The Rachel Cruze Show - The Fastest Way to Pay Off All Your Debt

Episode Date: February 3, 2020

This is the second episode in a series covering the Ramsey Baby Steps, and my guest is the man who started it all—my dad, Dave Ramsey! He’s here to get you pumped up for Baby Step 2: Pay off your debt.   In this episode of The Rachel Cruze Show, you’ll learn:   The absolute best method for getting out of debt Whether or not it’s really harder to get out of debt now more than ever How one couple paid off $85,000 using the Ramsey Baby Steps   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: Zander Insurance The Free Budgeting App The Plan to Get Out of Debt and Build Wealth Learn more about your ad choices. Visit megaphone.fm/adchoices

Before we decided to get off debt, we stayed frustrated with each other. Doing a budget eliminates so many money fights and money problems within a marriage. There is an unbelievable amount of peace to having everything in control and you're in control of it. My dad, Dave Ramsey. People are starting to realize the credit card is the cigarette of the financial world. You are the problem and you're the solution. Yeah. And that's both wonderful news and it's scary news.

Hey, everyone. Welcome to the Rachel Cruz Show podcast. I am so glad that you're here. And I'm really excited because this year we are going to start with a series on each of the Ramsey Baby Step. So if you miss last episode, we talked about Baby Step 1, which is saving a $1,000 emergency fund. And in this episode, we're going to talk about Baby Step 2, which is getting out of debt using the debt snowball. So we're going to bring on my dad, Dave Ramsey, who came up with the baby steps and has been walking people through them for the last 25 years. And we're also going to talk to a couple who is currently working their debt snowball.

and they are in the middle of their debt-free journey. And it's so great because they are starting to feel freedom, get control of their lives, and best of all, you guys, they have hope again. So here's today's episode. Now, a lot of people think that debt is not bad. Like, it's just a normal way of thinking. That's what society tells us.

And in fact, 80% of Americans are living with some form of consumer debt right now. Listen, you cannot create a life you love while you're in debt. When you are in debt, it forces you to live life looking through the rearview mirror because you are chained to stuff in the past. So how do you get rid of debt? Well, it all starts with the debt snowball. Okay, this is the best way, the most effective way to get out of debt. And this is the debt snowball where you list out all of your debts, smallest amount to largest

amount, regardless of the interest rate, pay minimal payments on everything, and pay off the the smallest debt first. And once that's paid off, you roll all the payments. all the money you're throwing at the smallest debt to the second smallest debt. Then once that's paid off, you have the mental payments of the smallest debt and the second smallest debt to roll over to the third smallest debt. So it gets bigger and bigger, bigger. Your money continues to expand to start knocking down each debts. And I love this because what this takes is motivation.

Okay? And once you pay off that smallest debt, motivation comes. Your behavior starts to change. Now, some of you might be thinking, but Rachel, shouldn't you pay off the highest interest rate first? yes, technically that would be mathematically correct. And that method is what they call the debt avalanche, which is terrible, by the way. I mean, like, avalanche or snowball. Okay, snowballs are way more fun.

I don't want to be caught in avalanche. No, no, no, no. So stick with the debt snowball. But again, mathematically speaking, yes, the debt avalanche could save you a few hundred bucks, mathematically speaking. But when studies have been done of people who do the debt snowball versus the debt avalanche,

they actually get out of debt faster using the debt snowball, again, because it's all about your motivation. It's all about your behavior change. Now, the debt snowball, it has worked for millions and millions of people, and I promise it can work for you. But up next, I want to talk about something that you need, no matter which baby step you're on. So earlier this year, I was at a live event, and before some of our live events, we do these backstage experiences. So you can purchase these tickets, and me and the other speaker will go back and answer questions and meet people. backstage. And during one of these backstage experiences, this man came up to me and he was like six foot something like huge. He was tall, a big, big, big beard. I mean, just like this burly man.

