The Rachel Cruze Show - What to Do to End the Year Debt-Free

Episode Date: November 22, 2021

Regret-proof your Christmas season and learn the ins and outs of debt, get affordable gift ideas, and give your child the most important gift of all. In this episode, Rachel shares: Everything you need to know about debt 25 unique gifts under $25 The best $100 you can spend as a parent Questions for Humans Conversation Cards Know Yourself, Know Your Money by Rachel Cruze The 14-Day Money Finder Learn more about your ad choices. Visit megaphone.fm/adchoices

We all want to be great gift givers, and this is the time that people are generous and it's wonderful. It's great. I don't want you going into debt. You can have a great Christmas season and give some really thoughtful gifts without breaking the bank. Hey guys, welcome to another episode of the Rachel Crewe Show podcast. I'm so glad that you're here. In today's episode, I'm going to break down all the basic knowledge of debt. So what it is, types of debt. I'm so glad that you're here. In today's episode, I'm going to break down all the basic knowledge of debt. So what it is, types of terms associated with debt, how not to go into debt, how to pay off your debt, and so much more. And then I want to take a question from Joanne about creating a will and how to go about getting one affordably. But first, let's talk about ways to not go into debt to buy gifts this holiday season. So here are 25 unique gifts under $25. And there's some real fun ones in here. I can't wait for you to hear. Take a listen. So for those of you, they're like, yep, we got a little kind of a tight budget this year.

That's okay because I have some great gift ideas, 25 ideas, actually, under $25. And you will thank yourself after Christmas is gone. And January is here that you did not spend a ton of money that you did not have. So let's start with the $25 range, the Amazon Echo Dot, 25.5.5.4.5.4.5. So this is great because it's like a wireless speakers that do everything from play music. You can add stuff to your shopping list. You can ask questions. It's awesome.

Now, the price is for a slightly older version, their third generation, but it's all the same. Now, for all you conspiracy theorists out there, this would not be your gift. A tilemate, so this is $25, and this is perfect for your friend that's always losing their keys. or their phone or their purse or something. So you just take these little tiles and attach them to the items that always get lost. And then you have an app on your phone, and it just ding-d-ding-ding, pings them wherever they are, and the stuff is never lost again. You can split an Ancestry.com membership.

So this is great for your friend that really is interested in their family history. You can get three other friends, so you four can go in and buy, them an ancestry membership, and that can be as little as $25 for you. Again, if you're a conspiracy theorist, you don't have to do this one. A silk hat, perfect cookie baking sheet, $22. So this is like that great cookie sheet that I feel like everyone has. So someone that loves to bake, they will very much appreciate this. A cast iron skillet, $20. I love a cast iron skillet. You can make so much in there. And my favorite thing we've started to do. you get cookie dough, and you put it all in the bottom, and you bake it, take it out.

It's like one big cookie. You put ice cream on top. So great. The gift that keeps on giving. All right, let's look at the range from $16 to $20. One of my favorite books this year I love to read, and one of my favorites was the Midnight Library. So this is anywhere from $50 to $20, depending on where you buy it from. And it's a great read, you guys.

It's pretty quick, and it just makes you think about every little life decision you've made, and it's brought you to this point. And what if those decisions change the course of your life? Oh, it's kind of one of those like, oh, it should be a movie. It's so good. A kid's initial necklace, anywhere from $10 to $20. This is a really sweet gift. My sister got me this for Christmas two years ago.

But it's one of those necklaces and it has these little circles and you can put the letter of your kids' name. So I have three, obviously, so it's like A-C. And these little pendants, they're so cute. You can find them on Etsy. other stores, but it's a really thoughtful gift. Also, a one-year subscription to Magnolia Journal. This is $20.

