The Rachel Cruze Show - The Millionaire Money Habits That Give You the Freedom to Spend Later

Episode Date: May 22, 2023

Today’s episode is all about choosing your spending habits wisely. I’m talking about where to invest your money when you want to build wealth, how to stay on budget during and after buying a home, and how to know when it’s worth it to splurge on products. What You Get in this Episode: 3 Places You Should Intentionally Invest 5 Things I Said No to Before I Paid Off My Home Luxury Products I Think Are Totally Worth It 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

After saving an emergency funds of three to six months of expenses and your debt is all paid, then I recommend investing. So whether you're investing in the market, home ownership, or your little one's future, you can achieve really big things. You just take it day by day in order to save the course. Hey guys, welcome to this episode of the Rachel Cruise Show podcast. I'm so glad that you're here. So in this episode, we're going to talk about millionaire money habits that give you freedom

to spend later. I'll go over a few of the last. luxury products that I think are worth the money. And then I'll talk about some of the things that I said no to while we are building our house. But first, let's talk about the three places that you should intentionally invest. Take a listen. At Ramsey Solutions, we talk about the baby steps, and these are going to be known as baby steps four, five, and six. But I know it can be kind of challenging and intimidating to balance multiple priorities at once. And plus, recently, President and Biden signed an act that affects these investments,

and it's actually a good thing. So today I wanted to unpack this news and talk about the why behind our recommendations and investing in these three specific areas at once. So first to start off, if you are in babysubs one, two, or three, meaning you're still paying off debt or you're saving up an emergency fund, keep up the good work.

Just keep at it and tuck this information for later. Now, if you're brand new to this channel and you don't know what I'm talking about when I'm talking about the seven baby steps, then I would encourage you to go to ramsysolutions.com and search seven baby steps to see our plan of getting in control of your money. Again, after saving an emergency funds

of three to six months of expenses and your debt is all paid, then I recommend tackling these next three baby steps together, which means your money is going to go to all three of these places at once. Investing 15% of your income and two retirements, and if your employer adds a percentage with a 401k match, that's great, but I want you contributing 15% of your money into retirement.

Also, you're going to be saving for your kids' college. And then you're going to be tossing any extra money at the house to get it paid off early. Okay, so now back to investing. Now, your first step, as always, is to create a budget. So if you've been working the baby steps, you are no stranger to this. And the strategy of budgeting does not stop after you pay off debt and have an emergency fund. Budgeting should be a lifelong discipline that helps you keep, control of your money. Now, after you've budgeted your four walls, giving and saving, you're going to

want to adjust any additional spending to accommodate these three goals that I mentioned, which again, is putting money in retirement, college savings, and paying off your mortgage. So let's talk about some of the common questions and conditions around these three investments. So first step is retirement investing. Some people ask, well, why 15%. Well, this is the industry standard. And most financial advisors recommend that you contribute this amount if you want to. to enjoy a comfortable retirement. Also, people ask, can I contribute a little less so that my employer match can total that 15%.

Well, no, I'm going to encourage you that you need to invest 15% of your money. And if they have any type of match in your 401k, that's just a bonus. You don't want to contribute anything less than 15% of your income. Should this percentage increase over time? Well, if you're already behind on retirement savings,

you'll want to contribute more as soon as you can. So once the mortgage is paid off, then we recommend investing as much as you can to increase those retirement contributions. Next is looking at college tuition. Now, if you don't have kids, or they're grown and gone, or you don't plan on having kids, then you can just skip this step and move

to paying off the mortgage early. But if you do have kids, then you're going to start thinking about their future. So some people ask, should college tuition savings come before investing for retirement. And a lot of parents feel guilty putting money into their retirement before saving for their kids college. But here's the deal. Your kids may or may not go to college. They may choose a career that doesn't need a degree. So retirement is going to happen whether you like it or not. College may or may not happen. So again, making sure you're investing first and then saving

for your kids college. Also, people ask, well, what if I have kids and I'm saving it for their college tuition, but they end up not using it. Well, this is where, by, by, Biden's act that he signed comes into play, which is amazing. So this bill would apply to 529 plans, which is a popular way to save for college tuition. A 529 plan is a tax advantage savings plan that lets your money grow, and what happens is you can use that for college. Now, if you don't use it for college, this act would allow $35,000 of the balance of your 529 to transfer into a Roth IRA

in the account of the beneficiary's name. So the account must be open for $5,000. years, and the transfers must be made after annual contribution limits for the Roth IRA. So it takes several years to reach that $35,000 lifetime maximum. But again, this is incredible. So you can actually use money from your college savings for your kids that you have in their name and open up a Roth IRA in their name instead. And it's just wonderful.

So we love that bill. I think it's great. All right. Next, let's look at the mortgage. So why not tackle the mortgage? before any of this, because I know some of you are very motivated to become fully debt-free, but you need to take advantage of compound interest as early as possible. And in the perfect world, you would be investing in retirement in your early 20s.

