Ramit Sethi says you can spend this surprising amount of money ‘guilt-free’

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Your monthly budget can include spending on the things you enjoy.


Key points

  • A conscious spending plan includes money each month for guilt-free spending.
  • Aim to spend 20-35% of your net income on guilt-free spending.
  • This includes expenses such as entertainment, meals, drinks and shopping.

Budgeting offers many benefits, including saving money and improving your money management skills. According to financial expert Ramit Sethi, your monthly budget should also include money spent on yourself without guilt or shame. Instead of using leftover funds after paying bills and other expenses like groceries, gas, and debt repayment, why not include guilt-free spending in your budget?

Sethi advises individuals to include guilt-free spending as a line item in a “conscious spending plan.” Keep reading to learn more about this unique way to budget and how much to set aside for guilt-free spending each month.

What is guilt-free spending?

Nobody likes to spend money on things like mortgage or car payments, electricity bills or other utilities. Unfortunately, this is often part of owning a house or a car and being an adult in general. Monthly budgets typically focus on bills, paying off debt, and saving for the future. Guilt-free spending is an extra line in your budget to enjoy the things you love.

According to Sethi, your budget (which he calls a conscious spending plan) should include money you can spend on yourself without shame or guilt. What the money is spent on depends on the person. This could include things like:

  • Trips to restaurants and bars
  • Movies
  • Thermal treatments
  • Shoes
  • Clothes
  • Travel
  • Coffee
  • Self-care

Since it’s your money, you can choose how you spend it.

What is a Mindful Spending Plan?

As the name suggests, a conscious spending plan is a budgeting method that takes an intentional approach to how you spend and save your money. Mindful spending focuses on analyzing your spending habits, then focusing your efforts on paying bills, saving for retirement, and setting aside money each month for yourself. This allows you to spend money on things you like while aggressively removing things you don’t.

Spending Buckets

A conscious spending plan focuses on dividing your income into four categories or brackets:

  • Fixed costs: 50% to 60%
  • Investments: 10%
  • Savings: 5% to 10%
  • Spending money without guilt: 20% to 35%

Sethi says these percentages are just a recommendation, although he says you shouldn’t stray too far. Here’s a closer look at each compartment of a conscious spending plan:

Fixed costs: Fixed costs include monthly bills, debt repayment and other necessities. Up to 60% of budgeted money should be spent on expenses such as rent, car payments, utilities, cell phones, student loans, and paying off other debts. The specific expenses depend on your situation. Not everyone has debt to pay off, but you may have other fixed expenses to include. Analyze your expenses to determine which expenses fall into this category.

Investments: According to Sethi, you should focus on saving about 10% of your income for long-term retirement savings. These funds can go into a 401(k), an IRA, or other investment vehicles. If offered, enjoy an employer match on 401(k) investments.

Savings: Savings refers to short- and medium-term savings goals. It all starts with building an emergency fund to cover unexpected life expenses. Then figure out other personal and financial goals you want to save for and start saving money each month until you have enough funds. Short-term savings goals can include holiday and birthday gifts, vacations, home renovations, and other needs. Medium-term savings could mean setting aside money each month for a new car or a down payment on a house.

Guilt-free spending: As mentioned, guilt-free spending covers all the other expenses you love. Guilt-free spending can be more calculated spending, like a manicure and pedicure, or it can include impulse purchases like a candy bar or a latte.

Spend time analyzing your spending habits to develop a conscious spending plan that works for you. Make sure it deals with paying off debt if you owe anything, but don’t forget to include guilt-free funds each month for you.

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