The Rachel Cruze Show - What to Do When Managing Money Feels Complicated

Episode Date: March 13, 2023

This episode is all about taking control of your money. Because guess what? That can help you transform your life. Today we’ll talk about the costly hoarding habits almost all of us are guilty of, find out whether or not I’m on board with a popular YouTuber’s debt payoff advice, and learn some trusty tips on cleaning up a messy budget.  In this episode: ·      5 Hoarding Habits That Are Costing You Money ·      Can This Advice Get YOU Debt-Free? ·      3 Reasons Why Your Budget Is a Mess 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

Emergencies are unavoidable. They're going to happen. Unexpected things, unexpected expenses. And so that's one reason we say to have that emergency fund. Because if you don't have it, guess who is prepared for you to have an emergency? Credit card companies. 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 be talking about what to do when managing money feels complicated. Because I know it can feel complicated, but it doesn't have to, I promise. I'll go over three ways to organize your budget. Then you'll hear a reaction video I had to a YouTuber going over how she got out of debt. I'll go over the things that I love that she did and some things that I would have tweaked to make it easier. But first, let's talk about three hoarding habits that may be costing you money. And remember, hoarding doesn't always look like what you see on TV. Take a listen.

Okay, I know when you hear the word hoarder, you're probably thinking, oh my gosh, It's some crazy extreme case, like on TLC, or there's a show about it. But here's what's interesting. My friends, the minimalist say hoarding is simply the inability to let go of excess stuff. It's a little convicting, yep. And that can look like habits that are somewhat normal. In fact, a sign of a level one hoarder is light amount of clutter in several rooms. And signs of a level two hoarder are overflowing trash cans and,

unclean food prep surfaces. So I think a lot of us might be hoarding and we don't even realize it. So let's talk about some of the common, seemingly harmless hoarding habits that are costing you. Okay, number one, shopping for items for your home

that are not needed. Oh, you know, you open up under the sink and you got tons of lotions and hairsprays and face stuff, right? Or back in the day, Bath and Body Works, like we'd have a major sale on it. like we just got to pile up on all this stuff, right? Or I'm the worst that after Christmas, I'm like, well, I'm going to save money and buy all this wrapping paper and bows and all of that, and I'm going to put it away, and then I forget

about it sometimes. Mm-hmm, that happened this year. Or maybe you have a gift closet that's full of like candles and knick-knacks for the, just in case I need a gift moment. You know, or you buy things in bulk at Costco, even though your family doesn't really need it, or you find multiple bottles of, expired condiments in the fridge. So again, I know some of this seems harmless

and it might even seem resourceful in the moments, but here's the deal. Most of the time, it ends up just wasting your time, your space, and your money. So when things are on sale, we tend to be like, well, we will buy this up because this is great. It's a great deal.

And I'm going to have it because I will use it. And then you go home, and if you get in the habit of it, you put it away somewhere and you forget about it. So you don't end up using it. or you think where did that wrapping paper for Christmas that I bought 11 months ago, where did it go? I don't remember. So unless there's like a very strict system in place and you actually consistently use it, that's one thing.

But this idea that, oh, it's just on sale, so I'm going to just buy it because just in case it's all there, yep, that's a sign that you could be a level one hoarder. So next time you go to buy something for a just in case or just because it's a great deal, ask yourself, do I have the mental and physical space to use this item? And is it worth it? My friends, the minimalist always say that just in case, get rid of it, get rid of it. All right, number two, fancy home organization systems for things you never use or don't need. Now listen, I love a good basket.

I love a good storage totes as much as the next person, okay? It's great. But here's a deal. It can be very helpful for things that you use because you're like, yes, it gives me organized, keeps things clean and simple and it's wonderful and it looks beautiful it looks beautiful but sometimes we want to go and throw crap in a bin even though we don't need to use that crap that that stuff needs to be thrown away or give it away or like moved out of the house oh i do this all the time with my kids toys it's terrible it's like stuff just piles up and like just get a cute bin from target and just throw it all in and again it looks aesthetically pleasing

because everything matches and it looks good there's just a bunch of crap in there And here's what's interesting. Research found that the average 10-year-old owns 238 toys, but it only plays with 12 on a daily basis. 12. So there's just a relief, though, when you go and clean things out. And again, it could be your kid's toy area. It could be your closet, whatever it is. But when you, like, get rid of stuff, you do, you like emotionally, like, oh, I just feel freer. It's so great. And listen, the reality is, though, most level one hoarders have stuffed every socially acceptable storage space in their house to the brim. In fact, our homes can even seem tidy due to all the expensive organization that went into

every single thing, but then we use up every piece of the room. So let me just encourage you, have space. Just have space. It feels good. Just to have space. If you're not using stuff on your kitchen counter, put it down, store it below, or get rid of it because it's like, oh, space just does something to you mentally and it's so good. And, you know, I say it all the time, you guys, true.

