Ramit Sethi: Four Key Numbers to Track if You Want to be a Millionaire

Many of us would love to be a millionaire.

The good news is that it’s achievable, especially if you can carefully manage four key numbers.

According to finance author Ramit Sethi, that includes your fixed costs, your long-term investments, your savings, and knowing what you can spend a month, guilt-free.

24/7 Wall St. Key Points 

• Many of us would love to be a millionaire. The good news is that it’s achievable, especially if you can carefully manage four key numbers.
• According to finance author Ramit Sethi, that includes your fixed costs, your long-term investments, your savings, and knowing what you can spend a month, guilt-free.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Your Fixed Costs

As adults, most of us have fixed costs, including rent or mortgage, utilities, car payments, groceries, debt, phone costs, necessary child costs, etc.

Those fixed costs should make up between 50% and 60% of your pay. Sethi says you should add another 15% to that to account for hidden expenses in those fixed costs. If those costs are higher than that, you’ll have a tough time with saving money, Sethi added.

If you’re under 60%, you’re closer to your goal of becoming a millionaire.

Long-Term Investments

Real wealth is made with investments, he says.

He believes you should put at least 10% of your pay into investments. That can go into 401(k)s, which will hopefully be a part of an employer match program, or a Roth IRA. You should also check with your financial advisor for other strong ideas.

Your Savings

Sethi also says you should set aside 5% to 10% of your pay into savings. That includes money you may want to use in a year or so for things such as a trip, a car, or even a home. That savings should also include funds for emergencies. If you’re struggling financially, start small with an emergency fund, if you can. Even a small emergency account of $1,000 is a safety net and a start. Or, if you can put away about $85 a month, you’ll have some wiggle room.

Know What You Can Spend

Figure out how much you can spend, guilt-free.

After you pay your bills and hopefully set aside funds for savings, how much money can you still spend guilt-free? While a good guideline is about 20% of your pay, a lot of people spend more than 50% of their pay every month and have no clue where they spent it.

At the end of the day, you’re in control of your money.  Keep track of it, invest it properly, take care of your debts, and don’t spend it all just because it’s there. If you can do that, you could be one step closer to becoming an eventual millionaire.