And he asked me if he could talk to me for a second. And I said, yeah, sure. And so he pulled me aside and he just started crying. And I took him a second to kind of console himself to even get his words out. But he began to tell me that him and his wife were on the journey of the baby step. and they were working their way through. And she actually watched the Rachel Cruz show for motivation, which was obviously so fun to hear. I always love that. And I can still see, though,

obviously the sadness from his tears and the way he was talking that something happens. And so as he began to tell me his story, three months prior to that live event, him and his wife, they got in a car wreck, and she actually ended up passing away, leaving him with their three young children. And so at the time, I was newly pregnant,

and I mean, you just put yourself in that situation. And I'm like, that is, it's the absolute worst thing that could possibly happen. And that happened to him and his family. I mean, it's unimaginable. And then he began to tell me, though, that he had purchased term life insurance and his wife. And they had it in place. And so he was saying, Rachel, like, this is not the way to get to baby step seven. But because of term life insurance, I don't have to work.

Our house is paid for. Everything's taken care of. And if we had not gotten that, this entire grieving process would look so different. And in that moment, I was like, man, that's why we do it, you guys. Like, we talk about term life insurance all the time on this show. And you know that Winston and I, we use Zander Insurance. I talk about it all the time.

And you might be thinking, okay, yeah, that's great. Maybe I'll get it one day. But listen, stuff happens, you guys. And you want to make sure that you and your family are taken care of. And I was so thankful for him and his story that money didn't have to play a role in their grieving process. Like, all that was taken care of. And again, that's not the way you want to get to baby Step 7. But man, how much more stress and heartache and life heaviness would be on that family

if they didn't have life insurance. So if you do not have term life insurance, go to zander.com. Get started on quote today because they will find you the best rights and they're going to take care of you and your family. Again, if something were to happen, having term life insurance is one of the best safety nets that you can have for your family. All right, up next, I want to bring on my dad, Dave Ramsey, and we're going to get back talking about getting out of debts,

because this is one place that can free up your family as well. But debt in general, it's changed, you guys, over decades now. And so we're going to hear all from Big Dave's perspective when it comes to that. All right, you're back. I am. Here you are at the Rachel Cruz Show. Almost like I work here. Yeah, almost sort of.

You're sort of connected, I guess. Okay. So this episode's all about Baby Step 2, and you've been known as like the get out of debt guy for decades now. So I'm curious from you, you take calls on the radio every day. What has changed about debt in 25 years? Like people's questions. Have you seen a difference from 25, 30 years ago with debt to today? Yeah, I think there's different, we've gone through different ebbs and flows of which kind of debt is the crisis of the day, the flavor of the day. Like when we first started, everybody was talking about credit card debt. how evil and how horrible credit card debt is. And we still think it is.

Do you find that people are in more credit card debt? It's become more normalized than even 30 years ago. What do you see around that subject specifically? 30 years ago, people wrote checks. Yeah. And so it was a big deal. The chunk chunk of the credit card. You would run across the thing.

You know what I was thinking about Home Alone, too, when he's lost in New York. And he has to get him into the guy and they pull it out and they chunk, and it gets into the Plaza Hotel. That's always my thought of, like, credit cards back then. It's like pulling out the cell phone on Jerry McGuire that's this big, you know, same thing. It shows you the age of the movie, right? But, yeah, so credit cards are, what's happened with them is the debit card has eclipsed first the check. And now checks have just about disappeared.

Yep. And then the debit card has become so normalized, and we've helped with this. We've made it very, very popular as an alternative to the credit card. So the credit card kind of looks like the dirty. crazy cousin of the debit card. The crazy thing is that millennial studies are showing are actually getting into less credit card debt than their parents were.

Because they have this option, and it's been put forward. I mean, people are starting to realize the credit card is the cigarette of the financial world. It used to be cool. And all the movies had it, you know, in 1950s, everybody's smoking everything, right? And then people start talking about,

hey, this stuff kills you. And then the Surgeon General came out. And then we put it in the elementary schools and said, oh, children, don't smoke. It will kill you. DARE programs pumped up. Exactly, the DARE program. But I mean, you know, and that's what's happening gradually with a credit card only in a more adult level.

