The Rachel Cruze Show - The Two Terrible Habits Keeping You in Debt

Episode Date: October 2, 2023

When it comes to monthly spending, it can be easy to settle for “just getting by.” But wasting your paycheck on minimum payments forever is no way to live (or budget!)—here’s what to do instead. What You Get in this Episode: ·     Why the Majority of People Will Stay Broke ·     How Minimum Payments Take Years of Your Life   Helpful Resources: Christian Healthcare Ministries 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[SP1]  Learn more about your ad choices. Visit megaphone.fm/adchoices

Everyone suddenly is acting like they're Jeff Bezos. And let me just speak some truth over you right now. If your brain ever convinces you that being thoughtful and intentional with your money means that you're missing out on something better, trust me, you're not the problem and you're not alone. Hey guys, welcome to this episode of the Rachel Crew Show podcast. I'm so glad that you're here. So if you're enjoying this podcast, if you do me a huge favor and leave a review,

will you please go down to that review area in the podcast section? and just write about what you enjoy about this podcast. It helps so much for getting this podcast in front of people. So hopefully they can learn to take control of your money because you know that's what it's all about or you wouldn't be here. All right, you guys. So in today's episode,

we're going to talk about two terrible habits that keep you from becoming a millionaire. I'll go over how putting off, paying off debt is one of your biggest wealth killers and why. But first, let's talk about why majority of people will stay broke if they keep doing this. So today, I really want to dig into the problem with credit card debt and minimum payments. So if you're familiar with what I teach, you know that I'm fully against credit cards and having debt.

But I think it's important to show you why I have the stance when it comes to debt. Because yes, you may be able to see a credit card balance. That's $1,000 and it may not look so bad. But you may not realize is that when you add up the amount of interest that you end up paying over time, you're literally getting robbed. and I always want you to have all the information you need to make the smartest and wisest decision for you and your money. So first of all, it may sound really simple, but let's go over how credit works in the first place. So you go and you swipe a credit card and you are borrowing the bank's money and they charge you what's called interest, which is a small fee to use their money. Now,

if you don't pay it in full, that is when you start paying interest. And so people, you know, again, pay their credit card balance off and full at the end of every month. Some people do. Less than half of Americans actually do. And then the remaining half carry on a balance month to month. So it's you actually not using your own money for the purchase, but you're using the bank's money, which is debt. So it can sound really great, right? I mean, how wonderful these credit card companies are just to give you some money for your shopping spree. Well, the kicker is that you're agreeing to pay them back every single penny and then some. Because along with credit card debts, again comes interest. And interest is that fee that you have to pay on top of the original balance.

And this is where it gets really depressing really quickly. So you're watching good, smart people being completely weighed down by thousands of dollars in credit card debt. And this is why I'm really passionate about it. People get stuck in this, you guys. It's in a really bad cycle. And I see it a lot that people just lean on credit card debt just this once. And again, it rolls over month to month and something else comes up. They know the money for it. They charge it. And it ends up getting out of control. So by choosing to make minimum payments on even just a small amount of credit card debt, you're literally agreeing to pay close to double of the original cost. So for example, let's say that you pay 2% of your total credit card debt, which is $1,000, and that's going to be $20.

So $20.00, sounds pretty doable. But if you put that payment on autopilot and did just the bare minimum and just passively paying it off till it's gone, it would take $2,126 and more than $16,000.00,000. years to erase that credit card debt if you just stick with that minimum payment. So that means you're paying more than double than what you would have paid in the first place of that $1,000 expense. And it would take 16 years. And that's more time that I'm recommending. Obviously, you pay off any debt, even your mortgage.

I'm like, people pay off their mortgans in seven years. So I'm not saying that this is what you have to do, but it's just showing the power that it can have. So let's talk about what you could be doing with that money instead of sending it to the bank. Well, first, there's a simple concept of just paying for things in cash. So this brings a lot of peace if you're able to cash flow major and minor purchases. Because, again, who wants to pay off that kitchen appliance over 16 years? Like, no, you don't want to keep paying that month to month.

So instead, get on a monthly budget, set yourself up for the future to say, okay, what is coming up? Where do we need to set money aside for emergencies or other things? That's called a sinking fund. And save over time. Now, another thing that debt and minimum payments can keep you from doing is investing and building wealth. So, for example, let's say you took that $20 minimum payment.

payment every month. And instead of paying the bank that, you invested that for 16 years. Well, you would have more than $9,000. So instead of losing $2,000 of your own money, you could have made $9,000 by just investing. And if you invested that $20 over another 20 years, you could have $84,000 instead of a negative $2,126. So understanding that paying interest is a price that you're paying, okay it is it gets into the negatives versus actually investing it and making interest and compound interest that's a beautiful thing all right now that we covered the practical mathematical reasons that minimum payments are not wise or any payments really let's talk about the bigger picture because on a larger scale i believe there's so much power in commitments and when you commit to putting in effort