So especially if you're starting the baby steps a little later in life, retirement and other savings need to be a priority. And finally, the question is, are there any exceptions at all to these rules? Okay, well, yes and no. I fully believe in the baby steps because they work. We've seen that happen over and over and over again. But of course, there's different situations. For example, if you've been putting money away for your kids' college since birth

and they have plenty and they're fine, then you can pause that or slow that progress and put more money at your mortgage. Or if you're five years away from retirement, but there's still 10 years left on your mortgage, then you can kind of go crazy and pay off the mortgage. Because ideally, you will go into retirement with no kind of debt, no mortgage payment, no car loan, nothing.

So again, assess your situation and then proceed wisely. All right, you guys, I hope this gave you a good overview of the investing portion of the Baby Steps. And whether you're investing in the market, home ownership, or your little one's future, patch yourself on the back for making it this far in your financial journey. It's pretty, pretty amazing. Now, if you're looking for more information on the Baby Steps or college tuition savings or retirement investing, there are tons of health.

helpful resources at ramsysolutions.com. We also have easy to use tools like an investment calculator and a mortgage calculator, too. Today, we're going to be talking about what Winston and I said no to when we were building our house. So living debt-free and being on a budget takes a lot of discipline, no matter where you are in the baby steps. And sacrifice obviously looks different for every family and every phase of life. But I just wanted to give you guys a glimpse into what life looked like when we had a really

big goal of paying for our house as it was being built. So if you are currently in the weeds of baby steps one through three, you are feeling the sacrifices of gazelle intensity. So maybe this is just some encouragement for you to know that what you are doing, your effort is worth it. I'm telling you, because the things you're learning now are things you may take with you throughout your entire financial journey, especially if something big comes up later in the future. So the first thing that I said no to when we were cash flowing our house was just luxury spending. Okay, so anything luxurious, so whether that was like, you know, pedicures or manicures or going out to lunch with friends a lot or, you know, sometimes you'd get a massage every now and then like for your birthday. Like whatever it was, we cut all of that back and we're like, nope, if it is a want, we're going to do what we can to not spend that money.

And even house cleaning, like I had someone come clean our house and we stopped. that for a period of time. And that was hard. I do love that. So nice with little kids and our house was disgusting. But I was like, nope, wherever we can save, that's what we're going to save. And I wasn't the only one that cut that stuff. Winston, he landscaped all of our yard and did all of that during that era. So we didn't have anyone doing that or paying out that money, which can be a lot, especially during the summer. So again, whether it was small perks, and I know a lot of this is like first world problem stuff, but it was just anything in our budget that we knew we could live with and we could have later down the road,

but any amount of cash that we could have month to month was important. And guess what? We survived, and you can too. All right, the second thing that I said no to when we were cutting back was travel. So we'd love to travel and we were doing, you know, some small vacations here or there, but we cut everything out. And we're like, nope, no anniversary trips, no birthday trips, no summer trips, nothing. So we pulled together all of our staycation tricks for that season of life.

and again limited our spending as much as possible. The third thing that I said no to was any major purchases that we could wait on. So for us, our cars, Winston was driving a truck that was over a decade old. Mine was, I think, bumping up to 11 years. And so they were fine, but they were getting to that point that it was like, oh, it would be nice to replace these cars at some point. But we were like, nope, nothing like that, because I'd be a chunk of money going out. And we're like, no, we will wait to save up after.

after the house is done. And so we did. We put all that cash together of what would have been replacing cars and put it towards the house. Now, we did not slow down our 15% into investing. So we still did that. We tried to max out where we could with our investments. But anything else really was going to the house. So we weren't doing any other investing besides just retirement. All right. The fourth thing that I said no to was instant gratification spending. So at the time, our house was still kind of partly furnished, the house we were currently living in. And I'm telling you, it was still hard. You know, you'd pop into home goods, or you'd see a picture on Instagram. You're like, oh, I could do a nice new rug, you know, or a cute

new pair of, you know, pillows or some accessories around the living room. And like, we could maybe get a new couch. Like, it was stuff that I just found day to day that I was like, oh, it would be nice to have. But we said no. So we really were aware, though, of the comparison that creaked in. Because when you do have a hard line, they said, no, we're not spending money on things we don't have to spend money on, you suddenly realize, oh, wow, Instagram is very convincing that shows you that you feel like you have to have these things and you don't. You really, really don't. So the idea that there's going to be new things to buy, that's going to be everywhere, you guys, and all the time. So when you actually save up and pay cash for stuff, when you're not working

towards a big goal, it's great. So consumerism is not going anywhere. So exercise some patience and just take it one step at a time. I mean, I look at my friends. I look at my friends. I look at my friends. and Ramsey personality, Jade Warshall, and her and her husband, Sam, literally slipped on an air mattress for multiple years while they were paying off their debt. So you are stronger than you think. And lastly, it's not actually a no, it's more of a yes.

It was to income opportunity. So anything extra that was coming up while we were cash flowing our house, we said yes too. So I took every speaking engagement, every work trip, every convention and conference, anything I could say yes to, I did. And Winston did the same.

