The Rachel Cruze Show - The Key to Hitting Your Money Goals and Building Wealth

Episode Date: November 7, 2022

Let’s talk about the strategies that will help you build wealth the right way! We’ll cover when (and if) you should ever pause investing, the different types of financial accounts we should all have, and how to make true progress with your money goals. You’ve got this!   In this episode: ·      Here’s When Investing Can Keep You From Building Wealth ·      6 Financial Accounts You Need to Build Wealth ·      The Key to Hitting Your Money Goals Helpful Resources: Christian Healthcare Ministries Financial Peace University EveryDollar                                                 Sponsors pay the producer of this show, The Lampo Group, LLC, advertising fees for mentioning their services or products during programming. Advertising fees are not based upon or otherwise tied to any product sale or business transacted between any consumer or sponsor. The following sponsors have paid for the programming you are viewing: Christian Healthcare Ministries.   Learn more about your ad choices. https://www.megaphone.fm/adchoices Ramsey Solutions Privacy Policy Learn more about your ad choices. Visit megaphone.fm/adchoices

When it's a goal because your spouse wants it or because a friend is doing it, and you think, oh, man, I kind of, I should probably do that too. Anything like that, it's not going to work. It has to be something that you own and something that you are passionate about, that you want to see that change in your life. You want to see that goal achieved. Hey guys, welcome to this episode of the Rachel Cruz Show podcast. I'm so glad that you're here. So in this episode, we're going to talk about the key to hitting your money goals and building wealth. I'll go over when investing can actually keep you from building wealth. Then I'll go over six financial accounts that everyone needs and why.

But first, let's talk about the key to hitting your money goals. Take a listen. So we're going to talk about goal setting and how we don't always see our goals through. And listen, goal setting's hard. I get it. There's a lot going on in life. And I feel like you're like, oh my gosh, goal setting. Like it sounds a little boring.

It sounds a little draining. and if you're not just like a self-motivator, you're like, yeah, I'm good. But listen, goals do a lot for you in life. They actually keep you on track and keep you moving. Give yourself a lot of grace, though, because for most of us, it's like, yeah, you make some goals in the new year. And then by March, they're nowhere to be seen. So I'm going to help you kind of shape your goals to, again, help you achieve the things that you want, specifically around your money.

Now, in order to make your goals actually happen, you want to make them as, specific as possible and be very, very intentional with them. Again, if your goals are vague and they're undefined, it's much harder to actually zoom in and say, hey, I'm going to work this and to be excited about them too. I find in my life the more vague things are, and it's like, yeah, it's out there. Yeah, yeah, there's no energy behind it. But the more specific and the more clear and defined your goals are with a timeline, you know what to do, the more motivating it and the more likely you're actually going to achieve them. So here are a few examples of some vague money goals that I've heard people just say.

And when they say them in the back of my head, I think, yeah, it may not happen for them because there's no plan around it. So here's an example. I want to save more money this year. Okay. How? When? Give me like the specifics.

Now, I want to save more money this year. This year. Okay, that gives you a time limit, right? So you're like, okay, let's just pretend you say that at the beginning of 23. So you have a year. I want to save more money. All right. Well, what does more money mean? Does that mean like 50 cents? Is that like four bucks? Is that $4,000? Like, what does that mean? So if you say, I want to save $5,000 by the end of the year. Perfect. So now we're specific. So then you can break it down by month, even by week, if you wanted, to know here's how much money I have to. to save. So again, there's energy behind it because it's specific. Another vague money goal is, I want an emergency fund. I bet you do. Like, if you don't have one, I'm sure you do want one, right? Like that, I get it. So what are we going to do about that? So if you say, I want to do a starter emergency fund of $1,000 in 60 days. And in order to get that $1,000,

