The Rachel Cruze Show - Save or Splurge? How to Handle Big-Ticket Items

Episode Date: April 17, 2023

When it comes to big-ticket items, we always want to know if the expense was worth it. In this episode, I’m sharing what I really think of my Tesla (plus a story my dad doesn’t even know!). We’ll also talk about what happens when people splurge on cars a little too often, and I’ll go over how I’m saving for my next big trip.   In this episode: ·      The Story Not Even Dave Ramsey Knows ·      Could This Cause the Car Industry to Collapse? ·      The Dream Vacation I'm Saving For Helpful Resources: Christian Healthcare Ministries 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. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

So I love sinking funds because you just put a little bit of money aside every single month in a specific category. Those small amounts add up to be the big chunk of money that you need versus getting to it. I mean like, oh my gosh, we got to come up with all this money. Hey guys, welcome to this episode of the Rachel Crew Show podcast. I'm so glad that you're here. So in this episode, we're going to talk about how to handle big ticket items, which ones are worth splurging on, which ones aren't.

and I'll go over how I'm saving up for a dream vacation right now. Then I'll talk about why it might be the worst time to buy a car. But first, let's talk about a story that I've only told maybe five people on the entire planet about. It's about my Tesla. And I'll also tell you if I think it's worth the money. So take a listen. This is going to be a fun one because I'm going to confess something on camera that only like five people, in the universe know. Yep. Even my family doesn't know. My dad doesn't know. My mom doesn't know.

So Dave and Sharon Ramsey, if you're watching this video or listening to this podcast, which I think you do at times. Here it is. I'm going to be talking about my Tesla. This car purchase was like a running joke in my family because I just always thought that they were just so cool. I love the idea of an electric car because why not? You know, I'm not like a huge save the planet kind of person. I mean, we compost sometimes for our garden, all the things, so it's not like I can be on this high horse of that. I just think they're really awesome. I think they're really cool. And George Camel, Ramsey personality, has one too. And so now. it's become a joke at work that George and I have Teslas. But I will tell you, I think the purchase

is totally worth it, totally worth it. But the beginning was not great. The Tesla purchase, yeah, again, it had some issues. So we'll talk about that here in a second. And it hurt my pride because, I mean, my family just made fun of me. They just think that I'm crazy owning electric car. And I wanted to prove them wrong. So I never wanted to share the story. story with them because I didn't want them to feel any level of satisfaction. Because the truth is, I haven't owned many cards in my life. I bought one at 16. I had to save up and pay for half of that car.

It was called 401 Dave. So as teenagers, we had to pay for half of it. That car took me, I guess, probably through four years of life. I got another car through college. That was 10 years in that car. And then I bought another used little BMW for a few years after that. And then I was like, you know what? I'm in my mid-30s.

I'm on baby Step 7. Winston, I've been doing this for 12 years. And I would love to purchase like a really fun car, like a car of my dreams. And that was a Tesla. It was. And it had crazy back orders because of like during all the COVID stuff.

I mean, it was just like a mess. So I was like, I know it's going to take me forever to get this thing. But I really do want it. And I think one of the biggest reasons is I just love stirring the pot. And with my family because they always are like, oh my gosh, it's so crazy. Electric cars, I don't know why they hate it so much. But I'm like, you know what?

I'm going to get a full-on electric car. Not even like a hybrid. I'm going all in. So stirring that pot, which is kind of fun. And Winston and I, we looked at it. We're like, okay, there's pros and cons to this. It's a nice car. Let's be honest.

So we're like, hey, we're going to be putting some money away for this. And we're going to have to prepare for it financially. We have some stuff in savings, sure, but we want to be smart about it. And all of the say, when I bought it, It was amazing, and it still is amazing. I mean, it legitimately feels like you're in a spaceship. Like, you get in, and everything is so simplistic. There's, like, nothing going on but the screen, the dashboard.

There's some stuff. And then I have, like, the yoke steering wheel. So it's like half of the steering wheel with some buttons right here. And that's it. Like, that's it. I get in my husband's truck, and I'm like, there's like 30,000 buttons everywhere. Not the Tesla. No.

