The Rachel Cruze Show - Should You Avoid These Popular Money Moves?

Episode Date: September 5, 2022

Get ready to hear my hot take on the FIRE movement! Plus, we’ll talk about inflation and some strategies for dealing with it, and I’ll react to a hilariously honest video about credit card companies.   In this episode: ·      Was It a Mistake to Pull Your Money Out of the Market? ·      Is It Really Possible to Retire Before 35? ·      The Video Credit Card Companies Don’t Want You to See   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

A recession is when the GDP recedes two quarters in a row. There's debate if we're in a recession, but my textbook and Econ 101 even, so technically, yes, we are in a recession if you want to look at the textbook definition. Hey guys, welcome to this episode of the Rachel Crewe Show podcast. I'm so glad that you're here. So today I'm going to be reacting to a video called Why Credit Cards Are a Scam from the Comedy YouTube channel. cracked. And it's part of their series called Honest Ads. And I can't wait because I hear it's a little

sarcastic, which I just appreciate that. So in this episode, we're going to talk about popular topics right now. We're going to talk about the fire movement, also known as the financial, independent, retire early. And is it possible to retire before 35? Well, we're going to talk about it. But first, let's go into why it was a mistake to pull your money out of the market. Take a listen. All right, we're going to talk a little bit about the economy this episode, okay? It's going to get a little nerdy, but just stay with me because I want to prove a point to you because I want to talk about investing and just the idea when we talk about it's like a roller coaster, but stay in it.

And when fear happens, people want to pull their money out because they're freaking out. I think the world's coming to an end. And I always tell them, don't write it out, write it out, because it's going to go back up. So let's look at that because we've had some freakouts and some fear recently. And you can start to see, oh, wow, okay, I can't stay. in this. So the jobs report just came out for July, and it was crazy good. So many jobs are created. In fact, 528,000 jobs were created, and unemployment dropped to 3.5%. So incredible, so great. Where they're even predicting that only 258,000 jobs would be created, and unemployment would be at 3.6%.

So we are in even of better shape than what they were predicting. And so what's funny is when the jobs report was released and everyone saw, wow, these jobs. economy actually like people are getting jobs and their wages are going up and unemployment's low. What happens is consumers, every day Americans like us are like, okay, I feel good about life. Like that's actually a good thing. That's a good sign. And so when people feel good and they feel confidence, they spend money. When they're fearful, they don't spend money. And so naturally, when we talk about investing and you look at the S&P 500 or the Dow Jones, those like little graphs that you see, which is the stock market, which is where your investments are,

are, it really is the pulse of how people feel, because when you're confident, people start spending money, guess what? Those little lines go up, up, up. But when people freak out and they hold their money and they don't spend because they're scared, it goes down, down, down. So when the jobs report released, the stock market, you guys went to do-choo-choo-choo-choo-choo-choo, all the way up to almost where we sit now at almost 34,000 points, okay? Where in June, I was sitting in this exact same seat when it was going do-do-do-do-do-do-d-d-d-d-d-d-d-d-d-d-fear, and it went down to 29,000. And people were, again, getting nervous. But I was telling you guys, don't pull your money out, just stay in it.

It's going to be okay. It's going to go back up. You'll see the market go back up eventually. We believe in the American economy enough to believe that. And sure enough, what has happened? Do-do-do-do-do-do. But if you remember in June, what's fascinating is that's when the recession, people were talking about, oh, gosh, the recession, because we'd find out in July if we were in a recession.

Now, a recession, the actual definition, is when the GDP recedes, it reduces two quarters in a row. So that, in fact, happens, even though there's a beta for in a recession, but my textbook and Econ 101 even forever ago, that's the definition of a recession. So technically, yes, we are in a recession if you want to look at the textbook definition. But again, it's a minor recession. but when the word started floating around in June, that's when the market went, because people were scared, pulling their money in, not spending.

