Whether it’s living paycheck to paycheck or never being quite able to take the next wealth-building step when it comes to financial planning, getting out of this type of cycle will only be beneficial. This may sound easier said than done, but financial expert, entrepreneur and author Ramit Sethi has a plan for you.
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When it feels like you can’t see the financial forest through the trees, it may be time to seek the advice of experts such as Sethi. Here’s how he explained the different ways you can take control of your money, get off a financial treadmill and run toward building wealth.
Earning passive income doesn’t need to be difficult. You can start this week.
Step 1: ‘Build Up Your Emergency Savings’
An emergency savings is a fund you set up separately from your other bank accounts in case of the unexpected, such as job loss or medical bills. Though many financial experts recommend you have at least three to six months’ worth of savings stored away in this savings account to help cover costs, Sethi recommended that you have at least 12 months saved.
As Sethi said in a recent newsletter, “If you lose your job, things could unravel quickly.”
If you don’t have an emergency fund and suffer a financial shock, it could lead to a debt spiral that is hard to escape, so it is better to be safe than sorry.
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Step 2: ‘Keep Investing’
Once you have the safety net of emergency savings established, you can start putting your money toward investing and building wealth.
Keeping your money in a bank account is safe, but it doesn’t yield the same gains as stocks, bonds or other investments. Once you establish your risk tolerance, don’t delay in investing today, or as Sethi said,
“Nobody’s coming to rescue us, and nobody knows which way the economy will go, so don’t wait. Think about how you can create your own income.”
Step 3: ‘Start Thinking About Earning More’
A steady income is great, but creating more than one revenue stream can not only protect you from unexpected costs or debt cycles but also help grow your money exponentially. Putting your mind toward increasing your earning potential is one of the biggest steps you can take in wealth building. Sethi said,
“And if you want to start a second income stream, start now so you can benefit later. You don’t have to have a winning idea or every detail figured out in advance. It’s actually better to start small, follow a system, make mistakes and learn as you go.
“You could build a second income stream this month and completely change your life’s trajectory. My first sale was for just $4.95. Just a few bucks. But I didn’t care! That sale felt amazing, because I knew if I could sell one, I could sell 10. And if I could sell 10, I could sell 100.”
Final Take To GO
The bottom line is that Sethi does more than just talk the talk, as he has proven time and again that his business acumen is strong and his financial advice is worth following. If you have found yourself on the paycheck-to-paycheck treadmill and want to break free, there are steps you can take to do so. You don’t build wealth in a day, you build it proverbial gold brick by gold brick.
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This article originally appeared on GOBankingRates.com: Ramit Sethi: How To Step Off the Financial Treadmill and Build Wealth
