The Rachel Cruze Show - What to Do Differently With Your Money in 2024 (with Dave Ramsey)

Episode Date: January 1, 2024

It’s a New Year's tradition: Dave Ramsey joins me to welcome the new year and talk about everything you need to know to win with money in 2024. Plus, I’ll share smart money tips that will help you have financial peace no matter what challenges the new year brings your way.   What you get in this episode: ·     8 Things to Do Differently With Money in 2024 with Dave Ramsey ·     4 Simple Budgeting Tricks to Never Overdraft Again ·     How Financially Smart Are You? (Money Quiz)   Helpful Resources:  ·     Watch or listen to Dave Ramsey now on The Ramsey Show. ·     Get the Rachel Cruze Wallet with cash envelopers. ·     Start budgeting for free with EveryDollar. ·     Learn more about Christian Healthcare Ministries. 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

I want to ask you 10 questions about everything from investing to insurance. And together, we'll find out how much you know about money and what you have left to learn. Hey, guys, welcome to this episode of the Rachel Cruz Show podcast. I'm so glad that you're here. And what a happy new year to you. You guys, it is 24. I can't believe it. So in honor of the new year, we're going to talk about what to do differently with your money in 2024.

I'll go over four simple budgeting tricks to ensure you'll never overdraft again. Then I'll go through a money quiz to see where you're at financially and what to do about it. But first, I want you to hear a conversation I had with my dad, Dave Ramsey, on eight things to do differently with your money this year. Take a listen. Well, welcome you guys, and happy New Year. It's just very exciting. I'm ready for 2024.

And I'm excited that you're back. Hey, here we are. here. It's some January tradition. And we're going to keep at it because the tradition is great. So we always start the new year with a video with you and talking about things to do with our money. And so, 2023 had some highs, had some lows. Twenty-twenty-three, I think the housing market for a lot of people was probably a low. People were like, oh, my gosh, what is happening? That's one. The student loan, you know, the whole thing, I guess depending on where you fall in the discussion, it was either a high or low. people that were expecting the forgiveness did not happen in 2023. There was a lot, I just feel like, kind of going on.

People, I do feel like, held their money a little bit. The scare of a recession kept looming in 2023. Interest rates were up. Yeah, it was an interesting year. Yeah, it was. It's tough for a lot of people. Yeah. Student loan payments had to start back.

And in some cases, the house they thought they were going to be able to do, they couldn't do. And so there's a lot of disappointment going to. with those two things. For sure. But it's a new year. Yay. I know. So we'll see what happens

because no matter what, you guys, whether it's the economy, the government, all of it, we really do believe that you can put yourself in a place today financially where you are prepared for whatever this year lies, right?

And we have no idea. It's an election year two in November. So there's just a lot that could be happening. So we want to make sure that you're in a place where you feel financially secure in your own home because that's what you can control,

which is huge. So we've made a list of eight things to do differently. with your money in 2024. So we're going to walk through these things, make sure that you feel fully equipped to take control of your money this year. So I'll go first.

Okay. First one, get on the same page with your spouse. This is the one that people hate me for. I had a couple of reels in 2023 about the subject, and they went into the millions, and the comments were like, who is this woman? Of course a woman would say that.

I mean, it was just like, every comment was like rolling their eyes at me. People hate this idea of, of combining money with your spouse. And you guys, I'm telling you, what's so fascinating to me is people that come in and do their debt-free screams or they hit a financial goal together if they're married,

we hear it all the time. They're like, you know, we did this, we did this. You know, our marriage has never been better. They put their marriage in the lists when they're talking about their money. And it's funny because we're not talking about their marriage, right? We talk about money and combining things, yes, and being on the same page.

But yet the outcome is that they are closer. They are closer in their relationship when they hit financial goals because they are working together because they see themselves as one. So in 2024, I would challenge you, encourage you, if you haven't already, with your spouse, get on the same page, you guys, have a goal that you're working towards together, combine your accounts. It's not his income, her income.

Does she have the right to do this? Does he have the right to do that? I mean, all that language, like, throw it out the window and see yourselves as one, as one team, because that's a key part of winning financially, and it helps your marriage. Well, the data says if you don't agree with that, you're wrong. That's what the data says.

