The Rachel Cruze Show - The Best and Worst Things to Do With Your Money

Episode Date: August 7, 2023

Take advantage of 2023’s high interest rates and put them to work for you! I’ll tell you how. Also in this episode, you’ll hear about one place you should never—really, never—keep your money and why denial isn’t just a river in Egypt (and other things I’ve learned hosting The Ramsey Show).   What you get in this episode:  ·      The LAST Place You Want to Keep Your Money ·      What I’ve Learned Hosting 1,000+ Hours of The Ramsey Show ·      Are You Missing Out on Free Money?  Helpful Resources:  ·      Learn more about Christian Healthcare Ministries  today! ·      Take back control of your money with Financial Peace University. ·     Start budgeting for free with 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 and The Op Games. 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 a couple months ago saying that account interest rates have officially reached a 15-year high, but not as many Americans are benefiting from this as there should be. That's right. You're welcome. Hey guys, welcome to this episode of the Rachel Cruise Show podcast. I'm so glad that you're here. So in this episode, we're going to talk about the best and worst things to do with your money. I'll talk about how to make more money for free.

then we'll talk about what I've learned after hosting a thousand hours of the Ramsey show over the years. You don't want to miss it. But first, let's talk about the place you shouldn't be keeping your money right now and why. Take a listen.

Okay, if you know me, you know I'm always talking about the importance of budgeting and saving for an emergency fund, investing, creating temporary sinking funds, even for the future, I mean, all the things. But today, I want to tell you about the one place you definitely don't want to leave your money long term. And with the rise of the internet and smartphones, there has been a

significant increase in identity theft, security breaches, scams, you name it. And because of this increase, it is more important than ever for you to be vigilant about where you're keeping your money. So I want to go over some recent updates on this topic and how to protect yourself and your money to make sure that they're not at risk and where to store your money long term so it grows over time. and the fact that it's secure. All right, let's get back to talking about where you shouldn't keep your money. So I saw a Washington Post article back in June

about three places people should never store their money, and the headline obviously got my attention. So the article says that Venmo, cash app, and PayPal are apps that are becoming more and more popular, but they do not protect your money well. Now, at first I kind of was like, well, of course they don't protect your money. like who's putting tons of money into these apps?

Like who's just leaving money there? Well, a lot of people. So those are all platforms, again, that I've heard of. And I used some of these apps, but I would never choose to store a large amount of my money in a digital payment app. But then I got to thinking, again, how common it is for people to run their businesses using these apps.

And even if you work a traditional job with an annual salary or an hourly wage, a lot of people take Venmo payments for their side hustles or use it to pay babysitters. So they're constantly being used and people can start to store more and more cash in these apps. So app payments have also become more popular

with small businesses and freelance services. I mean, if you go to a food truck here in Nashville, that's usually how you pay. I pay my therapist over minmo. I mean, it is so common. Okay, so if you're anything like me, maybe people have sent you money, you've forgotten about it and you leave it in there

and it grows, you know, or you hear people, again, that are using this further change. checking account. But listen, you guys, I just want to warn you, people are losing money left and right in these payment apps, especially if you were just leaving money in them. The article reports that a federal consumer watchdog is cautioning customers not to keep money in apps like Venmo, cash app, PayPal, and even Zelle, because that money is not insured by the government and can be completely lost if these companies fail. So basically, these kind of payment methods are becoming

more and more popular, which again, we use a lot. But they don't have the same. level of protection as traditional banks or credit unions. Again, if you're leaving large amounts of money in them. And like any exchange that takes place on the internet, the occasional error can happen. So know this, you guys. So whether it's a random technical issue or an intentional hacker, whatever it is, man, they can take money digitally from you if you leave money in there. Another article on this topic talks about how some states do offer protection for app users, but the rules are pretty inconsistent. According to the Consumer Bureau, some states allow companies to invest customer funds in risky security measures,

and some impose no restrictions at all. So it sounds like they're missing some kind of blanket protection over the system. But why are we just hearing about this? Because according to the first article, it's largely due to the fact a growing number of Americans prefer to make payments without cash. So, yes, we all know this. Old school cash, like people just don't carry it around anymore. paying, you know, with cash or even your debit card, I'm going to tell you, though, is the most

trustworthy payment method out there because, again, it's all protected. It's real. It's all there. Now, apparently 12% of frequent app users have reported sending money to the wrong person. Oh my gosh, just makes me so nervous. George Campbell did this. He talked about this on our smart money happy hour podcast. And again, it's really kind of freaky because as these things were being published, it talks about that at the end of 2022, none of the four largest payment platforms, Benmo Cash App, Apple Cash, and Zell offer reimbursement protection when this happens. So, again, we're supposed to just trust that this random person that we sent our money to will send it back to us.

