Everyone in the personal finance world (I would hope) is very familiar with Dave Ramsey. He has a very popular radio show, and has written one of my favorite personal finance books, The Total Money Makeover. So it would only seem fitting then that he raised an equally smart and financially savvy daughter.
Now Rachel Cruze is making a name for herself in the personal finance world, perhaps with a younger audience than her dad’s, with her new book, Love Your Life, Not Theirs.
Rachel graciously answered a few of my questions for Budget and the Beach:
Why do you think we are so susceptible to FOMO and how can that negatively affect our finances?
It’s almost impossible to be satisfied with your own life when you are constantly looking at what someone else has or the lifestyle they’re living. In our culture, we often let other people dictate our values and priorities. You have to know what you value most in life because all of your money habits flow out of what’s important to you: career choices, purchases, and investments.
To meet your financial goals and future plans, you sometimes have to say no to your wants and make sacrifices for your needs. Every decision you make will bring you closer or pull you further from your ultimate financial goals.
What is the biggest money obstacle you think most young people, or millennials have to overcome nowadays?
As young people, we have to stop comparing ourselves to one another. Comparison is the most damaging money habit we have, and it not only steals our joy – it steals our paychecks.
It’s easy to end up spending too much money to keep up a lifestyle that you think everyone else is living and you’re missing out on. Social media is a huge part of this because it gives you a little window into someone else’s life. The Joneses no longer have to live next door for you to see their new car or kitchen renovation. Now, they live in photos on Instagram.
You have to remember that social media isn’t always reality – it’s often someone else’s highlight reel. What you might not see is the huge monthly car payment they can’t pay or the second mortgage they had to take out for that kitchen renovation. It’s important to understand that the cycle of comparisons leads to discontentment which dead ends in debt. And that is something to avoid at all costs.
I read a lot of personal finance blogs, and more specifically debt blogs, where people are struggling to get out of debt, but they say things like they refuse to sacrifice things like travel, just to get out of debt. What are your thoughts on that?
If you’re really serious about getting out of debt, there will be sacrifices and choices required in the short term, and you have to accept some inconveniences, like skipping a vacation or driving an older car. You’re trading the short term rush of immediate gratification for the peace of financial success over the long term.
Unfortunately, not many people are willing to make that decision. But remember, these are just short-term sacrifices. When you get out of debt and get control of your money, you can say “yes” to a lot more. And these vacations and purchases don’t come with the financial baggage they did before.
What advice would you give to people who have started and stopped a budget over and over and have a hard time sticking with it?
The purpose of a budget is not to limit your freedom, but to give you freedom. Creating a new budget every month will give you control of your money and allow you to accomplish your financial goals. It’s not always easy, but there are some things you can do in order to succeed.
Create a new budget every month. Your expenses will be different every month, so you need to go over your budget before the month begins. The goal is to be proactive with your money, rather than reactive.
Put it in writing. Don’t rely on your memory or your ability to do the math in your head. It can be a blank piece of paper, a spreadsheet on your computer or an app on your smartphone (I recommend the EveryDollar app).
Be patient. You have to give a budget time to work. The first month is often a disaster, but you just have to stick with it. Give yourself three full months for things to start working. Over time it will become second nature to you.
Would you ever approach a friend or family member who you knew was struggling financially or being reckless with their money, but they were in denial, to try and help them? What is the best way to try and help a friend or family member with money, if at all?
Money is a subject that many people avoid because of guilt or shame. But when family or friends are struggling, it’s important that you reach out to them. You don’t want to come at it aggressively, but there are good ways to approach the topic with them.
Be empathetic. Start by letting them know that you know what it’s like to be stressed. Even if you haven’t been financially strapped, you know what it’s like to be worried, anxious or afraid. This will help eliminate any shame they may have in feeling that way about their finances.
Don’t judge them. Money talks are uncomfortable because many people fear being judged for their bad financial habits. Your loved one isn’t going to want to talk to you about their money issues if they think you are perched on a soapbox.
Offer help. This should be the ultimate goal of the conversation. Sit down and help them create a budget. Offer to be their financial accountability partner so you can help them stay on track.
Once you open up the possibilities to them, there is no telling how far they could go.
About Rachel Cruze
Rachel Cruze is a seasoned communicator and presenter, helping Americans learn the proper ways to handle money and stay out of debt. She co-authored the #1 New York Times best-selling book Smart Money Smart Kids with her dad, Dave Ramsey. Her new book, Love Your Life, Not Theirs, releases October 2016. You can follow Rachel on Twitter and Instagram at @RachelCruze and online at rachelcruze.com, youtube.com/rachelcruze or facebook.com/rachelramseycruze.
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