The Rachel Cruze Show - The Hard Truth Behind Today’s Money Stats

Episode Date: May 1, 2023

If you’re feeling weighed down with money woes, like minimum payments, retirement savings or investment uncertainty, today’s episode is a must-listen! I’m debunking common myths about living with long-term debt, the state of the economy, and a potential retirement crisis on the horizon. What You Get in this Episode: The Ugly Truth About Minimum Payments Are We Still in a Recession? Why 75% of Americans Will Never Retire Helpful Resources: Christian Healthcare Ministries Carly Jean Los Angeles with code “Rachel” EveryDollar Enter The Ramsey Cash Giveaway for a chance at $3,000!                                                 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 Carly Jean Los Angeles.   Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy  Learn more about your ad choices. Visit megaphone.fm/adchoices

So starting at age 25, if you were to take that amount, $1,300, and invested it every single year, instead of it going to minimum payments and interest, you would have $695,000 to be exact. Hey, guys, 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 hard truth about today's money stats. We'll talk about why 75% of Americans will never retire. and what you can do to change that, then I'll talk about the recession.

Are we in one? Are we not? What's going on? We're going to talk about it. But first, let's jump into the ugly truth about minimum payments. Take a listen. If you're someone who is still skeptical

about committing full on that you want to pay off all of your debts, well, I hope this episode exposes some of the ugly truth about the habit of just paying minimum payments. And honestly, you guys, listen, I get it. Okay, our culture has made it so normal for people to spend their entire lives just scraping by meeting their minimum payment, mortgage payment, and car payment and credit card payment and student loan payment. It's like you just pay the minimum what you can do to get by. But the harsh reality is that when you settle into that way of life, you end up throwing away thousands, even tens of thousands, sometimes hundreds of thousands of dollars in interest alone.

Those banks and credit card companies are getting free extra money over time that should be yours. Taking that money, that should be your money, but it is going to them. And listen, it doesn't have to be that way. Okay, so today we're going to look at exactly what you're missing out on. But before we look at the numbers, let's talk about the why. So many people have settled into consistent credit card debt specifically. So there's a belief out there that you have to have a credit score to make a big purchase, like a home or a new car.

But if you have listened to the Rachel Cruz show any amount of time, you know that is not true. Because we're not going to be taking out a car loan. Nope, we're going to be paying cash for our cars. And to get a mortgage, you can do what's called a manual underwriting where you actually don't need a credit score

for that process to get a mortgage because a mortgage is the one type of debt I will not yell at you for. But again, there's really no reason to say, okay, well, I have to have a credit card. I have to keep going into debt to keep my credit score going. And listen, another common excuse that I hear all the time for having specifically credit cards is like, well, I get the points and the airline miles.

And listen, the truth is, sure, some of you do. And some way you use the system and it works and you pay it off every month. But statistically, there are people that don't do that. And on average, I think I saw that the average American family owes $16,000 in credit card debts. And you're going in to debt deeply, not always. paying it off month for month to month, and then you end up paying interest. And then on top of that,

if you are someone that says, no, I do pay it off month to month, well, the reason you get those airline miles and you get those points is because the banks make a lot of money off of interest to people that don't do that. So people that are struggling are funding this industry

that then turns around and rewards you for playing their game. And so for me personally, I'm like, ugh, the whole thing. I'm like, I'm good. You statistically spend more on a credit card too. So I'm like, okay, the extra percentage that I would have spent subconsciously on a credit card, I'm going to keep, because I'm going to use cash or my debit card, and I can use

that savings to go and buy an airline ticket if that's what I want to do. So, again, I know some of you play the game, and it works for you, but for me, I'm like, I don't even want to play the game. I'm out. Okay. Then lastly, there's people in another category that say, well, yeah, I'll just go into debt, because I for sure can make the minimum payment, or I'll just pay off the debt soon, and it'll be fine.

What ends up happening is it becomes the norm, and you end up keeping it around, and if something happens, if life happens, there's a medical emergency, somebody loses their job, you have all that risk of all that debt hanging over your head that suddenly comes crashing down. So playing the whole debt game is just, it's so tough.

