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Step 1: Create a vision

To start, Sethi recommended reflecting on what you did well in the past year and what you could have done better. How do your numbers align with your budget (if you have one)?

Say your household income is $100,000 and your goal last year was to start saving 7% of that. “Well, did you save $7,000? If you did — great job, take the win,” he said in the episode. “If not, acknowledge it. Say, ‘Hey, we need to fix that.’”

Many people — whether doing an annual money review on their own or with a significant other — will often find a few areas that could use some work (for most people, it’s usually discretionary expenses, like eating out and travel, according to Sethi).

But an annual review is also an opportunity to “paint the picture” of what you want your life to look like in 2024,” he said. Once you have a vision for this year, you can “tailor your finances to make your dreams a reality.”

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Step 2: Evaluate your spending

Most financial personalities recommend some type of budgeting system. Sethi recommended a “conscious spending plan,” which he described as more of a “roadmap” to your financial goals.

That means you don’t have to track every nickel; rather, you stick to four buckets of spending: fixed costs, investments, savings and guilt-free spending.

According to Sethi, fixed costs — such as housing and vehicle payments — should make up roughly 50-60% of your take-home pay. If these costs are too high, it will be hard to meet your other goals, so he recommended “surgically” cutting costs in these areas.

Investments should account for at least 10% of your take-home pay — and by setting up automatic transfers into your investment accounts, you can "set it and forget it."

Savings should account for 5-10% of your take-home pay (for emergencies and big-ticket items, like vacations), while the remaining 20-35% can go toward guilt-free discretionary spending.

Step 3: Negotiate bills and fees

When it comes to regular bills and fees — such as your cell phone, internet, car insurance, bank fees and even credit card rates — Sethi recommended trying to negotiate with providers for a better rate, which could potentially save you “hundreds, sometimes thousands of dollars.”

But, he added, be sure to take any money you’ve saved and make it part of your conscious spending plan.

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Step 4: Master your credit cards

Credit cards can get you into debt, but they can also help you build credit — if used responsibly.

If you’re carrying credit card debt, Sethi recommended you “aggressively” pay that off; if you’re just paying the minimum balance each month, then your debt will keep accumulating with today’s “insane” rates.

But he also recommended using perks and points to your advantage, such as automatically doubling the warranty on certain products. For example, he recently discovered his Platinum Amex covers his subscriptions to The New York Times and Disney+.

Step 5: Earn more

If you’re “cut to the bone” and you simply can’t make the numbers work, it may be time for a different tactic. “There’s a limit to how much you can cut, but there’s no limit to how much you can earn,” Sethi said.

He pointed to three different ways you could earn more money:

All of these steps aren’t a one-time exercise, Sethi cautioned. Rather, “make it an annual tradition to reassess and keep your financial goals on track.”

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Vawn Himmelsbach Freelance Contributor

Vawn Himmelsbach is a journalist who has been covering tech, business and travel for more than two decades. Her work has been published in a variety of publications, including The Globe and Mail, Toronto Star, National Post, CBC News, ITbusiness, CAA Magazine, Zoomer, BOLD Magazine and Travelweek, among others.

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