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Chapter 1: What is the main topic discussed in this episode?
Hey folks, Dave Ramsey here, and I'm excited to bring you a special bonus episode of The Ramsey Show. In case you missed it, we recently hosted a free live stream for hundreds of thousands of people that was all about how to break the cycle of living paycheck to paycheck in 2024. Here are the facts you need to make real change and finally get ahead with your money this year. Check it out.
Welcome to Ramsey Solutions Break the Cycle live stream. I'm Dave Ramsey. I've been teaching this personal finance money stuff for over 30 years, showing people how to get out of debt so that they can build wealth, change their family tree, and be outrageously generous in the process. We take calls on our show, The Ramsey Show, which is a podcast, a YouTube show, and a radio show,
Now a billion downloads on the podcast, number one on Apple last month, with the second largest talk radio show in America, just to give you an idea of the scope, and millions and millions and millions of you on YouTube. Thank you. In the process of doing that, we talk to you. Also, Ramsey Solutions has a whole research arm, and we talk to you. We know what's on your mind.
It's kind of scary out there right now. When we talk to folks, we find out that most of you are uncertain. Some of you are apathetic. Some of you have given up. Some of you are working your tail off and you can't seem to get ahead. You've got the rat in the wheel syndrome going. Some people are just plain panicked.
Chapter 2: How can I break the cycle of living paycheck to paycheck?
So what does 2024 really hold? We've got a crazy economy. We've got inflation all over the place. We've got elections. I'd talk about nuts. And man, on top of that, we've got a high interest rate environment. Well, tonight we're going to address head on this uncertainty and the hopelessness that goes with it for a lot of folks.
In the last quarter, all of last fall, we started doing webinars on money and helping people with their budgets. In the process of doing that, we surveyed a bunch of you. We asked you three questions. What best describes your money situation? 80% of those surveyed said they were in the messy middle or in crisis.
The messy middle is starts and stops, falls off the wagon, can't seem to get traction, just a sense of chaos. Crisis is we're on the edge of the cliff or the car is going over the cliff. I mean, we're in facing foreclosure or repossession or might any moment. The second question we ask everybody was, what are the emotions you feel when it comes to money?
Three emotions popped up most often, fear, folks are afraid. Shame and guilt, the sense that I've done something wrong. Guilt that I don't have my act together. It seems like everyone else has Ken and Barbie. Everyone else has their act together, but not at our house. Fear, shame, and guilt.
The last question we asked was how long have you been living in this messy middle, this crisis with fear, shame, and guilt? This is the saddest answer of all. Most people answering that question, tens of thousands of people we talk to say, most of my adult life. That means folks are stuck. And that's why we're having this conversation tonight. Don't get stuck in a cycle. Break the cycle.
It turns out stupid has a gravitational pull. You can get locked into the orbit around stupid. And how do you bust an orbit? Well, you gotta expend energy to pull away from the gravitational pull that you've never expended before. And that's what we're gonna help you do tonight. Now, some folks try to do that with stuff like New Year's resolutions.
Well, it's January 11th and most of you already blown those. That's a joke. Instead, what we've found is you have to make a decision to change. Not a one-time decision, a permanent behavior shift. Back during the Fauci pandemic, Like everybody else, I was facing a lot of stress and we were trying to run our business and go crazy. And I ate every donut in a 50 mile radius, everything I could eat.
And I got just plain fat. And I looked in the mirror, I thought, this is ridiculous. I've got to stop stress eating or I'm gonna, the whole thing's gonna, I'm just gonna explode like a Willy Wonka character or something, right? So I've got to stop this. And so, okay, we're gonna start watching our intake and we're gonna change our physical activity.
So I started doing that and I put it on an app and my little app says that 1,371 days consecutively, I have walked or ran one to five miles every single day, except for three days in September of 2020 when I had some kind of mystery disease and I was in the bed. I don't know what it was. But other than that, every morning, rain or shine, I'm out there.
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Chapter 3: What emotions are commonly felt regarding money?
You've got to face your particular situation wherever you happen to be. You've been told your whole life if you follow the one normal path, everything's going to be all right. And you did it. You took out the loans. You got the job. You got the degree. You moved to the city to follow your passion. And now you're here and it's not working. The math in your fantasy is not adding up.
