- Well, hey guys, welcome to another episode
of The Rachel Cruze Show.
All right, there are five things
that you need to avoid, absolutely avoid,
in order to be successful when it comes to money.
Actually, there's probably more than five in life,
but we're gonna talk about five here,
because in all my years
of living and breathing personal finance,
I have found that these five
really can ruin people financially.
They steal your financial future,
they cause you to be stressed out and anxious.
Ugh, it's not good.
So, let's talk through the five money mistakes
that are destroying your finances.
All right, number one, credit cards.
Yes, Rachel Cruze does not like credit cards.
I know it's a shock,
but listen, credit cards, it's the one money mistake
out of probably this entire list
that people just justify it over and over,
so whether it's the rewards or the airline miles
or the points or the 0% interest,
everyone always has a thing.
"Well, Rachel, this is what I'm gonna use it for,"
or, "I'm doing it because of this."
Okay, listen.
In 2020, the average credit card interest rate was 16.43%.
You guys, that's insane, that's insane.
The average family paid $1,155
in just credit card interest alone.
$1,000, just bye, see ya.
I mean, it's so frustrating, because, number one,
when you use a credit card, you are spending more,
studies have shown anywhere from 10 to 30% more
when you're using a credit card. Why?
Because emotionally, mentally, you can just check out.
It doesn't even feel like your money,
so you're like, "Oh, yeah,
just add a little bit more here, a little bit more here,"
and you just end up justifying it all the way.
And it feels like, oh, it's fine.
Well, then you end up with credit card debt
and paying interest on something that you bought
a month ago or two months ago or three months ago.
So you spend more, and also, again, the rationale,
okay, well, I'm just doing it, again,
for all the point systems.
Okay, the billions of airline miles
that go unused every year,
and all those points and those rewards and the cashback,
all of that that you're getting,
it's not because the credit card companies just think,
oh, we just really are loving people,
and we're gonna just serve you and reward you
for spending all this money.
They're not doing it out of the goodness of their heart.
They're doing it because they're making a crap ton of money
off of interest of other people,
and other people that are probably struggling financially
and turning to credit cards,
thinking it's their only way out,
and because of them,
that they can't pay their credit card bill
and they are paying interest,
making the credit card companies and banks more money,
in turn, they're able to give you money.
So you're actually getting rewards
because other people are mismanaging their the money.
Bleh, not fun.
So, I just don't wanna be part of the toxic money culture
and that industry at all.
I don't wanna be part of them at all.
So, for me, I use a debit card.
A debit card will do everything a credit card will do
except get you into debt.
So you are not gonna be in debt when using a debit card,
but you can shop online, you can book hotels,
you actually can book rental car companies,
Dollar rental car, there are companies
that will rent you, yes, they will rent you cars.
Winston and I, all the time, rent cars, and we're fine.
But the debit card is key.
All right, number two, car payments.
The average car payments for a new car,
get ready for this, it's $554.
Average for used cars is $391.
So this is what's tough for me.
The car loan, mathematically speaking,
like, take all the emotion out of it,
just mathematically speaking,
it's probably the dumbest debt that you could get in,
because you're going in debt for something
that's going down in value.
So when you get a mortgage, for instance,
which is the one type of debt
I will not yell at you for,
you're buying a house.
In a majority of cases, over a long period of time,
that house will go up in value.
When you just drive a car off a car lot,
you lose just tens of thousands of dollars,
I mean, it's just gone.
It's unbelievable.
But you're borrowing money and paying interest
on something that's losing value.
Oh, I just hate it so much, I do.
So, listen, you can keep having that car payment
if you really want it.
Or let's say you took that $391 car payment
for your used car
and invested it for 30 years at 11% return,
do you know, you can retire with nearly $1.1 million,
a million bucks, instead of paying a car payment,
you invest it, and you get a million dollars.
You know what you can do with a million dollars?
Buy a really cool new car.
You can do a lot with a million dollars, I promise.
But, you can actually buy, with cash,
safe, reliable used cars.
Now, once you have a net worth of a million dollars,
you can go buy a brand new car,
because you can take the financial hit
of driving off the lot and it losing so much value.
But again, recommending reliable used cars.
So I'm going to put a link in the description
as we talk more about that,
because I want you to live like no one else
so later you can live and give and drive like no one else.
Number three, another mistake people make
that is ruining their finances is not budgeting.
In our survey of American finances
conducted here at Ramsey Solutions,
only 50% of respondents had done a budget in the last year.
