Ramit Sethi: The No. 1 Money Habit of Wealth Builders
There’s no shortage of financial advice, but Ramit Sethi, personal finance expert and author of “I Will Teach You to Be Rich,” said most people miss one simple habit that can put them on the right path.
If he could get Americans to change this one money behavior, Sethi believes it would make the biggest impact.
Spend One Hour Monthly Reviewing Your Money
Sethi said improving your finances starts with understanding exactly where your money is going. He said that there are four key numbers everyone needs to be aware of. They are:
Fixed costs: Rent or mortgage, debt, groceries, car payments
Savings rate: The percentage of your take-home pay you save
Investments: Retirement accounts and other long-term assets
Guilt-free spending: Dining out, travel and discretionary spending
"Once a month, one hour, set it aside. If you’re solo or with a partner, look at your key numbers," he told the New York Times.
"Most of us do not know our basic numbers," Sethi said. "When I ask, 50% of people do not even know their own household income."
Once people take a closer look, they often realize they’re overspending on fixed costs and saving less than they thought.
Instead of this being a cause for alarm, Sethi said to view this as a way to understand exactly what you can work on to improve your overall financial situation.
"What a blessing to be able to go, 'Oh, it’s very clear why we don’t have any savings: because we’re not saving. Now that we understand the basics, we can make some changes,'" he said.
Review Your Progress and Celebrate Small Wins
After reviewing your numbers, Sethi said to ask yourself the following questions:
Has anything changed since last month?
Am I on track?
What progress have I made?
"Then celebrate," he said. "That’s it."
Checking your finances monthly is a simple habit, but done consistently, it can turn financial uncertainty into clarity and control.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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