The Rachel Cruze Show - Red Flags and Surprises That Could Slow Down Your Money Goals

Episode Date: August 21, 2023

Think you have what it takes to be a millionaire? If you’ve got big money goals, then the last thing you need to do is make bad decisions that will slow you down. Watch out for these red flags that could be keeping you from becoming wealthy. What you get in this episode: ·     5 Signs That You Will (or Won’t) Be Wealthy ·     Are Credit Card Rewards Going Away? ·     Why 37% of Americans Are in Financial Trouble Helpful Resources:  Christian Healthcare Ministries  EveryDollar Ramsey Car Guide 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  Learn more about your ad choices. Visit megaphone.fm/adchoices

I saw an article that claims new legislation could result in credit card companies slashing their rewards. There's a lot that goes into this, so we're going to break it down. But what I want you to know is that this could be a good thing for you. Hey guys, welcome to this episode of the Rachel Crewe Show podcast. I'm so glad that you're here. So in this episode, we're going to talk about red flags and surprises that could slow down your money goals. I'll talk through a recent article that came out. stating that a handful of Americans can't cover a $400 emergency in cash and what you can do

to ensure you have a good emergency fund. Then let's talk about how credit card rewards could be going away and why you'd be better off for it. But first, let's talk about five signs that you will or won't be wealthy. Take a listen. So I saw an article that lists five things that stop people from taking control of their money and building wealth. Typically, I don't buy into the myth that some people can build wealth and others can't. I really do believe in the power of hope and the power of change and that you have the ability to take control of your future. It all might sound a little cheesy, but really your mindset is so powerful.

So I'm curious to go through this article and see if I agree with their points or if I don't. And maybe these things are things that could help you slow down, or maybe you realize, gosh, these things are standing in my way, and instead of just automatically thinking you'll never reach financial peace, you might have a change of heart. So let's take a look at the article's list. It says the first sign that you won't be wealthy is that you have a victim mentality. Hmm.

Okay. I could see some truth in that. Now, I know this topic can be really tricky, so I want to be clear that I'm not saying that obstacles are not real and that people don't face things that others don't, and some people have a harder life. So, like, that is all very, very true. And again, some people are born with more opportunity,

automatically brought to them. Some people, not as much. So, again, there's a trueness to people's stories and, you know, the families they're born into, the situations they're born into. But I would lean into the idea that being trapped in a mindset that you can never get ahead, never, ever, ever, ever. If that's what you believe over and over and over,

then you're probably never, ever going to get ahead. So I think there is truth and what you believe about your situation. And I love hearing Jade, one of our Ramsey personalities, talk about this. And I think she's a real big encouragement in this area, especially to people that are trying to pay off debt. Because if you don't know her story, her and her husband, Sam, paid off almost half a million dollars in debt in seven years using the baby steps. Half a million dollars, you guys. So if you want to hear more of Jade Story, make sure to check out the video that I linked below because, again, it's such encouragement to show people, man, no matter where you are, you can make progress going forward.

Okay, back to the article, though. So there's a level of that first that I would agree with, that first sign of that kind of victim mentality because that negative mindset will slow you down over time versus saying, hey, I'm going to have an attitude to figure out what are things that I can do to start winning with money today. And that's, you know, kind of the opposite of that victim mentality. So I would agree with that. All right. The second sign that you will never be wealthy is saying that money isn't important to me. So the article says, I've never seen a rich person not value money and understand that it's a tool for investing and business. Okay. I would agree with that. I would also add that it's a tool for money. generosity too. So something that I hear my dad say a lot is that money is amoral. It's not good and it's not bad,

but what you do with it and the motivation behind it is really important. And when you're completely indifferent about money, that it doesn't matter at all, then you probably are less likely to be intentional with it and intentional with seeing it as a tool to use it in the way that you want to use it. So, okay, I can see that. All right, they say the third sign that you'll never be wealthy is that you love to spend more than you make. All right, that's a pretty obvious one. I would agree with this. Yeah, using debt to buy every single thing that you want or even try to go into debt to build

wealth is not going to bring you lasting wealth. So you have to live on less than you make, live without debt, and intentionally make a habit of saving and investing in order to get to a solid place financially. And of course, you need to be budgeting. Yeah. If you haven't tried every dollar yet, that needs. that needs to be your next step when it comes to building wealth. It's a free budgeting app, and it lets you decide where your money goes instead of wondering

where it went. I highly recommend it, you guys, make sure to check it out. All right, the fourth sign that you'll never be wealthy is that you have a scarcity mindset. Okay, so first, the article mentions that a victim mindset is a key blocker to building wealth. Now they're saying a scarcity mindset is as well. And clearly mindset is really powerful in this. But I don't know about this one. a little bit of me that kind of may not agree with it.