Now, George Camel, in his experience, the person did, which gives me such faith in humanity, but again, it all kind of seems very risky. Now, technically, you could dispute any faulty charges with your bank, But again, there's a lot of phone calls and paperwork just to get access to money that was yours in the first place before the internet got involved. So don't get me wrong. There is definitely pros to using digital payment platforms. It's convenient.

Again, I use it. It's fine, but you don't want to have a large amount of money just sitting in them because people do carry less cash today. So it's nice to have the flexibility to pay for things directly without having to go to the ATM. But again, the point. is that we're learning more and more that this can't be a crutch for you to rely on storing your money and using it as a checking account. So immediately transfer your money from these apps into your checking account, okay? So keeping any amount of money in the app just to use it for next time to pay someone or again, as your personal checking, it's not wise. Even if it feels convenient,

just do bank-to-bank transfer and let the app be the middleman, but don't let the app be your checking account. All right, so to wrap us up, let's talk about where you should be keeping your money. So if you are following the Ramsey baby steps, these are a series of steps that help you with your money goals to take control of your money and move it through this process of possibly being stressed and freaked out to debt-free and building wealth. So if you have student loan debt, credit card debt, a car loan, you know, and you're trying to get that starter emergency fund of $1,000 that you want that first before you go and pay off all

of your debt, then once you are debt-free, you want to bump up that starter emergency fund to three to six months of expenses. So when you are saving for your emergency fund, whether it's the $1,000 or the three to six months of expenses, I recommend putting this in a high-yield savings account or even a money market account. So these kinds of long-term savings accounts allow for interest to passively be earned, which is great while your money's just sitting there, but also your money's still there in a bank where you can go and get it if you're. you need it versus investing it and it's in the market, it's much more difficult to get. So the point of having an emergency fund, think about it.

It's more like insurance than an investment. But if you have the option of just a boring old savings account or something that you can actually earn some more money, let's choose this one where you can still get it. Your cash is still liquid, but you're earning some more interest on it. That's a win. All right. So both of these options, whether it's a high yield savings account or a money market account are low risk and again, high reward because you're able to,

to get to your money when you need it. So after all the debts are paid, your emergency fund is fully funded, then you're going to move on to investing 15% of your income and two retirements. So you want to do this with your 401k program at work, a Roth IRA. So there's places for you to invest your money.

Now, when you're investing your money, keep contributing consistently your money in a place that is proven to increase your earnings over time. So by the time you need these funds for retirement, you might be shocked of how much, money is in there because it's been growing and because of compound interest. So my advice is always put your money in something that has a proven track record over time.

So things like crypto that came up, really exciting for a moment. A lot of people lost a lot of money doing that because it didn't have a long track record. So again, be investing your money in something that has a long track record. Now, Venmo, Cash App, Apple Pay, all these apps, you know, they're new, they're convenient, but don't trust them to store all of your money in there because remember they have little to no protection. So save that emergency fund in a good money market account or high yield savings account and then invest your money in good growth stock mutual funds using your Roth IRA 401K for it to grow over time. So if you need a tool to help you get started on all of this,

you guys, every dollar, the budgeting app is one of the best resources out there. It lets you create budgeting categories for your specific needs, which also allows you to save your money before putting it into a safe, trusted, long-term account. So today I want to talk about what I've learned from hosting over a thousand hours of The Ramsey Show. So if you're not familiar, The Ramsey Show is a caller-driven radio show now podcast that has been on the air for over 30 years. And we're actually on YouTube as well. So we record it live Monday through Friday afternoons right here in Franklin, Tennessee. and the original host was my dad and personal finance expert Dave Ramsey.

