Every year is like a reset button for your finances. That means you get to decide on any changes or adjustments you make for the rest of 2024.
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According to money expert Ramit Sethi, now is the perfect time to take inventory of your money and define where you want it to be. He suggests some questions to keep in mind when making your plan. Where do you want to travel next year? What do you want to spend more on? Less? Can I cancel my subscription? Can I donate more?
In a recent weekly newsletter, Ramit's Money Minute, Sethi outlined a financial checklist to set up your finances for the coming year.
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Reconsider your conscious spending plan
“Use these as general guidelines, but take them seriously. If your money follows these recommended percentages, it's a big win toward a rich life,” said Sethi. .
When it comes to fixed expenses, he recommends allocating 50-60% of your income to this category.
“If your fixed costs are too high, it may be time to find a cheaper place to rent (or rent a room if you own your home) or earn more income. ”
The second largest percentage (20-35%) should go towards guilt-free spending. Here he suggests re-evaluating your current subscription (and stopping your subscription if necessary). “Are your expenses within your means? Are you actively saving toward your spending goals?”
Then, plan to allocate 10% of your income to investments. Mr. Sethi stressed that if he has not invested at least 10%, he should find funds from elsewhere and reallocate them to investments, such as guilt-free spending.
Finally, he recommends putting 5-10% of your money toward savings, while also asking you to reconsider your savings goals and decide if they're accurate.
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Spending time negotiating bills and fees
“Many companies will offer you an introductory rate or lower your monthly fee if you ask,” Sethi writes. Here you can spend your time negotiating all your bills and charges, from cell phone bills to car insurance payments, cable TV and internet bills, and even bank fees. The key is to deplete your budget and eliminate anything that could be better allocated to your investment or savings goals.
Plan how you want to invest this year
When it comes to investing, Sethi says it's important to make sure you're making the most contributions to your 401(k).
“Make sure your money is invested in the right funds and not just transferred and left there,” the financial guru explained.
If you have a Roth IRA, he says the same is true for your Roth IRA.
“Your money should be invested (not just transferred and sitting there). Also make sure it's invested in the right funds.”
He recommends taking advantage of all the tax-advantaged accounts you can.
Let's pay off the debt
According to Sethi, this should be a top priority for 2024.
For starters, he says, reconsider your debt repayment plan. “How is everything going? Can you pay off your debt faster?”
Additionally, you should also check your credit report. Sethi recommends getting a free credit report at annualcreditreport.com, which he recommends getting once a year.
“You need to look for errors in the report and correct them immediately,” he pointed out.
At the same time, he also recommends checking your credit score.
“Many credit cards offer free credit score checks,” Sethi says. “Knowing your score is important because it affects how much interest you pay on debts like credit cards, loans, and mortgages.”
On the topic of credit cards, Sethi insists on always renegotiating your credit card APR. Calling your credit card company can be daunting, he says, but it's worth the effort.
“By lowering your annual interest rate, you can save hundreds, if not thousands, of dollars in interest payments, depending on your debt,” Sethi said. “The better your credit score and payment history, the more likely you are to negotiate a lower APR.”
Plan how to earn more this year
““Negotiating a raise is easy if you already have a job, but asking for a raise requires careful planning,” Sethi wrote. One way to do that, he says, is to show how your work contributed to the company's success and ask for fair compensation.
Alternatively, if your chances of getting a raise are low, you should try to find a job that pays better, he says.
“If your existing company doesn't have growth potential, look for a higher-paying job. During the hiring process, you have more leverage than ever in salary negotiations.”
In addition to the above, money gurus say it is equally wise to start earning money on the side.
“If you accept the idea that you can make more money, you'll be in for a big surprise,” he says. “You already have skills that others can pay for, and you don’t even realize it!”
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This article originally appeared on GOBankingRates.com: Set up your finances this year with Ramit Sethi's 10-hour plan
