4 Uncomfortable Truths About Money You Should Know, According to Rachel Cruze
Written by
Peter Burns
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Gary Dudak
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Getting your finances right isn’t a walk in the park. Sometimes it takes a long look in the mirror and admitting some uncomfortable truths about your money situation before you can make real progress.
Rachel Cruze, personal finance expert and co-host of “The Ramsey Show,” got candid about her financial journey in a recent YouTube video. In it, she shared some hard financial truths she’s learned over the years and broke them down so you can benefit from her knowledge.
Making More Money Doesn’t Guarantee Financial Success
As a finance expert for more than 15 years, Cruze has dealt with people with different levels of income. She’s met successful individuals who pull in $200,000 a year but still live paycheck to paycheck, and some who make $40,000 annually but have an emergency fund and no debt. The lesson she’s learned through these interactions is that having more money doesn’t guarantee that you’ll solve your financial issues.
A recent survey by Capital One found that 77% of Americans feel anxious about their finances, with 58% saying it controls their life. Cruze explained that the way to get your finances under control is more about your behaviors than the amount you make.
Practicing smart money habits, like developing a paycheck routine and budgeting, will benefit your long-term financial health more than a raise.
Investing Should Be a Goal You’re Working Toward
Another recent survey found that 41% of millennials aren’t investing, with nearly half of those individuals saying they don’t earn enough money to do so. Cruze believes this is a big mistake, because making a habit out of investing even small amounts can pay off in big ways.
When you invest at a young age, you give your investments more time to grow and compound. Compound interest is when the principal amount you invest gains interest over time. That interest then becomes part of your new principal amount and earns more interest. The process of your interest earning interest over time creates a snowball effect.
“The earlier you start, the better off you’re going to be,” Cruze said.
Life Is Fragile — And That Will Cost You
It’s not the most popular topic, Cruze admitted, but it’s important to consider the unexpected costs life throws at you. Unanticipated expenses, from medical bills and car issues to home repairs, can derail your financial progress if you’re not prepared.
Creating a buffer is one way to ready yourself for any expenses that come your way. It’s important to build up an emergency fund that will cover three to six months of your expenses in the case of a disaster.
However, Cruze pointed out that even an emergency fund can sometimes fall short. She suggests getting insurance in areas that make sense for your life to secure your finances.
You Can Change Your Future
It might seem impossible to get your finances in order, especially if you’re not earning a lot or have a large amount of debt. However, it’s important to stay positive and make effective decisions, no matter how small.
Cruze claimed that it takes around 15 years for someone to turn their finances around by building an emergency fund and investing. While this can seem like a long time, once you break free of financial trouble, you can reap all of the benefits for yourself and your family.
In the end, you’ll have financial freedom and disposable income from the small financial choices you make today.
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