And yes, can we just call this what it is? It was easier for your parents and grandparents to buy a house. That was their reality. The market's different now. And yes, it used to be easier for families to live on a single income. Yes, it used to be easier to go down the street and get a job at the local mill without a degree.
Or yes, you want to be a fiction editor and live in downtown Manhattan. And yes, you want to own an organic farm outside of Orange County. Or you just want to get a general admission ticket to see Taylor Swift like my friend George Campbell is dying to do. It all feels so impossible. The world got really expensive. For the time being, it's not going to change.
And becoming angry and resentful and railing against the system is like being super mad that it's hot in Arizona. It's not going to change the weather. It's just chafing against reality. The question isn't what clever post you can put up on Twitter or how angry can you possibly be or who's just the right person to vote for. The question is, what are you going to do now?
What are you going to do now? Choosing reality is about owning how life and the world truly is, not stomping around and complaining about how you wish it would be. Own it. This is how much you owe. This is what it actually costs to live in this city. This is what our life actually is. This is what it will cost to safely buy a home. This is how much this job actually pays, period.
This is our country. Of course you want new cars and kids in the right schools and vacations and just a home. I get it. And there's a snake on every corner that's going to loan you the money to get those things right now, even though you can't afford them. Choosing reality is not about getting the best interest rate or about your credit score.
Choosing reality is about being honest about who owns you. All right, second thought. If you wanna break the money anxiety cycle, you must choose freedom. And when I say choose freedom, I'm not talking about putting on an American flag underwear and running around your neighborhood. I'm talking about choosing freedom is not owing anyone anything ever. And yes, I'm talking about living debt free.
And I know you're like, oh, did Dave Ramsey pay you to say that? Actually, yes, he's begging me right now to say that. But listen, I'm telling you that the data confirms what Dave has taught for over 30 years. If your body knows that you owe money, if your body knows, your nervous system knows that you're not deciding what you do tomorrow, the bank is.
your abusive boss is, the mortgage company is. If your body knows you owe money, it will sound the anxiety alarms. And as I said earlier, my wife and I, we didn't come from a lot. We got married, I thought freedom was new cars, a big house, a whole bunch of graduate degrees. I couldn't afford those things growing up, and by God, I was gonna have them.
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Chapter 4: How do behaviors influence financial success?
Get this, one in four people said they rely on credit cards to make ends meet. They got nothing in the bank and they're hoping Capital One's gonna save the day. 50% of people said they struggled to pay their rent. 38% said, I struggled to pay my mortgage. Scary. And get this one, nearly four in 10 people have $0 in savings. Y'all, one emergency away from their life imploding.
And here's what that leads to. Half of Americans said they worry about personal finances daily. Every day they wake up, that same lump in the throat, that pit in the stomach, they get in their car, they go to the job they hate, just hoping to cover the bills. This is no way to live. That's bleak stuff. And maybe some of those stats hit close to home for you.
Now, there's a whole bunch of reasons for this that we could get into. And in fact, let's do it, because I think it's kind of fun to point some fingers. I mean, we could blame inflation, which has had its largest increase in 40 years. We could blame the housing market, with home values rising almost 50% over the past decade. We could blame the cost of higher education.
College tuition's out of control. It's increased by almost 400% since the 1980s. And of course, we could blame the Fed for raising interest rates, making debt more expensive and more crippling than ever. And we can't leave out the president, whatever old white man or middle-aged woman is elected in 2024, and for whatever reason you think they're going to ruin everything.
You could blame Congress who can't balance a budget to save their lives. And finally, we can't leave out the elder generations like the baby boomers who yell at us youngsters to get off their lawns from the comfort of a home they paid $30,000 and a bushel of raspberries for back in 1973. Gary's gonna Gary. It's just how he is.
And boomers, while we're on it, we love you, but please turn the flashlight off on your smartphone. Yes, it is on right now, and I know you didn't mean to. All right, that was a lot. And all of that, honestly, was a little cathartic. I understand why people complain now. It feels really good. But where do you fit into all this mess?
