Ramit Sethi Spends Less Than an Hour a Month on His Finances. Here’s How He Does It

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If you want to spend less time managing your money, Ramit Sethi’s technique could help you make that happen. Find out how it works. 

Spending time managing money is fun for some people — but probably not for most. If you don’t enjoy checking your bank account obsessively, then reducing the time spent on financial tasks may be important to you.

If you’d rather not devote your days to poring over spreadsheets or keeping regular tabs on your brokerage account balance, you may want to check out how finance expert Ramit Sethi has taken steps so he can spend less than an hour monthly on his own finances.

Ramit Sethi’s system for streamlining money management

Finance expert Ramit Sethi explained on Twitter that he spends under an hour managing his money each month because he’s made one simple move: He’s automated everything.

Sethi explains that you can simply allocate your spending into different categories and arrange for everything to happen automatically. For example, you could set up a system so 90% of your salary goes into your checking account, while 5% goes into a 401(k), and another 5% goes into your Roth IRA.

Once the money is in your checking account, you can devote another 5% to savings for things you’ll need to do soon like putting money down on a house or saving for a vacation. Then, you should pay as many of your bills as possible on a credit card and use your card for guilt-free spending, and then pay miscellaneous bills directly out of checking if they can’t go onto your card.

Should you automate your finances?

Sethi’s proposed system for money management is one of the absolute best approaches you can take. In fact, the more things you set up to happen automatically when it comes to your finances, the better off you’ll be.

The key is getting the percentages right in the first place. Most people should be saving about 20% of their income, including 15% for retirement savings. And, ideally, you will keep fixed expenses (your housing costs, car payment, etc) to about 50% of your income so you’ll have 30% left over for discretionary spending on things that don’t have fixed monthly costs.

Once you’ve decided on the right way to divide up your money, try to make as much of the process automatic as you possibly can. Set up automated transfers of your money into checking, savings, and brokerage accounts. Set up automated payments of your credit card bills so they are fully paid off every single month.

Automating the process does a few things for you. First, you’re very likely to stick to the status quo. So, if you have money sent automatically to savings, it’s going to actually get into savings — unlike if you have to make the decision to transfer money manually to savings every month. Second, you won’t have to spend much time managing money. And third, you will know where your money should be going at all times so you’ll know how much you can spend guilt-free.

If you want to simplify your life and maximize your chances of building wealth, you should follow Sethi’s advice and get your automated money-management system in place right now. It will take you a little time to get it set up, and then your money management should be pretty effortless going forward.

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