You're seeing that, yeah. To where the millennials are coming along going, hey, this credit card didn't work for our boomer parents. Yep. They got screwed by this. We're not playing. Yes. But it's not at the forefront of society's mind today. But then we kind of went through this thing where we went from car payments to car leases.

Car companies realized they could make a lot more money on leases than they could on regular payments, on regular car loans. And so they started pushing them. today, 78% of the cars that roll off a new car lot are car fleeces. And the reason is they make more money on them, but we went through a phase because it was kind of new and it was fadish. And then, of course, we've moved into the student loan epic plague. Yes. Because it has grown. Yeah. It's exploded. But the difference, though, of 30 years ago, student loans and today is massive, probably more so than car loans and credit cards combined. Right. Because of just the volume of it, the number of dollars. And there is a little bit of a stigma shift. You know, my generation to the next

generation, those are two previous to today. If they took out a student loan, they kind of did it holding their nose. And now everybody's like, well, that's just what you do. Yeah. And so the stigma has gone away from it. The fear around it has gone away from it. But now this epic plague is bringing the fear back, which is good news. Because it's waking people up going, this is not working. Yes. So debt has somewhat changed, shifted the conversations around it in 30 years. But the way to get out and the mindset around it hasn't changed in the sense of the things you need to do. So we talk about budgeting all the time on the show, about being intentional, and it's the best step you can take to not just get in control of your money, but to get out of debt.

So do you still find that to be true, that budgeting is still a key part of getting out of debt? Well, because you have to control the fuel that you have to get out of debt with. And the fuel is the money, and the way you control the fuel is the budget. it's it's you turn it up turn it down and you go okay we're turning this one down this one down this one down so that more comes over here and so we're cutting back lifestyle because we're sick and tired of being sick and tired we're really angry we're really scared we really have had it we're really going to change and we're not going on vacation and we're not going to a restaurant and we're not going to you know we're going to dress the kids in consignment clothes and we're really for the next 18 months the next 36 months

whatever it is we're really going to sacrifice deeply and that shows up in the written plan. That is not just a random series of decisions. Yep, so good. And then also taking responsibility. Like when you look at your life and the mess you've caused, not to put shame, but to say, okay, I've done this,

but then at the same time, I have the power to be able to clean up this mess. Do you see that as still a huge step in getting out of debt? Absolutely. The power and the dignity to make the own decision. And, you know, and really the realization that no one's coming. Yes. The Long Ranger's not coming.

You know, whatever's happening. The pioneers are all surrounded. They're being attacked or whatever, and the cavalry is not coming. And so you are the problem and you're the solution. And that's both wonderful news and it's scary news. Okay, guys, I want to just interrupt there because I don't want you to miss what he just said again. Just to repeat that you have the power and the dignity to completely change your future. Now, some of us may not remember who the Long Ranger is.

So big Dave, you know, he's just, he's just from a different time. I reheard this podcast and I was like, who's the Long Ranger? I don't even know if I know. But that's beside the point. The point is, though, for real, you have the ability to completely change your life. And again, it's up to you. No one else is going to do this for you. So if you find yourself saying, okay, there's places in my life.

There are things in my life that I want to change. Guess what? You have the ability to change them. It's up to you. Again, no one is going to come save you. No, you have to do it. But then the beautiful thing is, once you start this process, and specifically with your money, you start getting control, you start winning, then it was you that did it.

