Who among us doesn’t want to be rich — or richer? Even multibillionaires are constantly strategizing how to make more, more, more. If you’re coming from a place of scarcity or have yet to build any wealth, you may have no idea where to begin. You may not even think a “rich life” is possible for you. Financial expert Ramit Sethi may help guide you to the realization that it is possible — and that you can make major progress toward meeting wealth goals in just one month.
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In an email newsletter, Sethi shared how to build the foundation of a life abundant in self-made wealth. Make these two big moves (Sethi breaks them down thoroughly) within one month and you’ll be well on your way.
Step 1: Define What a ‘Rich’ Life Means for You
Your first step is to take your life off autopilot — Sethi finds most people don’t take that step — and define what a rich life means for you and your family.
“A Rich Life isn’t only about how much money you have,” Sethi wrote. “It’s more about using it more intentionally.”
Do you just want wealth so you can buy an expensive car and designer clothing? The material traits of an upscale lifestyle may be incentives for wealth building, but they’re not the whole package. They’re not, for example, spending time leisurely vacationing with your family during retirement.
“So ask yourself: What do I actually care about? What kind of life do I want to live?” Sethi said. “I want you to spend extravagantly on the things you love – and cut costs mercilessly on the things you don’t.”
If you’re having some trouble coming up with a concrete picture of exactly what your rich life looks like, look at your “money dials,” the areas where Sethi observes people spend the most money. Maybe you already spend on the aforementioned designer clothing. If so, you may want to follow Sethi’s lead and “dial it all the way down.”
Sethi also recommended creating short-term goals, like tackling high-interest debt, along with long-term goals, like saving enough for a comfortable retirement.
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Step 2: Follow Sethi’s Conscious Spending Plan
“Just like most people have no idea what their Rich Life is, they also have no idea where their money goes,” Sethi wrote.
“They feel guilty about spending, are stressed about saving, and somehow – even when they make good money – always feel behind.”
If you’re in the club of “where did that money go,” heed Sethi’s advice and make a conscious spending plan. This is less a plan than it is a system engineered to help you not only track your spending but to be intentional with how you spend it. Additionally, it encourages spending money without guilt but also without missing your goals.
A conscious spending plan, as envisioned by Sethi, may be designed by designating approximate percentages of your take-home pay into four buckets:
- Essential, routine costs: These should take up 50% to 60% of your take-home pay. Add 15% to cover unexpected but essential expenses like a medical bill.
- Investments that generate compound interest: Minimum 5% to 10% of your take-home pay
- Savings, including emergency fund: 5% to 10% of your take-home pay
- Guilt-free spending on genuine happiness: 20% to 35% of your take-home pay
Thinking in terms of these four buckets and organizing your spending life around them will help you align your vision of a wealthy life with its potential reality. And it may tell you what you don’t want — but need — to hear, like that you need a side hustle to meet your goals.
“If you look at your numbers and realize your Rich Life is outpacing your income, you need to start looking at getting a raise, or finding some other way to earn more,” Sethi said.
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This article originally appeared on GOBankingRates.com: Ramit Sethi’s 2 Big Steps To Launch Your ‘Rich Life’ in One Month
