Mar 28, 2024
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What does it mean to live a rich life?
Money personality and financial coach Ramit Sethi asks people that every day — and all too often, he gets exactly the same answer: I want to do what I want, when I want.
While strong money management could unlock that desire, Sethi said during an interview with Moneywise earlier this year he thinks that “generic” response is “just words.”
Instead of setting financial freedom as a goal, he encourages people to lay out their actual desires and to come up with a financial plan for how to achieve them.
“What I want to hear from people are vivid specifics that fit them like a glove,” he said. “I want to hear somebody saying: ‘I want to go to Italy for two-and-a-half weeks with my kids, my spouse and my parents. I see us sitting and watching the sunset over the Colosseum, drinking Italian wine and enjoying quality family time.’
How to get what you want
Before you set out to pursue your desires, you have to get in the right mindset. For Sethi, this means being specific in your financial goal-setting.
If your financial goal is significant, you may be tempted to reallocate some money away from savings and investments toward your discretionary spending.
If you have a specific financial dream in mind, like a seaside getaway in the summer or a French country house with a gazebo in the backyard, consider speaking with financial adviser to help you make a plan to get there. A professional advisor can examine your finances and help you navigate retirement savings while working toward your unique financial goals.
WiserAdvisor’s online service easily connects you to vetted financial advisors that suit your specific needs. You can choose from a list of professionals and set up a no-obligation consultation to discuss what you want for your finances.
You may also need to revisit your budget to ensure you are allocating the right percentage of your monthly income into necessities, savings and debt repayments.
Sethi encourages people to engage with his conscious spending plan, which is quite similar to the popular 50/30/20 budgeting method (with the key difference being that he separates savings and investments. He suggests you divide your monthly income into four categories:
- 50-60% on fixed costs (housing, utilities, gas, groceries etc.)
- 5-10% on savings (long-term emergency fund, vacations, gifts)
- 5-10% on investments (post-tax retirement savings, stocks)
- 20-35% on guilt-free spending (dining out, movies, fun)
Sethi advises people to be more cutthroat about their discretionary spending. If you don’t need two cars, sell one. If you’re renting out storage space for stuff you never use (and likely never will), end your lease and sell your clutter. And check your subscriptions because you might be paying for a streaming or delivery service you never use.
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There are other money hacks to consider. You could look for a new job that offers a higher pay rate to help you achieve your goals faster, get a side hustle or even rent out a room or a parking spot to generate some passive income.
You could also start implementing small habits that can have a big impact in the long term, like investing spare change with Acorns When you make a purchase with your credit or debit card, Acorns automatically rounds up the price to the nearest dollar and places the excess into a smart investment portfolio.
There are many ways to achieve your financial goals — as long as you have a specific target to aim for.
The Moneywise Editorial Team is a group of passionate financial experts, seasoned journalists, and content creators who are deeply committed to providing unbiased, relevant, and accurate financial information. With years of combined industry experience, our team is dedicated to maintaining the highest journalistic standards and delivering informative and engaging content. From personal finance and investing to retirement planning and business finance, we cover a broad range of topics to suit the financial needs of our diverse readership. You can trust the Moneywise Editorial Team to empower you with the knowledge and tools necessary to make wise financial decisions.
