The Rachel Cruze Show - What I Will (And Won’t) Do With My Money This Year

Episode Date: January 30, 2023

Today’s episode is all about the best things to do with your money. I share what I’m not spending money on this year, and we look at whether Minority Mindset’s Jaspreet Singh gives trustworthy advice on what you should do with your next paycheck. Then I dive into why I’ll never, ever use a credit card. (Spoiler alert: They’re shadier than you realize.)   In this episode: ·      6 Things I’m Not Buying This Year ·      Why I Will Never Use a Credit Card ·      Should You Do This When You Get Paid? 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

Even the things that we need can end up being wants at some point. If you have the money for it, that's great, but you don't need that, right? So understanding needs versus wants is really important, whether it's from budgeting or saving up for stuff. It just reframes your mindset to what you really, really need. 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 what I will and won't be doing with my money

this year. And I'll go over why I'll never own a credit card. then I'll walk you through what you should do with your next paycheck to make the most of it. But first, let's talk about things I won't be spending money on this year and why. Take a listen. Yep, I looked at my life and I just thought, hmm, these are things that I just don't need. They're not valuable in my life. They're unnecessary.

So I'm cutting them out. Now, I know they're not going to be the same for everyone. Whenever I do these lists, I always get people in the comments, like, oh, my gosh, how could you not take your kids out for ice cream? That was the biggest one. I was like, I'm just like I'm going out for ice cream this summer, I think is what it was. And people got so mad at me. I'm like, my children are fine.

They are loved, even though I'm not taking them out for ice cream. So you may get mad at my list. You know what? That's okay. We all have different opinions and I think it's fine. So here we go. You ready? My list for 2023.

First up, subscription boxes. Yes, it feels like there are boxes for everything. Still, I feel like it's been like this trend for a while. so whether it's food or beauty or whatever it is, there's just all these boxes, and I'm not doing it. Not going to spend money on subscription boxes, because for me, it comes in.

I either may not eat the stuff or cook the stuff if it's a food one or, you know, beauty stuff. I'm like, yeah, you may get some great ideas, but also it's just a bunch of crap that ends up in my bathroom counter, and I'm like, I don't want it. I don't need it, I don't need it. So I'm saying no to subscription boxes. But some of them are very popular, you know,

dollar shave, clubs, is less than $9 a month. Stitch Fix is a styling service with a $20 fee per box plus the price of the item if you want to keep it. So there's like some clothes in there that could be fun. Blue Apron. Meals are close to $10 a person, meaning one meal for Family Four is around $40. So yeah, you spend money on them. And if you use it and you love it, that's great. But man, not for me. And studies show that a third of consumers underestimate how much they're going to spend on subscriptions in general, not just boxes, but everything. by $100 to $199 every month, as well as 42% have forgotten that they're still paying for

subscriptions that they no longer use. Yep, happens a lot. So that is why I'm saying no to specifically subscription boxes in 2023. All right, next up, I will not be spending money on an extravagant kids birthday party. For my three kids, I'll have an eight-year-old birthday party, a six-year-old birthday party, and a four-year-old birthday party in 20-23. And naturally, birthday parties and, like, creativity and all that, it's just not my thing anyways. But also, I'm just not going to do it. I'm not going to spend a ton of money on their birthdays.

And if that's your thing, that's great. It's not my thing. In fact, we got home from a vacation. The next day was Charles's third birthday. Did nothing for it. I literally went to Party City, about a Spider-Man balloon. We baked a cake out of like a box, like a Betty Crocker cake, had some of the cousins over and saying happy birthday,

and called it a day. And guess what? He's three. He doesn't know. He doesn't know. Now, again, if people, if you have the money, and that's what you want to do, this? Great. That's great.

Not my thing. Not my thing. So, no extravagant birthday parties here. Next up, I am not going to be spending money on Valentine's gifts. Valentine's Day. We can talk about Valentine's Day. we can have a whole conversation about this whole thing. I kind of think it's silly.

I think it's overpriced. You go to a restaurant. They have a freaking set menu for you. You don't even get to choose what you want on most restaurants. Like the whole thing. I just, I can't do it. Winston and I, we don't exchange Valentine's Day gifts. All of it.