And now the jobs report releases, and you open up the app, and I'm seeing it on Apple News and on my phone, and everywhere, they're like, the market's gone crazy, do, do, do, everyone's happy again. So, again, I just wanted to pull this little sliver out in history to remind you.

That's how it kind of all works from like a high-level perspective without getting too much into the nuts and bolts of it. But also to remind you that when you, that when you are investing and you have money in the market, remember a couple of things. Number one, we want to diversify. You don't want all of your money in one stock. I don't like playing the stock market.

Have it in mutual funds, which are 90 to 200 stock group together. And that can be in a form of even retirement vehicles, like a 401K, a Roth IRA. So choosing good gross stock mutual funds within that is going to help you in the long run. And then if you max out your retirement and you want to do more, again, if you want to be in the market and have some good mutual funds outside of that, that's great as well. But the idea is when you're investing, I believe it is a great place to put your money when you're debt-free and you have a fully funded emergency fund,

and you have to write it out, okay? You have to write it out and don't let fear panic you because people pull their money out at the bottom and that's not good. I don't know if I don't like these words specifically, but Warren Buffett always says, get ready, to get greedy when people are fearful. Okay, so when people are fearful, remember,

the market went down, down, down. And that's when you can buy a lot that's cheap in the market, and then get fearful when people get greedy. So when people get greedy, the economy goes back up and just kind of be, huh. So again, not necessarily like perfect words to live by, but I think it's a fascinating thing. So basically just remember, when people are freaking out in the market dive, stay in it.

Stay in it because it will return, just like it is literally, as I'm talking right now. So remember you guys, you're investing, it's for the long call. All right. really possible to retire at or even before the age of 35. So we're going to talk about that today because we're going to cover something called the fire movement. This is something that I've read about.

I've seen it's a trend that's kind of cycled in and out, but now it's making a very strong comeback as more and more young people are saying that their goal is to retire early. So how do you even go about this? Well, let's talk about it. So first, what is the fire movement? So fire stands for financial independence, retire early. And people that are part of this movement, they have a goal of saving and investing aggressively about 50 to 75% of their income so that they can retire as soon as possible. And some people try to do this by the age of 35. So obviously, it's pretty extreme. It causes you to live below your means. It requires major satisfaction. sacrifice. But is it possible? Yeah, it is possible. People are doing this. Now, is it a good idea? It's debatable. But let's look at what it means to retire early. So what is the fire movement's definition of retiring early? So most people that follow this method aren't just doing it so they can

sit on the beach for the rest of their lives. They really just want to be able to travel, work when they want, not work at all, and just have the freedom to choose. So everyone has a different amount of money that they want to retire on, but most fire people aim for saving around 25 times their yearly expenses in order to be completely financially independent. So for example, let's say you spend $48,000 a year. That means you'll have to save up $1.2 million. And this is based on their assumption that they would withdraw 4% of their savings each year in retirement, which is the withdrawal rate that the fire method thinks is sustainable. If you invest, and have passive income.

So what can we learn from the fire movements? Well, here, there's some good points. So these people are really intense about their goals, which I love. I mean, I feel like sometimes we can just kind of float through life and there's kind like, I don't know what to do next. But they have something they're aiming for and they are driving towards it really intensely, which I love that. I think that's amazing.

Also, I think it's great to have a dream and to actually plan for retirement. they're obviously moving up the retirement age significantly. But they're thinking about it. They're thinking long term and like, okay, what do I want that to look like? Where, again, some people aren't even thinking about retirement until they're in their 40s and 50s and realizing, oh my gosh, where did my life go? These people really are starting early to think long term. Also, in order to do this, you have to live below your means.

And so this habit, I think is wonderful. It's something that we talk about on the show all the time. But, man, when you live on less than you make and you have margin, There's something about it that proves you can. You can do it. And it's possible. So it just proves that that is a great method of living life. And I love that they make saving and investing a priority,

that they say, I'm going to sacrifice things that aren't a big deal right now. It feels like a big deal in the present, but it's not. I'm going to take all that money and actually save it and invest it for the future. All right. Next, what are the downsides of the fire movements? Well, you have to have a pretty large income, or you have to make massive sacrifices, or both, for this to even be a possibility. So, again, depending on your income and depending on your sacrifice level that you're willing to do, it may not be in the cards for you.