I know I have to work X amount of time over time. I need to sell X amount of money of things out of my house and make money off of stuff and sell stuff. You know, when you start to gather that information, then you know, okay, in 60 days, here's exactly what I need to do to get $1,000. And more than likely, you will actually do it because you have that plan. Another vague money goal is I want to become debt-free. Yes, I bet you do. And so do a lot of people. But just saying it out into the universe doesn't do much, right? So, You want to break it down and say, okay, I want to be debt-free by the end of 2024. You got two years, and you're going to do it by doing the debt snowball where you list out all of your debts,

smallest to largest. You pay off that smallest debt first. In order to pay that off as quickly as possible and get your debt paid off in two years, you know you're going to probably work a second job for so many hours a week. You're going to budget every single month for those two years. You know exactly where your money's going, so you can put as much money towards your debt as possible. you're going to cut back on your expenses and actually live kind of a new lifestyle for those two years so that you can save more money to throw at the debt. You're going to see the minimum payments.

Again, it is so specific. You know when you want it done by and how you're going to do it. And more than likely, that's when you're going to pay off debt. And that's what I find when I talk to people that get out of debt and they do their debt-free scream on the Ramsey show. I really don't think one time I've had someone come on and they're like, yeah, we just really wanted to get out of debt. and here we are, and it's an amazing feeling. No, they're like, oh man, three years ago we hit the wall. Or 18 months ago, I realized, I have no money and I want money.

And they have this moment where they say, I'm going to change. So then we did all this stuff. We had a plan. So many people do, like, even the thermometer, or they have the construction paper chains that they make around the house. Like, there are visuals, there are things, there are plans. And that movement is what gets so exciting because you have energy behind it. So if you want to get out of debt, be specific.

and have that time frame. All right, another vague goal is, I really want to invest. Yes, I know. Investing is awesome, isn't it? So how are you going to do that? Where are you going to start? When do you want to do that? So if your answer is, okay, by the end of January, I am going to open up a Roth IRA and I'm going to start contributing 15% of my income split into that and my 401k at work. Great. See? Specific. You have a plan. You know what you're doing. doing. Another vague money goal is, you know, I just really want to buy a house. I just want to buy a house. It is vague. Now, an intentional version of that would be by the end of 2023, I want to save as much money as possible for a down payment, ideally 20%. I want to reach out to an endorse local

provider, a Ramsey trusted agent to help me find the right house and start making that contact and start understanding what kind of house I can afford. See steps that are very, very, very good. very specific. Now, this is also great, again, because you get energy behind it. Now, making goals, again, there's a bunch of different theories out there, but honestly, the things that are, that I find that work, that really, really help you achieve your goals, again, that they are specific goals, they are measurable, you can actually watch progress happen, they're time sensitive, you know exactly the time frame that you want that goal to happen, and they have to be your own. that's a big one.

When it's a goal because your spouse wants it or because a friend is doing it and you think, oh, man, I kind of, I should probably do that too. Anything like that, it's not going to work. It has to be something that you own and something that you are passionate about that you want to see that change in your life.

You want to see that goal achieved because, again, that's what's going to help you follow through. Now, also, it's kind of old school, but it's just the truth. When you write things down, it's amazing the percentage of goals that actually occur and you actually see them through versus just a vague idea in your head. This is why it's so powerful when you do a budget that you want it visual. You want it there.

That's why I always say, do it on a sheet of paper, do it on a budgeting app, like every dollar. Like have it visual. When you actually see the numbers, it helps you win with your budget. You know what you're doing. And the same is with your goals. If you have goals, write them down, even if it's on the back of a napkin at a restaurant or something, and keep it in your car, keep it, you know, on your bathroom counter. When you see something visually, it gets ingrained in your brain, and it's a reminder of what's going on. So the power and writing it down, oh, you guys, it's so worth it. I'm telling you. Now, if you have trouble maybe setting goals or you're like, I really want to have something that I can keep with me,