And then on top of the debt game is an interest. So when you make minimum payments, for a long period of time, it ends up adding up to so much money. Okay, and let's just pretend that you are somebody that has enough to provide for you in your family and you pay the minimum payments, you pay the interest, and that's how you live life. If you took all of that out and you said, okay, what if you weren't paying that payment and you weren't paying that interest, you would have all this margin to do a lot of stuff, you guys.

You could use that money to invest. You could use that money to spend. You could use that money to give. You could support so many causes in this world and help so many people with that extra money that's going to banks. It could be going to your family, to your community. And that is where real joy comes from, not from all the stuff that we put on for credit cards and car loans and all the stuff.

So just think about, okay, where is my money going and how is it being used? So I think there's a real heart check there that may help motivate you to say, man, Maybe I don't want to live a life paying minimum payments and paying interest to banks just to have a bunch of stuff. What if I do get my money in order, I have margin, I'm able to invest and give generously and do all these other things with money that honestly helps so much more in the long run. All right, so let's look at some specifics when it comes to numbers. A recent study says that the average mortgage interest paid over a lifetime was over a $142,000. thousand dollars and that was calculated at a 2.7% interest rates which now we know is way higher but you guys 142,000 dollars in just interest. Isn't that crazy? And the same study shows that the

average auto loan interest and student loan interest paid over the lifetime is almost $12,000 combined. Some of you may be thinking, oh it's just $12,000 over my lifetime. I mean, who cares? It's not that much money. Well, let's see what that money could have been. If you just invested it. So another statistic shows the average interest paid on credit card debt alone is around $1,300 each year. And remember, that's not including the interest that you lose on home, auto, or student loan debt. So starting at age 25, if you were to take that amount, $1,300, and invested it every single year, instead of it going to minimum payments and interest, you would have close to $700,000 saved by 65 years old.

$695,000 to be exact. You guys, that's pretty wild. I mean, all of that could have been going to you and building wealth and using it to say, hey, I actually want to retire with dignity and have some money at retirement versus sending all of that money to the bank. It's pretty wild.

Pretty wild when you think about the numbers. So I hope you guys that this was really helpful because I want you to see the reality of what's going on. I want you to have shame or judgment or fear, all the things. But I do want you to look up and say, man, is what I'm doing when it comes to debt smart? Instead of paying banks and credit card companies and motor companies and like all this stuff, what if I just paid myself?

Like, what if I took my money back in my own hands and did things for myself? It's pretty remarkable when you have that perspective. So if you're tired of feeling weighed down by debt and payments, or if the thought of throwing, again, money away to interest, this sounds terrible to you, let me just say number one. It doesn't have to be this way. It doesn't. Yes, you can handle your money

in a completely different way, which is so encouraging. And number two, I would say Financial Peace University is a great place to start. So this has been teaching people how to pay off debt and experience freedom with their money for decades.

And it will equip you to start tackling the seven baby steps and stay motivated throughout the entire process. So you can sign up today at ramsysolutions.com and get started on this journey, you guys, because this is here to help you

and to teach you and educate you, and also to motivate you. So it's really, really helpful. So please check it out. Today, we're going to be joining a conversation that is happening right now about the recession. So a lot of people feel like, oh, we're in the clear. Some people are like, no, they're actually going to declare a recession.

Some people are like, well, they never actually declared it. Some people are like, well, they changed the definition of it. It is a little crazy. It is a little crazy. So is the recession officially over? Well, that is a very bold statement to make, considering, again, that the government changed their definition of a recession. And so they're making some pretty big financial decisions because of that.

So today, I'm going to be reacting to a video made by minority mindset. And in this video, the creator gives an overview of different opinions out there on this topic. So I'm going to respond. to a few of these with my own perspective, and hopefully you'll kind of guide you to make the right decision in your mindset for you to keep making progress with your money, regardless of what politicians and the headlines are saying.