I'm not against stuff, okay? So have some nice stuff, but don't let your nice stuff have you. Don't go into debt for it and don't let it overtake you, overtake you when it comes to hoarding. So if you're tempted to spend a lot of time and money and energy on implementing home organization systems, first, just be honest with yourself. Do I really need to organize this stuff or do I simply need to let it go? Number three, having a junk drawer room,

trunk, closet, etc. So the stats show that nearly half of households have an entire room in their house dedicated to hide junk. Just to put junk, close the door, and keep it off limits, and it's all in there. It is all in there.

Sometimes it's the garage, it's maybe a room in your home. And again, if you don't have a junk room, then you probably have a junk drawer, we do for sure. Maybe a junk closet or even a junk trunk in your car. Mm-hmm. So again, you guys, letting this stuff pile up is not doing you any favors. And it only is adding to the chaos of your home, but you're also letting your stuff depreciate and value the longer it sits.

The average American has close to $300 of unworn items in their closet right now. So actually, if you sold all that stuff, you never wore, you would have cash, you'd have space. I mean, it's a win-win, you know? And I just find if I have areas that tend to overflow with stuff, I try to make that area smaller so it overflows faster. so it overflows faster. I have to get rid of it. So I love books. I love to read and I will buy the physical book.

I don't do it, can, though. I do the actual book. And my little chest in my room with some drawers and it's like two areas. And I just put a bunch of books in there. And when I read them, I'll store them. If I really like them, I want to keep them. But anyways, it just gets piled up and it overflows. But I like that it's not a massive bookcase because if I had a massive bookcase,

I would continue to keep the books. I don't need them. I give them away. Sometimes on Instagram, follow. me there in other places because I'm like, get rid of them. I don't need them anymore. And it's a great feeling. So what is it for you that puts you on the hoarding scale? Maybe you jump from hobby to hobby and you have old gear that just keeps piling up. You know, maybe you keep Tupperware around way too long and you're just like, that lid is going

to show up. I promise the lid will show up. I'm telling you right now it's not showing up. If it hasn't shown up in four to eight hours, it's gone. It's gone. Okay, so I want to know from you, where do you tend to hoard? I want to hear from you guys, so make sure to leave a comment as well. So today I'm going to react to a popular YouTube video about paying off credit card debt. The creator of the video says that she was able to pay off $10,000 in six months, which is amazing. So we're going to talk through this woman's situation and decide if her advice will help you become debt-free. So let's start the video and see what she has to say. Today's video is about how I paid off $10,000 in credit card debt in six months.

I am so excited and this really hasn't even hit me yet. First of all, this has been the best year for me financially and this is my first year being a full-time YouTuber where this is the only job that I am working. It's been that way since January so it's still relatively new. And I have been earning small amounts of money from YouTube since about 2012 but this is not a YouTube get rich quick scheme. It has taken a lot of time and work to get to the point where this is my full-time job. Okay, perfect. So let's pause there. George and I just talked about this on a recent episode of Smart Money Happy Hour. We talked about influencing and how it's a career now on social media

and we really looked at the ends and outs of it and I appreciate that she warns against the get-rich quick mentality. Oh, because it can be so easy to be like, oh look, they're making tons of money. that'll be easy. But honestly, making good consistent money on a social platform does not happen overnight. It doesn't happen for all people. But it can if you're consistent with it. But it is not a great method to get cash quickly. Another side hustle would be better for that. So I appreciate that she said that. So just want you guys to keep that in mind. Okay, let's listen to her next point. Really, I don't want anyone to directly compare their situation to mine. I think when it comes to personal finance, it's important to remember that it's all about concepts and strategies.