Very sleek, very simple. It drives itself. You can play games on the thing when you're, you're parked. Netflix. I mean, it's just like, it is a computer. I mean, it's just, it's the craziest thing. It is the craziest thing. And I love it. It's fast. It's fun. So while the Tesla definitely had some high highs, there were some low lows. Yeah. And the truth is, the Tesla broke down on me three months after I bought it by myself on the interstate. Yep. I'm driving down the interstate and all of a sudden the screen goes black

and this red like exclamation point starts flashing and it was like beep beep beep beep beep beep beep I mean like the scariest beeping you've ever heard and it said pull over immediately pull over immediately and I'm like what the crap is happening what is happening my I'm freaking out get off an exit it starts shutting down everything starts shutting down and with the Tesla everything is electrical even like getting out of your car you can manually do it with this lever under the door but like it's a button you press like everything is all right? Because it's a computer. It's all it is. It's a computer. And I'm like, oh my gosh, what is happening? I had to call Winston's. I was like, I don't know what to do. And they have roadside assistance for Tesla. So I get on the app. And everything's on the app. Even when you buy it, you buy it through like, I used Apple pay. Is that how crazy? I put money

in our account and be like, dumbbell clinket and like order your car on the app. I mean, it's just the craziest thing. Craziest thing. So on the app is where like this person comes on the side of the road. And by the time they got there, everything had just closed. It's like the car just died. Like nothing, you couldn't get in. And the door handles are even like, you know, electric. Like they go in and out. So, like, I couldn't get the door open.

I mean, nothing, nothing. They couldn't even open the hood to, like, click it in. The tow trucks. They had to put it on skates. I mean, it took forever. It was terrible. It was so dramatic. And I'm like, this was a new car.

So I start to, like, get pissed because I'm like, I just bought a really nice car. Like, this isn't supposed to happen. So longs were short, they, like, redid something in the computer, and they were like, you're good to go. Well, about 30 days later, it was like a month later. Winston couldn't turn it on in the garage. And I'm like, I bought a lemon.

I absolutely bought a lemon. We took it back to Tesla, and they ended up, it was like firmware. It's something happened. They replaced the entire thing and put a whole new computer system in, and they were like, you have a brand new car. Everything should be fine. And ever since that day, it has been totally fine. But it hurt the pride.

It hurt the pride. So I never told anyone that the car completely died on me because I want everyone to believe that a Tesla is great. And it is great. It is great. But it hurts the pride a little bit. It hurts the pride. Yep.

But the old Tesla, you know, not everything can be perfect in life. That's just what I tell myself. And I really don't regret it at all because some people are like, oh my gosh, are you so mad you have one? I'm like, no, I love it. I really do. You save on gas. It's like $3,000 to $4,000 a year on gas.

You know, it's awesome. Now, it is a luxury. I get that, but they actually can be budget-friendly. So here's what's wild is when you look at recent studies and now articles coming out that is proving that electric cars actually can be budget-friendly. The Tesla Model 3 now starts at $43,000. And that does not include the $7,500. tax credit that Americans get for buying electric vehicles. So that brings it to a total of $35,000,

which is $5,000 less than the average new vehicle sold in the U.S. See? It's amazing. Now, the conspiracy theory part of me, I know I've read about stuff. And like, if everyone goes electric, the grid goes down and we can't use all the electricity in the world. I get, yeah, all that might happen. And I'm not saying that everyone needs to drive an electric car. But it's something that I love, and if it's something you love, I just want to encourage you that you can find one that is budget-friendly. You can even find a used Tesla, get it even cheaper. George said that, and this is amazing. So I talk about all the time that you need to take control of your money and create a life you love. That's what it is. So sorry, Dad. I know you let your cars just

really get you, gets you in that truck heart of yours, but I love a Tesla, and it's great. And it's So if you have a big expense that you're working towards, whether it's a new car or a vacation, whatever it is, and that there's people in your life that you love and disagree with you, you keep marching forward. You go forward towards that goal. Don't look, don't look at everyone else and what they're saying. If you want that thing, you go for it. So I'm never an early adopter of things ever. George Camel, always. Me, never, except for this. I feel like I'm on the the front end of history. So it's amazing.

