The Rachel Cruze Show - The True Price of Living with Debt

Starting point is 00:00:01 When you have debt, it literally means that you owe money. So we all know that debt comes at a price, but debt also comes with some hidden costs that we don't talk about enough. So today, I want to explain the true price of debt, not only from a financial perspective, but also from a mental, physical, and psychological place as well. And stay tuned because at the end, I will be sharing one question that can kickstart your debt payoff progress once and for all. But first, make sure to subscribe and share this episode with a friend. Okay, let's start with these numbers. And since a hundred million Americans have a car payment, let's start there. As of late 2024, the average monthly car payment for new cars reached $730. And using our Ramsey investment calculator, if you were to invest

Starting point is 00:00:53 $730 a month from age 30 to age 65 at retirement, you'd have nearly $2.8 million. And that's doesn't even include interest, which is currently at about six to seven percent on top of the $730. So you guys, it is wild with debt. When you look at it from a mathematical perspective, it's insane. Like it is insane how much money we are giving to other people versus keeping it for ourselves and being able to invest and build wealth or to be generous or to spend it with our family. But in this episode, we're not going to talk about the math. We're also going to talk about the hidden price that you pay with living with debt. So let's just kind of unpack some of this. So number one, debt is a thief because debt not only steals your income from you, but it steals

Starting point is 00:01:43 your peace of minds. And once you view it as, yeah, this is taking something from me, it can really change your entire perspective. And we say your peace of mind because this is so real, like the amount of stress that people are under, the amount of lack of sleep, you know, loss of sleep that they lose because of that stress, it continues to compound. And what's so difficult is when you owe someone something, there is a piece of you that's not completely free. And in scripture, it talks about that the borrower is slave to the lender. And that's such a powerful metaphor. But when they talk about that and when that is said, there is something so true about that, that freedom comes when you have autonomy over your life, where you have the ability to say, what you want to do with your money, what you want to do with your hard-earned income.

Starting point is 00:02:29 Like, you think about your income, you guys? It takes a lot of work to make money, right? I'm like, there's so much effort and time and getting up, getting dressed, you know, work. I mean, there's just so much that happens to even get to work. Some of you that still go into an office, you know, you sit in traffic, you're driving somewhere. If you're working from home, you're trying to think about logistics and childcare and, like, getting the motivation. They're like, all right, I got to get this done. Like, there's so much that goes into working so that you make money. That's why majority of this work is to get a paycheck. And then when you get that paycheck and there's tons of debt attached to your name,

Starting point is 00:03:03 it is so hard then when it leaves for there to be money for you to do something with, right? So this idea of that freedom and autonomy is so huge. So it does. Debt is a thief because not only will it steal your income from you, but it will also steal your peace of mind. Number two, a price of debt is that debt is a cycle. So when you think about a car payment again, you know, it's very easy when you're you're in a cycle of car payments that, again, when you get to that point that your car payment it's paid off, the car's paid off, well, it's like, well, it's been a few years. So maybe I'll,

Starting point is 00:03:38 you know, just go get another one and you just end up in another car payment. So like the cycle of how they get you in is pretty remarkable because they're really smart at it because they know they're going to be getting your money. So instead of that cycle, if it's something different, if you break that cycle and do something different, let's say, you know, you're driving a $6,000 car and maybe you do it for a few years, and then you're saving up to upgrade, you can take that money, sell your $6,000 car, put that money, and step up again, right? There's like a totally different mindset when it comes to not being in the car loan loop. But again, that cycle of debt can feel really impossible to escape. So let's use the car loan, for example. So let's say you have a car loan.

Starting point is 00:04:19 Maybe even you're upside down on your car. Maybe you owe $28,000, but it's only worth $24,000, right? And there's a difference there of that $4,000. Now, you can work really hard, save up that $4,000 for the difference, sell it, and just, like, be clear, not have a car, and you'll have to save up some more money on the side. Or maybe you take a small loan. It's the one time that we're like, yep, I would rather you have a $8,000 loan, maybe $4,000 for a car, $4,000 from the upside down, you know, money that you're in. And that $8,000 loan is much better than the $28,000 loan that you're in, right? So there's an idea of getting out of it, but it takes a lot of sacrifice. And again, it's this part that in order to break the cycle, there has to be something that just shoot you out of it so that you're not continually in it running and running and getting nowhere. So the car is the good example because that is an easy one to get back into that loop, but doing something so radically different, so radically different, like driving a four or five, $6,000 car versus a $28,000 car, right?

Starting point is 00:05:18 I mean, that is different, but man, getting out of that cycle is so, so huge. Now, the next thing on my list is definitely the most devastating, but first, I want to tell you about one of our sponsors, Christian health care ministries. Just about everything costs more these days. So if you're looking at your health care options during open enrollment, check out Christian health care ministries. CHM is not health insurance. It's a biblically based health cost sharing ministry that's helped hundreds of thousands of families

Starting point is 00:05:47 like yours with health care costs without sacrificing freedom. So you can join CHM at any time like now. So learn more at CH Ministries.org slash budget. That's CHministries.org slash budget. And number three, debt preys on the vulnerable. So when you are in a really tough spot, that's where we find a lot of people go into debt. Now, some people, yes, are constantly in debt because of a lifestyle choice. They're living above their means and they're choosing to do things that, you know, they don't have the money for. Now, there are others that, you know, to a degree are doing that, but it's more out of necessity. And it's like, oh my gosh, my income is not keeping up with even just food, shelter, utility, news, and transportation. Like, even just the basics. Like, we're