Listen, if you're not budgeting,
you're not controlling your money.
In fact, you're probably wasting a lot of money.
When you can be diligent and say, okay,
I'm going to tell every dollar where to go,
even if it's mundane, okay.
I was talking to one of our friends
about this like two weeks ago,
and he said, "I just work really hard,
and I just don't wanna look
at every single dollar I spend.
It's just, it's just not worth it."
Oh man, man, no matter the income you make,
no matter the expense you make,
you guys, no matter what, you need to be budgeting.
Now, once you're on Baby Step 7,
if you kind of want to loosen the strings,
make bigger bulks in your budget
and not, you know, every single Amazon,
maybe everything's lumped together,
you can be a little bit more, okay, yeah about it,
sure, if you want, I guess.
But you need to be intentional.
You need to be able to say, okay,
this is a big part of our money
that we're spending on this month,
this is the amount we're gonna spend it on here,
this, all the categories, you need to be intentional,
because in the same survey,
budgeters, once who are budgeting,
are more likely to say that they're better off financially
than they were a year ago,
because they have a plan, because they're living on purpose.
Number four, whole life insurance, dun dun dun.
Okay whole life insurance is known
as a type of permanent life insurance,
which means you have it in place for your entire life.
Which I understand kind of sounds nice,
like, oh, yeah, I'll have life insurance forever.
But listen, if you're working this plan
and you're out of debt and you're investing
and your home is paid for on Baby Step 6,
and you start, you know, doing everything,
you're gonna be self-insured eventually.
So the idea of having life insurance
for your entire life is unnecessary.
Now, for whole life insurance, in the beginning,
you and the insurance company
will decide your policy amount
and what they call the death benefit.
So this is the sum that will be paid
to your loved ones or your beneficiaries when you die.
When you pay your premium, which is really expensive,
one chunk of it goes to the policy,
the other chunk is applied
to what's called a cash value account,
which is like an investment,
but at a really crappy interest rate.
The rate of return is really low.
It's not good. It's not a good investment.
And so there's all kinds of stipulations
like if you die too soon, if you don't die soon enough,
the company gets to keep the cash value account,
and your family never sees it.
You're putting money on an investment,
and if you die or don't die soon enough
or something happens, it's gone.
It's crazy.
I mean, no, no, no, no, no, no.
No, that should not be true.
And so what you have to remember is that your life insurance
and your investments need to be separate.
They need to be separate.
Insurance is over here and your investments
is in a totally different space, okay?
Keep them separate.
So what do you do if you have whole life insurance?
Well, you go to term life insurance.
It is 10 times cheaper than any whole life insurance policy
that you're gonna see out there,
and you can buy life insurance
for a specific amount of time,
just like 20 years or 30 years.
You get a policy that pays out 10 to 12 times
your annual income in coverage,
and as you guys know,
I always recommend Zander term life insurance.
Zander saves you the time
because they shop all the rates for you,
and they save you money by presenting you the best value
for your unique situation.
So make sure to get in touch with Zander at zander.com.
All right, last but not least,
the last mistake that people make
is not talking about money.
Listen, I know it can be awkward.
If you're not used to it,
it can be a weird conversation.
and it's like, well,
I don't really even know how to engage it,
I don't know.
So you're gonna stumble, you're gonna make mistakes,
but press in.
Talk about it.
Conversations around money are so valuable,
specifically if you're married.
And if you're not, having someone in your life
you can talk to about this.
99% of millionaires said
they have a long-term plan for their money.
Which means if you want to be successful,
you have to think, okay,
what are the things I'm doing for the long term,
so setting goals.
And if you're married, setting goals together.
It's going to bond you guys, unite you guys,
when you are working toward the same goal.
But in order to do that, you have to talk about money.
If you have kids, talk to them about work,
about giving, saving, and spending,
and generosity, and contentment.
Talk about this stuff.
You don't have to say, okay,
here's how much money we make.
I'm not saying tactically all the time,
but say, hey, let's have a conversation
with what money is.
What role does money play in our lives?
Have those conversations with people in your life,
you guys. Learn to talk about money,
because it is a shame-filled subject.
And when you can say things into the light,
that shame goes away.
Because most people struggle
with the same same things you struggle with.
So talking about it is so, so good.
All right, I hope I helped you understand
how to avoid so many of these money mistakes
that are costing people so much in the long term.
So guys, you can do this.
You don't have to make all these mistakes.
You can make changes in your life as of today.
You can learn to take control of your money
and create a life you love.
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