How To Build Wealth Just by Being Boring, According to This Ramsey Expert
Written by
Jordan Rosenfeld
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Molly Sullivan
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Finance expert Rachel Cruze, part of the Dave Ramsey expert network (and his daughter), recently discussed the fact that wealth building is not as exciting as it may sound, but actually rather boring “if you’re doing it the right way.”
Sharing a clip she found online in which finance expert JC Rodriguez interviewed a retired couple who are “net worth millionaires,” she explained how this couple followed a plan similar to the Ramsey team’s own “seven baby steps.”
Investing Is Not Flashy or Quick
What makes investing work is one’s “steadiness,” Cruze said, nothing flashy. It’s a way of proceeding that is “not riding on emotion … on the newest, greatest, biggest thing,” but staying consistent with financial principles over the long term. She stressed that wealth building doesn’t and shouldn’t happen fast, either.
Here are the Ramsey team’s baby steps to help build wealth in a boring way.
Start an Emergency Fund
The first thing you should do to build wealth is save $1,000 in an emergency fund, Cruze said. “This is really your starter emergency fund.” Think of it as that small little safety net “between you and life.” If you can get to $1,000 you can likely take the next step with more ease.
Pay Off All Debt
The next step may seem counter-intuitive at first to building wealth, but it’s very important — your biggest goal is get all of your debt paid off. Even if that means you must cash out other non-retirement investment funds, Cruze insisted. Then, you pay off the smallest debt to the largest debt, because there’s power in knowing that any future income you make isn’t going to anyone’s but your own pocket.
“You get to keep your income when you’re debt-free and your income is what’s going to help you build well.”
Beef Up Your Emergency Fund
Once you’ve got that clean slate, now you can really build a true safety net of between three- and six-months’ worth of expenses. Ideally, you’ll put these in a high-yield savings account but keep this money liquid.
Fund Your Retirement
Once you have that strong emergency buffer, you want to begin sending 15% of your income to retirement savings. She advised working with a financial advisor of merit to help you know exactly what you’re investing in so you don’t get into a “bad deal.” She also recommended using the Ramsey Investment Calculator to help you get a rough idea of how much your savings can grow by retirement age and how much you may need.
Save for College
After you’re on top of your own retirement investing you can begin to save for any children’s college funds. Cruze isn’t too concerned about the savings vehicle for this — a 529 plan, an educational savings account (ESA), it’s all fine. The goal is to help your kids start their lives financially stable. This allows them to get “off to the races faster and earlier so that they can do their own investing.”
Pay Extra on Your Mortgage
By the time you’ve made it to step six, you’re in solid financial shape, and now may be looking for ways to get even more financially ahead. If you’ve made it successfully here, Cruze insisted you put extra money toward paying off your mortgage early so you can stop paying that mortgage interest.
Live and Give With Generosity
Those who make it to step seven are financially sound and should be in a position to keep living their life as laid out but also give charitably as well. You should have very few payments beyond living expenses.
For the person just starting out, or living paycheck to paycheck, these steps may sound challenging but just start at step one and see how quickly you can build wealth, too.
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