Finance Pro Rachel Cruze Shares the Biggest Money Mistake You’re Probably Making

Rob Poindexter   Mon, October 18, 2021, 3:00 PM·3 min read

Rachel Cruze is a personal finance expert and the author of “Know Yourself, Know Your Money.” She is also the host of “The Rachel Cruze Show,” where she shares practical tips to save more money, get out of debt quickly and make progress toward your financial goals.

Recognized by GOBankingRates as one of Money’s Most Influential, here she shares why she believes having a budget is the key to financial freedom, why taking on debt is the biggest money mistake you can make and how to get out of debt ASAP.

What is the best thing you did to improve your own financial wellness?

A budget is one of the best things I’ve ever done with my money, and now my husband and I budget together every month. A budget is simply a plan for your money — and you need to have a plan for your money! I used to think a budget limited my freedom when it came to my money, but it gives you freedom because it gives you permission to spend.

I recommend a zero-based budget. This is where your income minus expenses equal zero. You’re telling every single dollar where to go. If 2020 has taught us anything, it’s that we need to be intentional with every dollar we have coming in. A budget will also help you and your spouse get on the same page with your finances. It forces you to talk about how you’re spending your money, your financial goals and your dreams. Money is the tool that will help you achieve those dreams, and the budget is how you steer the ship. I love using the free budgeting app EveryDollar.

What are some simple strategies or tools anyone can use to make sure they are allocating their money smartly?

A lot of people get overwhelmed with their money because they’re trying to do too many things at once. You’re trying to get out of debt, save, invest… the list goes on! Take one thing at a time. I recommend following Dave Ramsey’s Seven Baby Steps. If you have debt, your first priority is getting out of debt.

Start by building a starter emergency fund of $1,000. This gives you a safety net as you’re working your way out of debt. Then, work your way out of debt using the debt snowball [method]. List all your debts smallest to largest, regardless of interest rate. Make minimum payments on everything, except for the smallest debt.

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