Saved $1,000? Do THIS Right Away!

Your first thousand dollars can change the way that you treat money for the rest of your life, or it can just come in and get spent. Now I've helped thousands of people master their finances and if you get a few key habits right, they can be worth literally over a million dollars to you. And the sooner you do this, the better results you'll see. So in this video, I'll walk you through a straightforward three step process to save money and to start doing it fast. Let's get right into it with step number one. Build a solid foundation. One of the key differences between people living rich lives and everybody else is people who live a rich life plan before they need it. You don't want to wait until your back is against the wall from a huge wake up call you didn't expect, like losing your job or an unexpected medical bill. Because it can be really difficult to suddenly have to figure out what you're going to do next month. I don't want that for you. Unfortunately, this is the reality that happens to a lot of people. So the first step to living your rich life is to build a solid foundation. And it can be a lot easier than you think. Here's what you need to do. Create an emergency fund. You create an emergency fund for the problem you can't foresee. It's you getting laid off when the economy goes into a recession. It's having to jump on a last minute flight without caring how much it costs to see a sick or elderly parent when something is really wrong. That's what an emergency fund is for. And trust me, it helps you sleep easier at night. Here's what I suggest. Keep an emergency fund at a different bank than you have your checking account. That way you're not transferring money out of it to go to Vegas overnight. That's not the point. You keep it over there. You fund it every single month until you hit your goal. Now let me tell you how you hit that goal. For your emergency fund, I recommend three to six months of keep the lights on, living expenses, basically fixed costs. So as an example, if you typically spend $2,000 a month on your fixed costs, things you have to pay like rent, food, transportation, then aim for three to six months. That would be $6,000 to $12,000. That will give you a solid cushion to be able to handle anything unexpected that comes up. Now to start saving up, make sure you are adding money into your emergency savings fund and every single month. You never know when you're going to need it. If you've already saved 500 bucks or 1,000 bucks, great. But don't let these big numbers discourage you. Three months or six months of emergency fund can often take years to accumulate. That's okay. Just set it up automatically. That way you know that you are on the right path. Now, if you follow the next two steps, that number should add up quicker than you think. The key is that you need to start and make it automatic. Before I move to step two, I noticed that 55% of you watching right now are not subscribed to my videos. Hit that subscribe button if you haven't already. Make sure to turn on notifications so I can keep sending you videos on money and money psychology. All right, if you're thinking, hey, Ramit, this is great and all, but how much money should I even be putting towards my emergency fund? Or how much should I even be saving at all? That brings me to step number two. Decide where you want your money to go. This step is surprisingly simple. The best thing you can do is look at your money through the lens of percentages, not raw numbers. Now, very few people do this, but if you look at your numbers as a set of percentages, your plan will automatically scale as you make more or you make less. You never have to sit, calculate, ooh, is it worth getting this meal? Is it worth traveling here? No, it's all based on percentages. If you double your income, you can actually spend more on eating out, and you never have to spend time really, radically reworking your plan. Here's what I recommend. Start using my conscious spending plan. It's free. I'll link the template below. This way you can start spending money on the things you love and do it guilt free. You can also set up savings to happen automatically. Remember, I've helped thousands of people do this. I can help you do it, too. So to understand why a conscious spending plan works, you need to understand that most people simply do not decide what to do with their money. They literally wake up, their eyes go like this, they look around, whatever they see in front of them, they go, I think I need that. I think I need that. Oh, it's shiny great. I think I need that. Oh, that bag of chips at the gas station, I need that. Most of us spend with no plan, and they go, where'd my money go? Why inflation. You never made a plan. If you get in the habit of spending all your money, doesn't matter if you're earning $600 a week, $6,000 a week, $250,000 a year, you can spend every last Cent of it. But the beauty of a conscious spending plan is it allows you to save money at any level of income. And you can spend money on the things you love. Remember, saving money is not simply about hoarding every last cent you make and never going outside. That's not a rich life that sucks. Instead, a rich life is about spending extravagantly on the things you love as long as you cut costs mercilessly on the things you don't, including automatic saving and investing. That is how you create a conscious spending plan and you have your money work for you. Now, this is not complicated. Here's a simple formula I'm going to give you right now to benchmark your spending among four different categories. First, 50 to 60% of your take home pay covers your fixed costs. That would be things like your rent or mortgage payments, bills, transportation, groceries, debt payments, anything that's fixed and absolutely necessary. Next, 5 to 10% of take home pay should go towards investments. This