Ramit SethiRamit Sethi: The No-BS Guide to Living a Rich Life

These 4 Numbers Will Help You Fix Your Finances

14 Jun 2024 · 1 min

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Ramit Sethi (YouTube, Jun 14, 2024) presents four target budget numbers to manage take-home pay: fixed costs, savings, investments, and guilt-free spending. He recommends allocating 50–60% to fixed costs (rent/mortgage, recurring debt, utilities, car payments), 5–10% to savings, 5–10% to investments, and 20–35% to guilt-free spending; he warns many people overspend on housing and cars.

Questions this video answers

50–60% of take-home pay (after tax).

Rent or mortgage, monthly debt payments, utilities, car payment — recurring/fixed monthly obligations.

5–10% of take-home pay.

20–35% of take-home pay.

Chapters

I want you to know four numbers. The first is your fixed costs. So fixed costs should be 50 to 60% of your take home pay. That's after tax. Within fixed costs, that would be your rent or mortgage, any debt you're paying off every month, utilities, car payment, things that are fixed. Number two is your savings, ideally should be 5 to 10% of take home pay. The third is investments, again, 5 to 10% of take home. And the fourth is actually my favorite category, guilt free spending. This is going out. This is traveling to Italy. It's surprising your fiance with a beautiful dinner. That number 20 to 35% of take home pay. That's a lot. Pretty good. Yeah. If you know these four numbers and you're going to look and you're going to suddenly realize, oh my gosh, my fixed costs are 85%. That's very common. People overspend on their fixed costs. Yeah. And honestly, you shouldn't be fighting about the price of pickles. You shouldn't be fighting about $25 here or there. It's not the point. It's almost always people overspending on their housing costs and their car.