Everyone's income and expenses and situations are very different. Those amounts will vary wildly. But when it comes to debt payoff, the strategies are all pretty much the same. Okay, so part of this I love. So I love that she said, don't compare your financial situation with someone else. And don't you guys, the comparison trap is so, so real. And you have no clue what is going on with someone else. So don't make this like snapshot of someone's life and just a story.

assume you know everything about it. Do not compare your life. But then she says, well, everyone's strategy can be different. And I'm like, I don't know if I agree with that because I feel like, obviously I'm very biased. But the way we talk about it at Ramsey is the debt snowball. That's what we teach to get out of debt. And it is one of the proven methods of getting out a debt most effectively. So the debt snowball is where you list out all of your debt, smallest to largest, regardless of the interest rate, pay minimum payments on everything, and attack that smallest debt first. And you do it that way. And so that strategy, regardless of your financial situation, consistently will work. Okay, let's see what's next. Anyway, let me give some backstory into my situation.

How did I get into $10,000 of credit card debt? So I made this video back in March to publicly announce my debt payoff journey and specify exactly how much money I owe. In addition to my credit card debt, I also owe now about 18,000 in student loans. By the way, I chose to tackle credit card debt first because the interest rates are higher. My credit card interest rates averaged about 20%, while my student loan interest rates are about 4%. Okay, so I mentioned the debt snowball earlier, and remember, it's regardless of the interest rate. So I would still pay off her credit cards first, the 10,000 before the student loan, because it's the smallest amount, not because of the interest rate. Paying off debt is not always about math, you guys. Math itself is not what's going to get you

out of debt. You is what is going to get you out of debt. And when you get quick wins with paying off the smallest one first, it is proven to have momentum in the process. Okay, now she's going to explain how she acquired so much credit card debt. Once I got to college, though, my biggest problem was that I just was not making enough money to keep up with my expenses. And that is when I started to rely on credit cards to kind of bridge that gap. And obviously, we know those balances can grow really quickly. I used to work regular minimum wage jobs, you know, in food service, child care, work-study jobs on campus.

I made about $15,000 in 2016. And then in 2017, I studied abroad and couldn't work. And then that summer, I worked at a summer camp, which did not pay much. It's more of an experience. And in 2017, I only earned $5.5. $5,000. I honestly don't even know how I survived. So while studying abroad, my room and board was covered by student loans and I got a small stipend, but I did end up adding about $1,400 to my credit card by the end of my semester and time traveling. Shortly after that summer, I also had to spend $2,000 on emergency dental work. Yay to being uninsured. No, that was not fun. And I also decided to drop $2,000 on Smile Direct Club to straighten my teeth. I don't. definitely did not have the money for that at the time, but I was just sick of being insecure about my teeth, and honestly now, very worth it to me. I'm glad I did it then. But then, of course, studying abroad was amazing,

but it also cost a lot of money, and it definitely added to my student loan debt and my credit card debt. But again, I think it was worth it. I mean, I would not regret that experience ever. So yes, looking back, about 5,500 of my $10,000 credit card debt happened in just 2017. I had always been conscious of my debt, and I always made my payments on time every single month. But by like early 2018, I was 22, and I just still wasn't earning very much money. Okay, so this makes sense. This happens for a lot of people when it comes to travel and emergencies, especially in emergency surgery. This is where a lot of people get stuck in a credit card debt. So two things to remember. Number one, you want to budget. Okay, so you want to budget and know exactly where your money's going. So when

something like travel comes up, for instance, you can plan ahead. Now, we talk about having a thousand dollar emergency funds at the beginning of the baby steps. And this is really important because when unexpected things come up like this dental surgery, she has to have it. So what you would do in that situation is you have a thousand dollars saved, pause paying off debt, pile up a thousand dollars, put it together, get the surgery, make sure you're good, and then go and build back up the emergency fund of a thousand dollars and then start paying off debt again because here's the deal. Emergencies are unavoidable. They're going to happen. unexpected things. Unexpected expenses are very common. And so that's one reason we say to have

that emergency fund. Because if you don't have it, what's also common is going into credit card debt for those emergencies. Because if you don't have money in the bank, guess who is prepared for you to have an emergency? Credit card companies and the bank. They know that you're going to depend on them when emergencies happen. So we want to cut that out of the store. and have an emergency fund. So again, following the baby steps, living on less than you make, puts you in control of your money.

And then if you're budgeting when it comes to things like debt or comes to things like travel and all that, you can put that in your budget and plan out where your money is going. And she also says in the video that she doesn't regret going into debt for studying abroad.