I mean, our study of millionaires found that, out of all the millionaires we studied, one of the key things they said that caused them to be able to build wealth was working together with their spouse. The data says the number one cause of divorce in North America today, money fights and money problems. Well, guess what? That's people who are not aligned on where their money's going. They're not talking about it.

They've not combined things. It's just like you're over there in the corner doing stupid stuff and I'm throwing grenades at you and we get a divorce as a result. So, you know, I don't, you know, some of you have a little index. dependence problems or you've got other kind of little philosophical issues or something, but you're just wrong. It's just wrong, okay? It's not morally wrong.

It just doesn't work. Long term. Okay? And the data's in. And I always have the asterisk, you guys. If you're in a situation that there's an addiction that's not being dealt with, there's abuse. Oh, you don't combine money with that.

Yeah, yeah, yeah. I mean, if there are things that are harmful that you have to protect yourself, we are all for that, all for that. But if you're just the run in the middle couple with not a perfect marriage, but you're just doing life, like you guys, combine. your money. So do that differently in 2024. Next, it's probably one of my favorites. Yeah. Get on a budget. Get on a budget. Get a plan. No one accidentally wins the Super Bowl, the World Series, or the World Cup. It's not an accident. No one accidentally is successful

at business. No one accidentally has a successful marriage and no one accidentally builds wealth. It doesn't happen. It's with a plan. And the plan on a monthly, weekly basis is called a budget. Write it down. Get on every dollar. get on there with your spouse, be in agreement. And when you're aligned on that, if you aim at nothing, you will hit it every time. That's right. You know, and my friend John Maxwell says, a budget is people telling their money what to do instead of wondering where it went.

For 35 years, I've been encouraging people to do this. And for 35 years, I've been hearing people say, you know, Dave, when we get on a budget, we felt like we got a raise. You got to try it. Yeah, and regardless of income, too, because I think some people think, well, if I make X amount, I don't need to budget. But that X amount of income that you could be using for your future needs a purpose. You could look up in five years and be like, oh, gosh, we just made a lot of money.

We have no clue where it went, right? So, I mean, regardless of income, regardless of debt level, anything, you guys, do a budget. Yeah, our most successful parts of Ramsey, you know, tens of millions of dollars inside of Ramsey. They do a budget, a business budget. I mean, they're doing a budget on their P&L. This is what we're projecting our revenues and our expenses to be. The more money you make, the more you've got to do it. That's right.

That's right. So stay on that. And next is to pay off your student loans. So again, I feel like the government led us on a wild goose chase the last year or two with promises and all this stuff. But you guys, it's one of the types of debt that I feel like people do just kind of hang on to. It's just like it's just there, I think, because it's so normal, everyone has it. You guys get motivated to get this out of your life. Like, it is time.

This year is time to get rid of it or to create a plan to get rid of it. We want all of your debt gone. But for some reason, the student loan is like the sticky one. It's the one that kind of just ends up being around. and people just kind of are apathetic to it. But get motivated to get it out of your life and get that payment back in your life and you don't have to worry about student loans anymore.

It's done. It's done. All right, up next is... Protect the emergency fund. Yes. People will want to dip into this. Let me help you with this, okay? If it's not an emergency, you don't use the emergency fund. I mean, on day we're getting a couch. That's not an emergency.

We need a bass boat. That's not an emergency. Christmas. Christmas is not an emergency. It's always in December. They don't move it. It's always in the same spot. So these are not emergencies.

An emergency is an unexpected event. And I can tell you this. The more planning you do, the more budgeting do you do, the more margin there gets to be in your money, the less likely you are for something to be declared an emergency. The more likely you are to cash flow it out of the budget. I blew a tire. Well, let's cash flow that out of the car repairs

instead of out of the emergency fund. But you can't do that until you've been doing this a little while. That's right. The more you do this stuff, the more you've got everything dialed in, the more wiggle room there is in the budget, okay, we got a decent car repair fund over here, so we don't have to touch the emergency fund, even though that is an unexpected event for a blown tire, right? So don't mess with the emergency fund.

It's not, it's there for one thing and one thing only. It's not an investment. It's insurance to give your life peace. Yeah. And it's funny because once you have it around for a while, it's something does kind of, like when you first have it and something happens, you're like, oh, thank God it's there. And you use it and you've got to replant it. and all of it.

