The Rachel Cruze Show - The Biggest Financial Mistakes Americans Are Making Right Now

Episode Date: September 12, 2022

The economy may suck right now, but your bank account balance doesn’t have to. Let’s talk about how to avoid making big mistakes with your money. I’ll cover the crypto meltdown, the impact of upcoming elections, and why buy now, pay later companies are losing money (and if you use them, you are too). In this episode: Is This the End for Crypto? Why the Government Shouldn’t Be in Charge of Your Finances The Biggest Financial Mistake Americans Are Making Right Now Helpful Resources: Christian Healthcare Ministries Sponsors pay the producer of this show, The Lampo Group, LLC, advertising fees for mentioning their services or products during programming. Advertising fees are not based upon or otherwise tied to any product sale or business transacted between any consumer or sponsor. The following sponsors have paid for the programming you are viewing: Christian Healthcare Ministries Learn more about your ad choices. Visit megaphone.fm/adchoices

the buy now pay later. Companies are losing money. They're losing popularity because the hype is just kind of gone. So their value is going down, down, down. People are using it in times of trouble, which when you're using debt to be your safety net and causes more trouble in your life. 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 the biggest financial mistakes that Americans are making right now. We're also going to talk about companies out there that are not here to help you and how it's affecting most Americans today in a really negative way. So let's talk about what we can do to ensure that there's more money in your pockets. We're also going to talk about the midterms and what that means for your family and your money.

We're just kind of a little heart to heart. But first, let's talk about the crypto meltdown. What is happening? how is it happening? What are my thoughts? Oh, you're about to hear. So take a listen. All right. There's been lots of buzz happening around the old world of cryptocurrency. And I wanted to dive into it because people talk about this a lot. And I've had a stance on it, which my stance has always been. I'm not mad at it, but I don't think it's a great long-term investment until it proves itself. And so people got very mad at me, very mad. They're not happy with me. The fact that I was

saying this. I'm like, sorry y'all. And now, well, we're seeing a crypto meltdown. So we're going to talk about, hey, what has been going on? And what can you do with your money to actually build wealth in the future? So if you're not familiar with cryptocurrency, I did a video about this. I'll put the link in the description so you can check it out. Okay. So what is the crypto meltdown? What is happening? Well, lots of things have been happening. A Robin Hood, which is a trading app, laid off 23% of its staff because of the crypto meltdown. And basically, crypto holdings have gone way down, way, way down, and the market is basically just crashing. Digital currencies have now lost $2 trillion in value, which their peak was $3 trillion

in November of 2021. So peak was $3 trillion. It's lost $2 trillion. So yeah, it's not looking great. Bitcoin is off 70%, you guys. Several, several major crypto firms have filed for bankruptcy and even gotten into like this pyramid scheme that they found out. I mean, it's just crazy. And some of these companies that have filed for bankruptcy are Voyager Digital, Three Arrows and Celsius. And now people are just talking about, yeah, this is the crypto meltdown or even the crypto winter. Huh, will there be a spring? Cryptospring? We're not sure. And experts are saying that there's just going to be more and more firms, crypto firms that end up filing for bankruptcy because many consumers now are facing huge losses because their rights to all their funds and their assets. Some of them

are just not clear. So here's an example. Celsius, which again is a crypto firm who filed for bankruptcy. In their terms, they did not guarantee that the user was protected with their deposits in an event of a bankruptcy, which means, yeah, they didn't promise their customers will get their money back if the firm files for bankruptcy. So when it filed for bankruptcy, it was a total loss of any and all digital assets, which sucks because that means just people, yeah, their money's gone.

It's over, which is just, oh, it's heartbreaking. It really is. I wanted, did I want to be wrong? I don't know. I was supposed to say, I wanted to be wrong about the crypto market. Actually, I'll say that. I kind of did. Because the idea of it, I like that it's digital.