Because so far, it sounds like it's everyone else's problem to fix. So how do we get here and what do we do? Well, I've got a theory for how we got here. It all started when you were a wee little lad or less. You were never taught financial literacy in school, so you had no clue how money worked. But hey, at least you remember what year the War of 1812 happened, right?
And to make matters worse, you probably grew up in a home where money wasn't talked about, or when it was talked about, it was stressful and there was money fights. And what did our parents tell us? College is a necessary path to upward mobility, so it's okay to take out student loans. It's an investment, it's good debt.
So you financed your way through college with Sallie Mae's monopoly money, and you had no clue how big the payments would be after graduation or how the interest worked. And then while on campus, what happens? The sales rep lures you into your first credit card in exchange for a T-shirt and a freaking pizza. Because you got to build your credit score somehow, right?
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Chapter 5: What practical steps can I take to improve my budgeting?
This is the way everyone needs to go. And instead of milk and honey, you got soy milk and Splenda. It's disgusting. I know the Splenda, they're very aggressive fan base out there. But you know, the millennials, we've moved on to agave. And you have to say it like that to be as pretentious and annoying as possible. So at this point, y'all, we got two choices here.
We can throw our hands up in the air like we just don't care because you've given up and we're gonna rely on the government to fix our problems, or you can decide to buck the system to rise above it because you know now the system is designed to screw you over and keep you reliant on debt and stress. I mean that, think about this.
The entire financial system, the credit score, credit cards, student loans, auto loans, they're designed to keep you paycheck to paycheck and... really just steal your income. Debt is a thief, y'all.
And in my new book, Breaking Free From Broke, I unpack all of these industries with lots of humor and lots of research to expose the system for what it really is and show you a better way, a way to live with more peace and less stress and more money. But here's the deal. You have to believe this. It's not all your fault, but it's your responsibility.
It's not all your fault, but it's your responsibility. And the good news is the one factor you control in this whole mess is you. And I believe in that guy. I believe in that girl. And specifically the way you handle your money. And in just a few minutes, my friends, Rachel Cruz and Jade Warshaw, they're going to be out here showing you exactly how to do that very tactically.
And my friend John just talked about the importance of choosing reality. And it reminds me of the iconic scene in the 1999 sci-fi action movie, The Matrix. Now, spoiler ahead, but honestly, if you haven't seen The Matrix by now, were you really ever going to watch it? It's been 25 years, man. So Morpheus in the movie is rocking his signature shades, his trench coat.
He's just blown everyone's minds by revealing that what we thought was real life is actually a simulation cooked up by some power-hungry robots. So Morpheus offers Neo, the hero, a choice between the red pill and the blue pill. The red pill reveals the truth about the Matrix, keeping Neo trapped. And the blue pill lets Neo continue his life in this not-so-blissful ignorance.
And Neo, being the hero that he is, he chooses the red pill and he's awakened to the real world. And y'all, you have a similar choice when it comes to money and for your future. The brutal truth is you were lied to, and I'm sorry. It sucks. I hate that you're frustrated and you're anxious and you're feeling out of control. And it reminds me of this quote from Joe Kloss.
The truth will set you free, but first it will piss you off. Social media feeds, slick marketing, well-meaning family members, misguided guidance counselors. And of course, the guy in the mirror. Hi, it's me. I'm the problem. It's me. They've all lied to you. And worse, they've stolen your paycheck and they've stolen your joy. They've stolen your margin. And it's enough. We've had enough.
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Chapter 6: What tools are available to help manage finances?
and to talk about it because it's not realistic. And you feel like you failed. So just be realistic and you're going to learn. It takes most people, you know, several months to really get it locked in. And that's okay. And then finally, just be flexible. This is living and breathing with you, right? It's going with your lifestyle. I am voted most likely to go over the budget in our household.
And I receive that. But if I go over a little bit in groceries, maybe I can take a little from takeout, you know, to balance it out. And so that's the idea. However, never take from a category that's really important, like saving or paying off debt in order to balance the budget.
That's right. And just as you guys are watching this, just don't get hung up on these specific numbers. We kind of took... an average income of an American in these average numbers. So these are an example, right? You're going to plug in your numbers. And the other great thing is, Jade, you know, with people, you're the adult. Like, you're doing this. You get to decide your numbers.
