Have Buffer Money For Larger Purchases, According To Ramit Sethi — Here’s Why
Written by
J. Arky
Edited by
Amen Oyiboke
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Ramit Sethi has loads of great advice about ways that you can make sure you are making the most of your money. The financial social media influencer has garnished tens of thousands of views on his YouTube channel and has expanded into the TikTok universe to make sure that his message of financial literacy is reaching everyone on the internet.
At the end of 2024, Sethi posted a video to TikTok with the caption reading “For any big purchases … have a buffer. Especially when buying a house.” That’s because it all boils down to one thing that Sethi knows people overlook when they decide to drop a lot of cash on a big buy: phantom costs.
“You need to be prepared for how much you need to bring to the table,” shared Sethi, who described that he has made several high-priced purchases and has learned from experience what to do, as well as what not to do.
Sethi noted that no matter what the purchase is for a house, a wedding, or a car he gives himself a huge buffer in terms of the money he knows he will need. That’s because while the price tag might say one thing, phantom costs loom below the surface. These are things like hidden fees, taxes, service charges, and other associated costs that most people do not anticipate before going to the negotiating table to buy.
“You need to know that there will be unexpected expenses,” advised Sethi, sharing that during his wedding he did not just budget for the upfront cost of the wedding. Instead, he took the amount of money he knew he was going to have to spend on a venue, catering, entertainment, clothes, travel, and a wedding planner, then put an additional amount of money into his budget to prepare for the unforeseen phantom costs.
“In other words, I did not have a wedding so big that it would stretch my budget if it went wrong,” Sethi explained, saying that the same principle applies to buying a house. “You need to know that there will be unexpected expenses.”
Sethi described how you can read the contract over and over, get professional eyes on it, and even run it through some AI program to make sure all the numbers add up — which will still not take into account all of the phantom costs. In Sethi’s opinion, you should be prepared to spend at least $10K — if not above the original price you were anticipating. Sethi anticipates that it will likely be way above $10K, so put in as much money as you can afford to fit into the budget to cover those phantom costs.
It’s not just buying a house, which does not happen every single year, but something like a vacation, which typically happens once a year for most people. Having a buffer makes it so that if the unexpected happens, you are covered and still get to enjoy what you bought without worrying that you are going beyond your budget.
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