And budget-friendly, you guys. You can make a budget-friendly if you wanted to do. Today we're going to talk about what's going on in the car industry. So 2022 was a great year for cars. You could say that Americans went a little crazy once they had the chance to spend money again after the pandemic. So people were buying cars before they even landed on the lot, which means demand went up.

So then prices went up. Yep. So the average price paid for a vehicle in December of 2022 soared to a near record high of $46,382. And most people ended up financing those cars at rates that they couldn't afford. And this was also a time in history where used cars actually were making money. Like you could actually sell your used car for more than what you paid for it, which never happens because usually it's a depreciating asset. And again, history was made. It was a wild time. Okay, so let's break all this down. The cost of a car, how much it takes to borrow the money for it, all the things. So the cost that you pay each year to borrow money for your car is called the APR, which is the annual percentage rates. This is your car loan's interest rates plus all the associated fees. So right now, the APRs on car loans are the highest that they have been in decades. So we're talking about 8% interest on new cars. and 12.88% for used cars.

So guys, don't miss this. What you pay in APR isn't even going towards the cost of your car. It's just interest and fees. So what's happening is that a lot of people don't have the money left to make payments on the actual car, so they're not. And what's fascinating is car payment delinquency is at the highest it's been since 2009. So the repo man, well, his business is booming.

and we'll talk about that a little bit later. The first, how do you avoid paying for APR? You don't get a loan. Yep, that's it. You pay cash for your car. And people think that that's crazy and insane, and I get it because a car is a need for most of us. But listen, there are plenty of affordable cars out there, okay?

Even like a couple thousand bucks can get you a car. Not a beautiful car, not a great car, not a car you want to drive forever, but at least you own it and you're not paying $1,000. payments and interest on it. So financing a car, you guys, it's not going to help you build wealth. In fact, it does the opposite because you're paying money and interest payments instead of investing that car loan and that interest to be making money for you. So instead of you making interest on your money, you're paying interest. So it is easier and wiser to save 500 bucks a month, which is the average car payment for 10 months, go and buy a used car, no strings attached,

and you're done. But what do you do if you've already taken out a loan and you can't pay it back. So the repo guy that we were talking about earlier, yeah, he's no joke because in 2022, approximately 22 million cars were repossessed. So you want to do everything you can to avoid a repossession, which is basically where the bank comes in and takes your car back. And as soon as you know that you might be in trouble making payments, talk to your lender. There's no guarantees, but your bank may actually work with you to prevent you from defaulting on your loan because it's not that they're kind. They just want their money. So they may try to help you.

And again, your bank, they may lower pause your monthly payment for a short bit while you get your finances in order. So again, talk to your lender if you can't make the payments. But don't do a voluntary repossession. This is when you know that you can't make the payments and you simply give up the car and let the bank come and take it. And that's it. So I get that it kind of sounds like a good idea, but it's not. So if you can't catch up on your payments, sell your car. You may have to take out a small loan for the difference if you're upside down.

on it, but it is worth it. And again, given the prices of use cars these days, you may actually get some good money for it. You never know. So here's another thing. We have created a culture where your car is your identity, which is so wild. So like when people see your car, it's like it says something about you. And we have made that a thing in our world today. But I'm telling you, if going into debt is the only way you can afford a car, a nice new car, then you don't need it. You don't need it. So don't think that that's going to be part of your identity because it doesn't need to be that for anybody. In the book, The Psychology of Money, author Morgan Housel writes that when we're driving a nice car, we think that people are thinking

we're cool. But the truth is, most people are just looking at the car. They're not looking at the driver. They're looking at the car. So make wise financial decisions, you guys, when it comes to what you drive. It is so, so important. It is not worth the stress and the pain of paying out a car payment every single month when you know you could be investing. that instead. So remember, with budgeting and knowing what you have, you can get rid of your car payment, save up and pay cash for your next car. And here at Ramsey Solutions, we created a car guide to help you when it comes to navigating owning a car the smart way. So I will leave a link in the description below for you. Today is going to be fun because I'm talking about a dream vacation that I am planning and saving for.

You know where I'm just dying to go? Italy. Yep. I went my junior year of high school. high school back in the day and teenage Rachel just didn't appreciate Italy like mid 30s Rachel is what I'm telling myself. So I really want to go. We have little kids at home. So if we do a big trip overseas, it's not going to be like the two-week thing. So it's probably going to be seven days. But I want to go with Winston and I want to do Rome. I want to do Tuscany. Just some beautiful places over a few days. And I am. I'm just so excited about it. It's something that we haven't done a big, big trip like that. I mean, let's be honest, since COVID, probably like everybody. and we didn't even have a big international trip planned,

and I thought, you know, we could look out in the future a few years from now and just say, let's put it out there, let's work towards it because I love to travel and going somewhere fun and somewhere so different like that just sounds like my dream. I love to travel, so it's just going to be great. So obviously, international vacations cost a whole lot more than they would, just your typical beach vacation, or at least for us. So let's talk about how we're planning to afford it.

Well, first and foremost, figure out the cost of your trip. So once you know when you want to go, where you want to go, then you've got to figure out how much is this going to cost. So I always start looking at the big stuff like lodging, food, flights, transportation while you're there. And some of my favorite places to find deals on these things are Google flights, Groupon Getaways, TripAdvisor, Expedia, and Kayak. Now, this is also a good time to look to see of all the things that you could spend money on your trip and determine which ones you think are the most. valuable to you. And this is where your trips and these kind of vacations really do say, my gosh, we want to do what we want to do. And you can't just splurge on everything, right, unless you have, like, all the money in the world. So there are going to be places you may have

to cut back. So for example, I love food and wine and just good experiences. So I would rather do that than spend money on like a nice rental car, right? I mean, I'm like, oh yeah, give me something cheap or I can take the train, whatever. But I would rather spend money there. I would rather spend money on a beautiful hotel. I just love a good hotel than doing a ton of like museum tours or you know having a tour guide. I'm like I can just download, you know, an audio app or something on my phone and kind of figure it out because especially for this trip that I'm dreaming up, it's just going to be for food and experiences. And we can kind of do some touristy stuff. But I'm like, I would rather spend money again on food. And those kind of things than a very, very personalized

tour of the city. Now, we may go back when we're older and do that too, but for this trip, that's what I'm envisioning. All right, number two is to use a sinking fund to start saving up for your trip. So I love sinking funds because you just put a little bit of money aside every single month in a specific category. And then over time, those small amounts add up to be the big chunk of money that you need versus getting to it and be like, oh my gosh, we got to come up with all this money. But this is not just a savings account. So if you're saving for a new car, a vacation, anniversary gifts, Christmas presents, you know, if you have something that's going to be coming sooner or later, a sinking fund is a great way to do it.

So instead of lumping everything together in your savings account, you want to be very deliberate to say, okay, here's this specific amount I have in each sinking fund. You want it to be very, very clear. And this is not your emergency fund. Remember emergency funds is for emergencies. This is for saving up for things in the future. Now, let's go over how to set up your sinking funds. So first, you want to decide where you're going to store your sinking funds.

I love using every dollar because it will help designate the money in my budget that I know exactly what I need. And then the money goes into a fund. So this could be a high-yield savings account. A savings account, you could keep it in your checking account if you're very, very diligent, don't spend it. But that's where the money can go. But it's designated within every dollar.

Next, decide how much you need to save. So take the total amount of money you want to spend, divide it by the number of months or weeks you have left to make the purchase. So if we want to spend $5,000 in Italy next June and it's April right now, then we have 14 months to save. So that means I need a line item in my budget. And we're going to put away $350 every single month until June. And remember, a sinking fund will only work if it's in the budget.

So whether you budget on a spreadsheet or an app or a pencil and paper, put your sinking fund as a line item in your budget. And you guys, every dollar, the budgeting app, it makes all this so easy. They do a whole thing with sinking funds. Make sure to check it out. It is wonderful. And since it has a mobile version, then I can take it with me on the trip, track my expenses as we're vacationing. Because again, even though I'm a spender, I have learned to love the budget because it just gives me freedom to see how much money is left. And it's so great. Oh, Italy. Just dreaming of it right now. Oh, you guys. but the great thing is anyone can save up for a big ticket item, even a dream vacation.

So thank you, Sinking Funds. And thank you guys so much for listening to this episode. Please make sure to subscribe if you haven't and leave a review. It is so helpful. It is so, so so helpful. So please do that. And thanks you guys again. And remember to take control of your money and create a life you love.