There's a real danger of getting burned out early in life. And so, again, they go so hardcore, so quickly, so intensely that some don't even make it that far to that age. age of 35 or 40 to retire early, they get burned out beforehand. And many fire advocates recommend the use of credit cards and their points and rewards, plus investing in kind of some things. I'm like, eh, like interest bearing bonds and other stuff that's risky, just to have passive income. Also, many fire advocates also do it to just avoid working full time because they hate their jobs. They're like, oh, I just want to get out of the job force. When the truth is, you actually, you know, you can have a job that you love.

You don't have to, like, run away from work. So it is possible to still make a great living and enjoy the work that you're doing. And also a hardship here is that the cost of living is so high right now because of inflation that it's really harder than ever to save that much of your income. So that is a downside. Okay, so what's my take on the fire movement? Well, I'm definitely not mad at it. I mean, I think that there's a lot of people.

They're like, I just want to retire early. I want to save a ton of money as soon as possible. And I'm like, okay, if that's what you want to do, you go for it. There's nothing morally wrong with it. But I also would say, don't do it just because you're like, oh, I just want to retire and do nothing with my life at age 35 or 40. And yeah, not doing anything. I just think we have purpose and I think that we have things that we can actually do. So I don't want it to be a cop out for people not to, not just do a job, but do something that you're passionate about and that you love and that you're created for. Also, many people,

you know, they sacrifice so much early in life, you know, through their 20s. especially, and I say on the show, create a life that you love. And so there's part of enjoying that the money that you're working for and to kind of have a little bit of a balanced approach where the fire move, it doesn't have that at all. It's very, very extreme. Also, you want to think about the quality of life later on. So you have to think, okay, is that $48,000 as an example, going to last me for the rest of my life? Like, is that the thing, is that the number? Because chances are that number could change for you. Or you could think, do I just want to, and invest and save more steadily throughout the years and then be able to enjoy retirements later on

with millions of dollars in my 401k or Roth IRA. So there's a tried and true method for sure that I recommend when it comes to retirement. So this idea of being out of debt, having a fully funded emergency fund, and funding 15% of your income into retirement, it's worked well for literally millions and millions of people. And the truth is there's freedom when you don't have debt and you have an emergency fund to maybe enjoy some of the perks of the fire movement where you could say, okay, I do want to change jobs. And I'm able to because I have no payments. I have money in the bank.

And so I now have options again. And so that's what I love about the baby steps is it gives you those options. Now, if you want to go crazy and do the fire method and that's what you want to do, that's great too. That's totally fine. But I do think that there can be a balanced approach. I think the baby steps really do bring this. but if you do have questions about investing and saving for retirement and knowing, okay, am I going to have enough for retirement to maybe retire a little bit earlier?

And you just have questions. I would really recommend that you talk to one of our Ramsey trusted smart vester pros. They can answer all of your questions and help you make the financial moves that you need to make for what's best for you and your family and your goals for the future. So that's the fire movement, you guys. I think it's really fascinating. I love hearing people's stories about it because, I mean, I think there's a part that's for sure motivated.

and goes completely against the culture, which I appreciate, sacrificing, you know, saying no to just what you want in the moment for getting to a goal. And I think that that mindset is so helpful in life. Now, if you have a friend that's curious about the fire movement or you think this would be really intriguing for them, make sure to send this on to them. And for you guys, keep on the journey, no matter where you are,

depending on your baby steps, where you are financially, just keep at it. Have a goal in mind and be chasing it with, Intensity, maybe not as intense as the fire movement, but having focused intensity over time is so, so key. So today I'm going to be reacting to a video called Why Credit Cards Are a Scam from the comedy YouTube channel Cracked. And it's part of their series called Honest Ads.