By the grace of God, you had the ability to change your life, and it was you that did it. And I think that that gives you power and motivation to say, hey, my life can look different because I decided that I wanted it different. And then the third is a tool that you've been teaching for decades now is Financial Beach University. And we talk about this, but getting some of the time. mind up, going through that course, being around like-minded people. I mean, this is a huge step, too, to help accelerate your journey. In a much more intense situation, if you're dealing with someone who has an addiction,

there's two things that they do. One is they quit hanging out with their friends who drink if they got a drinking problem because you're going to become who you hang around with. It's just nature. And you know this because you don't let your kids hang around people, the kids that are misbehaving because they're going to misbehave like that kid. And so you can't hang out with your drinking buddies if you want to quit drinking because you have a drinking problem. And guess what else you do?

You get in a group of people who are solving this called 12 step. And so you got an alcoholic synonymous and you sit down and you go, my name is David, I got a problem. Now that's a much more extreme situation. That's a heavier burden than just simply changing your behaviors on money. But it's exactly the same equation only on a lighter form. And so you can't hang out with your broke friends who are putting stuff in your face on Instagram all the time that you can't afford and that they can't afford either. Right.

And you can't keep hanging out at the bar if you're a drunk with drunks. And you need to get in the group of people who are positive peer pressure in your church and in your 12th step that are going to turn this around with you. And so you get around a bunch of people who are going, hey, this is now in this group, being weird is normal. Okay, so stopping right there. But this is so powerful, you guys, this idea of hanging out with people who are like-minded. And I say that to say, you know, even just growing up as teenagers, I feel like my parents always said that.

You know, who you hang out with is who you become. And I would probably roll my eyes as a 16-year-old. But the truth is, especially when you're a teenager, for sure, you know, your influences around you are massive. That's huge. And as we get older, it is still the same. So if you are getting out of debt, you're working and sacrificing, but all of the people around you, you know, are making totally different decisions, it probably will be a little bit harder. but I want to say this, just because people are different than you and making different life choices, doesn't mean you completely have to shut them out of your lives.

I'm not saying that. But I am saying you need to have some go-to people in your life who are making the same decisions that you're making because you can probably start to feel crazy if you're the only one doing this. And literally, everyone you follow on social media, everyone around you, your friends, your family, everyone is telling you how crazy you are. You might start to believe it. But the truth is, you're not crazy. So find other people doing things different with their money.

like what you're doing of getting out of debt and budgeting, all of that, and surround yourself with some of those people because that is going to help you stay motivated in this process. So you guys, if you've got to check it out, do it. Because again, those are the things besides just the debt snowball and the tactical side of getting out of debt that's really going to help the mindset shift while you're in babysat too,

which is a very unusual person that has enough backbone and enough chutzpah to completely change their lives by themselves and not have people like-minded around them and not have continual content and input from new lessons coming at them. If you can just sit in the corner in the dark and change your life, you would have probably already done it. That's a good point. So good.

Always wonderful. Thanks for coming in. Good times. So fun. So fun. All right, coming up next. Micah and Chelsea are here. They're on Baby Step 2,

and we get to see what life is like for them on this step. Before we decided to get out of debt, we stayed frustrated with our finances, frustrated with each other constantly. I was really confused about how much we had. Neither of us knew. Every time we got a check, it was a relief because we thought, okay, finally another Band-Aid to kind of fix the problem.

We both grew up with money being a huge stress always. And to start our family when we got married, I didn't want that same environment. I didn't want, you know, the inheritance to be frustration. Especially for our marriage and thus for our kids. I'd heard about Dave Ramsey, and when I was early to, 20s and knew he had written some books, and that was about it. Something about pay something off and then roll that money to the next.

I had found the app through a friend, but didn't know it was the Dave Ramsey app, like a few years back. And I had shown him, but we had looked at so many budget apps together. I think I caught him at the wrong time, and he was just like, yeah, I don't, we're not going to do an app right now, you know. It took him finding it and being like, look at this. And us sitting down together and really like playing with it. I think the aha moment for us was probably the same as most people,

when they do the budget for the first time, as you see what's left over. She showed me, and I said, no, that's not right. You miscalculated. There's an unbelievable amount of peace to having every dollar and having every thing in control, and you're in control of it. I tell people all the time, like, I think it's actually freeing.

