Day: July 6, 2023

Know Yourself, Know Your Money with New York Times Bestseller Rachel Cruze

Rachel Cruze discusses her new book, Know Yourself, Know Your Money.

About Today’s Guest

Rachel Cruze is a two-time #1 national best-selling author, financial expert, and host of The Rachel Cruze Show. Since 2010, Rachel has served at Ramsey Solutions, where she teaches people to avoid debt, save money, budget, and how to win with money at any stage in life. She’s authored three best-selling books, including her latest, Know Yourself, Know Your Money: Discover WHY You Handle Money the Way You Do and WHAT to Do About It. Follow Rachel on Twitter, Instagram, Facebook, and YouTube or online at rachelcruze.com.

Summary

National best-selling author and financial expert, Rachel Cruze, joins Tim Ulbrich to discuss her newest book, Know Yourself, Know Your Money: Discover WHY You Handle Money the Way You Do and WHAT to Do About It. Tim and Rachel delve into various portions of the book, highlighting specific lessons and concepts relatable to pharmacists, parents, and anyone interested in learning more about themselves and their relationship to their finances.

Rachel walks listeners through “Discovering Your Personal Money Mindset,” including how we form our ideas about money and how we learn to handle money as we do through “Your Childhood Money Classroom.” Rachel goes through the four money classrooms. She reminds us that regardless of the quadrant that you grew up in, you can choose your quadrant from this point forward. Rachel outlines seven money tendencies, how they not only impact your financial picture, and how these tendencies affect interpersonal relationships with significant others. Tim and Rachel share an earnest discussion about money fears, detailed in Chapters 5 and 6 of the book. They close with an eye-opening discussion on part 2 of the book, focusing on the “Power of Contentment.” Rachel shares how contentment changes your motivation for spending. She explains a practical exercise for determining what brings you joy and demonstrates how learning where and how you find happiness allows you to focus your spending on what is truly important to you.

Links Mentioned in Today’s Episode

• The Rachel Cruze Show
• Know Yourself, Know Your Money by Rachel Cruze
• Dave Ramsey’s 7 Baby Steps
• Ramsey Solutions
• RachelCruze.com
• Follow Rachel Cruze on Instagram: @rachelcruze
• Connect with Rachel Cruze on Facebook
• Subscribe to The Rachel Cruze Show on Youtube
• Follow Rachel Cruze on Twitter: @RachelCruze

Episode Transcript

Tim Ulbrich: Rachel, welcome to the show.

Rachel Cruze: Yeah, thank you so much for having me. I appreciate it.

Tim Ulbrich: It’s really an honor to have you on, and I’m excited to talk about your latest book, “Know Yourself, Know Your Money.” And for those listening in the YFP community that are already familiar with the Ramsey baby steps, I think this book does an excellent job covering much of the mindset, the behaviors, the beliefs that are the foundation to ensuring your goals and dreams become a reality. So Rachel, in Part 1 of the book, which is “Discovering Your Personal Money Mindset,” you talk in Chapter 1 about your childhood money classroom. And you make a strong argument that this is the first step in understanding why we handle money the way that we do and that “there are really two ways we learned about money: what our parents communicated emotionally and what they communicated verbally.” Tell us more about these two modes of communication and why it is so important to dig into our past for some honest reflection before we chart our path forward.

Rachel Cruze: Yes, well whenever you talk to any great psychologist or counselor or therapist, they will tell you that so much of who you are today is from how you grew up, whether that’s coping mechanisms, defense strategies, all of that. Learning to kind of survive really in your childhood is something that’s engrained in all of us. And so when I was writing the book, I wanted to go in and say, “OK, I want to understand why we handle money the way we do.” Like you said, it’s not just the what — you know, we talk about the how a lot around Ramsey Solutions, how to get out of debt, how to invest, how to refinance, how to give, but I wanted to answer that question, why? Why do we do the things we do? And it always stems back to that classroom that you lived in, which is your home growing up. And there’s a lot of lessons in those classrooms that we grew up in that you want to unlearn. As an adult, you’re like, I don’t want to take that with me. And there’s a lot of lessons that you do want to take with you. And so being able to just pinpoint, hey, my money habits, the way I view money, part of that is because of my environment growing up. And so those two modes of communication, like you said, the verbal, what is said out loud, and then that emotional state, is really important. So as I was writing the manuscript for this book, you know, kind of coming across these two things, and I remember thinking, oh, OK, it’s like a quadrant. God gave me a graph to explain this, and I’m so happy because it ends up being this four quadrant where that verbal communication and emotional communication intersect. And it ends up really showing these four different money classrooms. And so for you to be able to identify OK, I grew up in Classroom No. 1 or Classroom No. 2 there, and to understand that really will show you why you handle money the way you do today.