And now it has additional five other co-hosts, including myself, that rotate in and out as we answer money questions, relationship questions, career questions from callers every single week. So if you've never listened, you should because again, it is on the radio, of course, but also podcasts and YouTube. So make sure to check it out. So I have been hosting The Ramsey Show for several years now. And there is a lot that I have learned along the way. And there's definitely a few patterns that always come up time and time again. So today I'm going to share them with you here all in one place so that if you're wrestling through some of the same kind of challenges or roadblocks that I hear from callers,

hopefully you can find some encouragement. It may be a practical way forward. So you're definitely not alone in this process. And remember, there's always hope. So let's dive in. The first thing that I have learned after hosting more than a thousand hours of the Ramsey Show is that everyone is searching for margin. Yes, this shows up in a lot of different ways,

but no matter the specific situation, almost every single caller is looking for advice on how to get more margin to accomplish their next money goal. So whether they're saving up for their starter emergency fund of $1,000, or if they're trying to pay off student loan debt or save up for cash for a car, everyone needs more money is what it feels like.

And my answer to this dilemma is always the same, is that margin requires sacrifice. If you want to have more margin, then your game plan is pretty simple. You have to raise your income and cut expenses. Financial margin doesn't just appear out of thin air, so there's going to be some level of sacrifice that's inevitable. And it's all about finding a way to increase what you're bringing in,

so that income side, and decreasing what you're spending. And this could look like picking up a side hustle on the weekends. Maybe it's cutting non-essential expenses for, a period of time, like streaming services or gym memberships. Maybe it's cooking at home for a month and saving money on what would be restaurants or takeouts. Now, don't get me wrong, all these decisions, these are hard to make, especially if you're used to a certain standard of living. So it's going to sting a little at first. But once you've realized that true financial peace is on its way, and it's right there in front of you and you can get to it so quickly, these sacrifices

feel way less difficult in the moment. But again, you have to be able to see, hey, I'm going to make these sacrifices for a period of time, and this is my end date. You want that end date. You don't want to do this forever, ever, amen. But you want to be able to see, okay, this is possible. And you, discipline creates margin. And I'm telling you, margin creates freedom. So the sacrifice is always worth it. The second thing that I have learned from hosting the Ramsey show is that denial is a common struggle for people. A huge amount of calls that we get to have some kind of denial or avoidance in the mix. And honestly, you guys, like, I get it. The truth is harder to hear sometimes and people just want to be seen and heard. But again,

the hard thing is ultimately the answer in the end. And I usually tell the caller, but they already know the answer really is. And people tend to have an inkling about what the next step should be, but they also know it's going to be tough. And so they're making any last effort that maybe there's an easier way to their solution. But again, I'm going to just tell you, I'll save you the trouble typically, the hard thing is the right thing. So selling the car to pay off debt faster, saying no to an expensive vacation while you're still saving up for an emergency fund. Whatever it is, trust your gut and make the hard decision. When you go ahead and start doing what you know you have to do, the light at the end of the tunnel comes faster. All right, the third thing that I've learned

while hosting at the Ramsey show is that when it comes to money, relational issues are extremely common. And what I mean by this is that there's a lot of hesitation around making bold money decisions that is connected to people in your life. So whether it's a spouse that's not getting on board or a parent who doesn't respect how you're spending your money, the people we do life with can be a huge roadblock to our momentum. And I don't want to minimize this struggle because people matter. Communities are really important aspect of life.

So it's painful when the people you love or the people you surround you. yourself with are making it more difficult for you to choose what is right for you and your money. So if you're facing this, I would encourage you to lean into communication. Be very clear, be direct, be confident communicating what you need in this season. And when you're honest and transparent, it disarms the critics and allows you to advocate for yourself in a really powerful way. And the people who truly love you will eventually come around and show up for you when they see you showing up for yourself.

All right. The fourth thing that I have learned after hosting the Ramsey show is that people love to think that they're the exception. I hear this excuse a lot of, well, my situation's different or my problem's really unique. But nope, I hate to break it to you.

You're not that special. Like Taylor Swift sings in one of her new vault songs, you're not the exception. You will never learn your lesson. Except we aren't going to learn the lesson, you guys, okay, we are. Because the bad news is, is that your situation is not specifically special.

