[MUSIC] Brought to you by the Every Dollar App, start budgeting for free today. >> There's a lot popping off when it comes to how people are managing their money. We know things are tight right now. There's a lot of factors out there. There's inflation and there's the housing market and insurance costs are going up, and the truth is Americans are feeling it and they're trying to find ways to squeeze in their budget and make things work. >> Because this article is how the middle class stays middle class. Here's the headline from MoneyWise. Why it's a big problem that 46% of the US middle class are now slashing or completely cutting out contributions to their retirement funds, yikes. >> So the survey found that nearly 46% of middle income families, they're cutting back on retirement contributions and they're doing it because of stubbornly high inflation, that's the major culprit that they're saying here. >> And they're even saying they're pausing them indefinitely. That's either cutting back or pausing indefinitely, which is a weird thing to say and never contributing again. >> Well, I know that people probably listening are like, wait a minute. You guys at Ramsey, you're always telling people to pause their retirement. Why are you so upset about this? And the difference is we never tell people to pause their retirement indefinitely. We want you to be millionaires. We don't want that indefinitely. We tell people, George, to pause their investing for a short period of time while they're in Baby Step 2 and 3 so that they can pay off their consumer debt, not their mortgage debt, just their consumer debt, and save up three to six months of expenses so that, and that way they're protecting their investments so that if there's an emergency, they're not dipping into that emergency fund, or I'm sorry, they're not dipping into those investments to cover everyday emergencies. >> And the truth is people just don't become debt free when they're trying to do 17 things at once. So you need that focus intensity to get there. And as of April 2024, the Consumer Price Index, which measures the changes in the cost of consumer services and goods, had risen 3.4% on an annual basis. Within that index, food costs were up 2.2%, shelter was up 5.5%. They're saying all of this is putting a strain on American households in that middle income range. 67% of whom say their income is falling behind the cost of living. And they're saying things are so bad that 36% of those surveyed are using credit cards more frequently to keep up with expenses. And that tracks, I found that on the Ramsey Show, as we've been taking calls. More and more people are turning to credit cards as their emergency Savior blankie to get them through, which is a terrible plan. >> Here's the thing though, inflation is still high, but it has gone down. And we're seeing it slowly, but surely go down, but it's still higher than it would be or should be. So I do want people to kind of, there's a big part of this George that, it's like if we keep saying everything's on fire, people are like, and they're running around, but there's part of it where we have to go, okay, things are actually getting better, interest rates are still high, inflation is starting to come down. So there kind of needs to be that feeling of, okay, we are going to come out of this at some point and we don't want to go to these crazy extremes, right? And so there's part of this George where I look at these people and I think, yes, if things are too expensive, you're busting your budget, you don't want to use credit cards. I like the fact that they're saying, what can I cut out? I think the problem here is just some people might be cutting out the wrong thing, especially if they're not in debt, if you're not in debt, now is not the time to be pausing retirement. Now's the time to prioritize retirement and maybe cut some other things in your budget if it's feeling tight for some reason. >> And let me show you with some math why this will cost you millions. If you follow the middle class plan of just let me, I got to keep up my lifestyle and unwilling to sacrifice and therefore, I'm going to stop retirement contributions. Let's say you're 35 years old, you have nothing in retirement and you're part of this group who says, you know what? I'm going to not put anything in retirement. I'm going to stop indefinitely. Well, it's 65 years old. If you just invest 300 bucks a month, that's what most people are probably doing. It's a little bit, get the match, just that 300 bucks turns into $678,000. >> George, I've found enough money to do anything with. >> I'll take 678,000 if you're offering me to. >> Okay. >> And here's the deal. >> You act like it's nothing. I'm like, this is something. >> Let's say you're 45 and you say I'm going to pause. Well, pausing that $300 monthly investment from 45 to 65 would still cost you $227,000. And this is not a lot of money that you're actually contributing, Jade. It says the contributions were 72 grand. >> Wow. >> And so you can see the more contributions, the longer the time span, the bigger and scarier this number gets of what you're missing out on. >> That's a really good point, George. But let's even talk about it in terms of what we choose to cut out of our budget. So let's pretend you're just kind of the average American. You're making $67,000 a year household income. And you're really feeling it. You're that average person that's maybe got a couple of car loans. >> Probably underwater on those. >> Underwater on your cars. Maybe