Ramit Sethi breaks down how to save for life's biggest expenses: weddings, kids, houses, cars. The average wedding costs $28,000. Instead of scrambling later, automate sub-accounts now and allocate percentages of each $100 you earn to specific goals.
Questions this video answers
$28,000
Men: 27; Women: 26
$333 per year (speaker's example)
$1,167 per month (speaker's example)
"Next Hundred Dollars" (allocate percentages of each $100 to specific goals)
Chapters
Here's the deal. Frankly, most of us are horrible at saving money for goals that we know we're going to need. If there's one thing you could do, it would be to sit down on a back of a napkin. I swear to God, take a napkin and get a pen and say to yourself, what are the biggest five purchases you're going to have to make in the next 10 years? Just do this. I can tell. You know what? I'll just tell you right now. You're going to get married, you're going to have kids, you're going to buy a house, you're going to buy a car. That's it. Let's just, you know what? Four things to keep it simple. Now here's the deal. If you can optimize for those four things alone, you will be much further ahead than everyone else. And here's how, as you see on that article and read the whole thing at your own leisure. But look, technically, we know a few assumptions. We know that weddings cost on average about $28,000. We know that people get married at these particular ages. 27 for men, 26 for women. If you do the math, and you want to pay for your wedding by saving for it, instead of, number one, pretending you're going to have a simple wedding, because guess what? You're not. It's just human nature. It's your day. You want to have the best of it. Let's just acknowledge we're going to have a big wedding. And two, well, that's it. So if you are 20 years old, you should be saving $333 a year for your wedding. Who? Who does that? Nobody. If you're 25, you have to be saving $1,167 a month to pay for your wedding. And of course, if you're 20, you know, if you're 26, it goes up dramatically. $2,300 a month. The point is, we don't even think about this stuff and set up savings goals. What I have is this concept I call the next hundred dollars. Where is your next $100 going? What percentage is going to your savings account? For me, let's just say, let's just pretend it's 20%. So out of $20, out of 100, maybe five will go to my wedding. Five, which, you know, I'm not engaged or anything, but I'm just planning five will go to a vacation, five will go to a down payment, and five will go for whatever emergency fund. That's how you want to set it up strategically. So you are taking advantage automatically every month of big savings things you're going to have to need. No, you don't need new accounts. If you have an ING account, you can set up savings accounts, sub savings accounts, right in there. You don't have to create anything new. It's free and it just works. That's why I like ing. If you have other accounts, I don't know what you do. You can do it in Excel, right? Maybe you have $5,000 in your savings accounts, and in Excel, you kind of break out where that money goes. I don't know. I like ing. It just does it for me. All right, here's the deal. Think about it. A lot of people just go through life like, oh, think about it tomorrow. The point is, if you look at that Excel spreadsheet on the weddings link, each year you wait, you have to pay huge more amounts. And the same thing is true of investing. Investing professionals know this. This is really interesting. People in their 40s have like, this midlife crisis, and they realize, oh, my God, I need to start saving money. Of course, by that point, it's too late to really get aggressive growth. If you're in your 20s, that is when you can get huge, huge, huge savings.
