You Can Change Your Finances in 6 Months… Here’s How

If you genuinely want to change your life, fix your financial problems and live your rich life, this is the six month blueprint you need to follow. Imagine waking up knowing exactly where your money is going without tracking every latte. Imagine hitting your savings and investing goals, making money decisions with total confidence, all aligned with how you want to live your life. I've helped millions of people, bus drivers, teachers, millionaires make that a reality and now it's your turn. I'm going to show you the exact step by step system that's going to work for you and you can spread it out over six months or tackle it in one month for a fast start. Your pace, your choice, but listen closely. If you can't give me 10 minutes of your attention as I cover the first month of this plan which has the most important action steps, I'm going to struggle to help you. So let's get to work. Month 1 Build the foundation of your rich life. Month 1 is all about defining your rich life and creating a clear plan to make that a reality. If you don't get this right, your whole six month plan will fall apart because it's not customized for your needs. Define your rich life. A rich life isn't really about money. It's about living intentionally, spending on what truly matters to you, not what society or Instagram or your neighbors say is important. So ask yourself, what do I actually care about? What kind of life do I want to live and what am I spending on that I don't care about? If your life looks like everyone else's, buying a house, leasing a car, chasing the latest gadgets, and not really thinking about what makes you individually feel great and live a meaningful life. That's a red flag. You might not be living your rich life, you might just be copying someone else's. I've got a new way of looking at this. I want you to spend extravagantly on the things you love. Maybe it's a wine tasting trip to Napa, maybe it's flying lessons, maybe it's having the best seat at every concert you attend. And I want you to cut costs mercilessly on the stuff you don't care about. If you don't give a damn about cars, why are you driving that car right now? These are some examples of what I call money dials or universal spending categories like travel, health or relationships. I use these to imagine and design my rich life. I want you to do the same. For example, having a driver waiting at the airport, pre cooked meals, someone to help clean the house. I've turned that dial way up. But social status stuff like watches. I don't even wear a watch. I've turned that dial all the way down. That is my rich life. I know my money dials. I want you to identify one right now. One money dial that you love. The one that you would spend 1,000, 5,000, $10,000 right now if money dropped into your lap and you had to choose. And then I want you to choose the thing you care least about spending money on. Maybe it's food, you're happy pouring oats into a bowl, putting a little water in there and just eating it out. Fine, lean into that. Once you've decided on those money dials, I want you to decide on two types of goal. First, short term goals, the building blocks. These are immediate wins, like pay off high interest debt, put enough money aside for Christmas gifts. These give you breathing room and confidence. Second, long term goals, the big dreams. This is where you dream big. You want to buy a house, start a business, retire early. With a long term plan and consistent saving and investing. These are 100% achievable. But unless you know what your rich life looks like and the goals that'll get you there, you'll be like the captain of a ship who has no idea where you're going. Useless. Now I know a lot of people going okay Ramit, but I want numbers. Tell me how to do this. All right, fine, I'll give you numbers. The second thing you're going to set up in month one is a conscious spending plan. What if you could make sure you were saving and investing enough money each month and then use the rest of your money guilt free on whatever you want. Eating out, travel, massage. Well, you can. Takes a little bit of work. You. The only catch is that you have to plan where you want your money to go ahead of time, even if it's on the back of a napkin. And you gotta know your four key numbers. Here's how to do it. First, start with your take home pay. This is how much you earn after taxes and deductions. It's the foundation for creating a conscious spending plan. Next, break your spending into four buckets. First, fixed costs, 50 to 60% of your take home pay. These are your non negotiables. Your rent or mortgage, utilities, groceries, transportation, childcare, debt. Once you've added up your total spending, I want you to add 15% to cover the expenses you might have forgotten about, like car repairs or medical bills. My conscious spending plan already has this built in for you. You can get a link in the Description below. Number 2 investments 5 to 10% ideally more this is where real wealth is created. This is your future money. Think retirement accounts. Think about index funds within those accounts or any other investments that are going to help you grow while you sleep. Third savings goals 5 to 10% these are short and midterm goals. Things like building your emergency fund, saving for a big trip, even saving for a house. And finally, number four my favorite category of all guilt free spending 20 to 35% of take home pay. That's a lot of money. Here's the best part. This is where you get to spend extravagantly on the things you love. Eating out, travel, hobbies, whatever lights you up. Why does this matter? Because it frees you to spend guilt free on what you love, whether that's spoiling your family, taking amazing trips without second guessing