Tim Ulbrich: Yeah, and this was really a gut check for me, Rachel, as a father of four young boys, you know, I feel like I do a decent job in communicating verbally about money. It’s something I talk about daily, but it was a gut check on like the emotional part and what are some of the messages that we’re sending to our kids? And so part of this as I read it is unlearning in part or reflecting upon your past but also for those that are out there that are parents, thinking about some of the money scripts and messages that we’re sending in our own homes as well.

Rachel Cruze: That’s right. Yeah. And even that nonverbal, you know, in the classroom, Classroom 1 is the anxious money classroom. And that’s where it’s verbally closed but emotionally stressed. Classroom 2 is the unstable money classroom where it’s emotionally stressed but verbally open, so it’s lots of conflict, lots of fighting. That Classroom 3 is the unaware money classroom, which is emotionally calm but it’s verbally closed. So it’s not talked about, but it’s also not felt. Like it’s a stress point, so you don’t really even — your head is kind of in the sand, if you will, about money until you leave home and realize, oh wow, there’s a lot to do with this subject. And then Classroom 4 is that secure money classroom. And that’s where it’s verbally open but emotionally calm. So that fourth classroom, kind of like what you’re saying, I really wanted the readers to think about their current nuclear family to say, OK, if I do have kids or if I want kids in the future, how am I going to do this on the verbal and emotional scale? And so moving to that Classroom 4 is really important for people because the thing about that is you don’t have to be a perfect parents by any means to be in that classroom. You also don’t have to have a ton of money, right? You don’t have to be like a millionaire to be in that. It’s these habits that you create. And what’s funny is when you’re emotionally calm about money, usually there’s a plan around it, usually there’s a level of healthy control. There’s some safety nets in place like an emergency fund, you know, there’s these habits that you do in the how-to of money that set you up to create that emotionally stable home around this subject where for so many people it’s not safe, it’s not emotionally calm, it is very stressed. And when you look at the statistics of the average American today, I’m like, yeah, I would be stressed too, right? Living paycheck-to-paycheck, having $16,000 of credit card debt, all of it. So I understand why that is, but getting yourself in a place financially where you’re more under control, you’re naturally going to bring in that emotional side in your household, which is amazing. And then the verbal side you pointed out too is talking about it. And I think it’s less taboo today than it was even 20 years ago. I think parents engage their kids in more conversations maybe than the Boomers did for their kids, you know, like when you look at the different generational differences. But again, engaging it and showing the mechanics but also the other side of it of hey, here’s what contentment looks like. Here’s what generosity does to your heart and your viewpoint in life. I mean, you know, bringing in those hard and soft subjects of money are important to talk to about with kids.

Tim Ulbrich: Yeah, and I love, Rachel, how you take folks through this journey of understanding these four different classrooms you mentioned in the quadrant. And it can be heavy to kind of walk through and reflect on some of this. But you end Chapter 3 where you talk about calm money classrooms, you end Chapter 3 by reassuring us that our childhood does not define us. You say, “Your childhood may have given you a rocky start, but it doesn’t make or break you, regardless of the household you grew up in. You get to choose your quadrant from this point forward.” What an awesome view, right? We learn from the past, but we’ve got an opportunity to chart a new path going forward.

Rachel Cruze: That’s right, yeah. I mean, there’s so much hope and I think even in the money piece of my messages that I communicate with people is like no matter what mistakes you’ve made, yeah, maybe you do have a ton of debt. So on a more logistical side, yeah, maybe you have a deeper hole to dig out of than the person next to you, but no matter what, you get to make the decisions to say, no, I actually want to change how I view something or the habits around money. And the same is true with your classroom. Some people, a lot of people I would say, grew up in a hard environment when it came to money with their parents. But yet you don’t have to just mirror that story, right? You can take charge of your life to say, you know what, I’m not going to sit here and bash my parents, but I’m also not going to defend them. I’m going to just tell the truth of what happened, and here’s the truth. OK, there’s some good stuff, and there’s some bad stuff. And the bad stuff I can forgive, and I’m going to move forward though to choose something different for my life and my family. And I think it’s powerful. And I think we have to do that in all of parenting. I’m not a parenting expert by any means, but I’m like, you know, my husband and I have said, OK, this is our family. What are we going to choose to do in this? And so the money pieces is part of that.

