Ramit Sethi, host of the Netflix series ‘How to Get Rich, shared his conscious spending plan during an appearance on Steven Bartlett’s podcast, The Diary Of A CEO
A finance expert has shared how he’d create a ‘conscious spending plan’, with guidance on how to save, spend, and invest money each month. Ramit Sethi, author of ‘I Will Teach You to Be Rich’ and host of Netflix show ‘How to Get Rich’, shared his plan during an appearance on The Diary Of A CEO podcast, hosted by Steven Bartlett.
It came as the two discussed home ownership and why Ramit doesn’t think buying is always a better decision than renting. “If I’m in a relationship and me and my partner have managed to save £50k what’s a better use of that £50k to drive a financial return?” Steven asked.
Suggesting what he’d do, Ramit replied: “I have a conscious spending plan. I have four numbers that couples should be talking about. The first off is your fixed costs. Those should be roughly 50-60% of your take-home pay. Fixed costs include your housing, that could be rent, mortgage, your utilities, your car payment, any debt payment, even groceries, anything that you need to live every single month.
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“50-60% is the number you want to be targeting. Right there is the crux of why couples are stressed about money. It’s because they’re spending too much on fixed costs and within that, there’s two areas they spend too much on, housing is number one because it’s so expensive and they don’t calculate, and number two is cars.”
He continued: “Next number is your savings, this should be 5-10% minimum. This includes your emergency fund. This includes saving for a down payment. Anything you’re saving for, money you don’t need for between one to five years. Next up is investments. This would be 5-10% minimum. This is where real wealth is created, and this is where couples neglect. They talk about saving and they’ll say, ‘Oh, we tried to save.’ I don’t try to brush my teeth. I don’t try to save. I make it automatic.”
“Finally, my favourite category of all: guilt-free spending. This is going out for drinks, concerts, travel,” Ramit concluded. “20-35% of take-home pay (…) and when you get down to that number and you’re out and you’re having drinks, you don’t have to worry about anything else, you don’t have to feel guilty or anxious because you’re already handling all these three numbers. You know you’re set and you have this money set aside and you can enjoy it guilt-free.”
Of course, not everyone can set aside a percentage of their earnings to save or invest, and it’s important to acknowledge what’s best for one person’s finances might not be right for someone else. Advice on managing money, savings and debt is available on GOV.UK.