Listen, I know memories are made and it is so exciting, but that's one reason you say, I'm going to put it in the budget. Do I want you to have those memories? Yes, I can. do, but I don't want you going into debt for those memories. It's not worth it. Just saying, hey, we're going to plan out and not let our money control us, not be owing people's stuff,

but I'm going to plan and budget and save for it. Because traveling around the world, if it's something you really want to do, then put it in the budget, create a sinking fund for that experience. So when the time comes, you have the money for it and you're not going into debt and wasting money on interest. All right. Speaking of interest, she actually shared, some numbers here in this next part. So let's take a listen. And my credit card payments were annoying, of course, but I was kind of used to just paying them. And I had no idea how much money I was actually wasting. I did the math just recently. And in 2018 alone, I paid $1,587 in interest across four cards. Want to know how much I earned that year? Just about $20,000 before taxes. So the amount of

interest that wrapped up on my credit cards was over 12% of my entire annual income. That is insane. Clearly, I needed to pay this off and I knew that I was not going to live with this debt forever. So remember, interest paid is a penalty. Interest made is a gift, right? So when you make interest on your money by investing it, that's amazing. Your money's making money. But then it's a penalty if you're the one paying interest. And that is one of the reasons that I teach people not to use credit cards because it is a slippery slope. You get used to living a certain lifestyle. And then if you up it a little bit and you don't have the money to pay the bill at the end of the month, interest is going to kick in and it is like throwing money away. So that $1,500 that she

paid in interest is gone. Like it is out there. It wasn't for anything else except for the bank in the credit card companies. That's what makes them rich, is interest. That's how they make their money, you guys. That is how they make their money. Okay, I'm done with my interest rant. So let's watch one more clip to see how she recommends getting out of debt. Now I'm going to tell you a few basic steps for paying off credit card debt and what my actual process was like. Step one, you've got to get serious and commit. This is honestly the hardest part.

A lot of us can live with debt and kind of push it to the back of our minds and ignore it. But it is so important to finally realize that you are done with this and you are going to start seriously working to pay it. off. Second major tip, you must track your income and expenses religiously. But the thing is, I actually enjoy this process now. Like, I used to be one of those people who was scared to even look at my bank account, and now I check it, like, weekly at least. I always know what I have spent, and I know what I'm going to spend in the next month. And that makes me feel more secure, and I don't feel like I'm drowning. Okay, I love this. I love, love this. So clearly, she handles her money way differently now. that she's out of credit card debt, which is so great.

So she recommends budgeting, yes. She recommends tracking expenses to pay off debt to avoid more debt later. Yes. She says having a month-to-month plan helps you know what to expect. And this is exactly what we teach at Ramsey. And I love every dollar the budgeting app because it does. It helps you plan and budget and know where your money's going. And I also love it.

She's just being so open about the lessons that she learned. You know, there's no shame. We all make mistakes. We are learning. But the idea is that you're starting a path that is going to help you financially, and that is the path that sounds like she's walking down, which is great. And it sounds like she is becoming more financially stable over the years. So she is doing better, which is absolutely incredible.

And trust me, we hear this all the time on the Ramsey show, that once you feel that crippling effect of debt, that weight, and you get out of it, you never want to get back into the cycle. So make sure to share this with a friend who's working to get out of debt. The encouraging thing is that we learn today is that your money situation is not permanent. There's hope that you can change your future with some discipline, changing your habits,

but it is possible for anyone. So today we're going to talk about why your budget is a mess, aka how to get your budget back in order when you let it go, or maybe it's just been really tight lately, and you're like, oh, I need some breathing room. The categories are out of whack. Listen, we're going to rain it in and look at your budget because a lot of these things consistently work for everyone's budget, regardless of where you are.

So first up, look at your budget categories and practice, or I challenge you to eliminate all of the ones that are wants versus needs. Or even just say, hey, let's put your needs up here in the budget and then all your wants down below and then be able to see, oh, man, there's a lot of wants, a lot of wants. Lifestyle creep is a real thing. We talk about this, and it is so easy to continue to spend money on things that are convenient, you know, but not 100% necessary. You know, like another tube of lip gloss that you bought, but you have five others as well, like the same color.