Because I think, you know, being frugal will help people save money and especially if you're getting out of debt and that kind of thing, I think is really key. But also spending money, you know, is not a bad thing either. So once you create margin in your budgets, don't be afraid to invest in wise things like your emergency fund or even an appreciating asset, like a house or retirement. So I don't know. But a scarcity mindset is someone that's like, okay, I don't know. don't want to take big risks.

But I think about my husband and I'm like, Winston is more of a scarcity mindset. And honestly, I think if it were him or I at the end of our life, he'd probably end up having more money safe than I would. I think he probably would be more wealthy than me. So I don't know if that's true. I think you can have a scarcity mindset and still be investing and all that. They're just not going to take these like extreme risks that maybe people that have an abundance mindset would.

And maybe that pays off in the end sometimes. but sometimes it doesn't. So I don't know about this one. I don't know if I agree with that one fully. All right, the fifth and final sign that you'll never be wealthy is that you're not obsessed with being the best in your business. Okay, it's a pretty strong statement. And the word obsessed is a lot.

So they're saying if you are not obsessed with being the best in your business, you will never be wealthy. And I don't know if that's true either, you guys. I really don't. I think doing your job well and doing it with excellence and all of that is really, you know, good for you, good for, you know, your company that's employing you. Like, all of that. Like, I get all of that. But I don't know. I'm just like, I have friends that are graphic designers and they're awesome at it. But it's not like they're just,

like, obsessed with it and they have to be the best of the best, the best, the best, best, like they work on their craft. They do well. So I'm like, someone that does that. And again, they don't get into debt. They live unless they make. They invests, all that. They're going to be wealthy. So I don't know if I agree with that one. I don't think you have to be obsessed with being the best of the best. Again, I think it's important to do things with excellence, but that word obsessed feels, I don't know, feels off to me. Okay. So it's an interesting list, you guys. I mean, and again, I think that there's a lot of things around building wealth. And I think the most important call out here is your mindset. I think that you really do. You have to be

very intentional about what you're putting in your mind, the people that you surround yourself with, the messages that you surround yourself with. I think that's really key. And then we We always say that personal finance is 80% behavior. It's only 20% head knowledge. So what you do with your money is what's going to allow you to be wealthy. It's a really big deal. Your habits and your choices around money, it's really key. So I love these kind of conversations.

I think they're really interesting. So hopefully maybe that this has inspired you or maybe even shifted some of your mindsets. But I would encourage you guys to be intentional with your money. And I mentioned it earlier. Download every dollar, our budgeting app. Make sure to get in there and actually start being on purpose. with your money, check out Financial Peace University.

This is another incredible resource that's literally helping people create wealth and build wealth and showing them the signs and the steps to do that. So you can sign up for that course at ramsysolutions.com, plus you can get tons of other resources. So just be sure to check that out. So today we're going to explore the claim

that credit card rewards are going away and why you don't need them in the first place. Okay, I saw an article that claims new legislation could result in credit card companies slashing their rewards. There's a lot that goes into this, so we're going to break it down. But what I want you to know is that this could be a good thing for you. Okay, let's take a look at the article. So the credit card competition act was introduced in June.

So before we get into the bill, first, I want you to kind of show you how credit cards work in a certain area. Okay, so when you think about a merchant, when you go and buy something, let's just take my friend Mark, for example. let's say Mark is buying groceries at Publix using a Visa credit card. When Mark goes to check out, Publix is charged an interchange fee or a swipe fee is usually what it's called by Visa. So this basically is a fee that the bank applies to Publix for using Visa's routing network to process the credit card transaction. So in many cases, the merchant, aka Publix, passes those fees onto the consumer by either inflating their prices, you're charging a transaction fee for credit cards. So there are two major credit card processors that merchants can use,

and that is Visa and MasterCard. And since there are really only those two big companies processing credit card transactions, they kind of have a monopoly, meaning they can make their credit card fees whatever they want. So this bill is proposing that big banks that issue credit cards also offer a network of smaller processors to merchants. So that means they wouldn't have to choose just between Visa and MasterCard. They could choose a smaller processor.

