This Is the Most Important Thing You Can Do To Improve Your Finances, According to Ramit Sethi
Written by
Andrea Norris
Edited by
Amen Oyiboke
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Ramit Sethi may be a money expert, but he says you don’t need to become one to improve your financial situation. In a recent Instagram post, Sethi said, “Too many of us get overwhelmed with thinking we need to manage our money perfectly, leading us to do nothing.”
Financial literacy is always beneficial, but all that knowledge won’t do you any good if you never take action and use it. That’s why Sethi believes getting started is the most important thing you can do to improve your finances.
If you’ve been putting off creating a budget, starting a savings program or investing, here are some simple first steps to get the financial ball rolling.
Get Started Budgeting
Maybe you’ve read up on the many budgeting methods –zero-based budgeting, the 50/30/20 rule, envelope budgeting, and others — and don’t know how to choose the best one for your financial situation.
You don’t need a strategy to start a budget. You just need a pen and paper or a spreadsheet on your phone or computer to take Sethi’s first budgeting step: Determine where your money is going.
Look through your past few months of bank statements and log where every dollar of your income went. Another option is to track your bills and spending over the next month.
Once you have a clear picture of your spending, it will be easier to use a budgeting method to align your income, expenses and financial goals.
If you’re still tempted to put off budgeting, don’t. Determining your budget is often one of the first steps to getting started with many financial tasks — like building savings.
Get Started Saving
Ramit says an easy way to start saving money is to go through your budget and cut out “things you don’t really care about or don’t use.”
Suppose you cut $25 from your monthly budget. You also need to ensure that money makes it into a savings account. If you don’t have one, open a high-yield savings account with no minimum balance requirements or service fees. Capital One and SoFi are two such options.
Then, set up a monthly automatic transfer of $25 from your checking account to your savings and gradually increase the amount as your budget allows.
Choosing a savings goal to work toward can keep you motivated.
Get Started Investing
Sethi stated on his website that people “mistakenly believe that investing is something complex and fancy” that requires a lot of time. He also believes it doesn’t have to be that way.
A simple way to start investing is to sign up for your employer’s 401(k) plan if one is offered and you’re eligible. A 401(k) is specifically for retirement savings. Typically, you’ll designate a percentage of your income that your employer will automatically deduct from each paycheck to contribute to your 401(k). Many employers match 401(k) contributions up to a specific percentage, making it a wise investing option.
Financial experts often recommend a traditional or Roth IRA for retirement savings if you aren’t eligible for a 401(k) plan.
Once you’ve established your investment account — or budget or savings account — continue learning more about managing and maximizing it, using that knowledge to improve your finances further.
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