and hard work not only do you see external progress but more importantly your character starts to change internally. Who wants to be going through life on just the bare minimum payment? You should not just have to survive this life, you guys. You should be able to transform and grow in a really meaningful way. And it's not like you have to suffer for years and years before you see the fruits of your labor. I'm not asking you to never buy anything that brings you joy or anything in life. Okay, that's not the case. But I am asking you to live within your means. So whatever that looks like for you, it's a really wise move. And this is the only way that you're able to create margin in order to chase those bigger future financial dreams that you have. So a little bit of

sacrifice today of maybe saying no to some of the bigger stuff that you want in life. It's amazing to say no right now to some of that so that in the future you can say yes. I saw a reel on Instagram the other day from one of my friends. Her name's Erica and she does a great job with some of her money content. And it was a really great illustration between the difference of someone who's just getting by with their spending and someone who chooses to be smart with their money. And it was her playing both sides of the coin, but it was even talking about getting a raise at work and careers. And it's like, you just start out. And one friend's like, oh, my gosh, let's go out to eat and celebrate and let's, you know, go enjoy our money. And the other one's like, I'll go

enjoy some of it, but also I want to invest some money. And then they come back in 10 years. And this friend's like, oh my gosh, I'm going to go and do all this stuff and buy a new car and get designer bags and all this. And the other friend was like, I'm probably going to enjoy some of it, but I'm also going to invest. So that was the story. And then as you play it out, the friend that kept investing, you know, they're like 55 years old or whatever. And she's like, hey, let's go retire and travel and hang out. And this friend's like, what? No, I still have to work for another 15 years.

I don't have any money. So it was just so funny to see the difference in like, yes, making some sacrifice in the short term does set you up better for the long term. So I hope you're starting to see how debts and that idea of just living in the moments and sometimes even if you don't have the money, you're still buying the stuff, can put you in a deep hole in credit cards, you guys. It's the avenue to that. It is. So just stop and think twice before you do it. Now, if you're interested in stopping the

endless cycle, make sure to check out the Ramsey Baby Steps. This is a great place to start. This is our 30-year-old tried and true method that teaches you how to prioritize the basic money principles to achieve your financial goals. And the baby steps will actually show you how to make progress instead of just staying complacent in a system that's designed to really keep you stagnant and paycheck to paycheck. So to find out more information on the Baby Steps and much more go to Ramsey's Solutions.com. And I don't know about you guys, but lately, does it seem like everywhere I look, people are acting and living just like these extravagant lives,

it feels like, oh my gosh, this is crazy. Did everyone become multimillionaires overnight? And I missed it. Like, is everyone going traveling to Europe? Does everyone have nice kitchens and, like, fancy cars? Like, it just feels crazy for some reason recently. And I've talked to some my friends about it. And, man, they feel the same way.

So if it's, if you feel like you're the, the only one that didn't go to Europe this summer or do something really bougie, trust me, you're not the only one. Now, not to mention Bank of America found that hardship withdrawals went up last year with some account owners dipping into the retirement funds prematurely. So listen, don't get me wrong. I know that times have been so tough for people financially. And some of you might be watching, like, are you kidding, Rachel? No, I'm not doing any of that boogie stuff. And listen, I hear that too. But man, it just felt like this overwhelming sense of, golly, it feels like everyone has it together.

It feels like everyone else has all this margin when I feel like that's not always the case. But this is why it's important to have a plan for your money. So today's episode is going to be reassuring for some, but maybe a little bit of a wake-up call for others. So listen, it's okay to go through seasons where your budget is tighter than usual.

That's what a lot of people are experiencing. But the key is that you don't want to stay that way. You don't want to stay strapped down to a really constraint feeling with your money. money. And if you feel like you're the only one in your community who's not spending outrageous amounts of money, you know, remodeling a bathroom or taking a trip across the world, you're not the crazy one, okay? And you're probably not the broke one either. So first, let's lay some groundwork because I think we need to have a little come to Jesus moment about

comparison culture. We've all heard the phrase, don't try to keep up with the Joneses, but what does it actually look like? Because for me, I know when I'm sitting there scrolling through social I'm looking at people's kids and their homes and their vacations, their bougie workout classes, their great hair, their fancy teeth, their nights out for dinner, they're organized closets, their makeup halls, I mean, everything, everything. And the longer I scroll and the more like black holes I get into when it comes to this, sometimes the more just spiraling I become where I'm like, am I the only one that feels like a hot mess?

Or I think, gosh, Winston I, like we have goals for our family, but we don't have the budget to go do it right now, but it feels like everyone's doing everything. And then I was talking to my team the other day about this, and everyone had the exact same feeling. So we started talking about how everyone suddenly is acting like their Jeff Bezos, and we're stuck thinking, we're the crazy ones. And that, like, oh, my gosh, we're the ones that aren't, like, going out and buying all this stuff.

So let me just speak some truth over you right now. You are not the crazy one, okay? If your brain ever convinces you that being thoughtful and intentional with your money means that you're missing out on something better, trust me, you're not the problem and you're not alone. I mean, apparently there are former bachelor contestes from the TV show who are cashing out their 401ks to go on the show. Yeah, let's don't do that. No.

