5 Money Mistakes That Are Destroying Your Finances

- Well, guys, welcome to another episode of The Rachel Cruze Show. Alright, there are five things you should avoid, absolutely avoid, to be successful when it comes to

money

. In reality, there are probably more than five in life, but we're going to talk about five here, because in all my years of living and breathing personal finance, I've found that these five can really ruin people financially. They steal

your

financial future, cause stress and anxiety. Ugh, not good. So, let's talk about the five

money

mistakes

that are

destroying

your

finances

. Alright, number one, credit cards. Yes, Rachel Cruze doesn't like credit cards.

I know it's a shock, but listen, credit cards, it's the only monetary mistake on probably this whole list that people just justify it over and over again, so whether it's rewards or airline miles or points or 0 % interest, everyone always has something. "Well, Rachel, this is what I'm going to use it for" or "I'm doing it for this." Okay, listen. In 2020, the average interest rate on credit cards was 16.43%. Guys, that's crazy, that's crazy. The average family paid $1,155 in credit card interest alone. $1000, bye, see you. I mean, it's very frustrating because, number one, when you use a credit card, you're spending more;

Studies have shown that 10-30% more when you use a credit card. Because? Because emotionally, mentally, you can just check it out. It doesn't even feel like your money, so you say, "Oh yeah, just add a little more here, a little more here," and you end up completely justifying it. And it feels like, oh, okay. Well, then you end up with credit card debt and paying interest on something you bought a month, two months, or three months ago. So you spend more and, again, the rationale is that okay, well, I'm doing it again for all the points systems.

Well, the billions of unused airline miles every year, and all those points and those rewards and the cash back, all that stuff that you're getting, it's not because the credit card companies just think, oh, we just love each other. . people, and we will simply serve you and reward you for spending all this money. They don't do it out of the goodness of their heart. They do it because they are making a lot of money thanks to the interests of other people, and other people who are probably in financial difficulties and turn to credit cards, thinking that it is their only way out, and thanks to them, they cannot pay the your credit card bill and are paying interest, which makes the credit card companies and banks more money and, in turn, they can give you money.

So you're actually reaping rewards because other people are mismanaging their money. Bleh, it's not fun. So I just don't want to be part of the toxic money culture and that industry at all. I don't want to be part of them at all. So in my case, I use a debit card. A debit card will do everything a credit card will do except put you in debt. So you won't go into debt when you use a debit card, but you can shop online, you can book hotels, you can actually book car rental companies, Dollar Rental Car, there are companies that will rent it, yes, they will rent it. you cars.

Winston and I rent cars all the time and we're fine. But the debit card is key. Okay, number two, car payments. The average payment for a new car, get ready for this, is $554. The average for used cars is $391. So this is what is difficult for me. The car loan, mathematically speaking, takes all the emotion out of it, just mathematically speaking, it's probably the dumbest debt you could ever take on, because you're going into debt for something that's going down in value. So when you get a mortgage, for example, which is the only type of debt I won't yell at you about, you're buying a house.

In most cases, over a long period of time, that home will increase in value. When you simply take a car off a dealership, you lose tens of thousands of dollars, meaning they just disappear. Is incredible. But you are borrowing money and paying interest on something that is losing value. Oh, I hate it so much, I do. So listen, you can still get your car payment if you really want to. Or let's say you took that $391 payment for your used car and invested it for 30 years with an 11% return. Know? You can retire with almost $1.1 million, a million dollars, instead of making a car payment, you invest it. , and you get a million dollars.

Do 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 really can buy, with cash, safe and reliable used cars. Now, once you have a net worth of a million dollars, you can buy a new car, because you can bear the financial impact of leaving the dealership and losing a lot of value. But again, recommend reliable used cars. So I'm going to put a link in the description as we talk more about it, because I want you to live like no one else so that then you can live, give, and lead like no one else.

Number three, another mistake people make that is ruining their

finances

is not making a budget. In our survey of American finances conducted here at Ramsey Solutions, only 50% of respondents had created a budget in the past 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'll tell every dollar where to go, even if it's mundane, okay. I was talking to one of our friends about this about two weeks ago and he said, "I work really hard and I don't want to look at every dollar I spend.

It's just not worth it." "Oh man, man, no matter what income you make, no matter what spending you do, you guys, no matter what, you have to make a budget. Now, once you're in Baby Step 7, if you want to loosen the strings, do larger amounts in your budget and not, you know, every Amazon, maybe everything is bundled together, you can be a little bit more, Okay, yeah, sure, if you want, I guess But you have to be able to say, okay,. this is a big chunk of our money that we're going to spend this month, this is how much we're going to spend it on here, this, all categories, you have to be able to say intentional, because in the same survey, budgeters, once who budget, are more likely to say they are better off financially than they were a year ago, because they have a plan, because they live with a purpose Number four, whole life insurance, dun dun dun Well, whole life insurance is known. as a type of permanent life insurance, meaning you have it in force for your entire life.

Which I understand sounds good, like, oh yeah, I'll have life insurance forever. But listen, if you're working on this plan and you're debt-free and you're investing and your house is paid off in Baby Step 6, and you start, you know, doing everything, you'll be self-sufficient. eventually insured. So the idea of ​​having life insurance for life is unnecessary. Now, for whole life insurance, at the beginning, you and the insurance company will decide the amount of your policy and what you call the death benefit. This is then the sum that will be paid to your loved ones or beneficiaries when you die.

When you pay your premium, which is very expensive, some of it goes into the policy and the other part goes into what's called a cash value account, which is like an investment, but at a really low interest rate. The rate of return is really low. Not good. It is not a good investment. And then there are all kinds of stipulations like if you die too soon, if you don't die soon enough, the company keeps the bill for the cash value and your family never sees it. You're putting money into 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 shouldn't be true. So what you need to remember is that your life insurance and your investments should be separate. They need to be separated. Insurance ended here and your investments are in a totally different space, okay? Keep them separate. So what do you do if you have whole life insurance? Well, move on to term life insurance. It's 10 times cheaper than any whole life insurance policy you'll see out there, and you can buy life insurance for a specific period of time, like 20 or 30 years. You get a policy that pays 10 to 12 times your annual income in coverage, and as you know, I always recommend Zander's term life insurance.

Zander saves you time by purchasing all the rates for you and saves you money by presenting you with the best value for your particular situation. So be sure to contact Zander at zander.com. Alright, last but not least, the last mistake people make is not talking about money. Listen, I know it can be uncomfortable. If you're not used to it, it can be a strange conversation. and it's like, well, I don't really even know how to activate it, I don't know. So you're going to stumble, you're going to make

mistakes

, but keep going. Talk about it.

Conversations about money are very valuable, especially if you are married. And if not, have someone in your life you can talk to about it. 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 about, okay, what are the things I'm doing long term, that is, setting goals. And if you're married, set goals together. It will bring you together and unite you as you work towards the same goal. But for this we have to talk about money. If you have children, talk to them about work, about giving, saving and spending, about generosity and contentment.

Talk about these things. You don't have to say, okay, this is how much money we make. I don't say it tactically all the time, but let's say, hey, let's talk about what money is. What role does money play in our lives? Have those conversations with people in your life, guys. Learn to talk about money, because it is a shameful topic. And when you can say things in the light, that shame goes away. Because most people struggle with the same things you struggle with. So talking about it is very, very good. Very good, I hope I have helped you understand how to avoid many of these money mistakes that are costing people so much in the long term.

Guys, you can do this. You don't have to make all these mistakes. You can make changes in your life starting today. You can learn to take control of your money and create a life you love. (upbeat music)