Now, I'm a mother, not a horrible monster. So my kids will get Valentine's to hand out to their classes because they do that. So like, I'll do a little bit. But this whole thing about Valentine's Day, I'm just not spending money on it. The National Retail Federation, are you ready for this? Survey suggests that people spend close to $175 per person on Valentine's Day. Now, if you got the money and that's what you want to do again, you go, girl.

You go, dude, but not my thing. So, no Valentine's Day here. All right, this one is definitely a personal preference, but I'm not going to spend money on trendy tennis shoes. Now, I have one pair of nice tennis shoes that are named brands, they're stylish, you wear with jeans, all the things, they're trendy, they're great. I bought them three years ago for my birthday, spent some money on them, and I wear them, I really do, but I have one pair.

And then for Christmas, I was like, should I get another pair? Like, there's all these other brands coming out of this. I'm like, I, no. Not my thing. So trendy tennis shoes, not buying this year. I'm going to rewatch this video this summer if I ever want to buy a pair of trinity shoes. I'm like, Rachel, stick to your word, stick to your word. But as of now, no trendy tennis shoes in Rachel's clothes.

closet, except for one pair. Okay, I know some of you are foodies and you love your very specific items at the grocery store and all of that, but this year I'm really going to try to stick to buying just generic brand named items at the grocery store. So sour cream, cheese, all the things, I'm going to go store brands. Yeah, not buying, not going to buy the name brands. And here's what's crazy. Some reports say that you can cut 15 to 30. percent of your grocery bill just by shopping generic over name brand. Mm-hmm. So that's my things, whether, again, it's flour, sugar, spices, oils, all of it.

It's going to be grocery store brands in 2023. All right. The last thing I'm not going to spend money on this year is multiple kids sports and camps and extracurricular activities, all the things. Now, I know I have younger kids and it gets harder, the older they get. But even in the summer, I'm like, there's like a thousand things they can do. sign up, you spend so much money, again, whether it's camps or if they're doing tons of supports, like the gear and the equipment, all the recurring costs, tournament fees, even like

gas in your car to drive them to practice and the meals that are out, all of it, right? It can just get out of control. And I know this is a big part of people's lives. But we've told our kids, as of this stage of life, like, you get one thing. Pick one thing, and that's going to be it because I don't know. It does. I'll be honest. It stresses me on as a parent to think.

There's going to be three of them doing this. I just have two right now. Actually doing stuff. Charles isn't doing anything, our youngest son. So, like, eventually he will. I'm like, oh, my gosh, it's so much. So we can cut back. Like this year, not even cut back.

We're not even doing it, but I'm not going to, like, go crazy on all this stuff. Again, I just think my kids don't need it right now. And I don't want to spend all the money on it all the time and everything. So that's it, you guys, 2023. Those are the things I look at that I'm like, all right, I'm not going to spend money on these things. So I think it's a great exercise because it really makes you think

with maybe what you're wasting your money on somewhere or where you're spending money you don't realize. All right, make sure to share this with a friend who you think would enjoy this exercise and you're able to say, okay, we're going to either cut stuff or put a boundary up here and it just feels good because it's, again, taking control of what you can control.

Now today we're going to talk about how to maximize your next paycheck what you need to be doing. Just spritz sing. from minority mindset. Talks about these seven steps that you should be doing every time you get paid. So some of what he says, I think is spot on. I'm like, yep, I agree with you.

And then some of it I would tell you to do it a little differently. So let's talk about the seven steps to make the most of your income. So one of the first things that he says to do once your net income is deposited into your checking account is to save $2,000. The second thing you have to do is save $2,000 in a separate savings account

as fast as possible. This $2,000 that you want to save needs to go in a separate savings account because this is emergency money. This is money if your car breaks down or if something really bad happens, you can rely on this cash to protect you that way you don't have to go into debt

or use your credit card to finance something that you cannot afford. This money needs to be saved as soon as possible because if you do not have $2,000 saved up for an emergency, you are in financial danger. Now, I love the idea of saving Absolutely. But actually, I would say, I would give some first. Giving is a foundational financial principle that we talk about a lot on this show. But it's really important. There's something about giving first and foremost that does something, whether you're a person of faith or not. There's something about that selfless mentality that I think is really, really key. So again, I would be giving first. Then I would save some money towards a $1,000 emergency fund. So he says $2,000, I would bring it down to $1,000. and then I would take care of my four walls next.