Tim Ulbrich: Absolutely. And give yourself some grace along the way, right?

Rachel Cruze: That’s right. Oh, absolutely. There’s hope in grace. Absolutely.

Tim Ulbrich: Absolutely. Rachel, in Chapter 4, which is “Your Unique Money Tendencies,” you introduce seven major money tendencies. And we’re not going to go through all of these, but I’ll read them off quickly. And those seven are save or spender, nerd or free spirit, experiences or things, quality or quantity, safety or status, abundance or scarcity, and planned giving or spontaneous giving. And I want to break down one of these further that I suspect our audience has heard of before, and that is the concept of being a nerd or being a free spirit. And so this as one example of these different tendencies, tell us more about the difference between these two and why each really has its own benefits and challenges and we want to think about these on a scale.

Rachel Cruze: Yes. Well, when I did these seven tendencies, I didn’t want one to be right or wrong because I feel like that can happen a lot. You know, it’s just no, these are naturally where you’re bent, and if you go to the extremes of any of these tendencies, that can get unhealthy. Kind of that middle ground is to say, ‘OK, I’m naturally bent towards this, but I can actually have a little bit of both,’ which makes you I think more well-rounded, honestly. But yeah, the nerd and free spirit, that was kind of a phrase that was coined, two terms that were coined by my dad, honestly, about probably 20 years ago talking about the budget specifically and how I make it a little bit more broad in just the idea of how you view money, but one of you — or if you’re married, usually opposites attract. But you either lean toward a nerd, which is the one that yeah, you’re just organized, you probably have Excel spreadsheets all over the place, you love to budget, you love to feel in control, you know what’s going on, you keep up with everything, numbers are your friends, it feels great to know what’s going on. And so that nerd is naturally going to be bent one way towards money, which obviously is more the control factor. Sometimes more the scarcity mindset, they want to just know what’s going on. And then the free spirit is on the opposite end, and that’s the person that is more hey, everything is going to work out. It’s fine, it’s fine. A budget to them, it feels restrictive. It feels like there’s no fun in life if I have to live on a budget, that means I have to say no a lot, and I don’t want to say no. I want to say yes because you only live once, you know? It’s a little bit more of that mentality. And what’s funny is I actually lean more free spirit in who I am, so this money stuff and budgeting, some of it was hard for me to say, OK, I have to learn this because I don’t have to become a nerd to be good at money. That’s not the reason behind this. But it is to say, “Hey, there are qualities that I need to pick up,” because if I’m a free spirit on the extreme of the free spirit side, I’m probably going to be broke. I’m probably going to have lots of debt because I’m not keeping up with anything, I’m just doing what I want in the moment, what feels good. And that’s not wise. But I also don’t have to absolutely love numbers like my husband. He is more of the nerd. Like I mean, he has spreadsheets. He’s like all about the five-year goal and what’s going in each month, looking at the mutual funds. I mean, he just loves it. And I’m like, I’m the money person that talks about this every day, and I don’t love it that much. Like I’ll do the budget and track transactions, but that’s about it. So again, it’s just pinpointing hey, here’s where I lean, here’s places I can learn, and here’s some really great things about that side of the nerd or great things about the free spirit. And then if you’re married, again, it’s good to call that too because I think in marriage, money can be such a difficult subject. But to be able to say, “OK, you’re not my enemy in this. You’re just more of a nerd in that or you’re more of a free spirit, so how can we come together and work as a team?”

