• Discounts and special offers
  • Subscriber-only articles and interviews
  • Breaking news and trending topics

Already a subscriber?

By signing up, you accept Moneywise's Terms of Use, Subscription Agreement, and Privacy Policy.

Not interested ?

The four numbers

According to Sethi, financially successful individuals and families only need to track four key aspects of their personal finances: fixed costs, long-term investments, savings and guilt-free spending.

“You don’t need to track [financial] ratios, or the price of ketchup — ever,” he says. “You track these four numbers, you can spend less than one hour per month on your finances.”

Fixed costs is the first and most important metric. This includes essential items that can’t be avoided and recur regularly, such as rent, mortgage payments, property taxes, car payments, utilities and essential food. According to Sethi, fixed costs should ideally be no more than 50% to 60% of your family’s after-tax income. He also recommends adding a small margin of safety for unexpected or hidden costs, such as car repairs and home maintenance.

With the bulk of your monthly expenses controlled, Sethi says you can dedicate 10% to long-term investments and 5% to 10% for savings that include an emergency fund and near-term ambitions such as home down payments and having kids.

If you ask Sethi, long-term investments are the essential ingredient for success. “That money compounds. It will grow like you wouldn’t believe,” he says. “There will be a point where you will make more from your investments than from your income.”

With 80% of your family’s after-tax income deployed in these three segments, the last segment is for guilt-free spending. Depending on your budget, this could be between 20% to 35% of your monthly take-home pay.

Sethis’s strategy can be summed up as simple budgeting and disciplined investing. On paper, this looks like a robust roadmap to riches, but the economic struggles faced by ordinary families in 2024 could put some of these simple targets beyond reach.

Kiss Your Credit Card Debt Goodbye

Millions of Americans are struggling to crawl out of debt in the face of record-high interest rates. A personal loan offers lower interest rates and fixed payments, making it a smart choice to consolidate high-interest credit card debt. It helps save money, simplifies payments, and accelerates debt payoff. Credible is a free online service that shows you the best lending options to pay off your credit card debt fast — and save a ton in interest.

Explore better rates

Cost dilemma

Real median household income was $74,580 in 2022, according to the latest Census data. That’s 2.3% lower than the previous year, while the cost of most essentials has only been moving higher.

Of 44.3 million renter households across America, 22.4 million of them were “cost-burdened” by housing, with 12.1 million of them considered “severely cost burdened,” according to a report published by Harvard’s Joint Center for Housing Studies.

Researchers consider anyone paying more than 30% of their income on housing to be “cost burdened.” Charlie Bilello, chief market strategist at Creative Planning, calculated that based on mortgage rates and home prices, the median American family had to spend nearly 43% of their income on housing alone. Other essentials such as child care, groceries, auto loans and utilities have also risen over the past year, leaving little room to meet Sethi’s 60% target for fixed costs.

Higher costs have suppressed the amount ordinary people can save and invest. The personal savings rate in January 2024 was just 3.8%, according to the St.Louis Federal Reserve, significantly lower than Sethi’s target of 10% savings.

Put simply, the odds are stacked against the average American family. Nevertheless, households that can beat the odds and manage to save at least 10% of their after-tax income can achieve millionaire status.

Assuming a median household saves 10% of their median income of $74,580, they can deploy $7,458 in low-cost index funds that track the S&P 500. The S&P 500 has delivered a 10.3% compounded annual growth rate over the past seven decades. Based on these assumptions, the median household can achieve $1 million in assets within 28 years.

With this in mind, Sethi’s simple strategy is certainly practical but would require above-average income, above-average savings or unique sacrifices such as living with parents along the way.


This 2 Minute Move Could Knock $500/Year off Your Car Insurance in 2024

Saving money on car insurance with BestMoney is a simple way to reduce your expenses. You’ll often get the same, or even better, insurance for less than what you’re paying right now.

There’s no reason not to at least try this free service. Check out BestMoney today, and take a turn in the right direction.

Vishesh Raisinghani Freelance Writer

Vishesh Raisinghani is a freelance contributor at MoneyWise. He has been writing about financial markets and economics since 2014 - having covered family offices, private equity, real estate, cryptocurrencies, and tech stocks over that period. His work has appeared in Seeking Alpha, Motley Fool Canada, Motley Fool UK, Mergers & Acquisitions, National Post, Financial Post, and Yahoo Canada.


The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.