How This Woman’s 7-Step Strategy Can Help You Get Your Money in Shape

A woman standing in an outdoor patio area smiles.
Rachel Richards wrote her book, “Money Honey: A Simple 7-Step Guide for Getting Your Financial $hit Together,” to address the disconnect she saw between her generation and financial literacy. Photo courtesy of Rachel Richards

When Rachel Richards was 11, her parents sent her to a water park for summer camp, much to her dismay.

To pass the time, she brought along a book. The book she chose was “The Motley Fool Investment Guide for Teens: 8 Steps to Having More Than Your Parents Ever Dreamed Of.” That’s right. Richards was about to get her finances right before money was a thing she even needed to worry about.

“I felt like I had this big secret,” she says. “That book opened up a whole new world for me.”

Lucky for us, she took in every word, applied the lessons to her life and wrote a book that millennials can definitely get behind. “Money Honey: A Simple 7-Step Guide for Getting Your Financial $hit Together” is Richards’ no-nonsense guide to getting your financial life together.

“Adulting is hard,” she writes in her book. But she hopes to make finances a little more fun.

The ‘Money Honey’ Approach to Personal Finance

Copies of a financial advice book lie on a table
Photo courtesy of Rachel Richards

Richards, a senior financial analyst in the manufacturing industry, paid for her entire college degree with scholarships and cash. She saves 50% of her income, lives virtually debt-free, goes on vacation every year and has over 30 rental (read: passive income) properties. And she’s only 27. Can you say #goals?

Richards saw a huge disconnect between her generation and financial literacy. Her book is meant to fill the void.

She’s spoken with many young people — friends, family members and people in online communities — who want to be financially independent but don’t know where to start.

“The formula for financial independence that worked 30 years ago just doesn’t work today,” she says. “Back then, when college was a reasonable price, students graduated without debt or with minimal debt, and a bachelor’s degree meant a well-paying job. It was a lot easier to save money, live within your means and ultimately retire comfortably. But today, that formula just doesn’t add up.”

The Dave Ramseys of the world will tell you exactly what to do first (pay off debt), how much to save toward retirement and how to “cash flow” big purchases and vacations. Oh, and credit cards? Those are a big no-no.

“I think that’s a little too rigid,” says Richards. “Everyone’s situation is different, and a blanket approach might not necessarily be the best option.”

In fact, in the second chapter of her book, Richards starts out with this disclosure:

TL;DR There is no hard and fast savings-percentage rule, because each situation is different. You must save a significant portion of your income. Ten percent won’t get you anywhere. Up your savings game by increasing your income or decreasing your expenses.

She’s also not going to tell you to cut up that credit card. “I haven’t paid for a flight in years, and it’s because I use a credit card with airline rewards. There’s a lot of benefit in having a credit card if a person can use it the right way.”

Paying off the full balance at the end of every month, she says, is the key to making the most of the rewards programs credit card companies offer without falling into the never-ending cycle of high balances and minimum payments.

“I never put anything on my credit card that I couldn’t pay for in cash right then and there,” Richards explains. “Credit cards can make it easy for people to give in to instant gratification, though. And if someone really struggles with that, then they probably want to stay away from credit cards altogether.”

That’s just her way of serving up a little #toughlove in the name of financial peace.

Many financial gurus also say you should stop contributing to any kind of savings or retirement until the debt is paid off, but Richards says you should never, ever stop contributing to that retirement account. “It comes down to the time value of money. One thousand dollars invested today is going to be worth so much more this year than it is next year when you’re looking at 30 years down the line.”

Everyone is in a different place financially, Richards explains, which means one cookie-cutter approach just won’t work. Her seven-strategy approach is a modifiable blueprint meant to be tailored to each person’s needs.

7 Strategies to Help You Get Your Finances Together

Let’s face it: You can learn all you want about finances, but if you don’t take action, nothing changes. After discussing budgets, interest rates, investing, taxes and more, Richards provides an actionable plan to get you moving toward meeting your financial goals. Her seven strategies are:

  1. Know your current (financial) story. Denial is a beast, and to move toward financial health, you have to know where you’re starting. The only way to do that is to get honest with yourself about your current financial situation.
  2. Brainstorm your financial goals. What’s most important to you? Paying off debt? Building up six months of expenses in a savings account? Determine what your goals are so you can make a plan.
  3. Grow your “golden number.” Simply take your after-tax monthly income and subtract your expenses. What’s left is your golden number.
  4. Fill up Savings Bucket No. 1.  Richards proposes four separate “savings buckets.” The first is for emergencies. The second, she calls medium-term savings, which is where you’ll put money for vacations or big-ticket items you plan to purchase within the next year. The third, long-term savings, is for anything you need to spend money on after the one-year mark but before retirement. Planning for a roof replacement or a big vacation overseas in two to five years, for example, would go into this bucket. The last of the savings buckets is your retirement fund. You need short-term and long-term savings, but the emergency fund comes first. Putting $1,000 into Bucket No. 1 is your first priority.
  5. Determine your minimum contribution to (savings) Bucket No. 4. Retirement is on the #goals list, right? Well, the only way to retire is to save that money. Here’s where you put it.
  6. Prioritize and achieve your goals — figure out what comes first. Richards suggests looking at whatever has the highest interest rate, whether that be debt or savings, and starting there.
  7. Complete your annual review. What’s the point of making a plan if you don’t assess whether it’s working? A review will tell you what works, what needs to change and how to go about it all.

The road to healthy financial freedom, Richards says, starts with one simple concept: “Live within your means. If you are spending more than you are making, you will never be financially independent. This is a mantra we should all live by.”

Nicole Slaughter Graham is a freelance journalist who likes to turn life’s mishaps and parenting woes into articles. Lately, she’s contributed to The New York Times, The Washington Post, CNN, Cosmo and more.