But once it's been there for a while and you kind of go through life, when something does come up, it is funny how you naturally are like, can we have a way not to touch it? That's how I am. I'm like, can we do anything and not have to touch that money because it becomes such a security to you that you're like, I don't want to touch it. So we haven't touched ours at Sharon and Dave in decades. Yeah, yeah. But you still have one.

We've got lots of margin, number one. Number two, we're just not as, you know, we just don't let drama intersect our finances like we used to. Yeah, yeah, yeah. And the margin probably creates less drama at a time. For sure. All right. Number five, try out a new side hustle and create more margin in your budget.

So the baby steps, especially those of you that are like, okay, this year is my year. I'm going to get on track. I'm going to be doing this stuff. I'm going to follow the Ramsey baby steps. I'm going to do it. One of the best ways to especially get through your first three baby steps is you got to look at both sides. You got to look at your income and your expenses.

But your income can change drastically. Like you can be able to say, hey, I have the power to take four nights a week and go do a part-time job, to take a full Saturday, maybe every Saturday for the next five months, and I'm going to work eight hours. Like, you have the ability to say, hey, where do I have margin in my time that I can fill up and get that part-time job, get that side hustle. So there's so many great ways. I mean, there's so much that we talk about when it comes to side hustles.

But I think one of the best things you can do is, like, what are you naturally good at? What are the things that you're naturally good at that you can charge for, that you can say, hey, you know, I can tutor. I can be, you know, do sports is like a thing. My kids are at that age and, like, sports. And people pay to have someone come in and help with their sports. So I'm like, if you were an athlete back in the day, like, what do you know? What skills do you have?

Like, think about what you have, anything in those streams of income. But then also, it's a great, we have a great world for side hustle. So whether it's Uber, you know, grocery delivery services, anything you can do to pick up extra money to get some extra cash, especially for those first. three baby steps. 2024, it's your year. Get that side hustle. Yeah, and here's the thing.

98% of the people who stand on our stage and do a debt-free scream, their income went up during the journey. Yeah. Which means they either changed jobs, took on overtime, and or added side hustles. So we always see an increase in income, even if it's a temporary increase in order to punch that debt in the face. That's right. That's right.

Prioritized contentment is the next one. Contentment. Rachel and I have written about this a lot, teaching children. children that. You've got the contentment journal. Here's the thing. When you don't have to have it, all of a sudden it changes everything. It might be, godliness with contentment is great gain, contentment might be the most powerful financial principle there is. When you're content, you can avoid debt. When you're content, you can get out of debt. When you're content, you have margin to be generous. When you're content, you have margin to invest. But when you're just

consume, consume, consume, consume, consume, consume. And you're just living in the basket of materialism. That's the opposite of contentment. You can't make enough money to live like that. You can't make enough money to out earn your stupidity. And so, you know, this idea of it's going to be okay. It's just some stuff. Get you some stuff. We're not against stuff. But this idea that stuff is going to make you happy is a joke. Yeah. And it's exhausting. That race. That pursuit. It's constant because there's always going to be something, you guys. There's always going to be something.

And I think because of even social media. It's a dopamine hit. Yeah. In our world, I'm like, you just are flooded with stuff all the time. So, like, it's so tiring versus just laying it down. I'm like, okay, I'm done. I'm good. I'm good.

That contentment, it's huge. Number seven, which kind of coves into that contentment piece, is to be aware of lifestyle creep. So one quarter of the top 10% of tax filers, so people that make a problem, approximately $175,000 a year, identified themselves as poor, very poor, or getting by, but things are tight. And we all rolled our eyes and said, oh, brother, just then. Oh, my gosh.

So it's just, it is wild how you can just learn to live up to that edge of what you're making. I was watching, there was a real, and it was some guy, sorry, dude, I don't know who you are, but it was really good because he was just saying he's worth, like, I don't know, $30 million or whatever he was saying. And he was like, yeah, I get the car, buy the crazy cool car, and I'm happy for a week. And then that goes down. And then he's like, and he's like, I've chased, chase, chase, he's like, I've done it all. And it's not.