We've seen it all. Common money mistakes, again, are very common for a reason. But that is why we have tools like the Baby Steps and every dollar in Financial Peace University to help every person in every walk of life take control of their money and experience financial freedom. And these things have been around for so long because they work. So learn your lesson early, lean on these resources that are trusted, and do the process, you guys. Do it. Okay, that brings me to the fifth and final thing that I've learned by hosting the Ramsey Show is that every single money problem could have been avoided of people knew about the baby step sooner.

And specifically the emergency fund, you guys. Oh, my gosh, we've taken hundreds of calls of people who've gotten tangled up with credit card debt or bad investments or get rich, quick schemes when they're in a bind. and they don't have an emergency fund to rely on. So when you don't have a cushion like that, when you don't have money in the bank, it feels like you have no other choice, but to make even worse financial decisions to get you into more of a mess.

So listen, humans mess up. Life happens, but it means that we want to be prepared for the future. So if you're not familiar with the concept of an emergency fund or the seven baby steps, here's a quick overview, okay? You want a $1,000 emergency fund first and foremost. Then you're going to pay off debts. Once that's paid off, bump up your emergency fund to three to six months of expenses. Then you're going to invest

15% of your income into retirement. You're going to fund kids college. And then you're going to pay off your house early. And then baby step seven, the final step is to build wealth and be extremely generous. So all of these have been ordered. And we have talked to people that, oh, if they've done this and if they're on a budget, P.S., that's a big thing too, then a lot of these scenarios can be avoided. But life happens. And we're still going to take these calls, but usually going back. back to the baby steps is a tried or true way to win with money long term. All right, you guys, those are really the top five big overarching things that I have learned from hosting The Ramsey Show for more than a thousand hours.

And like I said, if you're listening to this or watching this and you feel like, golly, this is me and you're relating to it, you're definitely not alone. I have listened to a lot of money problems, but I've witnessed just as many successful stories that are full of joy and freedom when it comes to their money. So if you are ready to take control of your money, but you have no clue where to start, give Financial Peace University a try. FPU is a personal finance course that shows you step by step exactly what to do when it comes to getting rid of debt, saving, budgeting, and investing for the future.

So you can join a class at ramsysolutions.com, and I'll leave a link in the description. And you can literally start today seeing progress with your money, so do it. Today, I want to make sure that you're not missing out on free money. That's right, you're welcome. I saw an article a couple months ago from CNBC saying that account interest rates have officially reached a 15-year high, but not as many Americans are benefiting from this as there should be. So some of you might be thinking, wait, how can high interest rates help anyone?

Yep, but we're going to talk about how you can actually benefit from these crazy high interest rates. Let's look at the state of interest rates right now because unless you've been living under a rock, you've probably heard that interest rates are the highest they have been in years. According to this article, top yielding savings account rates

are just north of 5%, which is the highest since 2008 and much higher than last year's 0.8%. The Federal Reserve, or the Fed, has been raising rates periodically over the past year to offset inflation, which, again, sort of provides some temporary relief in some ways, but it doesn't fix the root of the problem.

So, as you might expect, most of the responses have been pretty negative because high interest rates means it's really difficult for people to afford loans and afford the interest rates when it comes to debt. So this includes buying a home, taking out a loan for a car, consumer debt, credit card debt, basically anytime you're borrowing money, then you're paying thousands of dollars more because interest rates are higher. But the good news is the opposite is true. Everyone that is fixated on how awful it has been because of debt, that's very true. Like I understand, but what people are not talking about is the benefit of saving money during this season because of high interest rates.

You're actually making more on your money when you have savings. So let's think about it. The more money you're able to save right now means more money you're able to earn from interest with no extra work on your ends. Just by keeping your money in the right place, you can let interest rates actually benefit you. So there are two places that I recommend keeping your savings long-term, a money market account or a high-yield savings account. And these places are safe and provide great opportunity for some growth over time. So if you're familiar with the seven baby steps, you know the very first step of your financial journey is to save a $1,000 emergency bend.

This is your first goal, even if you have debt to pay off and a mortgage and everything. You want $1,000 first and foremost. And we say to keep this, again, in a place that you can get too quickly because if an emergency happens, you want to be able to grab it. So you don't want to go and invest this in the market. You want to be able to get to it quickly.

