Are You Wasting Your Money on the Wrong Things? Here's What Ramit Sethi Recommends

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  • Creating your own Money Rules is about prioritizing your spending on the things you love, and cutting spending on the things that don't really matter.
  • Your Money Rules should be specific to you and align with your interests and goals.

Does this budget bring me joy?

Most of us are guilty of occasionally spending money on, well, nonsense. We fall victim to the aptly-named impulse items at the checkout counter. Or we get suckered in by the brightly colored "Sale!" stickers for things we never would have bought otherwise.

But every dollar we spend on things that aren't important is a dollar we're not spending on the things that are important. Personal finance guru Ramit Sethi wants us to change that.

To help people ensure they're spending on the right things, Sethi developed his Money Rules. Setting your Money Rules is all about spending more on the things we love -- and spending less on the things that absolutely don't matter.

Figure out what you love -- and hate

Creating your Money Rules isn't about what everyone should do, it's about what you should do.

"The more 'dialed in' your rules are, the more they should fit you like a handmade glove. In fact, at a certain point, they should seem 'weird,' even 'ridiculous"' to others (my rule about appetizers makes no sense unless you know my background)," said Sethi on Instagram.

Sethi's own 10 Money Rules are what make sense to him, for his lifestyle and his goals. He focuses on things like travel and self-improvement. For example, one of his Money Rules is about always flying business class on long flights.

But your Money Rules may be entirely different. Maybe you don't like to travel, but you love to cook -- on top-of-the-line appliances with exotic ingredients. Great! You can make a Money Rule about saying "yes" to top-tier ingredients.

Alternatively, you can also think about it in terms of what you really hate.

"What do I hate? Similar to above, but a different 'lens' to view the world through," says Sethi. "I *hate* not knowing where certain things are in my house, so I hired a personal organizer."

Do you absolutely hate cleaning? Then perhaps putting money toward a cleaning service makes sense for you.

Of course, while everyone's money rules will be specific to them, there are a few of Sethi's own Money Rules that will make sense for most people. Having a one-year emergency fund, for instance, is a good goal for everyone. As is his rule about saving and investing set percentages of his income.

Mercilessly cut the things that don't matter

If you're going to spend more on what you love, you'll need to find that money somewhere. That's when you need to mercilessly cut spending on all the things that don't matter.

Think of this as the Marie Kondo method of budgeting. Look at your extraneous expenses and think, "Does it give me joy?" If the answer is no, slash it!

Does your Netflix subscription really bring you joy or are you out of things to watch? Does the meal kit service really make your culinary life better, or is it more misses than hits? If it's not making you happy anymore, stop spending money on it.

That said, this doesn't mean stop paying your important bills -- having a roof over your head and paying your debts definitely matter, even if your electric bill doesn't bring you joy. We're talking about expenses outside the basic necessities here.

But, maybe there are still places to trim even when it comes to the necessities. Do you pay for extra internet data or a higher speed than you really need because the provider made you think it was necessary? Slash it!

Saying 'yes' instead of 'no'

If you check out Sethi's own Money Rules, you'll find a lot of them are about saying "yes" to things, instead of saying "no." That's on purpose. The Money Rules are about prioritizing your spending, not penalizing it.

As Sethi puts it, "Money rules help you make a few key decisions to cut through the thousands of financial decisions you face every year."

Many folks cringe at the "B" word; building a budget, and sticking to it, can often feel tedious and limiting. Instead, making a set of Money Rules focused on directing your spending to the things you love -- and away from the unimportant things -- can help you keep your finances on track in a more positive way.

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