And the guy interviewing him was like, so what makes you happy? It's fishing with my friends. Like, when me and my buddies go out, like, that's what I enjoy. Like, I enjoy being with my people. Like, he was just saying, it's like the stuff money can't buy. And there was something about that that you think, oh my gosh, if I could just make X, you know, first, and he said this, he was like, for a period of time, yeah, it's awesome. Like if you're a $100,000 guy and I bump you up to $200,000, yeah, you'll be happy.

But then you're going to get used to that $200,000. And then you're like, well, what's the next thing? What's the next thing? Because that finish line keeps moving. And what happens with lifestyle creep is you get that raise, you bump up the lifestyle. You get the raise. You bump up the lifestyle. And you think, like, oh, my gosh, I thought that raise would give me margin, give me peace.

But you didn't check your spending and your lifestyle. So keeping that portion small living below your means, you guys. If you're not doing that, 2024 is your year to do that. lifestyle creep, it's so easy, it's so sneaky, but be so purposeful, especially if you're getting a raise of what you're doing with that, because if you just live up to that raise, you're going to be in the exact position you are today. Number eight, buy a house only when you're ready. Calm down. Oh, my goodness. People go completely berserk about buying houses. I want you to get a house. Our data says that home ownership is

a key part of becoming wealthy. So long-term, you need to get a home. When you buy a home improperly, it slows down your wealth building. It adds stress to your life. The home is not a blessing. It is a curse. Improperly is a couple of things. So let's just say what properly is, and then anything that's not that. Number one, you need to be out of debt before you buy a house. I don't care. You need to be out of debt before you buy a house, period. The heat and air is going to go out. The roof's going to leak as soon as you move in and you got payments everywhere, but you thought this house was going to be, it's not. You just added a mess to your life.

If you have a student loan, Sally Mae needs her own bedroom. Don't do that. Don't buy a home until you're out of debt. The second thing is you need your emergency fund in place so that when that heat and air goes out, you can fix it. Because you don't know. Home ownership is more expensive on a monthly basis than renting because the landlord fixes all the broken stuff.

So it is more expensive in the short term. Over the scope of your life with the increases in values, that's where the wealth building comes. But if you're starving to death right then because you didn't have an emergency fund and you had debt, that's silly. And then when you do buy, don't buy more than a 15-year mortgage and don't buy where the payment is more than a fourth of your take-home pay. Well, isn't the house? I'm sorry, buy a house you can afford. And then it'll be a blessing and it'll be part of your wealth building plan. The problem with houses is it's such a big number that when you do it wrong, it clobbers you.

When you do it right, it blesses you. There's really no middle ground. There's nobody that just goes, oh, I just squeaked by. I mean, really you're going to do it right and it's going to be a big good deal, or you're going to do it wrong or it's going to be a big bad deal for you. So you've got to stay away from the housing market until you're ready. So good. All right, you guys, those eight things.

Hopefully you will do different in 2024 to say. set yourself up. But just remember these two things. Number one, there's always hope. Okay, regardless of where you are financially right now, we meet people literally every single day. I mean, millions of people have walked through this plan. And can we just tell you every income level, every debt level, every background, every marital status, number of kids, I mean, any situation you can imagine, we have seen in every situation, some take longer than others, but they have the ability to change what they've been doing, which is number two, that you have. hold the power to change your circumstances. So there is hope to that. And you have the ability to

change. And change is uncomfortable. Change is hard. It's weird when you do something new. It's not fun because you're like, I don't really know what to expect. Like it just feels off. And it will feel off for a bit. But then you actually start to gain traction and you start to win. And that's what it is, you guys. And listen, yeah, life may be unfair, right? There's going to be times where things are harder, things are easier for you. But regardless of where you are, you have to start somewhere. and that is now. So use that list we just walk through. Be patient. This is a marathon. It is not a sprint. But you are able to do this. And we see it all the time. That hope and that change, it is such a reality for people. So if you need one tangible practical step, make sure to sign up

for our budgeting app every dollar. This is the thing that's going to launch you into this plan because a budget really is your roadmap. It is the thing that is going to help you day to day, literally, week to week, month to month to know where you are. And it's going to help you walk through the baby steps. All right, you guys, that's it. Dave, thanks for coming by again. That was fun. Dad, I know. I love always starting the new... It's our annual tradition. The new year off with you. So today, I want to talk about something that a lot of people live in fear of when it comes to their money. And this isn't one of those fears that just magically goes away once you decide that you want to be wise with money. Yeah, I'm talking about the fear of overdraft.

