7 'baby steps' for building wealth and paying off debt

We want to turn now to a conversation around building wealth. According to a 2024 UBS report, the U.S. will have more than 25 million millionaires by 2028. And Ramsey Solutions is talking about a method that you can use to become a millionaire using just seven baby steps here. So joining me now on set to discuss, we've got Rachel Cruz, Ramsey Solutions personal finance and budgeting expert and host of The Rachel Cruz Show. Rachel, great to have you in studio with us. Thank you. Thanks for having me. Let's dive right in here. I mean, the first two steps they have to do with savings and debt. So break them down for us. Sure. Well, the very first step is to get a thousand dollar emergency fund. Now, some people, you know, listening or watching, they think, wait, what, is that it? But 40 percent of Americans can't cover a four hundred dollar emergency in cash. So that starter fund of actually having cash is huge. So you can put that just in a high yield savings account. And then step two is actually getting out of consumer debt and do that by listing all of your debts, smallest to largest, regardless of the interest rate, pay minimum payments on everything and pay the smallest debt off first, because your income is your largest wealth building tool. In order to build wealth, your income is so huge in that. But when your income is going out 18 different directions and payments, you're making the banks rich and not yourself. Right. After you've essentially paid down your debt here and you're thinking about your house or minus your house, at least, there are three steps that kind of spread your money out to different areas. Talk to us about that. That's right. Well, step three is you're going to build up your starter emergency fund to three to six months of expenses. Again, having that cash liquid to be able to get to when you need it. But having that cash is so important. And then baby step four is funding 15 percent of your income into retirement specifically. So 401K, 403Bs, Roth IRAs. And then baby step five, if you have kids, start thinking about kids college, 529s, ESAs and start thinking about their future. And we have the last two steps as well. Finally, getting to that mortgage and ending with wealth. Talk to us about those last two steps. That's right. Step six is paying your house off early. And we find that people are doing this in around nine to 11 years. And this is huge. When you don't have a mortgage payments, there's not only freedom from an emotional standpoint when you have no payments, but also a financial. And then baby step seven, when everything's paid off, you continue to build wealth and invest and be extremely generous. We were just talking about this in the break before we began our segment. It's the holiday season. I just want to get your take on budgeting through this season and on gifts as well. Talk to us about your approach. You know, it's really important, I think, to be proactive and to ahead of time say, hey, here's the amount of money we have to spend. You know, we're two weeks from Christmas right now, so it may be a little late in the game for 2024. But for 2025, it's the idea of not going into debt, finding margin when you can, but also setting healthy boundaries. I mean, people have really been struggling the last couple of years, and it continues to be expensive when you're going and buying things. So maybe that there is a conversation to yourself, maybe with your spouse, if you're married to say, hey, Christmas may look different this year, but we're actually going to put boundaries up and spend money we actually have versus going and borrowing money. Because about 28% of Americans are still paying off debt from Christmas of 2023. Interesting. Rachel, thanks so much for taking the time here with us today. Rachel is also the author of the new children's book. We have it here on set with us. New children's book, I'm Glad When I Can Share. There you see the book cover on your screen right now. Rachel, thanks for taking the time. Thanks for having me.