Tim Ulbrich: Yeah, you do a great job in the book going through each one of these sets that I mentioned and not only what they are and some of the differences and where that balance might but also some great exercises at the end of the chapter where folks can reflect upon those, and I think it would be great conversation starters as well for couples that are going through this together. Rachel, Chapters 5 and 6, it gets real, right? You start to talk about your money fears, six of them in total. And I want to pick apart the fear that you say is the most common one you see, which is not having enough. And essentially, this is if something bad happens, the fear that I won’t survive financially. And as you talk about in the book, this could be job loss, this could be a huge health bill, this could be a major house issue. And really, the list can go on and on of all of the things that might go wrong. And it could be a today thing, a today fear, or it could be a future fear. For example, will I have enough when it comes time to retirement? And I think this quickly becomes overwhelming and for many can become paralyzing. And as you say in the book, the “what if” question, it’s a scary question. And so tell us more here, how can we face this fear head-on without it ultimately paralyzing us to take action with our financial plan?

Rachel Cruze: Yeah, when we talk about fear — for this book, I did a lot of research around it because usually fear is just seen as a 100% bad thing, right? Face your fears, don’t let your fear hold you back, all that. Well, some of that, yes, is very true. I remember talking to Dr. Chip Dodd about this, and I loved what he said because he said, fear can actually be a gift. Fear is your body’s response that you are in need of something. Now, again, when that fear becomes paralyzing or turns into anxiety, like any of that, we don’t want that. But just that initial fear, OK, what is that telling you? Because it actually could be telling you something that you need to listen to to diminish that fear. So for a lot of people — and gosh, we just walked through 2020, right, which was just the craziest year I think of all of our lives, around this. And so you could say, OK, my fear is that if something happens, am I going to be OK? If we lose a job, am I going to be OK? Well, you look at your situation and again, just pulling in just stats that I know that 78% of Americans live paycheck-to-paycheck, the average car payment is around $548, the average family owes $16,000 just on their credit cards. So you put all that together and if something happens, are you going to be OK? Well yeah, you’re going to be able to literally survive. But financially, you’re going to be in a mess. You’re going to be in a mess if you don’t have another paycheck to pay these bills. So let’s look at the reality of what’s going on. Again, it’s not to paralyze you, but it’s to say, OK, what can I do now to get in better control of my money? Am I budgeting? Am I living on less than I make? Do I have an emergency fund? And do I have a goal that I’m working towards that actually puts my money towards something, right? Am I giving? Like am I doing these things? And for a lot of people, if they say, “No, I’m not,” hopefully it’s a little bit of a motivator. I don’t think fear has to be the only motivator, but I think it’s a good jumpstart to it of OK, let’s get some things in place so that we can say, OK, maybe you look up in 24, 36 months, three years down the road, and you’re completely debt-free, you have a fully-funded emergency fund of 3-6 months worth of expenses. You now have retirement planned out, you know how much you’re putting in each month, like you actually have a plan in place. And what caused that may have been that fear of wow, if I lose one paycheck, this entire thing just implodes is what it feels like. So again, let that fear drive you. And again, it’s a big one, that fear of am I going to be OK? And what’s interesting is prior to 2020, it was women’s top financial fear. So for some men, it was oh, there’s a dream that I have that I can’t get to because of my life or you fill in the lank. But women day-in and day-out, consistently when surveyed, it was am I going to be OK? And then I think you fast forward to 2021, I don’t have hard data for this, but I would say a lot of people now are in that bucket.

Tim Ulbrich: Absolutely.

Rachel Cruze: Because of what we walked through. So again, I want this fear to not turn into something that’s super unhealthy, but I want it to be a little bit of that jumpstart to say OK, is this rational? OK, maybe it is. So maybe I need to change some things. But then also I’ll tell you this too: It could be irrational. I mean, my husband and I have been doing this plan for 11 years of marriage, so we are, we’re debt-free — I mean, we’ve done it to the t. And it works, No. 1, I can say that. I’m the proof. But No. 2, even during the pandemic, I had a few nights where I went to bed thinking, oh my gosh, are we going to be OK? But what allowed me a little bit to have that safety is realizing No. 1, black-and-white on paper, the numbers, yes, we’re going to be fine because we’ve been doing this, we’ve been diligent. But also No. 2, Rachel, it’s a little bit of a wakeup call for me emotionally to say why am I so fearful that this foundation that I’ve set, this financial foundation, that if it was shook, who am I? Right? And it made me do a gut check, honestly, to say OK, where is my identity? Where have I been putting value? Because money, while we need to be responsible with it and we want to be able to do things like get out of debt and build wealth and change our family tree and be generous to others, all of these wonderful things, money is not our God. And if it’s the thing day-in and day-out that you’re looking toward, it’s not going to fulfill you. And I kind of got to a place where I had to do a gut check on myself last year to think, OK, who am I emotionally on that side, right, if that foundation is shaken? So again, this fear conversation I think is a really important one to have. And I think it’s a really good one to have.