So that's food, shelters, utilities, and transportation. So again, kind of that's the picture I would look first and foremost. So a little different than what he says, just the $2,000 I would give, make sure you have $1,000 saved, and then cover those four walls. Next, he says to pay down your high interest debts. Now we're going to pay down your high interest debts. So after you have $2,000 saved up, what you want to do is you want to pay down any high interest debts. interest debt. So this might be credit card debt. This might be payday loans. So any high interest

debt that you have, you want to pay this down as fast as possible right now after you save $2,000 because this money is skinning you alive financially. Now, I love the debt snowball, which is where you pay off the smallest debt first, regardless of the interest rate, because when it comes to paying off debts, we all know that it's more about your behavior change. It's those quick wins that get you through. And people, you know, when you look at the math of it, sure, paying off the highest interest rate mathematically makes sense. But you don't take into account the person. And those quick wins are really key. So I would start paying off the smallest debt first regardless of the interest rate. But we both are on the same page. The next thing you need to do is pay off debt. So I love that he's teaching that.

I would just do it, you know, just a little bit different the way I'd paid down my debt. But I love that that is a priority for him as well. All right. Next, he says to invest 15% of your income. First, using it to pay down your low interest debt, like student loans and a mortgage. So there's a few different ways you can do this, and it depends on what your risk tolerance is. If you don't like to take a ton of risk, one thing that you can do that will give you a guaranteed return on your money, guaranteed, is you can pay down now your remaining low interest debt. So that means your mortgage, your student loans. If you pay down your student loans one year early, you're getting a guaranteed 6% return on your money.

Because if you're paying 6% interest to your student loan lender, and you paid off a year early, that's 6% interest you no longer have to pay to your lender. You can invest this money to grow your mind, so that means you can use this money to buy books, you can use it to buy classes, to attend seminars, things that will enhance your mind, enhance your financial education. That way, you can make better decisions with your money, maybe earn more money, or if you don't have any debt or you want to be more of an aggressive investor, you can use this money to invest directly into the stock market or into real estate.

So when he says invest 15%, but then use it for low-interest debt to pay down, the way I look at that is investing 15% of your income into just invests. investments, right? That I would put, regardless of the interest rate, your student loan would be on the debt snowball, and then your mortgage will be later on down the line to pay it off. So I would, I love the 15%, but I would put it in traditional retirement, like your 401k or Roth IRA. Then he says to put your income into a bigger emergency fund of about six months of expenses. Because now what's going to happen, you have 15% of your paycheck going over here. You also want 10% of your paycheck going here to your savings account.

the savings account is money that you're using for emergencies only. Okay? And once you have this $2,000 cushion built up, that's a small cushion, but you need to build that bigger. You ideally want to have three to six months worth of expenses saved. So if you're spending $3,000 a month, you want to have a minimum, a very minimum, of $9,000 saved up. Love that.

I love the 36 months of expenses. So I would actually do that before I invest 15% of my income into retirement. So, again, a little bit out of order of how we would do things. But I love that he talks about a six-month emergency fund because, you know, some people have all different numbers. We say three to six months depending on, you know, if you have kids, if you have a big family, maybe if you are contracted for work and you don't have this, you know, consistent income, whatever it is. But six months always, always feels great. All right, now you've got the rest of your income. And I love that he has to say how to spend it. In this account, your checking account, you are now going to be left with 75% of your remaining net pay.