every purchase. And if there's no way you can currently spend 20 to 35% of your paycheck guilt free every month, maybe that will give you a gentle kick in the butt to, I don't know, finish watching this video by the nice man who will help you get your financial numbers in order. Month 2 Build a Moat Month 2 is about building yourself a full financial mode. That's the thing that's going to make you less vulnerable. And the first step is starting an emergency fund. This is going to be your financial safety net for when life throws you a curveball. Medical bills, car repairs, or especially if you lose your job. Without an emergency fund, the danger is that you end up relying on credit cards or raiding your savings or retirement accounts to pay for essentials. My standard advice is to gradually save up three to six months of essential living expenses or fixed costs. Calculate your monthly basics like rent, groceries and utilities, or use my conscious spending plan in the description below to do this automatically. And then multiply that number by three or six. That'll give you three months or six months of expenses. Then open a high yield savings account, nickname it just in case, and send a set amount like 50 or 100 or whatever fits your CSP or directly from your checking account to your emergency fund. And if you really like that feeling of safety, you can expand it. You can make it 6 months, 8 months, 12 months. Once you are consistently building your safety net, it's time to confront the financial bully who's been following you around. High Interest Debt Getting rid of high interest debt is one of the most powerful things you can do with your money. Let's look at one of the most common examples. Somebody who has credit card debt and only pays the minimum amount every month. Let's take a real example. You have $6,000 in credit card debt with a 25% interest rate or APR. The minimum payment each month might be interest plus 1% of the balance. So your first payment is $185 of that money. Only $60 actually pays down the balance of the debt or the principal. The other $125 is just paying interest. Now listen closely. If you keep paying the minimum, it would take you over 25 years to pay off your debt and you would pay almost $12,000 in interest. This is the equivalent of a little boy letting a school bully take his lunch money on the first day of school, then coming back with his pockets jingling every single day for the next 30 years. Debt can feel overwhelming, but with a clear plan, you can take control and eliminate it. Start by listing all your debts, all your cards, how much you owe for each, their APR or interest rate and minimum monthly payment. Immediately you have more clarity. If you have unmanageable debt, one of your first calls should be to your lenders to try to reduce that interest rate. Yes, sometimes they will actually drop your interest rate. The worst they can say is no. And if they say yes, you're already one step ahead. List how much money you can put aside each month to crush this debt. Now remember, the only way you'll actually know this is if you download the conscious spending plan from the description and plug your numbers in. It will become immediately apparent how much you can use to pay off your debt. Maybe it's $100 a month. Maybe it's $500 a month. That's a start. Assuming you want to pay the least possible amount of interest on your debts and you want to get rid of this debt fast, here's what you're going to do. Keep paying the monthly minimum on all your cards. Maybe that uses 400 of your $500amount. Next, use the remaining hundred dollars to pay off your highest interest debt. That way you are plugging the biggest hole in your boat. Once that's paid off, move to the card with the next highest interest. You can kind of think of this as a reverse way of investing. Every dollar you put towards high interest debt is a dollar that you are saving in future interest. It's basically taking you closer to your rich life. Do you see how you are taking control? Congratulations. By the end of month two, you've tackled the urgent stuff. Debt, spending and your emergency fund. Even if it's going to take you a while to fully fund them. You have a plan and you know when it's going to be done. Plus, you've started to define your rich life. Now it's time to make that vision a reality. Month 3 Build wealth like a pro in month three, you'll create simple automated systems to build wealth. No stress, no complicated spreadsheets. Just steady, predictable growth. Let's get started with how how to Invest Speaking of investments, if you'd like financial advice that actually works and less spam from crypto bros who tell you that it's going to the moon. And even though we used to hate government regulation, now we really want the government to get involved because it means we can pump our bags. Click subscribe and turn on notifications for more videos like this. Debt holds you back, but investing sets you free. It's how your money grows quietly in the background, even while you sleep. Here are my four laws for investing. 1. Index funds are your new best friend. I know a lot of you love dogs. Some of you love your spouse. Try starting to fall in love with low cost index funds. These are collections of hundreds of stocks that mirror the performance of the overall market. And historically, for the last 100 years, the market has gone up. It goes up and down, but over time it has gone up, averaging about 7% after adjusting for inflation. 