you've got some credit cards that you're leaning on here and there. I'm not saying you're balling out with credit cards. I'm saying you might be using them to get gas and things like that. What would it look like to trade in those card notes instead of being so focused on the retirement edge, which again, if you're in debt, we do want you to pause retirement. But what would it look like for you to kind of change your mindset and go, what's really the thing that I need to cut out of my budget that's going to make a big difference? And from a lot of Americans, it is their car payment. Whether you're making a lot of money or a little bit of money, if you're feeling tight, it's probably because you're spending $500, $600, $800 a month on vehicles. And if you can get that under control, then you can pay off your debt quickly. You can pause it while that retirement is paused. You're paying off debt quickly so that you then you can come back with a vengeance. You can invest 15%. You've got that money cleared up again. And so it's really just- >> Yeah, it's one of the only types of debt that's somewhat reversible because you do have an asset attached with the liability. So you can sell that car, hopefully get a good portion of that money back, get out of this thing, save up a little bit more, and purchase a used cash car to get around in. That's a big part. And then there's just lifestyle. >> That's right. When I get housing is expensive, we get calls for people's mortgages 50, 60% of their take home pay, and I'm going- >> Yeah. >> And you wonder why you have no margin in your life. >> It's big. >> So you've got to make different decisions when it comes to housing. >> And that might be a big one that a lot of people are facing right now. I mean, we're coming off of a crazy, the housing market is still crazy. But there was a time where people were paying so much more than value, right? And they overbought, and now people are kind of feeling that. It's like, oh man, my mortgage is 40% of my take home pay. And for those people, you might have to look at figuring out what's a better option for you moving forward. Because if you can't see, if you can't see on the horizon, you are earning more money to close that gap, you're going to be living like this. >> You can take it out. >> Yeah. That's- >> And they have golden handcuffs, Jade, because they'll call in and say, well, Jade, I have a 3% mortgage interest rate. Why? I can't let that go. And they're just stuck in that position because they're unwilling to let go and rent for a while. >> It might be in a season of rent. >> You know, they're going to have to jump to a much higher interest rate. And so these are real problems on top of, of course, the groceries and eating out and your lifestyle and the subscriptions and all the luxuries that you've come to enjoy that are hard to get rid of. >> Yeah. >> Because it's hard to cut down your lifestyle. But if you can do this for a season, you never have to worry about cutting out your retirement contributions, which is the last thing you should go to cut out on after your debt freeze. >> That's right. >> So I hope these people are in the camp of, listen, I'm just broke and I got a lot of payments here and there, and that's why I'm cutting back on retirement. That makes sense. But as long as they're doing it with the intention to go hard on paying off the debt, because again, this is not an indefinite choice that we want you to make. Otherwise, you're going to retire with nothing. And that's definitely, then you'll be calling the show saying, "I'm 67 years old and I don't have anything in retirement. Can you help me?" >> We call it social insecurity for a reason. >> That's right. >> These payments will get you at the poverty line if you're lucky. >> 100 or so. >> For most people, they're going, "Well, I make $1,500 in Social Security." And you're like, "Okay, if you made $1,500 at your job, you would be in the poverty line." >> Yeah. >> 40% of your income is what you hope to gain. >> You get a portion of your income back, and depending on your life, how long you've been contributing, what your income was, it's not enough to survive on. >> No. >> And so you got to develop a plan, and I'm telling you, in the millionaire study we did, 80% said, "The 401(k) was my ticket to millionaire status." >> That's right. >> That and a paid for home. >> That's right. >> And so this is not the spot you want to pause on. 15% once you're at a debt, consistently, you will become a baby steps millionaire. >> Absolutely. And if you're looking, if you're like, "Jade, I don't know where to start." Well, I know as it's hard for us, we're living paycheck to paycheck, a good place to start is with a good budget. You know, all the time we talk about every dollar budget, because it's the best way to really see what's going on with your money. It's a monthly habit, you're doing it every single month before the month begins, you're creating and sticking to a plan, and every dollar makes it really simple. You can plan spending, you can track transactions, you can save for honestly what matters most to you, and all of this isn't an easy-to-use app, it fits into your lifestyle, and this is what we need. This is how we make progress. And when you look at your every dollar budget, you can see what you're spending money on and pick the right things to cut back on, not the things that are going to be valuable for you moving forward to download it. Everydollar.com, every dollar for free at the App Store or Google Play today.