So we look and we're like, man, we spend a lot of money on wants because really your needs is what we call your four walls, which is food, shelter, utilities, and transportation. Everything else is a luxury. except for your four walls. So again, even within your four walls, you could have restaurant category, which is technically food. But listen, if your finances are really tight right now,

if you're getting out of debt, if you're trying to find any margin, if you eat at home, take that category out, and that is money now that you can use in your budget or just to have margin with. And listen, this doesn't have to be forever. And it just kind of helps just to get a reset. Christina, one of our Ramsey personalities,

she did this in January, you guys. She and her family did a no-spin January, where they only bought things that were necessities that fit into the four walls categories. That's it. That means they only ate meals at home for a month, and let me tell you, they saved a ton of money in just a few weeks.

So discipline like that is really helpful, and it does help you reframe, like, wow, what was my norm, spending all of this money over here? If I take it away and have this new norm for a little bit, I realize, oh, maybe I can do a little bit over here, but I don't have to go to the extreme like I was. So again, reframing your mindset is so helpful. And I want to encourage you occasionally

just to take a break from those wants, those things that are just consistently in there. So whether it's subscriptions or food delivery services or things like that, take them out for a season. Again, if you're getting out of debt or you need more margin, especially for you guys, because it gives you some breathing room. And it is, it's amazing what happens.

when you spend on just your necessities and not your wants. The second thing you want to do to re-evaluate your budget is to talk to your friends. Yes. People that are in the same, you know, span of life you are, season of life you are, it's actually really helpful to be like, hey, can I just know how much you guys spend at Costco? My sister-in-laws, we did this the other day because when I have Marco Polo, we use this app.

It's like for like old people, I feel like, but we use it. Yeah, and they were like, can we just ask everyone? like, how much is everyone spending at Costco? Because it feels crazy. So there's just a level of like, okay, wow, okay, let's just see where we're at because we all have three kids and like all the things. So it is. It's just helpful to talk about it.

Now, I may panic some of you, but if you have a friend that is good with money and that is helpful, sometimes it's nice just to kind of share like, mm, am I crazy? Am I off here? I have some single friends and they do this regularly and they swear by it. Now, if you're married, you're going to have your spouse with you, and you guys are going to be working on this, which is awesome. But I would even encourage you every now and then to be like, hey, you know, bring in a mentor or a trusted friend, again, someone that is good with handling money, that is wise,

and talk to them and just see like, okay, does this feel right? Just getting some feedback on your budget from a trusted source can be really helpful. And it can reduce shame. It can reduce questions around money and just kind of get in this new rhythm. And even things Winston and I have adapted over the years is things that we've heard from friends or from family. So it is really, really helpful. And money is something that everyone has to deal with, no matter how little you have, how much you have, everyone has to deal with it. So people that you trust that you know are wise with money, yeah, talk to them about it. I think that that's awesome.

Okay, the third thing that you can do to clean up your budget is to get into the habit of adjusting it month to month. Have you ever stopped to think about the fact that there are different expenses for different seasons and months of the year. Different things are going on. So for example, if you have two kids and their birthday falls in December, you know you're going to have Christmas and two kid birthday parties. So you adjust for that. And then come January, you don't need those categories anymore. Or if you have a category for date night and it's Valentine's Day or your anniversary month, you know that that date night category is probably going to be a little higher. The next month, you can go back and lower it. So this kind of takes.

some practice to get a hang of it, but Winston and I, we do this all the time. And if it's helpful, what we do is we have our set expenses and then underneath the very bottom is our month-to-month expenses, things that just come up, right? Like if there's camp money due for the kids, if I, like, applied, you know, for them to go to camp, to insurance that comes, you know, four times a year, like, whatever it is. So then we go to the next month to plan next month's budget. We look at those categories at the bottom and we're able just to eliminate them because we don't need them for that month and then add in other categories for that month if we need them. So it's just helpful to stay organized.

It takes us like five minutes, but it's helped us out a lot. All right, you guys, there you have it. If you've been thinking about tightening up your budget recently, I hope that this video was helpful. And if you have not downloaded every dollar our budgeting app, I would do that because, again, it's always helpful to see things in front of you visually and every dollar connects to your bank. So it helps you track transactions throughout the month to make sure your budget is on track.

And these are just small things that you can do, man, that you can adjust and find margins so quickly. All right, you guys, when it comes to organizing your budget, anyone can do it. So hopefully those three tips helped you out. And thank you guys so much for listening to this episode of the podcast. One thing that is so helpful is to leave a review and share this podcast with a friend. It is so, so helpful because we want to spread the word. And if you have not subscribed to the podcast, make sure to do that as well. and remember to take control of your money and create a life you love.