7% per year on average is a lot of money. Now this is a simple way to invest while getting pretty great returns. No need to track the stock market. No need to log on and look at all these stocks every day. None of it. Pro tip if you want to make this really easy, you can use something called target date funds from low cost brokers like Schwab, Vanguard or Fidelity. You simply pick the year you want to retire and then you look for the fund with that name and the fund does all the work for you. Like Vanguard 2060, it automatically diversifies and rebalances as you go along so that your investments get less risky the older you get. 2. Time in the market beats timing the market. Invest early, even with small amounts, even 20 or $50 a month, and your wealth will stack up dramatically thanks to time and compound interest. Compound interest means you're going to be earning interest on your money and then that interest is going to earn even more interest. That starts to snowball almost exponentially. Let me show you some real numbers. Let's say you're 30 years old. You already have $5,000 invested from when you were in your 20s. But but now you got a raise, you can afford to start contributing. Let's just say $1,000 a month after 35 years, when you're 65 years old, you'd have invested a total of $425,000. But thanks to compound interest, you'd have $1.76 million in the bank. Do you see what this means? It means you made $1.3 million in investment returns. Do you see how amazing that is? With that money in your account, you could spend almost $6,000 per month for the rest of your life and safely never run out. This is why it drives me insane that so many people think investing is this super complicated thing that they don't know how to do. You can learn. I'm telling you how it works right now. Third, max out your tax efficient accounts. Let me put it this way. If you if your employer offers a 401k match and you're not taking advantage of it, you are leaving free money on the table. It's like walking past a $100 bill and saying no thank you. Look into your 401k. If you can contribute to a Roth IRA, let that money grow and it can be withdrawn tax free when you retire. If you're eligible for a health savings account, you can use that as an investment account with a triple tax advantage. These are amazing investing deals that you have access to as a normal person. Don't worry about all the rich people secret investments. They're mostly bs. You have access to amazing cheat codes the government gives you to incentivize investing. Take advantage of them. Fourth, fire your 1% AUM financial advisor. Let me blow your mind for a second. See, most financial advisors charge based on a percentage. They'll charge something like 1% of your total portfolio. Doesn't sound like much, right? Wrong. Without fees, a $100,000 portfolio would grow to about $761,000 after 30 years. But if you're paying a 1% fee, it shrinks to around 574,000, meaning that fee quietly ate up 25% of your total returns. Pull out your wallet, you freaks. Yeah, I'm talking to you watching this video right now. Oh, you have $100 in your wallet. Give me $25 right now and then whatever you have in your wallet next year, give me 25% of that and on and on and it's going to compound. And I'm going to use it to buy a BMW. And then I'm going to park, cross lines and make everyone inconvenienced around me. Be nice, Ramit. You're trying to help people. Keep it Simple. Stick to low cost target date funds or index at low cost brokers like Vanguard Fidelity or Schwab, which frankly will beat most financial advisors in terms of performance over the long term. And if you do have a more complex financial situation or you want personalized help, that's okay. Use a financial advisor who charges a flat fee or an hourly fee. That's what I've done in the past. And when you do this, you're paying for advice, not paying a percentage of your money. A great option for a flat fee based financial planner is our sponsor Facet. Facet will help you understand and expand your financial opportunities by providing you flexible access to a team of financial planners, CFP professionals, and a team of professionals providing guidance across retirement planning, tax strategy, estate planning and more. Instead of taking a percentage of your portfolio, there's an affordable flat membership fee. And when you have complex questions about your money like can we retire? When can we retire? What if I want to leave my job and start a new career? How can we pay for kids college? How are my investments doing? It can be really helpful to have a professional run some scenarios and give you a second set of eyes on your financial picture. We've even partnered with Facet to run scenarios for many of the couples on my podcast who who have complex financial situations. They're incredibly helpful. Look, a financial planner is not for everyone. But if you want a second set of eyes on your finances, check out their membership options@facet.com ramit or click the link in the description below. All right, now that you have a good idea of where your money needs to go, it's time to make it automatic. You think I want to sit around moving, transferring money, keeping track of it in the spreadsheet? No. You. You want money flowing to your accounts without lifting a finger. No more missed bills, no more guessing how much money you have to spend each month, and no more logging on to online banking or using freaking apps on your phone. I have no financial apps on my phone. Why would I have that? It's all automatic. Automate your rich life. Here's how it's going to work. Let's say your salary hits your checking account on the first of the month. Let's start with your 401k. Say that you get a 5% match from your employer. So you want 5% automatically sent to your 401k so that you get that full employer match. Next Roth IRA on the 5th of the month, when you are sure that your paycheck has hit your account, you automate A monthly percentage of your income, let's say 5% to go from your checking account to your Roth IRA or other tax efficient account where