There's not like this huge government oversight, which I kind of like that too. Like, it's like, maybe the future, like this is going to be a new way. And maybe it'll come back, all that. I don't know. But, you know, so part of me was like, you know, maybe it'll be okay. Maybe I'll look up in five, ten years and it's had a really good growth. Well, it has not. It is not just, we're.

We're again, the market, the stock market lost some value, but guess what, guys? It's gone back up. Okay? So it's a mess. It's a mess. Okay. So why did this happen? Why did the crypto meltdown begin?

Why did it happen? Well, there's a couple of factors. A lot had to do with inflation, which caused the Fed to raise interest rates. And so stable coin, not so stable anymore. Stable coin, a type of cryptocurrency was supposed to be equivalent to the U.S. dollar, but it destabilized and collapsed. It's also become clear that so many crypto companies have been relying on loans just to keep them going.

So here's an example, which I think is just fascinating. So when Voyager Digital filed for bankruptcy, they admitted that they owed $75 million to Alameda research, which was owned by crypto billionaire Sam Bankman-Fried. What's even crazier is that Alameda owed Voyager $377 million. so they're just like lending each other money, which just creates this unstable system. So that's kind of a high view. We won't get into like all the crazy details

of the crypto meltdown, but just in turn, like that's what we've seen. It's been a downturn. In fact, it's like the biggest downturn we've ever seen with digital currency. So again, I'm not mad at crypto, but it just proves the fact that when you are putting your money in something that is not proven, you guys,

it does not have a long track record. You can throw NFTs in here as well. So maybe long term, we don't know, maybe it goes back up? I don't know. But the idea is that when you're putting money in something that does not have a long track record, you are gambling. Okay? So if you are out of debt and you have a fully funded emergency fund and you're funding retirement in actually places that have a long track record, like mutual funds in the stock market, then all that's covered. And you got some money at the end of the month. You think, you know, I just see that if I lose it, it's not the end of the world,

it doesn't change my life. But I kind of want to play in this. You know, that's fine. That's what you can choose to do. But when people cash out their retirement or they go all in on anything new in the financial industry that does not have a proven track record, I'm just like, red light, red light, stop, stop, stop, stop. So end of the day, you guys, will it fail again completely? Who knows? It's not looking great right now. But the idea for you and your money, the end of the story of this is that I want you to put your money in things that you know you will get a return on, that your money will make you money in the long run, and that really is investing your money in the market, ultimately, right? You can do real estate even, you know, there's other places to invest, but funding your Roth IRA,

funding your 401k or your 403B, these avenues that time and time again show over a long period of time, it's not exciting, it's not flashy, but over a long period of time, it works. It works. So, again, I'm not mad at crypto. I feel really terrible for people that put their money in and lost it completely and have nothing to show for it. That's really hard. But again, we've got to be wise, you guys. You've got to be wise to make decisions with money that you can prove to yourself that there's going to be a long track record.

So that's what I'm going to just preach all day long. All right, two things that I love in life besides Jesus and my family are politics and pizza. Yeah. And so midterms are coming up in November and I'll be honest. I can't wait. Some people, most people hate it. It's all over the news. You see signs of people's yards. And people are, oh, my gosh, this is so annoying. And I'm like, oh, this is the time. It's happening. I love voting. I love going to the polls. I love watching it on TV. And when all the results come in, oh, I'm like, I'm there flipping between like CNN and Fox and CNBC and ABC. I'm like, I just want to get all the people's perspectives. Like, this is my time to shine people. My time to shine. But, as much as I love it and sitting on the sidelines just relishing in the midterms in election season, I am still reminded over and over again, regardless of who gets in office, they're not going to fix your life.