And the banks in this network could also offer lower fees, making them more appealing to merchants. So this is where the credit card rewards come in. So if big banks are losing their business to smaller network banks, that means they're getting less money from swipe fees. And that decreases their profits. And when profits go down, you know what happens next. the fluff gets cut. So economists are predicting that banks could make up for this loss by offering

less credit card rewards. And a lot of people are freaking out about this. But listen, you guys, the reality of credit card rewards is there to make you spend more money. So that extra money that you're spending to get the points for the airline miles could actually just be going to saving that money and using that money, your money, to buy the airline ticket instead of going into debt. So that's just one reason why you don't need a credit card. Let's just go over a few more. One argument I hear from a lot of people who use a credit card is, but Rachel, I pay mine off every single month. Well, although that would be perfect in the world if that was true, but Ramsey Research found that 80% of Americans who have a credit card, half of those people

have a balance and are racking up interest. So reason number one, you don't need a credit card, is that it's better to own than owe. When you owe money on a credit card, that means interest is piling up. You're spending more money. You are paying interest instead of earning interest with money instead of keeping your own money

and maybe investing it or saving it. The second reason that you don't need a credit card is that you can still shop online and in a store with your debit card. Yes, I have a debit card, and trust me, I shop. I love to shop, and I'm still shopping with a debit card. that's my own money leaving my account. And even our great friends at Target,

they have a debit card. So I do. I have a Target debit card, but it's money coming right out of my account. So it's amazing. When you are spending your own money, you guys, studies have proven this, that you spend differently when it's your own money.

All right, reason number three, you don't need a credit card, is that you have an emergency fund. Yes, that is our hope. Our steps when it comes to becoming financially secure is the baby steps. And the very first one on there is to get a $1,000 emergency funds.

So that means if you have a flat tire, then you actually have money in the bank to pay for that. Because what happens is when you don't have money saved and you don't have an emergency fund, then you have a flat tire and you swipe the credit card to fix it. So not only did you have a car issue, now you have a financial issue because you have a bill that you're going to have to pay later on down the road.

So it eliminates all of that. You are able to spend your own money. You are your emergency fund, which is great. And the final and the fourth reason that you don't need a credit card is that you have a budget. Track every single dollar that you spend. And when you do this, you're going to be able to see, okay, what can I afford and what can I not?

And it keeps you on track from overspending and buying stuff that you can't afford because if you follow your budget, you follow your plan, you're going to win. So when credit cards are not a part of your life, you guys, you can live the way that you want to in such financial freedom. And sure, you may have to wait for some purchases, but that's okay. You can actually start to learn even to be content and have patience, which is really hard for a lot of us in our world today. But when you move at the speed of cash and you use your own money, it's amazing what produces inside of you. Today we're looking at the shocking reason why 63% of Americans are in financial trouble.

Now, there could be a lot of situations that could cause someone to be in financial trouble. But today we're going to look at one statistic in particular. And you guys, it's kind of scary. So I'll tell you what it is. and then I'll give you a simple solution so that you won't be one of the people in this stat. All right, let's break it down. So every year, the government asks people in a survey

if they would be able to cover a $400 emergency with cash. And this year, that number dropped from 68% to 63%. That means only 63% of Americans would have cash for an emergency and the remaining percentage wouldn't. So if the dishwasher breaks, they're putting that repair on a credit card. And if you use a credit card for emergencies, the emergency really doesn't go away.

So yes, the dishwasher might be fixed, but then you're still paying for it after it's done. And then what happens if you get into a fender bender and have to pay an insurance deductible? That means you're paying off the dishwasher repair. Chances are you may not have the cash to cover the other emergency. So back on the credit card it goes, and the balance and the interest just keep racking up.

And this can become a really vicious cycle when you use a credit card, especially when you use them for emergencies. So especially when it comes to emergencies, you guys, I want you to be your emergency funds. And that is how you break the cycle, is you have money saved in the bank. So you need $1,000 emergency funds. Now, I know that that is way over the $400 mentioned in the survey, but you want to make sure that you have plenty of cash in case there is an emergency that comes up that is more than $400.