And before you say, Rachel, I've never overdrafted in my account. Like, it's been years since I've done that. I'm a saver, so I don't even have to worry about excess spending. Well, I don't want to break it to you, but I will. You might not be as invincible as you think you are. Listen, overdraft pops up in really sneaky ways, especially if you're doing buy now, pay later purchases and you forgot about them or a monthly charge for your iCloud storage. If you are brand new to budgeting, there are nuances that take some time to learn. But guess who has done her time? Yes. I have four reliable budgeting tricks that can be absolute game changers for my bank account, and I want to make sure that you know about them. So number four. So I really made this tip, basically my entire personality.

I am a natural spender, especially when it comes to Amazon, Amazon clothes and jewelry and all the things. And I knew this about myself when Winston and I agreed to make budgeting a priority. And I was worried that, again, I'd be the one that would overspend because historically, that has me. But then I thought, okay, my parents really kept themselves from overspending when there wasn't, you know, a single dollar of margin back during the years when they were coming out of bankruptcy and they were really, really diligent about their budget. And mom and dad took plastic completely out of the question, no debt at all. And so for every category in their budget, there was an envelope that they would cash out. And because you cannot physically overspend when you don't

have enough money in your hands. So they used it to stay really accountable. Number four is to cash out budget categories that you tend to struggle with. Now, this can be a game changer, especially those of you who are new to budgeting, because it was for me that I even made a wallet to help people stay accountable when it comes to all cash spending in this system. It doesn't have to be boring or frumpy, like it can be really cute and really fun. And so I did this for years, you guys, especially when it comes to food, when it comes to clothes. And again, there are so many categories that you could look at in your budget and say, gosh, I need an envelope for that.

So make sure to check that out. And there's one category in your budget that you should always have an envelope for, which brings me to tip number three. Because keep in mind that the main goal of any budget is to make it a zero-based budget. That means every single dollar has a designated purpose before the month begins. But no matter how precise you think you're being, we all have had that terrifying moments of overdraft anxiety, right? Just picture this with me.

You're in the car, heading to your sister's birthday dinner, and you kind of spaced out all of your resources, and you've allocated all of your money in the budget for every single purchase, including her birthday gift and card, and you even set aside $15 to pick her up some flowers for the birthday dinner. But then you're 10 minutes from arriving, and the host calls and asks you to stop at Walgreens and get candles on the way. And this feels like, oh, yeah, no big deal.

It's just candles, right? Not a big deal. But when you're working a zero-based budget, $5 means you've got to find $5 from somewhere. And if it's not in there, then that means overdraft could happen. And you're thinking, oh, what do I do? So this is why my third tip is so key, and that is to add a miscellaneous category to your budget. It keeps you intentional and conscious, but it also serves you well because it's a little bit of a cushion that we all need when it comes to taking control of your money. But if you really want to feel secure with your monthly spending, tip number two is for you. This one will make you feel like you have your entire life together. And especially if you get paid more than once a month, this is a must.

You know that feeling at the beginning of the month when you get paid, you're feeling great about that balance in your account. And then suddenly your expenses start to trickle in at the same time, like your mortgage, HOA bill, utility bills, all this stuff starts coming. Well, did you know that some lenders will allow you to actually break up your mortgage into two separate payments every month? And a lot of services like Xfinity or Netflix or your gym membership can actually be paid at any time throughout the month you get to set up the time. So you just got to call them and tell them when you want the money pulled out of your accounts. So you guessed it.