I want you to check out the Ramsey goal planner. So this is more than just a traditional calendar. Yes, there's a calendar in it. But there's also teaching around helping you stay encouraged and motivated when it comes to your spiritual life, money and your relationship. So George Camel is in it, Dr. John Deloney and myself where we write every single month, again, a piece of encouragement and helping teach you on these topics, but also to help continue to motivate you when it comes to your goals. So the goal planner, again, is all about helping you create goals and keeping them for the year. And it also has the handy-dandy calendar in there,

which we all need month-to-month, too. So make sure to check it out at ramsysolutions.com slash planner. A lot of people think that it is crazy to stop investing. That if you're investing, why would you ever stop? I mean, compound interest is a powerful thing. You should always invest no matter what. Well, I'm going to tell you that there are some very specific times that not only is okay to pause investing, but you actually should,

which might sound very counterintuitive to pause investing, but I promise it might actually help you, and it will help you in the long run, build more wealth if you actually take a step back from investing, which I know, you're like, that makes no sense. So, listen, in these scenarios, I'm talking about pausing it temporarily, okay? Then you're going to get back to investing and cover up the ground that you've missed out on,

which is very important, but, man, pausing it, again, for these certain scenarios might be really, really important. So here are a few where I would encourage you to pause investing. Number one, to save up for an emergency funds. Yep. It doesn't really help if you have money in your 401K and something happens tomorrow and you need money. They're like, well, I have money there, but I don't have any cash, right?

It doesn't really help you out. It does not help you out. And so, again, if you pull money out of retirements because you're younger than 59.5. You're going to be hit with a lot of penalties and fees and pay taxes if it's not in a Roth just to get money to replace your water heater that's broken. Okay? So not smart, not smart. So for a while, I would say pause investing to save up.

If you don't even have a thousand dollars save, do that first and foremost. Save that $1,000. And then I would encourage you to pause investing, keep it pause, to pay off your debt. Listen, this is where a lot of people are like, I don't agree with that. But if you can focus all of your time, all of your energy, everything towards one thing when it comes to your money, you guys, you can do it so much faster. And with debt, it hangs around, whether it's your student loan, or it's the car loan that you've had, or your credit card bill, whatever it is. And it just kind of floats up there. So when we talk about getting out of debt, and we talk about being so intense

this process. Okay, so this is like taking on side hustles. This is selling stuff, cutting expenses, doing what you can to get as much money as possible to pay off your debt as quickly as possible. Because listen, when you don't have payments, you got money again. Think about it. If you never had a car payment, $600, $600 leaving your account, your credit card bill, a few hundred bucks there, maybe even your student loan, a few hundred bucks. When you just add all this up, it adds up to so much money. But when you don't have debt, you're going to have all that income to invest. even more. So pausing, investing for a short period of time to pay off your debt that frees up your income, which is your largest wealth building tool, it's possible. And here's the deal, too. For most

people, they're getting out of debt in 18 to 24 months. So I'm not saying pause investing for 15 years or something like that. No, no, no, no. This is for a short period of time to focus all of your energy to become debt-free. Another reason to keep your investing paused is to save up for a down payment. So this is technically what we call babysept 3B. This is after you're out of debt and you'll be fully funded emergency fund of three to six months of expenses. After that, you want to start looking to save up for a down payment. Now, if you are a first-time home buyer, this could be anywhere from 5 to 10%, but usually I would recommend if you can get 20% for a down payment, that would be huge

because you can avoid PMI, private mortgage insurance. But if you can't, that's okay. But again, putting money away quickly to save up that. down payment. Now, some people, they want to do both, and I'm not mad at that, but also if you want to buy a house, I want you to get that down payment as soon as possible. So again, keeping your investing world, that investing will pause for a short period of time to gather some cash for your down payment makes that go so much faster. Now, I don't want this to be over like years and years and years and years, right? I want you to press play on investing as soon as possible, but I also want you out of debt,

fully funded emergency fund, and a good down payment. Now, another reason to pause your investing is if major life events occur. So if something really big and unexpected happens, like the death of a spouse or there's an accident, even losing your job. Ideally, your fully funded emergency fund would take care of a lot of your living expenses during that time. But for some reason, if it's even a bigger deal, pause investing. You can pause it for a period of time while you get through whatever is going on in life.