Tim Ulbrich: I do too. And I think it can be motivating for the reasons that you mentioned. Our listeners have heard me say many times about really building a strong financial foundation and think about what the building blocks of that are. But there are challenges that can be had in the security of that foundation and what you’re ultimately putting that security in. So I think a great reminder. And this section of the book, as I mentioned, really powerful. You talked through several other fears. We’re just scratching the surface here. You talk about the fears of not realizing your dreams, of not being capable, external fears, past mistakes, repeating the past, you know, all types of things that we want to be considering. So I hope folks will pick up a copy of the book and check that out. Rachel, Part 2 of the book, “Discovering What You Do With Money and Why,” you connect the information the reader learns in Part 1 so that it can then be applied to their personal situation. And one thing that stood out to me in this section was the concept that you talk about, the power of contentment. And you say that “contentment is a process that changes your motivation for spending money.” Tell us more about that.

Rachel Cruze: Yeah, contentment I think is a huge piece of this financial conversation that has to be in place because money is like a magnifying glass. It makes you more of what you already are. And so if you are a discontent person and you think — and it’s all of us, you know, at different times in life for sure and maybe different parts of the day too, so I’m not speaking out of that I have found the answer to it all — but realizing though if we live in a discontentment state, which usually results in OK, if I can just make x amount of money, if I can just buy this kind of car, if I can go on that kind of vacation, if I live in this kind of house, then everything is going to be fixed. And we think that in our culture in our country that our problems are fixed by stuff. And that discontentment is just magnified, and the problem is that if you build wealth and you actually have the money to go and get these things, you get the things, and it doesn’t fulfill you and you’re discontent again with just more stuff around you. And so there’s that heart piece that I think is important to keep in check. And for me, it’s calling out to people, OK, what are the things in your life that money — there’s not a price tag towards. And this was kind of my journey even just last year, I thought, Rachel, what are the things in my life that I can’t pay for. Well, that’s a great marriage, having children that I am trying to raise in the best way possible, my health, my spiritual walk, my family, you know, my friendships, like relationships. So kind of mapping those things out and realizing OK, if I can invest my time and my energy in those things, life is so much richer, right? And again, not that it doesn’t mean you can’t have a great house or go on a great vacation. My husband and I just got back on Saturday from a fun trip that him and I just took, you know, for a few nights. It was fantastic. It was wonderful. But those things don’t fulfill you, right? It’s the fact that I was with my husband. And we got to have that time together. That is what was fulfilling. And so all of that I think stems to that contentment, and that contentment piece, again, I think is — we tried to find it in stuff, and I really push people to find it in things that money can’t buy.

Tim Ulbrich: My favorite part of the book, Rachel, is that you make a really good case for the importance of connecting saving and dreaming. Saving and dreaming. And we talk a lot on this show about having a strong financial why. And this chapter reminded me of that concept. You say that, “Not having any savings is a worrying sign for two big problems. The first problem is that your house isn’t in order. You’re not prepared. But not having savings is also a worrying sign of a second problem: that you’re not tuned into your dreams.” What do you mean by this?