He took on some extra work projects. So we did whatever we could to increase our income during that time. So we were saying yes to a lot, and we knew it was a season. So getting income up was a great way for us to help cash flow our home. All right. If you are working towards a big money goal, like maybe you're trying to pay off your home or maybe you're saving up for another big purchase, I hope that this gives you some encouragement and inspiration that you can achieve really big things.

You just take it day by day, practice a little self-control, And if you've ever paid for a huge purchase in cash or channeled that gazelle intensity for a long period of time, I would be curious on what you said no to in order to stay the course. So leave a comment below and let us know. Today I'm sharing five luxury products that I think are totally worth it. Because I'll be honest. I like to be smart with my money, but I also love to be a little boozy on occasion. So you're allowed to embrace your bougie tendencies as long as they're in.

the budgets. And the great thing about personal finance is really just that. It's personal. So splurges and luxury spending look different for everyone. But today I'm going to share with you what it looks like for me and I want to hear what it looks like for you. So okay, the first luxury products that I do think is worth it is a quality shampoo and conditioner. So my favorite brand at the moment, it used to be purology, but I've switched to it's either carostaz or carastasy. people pronounce it different ways, but it is a great shampoo and conditioner. And with this, I always lean more quality than quantity. So again, it's kind of expensive. You can get cheaper shampoos and conditioners, but I love investing in a good product that I'm going to use,

you know, multiple times a week, keeps the maintenance down, keeps my hair good, all the things. The second luxury product that I think is worth it is a classic designer bag. So personally, for me, I have loved my Louis Vuitton, never full tote bag. You can call me a diva. I don't care, but I've had this thing for over 10 years, you guys, and it has stood the test of time. Truly great quality, because I wear it all the time. And I rarely buy purses anymore. I really don't. I mean, I just have that bag that everything goes into because I can put everything into it, whether it's like books or stuff for work or my kids' toys or an extra change of clothes, like whatever I need, it never gets

full, which is I know why they named it that, but that's what it feels like. I can just put so much stuff in it, and it's great. It's like the never-ending bag. The third luxury item that I think is worth it is good sunscreen. My favorite face sunscreen is a brand called Super Goop. And they have a lot of different versions of their famous face sunscreen, but it's really expensive. It's kind of stupid how much you pay for it. But it's like really good quality. It's great to put under your makeup. It has really good ingredients for your skin. And if you have researched anything about skincare on social media or anything, you know how much people preach

wearing sunscreen every single day. Dermatologist will tell you this, and it really is one of the best things to do as you're getting older. So SuperGoop is great. Again, I can put it on during the day. You can put makeup over it, and it's great. And as good ingredients, so expensive, but I love it.

The fourth luxury product that is worth investing in, it's just a good pair of casual sneakers. So I do have a pair of golden gooses, and people, you know, might hate that. It's a little bit of a controversial one. but I love it. I got the pair for my birthday, my 30th birthday a few years ago. And I was like, you know what? I'm going to buy a pair. And people make fun of how expensive they are, which I get because they already look worn and distressed and all of it. But I don't

care. They have a little sparkly star on it. They're really fun. They're comfortable. They go with anything. And I genuinely wear them all the time. I have one pair. I personally don't need like eight pairs of them. I just need one pair. And I love them. So it's worth it for me. And the fifth and final luxury product that I love is just good perfume. So to me, this is kind of a classic item that you definitely can do without. It is a luxury. It's not a necessity. So if you are working your way through the baby steps, this is not necessary.

But I do love a good perfume. And in fact, someone said this to me when I was pregnant with my first baby is to wear a different perfume with every pregnancy. Because scent is one of the things that brings back your memory. So I kind of fell in love with perfume during that time because I had a different perfume for every pregnancy. I have my favorites that I wear during the day, all of it. So I personally love Joe Malone's perfume. Their sense are like really subtle and great, but I do. I love a good perfume.

All right, you guys, that's it. Those are my five favorite luxury products. And sometimes spending a little bit more money on items that will last you a long time is really worth it. Quality is great versus buying 20 of a cheaper version, which I do that with some stuff. But when you find those products that you love and you want to invest in, I think it's great.

So once you've paid off all your money, your debt and you saved up your emergency fund, this is where you can really make room in your budget for luxury items that you want. And I would recommend doing a sinking fund during this time. So a sinking fund is where you have short-term savings month to month to reach your goal. So for example, let's say you saved $50 a month in a sinking fund so you could buy a nice handbag at Christmas this year. Right. So whatever it is, you just break it up month to month. So that way, when it gets to the point for you to buy the product, you have all the money there. And if you have not used every dollar our budgeting app, you need to do that because it makes

sinking funds very easy and accessible. So it's a godsend. It really is. Oh, luxury items, you know, you gotta love them, right? Well, thank you guys so much for listening to this podcast. And if you don't mind, will you please leave a review? It means so much to us. Not only personally, is it great to know that the message is getting out, but also it helps

with the algorithm of how podcasts are ranked. and where they fall because we want more people to see this show and get this message because we want more people to control their money instead of their money controlling them. So that would help us out so greatly. And if you've not subscribed to the podcast, make sure to do that as well. Thank you guys again for listening. And as always, make sure to take control of your money and create a life you love.