Both sides will be making promises of all different kinds of things. Now, obviously, they put things into place that can affect our lives for sure. But when it comes to just you and your money, guys, it's going to be up to you. It's going to be up to you. regardless of who gets in, the governor, your senator, congressman, I mean, all of it, right? And then we go to the presidential elections, all of it. Like, at the end of the day, it's up to you. And I just want to remind you that. Because I think we can get lost sometimes. Some people can of just this idea of, you know, getting a certain person in or if this happens,

this change, my life will be better, like all of this. But listen, when it comes to your money goals, it really is. It is up to you. So remember, if you feel like you are struggling when it comes to money, maybe you just haven't made the progress that you wanted to make, I'm just here to remind you that if you want your life changed, you can do it. You can wake up tomorrow and start making different decisions about money. You can. You can say, I'm actually going to create a budget. And I'm actually going to track my transactions throughout the month, and I'm actually going to live on it. I'm actually going to tell myself, no, when a category starts to run low. Or on the flip side, if a category has extra money in it, I'm actually going to use that extra money to be wise, maybe pay off debt or put it in savings. But I'm actually going to be intentional with every single dollar of my paycheck. Also, you might say, you know what, I am so annoyed that I see how much I make per month. And then how much I have left to spend after the bills are paid.

The car loan, student loan, you know, the four credit card bills I got to pay, all that. I'm just, there's not that much money left. I want to get out of debt. Well, guess what? If you want to get out of debt, including student loans, you can do it. Up to you, regardless of Washington, D.C., regardless of the White House, or the capital. I do love the capital. I think it's a beautiful building, but it's not going to change your life. If you want to get out of debt, guess what, you can. You can. You can start paying off that smallest debt first. Once that's paid off, you roll it over, the second smallest debt. Or maybe you're sitting there thinking, gosh, you know, I just have no savings. Like, if something does have,

happen. If something happens, I don't know what I'm going to do. I really, I don't know if I can make my mortgage payment. I don't know if I could put food on table, all of it. Well, guess what? You get to build up an emergency fund. You get to say, all right, I'm going to cut my lifestyle. I'm going to work extra to put money aside and start building up my first $1,000 emergency fund. Like these kinds of things, you guys that we talk about on this show day in and day out, when you start to make progress and move with your money, it's because you decided to do it. that it's up to you. It's up to you. So this is your friendly reminder during midterms. And a lot of people are going to tell you that they're going to make your life better.

And if you elect them, everything will change for the better and that your life will be better. Well, your life is really only better specifically with money when you make it better. I'd say all areas, but this is about money. We're talking about money on the show. So that's what I'll stick with. But I think it's a powerful thing when you realize that you are the one that is in charge of your future and nobody else. All right, on the show, we've talked a lot about the buy now, pay later programs out there. And if you've missed it, I'll put a link in the description. But basically, it's just a trendy form to get you into debt. Mm-hmm.

And when you go to checkout online, it's Klarna is there or afterpay is there. And they're like, hey, look, you could buy this total amount, or in four easy payments, you can pay as you go, month to month, for something that you're buying right now. Everything, you guys, from clothes, groceries, gas, review. pizza. And the problem is, number one, it's debt. You're still owing money to something that you just bought versus just paying it outright. So you tend to spend more, which is not good. But then also with these programs specifically, if you miss one payment, the fees start rolling in. It is unbelievable. So listen, it was never a good idea. Okay? Like when I heard about it, I was like,

no, no, no. And now it's being proven that it's not a good idea because these companies are For instance, Klarna is one of the big ones, and they've gone down in value 85%. Yeah. So it was at the company was worth $45.6 billion a year ago, and now it's worth $6.7 billion. So, I mean, still a lot of money, let's be honest. But it has dropped so dramatically. And the hard thing is here, everyone's losing. So the companies are losing, but also people are.

losing because they're using these programs because of things like inflation or they can't afford something. So what ends up happening is they think they can make the payments. And then when they can't and they miss the payments, so they owe so much more, you guys. They can charge interest and fees and all of it. So the companies are losing money. They're losing popularity because the hype is just kind of gone. So their value is going down, down, down. And again, people are using it in times of trouble, which when you're using debt to be your safety net in life, it causes more trouble in your life. In 2021, a survey found that about one-third of buy-now pay layer customers have fallen behind

on at least one payments. And so it's so frustrating because, again, it's just, it's a form of debt, you guys. Like, that's what it is. And so not only do they make the math look really shiny and exciting because you see the total amount of what you're going to purchase is what it is and what would be taken out of your checking account, you know, if you use your debit card. But then they're like, oh, no, but these four payments, look how small that amount is. And you see that, and you're like, oh, I can pay that right now.

