The Rachel Cruze Show - What Is (And Isn't) Worth Your Money

Episode Date: April 3, 2023

What are the right things to use your money on? That’s what we’re covering in this episode, starting with how Winston and I are currently investing. I also react to a YouTuber’s claims about what the middle class should be able to afford and reveal some products I just don’t think are worth the hype.   What you get in this episode: ·      How I'm Investing in 2023 ·      15 Things the Middle Class Can't Afford Anymore ·      3 Products That Aren't Worth the Hype 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 Learn more about your ad choices. Visit megaphone.fm/adchoices

Just remember that you have the ability to take control of your money. And we talk to people making all different ranges of income that are getting out of debt, that are saving up and paying for things, that are delaying gratification for the moment to put money aside. Like, it is possible and it's happening today. 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 is and isn't worth your money.

I'll go over three things that aren't worth your money. the hype. Then I'm going to talk about some things that the middle class can no longer afford. But first, let's talk about investing and how Winston and I are investing in 20, 23. Take a listen. So this is a topic that I've been asked about. Again, investing is for some of you right now that you're really interested in for some of you, maybe later down the road. But I want to just share with you, here's what Winston and I are doing. And I want to start off by saying first and foremost, saving in general just doesn't come naturally to me. I'm a natural spender. And so honestly, when it comes to investing, I have to tell myself, like, 65-year-old Rachel is going to be so happy.

She is going to be so happy. She's going to live the life. She is going to be living the life. I have to, like, talk myself into it because sometimes it can feel like a black hole. Like you're putting money away and you're not going to see it for decades. And it's just really hard. But what I have found that is motivating for me is investing. It's kind of like accountability, honestly. for me because I'm at the point where I'm like, okay, I don't want to just go and just spend a ton because I've been through seasons of that where I'm like, oh, yeah, spending money is really fun. I'm going to spend it on a bunch of stuff. And then at the end of the day, I'm like, okay, that didn't satisfy me like I thought it would.

And so I've just realized accumulating and spending stuff for the heck of it just, you know, it just doesn't do it for me. So I'm like, okay, if I have extra money, I'm going to be able to invest it and let that money work for me. So this just allows me to feel productive. about my income. I'm like, okay, I'm using my income to do something good. Because when you invest, your money is making money.

And again, not that spending is wrong, and I'm all about spending. I get it. But it is being wise about the future. So I do want to caveat this as well, is that Winston and I are on Baby Step 7. So we've been doing this plan for 13 years. And we got married young. We both were in good financial spot that I know not everyone does, but we didn't have student loan debt.

You know, we really didn't have any debt. We kind of were starting off with a lot. little bit of savings and started off our life there. So again, we started off young in a great spot. And then we've just continued to have good money habits. And the way we view our money, the way we look at it, we're just really intentional. So it's been 13 years. Okay. So just take a deep breath because if you're not at this place right now, it's okay. It's okay. This takes time. This is a marathon. It is not a sprint. And depending on what baby step you're on is going to depend on what you're going to do with investing. So we'll talk about that a little bit.

later. But first, let's just get right to it. So one of the big things that Winston and I do is we try to invest and max out our Roth IRAs as soon as possible. So we do a backdoor Roth and the year before we save money so that when January hits, we try to go ahead and max everything out in January because that means that gives us the entire year to have growth and for it to be in the market that money. So the sooner that you can invest, obviously the sooner it's in the market. And so if we can do it earlier in the year, it just gives a full year for growth versus doing it later in the year. So that's just kind of a rhythm that we've been in for a few years again. We're really intentional the year before.