and that's okay. That's okay. But eventually, again, you want to press play on investing so that you can get compound interests and all the wonderful things that investing does. But during periods of whether it's tragedy or grief, whatever it may be, sometimes it's good just to, like, not make any big decisions for a while and just kind of pause. And that could mean, again, pausing your investments so that you have more income coming in. All right, just to be clear, don't pause investing to go see Duolipa in concert. Don't pause investing to buy a new car. So scenarios that I talked about are really the only reasons you should pause retirement investing.

And if you want to get back on track after they've been paused for a while, I always recommend putting 15% of your income into retirement. So that's going to be your 401K. If you have not opened up a Roth IRA, do that. If you have additional investments or additional money beyond after you've maxed all those out, and you still haven't hit your 15%, and HSA is another great option or just a good mutual fund, because I am a fan of investing. Hear me say that.

It is an amazing thing. And we've all seen the charts of like, if you were 18 and you invested $42 every year, you'd be a billionaire by the time you're 59 or whatever it is, right? These numbers, they are explosive. I think it was Albert Einstein that said compound interest is the eighth wonder of the world. Like, it really is. It's an amazing thing. But it's really only amazing when you have a strong financial.

foundation. Because when you are shaky, and again, you have money in retirement, but you have no money, you're living paycheck to paycheck in your everyday life, sure, 60-year-old you is going to be very happy, but now until then, you're going to be stressed out and it's not worth it. So clean up that part of your life and then, oh, see the magic of the money just working for you. Like when they say make your money work for you, that's investing. When you are sleeping, it is making money. It's a great thing. So if you want anything, any extra help when it comes to investing because it can be a very intimidating

and confusing topic. I totally get it. I would recommend reaching out to one of our smart vester pros. They can help you understand exactly what you need in your unique situation, and they will make things way less confusing and break everything down and show you exactly what you need to do.

So I'll put a link in the description where you can get in touch with a smart vester pro. So we often hear that it's important to put money away. Yes. You're like, okay. where do I do that? Where do I put this money away?

If I want to build wealth or I need savings, like what is that? What do I do? So it can be very confusing of figuring out what specific accounts that you need. So we're going to talk about it. We're going to list out the financial accounts that everyone needs to have.

First and foremost, good old savings account. Yep. Now, there is a difference between a savings account and a money market account, sort of. A money market account, you actually earn a little bit more in interest, which is a good thing than a traditional savings account. But they're basically the same. You want check writing privileges out of both, which is really key.

And even if it comes with a debit card, that is a plus. Now, mostly like a money market account, you can't use it as a checking account. So you can only use, like, six transactions a month tops where you start to get penalized. So it's really there just to let your money grow. But that's where Winston and I put our savings. we have two money market accounts from the same bank. We use Alli Bank online. So we have an emergency fund line.

That's just our emergency fund that we don't touch. I like to see it there. It's no, it's there. In case everything hits the fan, there it is. And then any extra savings that we have, we put in the other account. So we usually see those two numbers very close together, which is very helpful.

So if we have a big purchase that we have to make or something and we use money out of our money market account, we have a check that we can write, and it makes it very easy. Now, George Camel, other Ramsey personality, he just loves a traditional savings account. He's happy with that for his emergency fund, which is great. But either way, having a savings account is really important. Next is a checking account.

