Rachel Cruze: Take These 5 Steps To Avoid Going Broke and Manage Your Money
Written by
Ashley Donohoe
Edited by
Zuri Anderson
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
A recent SurveyMonkey and CNBC survey found that 73% of Americans were experiencing financial stress. Layoff fears, high interest rates and rising prices were key contributors.
When the economy is shaky, good money management is crucial to avoid struggling to cover basic expenses or turning to credit to make ends meet. According to the money expert Rachel Cruze, following some simple practices can even help you financially thrive when times get rough.
Cruze’s recent YouTube video featured these five steps to avoid going broke and to better manage your money.
Start Using a Budget
Cruze said it can be easy to feel like you have less control and become overly fearful about money if you don’t have a budget.
But once you start using one, you’ll have all those numbers in front of you, giving you a realistic picture of your finances. Plus, you’ll know where each dollar of income goes over the month so you can rein in spending in wasteful areas.
Cruze recommended using the Ramsey Solutions EveryDollar app, which also has helpful financial education tools, but you can use a spreadsheet or a handwritten budget.
Get Your Money in the Positive
Cruze discussed how some people come up short after each paycheck since they spend excessively and get into debt. This cycle of being in the negative is hard to escape.
Her advice was to quit turning to debt and find a different way to make up for the shortage. For example, you could look at your budget and make cuts or take on a second job.
Once you’re in the positive, you’ll have a better chance of growing your net worth. Plus, you’ll stop losing cash to credit card interest, which averages nearly 22%, per recent Federal Reserve data.
Build Your Starter Emergency Fund
“Before you start paying off debt, you do need a cushion to make sure that you have money when unexpected things come up, so it doesn’t put you back into debt,” Cruze said.
She recommended prioritizing saving $1,000 as soon as possible to give yourself a financial safety net for things like medical bills and big repairs. While that might seem like a big initial goal, finding extra income options will help speed up the process.
A Ramsey Solutions blog post listed several creative ideas, like monetizing your hobby, doing online surveys, renting out your vehicle or using gig apps like Uber or Instacart. Find something you like enough to stick with for the long term.
Earn More and Spend Less
Cruze suggested continuing to make extra cash through a side gig or second job. This gives you a larger financial cushion and leaves you with more options to invest, pay off remaining debt or make a major purchase someday.
While doing that, cut your spending by sticking to the budget made in the first step and regularly revisiting your expenses. Cruze mentioned you should know how to recognize your needs versus wants since even some long-time recurring purchases might not be necessities.
“I want you to go through all your expenses and say, okay, is this food, is this shelter, is this utilities or transportation — that’s basically like what we need right now,” she said.
Finish Funding Your Emergency Savings
After you’ve cleared your debt, Cruze advised increasing your $1,000 emergency fund to three to six months of your typical expenses.
That money should go somewhere that is easy to access and offers a competitive interest rate, like a money market or high-yield savings account. The Consumer Financial Protection Bureau suggested using automatic transfers and rewarding yourself to keep up the progress.
Cruze said having this large stash of cash makes a big difference if you face a major loss, like a layoff. While it would still be frustrating, you’d at least have peace of mind that you can keep covering your monthly expenses.
More From GOBankingRates
