'How to Get Rich' star Ramit Sethi on what to do amid tariff chaos: Build a 12-month 'war chest'

• Ramit Sethi advises against panic selling amid market volatility and tariff chaos.
• Instead, he recommends building a 12-month emergency fund.
• To increase savings quickly, cut non-essential costs and delay major purchases.

As the stock market roller coaster continues, you may be thinking: What should I do with my money right now?

Business Insider asked personal finance expert Ramit Sethi what investors need to know amid the tariff chaos — and what he's doing with his own money.

"Slow down and don't panic," the author and host of Netflix's "How to Get Rich" told BI. "Times like this can cost investors millions of dollars because of rash decisions they make. The most important thing you can do is avoid selling your investments out of panic."

Don't even look at your investment accounts, he added: "It's the same as walking into a casino after 2 o'clock in the morning: Nothing good is coming from that and nothing good is coming from you logging onto Vanguard on your phone."

Instead, shift your focus to your emergency fund. Now is the time to add to it.

"I am recommending a 12-month emergency fund, which is only the second time in history that I've ever recommended that — the last time was during Covid — and that is because of the massive uncertainty that these tariffs have unleashed," said Sethi. "When companies see uncertainty, they retrench; when they retrench, they lay people off."

The self-made millionaire is implementing his own advice.

As global markets have tanked, rebounded, and fallen again in response to President Donald Trump's tariff announcements, "the only thing I've done is to start to build up an even larger savings account," said Sethi. "Other than that, I have made no other changes, nor would I. You should not be adjusting your investments on a daily basis. Investing is much more like cooking Thanksgiving dinner: You put the turkey in the oven, close it, and then let it sit for the next 35 years."

How to build your 12-month 'war chest'

A 12-month emergency fund is "a lot," acknowledged Sethi. "If you don't have 12, start with three — but get aggressive and start to build that war chest."

He provided five strategies that anyone can use to start rapidly building their savings.

1. Cut back on non-essential costs. "The first thing is to take a really hard look at your discretionary spending — that would be fun stuff, going out, eating out, travel — and really tamp down or even eliminate that spending," he said.

Identify your guilt-free spending areas, cut back, and redirect that money to your emergency fund. Keep in mind that this can be a temporary adjustment.

2. Put off regular expenses. Think about recurring expenses that you can delay. "For example, if you currently do any type of self-care every three months, let's say, consider making it four," said Sethi. "That seems like a small change to make, but over the course of a year, it can generate hundreds of dollars in savings."

3. Delay major purchases. Now is the time to hit pause on moving apartments, buying a car or home, or applying to grad school, said Sethi: "Those are massive decisions, and if anything else in your financial life goes wrong, such as losing your job, it can produce catastrophic consequences, so I would just hold off on those things."

4. Stop overpaying on low-interest debt. Low-interest debt typically refers to loans with interest rates under 6% APR. If you're paying an extra $200 a month toward a 3% mortgage, for example, consider sending that $200 to savings, at least for now.

5. Consider lowering your 401(k) contribution. You can also temporarily decrease the amount going from your paycheck straight to your employer-sponsored retirement plan. Just make sure you're still contributing enough to get the 401(k) match if your employer provides one, said Sethi.

As a last resort to free up extra cash, you can lower the amount of money you're putting toward high-interest debt, he said: "But I would really prefer you do everything you can before doing that because once you stop paying extra toward 27% credit card interest rates, it's very difficult to get out of that situation."

Put your additional savings in a high-yield savings account and "move on with your life," said Sethi.

For people looking to optimize in a down market, he warns against investing more than you normally would.

"One of the mistakes people are making right now is they are still trying to optimize every last tiny bit of their investments," he said. "A lot of folks right now are saying, 'Hey, what if I just invest extra because the market's down?' That sounds really smart, but that's really just market timing. That's the same as saying, 'Why don't I sell because the market's down?' It's just that this time you're a buyer instead of a seller."

If you have extra money, "you would probably be better served in the short term putting that money in a savings account and building up a sizable war chest versus investing that money and taking the risk of potentially getting laid off."