Now, once you've done that, and then you've paid off all of your debt except for your mortgage, you move on to Baby Step 3, which is building up a fully funded emergency fund of three to six months of expenses. Now personally, I recommend accounting for monthly expenses only, but some people choose to do three to six months of income. Whatever works, we just want a good emergency fund in place. So now once you have that amount of money saved up,

you're going to have to think, okay, where am I going to store this money safely so that it's there if I need it? So you can either transfer your emergency fund to a money market account or a high-yield savings account. Now, these two accounts serve a similar purpose, but the big difference is the access you get to your money. So there is some small discrepancies between the two, like minimum balances and deposits or even fees for withdrawing money,

fluctuating interest rates, all of it. But since both accounts allow your money to be stored safely and earn interest over time, there's not necessarily a right or wrong method here. So I recommend doing just a little bit of research and figure out, okay, what are the pros and cons on each of these based on your priorities? So, for example, high-yield savings accounts sometimes have higher interest rates, which is awesome because, again, your money's going to grow and that's great.

However, those accounts sometimes you have limits on transferring your money, which means you can't take your money out very often from high-ield savings accounts or you'll get dinged. So if you're looking for something, again, that you need to withdraw the money, a high-yield savings account may be more difficult and more costly. But if you're using it just for an emergency fund and you think, you know, there's probably not going to be a lot of reasons for me to take this money out, then you can leave it in there and it's great. Now, on the other hand, money market accounts give you easier access to your money.

So they come with checks, rural checks, even a debit card. So you can actually take out a certain amount of money every single month. You can't use it for like a checking account. It's not that much. You can't withdraw that many times. But again, it's easier. So let's say that you've saved up money maybe for, for wedding expenses in a sinking fund.

A money market account might be better for you because, again, it allows you to withdraw the money as you need it to a certain point. But keep in mind, money market accounts come with slightly lower interest rates than high-yield savings account. So if you find that you're not taking advantage of the flexibility as much as you thought you would,

then you may want to consider swapping it to a high-yield savings account to earn more if the money's untouched. Plus, high-yield savings accounts are FDIC insured while money market accounts are not. and although they're both still very low-risk investments, it's still something you want to think through. So the bottom line is this.

When you have your emergency funds in place, you need to be strategic about where you're keeping your money, letting it sit in just a regular bank account or just a regular savings account. It's not great because, again, you could be earning money somewhere else. And don't forget, in addition to your emergency funds and your regular monthly savings, you know,

to keep it a habit. Babysept four is when you invest, your money, at least 15% of your money, into retirement. So this is like your 401k match at work, Roth IRAs, all that. So you definitely want to take advantage of those as soon as your emergency fund is complete. So talk about letting your interests work for you. Well, compound interest will do that, especially with retirement funds and wealth building and investing. It's incredible. So don't miss out on retirement investing and keep increasing your contributions as much as you can as your income goes up.

All right, you guys, I think that does it. I don't want you missing out on some of this money that you could be making. So this information, again, is really important. So assess your situation and figure out, okay, what needs to happen here? Do I need to start an emergency fund? Maybe you have no savings, so you want to start. Maybe you say, gosh, I've been having it just in a savings account, a traditional savings account at my bank.

Maybe I should look into a high-yield savings account for more interest and actually make some money while it's sitting there. Maybe you need to ask, do you need to check on your retirement funds even and say, okay, are those doing what they should be doing? So wherever you are in your financial journey, make sure you are intentional, you're looking at situations, you're looking at your life and what's coming up in your season, and you're assessing the best place to put your money. And the best place to start making small changes is with a monthly budget.

So you can download my favorite budgeting app every dollar for free. So try it out for a month and see what you think. I guarantee you will see progress with your money if you've never budgeted before. It's incredible. You start to feel like you actually have control over your money. Guys, interest, it's a beautiful thing when you're earning it and not paying it.

All right, you guys. Well, thanks so much for listening to this episode. If you have someone in your life that you know needs a great money message, make sure to send them this podcast. And if you will, leave a review. It is so helpful to hear about what you guys are learning, what you're loving, get the show in front of people that may not know about it so that we can keep spreading hope

when it comes to people and their money. All right, you guys, remember to take control of your money and create a life you love.