So in 2022, we were putting money aside. So when 2023 hit, we had the money to do that. And again, this comes with some great tax advantages like tax-free growth, tax-free withdraws once you hit retirement. And putting money into a Roth IRA is a great plan because you've already paid taxes on it. So you're using the money. You've already paid taxes out of your paycheck to fund your Roth IRA. So your Roth IRA itself is not an investment, but it holds your investments and protects them from

taxes. And you can put a lot of different investments into your Roth IRA, so your mutual funds, anything in there, again, it protects from taxes, which is huge. Now, some employers offer a Roth 401k plan, which is amazing because, again, the money you're putting into your 401K is protected from taxes as well. But if you have a traditional 401K plan is awesome, but there is a difference between your Roth IRA, which is not with your employer, your 401K is. And each one is going to have different income limitations. It's going to have how much you can actually max out per year. And all of those change year to year, depending on the governments and the president and all of that. So make sure that you're up to date to know,

okay, what are those terms and conditions? Because these are really important vehicles, your Roth IRA and 401K to be investing in for retirement. All right, the next thing we also do is try to max out our HSA, which is a health savings account. So if you didn't know a health savings account is a tax-advantaged savings account paired with a high deductible health plan that can help you pay for medical expenses

for both now or later. So this is a great thing to have. But if you have the cash flow to be able to say, hey, we're going to use cash for medical expenses, then this actually can just work as a savings account. And once you reach a certain balance, it can actually change into an investment account, which functions a lot like an IRA. So your health savings account is a great place to be able to say, hey, we're going to put some money here. And it's also a place to save for retirement.

It's another vehicle here on the side. So make sure to check that out if you haven't. The next way that Winston and I are investing is we have a rental property. So when we built our home a few years ago, we kept our original home, and we've been renting it out. we have that as an investment property. And again, not everyone is here because we want you to be debt-free before you go into real estate investing. But if that's your thing, I think it's a great way to diversify and you start small.

The very first property we ever had, which we ended up selling to help build the home that we're in now, was a foreclosure condo. And it was nasty and dirty. But we got it in foreclosure. And that was our first kind of taste into the rental market ourselves. And it was just a great feeling to be able to say, hey, yeah, we're diversify. and we have some real estate. And again, it's not like this big grand thing.

We're not going into debt for it. We're starting small, but we move at the speed of cash. So it'll be a long time before we probably have another investment property. But that's a great place that we've kept money and we were really intentional that when we built our other home, we could still keep it. So that's just another place that we invest. The next place that we invest is our 401K.

So I mentioned this earlier in the video, but your 401k if your employer offers or a 403B is another great place to put money for real. retirement. Now, within your 401k, there are different types of mutual funds that we recommend four different types to be investing in. So again, you get some diversification. So a growth, growth in income, international and aggressive growth. So divving up your money in different types of mutual funds is also really important. So look at that because, again, investing in your 401K is important, but you're going to be able to pick where you put your money. So investing in those four different

types is key. All right. Lastly, I always let an investment professional help me. and Winston and I together with our money. So we have SmartVestor Pros all over the country, and they are really financial experts in this space. And so if you do not have someone that is helping you with retirement, it is really key. And what's great about SmartVestor Pros and Financial Planners is that they're looking at your entire picture.

They're seeing everything going on. And these people are so smart because they do this day in and day out, and they really can help guide you and change even your course, you need to change, and that's what's really helpful. And if you have big life changes, like your job situation where you live, your health, the edge of your kids, all of it can change your investment strategies. So it's really important to have somebody on your team, which Winston

and I have. We sit down with him every January and we look at everything and we just say, okay, hey, what is the best use of our money that we have? Now, again, I want to reemphasize that we are on baby step seven. Those of you that are not, you may not be investing right now, that's okay. Or if you're on babysaps four through six, you may not be investing more than 15% of your income, and that's okay. You really do want to walk out the baby steps

because it is the quickest way to get from point A to point B to build wealth. So baby step one is your starter emergency fund of $1,000, baby step two is getting out of debt. Baby step three is three to six months of expenses. You're going to be pausing investing while you're doing that. Then you can press play on investing on baby step four, which is 15% of your income into retirement, fund kids college, baby step five, pay off the health,

early, Baby Step 6. And then Babysop 7 is where you can invest more and become extremely generous, is what we say. Just build wealth. And you're doing all of this, not just to store up money for the heck of it. But it really is to say, okay, what is the wisest thing to do with my income right now? Is it to put it in the market and let my money work for itself, which is awesome? And changing our family tree, being able to leave a legacy to our kids, to be able to be generous, to be able to do things with money because we always say money is a tool.

and that's what it is. So again, this is what we've decided to do in our household. So we don't up our lifestyle very much at all year to year. We kind of keep it pretty consistent because, again, I've just learned after years of having some disposable income, which is great, it only buys you so much and stuff only gets you so far in life. And it's kind of like, okay, could I be making better use of this money? And so that's what we've been talking about as a family, as a couple, and something that we've implemented over the years. So we did not start off here. it has taken us 13 years to get to this point. So hear me say that.

