Rachel Cruze: 3 Steps To Saving Your First $100,000

©Rachel Cruze

Commitment to Our Readers

GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Reviewed
by Experts

Trusted by
Millions of Readers

We all dream about getting better when it comes to saving — especially when it means putting together a sizable nest egg. But how to achieve something that seems so out of reach?

Money expert Rachel Cruze knows a thing or two about reaching significant financial milestones. On her recent episode of “The Rachel Cruze Show,” she walked her fans through ways they can save their first $100,000.

According to Cruze, the best way to save big is by employing what she calls the “seven baby steps,” — a proven system she said has helped hundreds of thousands of people take control of their money. 

These steps include saving $1,000, paying off all your debt, saving three to six months of expenses, investing 15%, saving for college, paying off your house, building wealth and giving back.

Here we’ve outlined how she said some of these steps work.

Create a Monthly Budget and Save a Starter Emergency Fund

“Your budget is a plan for your money and if you want to get $100,000, then your budget is your roadmap to get there.”

Cruze recommended Every Dollar, a free budgeting app to manage your finances. She noted that if you’ve never budgeted or tracked your money before, it’s going to take around three months to get you set up.

“Three months of budgeting for you to feel consistent. So keep at it. Just start somewhere and adjust along the way as you need to.”

That said, the money expert noted it’s also important to give yourself grace.

“Controlling your spending can be tough,” Cruze emphasized. “But once you have the tools and are following a monthly budget, you’ll be able to budget to save $1,000.”

“That $1,000 should be enough to cover minor emergencies that come up while you focus on paying off debt.”

Pay Off Debt

“It’s going to be almost impossible to build wealth and save six figures if debt payments are constantly draining you financially,” Cruze said.

She said this second baby step is vital — aiming to pay off all your debt, minus your mortgage.

“I know it can feel kind of daunting and overwhelming to think about paying off your debt, but you have to get any and all debt out of the way so you can free up your income so you can build real wealth long-term.”

To attack your debt with intensity, Cruze noted you’ll have to do some drastic things like selling stuff to get extra money. 

“Then on nights and weekends, look for a side hustle. Drive for Uber. Cut off all your streaming services for six months,” she said. “Do whatever you can to put as much money towards paying off your debt.”

As a suggestion, Cruze offered the “debt snowball” method as a way to combat any debt.

“It’s not about attacking the highest interest rate first — it’s about attacking the smallest amount of debt you have first.”

To start, you want to list out all of your debt from smallest to largest, and you’re going to pay off the smallest one first. After you’ve done this, she said to use any extra money you have to pay off the smallest debt. 

“Once that’s paid off, you roll it over to the second smallest debt.”

Cruze explained that once all of your debt is paid off, you’ll have room to start building up good savings.

Have a Fully Funded Emergency Fund of 3-6 Months

According to Cruze, the median income for a single adult in America is about $62,000 a year.

“If that’s you, then after taxes you’re bringing home around $4,000 a month,” she observed. “So, if you’re spending that full $4,000 a month — all of your expenses are that — you want to multiply that by six, and you want to save $24,000 in your emergency fund.”

To do this, she recommended looking at your bills and seeing what you need to have covered. After you jot down the total of how much it will cost you per month, you’re going to multiply it either by three, four, five or six.

“So, you’re going to have a three-month emergency fund to six months.”

Overall, Cruze said to analyze what’s best for you. If your income is inconsistent, for example, she recommended leaning toward a six-month goal to have some extra cushion. Or if you have many kids or many expenses going out, six months will do more to cover you.

Whereas a three-month goal would apply to anyone with a more consistent income (you don’t have a lot of people depending on you).

“You can pick it, but that’s going to be your fully funded emergency fund.”

Starting with these steps will put you on track to saving up $100,000.

Share This Article: