Ramit Sethi’s 10-Hour Plan To Set Up Your Finances for the Year
Written by
Cindy Lamothe
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Amber Barkley
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Every year is like a reset button for your finances — meaning that YOU get to decide all of the changes and adjustments you’d like to make for the rest of 2024.
According to money expert Ramit Sethi, now is the perfect time to take a financial inventory and define where you’d like to be. Some of the questions he suggests keeping in mind when drawing up your own plans: Where do I want to travel next year? What do I want to spend more on? And less? Can I eliminate subscriptions? Can I donate more?
In his recent weekly newsletter “Ramit’s Money Minute,” Sethi outlined his financial checklist to set up your finances for the next year.
Take Stock of Your Conscious Spending Plan
“Use these as general guidelines, but take them seriously. If your money follows these suggested percentages, that’s a Big Win toward a Rich Life,” Sethi noted.
When it comes to your fixed costs, he recommends allocating 50-60% of your income to this category.
“If your fixed costs are too high, it may be time to look for a cheaper place to rent (or renting out a room if you own a home) or earn more.”
The second largest percentage (20-35%) should go toward your guilt-free spending. Here, he suggests reassessing any current subscriptions (and cutting any out if necessary). “Is your spending within your means? Are you actively saving for your spending goals?”
Afterwards, plan on designating 10% of your income toward your investments. Sethi emphasized that if you aren’t investing at least 10%, you should find the money from somewhere else — like your guilt-free spending — and reallocate it to your investments.
Finally, he recommends allocating 5-10% of your money to savings while also asking you to revisit your savings goals and determining whether they’re accurate.
Spend Time Negotiating Bills and Fees
“Many companies will offer you introductory rates or lower your monthly fees if you ask,” wrote Sethi. Here, you can spend time negotiating down any bills or fees — from your cell phone bill to car insurance payments, to your cable and internet bill, and even bank fees. The point is to eliminate things that drain your budget and could be better allocated towards investments and savings goals.
Plan How You’d Like To Invest This Year
Speaking of investments, Sethi says it’s important to confirm that you’re contributing the max to your 401(k).
“Make sure that your money is being invested, not just sent over and sitting there, and that you’re investing it in the right fund(s),” the finance guru explained.
He says the same applies to your Roth IRA, if you have one.
“Your money should be invested (not just sent over and sitting there). Make sure it’s being invested in the right fund(s), too.”
He urges you to make sure you’re taking advantage of all the tax-advantaged accounts you can.
Take Charge of Your Debt
This should be at the top of your priorities for 2024, according to Sethi.
To start off, he says to revisit your debt payoff plan. “Are you on track? Can you pay any of your debt off sooner?”
Additionally, you should also check your credit report.Sethi advises getting your free credit report at annualcreditreport.com which you can retrieve once a year.
“You’ll want to look for any mistakes on the report and fix them right away,” he noted.
While you’re at it, he also recommends checking your credit score.
“A lot of credit cards offer free credit score checks,” Sethi notes. “It’s important to know your score since this affects how much you pay in interest on any debt — credit cards, loans, mortgages, etc.”
On the topic of credit cards, Sethi is adamant that you make it a point to renegotiate your credit cards’ APRs.As daunting as it may seem to hop on the phone with your credit card company, he says it’s worth the effort.
“Lowering your APRs can save you hundreds — if not thousands — of dollars in interest payments, depending on your debt,” Sethi said. “The better your credit score and payment history, the better your chances of negotiating a lower APR.”
Map Out Ways To Earn More This Year
“If you already have a job, it’s a no-brainer to negotiate for a raise, but asking for a raise takes careful planning,” Sethi wrote. He says one way to do this is to show how your work has contributed to the company’s success and then ask to be compensated fairly.
Alternatively, if the chances of a raise are slim, he says to make it a point to look for a better-paying job.
“If your existing company doesn’t offer growth potential, look for a better-paying job. During the job-hiring process, you have more leverage than you’ll ever have to negotiate your salary.”
In addition to the above, the money guru says it’s equally sensible to begin making money on the side.
“When you embrace the idea that you can earn more, you’ll discover a huge surprise,” he said. “You already possess skills others would pay for–and you’ve never even realized it!”
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