But I want you to have patience with it and to know that, like, yeah, you get to decide what to do with your money. And that's the other powerful thing is that your money is yours. When you make an income and you've made decisions to get you to a point, you get to decide, hey, what do we want to do with this?

So that's what we've decided to do. Thought I'd let you in on it because I think investing is interesting and everyone kind of has a different take. Today I'm looking at epic economists viral YouTube video, 15 things the middle class can no longer afford. And this is something that I feel like a lot of people are talking about

and they're concerned about recently because I talk to people every week on the Ramsey show and so many Americans are feeling inflation, they're feeling the pinch of their budget, and their face with some really big challenges in the world. So epic economist, he claims that there are 15 things that used to be expected for the middle class family to afford, but now because of factors like inflation,

or layoffs or overall decrease in job raises, that some of these are considered luxuries. So what's interesting is in the video, I feel like he used some Ramsey Lingo, which I loved. So I just want to unpack the video and kind of just see what we think about this. So the first thing he says is that middle class earners can no longer afford is maintaining what he calls

the standard middle class lifestyle. So again, this is very subjective. So what you may consider a luxury, someone else might not, something that someone considers a luxury, you may not. So again, it all depends. It's a little subjective, but he goes on to explain that until 1990, the standard middle-class lifestyle included owning a home, having two cars or more, sending your kids to college, affording basic health care costs, traveling at least once a year, and having purchasing

power, the ability just to have fun money and spend when you want. So, again, when you look at all of these factors, things change, right? the housing market is way different than it used to be. College tuition is freaking insane right now. So, yeah, some of these things on the list, I may agree with them that, yeah, it would be really hard. Now, the two-car thing depends on what kind of car, right? If you're talking about, like, a luxury SUV versus a great Honda accord,

then I think the middle class you still can afford two cars, but they may not be luxury SUVs that cost. a hundred thousand dollars a year, right? So depending on the car, I think college tuition, I think this is a tough one. I think saving for your kids college is an important factor, but I think a lot of people, middle class and not, are struggling with debt payments, credit card bills, so many other things that are taking priority, which they should, paying off debt should be more of a priority than your kid's college fund. But college is out of control right now. And so, you know, I mean, I think it is hard for the middle class

to afford that. But again, with college, people are going out of state. They're going to private colleges that some people don't even, you know, look at different options like community college or in-state tuition, all of that. But college is a tough one. Again, the housing market is all over the place. And for a long time, people had homes and bought homes with zero percent downs. You know, they put nothing down and the banks were giving out loans to people that shouldn't have had those loans in the first place, aka the recession in 2007 when the whole market went down. So I think at different points of our history, we've realized, okay, we know, we're people overextending themselves.

So yeah, so that list, I think, could be argued different ways, but I get how some things today, yes, are becoming more further out for the middle class. And again, when I looked at the middle class, the range was anywhere from $47,000 a year to $141,000. So you have lower middle class, upper middle class. So I guess depending on where you are in that range, too, is going to make a difference. Now, in the same point, he also says that 72% of the middle class, workers today feel like their income isn't keeping up with the rising costs of living.

And I think there's a factor of this that is true. I mean, inflation is a very real thing. I mean, you just have your basics that are covered and it feels like we're in a pinch. I think it is true. But I also think the lifestyles we live today looked a lot different than 1990. Just an interesting fact of I binged to Laguna Beach the other day, which was like when I was in high school, it was one of the first reality shows. but even, you know, seeing, you know, they live in, like, the most expensive part of the country, basically, like, right?