This is perfect for your Chip and Joanna Gaines fans out there. You can even do a two-year subscription for $30. So it's great. All right, next is a cookbook, the Mexican Home Kitchen, $17. And this is perfect for the Mexican food lover in your life. Now let's look at gifts that range from $11 to $15. You can do the fun set of cards, questions for humans. It's $15. So this is perfect for couples or friends that want to have fun and not just be on your phone

all the time. And so these are really fun new cards that have different questions on them. And they're from my friend and fellow Ramsey personality, Dr. John Deloney. So they're conversation starters. And there's a set for couples, a set for friends, and a set for kids. Again, great way for people to connect without their devices. A natural soy wax candle set, $15. This is perfect for the homebody in your life. You can get a set of three of these, and they come in lavender and vanilla, cedar and suede, and black current. A wireless phone charger, $14.

This is, I have one of these. It's my favorite because you don't have to like, just set it down, right on it. Just put it right there. A little green thing lights up. It's perfect. They also have cordless chargers for AirPods, even some Android phones. It's awesome.

So the U-Tech Wireless Charger gets a 4.5 star and 126,000 reviews. Love it. Now you can do a magnetic phone mount for $13. This is perfect for your friend who loves to talk on the phone and drive or text and drive, so you can help them drive safely. and they can secure their phone on this magnetic phone mount, which clips directly onto their air vents. Also, personalized golf balls for $13.

I feel like all the men in my life are golfers now. I don't know how it happened, but it's happened. So this is a really great creative set. I think this is so fun. We actually went on a trip with some friends, and one of the guys did it for all the guys and took pictures offline of them and put on golf balls. So it's a really fun, create a gift.

An enneagram mug, $13. It's perfect for any of your friends that are obsessed with the anagram. Yep, there's nine different mug options out there, one for each type. And it features all the characteristics of each number. So for the three, we are driven, goal-oriented, ambitious, initiator, adaptable, and efficient. Yes. Drinking coffee out of that, it just makes me want to just go charge the day. It's awesome.

All right. A lost-in travel guide. for $12. So your friends that loves to travel, maybe they have a trip booked out there. This is a really fun thing to flip through because it's curated by locals. So the local spots in the city or area they're traveling to, it's all there. Awesome. All right, gifts under $10. Know yourself, know your money. It's $10. Yep, perfect for the book lover in your life. So anyone who wants clarity in why they They handle money.

The way they do, this book is for them. It goes beyond the baby steps and helps you take control of your decisions around money. So it's on our $10 sale. It's right how to put a little plug in there. You can do a cigar cutter for $10. So if there's a cigar enthusiast in your life, they will appreciate this. The Sauce Moto Dip Clip, $10. And this is one of my friends, obsessed.

Yep, you put a little bit. a little in-car sauce holder. Again, it clips onto your air vents. So when you're driving and eating your fast food, you can just use it for your dipping sauces. I don't know why it's so funny, but it is. So great. It's really creative.

Next is a flavorical popcorn seasoning $9. This is perfect for your family movie nights. You give your popcorn just that authentic movie theater flavor. Capuchino art stencils, $9. all your coffee lover friends out there, you know? People are making their own stuff at home. They're being their own barista, especially if you're working the baby steps and you're skipping Starbucks.

You can do all that fun art. I can't even imagine. I don't even know how you would do that, but it's beautiful. Beautiful art and coffee. Only $9. A card version of Monopoly, $8. So this is perfect for Game Night. My associate producer and his wife love this one.

So it's basically a faster version. of the Monopoly board game, which is a major improvement. I love that. A fidget popping toy with like those little bubbles, have you seen those? So like $7, great for kids or parents who are tired of the fidget spinners. Yeah, we see poppets. They're everywhere. And it's great.

It entertains them. Shaped silicone AirPods case, $2 to $5. So your AirPods or your earbuds, this is like a case that holds the charging case. So they sell them at Urban Outfitters. You can put them on your keychain. It's great. Make homemade cocktail kits, $2. So this is pretty fun.

So you can get those little bottles of, like, rum or vodka or wine at the liquor store. Again, you can buy some, and they're like $2 each. Wrap them up. Put, like, little sugar cubes and a little handwritten recipe card with a ribbon. And voila. You got a little homemade cocktail kit for $2. So great. a gift and experience, like a cooking class or a vineyard tour.

So this is great for people in your life who love to try new things. They like to experience. And this can actually be free if you are the expert chef or tour guide. All right. Some ideas out there. Lots and lots and lots of ideas. Again, that you do not have to go into debt during the holidays for gifts. And hopefully this helps spark some inspiration for you,

that you can have a great Christmas season and give some really thoughtful gifts without breaking the bank. Well, maybe you've heard me talk about debts every now and then here on this show. And there's a lot around the subject. It can be confusing. There's a lot of terms. So today we're going to dive in to understanding what debt actually is and how to get rid of it.

So what is debt? Well, anytime you owe money to anyone, that's debts. Yep. if you owe money to anyone for anything, that is debt. So mortgages, credit cards, car loans, student loans, personal loans, even after pay, all debt. Now you may be asking yourself, okay, what is good debt, what is bad debt? Well, the truth is, they're all bad. Yep. Now, a mortgage is the one type of debt I will not yell at you for. But when you go into debt, you're choosing to put your money, not to your future, but honestly, to your past.

It's like living life looking through the rearview mirror. You're throwing your money to your past instead of being able to look to your future. And debt is so hard because it is so normal today. Everyone just accepts the fact that debt has to be a part of your life. But it doesn't. It really, really doesn't. So I do want to break down some of the most common types of debt. debt. So let's start with the mortgage. A mortgage is the money that you borrow to help you buy a

house. And according to the Census Bureau, the average monthly mortgage payment in America today is almost $1,500. But 37.1% of houses have no mortgage. Isn't that crazy? I was like, dang, that's pretty good. Now, the only kind of mortgage I recommend is a 15-year fixed rates where you put 10 to 20% down. for your down payment, and where the payment is no more than 25% of your take-home pay. So that's kind of the nuts and bolts of the mortgage when it comes to the Ramsey Way. All right, let's look at credit cards. A credit card is a payment option that lets you buy what you want right now with money you don't have, so you pay for it later.

And the credit card is the most common source of debt among American households today. The average credit card debt per household is $14,821. America has $819 billion in credit card debt. And the average annual percentage rate or the APR on credit cards is 16.3%. It's credit cards. All right, let's look at car loans. A car loan is money that the bank lends you to buy a car. 37% of households have car loans with an average of $30,240 per household. And the average monthly payment is $554 on a new car and $391 for a used car.

And 7 million Americans are more than three months behind on their car payments. Now, if you finance a new car, let's just look at the math. Let's say it's a $26,000 car. Well, after six years, you would have paid almost $33,000 for that car that now is going to be worth close to $6,000. Cars just... Now, student loans, another very common type of debt. That is money from the bank or credit union or the U.S. Department of Education. You borrow money from them to use to pay for college. The average student loan borrower owes $35,359. And the repayment plans typically vary from 10 years to 25 years. And a lot of young adults saying owing on student loans keeps them from basic financial and life decisions.

So 40% of people delay investing in retirement, 47% put off buying a home, and 21% even wait to get married, because of their student loan debt. Then you have personal loans. So a personal loan is money that the bank lends you in a lump sum that you can use like cash. The average personal loan amount is $6,800, and more than half of borrowers take out a personal loan to consolidate their debt or pay off credit cards.

But listen, taking out debts to pay off debt, it's just kind of like just swapping the name of it. And again, some people are like, yeah, but I can get a lower interest rate on this personal loan than that. And that kind of just gets into that, like, back and forth of living in this debt world, which we'll talk about in a little bit. But again, that's why more than half take out a personal loan. Now, other types of loans include payday loans, 401K loans, medical debt, personal lines of credit, home equity lines of credit, like a HELOC.

There's buy now pay later loans, like after pay. there's a lot, a lot of debt. But in every case, debt steals the very thing that helps you win with money, your income. So now let's break down common terms around debts that you need to know. Minimum payment. What you have to pay every single month on your debt at a minimum is your minimum payment. If you pay any less, then you're probably going to get slapped with fines and fees. Principle. This is the original amount that you borrowed without interest included. Balance.

This is the amount that you currently have to pay on your debt. So if your original loan was $30,000 and you've paid $5,000 already, your new balance is $25,000. And of course, that doesn't include interest. Interest rate. When it comes to borrowing money, there's no such thing as free. And lenders make money when you borrow money. So your interest rate is what they charge as a percentage of what you've borrowed. 90 days, same as cash. You often hear this when it comes to furniture or appliances.