Yep, one that everyone needs. And since you're not using credit cards, right? Yeah, you need a debit card. Yep. And so that helps with your checking account, all of your expenses. It's where every paycheck's hit and you spend money out of. but just a traditional checking account is awesome. Now, for me personally, I like having a checking account with a local bank

because I just like the idea of knowing the people. And if you need something, you know, there's more of a personal connection or a credit union is another great option. I personally don't care for like the big national banks because you just are a number. And again, I understand that there's a lot, but I like a state-specific bank personally. So that's what we use here in Tennessee. Next, retirement accounts. So these can be in different types.

of accounts. So you have a 401k or a 403B. And this is with your company or a 403B as if you work for a nonprofit or a school or the governments. And this is where an employer usually will match you. So you put in, you know, 3% of your income and they will match you 3%. Whatever it is, they will match. Or you can put more in if you'd like, but it's run through your company. There's also Roth IRAs, which are fantastic. There's income limits for these. So there's a thing called backdoor Roths if you make too much to qualify for a traditional Roth IRA. And you can only put in so much per year. Now, a traditional IRA is where you put money in before you're taxed. And so that money goes in, and then you basically get the tax deduction from the money that is left in your paycheck that

you'll pay taxes in April. A Roth IRA, you put money in after you pay taxes. So taxes are paid, it's the money you take home. You put that money in the Roth IRA. And I like this option better. even though I understand it's like, oh man, it's after taxes are taken out and all of it. So it hurts a little bit more in the present, but it grows tax-free. So that word Roth, remember that, you guys. This is huge. And some companies even offer a Roth 401K, which is like, yes, so great. So you're only going to do your retirement accounts once you are debt-free with a fully funded emergency funds.

But, yeah, investing, definitely a place that you're going to have some accounts. Now, there are also some financial accounts that you're going to need based on your situation. So if you have kids, you'll probably have some college savings accounts. So there's ESAs, educational savings accounts, but there's an income limit to those, and you can only put in so much money per year. So if you want to put in more money, or again, you make too much to qualify for an ESA, there's 529s, which are awesome as well. I would be very specific on what 529 account that you pick. I don't like state-specific or prepaid tuition 529, so look at ones with your financial advisor that gives you some good options, but these are both great options to save for your kids

college, because again, they grow tax-free, which is great. Next, you may want a sinking fund. So this would be if you know, hey, we're going to replace a car soon, or maybe you have a big vacation we're saving up for, anything that's more of a big purchase, a sinking fund is great, which means that you save money per month leading up to your big purchase. So say you have a $1,000 dollar purchase coming up and it's in 10 months. You're going to save $100 for 10 months. And some people open up a brand new savings account just for sinking funds so that it's not in your checking because you may end up spending that money.

And so keeping track of it in a separate account, some people love that. And so that's a great option as well. Also a business account, if you own your own business, especially if you're doing like a side hustle or you're doing freelance work or you're just starting something maybe from home, I would keep those separate than your personal accounts because it's so easy to mix them together and then it can get really confusing of how much money's in there, how much should I use to reinvest, and all of that. So if you have your own business, I really recommend keeping those things separate to keep it clean for tax purposes and also just to keep track of what's going on.

All right, it's pretty much that simple, you guys. I'm sure there's some other things that will come out in the future that we'll talk about. But when it comes to winning with money and building wealth long term, there's not a bunch of fancy secrets. Honestly, that's it. That's a pretty great plan. If you think about it, if you're out of debt, you have a fully funded emergency fund in a good money market. You got your checking and you're budgeting every single month. You're putting money into your Roth IRA and your 401K all the time and that's building and your kids have their college savings. You know, this is a great plan. It really is. You're going to see advice all over the internet that's like, do this and this and take that and take that money here.

interest here and borrow that and so you can do this and go through them, blah, blah, blah, blah. It doesn't have to be that complicated. Building wealth over the long term usually is not fancy. It's not exciting. It's not a secret. It's just being consistent day in and day out. And these accounts are here to help you do that and to build wealth, to change your family tree and be extremely generous. So yes, I am a big fan of investing. I hope you hear that. But there actually are times that you should pause it. So I hope that that helped you Thanks so much for listening to this episode. And if you have not subscribed,

make sure to hit that follow button. And if the spirit leads, you can leave a review. And remember to take control of your money and create a life you love.