Your budget is there to work for your life, okay? That's what's really key here. So as you can see, we ended here with debt. And it's always a little bit sad to see, okay, all these payments coming out that if you were, if you didn't have those payments, if you're getting out of debt, and once you are debt free, all of that will stay in your checking account, which is awesome.
But here we are with $325 over budget. So when you're over budget, there's really two ways that you can look at this. You can cut expenses and you can up income. So when you cut expenses, Bobby, let's go up to maybe restaurants, which kind of hurts. But when you're in debt, you're going to be cutting a bunch of stuff, you guys. That hurts, Rachel. It does hurt. I love it. It does hurt.
But what's crazy too, Jade, is we do these webinars. We've done every dollar webinars with maybe some of you have been with us, but thousands of you. And there was someone recently that said that they cut all their subscriptions and they saved $500 a month. That's crazy. On cutting subscriptions. It's unbelievable. And then we talked to people that get side hustles, Jade.
And I mean, they're making $1,000, $1,200. I mean, it's wild what people are making. So even up at the income, you can be able to say, okay, where we can maybe add some money.
Absolutely. You know, some of you, you're looking at this and you're like, listen, I have already gone down to a bare bones budget. There's nothing else that I can cut out. If that's you, you probably need to look at bringing in more income. And that might look like a side hustle or raising your income in another way.
But most of us, if we went out and drove Uber, did Instacart, you could probably bring in at the bare minimum an extra $500 a month. So Bobby, let's add $500 a month there and just see how it changes the number up top. So he adds the $500 and it's loading. Oh, there we go. We have extra money to spend on whatever we choose.
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Chapter 7: How can changing my mindset impact my financial situation?
If he can just get past those bad guys chasing him, it'll no longer be a threat. So with sweat pouring down his face and his eyes narrowed, he's focused. He pushes the pedal to the metal. The car rams through the fence. And of course, that sets off a series of like random explosions in the background, ensuring that our bad guy is no longer a problem. and the hero busts through the fence.
The gates burst wide open and he drives off into the sunset. Wow, what a great scene. That's a great movie. Man, we love movies like that, don't we? We love when the hero is both brave and courageous. We love to see the hero win, but What if the scene were different? Let's take a moment and rewind back. Let's think for a moment.
What if the hero approached the fence with his nemesis gaining on him, but instead of speeding the car up, he actually began to slow the car down? As a matter of fact, he comes to a complete stop when he gets to the fence. And then our hero gets out of the car and he kind of begins cautiously walking around, seeing if there's a way to get around the fence.
He tries the padlock, no, that won't work. And when he realizes there's no way to get around the fence or through the fence, he gets back into the car. And instead of gunning the engine forward, he puts the car in reverse. He doesn't believe that he has the ability to go through the fence or around the fence.
And so he puts the car in reverse and drives back towards the very mess and the very chaos that he was trying to escape. Man, this movie sucks. I don't know about you, but I want my money back. Okay, what happened to our hero? And yet... This is what so many of us do when it comes to our money, our money journey. It's like, we're all hype and no fight, right?
We come to the beginning of the year and we're like, all right, I'm ready. This is my year. This is the year I'm getting out of debt. I'm getting on a budget. I'm getting everything on track. And we feel super optimistic until the moment that we face a barrier, right? We come against that fence, and the moment we hit it, we want to turn and go back the other way.
Because we don't believe that we actually have what it takes to bust through that barrier. Now, Rachel and I, we just laid the plan out for you. We gave you the blueprint. But if there's anything I've learned, it's this. If behavior is your getaway car, Belief is what's in the driver's seat, okay? Your belief is what drives your behavior.
Depending on what you believe, you'll either ram through that fence, right? Or you'll put the car in reverse and go back the other way. Listen, this plan, the plan we laid out for you, that's not in your driver's seat. Dave Ramsey, he's not in your driver's seat. I'm certainly not in your driver's seat. Your belief is the only thing in your driver's seat.
And I can tell you, you're always gonna encounter barriers, okay? On this financial journey, you're gonna hit mental blocks, okay? These obstacles, they are guaranteed, but you won't make progress. You won't ram that fence if you don't actually believe that it's possible for someone like you, Okay? And I know some of you are like, okay, Jade, I'm getting it. That's me.
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