So this is something that if you do not pay off the entire balance and close your account within 90 days, that offer converts into a loan. And very few people actually pay off that before 90 days. So if you don't pay it off within 90 days, again, it goes to a loan, and you're going to owe late fees, penalties, monthly payments, and interest on the 90 days previous. You have to pay all that 90 days. It's not a good deal. Not a good deal at all. Debt consolidation. Debt consolidation is when you combine several debts into one monthly bill.

So this is something that a lot of people do because it's like, yeah, I'll just consolidate, and it, because again, you make it a lower interest rate, and it feels like mathematically you're helping. But again, when it comes to debt, it's more about behavior. Debt consolidation, the only type of debt that I would recommend if you can get a lower interest rate or your student loans. Because you're more than likely not going back into student loan debt. But some people try to put a band-aid over the situation by consolidating their debt versus just paying it off and dealing with it. Now, there's non-mortgage debt. And this is everything you owe except the loans related to.

the purchase of your house. So credit card, student loans, medical debt, afterpay, PayPal credit card, furniture loan, car note, all of that is non-mortgage debt. Debt-free date. This is the date that all your non-mortgage debt is paid off, and it's time to celebrate. It's a big, great date to have, but the date that you get, you probably can pay it off faster. Now, debt, again, it's a huge problem. I mean, it has caused so many people to live outside of their means, and it ends up with, you end up with so much stress and fear, loss of sleep, I mean, all of it. And when you're in debt, you're making payments, again, to your past instead of thinking, okay, what do I want to do in my future? But for a lot of people, they're living paycheck to paycheck, and this is what I want. I want you to have the

freedom, the freedom from debt, the freedom to say, yeah, what if I didn't have any debt? Imagine all the money that goes out of your paycheck to payments. What if you didn't have any of those payments and your paycheck came in? Think about, what could you do? What could you do with your kids? Where could you travel? The things you could do, the options you could have if you actually had your entire paycheck versus it going out 80 different directions. So whether you've been listening to all the Ramsey stuff for a really long time, or maybe this is your first time hearing it, but you guys, there is a plan. that works. We call it the baby steps, and it is. It's our proven plan that have helped

literally millions of families, get out of debt, safe for emergencies, build wealth, and just get in control of your money. So that first step is to save a starter emergency fund of $1,000. That's it. It's the first step you got to do. And the second step is to pay off your debt. So we've been talking about debt on here a lot. But the debt snowball is something that is so key. And we teach when you pay off debt, you're going to list out all of your debt smallest to largest, regardless of the interest rate, pay minimum payments on everything, and pay off that smallest debt first. Because as we talked about, whether it's taking out a personal loan to pay off debts or to consolidate your debts, get a better interest rate,

like the math, it's not a huge deal because what the big deal is and what we found is that personal finance, it's 80% behavior. It's only 20% head knowledge. Your behavior is what is key. And when you get these quick wins by paying off the smallest debt, you actually in turn pay off your debt faster by doing that plan versus the highest interest rate. So there is something to be said when you know that you can do it and you start to know and have hope and actually have proof that this is working when you pay off that smallest debt first because you think, okay, this is possible. I can do this. Now, if you want to learn more about our proven plan the baby steps, text Rachel Plus to 33789.

And this is going to help you again, eliminate your debt, figure out how to pay it off as fast as possible, and get your life back. Now it's time for Ask Rachel. So this is where I get to answer your questions. And Joanne has called in. Hey, Joanne. How are you? Hi, I'm good.

Thanks for being on. I so appreciate it. Where are you calling from? Jacksonville, Florida. Jacksonville, Florida. So great. So where are you in your money story, your money journey, kind of what process are you in? I'm on Baby Step 2, and I only have my car to pay off. Amazing. So how much left?

Oh, a lot. $25,000. Okay. How much have you paid off? About 10. Oh, amazing. You're doing it. Yeah. I'm just making little extra payments every month and doing, you know, throwing as much as I can on it. It's fun. It's really fun. That's amazing. So what made you start that? I'm just curious, this whole journey of getting out of debt.