Tip number two is to strategically use auto draft. So if you're not familiar with this, this is where, again, whether it's a subscription or a membership you have, that's money that just comes right out of your charge. checking account. You're not going in and paying every single month. It's automatically pulled out. And you can be strategic to space this out so that you don't have to ride that roller coaster of fear of feast or famine depending on the week. So it's really, really key, you guys. So you can plan out your paychecks and you can know, okay, not all of my accounts are going to be hitting at this exact same moment. I can spread them out and it's going to give you some margin and leeway. My number one tip is the most important. And it's the one that,

people always think that they can skip. And for us, this tip is always crucial, especially after the holidays. We've made it through all the craziness of Christmas, but then all the subscriptions renew in January. Okay, when February hits, we should expect to be in the clear, except then all the kids have to buy valentines for school, and you have to do all this and this, and then you're suddenly paying deposits for summer camps coming up, and then you realize your anniversaries in February 2, so you've got to factor in a date night. But surely, there'll be room in March. No, no, because then there's spring break in March and expenses are coming here and there. When you see my point, it feels like it never ends. Every month is different, but this doesn't mean

that you have to live in a constant panic while your budget fluctuates in a way that makes you feel out of control. Instead, what if you decided to set expectations on the front end so you knew exactly what to prepare for every single month financially? Which is why my number one tip for avoiding overdraft is to adjust your budget every single month. committing to getting into the habit of budgeting may be a one-time decision, but true success with your budget is an every month thing. And don't forget, the best way to do this is with every dollar. It's a budgeting app. It's amazing. It lets you customize your budget every single day since you are in full control of your money and overdraft isn't even a factor. Today's episode is for all my millennial friends out there who wish they had been taught about taxes

in school rather than having to find the X and the Y coordinates on a graph sheet of paper. God bless those days. Do you ever look around and just think, okay, I know I'm technically an adult, but I have no idea how the housing market works. So if that sounds familiar to you, you are not alone. And that's why I'm bringing this personal finance quiz directly to you. So I'm going to ask you 10 questions about everything from investing to insurance. And together, we'll find out how much you know about money and what you have left to learn. But there is a kicker.

Just because you can pass this quiz with flying colors doesn't mean that you are good with money. A little plot twist. So make sure to stay till the end so you can hear what I mean by this. Plus, I'll share some must-have resources that can help you wherever you fall on the financial literacy scale. All right, so the first question of this financial literacy quiz is, we all know

budgeting is important, but making a budget is different from balancing a budget. What does balancing your budget mean? A, you're able to buy anything you want. B, your income for the month matches how much you decided to spend and save. C, your budget stays the same month after month. Or D, you can weigh your money on a scale. If you answered B, your income for the month matches how much you spend and save, you are correct. Well, done. That is a balanced budget to make sure the money coming in, that there is enough there

to pay all of your bills, to save some, to give some. You have a balanced budget. All right, question number two. Which of these factors impacts your credit score the most? A, amounts owed. B, length of credit history. C, a credit mix. D, new credit, or E, payment history.

The answer is, E, payment history. Now, everything that we talked about there does contribute to what your FICO score is. Okay, so you look at how it's all calculated, and that is your credit score. That is how a lot of is calculated. But when you look at the pie chart of all those things, the biggest percentage is payment history. So making sure that you're paying on time, and those of you working your way out of debt, that's why we always say to pay minimum payments to make sure you stay current on everything. All right, question at number three, what's the lowest amount you'd need to save for a down payment

to avoid PMI, which is private mortgage insurance? A, 3%, B, 10%, C, 20%, or D, 25%. The answer is C, 20%, so we always recommend if you're saving up for a down payment, anywhere from 5 to 20%. So, if you're saving you If you are a new homeowner, if you're buying your first house, you can go as low as 5% if you want. But for those of you that have equity in a house, like we would really push you to 20%, even though that's a lot. Again, avoiding PMI, which is so great. That is a fee that you don't have to pay anymore. You don't have to pay.

It's great. It saves you money in the long run. That is key. So that 20% is amazing. All right, question number four. And which type of retirement account offered by your employer would you contribute after-tax dollars? A, a traditional 401k, B, an IRA, C, a Roth 401k, or D, a pension. The answer is C, a Roth 401K.

So, 401Ks are retirement accounts that your employer offers. So they will usually do a match, so it could be three, four, five, six percent match, and you can match up to that. Now, a traditional, you fund your 401k before you pay taxes. A Roth, the word Roth, which also could be a Roth. IRA as well, but Roth is important because this is after tax dollars, which means you fund your 401K after you've paid taxes, which means you get paid your salary, which is awesome. And then we all know after taxes, yep, that drops. So what you actually bring home is a lot lower than that.

And then when you pay and you put in to your 401k out of that money, that means you've already paid taxes on it. So the growth from there is tax free, which is incredible. If you do a traditional IRA or a traditional 401K, again, that means you are putting money in before you've been taxed, which means you have to pay taxes when you pull money out of that account later on down the road. So you can do anything rough, that is huge. All right, question number five, every time you swipe a credit card, you have to deal with APR, annual percentage rate. This means if you carry a balance, your interests will be charged how often? A, yearly, B, monthly, C, weekly, or D, daily? The answer is,

Be monthly. Every month, you will pay interest if you hold a balance on your credit card. And listen, people are like, well, I pay mine off every month. Yes, some do, but some don't. And you don't go in sending it for credit card thinking, I'm going to go deeply in debt and be stressed out. But sometimes that's where people find themselves. And credit card debt has reached a all-time high in our nation. So you guys, be aware of this. Be aware of this. Cut up the cards.

So you don't have to worry. Worry about all this interest rate stuff, okay? It's a better way to live, trust me. All right, question number six. Which type of debt cannot be erased by bankruptcy? A, medical debt, B, personal loans, C, credit card debt, or D, student loans? The answer is D, student loans. Yes, they are not bankruptable.

They are around forever and ever and ever. Not fun. But the great thing is, you can get out, you guys. We teach people all the time how to get out of debt, including a student. loan debt. So it is possible for you to be debt-free. All right, question number seven, which type of car insurance coverage would pay for damage to the other person's car when an accident is your fault? A, collision, B, comprehensive, C, personal liability, or D, property damage liability. The answer is D, property damage liability.

Now listen, insurance is one of those parts of money that can get so granular and like specific. So again, always make sure that you're listening to people out there who are wise with their money that are experts in this stuff to be able to know, okay, what kind of insurance do I need? We have actually a coverage and insurance coverage checkup at Ramsey Solutions.com. You can check out. But knowing all of this, again, it's good knowledge to have. All right, question number eight, what isn't included in your closing costs when buying a house? A, the down payment, B, loan application fee, C, title insurance, or D, loan origination fee. The answer? A, you're down payments. Yep, not part of the closing cost, something you have to save up for sure. Make sure you have a good down payment. We said it earlier. Remember, 5% at the least, up to 20% is fantastic.

All right, question number nine. Which of the following is not a mandatory deduction from your first paycheck at a new job? A, Social Security and Medicare taxes. B, 401k contribution. C, state and local income tax, or D, all of these are mandatory deductions. The answer? B, your 401k contribution is not mandatory. And in fact, we don't encourage you to fund retirement until you are debt-free and have a fully funded emergency fund. All right, question at number 10, which of the following is considered an excellent credit score? A, 720, B, 750, C, 800, D, 900, or E, they're all considered excellent. The answer is C, 800. Oh, you guys, but I will say, the credit score is not a place that we worship and we focus on

and we try to do everything we can to build your credit score because debt, I don't want to be part of your life. And you usually have a credit score to go into more debt. So it's not the thing we're focusing on. We're focusing on getting out of debt, putting money back in your life through an emergency fund and funding retirement and all of that. That is the best way to go. But I'm curious, how'd you do on the quiz, you guys?

Listen, I have good news and bad news for you. The bad news first. If you passed and got every single question right, again, that doesn't necessarily mean you are great with your money. The good news, even if you got some of the questions wrong, this could actually mean you're still making wise financial decisions. And the reason for all of this is because when it comes to debt and credit scores and interest and loans, these are all things that if you're following the baby steps and you have your priorities in check, you may not be as familiar with because you don't need to be. Your credit score is only relevant and important if debt is a major part of your life, like we said earlier.

but if you're living debt-free, you're paying for things in cash, you're saving and you're investing, it's not something you're worried about. And this is where financial peace comes in, when you don't even have to bother worrying about things like credit scores and interest rates because you're an amazing position. You're not using debt. And that is where I want you guys to be. All right, so hopefully you ace that quiz, and hopefully you're ace in the quiz of your actual money and dealing with it. So fun. Well, thank you guys so much for listening to this episode here at the beginning of the new year. Thank you to my dad for being a great guest on the show.

And make sure to share this with a friend who's wanting to get on track with their money this year. Sharing the show helps us out so much, you guys. So I appreciate it. Well, thanks again for listening. And remember to take control of your money and create a life you love.