Rachel Cruze: Well, when I did this part of the book, you know, I wanted to kind of walk through OK, why do we spend the way we spend? Why do we save the way we save? Why do we give the way we give? And so when I was in that saving section, I was like, OK, why do we save the way we save? And I’m like, well, what are the things we save for? What are the — I’m like, well, it’s because we have these dreams. Is it to build a house one day? Is it to be debt-free? You know, whatever it is, and that gives purpose behind our dollars. It gives us purpose to say OK, when the money comes in, I actually know where it’s going. It’s going to something that I value in life. And that’s what makes things rich, right? That’s what brings joy. And people that just live life and they’re not intentional, it’s just kind of that paycheck-to-paycheck, I go to work, I get paid, I just keep doing the same thing. And you look up in five years and not much has changed about your life, I bet your savings hasn’t changed either because you don’t have a goal, you don’t have something you’re saving towards. And so that dreaming portion, it is, it’s so, so critical. I mean, any great book motivator that shows you how to be better in certain parts of your life, goals are always in there. Those dreams are always in there. And so there’s the short-term dreams, have something that you’re working towards five years and less so that you can get to it quickly. And then have those dreams that are five years or more that you say, OK, out there in the future, what do I want? And then also have shared dreams. If those two dreams don’t coincide with your spouse, then have something you guys are working at together. I mean, all of this is going to be a partnership if you’re married. But I think having those dreams together is so crucial where yes, we are individuals, so my husband may have a dream to go on a hunting trip, you know, to South Dakota. That’s not my dream. That’s great if that’s his dream. It’s not my dream. So what are the dreams that we have together? And so all of that, it gives you such motivation. And it was funny, that trip we just went on last week, we had an agenda. We had like four things we wanted to talk about. But one of them was we literally set our financial dreams. One of ours was to build a house, and we moved in November of ‘19. And honestly, since then, I mean, we went through 2020, which was crazy. Now, we’re kind of on the other side saying, OK, what do we want? Besides just a number, what are the things that we’re shooting for? And just having those conversations, it’s so fun. I mean, it just brings life to you or again, if you’re married, to your marriage, just to have things that you’re working towards together. Again, it gives you purpose. It gives you purpose to save. And if there’s not purpose to save, you’re more than likely not going to do it.

Tim Ulbrich: Yeah, I think shared dreams, it’s so important. Great wisdom. I think especially for folks that are in the weeds and maybe frustrated with the budget or feeling like a goal is taking forever, I think some of those dreams can lift folks together and get excited behind the vision, you know, especially while there’s other things that are happening along the way. Rachel, I want to wrap up our time by talking about giving. And you make the case that giving is ultimately the antidote to fear. Why is that the case?

Rachel Cruze: There’s something about living life with an open hand where you say, “You know what, I’m actually going to give things,” because I think the opposite of that is that closed fist mentality where you’re going to just control everything and it’s all yours and it’s just all right here, and there’s a level of that that just, it gets exhausting. And there’s not joy in that. And so when you actually open your hand and give, which sounds counterintuitive, right, if I’m trying to put money towards a dream or I’m trying to put money towards getting out of debt or building an emergency fund, but I’m giving some of it away, like that just seems so backwards where in fact what it does is it fuels you. Because when you live a life that you move on the spectrum from being selfish where it is all about you to selfless where you actually see other people and you see OK, the needs that are out there, things that your money can do, even if it’s not a lot of money, but using it as a tool to help people, it changes you. I mean, it really, really changes you. And there’s nothing like it. It’s cliche to say, but it’s true. The joy that you get from giving is unlike any other joy that you can have in life. Like it gives something to you, to your soul. Because I think we were created to be givers. And when you’re living in that, it changes your perspective. And I also think selfless people have a better quality of life. I think they’re better spouses, better parents, better coworkers, better friends. You know, people that actually care about other people, it’s an amazing thing, but I think it does, it gives you a quality of life that’s so deep. And I think that it can be — obviously you can give all different kinds of ways, but your money is one of those. And when you live that life with an open hand, it does something to your soul that I think is so, so healthy in a world that is so self-centered.

Tim Ulbrich: Rachel, great, great stuff. Where is the best place that our community can go to connect with you and learn more about your work?

Rachel Cruze: Yeah, you can go to RachelCruze.com. The book “Know Yourself, Know Your Money” is anywhere books are sold. And I’m also — I have a podcast, “The Rachel Cruze Show” you can check out as well.

Tim Ulbrich: Awesome. So to the YFP community, make sure to pick up your copy of “Know Yourself, Know Your Money,” available really anywhere, also available at RamseySolutions.com. We’ve just scratched the surface during this interview. I’m confident you’ll gain so much more from digging into the book and completing the activities at the end of each chapter. In the book, you’ll discover what’s at the root of your money tendencies, including how to overcome your biggest money fears, how your childhood impacts your money decisions today, and what really motivates your spending, saving, giving, and more. Rachel, thank you again for taking time to come on the show. Really appreciate it.

Rachel Cruze: No, thanks for having me. Really, really thankful. Thanks.

[END]

 

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