I mean, you're in Laguna Beach. But their houses, you know, some of them, they were not crazy insane. They didn't have these, like, massive kitchens and all of us. Elsie's dad and mom were building a very nice house in season one. But the point was, I was, like, looking at this, I was like, oh, wow, you know, like, if you put this kitchen on Instagram today, people would be like, oh, that's a small kitchen. Because today you're used to, like, this massive floor plans and white and everything. like the aesthetically pleasing style of today and kind of what we expect today, I think has gone up. I think our expectations of life have gone up than they did 10, 15, 20, 30 years ago.

So I think that's a very real reality that we need to think about. All right. Next, I want to stop just for a minute on his number three and number five points. So number three was that the middle class earners can no longer afford is having a stay-at-home parents. And then number five is being able to afford the cost of preschool. So child care is a huge dilemma, and it is so expensive, you guys. I mean, for some people, it feels like one parent's salary is basically covering the cost of child care and schooling. And it's estimated that the average full-time preschool education in America costs more than $13,000 per year, which is a lot. And he argues that most countries with developed economies here like the U.S.

offer publicly funded preschool programs, just like public K through 12 education. And yes, we are so lucky to have public education here in our country. Shout out to all you teachers. But if you are in the middle of preschool in those years, it is so hard. So you have to keep in mind that it's temporary,

but you also want to look at your budget to be able to say, okay, is it worth it? And I think a lot of people right now are understanding like, okay, this, you know, two parents are working. and if one, if 75% of their salary is going to preschool, is it worth it? Like, where do you plug in and not? And it's a really hard decision because a lot of people are feeling stuck in it.

But I would say, shop around, look at your options, look at your budget and say, okay, does it outweigh sending our kids to preschool in order to work? And you need to look at that margin because it's going to be really, really important. All right, number six is going to Disneyland. So I talked about this a few episodes ago on smart money happy hour. But this is a big deal because he talks about a four-day all-inclusive ticket used to cost $70 per person in the early 2000s. And today, it's $400.

So it's expensive. And I think we see areas in life like this that you're like, oh my gosh, it's just becoming more and more expensive. And what's hard is if you are, you know, lower middle class, yeah, that's, that's a lot of money of your income to be going to Disney World. Like, it is, just mathematically looking at it. And so, again, it's kind of defeating, but it has risen. The whole Disney brand, some of you are so mad at Disney, you're not going anyways,

but it has. And I think for, yeah, I think they have outpriced themselves for the middle class. I mean, it's not affordable. I mean, it's just, it's really not. It's very expensive. And then there's number 11, which is paying for things in cash. So he is claiming that the middle class can no longer afford to pay cash for things. He says that 49% of the middle class earners are relying on credit cards to make ins meets.

And another report says that 43% of the middle class plans to add to their debts in the next six months. So this is the place that I just know by talking to so many of you out there that this is not your life. you have truly decided we're going to spend what we make. We're going to spend what we make. And even if that means that our lifestyle doesn't look like everyone else is, that means even if we have to say no, which sucks and that's not fun, but we are going to stay within our means to avoid going into debt. People are doing that.

And I think debt has become more and more common as an avenue to get what we want when we want it. And again, we're talking about that lifestyle creep of what things were like, you know, 10, 15, 20 years ago versus what we expect today. And I think our expectations have gone up some. But to be able to say, yeah, we may not be able to go to the nicest restaurants or shop at the most, you know, organically pleasing beautiful grocery stores like where you shop for your food matters on what you pay for it.

And so it's all these choices that we all make day in and day out. But it is still possible for the middle class to pay cash for things. So I do want to hear me say that. Now, one of the last things that he mentions is that middle class families can no longer afford saving for the future. He says family's making between $60,000 and $100,000, don't make enough money to save each month. And here's the deal.

If you look at the average of debt, you guys, average car payment for a new car, $700. The average family owes about $16,000 in credit card bills. If you took out student loans and you have those student loan bills every month. All of these factors, that's a lot of your income month to month that is leaving in payments. That's what's happening. And so if that was removed, then you would have margin to save, right? I mean, mathematically, there would be more money there.

