INDIANAPOLIS — Financial experts Dave Ramsey and Rachel Cruze stopped by the WTHR studio to give inflation advice ahead of their sold-out Indianapolis Building Wealth event.
Allison: Four in 10 people report having $0 in savings according to a Ramsey Solutions Survey. Where do they start to get out of that?
Dave: Saving money or handling your money is an act of intentionality, you got to just do it on purpose.
What happens with most people is we earn money, we spend it and then we look up and go, 'Where'd it go?' instead of what's happening to your money. And so this idea of being intentional — no one wins at anything accidentally. You don't accidentally save money, same thing. You've got to say, 'We're going to aim at this. We're going to do the dreaded B-word — the budget. We're going to make every dollar behave every month and agree on it with our spouse.' And then we've got a game plan that causes savings to appear.
Allison: And with the budget, you have a budget app called EveryDollar. You can fill it out, for the people at home who don't know what it looks like, you just plug in the different amounts and say, 'Hey, I got $200 for electric this month.' But how can people best figure out how much money to put in what section?
Rachel: I always tell people, if you're first budgeting, go back for the past three months and look at your bank account. Kind of average [it] out. Here's what we spend on groceries, on average. Here's what we spent eating out, which will make you sick. This is what our cable is on average. Remember what those numbers are before you budget.
You can probably decrease some of those that aren't fixed expenses because you're actually being intentional with your money. I'd say start out there. But always know it takes about three months for the budget to work. So EveryDollar is a great helpful app because it does the math for you. You can drag and drop your transactions because it connects to your bank. So it is wonderful, but give yourself 90 days and give yourself some grace in this.
Allison: What happens if you're on board, but a spouse is a spender. What is the best way to navigate that situation?
Dave: You know, what we've got to do is realize that money problems are not really the problem. They're the symptom. And one of the biggest things they're the symptom of is marriage issues. What we end up seeing is that when people start budgeting together, setting goals together, dreaming together, even facing their fears together, it becomes this like marriage counseling session to do a budget. It's the weirdest thing. And so really, what happens if the spouse on board is that means we don't have a dream for the future that we're both in agreement on. Because otherwise, we're not going to sacrifice to get to the same the place.
Rachel: For couples, I would say to embrace your differences because you are going to have a spender, you probably are going to have a saver. Opposites attract. I always say you need each other in this and see yourself as a team. Many couples, they have their money issue in the middle of them. Visualize you both locking arms and looking at the problem out there and say, 'Hey, together, how do we figure this out?' We, Dave, are actually both natural spenders. You can be a natural spender and still be wise with money.
Allison: And for the person who's at home, who doesn't have a savings, but also has credit card debt? Where should they start? Do they build up a savings first and then tackle the credit card debt or focus on the debt?
Dave: We've been teaching a thing called the baby steps for years. And the baby steps — baby step one, is simply get $1,000. A little starter emergency fund, it's not a full one. But just to kind of, you know, if the tire goes flat, we don't have to put it on a credit card. So little baby emergency fund, and then list all of your debts smallest to largest, not counting your home and attack that smallest room with a vengeance. We call that the debt snowball and work your way down through the debts smallest to largest. And the person that does that, again, with a couple working together, they typically are getting out of debt in about a year and a half to two years, everything but the house. That includes the big old nasty student loan, that includes the big old nasty car debt, everything. You can do this, but it requires us intense focus and working together.
Allison: You both have podcasts. What's a question that's been coming up more frequently that you can think of?
Rachel: So when it comes to inflation, I feel like there's just a lot of fear around that. You're seeing your mother-in-law posts on Facebook about it. You're seeing the news, and they're talking about it, but it's just everywhere. We tell everyone 'OK, focus on facts and not fear,' because sometimes it can just feel like it's like it's crazy, right?
We go to the grocery store and see eggs, and we're like, 'Oh my gosh, how is it costing that much?' Being able to focus on facts, that's why the budget is really important to combat inflation because you are purposeful with your income because it can be overwhelming, and it can be fearful. You may have to sacrifice a little bit in the season and cut back on lifestyle, which no one likes to do.
In order to get that budget to zero to be able to say, my income plus saving giving and my spending is at zero, is what's really key. And so the inflation topic overall is what we're hearing about the most.
Allison: The importance of shopping around for different services. Like insurance, for example, a lot of us are like, 'It costs what it costs.' But what about just calling around different vendors to get different prices to even shrink the necessity spending?
Dave: Absolutely. Again, when you start paying attention, you find money. It's like, 'Oh, look at this, my dad got me insurance, this is crazy.' You call an insurance broker, instead of just an agent, and let them shop a bunch of different companies for you, and get the best possible deal on insurance. A lot of people will save $700, $800 a year doing that one thing. When you sit down, you look to go look at that I have never turned on that television, that particular app, and paying nine, ten bucks a month — clip that sucker, you know, get rid of it! And so there's a lot of stuff that we just kind of let happen to us that when you start paying attention, it's just cleaning up the dust in the corner. And all of a sudden there's some room to survive a time like this where it is a little bit scary.
Watch the full interview below: