Ramit Sethi Shares The First Step You Can Take To Improve Your Finances: 'That's When You Take Control Of Your Money'

Ramit Sethi has been helping people master their finances for more than 20 years. He knows how complex finances can get, but he recently broke down some simple steps you can take to improve your finances by 82%. He starts off with a powerful step that can get you on the right track and generate strong momentum.

"That's when you take control of your money," Sethi proclaimed after revealing the first step.

Sethi started his video by explaining that many people want financial freedom but get paralyzed by uncertainty when it's time to take action. He pointed the finger at anxiety and fear as two of the main reasons why people stop in their tracks after they decide to give their finances a closer look. He then revealed what you can do to get on the right track.

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Set Your First Small Goal 

Before you can achieve long-term financial goals, you have to demonstrate that you can make progress. That's the entire purpose of Sethi's first step to improving your finances by 82%. Instead of rushing to make big moves, you start with something small, like saving some extra money each month.

Sethi suggests starting with a small emergency fund and contributing up to $200 per month to a high-yield savings account. If you contribute $200 per month, you can quickly get to a $1,000 balance. Not only will you collect steady interest payments, but an emergency fund will give you some financial protection before another emergency strikes.

Some people fall behind on their finances because they have to take out loans to cover emergency expenses. Origination fees and interest reduce their wealth and make it more difficult to climb out of debt. An emergency fund keeps that risk at bay and can put you in a position to fortify your investments later down the road.

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Create A Positive Feedback Loop

When you make a positive change, it becomes easier to take more actions that strengthen the positive change you have already made. This concept is called a positive feedback loop, and it's one that Sethi preaches in his video. 

"When you save $1,000, you start asking yourself, ‘What else can I do with my money?'" he explains.

This mentality can help some people go from a $1,000 emergency fund to a $2,000 balance. Then, the power of compounding starts to work in your favor. Your interest will grow each month as you save more money, and it can reinforce good money habits. 

Soon, you may be looking deeper into your finances and discover how you can contribute $500 to your emergency savings account each month. 

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Taking Control Of Your Money

Millionaires become millionaires before they reach a $1 million net worth. It takes a special type of mindset to reach that figure, and it starts with taking control of your money. Sethi says you start to get into the driver's seat when you create a money plan and stick with it. After seeing initial progress, you'll want to double down and create a positive feedback loop.

Establishing long-term goals can help you master the basics and create a solid foundation. Long-term goals combined with short-term benchmarks like saving a specific amount of money each month or making an extra $500 per month with a side hustle can give you more control over your finances and future.

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