I went through a divorce, which was, you know, that's fine. And I had always wanted to follow y'all's plan and do that and didn't have a spouse that really, he could talk it, but didn't want to do the work. So when I was single, I decided, I'm going to try to do the work of this. And so I've been doing it. That's amazing. I mean, there's so many. single moms out there that look for that inspiration of, hey, I want to do this. And it's hard for anyone. But I think especially for a single parent, I'm like, you know, you have so much responsibility on you. So the fact that you, you know, took a step out there in that direction and start in the process. It's just amazing. So I applaud you for that. Absolutely incredible. Yeah. Yeah. So what is your specific question for today? Well, we had a will together. And now I need a new one.

and he had a grant through his work, and so we were able to get a will for free and all. It was nice. And I called the same company, and I said, hey, I just want to update it. Like, I'm thinking, just pull up my file, change a few words, and I'll pay you $100 or something. And they said it was going to be about $3,000.

Oh, my goodness. And I was like, to recreate something you basically already have. With all my information, all the things I want, just take his, you know, just make, yeah, I was shocked. So I'm on your Facebook group, and so I asked, I'm like, I need a will that's not $3,000. Yes. Can I ask, do you have a complicated estate? No, not at all.

Okay. So when it comes to wills, everyone just needs a state-specific will, and there are companies out there that you can even just do it online, and they're so simple. Mama Bear Legal Forms is a company that we love, and it's like $129. So which you, yes. Yes. So there are definitely more cost-effective ways than $3,000. Now, again, if someone has a really complicated money situation, you've got to have attorneys in place and, you know, you're doing estate planning, all of that, and that's a different story. But yeah, for a basic will of

guardianship of your kids, where your assets go, your property, all of that, yes, there are so many options out there. Again, I love Mama Bear Legal Forms. There are a company that we've talked about on the show before, because they are inexpensive relative to $3,000. And it gets what you need taken care of, absolutely. So tell me this, Joanne, because some people watching, they don't have a will, they don't really think about it. What has caused you to be like, no, like what caused you in the first place to do it? And what's causing you to say, okay, I need to update this, because I think this is a really

important, great conversation. Yeah. Yeah. We had never had one, and we have four children that are adults. and so the whole time with them growing up, we never had one, which was not good. But now, but we have a 13-year-old. So at the time, he was maybe 10 or 11.

When we finally did a will, I'm like, because he was the only one at home, and I was really worried. It was more the guardianship part. Like, what if we went, you know, out to dinner or on an airplane without him? And we, you know, there was an accident or something. Absolutely.

I was concerned about something being in writing to protect my kid. that was the most important. And so now that I'm divorced, you know, like he's still on my paperwork for if I go to the hospital, you know, the, no, I want my mom or, you know, something else. So now I just want to update it. And I just really thought it would be easy, but it wasn't. So now that I have my own assets and my own money and everything, I want to make sure that my wishes exclusively are taken care of. So I just think it's a wise, you know, grown up thing to do. It took me a while to do it, but now I just want to make sure I have it correct for me in my new situation.

Absolutely. And again, I applaud you for that because it's all these elements of life. Like you said, the grown-up thing to do, right? There's all these things in life that you're like, oh, I know I need to do this, but it's time-consuming or I don't even want to think about it. Some people, it's just like this avoidance of the inevitable that they're like, oh, it's too scary to even go down that route. But for you, I just feel it from you, just talking to you. I'm like, there's just this level of, like, confidence with you. of taking care and being proactive with your life that I think is absolutely amazing.

And this conversation of even just doing your will and you're like, yeah, I need to void that old one and I need to start over and what does that look like? There's just a level of you starting the story of your life, you know, and this being, obviously, a very small part. A will is a very small part of your story. But it's an element and a representation, I think, that you really have. You've kind of taken the reins of your life. Do you feel that? I don't know.