It keeps us on the same page all the time. We don't have to fight. I don't have to ask. It's good for your finances, but it's also good for your marriage and teamwork. There's a transparency there that, is necessary in a marriage. It's not just when you're debt-free,

but it's while you're in debt and budgeting. It's brilliantly titled financial peace is a really comforting thing. All right, Michael and Chelsea, thank you so much for being here. Thanks for having us. Yeah, thanks for having us. Sharing your story.

So we always talk about how you can wander your way into debt, but you cannot wonder your way out. And Baby Step 2 is tough because you have to be fully committed and you can't just be like on the plan-ish. We call that is-people. And so you would say that you were kind of ish people before being fully committed. So kind of tell me your story around that.

Yeah. So before we really dove into it, I guess we were as ish as it could be. I knew how to spell Dave, and that was about it. Okay, there you go. And I knew Dave Ramsey. I knew he had written a book, and that was about what I knew. We had some friends that they were hosting FPU. and we went to their house one night and got a cute little folder.

And we were like, great, we'll order water when we go out to eat. And we went to one class and didn't go back. Yeah, yeah, yeah, yeah. And I also didn't realize it was a regular thing you attended. But so it was, that started Dave-ish. And we always knew, at least I always knew that credit cards were bad and snowballs were a thing. Yep. And so we said we snowballed, but we might have.

had done it once or twice. So we don't count our debt-free journey until we really started the budget. We just wandered in darkness and was confused and frustrated. Yeah, so Chelsea, what did marriage look like when you guys were in that season? It was okay, but we just either avoided and or, I wouldn't even say, argued as much as just constant frustration and miscommunication. Yeah, so were you guys, so you feel like you didn't really have a plan, It was kind of just like here and there.

So what was the catalyst? What was the point that you were like, okay, something has to change. Something has to be different. Every time she grocery shopped. It was. Those were arguments. Okay, okay. We felt good because we had good intentions, but we didn't fall through with any kind of budget.

So we felt like, it's almost like, I think I'll start a diet and feeling like, for me, I thought about having a diet. I feel thinner already. I think I'm going to be a runner. That feels good. That feels good. Yeah. So that was kind of the mindset.

We didn't, we just stayed frustrated because there was always confusion. Yeah. But we really started, as income increased, we start to see I'm making more so we can pay more. We can do more. And that was a hard part. When we initially started and thought we were going to go at it, I'd gotten laid off. She gotten pregnant. And I started a job, and I was getting $800 a month, and that's what we had.

And there's no way. of surviving. Right. The income was the problem. Yeah. And so just promotions and job changes, it kind of led and grew quickly. And then we saw we have enough to where we can really go at it. Yeah. You know, and that's always a day thing. It's not a debt problem. It's an income problem. And it was initially. So what was the one thing that really helped you guys get out of debt, would you say? The budget app. The budget app. Every dollar. Every dollar. Okay. Okay. So tell me about that. How was that doing it for the first time? I mean, it took us a few months to really get in the groove really starts saying. But even just the first month, he was like, what I got done? And I'm just like,

we can put this much toward debt. He was like, no, I don't even make that much. Are you sure? Like, you did everything. And, you know, it was just, it's really freeing to see how much, how much we could get done as quick as we could. When we had started or knew about financial peace, you know, I kept thinking financial pieces when you're debt-free, but part of that piece is having structure. And that budget brought piece. I mean, we're going to be doing probably our budget meeting on the way home. And that was the turning point.

So compare your budget conversations before doing every dollar and all that till after, because it sounds like night and day. Oh, yeah. Yeah. It used to be, I would write it down on a piece paper, and sometimes he would, and we do math really differently.

So he'd show me what he did, and I'd be like, what? And I'd, you know, vice versa. Like, we do the exact same thing. and neither of us even understood the way each other did math or what, you know, and then we'd end up not talking about it because you'd be like, you know what? No, mm-mm. I can't, you know, either we're going to argue or we're just not going to talk about it.