All right, his first points, which he says is the main purpose of the entire video that he made, is to read data and form your own analysis on that data. He says you should be paying close attention to the numbers, and then use your own mind to decide what you think about those numbers. And I totally get where he's coming from. That makes sense. And I would even take it a step further, you guys,

and say, think about your personal situation. So even whatever the numbers say or what the data is saying, think about your job, your money, your family. Because, listen, there could be a jobs report that comes out, and it's terrible. Or you could see headlines talking about massive layoffs. And all of that might be happening, and it might be really alarming.

But if you are in a job that is not, you know, laying people off, or you're in a current job market with your field that you're in, your company, I mean, you look at all the things around you. And if everything seems stable around you, then yes, is that terrible for people out there that it's happening to? Yes, absolutely. But don't let that freak you out if you have no reason to freak out. So, again, making sure that, yes, what is happening in your household is really important.

But what also can be true is that certain leaders think that inflation is on its way out. And they're like, oh, yeah, inflation, it'll get back to normal so soon. And again, we don't know. I read a report that, no, the Fed's going to raise rates again. Like, I mean, like, who knows what's going to happen? But again, what is happening with you? So the important thing is sticking to your budget, knowing what your money goals are is what's important. So there's a lot of information out there.

And again, I think it's really powerful to know what's going on. But I also want you to discern that information to figure out, okay, what is really affecting us? Because there's only so much that you can control. And there's a lot of things you can't control. So focus on the stuff you can control. All right. Up next, he talks about how inflation continues to rise faster than wages, but people are still spending more money.

So a little spoiler alert. That's called going into debt. So after pointing this out, He explains that whether that this is good or bad, it depends on who you ask. So a lot of people make the argument that it's a good thing that people are spending so much money, whether it's in cash or on credit because it's helping the economy. But I want to remind you that spending money that you don't have is never a good idea. It's never a good idea.

It's a very slippery slope. And I know it's easy to blame the financial strain on the government or the economy because there's truth that, yeah, like, inflation is hurting people. Like, you are feeling the pinch. I think everyone is. But again, what affects you and your money? So, that stuff does affect you and your money because you're like, yeah, I'm spending more at the grocery store. I'm spending more, you know, I think gas has gone down a little bit, but like you're still feeling it there. And so what you have to realize is regardless of when prices go up and down, income is what we're seeing is still saying the same. So what do you do? What can you do to control what

you can control. That means probably cutting things that used to be the norm, which is really frustrating and it's not fun to go backwards. But again, you have to take the responsibility of what's going on in your home really, really seriously. And the truth is, is that not everything is your responsibility, though. It's not your responsibility to single-handedly save the economy by going on and spending money that you don't have. That's not your job. That's not your responsibility. But your responsibility is to save, live on a budget, be free. in times when things are financially chaotic, if it's affecting you and your budget,

make decisions based on that. So again, knowing what is going on in your household is so, so important. Next, he says that more and more Americans are struggling with car payments now because they finance them. So car prices are coming down and people are underwater on their investment.

And yes, I do agree with him on this. This is what we are seeing. And this is why we always encourage you to stare clear of car payments. Oh, it's so tough because you are mathematically borrowing money on something and paying interest on something that is going down in value. So it's not like even real estate that I know real estate's been crazy the past few years, but that's an investment. Like over the course of real estate history, majority of the time, you're going to make more money when you sell your home and when you bought it. Your car is the complete opposites. You lose money

on it. You spend more when you buy it, and it drops. And people are taking out money. And again, money they don't have with high interest rates right now. And it's just become a disaster. So I recommend buying a used car that you can pay for with cash. So it may not be a beautiful car. It may not be a fun car. But at least it's a car that doesn't have payments. And you can slowly start stepping up and getting a nicer, nicer car as you save more money. And then once you hit Baby Step 7, then you have a net worth of a million dollars, we say then you can go buy a brand new car, you can financially take that hit. So again, financing a car is never a good use of your money or a wise investment.

Okay, the last point of his that I want to unpack is when he says that going into debt is a temporary option. So he argues that using credit to make purchases, if that works for you for a while, that's great, but then eventually you're going to hit a breaking point. And he's right about that. Yes, you will hit a breaking point because when you live your life, paycheck to paycheck, you live your life dependent upon credit cards or debt, you finally do hit this point. Most people do where they wake up and they're like, I'm done.

