Rachel Cruze: 5 Ways To Achieve Financial Security
Written by
Nicole Spector
Edited by
Rebekah Evans
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Getting to a place of financial security — through budgeting among other methods — is a struggle for many of us, more so than ever, according to recent findings from Northwestern Mutual. Their 2024 Planning & Progress Study, published last March, found that Americans’ feelings of personal financial insecurity are on the rise. One-third (33%) of adults say they do not feel financially secure. This represents a spike from 27% who said the same last year and was the highest level of insecurity recorded by the research series, which launched in 2009.
The study highlighted a few factors contributing to America’s growing financial insecurity, including inflation, lack of savings, debt and healthcare costs. So, how do we achieve financial security? Personal finance expert Rachel Cruze discussed five ways in a recent blog post on Ramsey Solutions.
Also see Cruze’s suggested ways to ease financial stress and build wealth.
Live on Less Than What You Make and Save What’s Left
Cruze’s first tip to achieving financial security is to live on less than what you make, asserting that your income is your greatest wealth building tool. If you’re living paycheck to paycheck, it may sound impossible to spend even less, but spending less is exactly what Cruze recommends.
“Live on less than you make and start saving money,” Cruze wrote. “To do that, you’ll have to learn to tell yourself no and be content with what you have. And that can be really hard for most people! But when you get to that point, you’ll be more financially secure than ever before.”
Ditch Your Credit Cards
Millions of Americans are bombarded with credit card debt, according to the U.S. Government Accountability Office, and because of the high APR on these cards, the problem only compounds over time. Cruze, like so many other financial experts, urges you to put down the credit cards. She address the fact that many boast appealing rewards, but concludes that these perks just don’t justify the debt that they invoke.
“To ‘earn’ those points and miles, you have to spend a lot of money,” Cruze wrote. “And along the way, you’ll be tempted to spend more than you would with hard-earned cash just to chase those rewards. That’s a problem.”
Bid adieu to your credit card dependency if you want to achieve financial security.
Pay Off Debt
Again, Americans are by and large slammed with debt. You need to prioritize eliminating it. Now.
“You’ll never be financially secure when you owe people money and have to make payments every month,” Cruze wrote. “So, if you want financial security, it’s time to become debt-free! Start by deciding and committing to not borrow money anymore. Then, start working the debt snowball method.”
Cruze broke down how to practice the debt snowball method of tackling debt, in the five steps listed below.
- List your debts from smallest to largest (regardless of interest rate).
- Make minimum payments on all your debts except the smallest debt.
- Put as much money as possible toward your smallest debt every month until it’s gone.
- Then, take what you were paying on your smallest debt and add that to your payment on the next-smallest debt until it’s gone too.
- Repeat the cycle until each debt is paid in full and you’re completely debt-free.
Build That Emergency Fund
Nearly half of Americans can’t afford to cover a $1,000 emergency, according to The Hill. Not only is this a stressful way to live, it’s potentially disastrous for your financial wellbeing. And, as Cruze highlights, a lack of an ample emergency fund will keep you in financial insecurity. She also points out that not having one only fuels reliance on credit cards, which leads to debt.
“So, how much should you save for emergencies?” Cruze wrote. “If you still have consumer debt, begin with a starter emergency fund of $1,000. This will cover smaller emergencies while you’re getting out of debt. Once you’re out of debt, take your emergency fund up to a full three to six months of expenses.”
Invest at Least 15% of Your Income
Financial experts typically recommend that you begin investing as early as possible and stay the course for your whole life. Cruze is no exception. She explained you need to invest at least 15% of your income to reach a place of financial security.
“Let’s crunch some numbers to see how to make this a reality,” Cruze wrote. “If you start investing 15% of a $55,000 salary into good mutual funds with an 11% rate of return at age 30, you’ll have over $3.3 million in your retirement nest egg at 65.”
Starting later, though less ideal, is still an excellent move, so don’t let your age deter you if you’re older.
“Investing 15% of a $65,000 salary from age 40 to 65 with an 11% rate of return will grow to over $1 million,” Cruze wrote. “And of course, 15% is just a starting point. Once your house is paid off, it’s a good idea to invest even more than that.”
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