So I guess you can call this your net net pay, because this net pay was after your taxes and your 401k, and now the 75% is after you paid yourself. It's after you invested your money to build your wealth, and it's after you saved your money to protect you. But this is where you have to be careful, because now you need to know the difference between a need and a want when it comes to spending your money. Yes, and amen. I mean, this is a big conversation because it's like, like, yeah, you may need a new car. Do you need a new BMW? No. I mean, if you have the money for it, that's great, but you don't need that, right? So even the things that we need can end up being wants

at some point. So understanding needs versus wants is really important, whether it's from budgeting or saving up for stuff. It just reframes your mindset to what you really, really need. And then when you budget and to be able to say, okay, here are the things I actually need. That's why I talked about the four walls at the beginning of this video to make sure that those are your needs, right, food, shelter, utilities, and transportation, and then everything else is the want. He also talks about any excess income. He recommends buying time back. Buy your time back. Listen, at the end of the day, it doesn't matter how much money you have or how good your financial system is if you don't have the time to actually enjoy your life

and to enjoy your money. And I love this advice too. This is so great because time is the one commodity that you can't get back, right? You can't get more of, you can't get less of, like, it is what it is. So if you're able to do, save time on things, that's amazing. Things like grocery delivery, if you want to put some extra money towards that, so you don't have to go to the grocery store, you know, it's conveniently right there.

You're a mom with a bunch of little kids and you're able to have someone deep clean your house every now and then so that on the weekends you're not doing that. If there's any way just to free up time and use extra income if you have it to do those things, I think that's a great priority. That's something that I really value.

And I think it's important. So again, if it's something you value, I think it's a great place to put some extra income. All right. I love it. I love finding different people and what they have to say about money, even if we don't agree on everything. But we're pretty spot on a lot of the values and principles with money. So that's always fun to see. Even though some stuff is out of order, it's great. But I'll say, you know, for us and the Ramsey Baby Steps, it's been over 30 years of this plan. And it's really the quickest way we've seen to get from point A to point B, from feeling out of control with your money,

not know what you're doing to being in control and building wealth. And so the seven Ramsey Baby steps is something that I still really recommend and kind of what we walk through. But again, all of you that have done it, you know, you know the freedom that comes with taking control of your money, which is so huge. And I think a lot of us we can get in this cycle every month of just wondering where our money went. And so one of the biggest principles is just being intentional and saying, okay, I have to know exactly where my money's going. And when you start to do that, you start to realize, okay, look at all of my money that's going to debt, for instance. My income comes in and it goes right back out to payments.

And I'm not able to use those hundreds of dollars to go and invest and build wealth, right? It makes you reframe everything when you start being intentional. So that is so, so key. If you guys haven't checked out Financial Beach University, I would recommend that because this is a great momentum starter to be able to say, hey, if you need the foundations when it comes to your money principles, this is a great place to start. So today, I want to talk to you about why I'll never have a credit card. It's one of those things when it comes to money.

something that we teach here, our MZ Solutions, that people are like, what? Really? Really? And I get comments, even on social media, they're like, but you really at least, like, have one, right? Listen, I've actually never had a credit card my entire life. Nope. And I'm going to tell you why, because it's more than just, like, your balance every month and cashback and miles and all of that. There's so much more there to why I will never have a credit card. So first, let's just talk about interest. Okay, so right now the average annual percentage rate on credit cards is close to 18% and 40% of Americans have a balance, which means they are paying interest on average 18% interest. Okay, so people are like, well, I pay mine off every month.

Well, 40% of people don't. But one of the benefits that the credit card companies use to kind of lure you in and encourage you is to spend more so you get cash back. so you can tell yourself that, oh, I'll use this card, and then I'll get something out of it, but really who's winning? You get 1% cash back, but then you're paying 18% in interest. So here we go. Yep, not good. So I don't want to deal with interest. I don't want to deal with the bill, all of it. So I'm like, listen, I'll have my debit card and I will pay as I go throughout the month with my own money. Now, again, some of you are like, well, I do pay mine off every month. And so the interest doesn't affect me. And I'm going to be

responsible and build my credit score, and that's how I'm going to use my credit card, is I'm doing that to build my credit score. Well, here's the deal. You get a credit score or a FICO score to go into more debt. That's what it's for. And some people are going to tell you that, well, you have to have it to, you know, rent an apartment or to, you know, apply for a job or rent a car, all these things. But listen, no, you don't. You don't have to have a credit score. You can get around all of those things without a credit score. And without a credit score. And without a credit card. Now, a rental car company that's like the biggest hiccup that I've found, but we found the rental car company that works. They take our debit card and they put a hold on it for amount of money,

but then we're good to go. So you actually can live life without a credit score and a credit card. Next, again, a lot of people think of a credit card like cash. So they go and they just spend throughout the month on normal expenses, other things, their credit card and they just pay it off every month. Well, here's the deal. You don't realize how much you're spending when you're doing that. You end up spending, they say 12 to 18% more when you're using a card versus your own money, so a debit card or cash. And so as you go along the month, again, there's no emotional tie to what you're doing and what you're spending because there's no money that you're feeling.

And then at the end of the month, that's the bill you pay. Instead, I would encourage you to budget and actually have a real-time pulse of what you're spending in each category. So you know, when you use your debit, card and you use an app like every dollar that connects to your bank, when you swipe your debit card, that transaction comes in. And so you get to drag it to your category and your budget and know, okay, here's how much I have left in groceries, here's how much we have left in restaurants or miscellaneous, clothing, whatever it is. And you actually are keeping taps throughout the month of where you're spending versus just swiping a credit card and paying the bulk at the

end of the month. So you end up saving a lot more money, spending your own money and budgeting. And also, people think, well, you know, credit card, it's going to be my emergency. Here's the deal. After you deal with that emergency with the credit card, then you have another emergency later by having to pay off the credit card. Then you've tripled your emergency. So I would rather your money be your emergency fund. So I have been doing this money stuff for about 13 years now. And so I have a fully funded emergency fund. Me in Winston, we have our emergency fund. So we have money that if something happens, then that's the money we use. We don't go and borrow the bank's And I know people are like, well, that's you guys.

You did this. Listen, it takes time, but everyone can do that. You can have money in the bank for you for an emergency instead of depending on credit card. And then you, again, put yourself in a financial hole, which ends up being another emergency later down the road. Now, one of the biggest reasons that I just won't play the game of credit cards and rewards and miles and all that is here's the deal. Credit card company is making a lot of money. Banks make a lot of money off of people who don't pay it off every month. and they pay the late fees, they pay the interest. That's how they make money is mostly through

interests, okay? So 40% of people don't pay off their credit cards every month, which means that they are paying interest, okay? And these are people, yes, some may be just spending crazy, all that, but these are also people that are trying to cover medical bills, single moms, college students who are trying to, like, you know, afford gas to get home. Like, some of these are really dire situations, and these people are leaning on credit cards, and they can't pay it off every month, So they're paying interest, so they're funding the bank. They're giving their bank more money, and they're making so much money off of these people.

And then in turn, they're like, well, we'll give you some airline miles or some reward points or cashback because we're so generous and so nice and all that. But they're doing all that because these people are struggling. So the whole system is just kind of gross to me. I don't like it. I'm good. So I would rather just take care of myself and pay, you know,

what I'm spending today, have my debit card, have my budget. and continue on my way instead of trying to fool with the system. So listen, it's a game. It's a huge game. People spend a lot of time, a lot of money, a lot of energy playing the game, and it's not worth it to me. I'd rather live my life with peace knowing that I don't owe anyone anything. So I know that shifting your mindset from living with credit cards to not is a big one

because it's weird not to have a credit card. But also, 78% of people live paycheck to paycheck. So I'm okay, being weird. If that's normal, I want to be normal. It's a big deal, you guys. And listen, I'm not mad at you if you have a credit card, okay? I'll even go out with, like, friends. And they're like, don't look at my credit card.

I'm like, listen, I'm not mad at you, but this is why I'm choosing not to do that. And I want to teach you that because I want you to ultimately do what's best, do the wisest thing that you can do with your money to be able to win. And cutting up the credit card, I think, is one of those things. So make sure to share this with a friend who's maybe obsessed with her store credit card or loves for airline miles, just, you know, see what they think. Oh, credit cards, you guys.

Listen, just cut it up. Just say no. Just say no. All right. Well, thanks so much for listening to this episode. I hope it helps you in your money journey. And if you have not hit that follow button to subscribe to the podcast, make sure to do it. And if the spirit leads, you can leave a review.

And as always, remember to take control of your money and create a life you love.