it can grow. Tax advantage, sometimes tax free, ideally in something like index funds. Retirement savings. Done. Next, let's talk savings. You're going to send an automatic amount, a percentage of your paycheck to your savings goals. Maybe 2% of your income goes to your wedding Savings account. Another 2% for your house down payment. The last 1% tops up your emergency fund. Paying yourself. Done. Next, your credit card. This is what you will use for guilt free spending and regular bills. You set up a direct debit from your checking account to pay this credit card off automatically, in full, immediately. No more late fees. Done. Finally, miscellaneous bills, things you can't use a credit card for like utilities, rent, et cetera. You can actually automate this too. You set up a direct debit from your checking account and you let it flow. It can be done online or your online checking account can even issue a check every month. Boom. One less thing for your to do list. Now, if you want more detail on this automation or you have an irregular income, you don't get paid the same each month. I have a video here that's going to show you how to set this up. All right? Now, by month four, you got your main systems and your strategies in place. But there's still one thing that will hold you back. I'm talking about you. Month four, conquer your money psychology. In month four, it's time to take a serious look in the mirror and have a conversation with yourself about your invisible scripts around money. Those beliefs that you hold so deeply you don't even realize they're there. They're invisible, shaping how you save, spend and invest your money. Until you understand these stories, you will never be able to challenge them and start to change them. Here are some scripts that I come across all the time. Money is evil. Money is bad. You've heard it before. Rich people are greedy. If I make too much, money changes people. Yeah, money does change people. It made me more adventurous, more spontaneous, more generous. This script keeps you stuck, scared and small. Money is not bad. Money is a tool that allows you to live the rich life you want to. What matters is how you use it. I'll always be bad with money. I'm not good with money. I'm not good at math. Stop it. Nobody is born knowing how to manage money. But you can learn the basics. This isn't some cryptic language that only ancient priests understand. If you believe this script, you will never take the small, simple steps that actually make a difference. Next, I need to make more before I start saving or investing or the equivalent must be nice. There's no way I can put aside even $20 a month for investing. Ah, the classic procrastinator's excuse. If you are waiting for the perfect salary or some magical future moment, you're going to be waiting forever. Give me your spending. I guarantee I can find $50 a month immediately of money that is being wasted that could be redirected to something more aligned with your rich life. I know I can do it. What I want is for you to know you can do it. I deserve to treat myself or you only live once. You can't take it to the grave. Listen, if you want nice things, great. I like nice things. But you can't use these pithy little phrases to justify overspending on random things. That is how you stay broke while convincing yourself it's all about self care. So I want you to take 10 minutes and write down everything that comes to mind when you think about money. No filters, no judgment. Just focus on your internal money dialogue. Things like, I'm never going to have enough money, I came from poverty, I'm going to die in poverty, or I can't learn this stuff. Then ask yourself, are these beliefs helping you or holding you back? If they're holding you back, I want you to make a decision that you are going to consciously change them. Now. You know another thing that most people never do? Talk to their partners about money until there's a disaster. Why are we like this? Why do we only talk about money when something goes wrong? Let's fix it. If you don't have a partner, go ahead and Skip to month 5. Have a money date. This month I want you to sit down with your significant other and have a 30 minute money date. No stress, no spreadsheets. You don't even have to talk about numbers. Just an open conversation about money. How you feel, what you want, what's holding you back. Here's the agenda for for your money meeting. Number one, start positive. It's going to take like five minutes. Pick a calm, quiet time. Start with a compliment. You are so great at finding travel deals. Thank you. It always makes our trips amazing. Number two, discuss your rich life. This is like 10 minutes. Ask them what does a rich life mean to you? If we could spend more on something we love, what would it be? Start from a place of possibility. Number three, unpack your money scripts. This should take about five minutes. Ask them what you learned about money growing up. How do you think that that affects you now? See, just like you need to know your own invisible scripts, you also want your partner to explore theirs. And number four, review the numbers. Five minutes. I'm talking about sharing the basics of what you've learned over the last three months. Income, savings, big expenses. Remember, this is five minutes. We're not pulling out a spreadsheet. Even me, an optimizer who freaking loves them. I have to tell myself, don't do it, Ramit. Don't pull that spreadsheet out with 45 tabs. That looks incredibly beautiful. Don't do it. You just want to build awareness and connection. And number five, end on action. Five minutes. Celebrate a win and pick one small step. Hey, let's set up a travel fund this month so that next year we can take that trip. Or when should we talk next? How about two weeks from now?