And apparently it's supposed to be so funny. I've never seen it. So this is my first time viewing it. And I can't wait because I hear it's a little sarcastic, which I just appreciate that. So, okay, here we go. Want to have money without having money? Want to go to stores and get things because you want them? Then use my Horton card.

It's reliable. It's no fuss. It's a fancy plastic IOU card that will have you swimming in debt for the rest of your and your offspring's life. Oh my gosh. Okay, pause for a second. Okay, fascinating. You'll be swimming in debt for the rest of you and your offspring's life. It's very fascinating that they said that,

Because I think so much of understanding money, we don't realize how much we're impacting our kids. And when your kids see something that is so normal, they're going to jump in and think, yeah, that's normal mom and dad did that. So I'm going to do that. Like, it's a mirrored effect until someone says, no, no, no, no, no, no. And for the rest of your life, because they are dang good at trapping you and just kind of keeping you in the cycle. It's fascinating. Okay, okay, let's keep going.

And to make sure you feel comfortable with spending money you don't have, we'll use this comedian to make you feel like it's no big thing. I'm from that TV show that's doing reasonably well. So I've got a sense of humor about spending money on stuff I don't need. Just charge my card, buddy. Okay, pause. I love that they're making fun of the fact that they use celebrities because we see that all the freaking time.

We're like, oh, well, if they're on TV, they must be really great with their money. So I'm going to listen to all their advice for getting it. These credit card companies are paying them so much. much money to do these ads. But we just think that they're trying to help us out. So that's really funny. Whatever.

It doesn't really matter to me because I'm mostly excited to get cash bag. Relatable. I know. Why use gross paper covered with pictures of dead guys when you can use my square piece of dinosaur carcass with numbers on it? In fact, nowadays, you have to have a square of recycled soda bottle. Because how else would you even be able to purchase your online subscription to watching what used to be free, or paying for an expensive education that won't lead to a job,

really any financial milestone. That's right. To get a roof over your head, you need to earn credit, which is really just showing you own a little square that you have to pay off continually. Somehow that's what makes you trustworthy and shows you're good with money. We've made it impossible to live without our plastic numbers swiper. We're putting chips in some of them now. Look at that.

Oh, they're putting chips out. Gosh, conspiracy theorist. Rachel's going to enjoy that one. Okay, so this is just so funny because I'm like, yeah, this is the world we're living in that we feel like we have to have debt, specifically credit cards. Get a credit card, build your credit, in order to have a roof over your head to get a house, even though we know you can do manual writing. It's totally fine. You can get a house without a credit score. But man, just like the picture of thinking how normal it is. It is so normal. There's no way you can do life without this plastic card and how well they've marketed that to us, you guys. Like, we think it to the fact that when someone says it out loud, it's sarcastic and funny, which is what we're experiencing now.

Okay, keep going. You can't even use these everywhere. You can use it in some places that pay me to accept your card. Otherwise, you can just use money, which is what people who are taking your money would prefer. I'm an expensive middleman who's charging everyone extra for using my plastic cut-up. Also, you'll probably need a different swipy swiper when my card doesn't work at one place where another one does work.

Is it harder to keep track of how much you're spending when you don't physically see the presidentially decorated paper strips leaving your hands? We're counting on it. Ah, okay. See? They know, you guys. I bet he's a fan of Ramsey Solutions. Yes, that when you spend with cash, you actually end up spending less because, like, he's just so. said, it is leaving your hand. You have to trade something in a transaction. And what that does

your brain, the pain centers of your brain light up. Something happens where you feel money leaving. It does something different than just swiping and keep going. But he said, yeah, that's what we're hoping, is that you just keep, you keep going and collecting more and more. So, so interesting. Okay. Courage you to go paperless. We'll say it's for the environment, but it's really because we know if we send you emails of the charges you made, you'll only skim the email. If if you're reading them at all. Here's where it gets fun for me and exclusively no one else.