Like, I'm so tired of this. I'm so tired of working hard. I'm so tired of dealing with a jerky boss at work, doing a job that I hate just to make payments. Like, I'm done. And I have nothing to show for it. I have no money saved. I don't have a lot of investments.

And like, what do I do? And so we call that their sick and tired moment. Here are Ramsey Solutions. A lot of people say, I'm sick and tired of being sick and tired. And there is when people make a choice. They say, okay, can I control something? Can I wake up and make a different decision

about my life and my money to get me out of this? And I believe you can. And I know it's not easy. And I know, and I know, you know, not a lot of people say this out there. But the reality is that people that I meet every single day have overcome years of paying off debts because they made one decision that said,

I can do this. So I want you to take a deep breath and just know that you have the ability to have money set aside for an emergency fund. You have the ability to get out of debt. And I think the slippery slope is when you say, oh, yeah, I'll just use some debt right now for this little bit. Don't even make it a habit.

And when you have that emergency fund, don't dip into your emergency fund unless it's an emergency, okay? So keeping structure around. your money and boundaries around your money gives you freedom. So if you have to cut some streaming services for a month or eat an extra meal or two at home each week, maybe clean out your closet and sell some stuff to kind of get you started and boosted on this idea of living within your means and even going and paying off debt. And that living of sacrifice, that lifestyle sacrifice will not be forever, but it is such a wise choice for right now. So

hear me say that there is always hope. There's always hope. And again, with my job, I have the privilege to meet these people all the time that have this level of freedom in their lives because they decided to take the power back in their own hands, get out of debt, build an emergency fund, have a solid financial foundation under them,

and that can be you. So are we technically in a recession? Well, they've not come out into clarinets. They've been very wishy-washy up in D.C. about this whole thing. So, listen, if you look at what a recession is, it's when the GDP is down two consecutive quarters, and that has happened. So technically, we would be, but they technically have not declared it. So, again, what I want you to see is above all that, you guys, is that regardless of whether we are in a recession or not, what is affecting you? And the reality is, is the job market

affecting you? Well, if you're in a stable job and your company's not laying off people, then no, affecting you? You're in a secure position. Is inflation affecting you? Well, if you were living paycheck to paycheck before this whole thing that happens, then yeah, you probably are really feeling the pinch. But if you have margin in your budget, you've lived below your means for a while, you can cut a few things, you're still living life. Maybe it hasn't affected you, right? So, look at the things that are affecting you. Don't let the word scare you and create a lot of fear. All right, you guys, I hope that you enjoyed this video and I think some of the stuff that he said on there were some hot takes that, again, common sense would say one thing.

D.C. and politicians and economists may say another, but I want you to decide. Again, the word recession is a really scary word and people freak out. But remember, what are the things that are affecting you in your household? And that's what I want you to focus on. And more importantly, I want you to be motivated to budget. And if you have not downloaded the every dollar app, do that today. Because it's going to help you budget your day-to-day transactions, knowing what's going on. It just gives you this power over your money, and it's wonderful. Hey, guys, we're going to be talking about retirements.

Oh, yes. I know this topic can instantly fill you up with excitement. Just kidding. For most people, it fills them up with dread. Oh, and especially if you are a rule following millennial or Gen Xer out there, then you've tried your best. You did your best to go to school, get a degree, land. job and the rest of life should just fall in line, right? Because I mean, there's social security.

That'll take care of me, right? Well, I hate to break it to you, but there is another money problem that our government is not going to bail you out of. And for you younger people out there, it could be hard to even comprehend that your future, what it will look like, because it is so far down the road. And again, you're just trying to stay on budget, buy eggs at the grocery store that won't completely break the bank. And, like, just, just, you're just. You're just trying to stay on the road. And, again, you're just trying to stay on budget. And, you're just, just doing your life. But this is why now, more than ever, it is important to understand what is going on because there are so many unpredictable factors out there, even within Social Security and

inflation. So it's wise to make sure that you have a plan for retirement. So we're going to talk through some things that people are really worried about and what you can do to prevent stress later. So one video that I recently watched said that the first one video that the first of the first of obstacle in retirement right now is the housing market. So in 2019, the median age of a first-time home buyer had risen to 34. And researchers think that it will continue to increase. So lots of employed young adults out there from 18 to 30 are still living at home with their parents because

