4 Things To Know If You’re Trying To Break the Cycle of Bad Money Habits, According to Rachel Cruze
Written by
Ellie Diamond
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Amen Oyiboke
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As the daughter of Dave Ramsey, Rachel Cruze understands the power of financial privilege. She uses the solid foundation her parents gave her and her knowledge as a certified financial coach to help other people break toxic money cycles and change their financial futures.
Cruze believes in the power of good money habits to change a family’s finances for generations. In a recent YouTube video, she shares these four principles for breaking destructive money cycles and building generational wealth.
It’s OK To Give Your Kids a Strong Foundation
Cruze understands the power of teaching kids to work for what they have. She knows that some parents are wary of providing an overly deep cushion. She also believes that you can teach the power of financial responsibility while creating a solid financial footing for your family.
The journey itself can be a powerful lesson, especially for older kids. Cruze recommends bringing your kids into the loop as you learn new habits so they can see the power of intentional change.
Get Out of Debt First
According to recent research by Northwestern Mutual, the average American owes $22,713 — an increase of almost $1,000 since 2023. Cruze believes the first step to changing your family’s money story is to get rid of that debt.
“Except for a mortgage, just say no,” she advised.
Invest Consistently
Once you’ve paid your debt and saved three to six months of expenses in an emergency fund, the next step is to start investing.
Investments make your money work for you and your family. According to data from SoFi, the average stock market return is about 10% per year, or 6% to 7% when adjusted for inflation. Those earnings can go back into your portfolio to earn even more. The longer you keep that money invested, the more opportunities you have to earn.
“We can actually use the money that we earn to continue to invest for our kids, and then our kids will do the same for their kids, and you keep changing that family tree,” Cruze explained. “[It’s] a really beautiful thing.”
Plan for the Future
Cruze encourages people to prepare for their far and near futures. She recommends putting 15% of your income into a retirement fund and starting a college savings account for your kids if possible.
She also recommends saving for larger anticipated expenses, like the car you’ll need to replace soon or the vacation you want to give your family. Cruze recommends a “sinking fund” to prepare for these expenses.
A sinking fund is a chunk of your savings that you dedicate to a particular purpose. For example, say you’ll need a new car within two years. Kelly Blue Book puts the average price of a used car around $25,000, so you set that as your target.
Then, you divide that total to find the amount you’ll need to save per month — just over $1,000 if your target purchase date is two years from now.
“It comes down to your decisions and your habits, but you can change the game for yourself and your family,” she said. “It’s empowering.”
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