And according to an article found in Forbes, the, national average for a roof repair is $950. The average for replacing four tires is $668. So $1,000 will cover you as a starter emergency fund. And at Ramsey, we teach that saving your emergency fund is the first thing that you do even before you get out of debt. So you're not worrying about paying off debt until you have that $1,000 saved up. That way, if an emergency happens while you are paying on debt, you have the cash to cover it. And that's, really it helpful, you guys, because it really, it turns an emergency into an inconvenience instead of a crisis for so many other people. All right, the best way to save up your $1,000 emergency fund is by having

a budget. And I love the free budgeting tool every dollar. It makes it really simple to plan for your money and to budget for your $1,000 emergency fund. So let's go through how to start your budget. If you're on baby step one, meaning you have some debts, but you still need to save up $1,000, then this is for you. Okay, the three main categories you're going to see in your budget is your income, what you're bringing in, you're giving, and also your spending. Now, your income is going to vary, and you want to put that at the top of the budget. Then you want to give 10% of your income. And we talk about giving a lot on here, but you guys, this is a really important part of your financial journey. And we always say to give a little until you can give a lot, but be giving

something regardless of where you are financially. Because, giving really is the mechanism that helps move your heart in this process and really helps your character. I mean, there's something about living with an open hand that's really key. So don't skip on giving. And the third category in your budget is spending. Now, the first four categories in spending are the first four things that you need to do. And I call those your four walls. So this is the very first thing that you're going to do again before you pay off your credit cards or your student loan. Make sure these four things are done. And that is food, shelter, utilities, and transportation. So we talk about food, doesn't mean eating out at a restaurant every night of the week. When you're budgeting for food,

it means, hey, what do we need to feed our family at home? And maybe it's not the nice, big, great grocery store, but like the cheap grocery store where we get cheap food for a period of time to save as much money as possible. The average American spends $560 to $1,296 a month on groceries. So if you're paying off your debt, your goal is to spend less than the average. So you want to make sure, though, your food is covered. Next is utilities. So this is your basic needs like heat, AC, water, garbage pickup even. I mean, the things that keep your household running, again, that is utilities.

And then also in your four walls is transportation. And again, this is budgeting for things like gas for your car or if you use public transit, make sure that that's in there. You want to be able to say, okay, here's money to get me to and from work, to and from the places I need. This doesn't mean like, we're taking a big road trip across the country to go to a concert.

No, this is really your bare bones. Again, these are for people on Baby Step 1 who are saving up the $1,000 emergency fund. So when you're doing all this, you guys, and your four walls are covered, then you want to start saving up that $1, and in Baby Step 1, again, you're still trying to save that emergency fund

as fast as you can. And it might feel really intimidating at first, but remember, you're trying to get out of debt as fast as you can. So that $1,000 emergency fund really makes people nervous, but I want some of that nerves, if you will, help you do Baby Step 2, which is getting out of debt. I want you to be able to do that quickly. And maybe some of the fear of only having $1,000 in the bank gets you out of baby step 2 faster so that you can save up a bigger emergency fund in Baby Step 3. All right, so to save $1,000 fast first cut back on spending. We talked about the sum when we were talking about

the four walls, but do whatever you can to shrink your budget. So again, stop going to restaurants when you're looking at your food category. That's going to save you a ton when you're grocery shopping. You know, pick the store brand over the name brands. It's always going to be lower. Like, find these things that you can do to save money. And I have a whole video about this that I'll link in the description. So go check it out and make sure you watch it before you make your next grocery list. All right. Another way to save $1,000 fast is to increase your income. So you you could get a part-time job, work overtime, even do a side hustle like babysitting or dog walking. And also, another great way to save $1,000 is by gathering up all your loose change and cash.

Check old purses and pockets, random birthday money that could be laying around, whatever it is, put that money towards saving up $1,000. And finally, check your tax deductions. So if you got a really big refund last year, that means that you overpaid on your tax. So you can actually change that number by adjusting your tax withholding to put more money back in your paycheck. All right, you guys, I know that hearing you need to save $1,000 can feel overwhelming, but you can do this.

And imagine how empowered you'll feel when you have money in your savings account. And emergencies are something that we don't expect, but we can plan for them, knowing that they're going to happen. And we have our emergency fund in place. Again, it takes a crisis and turns it into an inconvenience. So you guys, an emergency fund is possible for you. So get it so that you're your emergency fund and not your credit card. All right, you guys, thank you so much for listening to this episode.

I so appreciate you guys. If you can share this episode with a friend, spreading the word helps us so much. And also leave a review. If you love the show, let us know what you love about it because we love reading them and also it helps with the algorithm. So we want this show and more hands of the people out there because we want to help people get control of their money because as you know, that's what the show is all about. So thanks again, you guys. And remember to take control of your money and create a life you love.