Or if it's not that extreme, sometimes it's just a general mindset shift that convinces people that they don't have to take responsibility for their circumstances. And I've been hearing people say, well, I can't control the economy. So I might as well just charge the expense and deal with it later because what else am I supposed to do? Yes, there's definitely truth to the fact that you can't control everything. but there are things that you can control. And no matter what, there is a price tag attached to everything. And sometimes we have to say, just not right now, or we have to flat out say, no, I can't do this. And it might sound a little harsh and really tough. But listen, we all need to remember this. And I want to encourage you that it feels like life isn't fair sometimes. And I get it.

I hear people's circumstances every single day with my job. And it is hard. But I also want to tell you, we were never meant to keep up with the Joneses because the Joneses have different circumstances. And sometimes, yeah, that sucks. Okay. Let's just be real. Because if you're comparing yourself to your next door neighbor and it feels like, you know, they got a brand new car in the driveway or, you know, they have the latest, you know, gadget in the backyard for their kids. Now, there are some factors to consider here. But the first thing I want you to keep in mind when you're fighting the comparison culture battle is that they actually might have more money than you do. Okay. Because sometimes I can be like, oh, they're probably broke and racking up credit card debt to go on that vacation that I want to be on.

But there they are. And that's not the right attitude because the truth is, like, yeah, they may actually have saved up and paid for that. Or maybe they make an insane income and good for them. But also, remember, like, that doesn't necessarily mean that they're genuinely happy or fulfilled. Or maybe it does. Like, you never want to pair this idea of, oh, gosh, this is probably what's going on with my insecurity and I'm going to pair it together. because the truth is that maybe they do have the money for that thing, or maybe they do make a great income, okay?

But also remember, it doesn't always equal happiness and fulfillment. Some people think if I just can get to that number, I'm going to be happy and I'm going to be satisfied. And that's not always the case. Money is a magnifying glass. It makes you more of what you already are. So when you're comparing someone's situation, when you may not know the ins and outs of their life,

that's where stuff gets really dangerous, you guys. So we just want to pause, let them love their lives. Sure, take a little glance at the, a nice vacation on Instagram. We all do that. But then besides that, you have to put the blinders on. And here's the deal, too. If you do find yourself where you're like,

I don't have that margin to go and do the thing that they're doing, just know that it probably won't be the case forever. So really focus on gratitude and the blessings that you do have in front of you because that's another thing that you can control is your attitude. Another possibility is that they don't have the money and they're affording all of these things by actually losing money and going into debt. So obviously debt is never. going to bring you a level of deep peace and contentment because you're constantly living life

outside your means and it's really, really hard. But whatever again, that person's explanation may be, it's not your job, again, to know the details. But it's your job to keep things in perspective so that you can continue pursuing your money goals. Now, another complaints that I hear all the time is that it's unfair that the millennial generation is having to wait so long to buy a house. or how much money people are having to pay for their first house when their parents bought their house for like $10,000, which I know it was the case, but that's what it feels like. So again, once you can't compare apples to apples. We live in a different world in 2023.

And I'll be honest, there is actually more income opportunity. There's more businesses to start because of technology and all of this. Like, there are things that we have in 2023 that our parents and our grandparents didn't have. Now, does the real estate market suck right now? Yeah, sure. And is it really expensive to buy a house? right now, absolutely. But also remember other generations face hardships that we may not have to ever experience. So my point is that there always is going to be inconsistencies to pick apart.

So instead, channel all your energy into your circumstances in the here and now because that's the reality. We can't go and change the past. We can't get in a time machine and go back and buy a house in the 1950s. We can't. But what we can compare now is what we're doing, what we're doing today with our money situation and how it's going to affect us down the road. So that's one reason the baby steps is so key you guys getting out of debt getting an emergency fund in place looking at retirement doing all of these things in order and the ramsie baby steps is so so key and then saving up and paying for stuff it is hard the down payment that you're going to have to save for to pay for a house this year is much larger than in 2019 or in 2008 if you bought at the bottom right

I mean like all of that all these factors are in play but putting a little money aside month to month is going to help you get closer to your goal and those tactics action steps make such an impact for your future. And the power of a mindset shift will transform your present as well. So be patient as you work the baby steps and know that your time is going to come. And you'll get to spend more money when you actually have it. And that takes time. And in the meantime, keep in mind that comparison culture is not real life. It sounds really cheesy, but everyone really is fighting a battle that we can't see. So don't compare the details of your reality with a tiny little shred of their life that you see on social media on a highlight reel.

Slow and steady wins the race. So when it comes to being and staying broke, don't be part of the majority. Take it one day at a time. In the next coming weeks and months and years, you'll be amazed at how far you come. And if you're realizing that it's time to make some changes when it comes to your money, I would really encourage you to check out Financial Peace University on Ramsey Solutions.com. So FPU is our nine lesson course that teaches people from all. walks of life how to build wealth the right way.

Oh, minimum payments, you guys. Oh, my gosh. Don't spend 16 years on a thousand dollar credit our bill. Don't do it. Don't do it. All right. Thanks so much for listening to this episode. If you have a good friend who you know enjoys talking about money or maybe you just want to share this info with them, make sure to share this episode. That's so helpful. And again, thank you guys always for being loyal listeners. I appreciate you tuning in to the podcast. And remember to take control of your money and create a life you love.