of the high cost of living in so many cities. And those who are able to buy a home are only able to afford condos or townhouses rather than houses with. additional property value. So let's say someone is able to buy their first home by 34. They go and they choose a 30-year fixed-rate mortgage. And this means they typically will not pay off their house until 64 years old, which puts them at retirement age. And part of the advantage of paying off your mortgage early is being able to experience huge margin after your debt is paid off. And if people are not able to experience that margin, they're less likely to be saving and contributing to retirement funds at the rate they should. So if you've been around for a while, you know that this is why I'm

such an advocate of budgeting, creating a budget, regardless of what your income is. It really helps you set aside for things that you need to be able to say, okay, where should I be saving? Let's put some money aside here to save up for an emergency fund or for retirement. And what we've seen over and over again is that consistency is key. So how much money that you're able to invest in retirement matters less than when you start and how often you contributes. And it's never too late to start. So hear me say that. The next concern people have in terms of retirement is social security. Recent predictions say that by 2035, the social security pool will only be 75% funded. One of the reasons for this is that people are living longer. So people are receiving social security payments for much longer

her than they used to. And it's estimated that by 2035, the number of Americans, age 65 and older, will increase from 56 million people to 78 million people. And obviously it's great news because people are living longer and that's great. But when you consider retirement, this is where it becomes a classic issue of supply and demand. So I've said it before. You can only control you and your money. So leaving it all up to the government and programs like Social Security is not a wise decision. If by the time you retire and the government is able to assist you with money in your situation, then sure, that's just gravy on top. But if not, trust me, you will be so grateful you started investing now when that time comes.

Another reason people are afraid their retirement is at risk is the stock market. So due to overinflated shares, people would need to invest three times. as much as they currently are to fund their retirement. A published piece in the National Bureau of Economic Research suggests that the economy prosperity of America over the last 200 years was actually more of an exception rather than the norm. In other words, we can't count on a successful economic growth

of our past to be given in the future. And he says that a lot of economic advances America has been able to make in the past can't necessarily be replicated, because the factors were so unique. So for one example he gives is that we doubled our productivity when women entered the workforce.

And there may not be another way for us to double our output like that again. He definitely has a point in that and we don't know what the future is going to look like and we also know that that's not all in our control. But again, what can we do? We can control what we can control. Plus, I think it's encouraging to look back

at the stock market trends over decades. and besides, you know, a few little spurts that went downhill during some hardship, the stock market's trend goes up, up, up, up. And it's highly unlikely that you invest through your entire career and end up with less money than you started. So his little doom and gloom a little bit, I'm like, eh. Because again, I just look at patterns and things with long track records, and I'm like, yeah, but if it has a long track record and it's increasing over time, again, it's doing this, the market, but the trajectory is this.

That's encouraging. Okay, you guys, I hope that this offers you some clarity, that again, there's a lot of factors that are very real, and you may be feeling that impact. And if you are, you're not alone. But try to remember that there are tools that can help you take the power back in your hands. So if you are new to budgeting and saving,

check out the seven baby steps. And they show you step by step how to save, pay off debt, invest, and stay consistent in the journey. And when it comes to investing in retirement, one thing we always recommend here at Rams that you work with a smart vester pro. They are a wonderful resource to guide you through your investment journey. So make sure to share this episode with a friend who has questions about retirement and

investing and just know, you don't have to be one of those stats out there that says that you'll never be able to retire. You can take control in your money and your current situation, invest 15% of your income into retirement after you pay off debt and have an emergency fund, and you will be well on your way to a bright future. Oh, retirement for some of you. it might be around the corner. For some of you, it feels decades away.

But again, you guys, this is something that you can control. So get in a position where you can start funding retirement. Well, thank you guys so much for listening to this episode of the podcast. And if you have not hit the subscribe button, the follow button, make sure to do that. And please leave a review. It helps us out so, so much. So thanks, you guys. And remember to take control of your money and create a life you love.