great place to start when it comes to bundling your home and your auto. If you own a house or rent a house, but again, regardless, make sure you know that you need to budget for insurance. The fourth car costs that most people forget about is maintenance and upkeep. This is the worst. Can I just say that? I hate paying for this kind of stuff. But having a maintenance category in your budget is something that it really can be a game changer to have peace of mind knowing that you have money if or when your car breaks. And you obviously don't have to pay for an oil change

and a new set of tires every single month, but those things can add up very quickly. Had to replace two tires on my car. And then our car battery went out in the minivan. Just terrible. Now, the best way to prepare for this is to gradually drop in a small amount in each paycheck. So again, that's a sinking fund.

So when the maintenance cost comes, you're all prepared. Now, the fifth hidden car cost that most people overlook is vehicle depreciation. We kind of talked about that. earlier. I'm not trying to be dramatic. But listen, this is something we do not talk about enough. And it's become normal to throw away hundreds of dollars every single month in a car payment on a depreciating asset that's worth less and less every time you drive it. I talked to someone

on the Rams you showed the other day and their car payment was $1,700 a month. Like, that's more the most mortgage payments. I mean, like, it's unbelievable. So unless you're on Baby Step 7, transportation, it's a necessity, okay? It's not a luxury. We're getting from point A to point B. and don't throw away hundreds of dollars or thousands of dollars because of that, okay? Don't have a car payment. It's like one of the things in life again. We're talking about throwing your money away. It's interest and all the stuff.

So, okay, now that we've covered all of those hidden expenses in the car buying process, here are three main takeaways to remember. Number one, always think about the big picture before you make an important decision, especially when it comes to your money. Be thinking about overall, what is going on here, right? Like when you're looking at the car, you're going to drive. is it going to be something that you probably have for a few years? As you think about your family dynamic, think about the cash that you have. Like, be looking at the future and know, hey, I'm going to look at my

entire financial picture when I make this purchase. Number two, prepare your budget by factoring in those five sneaky expenses, make sure your emergency fund is secure before you bring a new vehicle into the mix. Now, for some people, their car like just dies on baby step two and they're getting out of debt and they have to find something. The car, again, it is a necessity. It's getting you from point A to point B, and it's one of those things that we get so wrapped up in when it comes to our identity, kind of how we feel our ego, and it gets us in a lot of financial trouble. Okay, so make sure you have the cash to buy it. And again, I don't care if it is a crappy car, whatever it is to avoid the car payment,

that is key. And the last step I would say is to find a car mentor to walk alongside you through this process because car people, they love cars. They nerd out, they know exactly what's going on, they know makes and models, how to do things. my editor David might be one of these people. My husband, I'd throw in this category too. But I'm not kidding.

When you have somebody that's knowledgeable on something like cars, it is so helpful. We took our minivan in because the battery kept dying and they ran all these tests. And then they emailed me, you guys, a list of six things that were urgent. They had this, like, green explanation point next to it. And they're like, must do, must do, must do. And honestly, if it was just me, I'd be like, okay, I must do this or my car's going to explode. Like, I don't know what to do. And Winston texted back because I'm sorry.

screenshot it to him. He was like, say no to everything. It's fine. And I was like, okay. And so, honestly, I wouldn't have known that. And so find somebody. I don't care if it's your uncle or your dad or a friend or friend's husband. Like, I don't care who it is, but somebody that is good with cars and you can be like, hey, what do I do here? It will save you hundreds, if not thousands of dollars, okay? We all know that money buys things, right? It's a pretty simple concept. You learn that from an early age, but something not enough people talk about or really understand is that. the importance of investing and appreciating assets instead of depreciating assets. Some of you might be even thinking, what is an asset?

Well, today we're going to unpack all of that so you don't fall into this trap by throwing money away on things that have no long-term value. So first, let's define appreciating and depreciating assets. So a depreciating asset is something that goes down in value after you buy it. An appreciating asset is something that goes up in value after you buy it. So examples of depreciating assets. or cars, most clothing, machinery, electronics, appliances, mobile homes. Some example of appreciating assets is land or property, real estate.

Some designer items like vintage and that kind of thing. Some high-end art, some investments and stocks. So you would think that after a quick Google search of some of this information, the problem of debt and bad investments would just be solved, right? That no one would get into a bad deal like this. But sadly, no. Comparison culture and consumerism and status symbols, all these things play a huge factor and how we are influenced. And sometimes it causes us to throw money away on material things

that don't bring us a return on our investment down the road. Which is why it's important to, number one, pay for things in cash, especially depreciating assets that are necessary. So think about cars or appliances or clothes. Number two, get yourself in a place financially, where you can invest in things that will passively add to your net worth over time. So when you think about investing in a mutual fund and you have it in the market, you will make interest on that over time. Or real estate.

If you go and buy real estate, that asset will appreciate over time. Your net worth should never be the end-all be-all that defines your worth, but it is a natural thing that can happen over time as you start making wise financial choices. Okay, let's talk about how, to invest in appreciating assets. So when you look at the Ramsey Babyseps, you want to be out of debt, have a fully funded emergency fund of three to six months of expenses, and then you're going to start investing in retirement. So when you're doing this, you are investing, again, in stocks under your 401k or your Roth IRA. And when you're doing that, you are investing your money that

will make interest over time, which means it is appreciating. Now, all this sounds great, but it can be tough to stay motivated and disciplined if you don't fully understand the numerical difference that it makes in your budget. So let's crunch some hypothetical numbers, okay? Let's say you eliminate your monthly car payments, pay it off completely, or maybe you sell your car and buy a used one instead. But the average car payment is anywhere from $430 to $575. So let's say you invested $500 a month for 30 years with an average return rate of 10%. You would have $930,000. You would have $9,000. $115,000, say, for retirements. And that's only after contributing $170,000.

So instead of putting your money towards something that's going down in value like a car, what if you didn't do that? And instead you took that car payment and you invested it and actually made money for you. So you see that appreciating assets? That is something that I can get behind. Or let's say you're able to buy a house when you're 35 years old. And the estimated return on real estate investing is anywhere from 3 to 5% per year. a really safe range, very moderate. So if you're in a big booming city like Nashville,

it's probably significantly more. So if you bought a house for $350,000 with a $35,000 down payment and paid it off in 15 years with a 3% return rate, by the time you turn 50, you'd own a home worth at least $157,000 more than what you originally bought it for. Meaning you would have an asset worth $507,000 to factor into your net worth. So that's what I'm saying. Appreciating assets, it's amazing. Meaning, again, you're taking a asset that is worth $507,000 now, and you can add that to your net worth. So if you're starting to see this power of putting your money in places that are going to help you long term and spending your money with that future mindset is really powerful. So just for fun, I want to encourage you to take this information and play

around with, you know, some numbers. You can go to Ramsey Solutions.com and use our investment calculator. I'll leave a link in the description. so you can plug in your own numbers and get motivated to make wiser investment choices in the new year. And the best tool to help you do that is the every dollar budgeting app. I know I've been talking about this so much, but I want you to try it out because it's the thing that's going to help you see all these numbers laid out. And you're able to think, okay, what if I took that car payment that I'm paying? I take it out and plug it into the investment calculator. And it all starts working together.

All right, you guys, now you're smart. You know all about appreciating and depreciating assets. I hope that this is such helpful information. And thank you guys so much for listening to this episode. If you love this podcast, if you would leave a review, it helps us out so much. So thankful for you guys. And remember to take control of your money and create a life you love.