And actually, I can pay a little bit more so I can add more stuff in and you end up spending more money. Because when you use debts, there's not an emotion attached. But when you're spending your money knowing that it is coming right out of your bank account, subconsciously, you end up spending less. Now, I know times are so hard right now, right? Inflation has been the word of the year and stuff is just, it's so expensive. It's so expensive. So people have fallen on a hard time. And again, when you feel like you have no options and you're fearful and you're stressed,

you're going to just jump at whatever feels easy. And that's always a warning flag to me. When something is just really easy in the moment, usually there's going to be long-term negative effects. But when you do the hard in the moment, like, oh, working extra or even getting a part-time job, you know, after hours of your main job or doing a side hustle, like working more, which is not fun in the moment, or cutting your lifestyle and saying, hey, all these subscriptions that we have are going to cut.

we're spending way too much on LTE, we're going to cut that, and you cut your lifestyle. Again, in the moment, it's not fun, it's hard. But later in a month, two months, three months on the line, it gets easier because you have margin. So I would really encourage you, do the hard thing in the moment because you're probably going to get better results later on. So there's some things to talk about, though, when you feel like, gosh, there's this cool new thing, it's flashy, it looks awesome.

You know, I don't know whether it's cryptocurrency or buy now, pay, pay, later, but it's like in the financial space. There's always these new like little trends that pop up. But I just want to tell you, you know, stay with the classics. Stay with the classics. You know, just think of a cardigan, timeless, timeless cardigan, fashionable. It could be a 20-year-old sweater. No one would know, because it's just a classic cardigan versus the trends, you know. You remember those Terry Cloth, juicy couture jumpsuits? Remember those? Those were trendy. Now it's like, oh my gosh, I can't believe we wore those, but we did, but we did. So we're going to look at buy now, pay later, all these trendy things like that jumpsuit, that

juicy jumpsuit we're going to think, wow, I can't believe we did that one. But then you're going to look at that classic cardigan, timeless, you know, living on a budget, living on less than you make, having a rainy day fund, timeless, just like the cardigan. So what's the moral of the story, people? cardigans are great. Timeless money strategies are always going to work. The fads will come and go and usually take your money with it. So a couple of things. Remember, rule out debt to say I'm not going into debt for things. Meal plan. Food is the biggest part of our budget that everyone busts, including the cruises. So looking and saying, here's a meal plan, here's what we're going to have every night

of the week, here's our lunches, here's our breakfast, like we're going to know exactly what we're we're going to eat. We're going to just shop for those things and stick to it. Also, watch out for lifestyle inflation. This is tricky because it's like, oh, you know, we're going to just creep up this thing here. I'll just add that subscription here, here, here, and you look up, you're like, we are spending more money than we realized. Also, cut out anything that you don't need, that you don't use, shrink that budget down. If you're going to go buy something, shop around, do price comparisons at other stores to get the best value. You know, be smart, you guys. Be smart with your money to take you through this hard time that a lot of people are in. So the economy, it is. It's difficult,

but buy now, pay later, as a trend and as a service, it's not going to help you. In the brief moment, it may feel good, but it's not going to be good down the road. It's really not. And so you're the one that can change your financial situation. You have the power to do that. So say no to the buy now, pay later options and say yes to money in the bank. So share this with a friend that you want to warn to about the by now pale layer programs. It's like a thorn in my flesh. Hate it. Hate it for people out there. Oh, just the worst. Just the worst. All right, you guys, thank you so much for listening to this episode. And if you have not subscribed to the podcast, make sure to hit that 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.