And so, yes, things have increased. Everyday expenses have increased. And yes, people are feeling that effect in a very real way. But also, you have to understand that you are still making decisions with your money and your lifestyle and deciding, what am I spending my money on and what I'm not. What am I choosing to buy like a car? We know, what level of car are we choosing? Where are we shopping for our groceries? Our kids' education even, you know, if we're trying to save up for college, where are we deciding

and talking about that they're going? Like, everything has a range. And it is hard today. I mean, I get it. And we hear from you guys all the time. Like, it is, it's really tough today. But making those decisions and knowing that you have the power, though, to make different choices is what is so, so key. So I know this has been a lot, but two main things I want you to get from this. Number one, if you're feeling like your budget is tighter than ever, obviously you're not alone. And number two, regardless of what the epic economist says, what the news says, what your sister-in-law says, regardless of all of that, just remember that you have the ability to take control of your money. And we talk to people every single day making all different ranges of income that are getting out of debt,

that are saving up and paying for things, that are delaying gratification for the moment and having patience. to put money aside. Like, that is happening today. So I want you to hear that, that it is possible. And if you haven't been working the baby steps, if you haven't been doing a budget and being very diligent

about where your income's going, all of that is going to help you. But by just by going by the seat of your pants and just live in life and not being intentional with your money, that's where a lot of people feel the strain and the stress. So the more on target you are with your money goals, the more purposeful you are with your income,

the more peace that you're going to have. Today we're going to be talking about de-influencing, which is a new trend taking over TikTok. So if you have any kind of social media, you've probably been faced with comparison culture at some point because influencers are everywhere. And maybe you've seen people talk about certain products on Instagram and you immediately click the link

and go through and buy something, because I know I have, and I'm sure you're guilty of that too. But think of de-influencing as the opposite of influence. So instead of content creators just trying to get you to buy products that they're promoting, they're telling you which products you really don't need at all too. So as early as February of this year, de-influencing hashtag had over 50 million views on TikTok. I recently saw a TikTok from Overcoming Overspendings, Paige Pritchard, and I love what she had to say about de-influencing.

So today we're going to talk through some of the points that she made because I think they were really great. And also, I'll be sharing items with you that I have bought and don't think they're worth the money. So the first thing that she points out is the way that we talk about products. So there's this de-influencing trend going on right now, which I absolutely love, because I've been talking about this for a long time. That's what my whole page is about. I think it all really started in response to Mascaragate. And I'm going to let the beauty and the makeup influencers handle that one. But what I will say, what I found so interesting about that video with Michaela, were the very first words that came out of her mouth, which were,

this literally just changed my life. And look, she's not the only one guilty of talking about products like this. Really, all of us have been programmed and conditioned to talk about products in this way because consumer culture that we lives in wants us to believe that a product actually does have the ability to change our world. Isn't that true? I mean, the way we talk about stuff, our words have an effect on us and our habits. So listen, I love my Stanley Cup. Yep, I got one.

I was influenced by it. And it's great. But also, the Stanley Cup did not change my life. Or I don't need it to change my life. No, I bought it because, let's be honest, it was trendy. I saw it everywhere, put it in the budget, and bought it. But we just have to be careful about the words that we use. Because once the latest trend loses its shine, then we're back into the cycle of buying something.

thing that promises to change our lives. And if it's not in the budget, it is not worth it, especially do not go into debt for these things. And comparison culture, consumer culture, it is real and it is very, very sneaky. Next, she names a few brands and items that people claim changed their life. This is why so many of us, I used to be in this camp, okay? I used to have tens of thousand dollars worth of credit card debt. I have blown through an annual salary and pull shopping, which you can go watch that video on my profile if you want. But this is why so many of us, myself in the past included, rack up tens of thousands of credit card debt. We have cabinets and drawers and pantries full of stuff that we don't need because we go out buying these products