So a lot of times we didn't talk about it. And so now it's so opposite because you're on the same page. So would you say we talk about, especially with couples, that working together and doing a budget eliminates so many money fights and money problems within a marriage. Would you say that's true for you guys? Oh, yeah. And not even just that. I think it's relationship building.

It's more than just taking out. something. It's adding, it's changed so much of the way that we think about it. Within marriage, and then also, obviously, with paying off debt because doing a budget, it's a big part of Baby Step 2, getting out of debt. So what did you guys start with? How much debt did you start with? Well, we didn't really know. And that was a terrible feeling, is not knowing. And unfortunately, through, for about a year, we would get another letter in the mailbox saying, hey, your AES loan has been bought out by so-and-so, and now you owe us this with this interest. So ultimately overall, once we figured all out, it was about 80 to 85,000.

Okay. Yeah. And how much you guys have left? Five thousand. Yeah. You're like right there. I know. How does it feel?

Because I mean, I know you're technically not debt-free. You got one more money. You got to get that paycheck in. But emotionally, it's there. So, like, how do you feel? It feels good to know that our money's going toward the green. It's going towards something, something that's really in the positive. And that alone is exciting.

So good. Okay, so what encouragement do you have for people watching that are like, okay, I've got my $1,000. I'm about to embark on Baby Step 2 this journey and I think I'm committed. I might be ish, but like what encouragement would you say to be fully committed to this process? I would just say, especially if it's a couple, just really be open to talking about it and getting started and trusting each other with it. It just helps so much to get on the same page and you'll be shocked at how much you can get done, even if you have a fairly small income. I had a friend asked me, how did you, how were you doing this? And my response, he took it as an insult, but I just said, well, self-control. And that's what we don't have as Americans, as just people blessed with so much that we have. If we, if we want to get it, we can go get it. Ultimately, I think it's just self-control and patience. And that's the hardest thing to have, to pray for, and to just manage. Well, you guys are incredible. I mean, seriously, the amount that you've paid off and that you're so close and that you guys are working together as a team, I mean, it just has transformed. I know so many different parts of your lives, and so I'm so thankful that you came and shared your story. So thank you. Thank you, guys, so much.

And I can't wait for you to be debt-free next month. Yeah. So exciting. So exciting. Thanks for coming on. Appreciate it. Oh, I just love their story. And for you guys, I am so rooting for you to get out of debt.

And I hope this episode is motivating you to. to do just that. And remember, your mindset is so, so important. Knowing and believing that you're the one that can take control of your money and your future is so key. And surrounding yourself with people that are on this journey to is going to help you throughout it, I promise. Thank you so much to all the guests who came on today's episode. It was so fun. And again, I love talking about getting out of debt. It's so, so great. And to get everything we talked about in this episode, make sure to click a link in the description below. Also, I want to hear from you and answer some your questions. So I've set up a new voicemail just for you. You can call and leave your message,

and I may answer your question on a future episode of the show or podcast. So make sure you call 844-944-1075 and ask your question. Now, if you've not subscribed to this podcast, make sure you do that. And if you haven't checked out the video version of the show, you can do that on YouTube. And as always, if the Spirit Leads, make sure you leave a review if you love this podcast. Well, thank you guys so much for listening to this episode. And remember to take control of your money and create a life you love. So if you guys enjoyed this podcast, we have more from the Ramsey Network, like The Ken Coleman Show. According to a recent Gallup poll, nearly 70% of Americans are disengaged at work. If you dread going into work every Monday morning and you're

just trying to make it to the weekend, the Ken Coleman show is for you. Everyone has a sweet spot. Your sweet spot is at the intersection of your greatest talent and greatest passion. We will help you discover what it is you were born to do and then will help you create a plan to make your dream job a reality. You matter and you have what it takes. Join the conversation on the Ken Coleman Show. To hear full episodes, just search Ken Coleman wherever you listen to podcast or go to Ken Coleman Show.com.