Saturday 20th April 2024

Ramit Sethi’s budgeting guidelines – are they helpful to Millennials?

The author of ‘I Will Teach You to Be Rich’ proposes budgeting with 30% for guilt-free spending, a unique approach for today’s lifestyle-focused millennials and Gen Z, Finance Dee writes.

Ramit Sethi

Ramit Sethi, the author of bestseller I Will Teach You to Be Rich is a little different from the finance gurus of the past.

Although he believes in the age old principles of budgeting, or as he likes to call it “a conscious spending plan”, getting out of debt, and putting away for the future, he really focuses on this idea of building your “rich life”.

And he actually puts his money where his mouth is.

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When it comes to how you should divvy up your money to live this rich life he talks about, he recommends staying somewhere close to the following guidelines1:

  1. 50-60% of one’s income to go on fixed costs. These are all the essentials to live, such as your rent/mortgage, household bills, groceries, transport, or any debts you may have that need tackling.
  2. 10% of one’s income to go towards investments. This could be in the form of putting into a pension or an investment account such as a stocks and shares ISA in the UK.
  3. 5-10% of one’s income to go towards savings. Saving for that emergency fund. Towards the house deposit. The car you need. Those sorts of things.
  4. And last but certainly not least, a whooping 20-35% of one’s income to go on guilt-free spending. Essentially, spend it on whatever your little heart desires.

Although these guidelines aren’t too dissimilar from the well-known 50-30-20 rule (50% needs, 30% wants, 20% debts/savings) I think it may be how he has phrased the fourth budget category, and how he talks about it in his podcast and Netflix show, that feels a little scandalous for the likes of me who spends less than 15% of my income “guilt-free”. But that’s a topic for another article.

After the initial shock and some time to really digest, I can’t help but think maybe this is the kind of guideline that will actually work for the vast majority of millennials and Gen Z’s who both desire and are accustomed to a certain type of lifestyle. Often a much more expensive one than our parents and grandparents.

With any budgeting guidelines, they are just that, guidelines! Everyone’s circumstances are unique and it’ll be almost impossible to have a one size fits all approach to budgeting.

But budgeting guidelines are a useful way to help you categorise your spending to see where your money priorities lie and if they align with where you want to be.

With Ramit’s guidelines, it puts into place some securities for the future by squaring away 15% into savings and investments (maybe a bit low for those who want to be more aggressive savers), but crucially it allows for up to 30% of your budget to be guilt-free. No strings attached. No questions asked.

So what do you think of the idea of 30% guilt-free spending? Does it make you a little uncomfortable – if so, why? Or do you think it’s the right amount to give you the feeling of that infamous “rich life”?


  1. https://www.iwillteachyoutoberich.com/conscious-spending-basics/

Finance Dee

Mouthy Blogger

Finance Dee is a British-Jamaican living in the SE of England. By day she's a research consultant and by night a finance YouTuber and FIRE blogger

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