thinking, oh, this is going to be it. This is going to be the product that is finally going to make me happy. And of course it won't. Mascar isn't going to change your life. Stanley Cup isn't going to change your life. Ugminis, not going to change your life. The Charlotte Tilbury contour wand, not going to change your life. This was probably the largest revelation that I had to make to change my shopping and my spending and my consumption habits that allowed me to essentially turn my entire financial world around, was realizing that I am searching for something in the consumption of all of this stuff and in the consumption of all of these products that I'm never going to get. I am playing a losing game. When you do come to this realization that no product is really going to change your life. the way that you think it's going to,

you become a lot less susceptible to constantly buying stuff on this app and being influenced to buy stuff on this app that you really don't need. Again, it's just wild how these popular brands that maybe you had never even heard of a few months ago have become so trendy on social media, it's all you see, and you're thinking,

wow, everyone has this. And here's the things to remember, you guys, is that companies are paying people to talk about their products in this way. And it's not like these items just came down from heaven, to change the world. No, people are paid to talk about it.

And sure, some of them are great products, but also you have to realize that maybe the person talking about it loves the product because they were paid for it, or maybe they love it because they love it. But there is a brand strategy here. So we also need to recognize that and recognize the strategy of our responses because it can be so easy just to say,

okay, I'm going to get it because this person's saying it. So again, remember, if it's not in the budget, though, you don't need it right now. All right, so if you're ready to be de-influenced, here are a couple of things that I bought that I did not love. First up was a bathing suit from Amazon, and it came in, kind of deformed and kind of crazy. It did not look great, and it was not the size or the quality at all

that I thought it was going to be. So it did make me sad because I have bought some swimsuits on Amazon that were great. And they're inexpensive, and I was like, oh, this works. And, yeah, this one definitely did not work. The second one is I bought a pair of shoes. that were squeaky. Okay, so they were really cute,

and they're like this cute camel color. I mean, I still wear them. And they're actually comfortable, but they are so annoying. This noise that it makes when I walk, I'm like, what is it? They are so loud. And I almost hate to wear them sometimes

because they are so loud and annoying. So it's so bizarre. I'm like, I guess they're not that great quality because they're like squeaking. It's weird. It's so weird. And the last example actually came from my sister. She told me last week

that she bought a pair of mom. because she was like, I want to try it. Like, you know, skinny jeans are out these days. Mom jeans are in. Anyways, she said she put it on, and she was like, oh, these look terrible. And then right in that moment, her husband and son walked in. They were like, Mom, what are you wearing? She was like, yeah, this isn't worth it.

Not good. Not good. Even though it's trendy, that one particular style or one particular pair of jeans, she was like, no, get it out of there. So listen, that's the deal. You know, you're going to buy stuff that you see online and think, oh, yeah, this is great. And it ends up not being great.

So obviously you can take it back and get your money back, but also it's that reality that it's just stuff. It is just stuff. So when you have the urge to buy new products, here's a couple of things to remember. Take some time to evaluate your needs versus wants because you're under the influence. You're thinking, I need all of this. But do you really take the emotion out of it? Also, look at your budgets.

I use every dollar and it's great. I'll put a link in the description, but it is a budgeting tool that helps me. Because if I still have money and the Rachel line item, or miscellaneous or something else. And I'm like, okay, do I have the money for it? But it helps guide me to be able to say, is it worth spending this money on this item compared to my budget?

And it just gives you a filter. Also, practice the 24-hour rule. If you did not know that thing existed five minutes ago, that means you really don't need it right now. So wait 24 hours. I even put it in my cart sometimes and leave it there for a few days. And if I come back and I'm like, oh yeah,

I still do want that. And it's in the budget, then you can buy it. It's great. But again, let the emotion wear off. All right, I really want to know from you guys what products were not worth it that maybe you thought this is going to be amazing. This is going to change my life. And they just were not cracked up to be all of that. So I want to hear from you. So leave a comment again on something that you thought this is going to be a life changer. And it wasn't. It is kind of a bummer when

you buy something. You think, oh, it's going to change my life. And then you remember the reality. No, it's not. No, it's not. Well, thank you guys so much for listening to this episode. and if you have not subscribed to this podcast, make sure to do it. And will you please leave a review? It helps us out so, so much. So thanks you guys, and remember to take control of your money and create a life you love.