According to financial guru Ramit Sethi, there are seven levels of wealth. Once you get into the fourth level, things get pretty exciting. This “Growth” stage is when your money works harder than you.
Sethi shared strategies you can use to reach this level, plus how you can advance to the final three levels of building wealth. However, he said that people who are in growth mode typically have these two details in common.
“You think in percentages and strategy,” Sethi stated in the video.
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Percentages are important when it comes to investing, knowing the percentage of money you keep, and setting long-term goals. Strategies can help you turn your goals into realities. Here’s how thinking in percentages and strategy can boost your finances.
Be Highly Intentional With Your Money
People who are in growth mode are highly intentional with their money. They carefully consider every expense and how their daily actions move them closer to their long-term goals.
Percents and strategy both play a role in conscious financial management. Sethi suggests increasing your annual portfolio contributions by 1% each year. For instance, if you contribute 15% of your paycheck to your portfolio, Sethi believes you should bump it up to 16% next year.
This level of intentionality makes it easier for wealth to build on itself. You are already making consistent investments at the growth level.
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Make Healthy Trade-Offs To Grow Your Wealth
Trade-offs are a part of life. You have to say no to some people or opportunities to say yes to other people and opportunities. Any time you say yes to something, you automatically say no to anything else during that time frame.
You can make certain trade-offs that minimize your expenses so you can build your wealth faster. For instance, you may have some unused subscriptions that continue to rack up debt. Getting rid of these subscriptions and removing other unnecessary costs can move you closer to your long-term goals.
However, Sethi isn’t an advocate for penny-pinching for your entire life. He believes in spending money on things that bring you the most happiness. Trading off the expenses that don’t make you as happy will free up money you can use on the expenses that bring you more happiness.
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Use A Compound Interest Calculator
Sethi encourages his viewers to use a compound interest calculator to map out how much their wealth can compound in the long run. You can enter your current net worth and see how an annualized 8% return will affect your wealth over the next 10, 20, and 30 years. Sethi recommends using those time frames in your calculations.
Compound interest calculators can give you more momentum and help you ramp up your investments. These calculators also let you see how small increases to your monthly portfolio contributions can have a big impact on your long-term wealth.
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This article Ramit Sethi Identifies Two Key Traits Of People Who Are Growing Their Finances: ‘You Think In Percentages And Strategy’ originally appeared on Benzinga.com
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