We've only just met, but I'm like, I just get. so much from that. I've made a lot of changes in the past year that I've been a single mom, and I do. I feel like, oh, I'm finally in control of myself and my life and my goals, and it's really nice. So I think a will is very important. I've been, I have wanted to do one for 20 years, but just so, but now that I'm in charge of my own life, I can do what I want, and I want to update my will. Well, amazing. I, and I'm so sorry for what you walk through with the divorce and all of that. But on this side of it, again, I'm so encouraged by taking reins of the decisions in your life and you're doing it, which is amazing, absolutely amazing. Okay, so I'm going to put you

on the spot real quick before we get off because I, again, I have such a heart for moms because I'm a mom, so I just naturally gravitate towards moms more than dads, but the dads out there too that are single dads. What encouragement for the single parents out there do you have to even start this process, whether it is, hey, I need to do something like a will? that's kind of scary and intimidating to, to I need to do a budget, or I need to get out of debt these things. Like, what encouragement do you have for people that? They can do this.

Single parents, it's hard. It is hard. It's a lot of work, but they can do it. They can. It is very hard. You have to join Rachel's Facebook group. I did not tell her to say that people. I know.

No, it's been so helpful. The baby steps, I use the every dollar app. It's so great. The baby steps are so helpful. shopping at Aldi's. I mean, all the little tips that you, I mean, I'm like, I can feed my kid's steak every couple, you know, a couple times a month because I shop at all these little things like that makes such a difference.

And having a budget and the every dollar app and just following your plan, just knowing where all your money goes, it's so shocking. I did your like 15 day challenge, like 15 days to find. The 14 day money finder, yes, yes. That was really very, I knew a lot of it already, but that was so. helpful. So just, I think the biggest thing is just to make a decision and just start. And it feels overwhelming. But if you just start and you're going to mess up and then you start again and you're going to mess up and it's okay. And you start again. And then I had my son, he's 13 and he did the middle

school, we homeschool. So he did the middle school financial. curriculum, yes. And so he has some money in savings and he also has a 529. So I asked him, I'm like, do you want to move some of your money from savings to your 529? And he said, I need my $500 emergency fund. Don't touch that. So getting your kids on board and educating them as you're doing it. I'm very open with him and like, we aren't going to buy that because I only have this much to spend.

And so we're going to eat this this week or, you know, whatever. He's really on board with, involve your kids. It's got to be a family thing. as a single. So he's like my accountability person. And he enjoys it. So you can do it. All those single parents, you can do it. It's hard. So hard. But you can do it. And it might take longer than people that are married, but it's okay. Like, who cares if it takes you a whole year to save up your $1,000 emergency fund? You did it. At the end of the year, it can be like, I did it and be proud of yourself. So, yeah, baby steps. Absolutely. Joanne, you're amazing. You're absolutely amazing. I'm

I mean, everything you said, I'm like, yes, so spot on. But I think the ultimate is, like you said, you have to start. You have to make this day. And you're going to mess up, too. I love that. Your grace. Everyone out there. Give yourself grace.

You're not going to be perfect. You're not going to be perfect at it. There's going to be good months. There's me bad months. But the idea is that you're continuing just to move forward. Even if it's like two steps back, three steps forward, right? Right. That forward progress is so key.

And it helps you keep going, that momentum. So I feel it from you, Joanne. I'm so proud of you. What an amazing, amazing woman. you are and mom. And so I just, I cheer you on and I cannot wait for your debt-free scream. I know. Me too. It's paid off. I'm cheering you on. Yes, me too. I cannot wait.

So great. Thanks so much, so much for coming on and sharing your story with us. I think it's so encouraging. Absolutely encouraging. And for having me. Absolutely. And anyone out there, if you have a question, you can go on any of my social media channels from YouTube, Instagram, Twitter, Facebook, ask your question. and maybe you can be a guest on the show like Joanne. Gosh, wasn't Joanne?

Just fantastic. I mean, seriously, such an inspiration to single parents out there. I mean, she's doing it. Absolutely killing it. So, so proud of her. And I hope you guys enjoyed this episode. Thank you so much for listening.

And if you have not hit that subscribe button, make sure to do it. And if the spirit leads, you can leave a review. As always, make sure to take control of your money and create a life you love.