We made it so the longer it takes for you to be able to pay us back on time, the more money you'll rack up an interest, and the harder it'll be to pay off. And doesn't that sound like it should be illegal? It's not its interest. Interest is a random percentage we charge you because you made charges. This is going to get pretty technical and pretty crimey,

so let's look at a graph. If you're the average American credit card holder, then you owe more than $10,000 in debt. Let's say your interest rate is 24.99% and you're paying off just the minimum because times are tough, or, you know, because times are normal. That means that in 10 years you'll have paid more than $26,000 and still owe over $11,000 more, and that's just 10 years. After 50 years, you'll have paid $165,729 and still owe more than $17,000. So you will always owe me money, but the more you... Oh, okay, pause.

So that's the thing, you guys. Like, that's one reason that we talk about this whole industry being so toxic. So where the average American owes $10,000 in their credit card, and some people are like, well, I pay mine off every month, all of it. And I'm like, okay, yes, maybe you do. Maybe you're one of the less than half of Americans, 48% of Americans that actually paid off every month. You're still benefiting from people stuck in that system he just showed.

So your rewards and your points and all of that is off of this toxic system of these people that are stuck in it. And until they decide, hey, I'm going to have to sacrifice and get an extra job and do what I can to pay this off to get above it, to get beyond it, versus just stuck in this hole. Like, that's the industry. That's what they want. And so they paint themselves, like they're trying to help you or that they want to advance you and you get free, you know, upgraded first class tickets to this, there, whatever the thing is. And I'm like, yes, but you're stuck in this industry, in this industry that does that to people. Like it's crazy. I read a book called Four Winds about the Dust Bowl and all these

okeys they called them that migrated to California and they got put to work on these huge farms and they had like their own grocery store and their own bank and all this and they had to use, they had to go into debt like in order to buy food at that grocery store. I mean it was like this sick cycle and I'm like man that exact specific thing obviously is not happening like right now exactly that way but in the same way there's financial industries part of the financial industry that is doing that, that's getting people stuck in a cycle that if they just live in it, they literally mathematically can't get out. And so, oh, it's mad, okay, keep going. The more worthless things will give you. All right. Yes, let's hear it for stuff. Or even better

than stuff, cashback, which is just a tiny portion of money that you'll use to pay off the debt. But of course, you'll never see actual money. The more you charge, the more cashback we give you. It's like you're digging a hole, and we throw in a handful of dirt to help you get out of the hole, but only after you dig five feet deeper. If you're worried you might not be able to pay off this credit card, we'll encourage you to get another card to pay off that one, and then another to pay off that one. The more credit cards, the more you have to pay, and the more you owe us.

It's literally the same apparatus as a Ponzi scheme, but we tell you about it. With a 300-page tiny printed booklet that you won't read. Get yourself a Horton card credit card. Go ahead and swipe it through machines till you owe us billions. Oh, is that too harsh? Oh, here. Hey, laugh machine, make the people feel better with your jokey words. Hey, so you guys ever notice how Katie...

Katie Perry is... You feel better already, right? Katie Perry's basically just Zoe Dish, but gassier. I'm Roger, by the way. Oh, man. And here's the crazy thing, y'all is like, it's all true. I'm like, yes, it's exactly what's happening. Exactly what's happening.

Oh, man. Okay, well, that gave, enlightened me a little bit in my day and just remind me, yeah, that's exactly, exactly what is happening. So, hopefully got a little entertainment, a little education there. And remember, just stay far away from debt and credit cards. It's not worth it. It's just not worth it. You can use a debit card, get everything you need to have in life.

But it's your money. You're actually using it. You're not engaging. with the bank and their money and then interest and all that. Oh, man. All right, you guys, thanks so much for listening to this episode. And if you have not followed this podcast or subscribe to this podcast, make sure hit the follow button.

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.