- 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. (upbeat music)