Starting point is 00:06:32 not even talking about a fancy cell phone bill. Like, not even that, right? Not even a nice cell phone plan. Literally, the basics, the basics are people are barely getting by. And that's where people, again, stuck in this mentality because of the industry praise on people like that. Because when you feel hopeless, you're going to go to the next lifeline that feels easy to get to, right? Which is totally understandable. But those lifelines are usually the things that keep you trapped in it. So whether it is payday loans, whether it is credit cards, you know, it's the cycle of saying, yeah, I'm desperate. So I'm going to go get any lifeline I can and then realizing that you get stuck in that cycle over and over again. And that's what's so hard.

Starting point is 00:07:14 hard is that, you know, people get into debt in really scary, sad situations a lot of times. And so that's why, again, I think it is so important on the front end, as much as you can be proactive with your finances to get yourself in a place to say, hey, an emergency fund is so key. And we talk about the $1,000 emergency fund and some people feel like, oh, my gosh, it's not enough. But when we look at the stats, 40% of Americans can't cover a $400 emergency in cash. So even that baseline of that $1,000 cash is like night and day for people. Okay, it is such an important step. So that very first step that you take can be that lifeline for you instead of depending

Starting point is 00:07:50 on the debt industry, which is out there and really does prey on people. So again, that is one thing that debt is costing us is that when you are in a vulnerable state, usually they're there to quote unquote rescue you, but then not only do you have the issue that you had, but now you also have a money issue because of the debt that was used. So I know that this can like feel overwhelming and kind of heavy, but listen, there is good news. And that is why I love to do what I do in life because we meet people in these places, you guys, for sure, where they feel like, oh, my gosh, debt is a thief. I feel like I'm stuck in this cycle or, like, a bad event happened and debt was the thing

Starting point is 00:08:24 that, like, I ran to, right? So, like, there are these people in these situations all over the ways. This may even be you. But what we get to see on the other end of this is people that start to make a change. And they start to say, I'm going to not only get out of where I am currently financially, but I'm going to change my entire mindset around this. And when you set up a life without debt, you do set up a life with much more peace, much more peace. And again, that may be lowering your lifestyle. That may be saying, hey, we're going to make

Starting point is 00:08:53 some tough decisions and maybe change jobs or we're going to be moving to a different city. Like some people make big drastic changes because they're chasing peace. And peace is out there, and it may not be a big drastic change like that. Maybe it's, hey, I'm finally actually going to do a budget or, hey, I'm actually going to just pay for things with my own money instead of using the bank's money, right? It's these small changes that you can make that actually will create a huge difference in your life. And again, not just mathematically like we were talking about, but truly give you peace when it comes to the spiritual side of you or the emotional side. Your mental health, I mean, all of it, there is so many pros, science is showing us when you don't have debt. When you

Starting point is 00:09:34 don't owe anyone anything, there is something so freeing about that. That is so huge. Now, if you want to get there, there are some really critical steps to take and proven steps to take to get yourself in a place apiece. That $1,000 emergency fund like we talked about, that is number one. And then next, number two, is getting yourself out of debt. And you're going to do that by listing out all of your debts smallest to largest, regardless of the interest rate, pay minimum payments on everything, and pay off that smallest debt first. And then once all your debt's paid off, on average, people are doing this in about two years, after that's done, then you're going to save up an emergency fund of three to six months of expenses. And then beyond that is, you know, funding, we're

Starting point is 00:10:09 hire men in kids college and paying the house off early. All of that is so great. But those first few steps are so critical to the subject of debt because I want to get you in the place where you are actually driving your life and your money and it's not someone else telling you what to do. So here's the question I want you to ask yourself, if you haven't really reached your breaking points or this feeling of like, oh my gosh, I'm so sick and tired because a lot of people, that's where they start to change is where they're like, I'm so done with this. I'm so done with this. And maybe if you haven't gotten there, ask yourself this. Is your piece more valuable than material things?

Starting point is 00:10:43 And it's a challenging question because if you say, no, I would rather have peace the material things. And that means you can be selling some stuff to get some extra money to pay off debt. That means not buying things. Like there is a shift in your spending habits that can create that margin that will give you a level of peace with your money that is unbelievable. So again, if you feel like, yeah, I want to make that change, then I would love for you to do a budget.

Starting point is 00:11:08 because I think that's one of the first starting points as well to get and find money for that $1,000 emergency fund. It's the roadmap to help you get out of debt, all of it. But a budget is so huge. And if you've not downloaded every dollar our budgeting app, I would do that because you can create a budget for free there. And again, I think it's a powerful tool to have. It's just an app on your phone, so it's with you wherever you go. But it is the plan that you create for yourself to say, hey, here are my boundaries with my spending. Here's where I want my income to go. And it's going to help you not only find you. margin, but also find control over your money, which is what we all want. And if you're still on the fence about the whole no debt thing, make sure to check out my episode here on the only exceptions to

Starting point is 00:11:48 my no debt policy. And if you're listening on podcast, I will leave a link below. All right, you guys, remember to take control of your money and create a life you love.

The Rachel Cruze Show - The True Price of Living with Debt

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.