is where the real wealth is created. And ideally it's even more than 10%. Next 5 to 10% to savings. This is including your emergency fund. It's also including money you don't really need for the next one to five years. Could be savings for a down payment, car, etc. And finally, my favorite one of all, 20 to 35% goes towards your guilt free spending. Eating out, travel, going to a brewery, whatever you want. That is guilt free spending. And of course, within those categories, you can break it down even more. For example, if you're putting 10% towards savings, half of that could go towards your emergency fund. 25% towards an anniversary trip and 25% towards a new car. You get to decide where your money goes. Those benchmarks are just a really helpful way to see how you stack up. This is about creating a plan that works for you. Remember, this conscious spending plan isn't just about managing money. It's about setting a big ambitious goal to live a rich life. You want to travel four times a year. Fantastic. That probably means you need to be saving more, you need to be cutting your fixed costs. You might even need to be making more money. But without understanding the numbers, you can't just go, I think I'd like to travel and then have it happen. Nobody trips and falls into a rich life. You have to cause it to happen. I'll give you an example. I don't really care about getting a new car every couple of years. But I love spending money on nice clothes. I love the fabric, I love the craftsmanship, I love it. And some People think I'm crazy for spending the amount of money on certain pieces that I have, some of which cost even more than the car I owned. I But that is part of creating a rich life. It's personal to you. The nice thing is if you use a conscious spending plan, it's not a budget. You're not sitting there tracking the price of apples. Oh my God. Granny Smith. So expensive. We really need to shift to the other one. No, nobody cares. Apples are not going to change your financial life. But your investment rate is. Your savings rate is knowing your guilt free spending percentages and keeping your fixed costs in order that also will Four numbers can change your life. Now once you know what you're trying to achieve, the third and final step, make sure you never miss them. Step 3 Automate your finances. You do not need to be sitting there logging into 45 different apps on your phone and paying bills manually. It's a complete waste of time. I hate to tell you, computers can do this way better than any of you can, so just stop it. All right, back to this crucial step of automating your finances, which will save you time and actually help you save, invest and even spend more money on the things you love. If you do this, you can make sure that you are consistently saving without even needing to think about it. In fact, you can set up automatic transfers to your savings account right now watching this video so that as soon as your paycheck hits, your savings account is getting filled up. It's pretty easy to set up. In most banking apps or websites you'll find an option called link accounts or Transfer or set up payments. Let's assume you get paid on the first of the month. Here's how you would set up your transfers and bill payments to happen automatically every month. On the first of the month, part of your paycheck is sent to your 401k and the rest is deposited into your checking account. On the 5th of the month you would set up an automatic transfer to your savings account and any post tax retirement account you have, such as a Roth ira. Now here's a cool little feature in many of these online savings accounts. You can create sub savings accounts or multiple named accounts so you can transfer 50% to an emergency fund, 25% to our Tahiti beach fund, and on and on and on. You can call them something and make it very vivid and specific. On the 7th of the month you have an automatic payment that can be sent via bill pay for any places that don't accept credit card payments like for Example, a landlord who wants a check. And to do this, it's best to get all of your bills on the same schedule. Gather them all up, call the companies. You can even do it online now, ask them to switch your billing dates. Takes like 20 minutes. And automating these payments will make sure you never incur any late fees. Best of all, it's just happening automatically. And it can feel scary to automate all these payments. What if it messes up? You have to remember these computers are more reliable than you are. If you're traveling, your bill's still getting paid. And if something happens, your bills are still getting paid, your savings account is still getting full. You will always be sent an email before transfers are made, so you can always have your eyes on it. But by default, you are setting up your financial world so that every month, your investment account is getting filled, your savings accounts getting filled, and all your bills are getting paid. After all, your goal is not to become a financial expert. Your goal is not to sit here and manually click 10,000 buttons to pay off a credit card bill. It's to use your money to live a rich life. And automating your finances is a key step towards this. The great thing is that not only do you have money tucked away now for a rainy day, including an emergency fund, you've also laid out a foundation for your own financial goals, even at $1,000. By automating your finances, you have created a system where you can put the next 500, the next 5,000, the next $50,000 through that system. And your savings account will get full, your investment account, and on and on. That means you can spend just an hour a month on your finances, and your savings and investments will grow automatically. This is how you start living a rich life. And this is how true wealth is created. Now check out this video popping up on screen right now to watch more.