The School of Greatness – How to Create a Rich Life with Ramit Sethi

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Key Takeaways
  • Instead of of being DERISIVE, be CURIOUS
  • Everyone has a money dial – a place where they love to spend money
    • Spend on your money dial, but save hard elsewhere – invest the difference
  • Stop checking the market – you’re not a day trader. It’s all about the long game.
  • The Latter of Personal Finance – This is where your money should go, step by step
    • Take full advantage of company matching for your 401k at work
    • If you have debt, pay it off aggressively
    • If you have money leftover – max out a Roth IRA
    • Then go back and max out your 401k contribution
    • If you still have money, create a non-taxable, non-retirement investment account
Intro
“Money is not just money”
  • You can use it to create a rich life
    • If you want to fly business class, you can
    • Money amplifies what you really want to do in life
  • Everyone teaches you how to save money, but almost no one teaches you how to spend it
  • As you earn more, you change your spending habits
    • It’s common for someone who can’t afford business class, to wonder why anyone would ever pay extra for that
    • But people who can afford it, don’t tend to mind the price, for the benefit of increased comfort
The D to C Principle
  • When someone says – “I just bought a business class ticket” – Notice your instinctive reaction…
    • “Wow what a show off” or “That’s ridiculous” ” etc. etc.
  • Instead of of being DERISIVE, be CURIOUS
    • “Why would this person buy a business class ticket? Maybe there’s a good reason behind it? He/She must know something I don’t, and I want to understand why.”
The Money Dial
  • Each of us has one “money dial” that we love spending on
    • This is the thing you love to spend money on, the thing that gives you joy, and could spend endless amount of time optimizing
    • As you earn more money, you turn the dial up
  • Ramit’s is convenience
    • He has a personal chef and an assistant
  • Wellness is common for people
    • Certain wealthy people will pay for a personal trainer, a dietitian etc.
The Latter of Personal Finance
  • This is where your money should go, step by step
    • Take full advantage of company matching for your 401k at work
    • If you have debt, pay it off aggressively
      • Actually know how much you owe, and have a debt payoff date
    • If you have money leftover – max out a Roth IRA
    • Then go back and max out your 401k contribution
    • If you still have money, create a non-taxable, non-retirement investment account
Financial Advice
  • Spend on your money dial, but save hard elsewhere – invest the difference
    • What should you be investing in? – Simple low cost target date funds 
  • Most businesses don’t last more than 80 years
    • If you’re doing well. Be smart – put $5k (or whatever is appropriate for your level of success) away each month.
  • “I am happy to pay my taxes. Only in this country could I have been this successful”
  • What should you invest in after you’ve maxed out your 401k, your Roth IRA, your HSA etc.?
    • Create a non-taxable non-retirement account – and just continue to invest. Ramit uses VanguardVanguard. (It’s essentially just a retirement account, without the tax breaks you’d get from a 401k/IRA)
      • “At a certain point, the compounding interest is so insane. You will start to actually earn more from your investments, than you will from your income – even if you’re making $500k/year.”
    • Only then….after this…have fun with 5-10%
      • Ramit did some angle investing
      • Or, invest in crypto
  • Stop checking the market – you’re not a day trader. It’s all about the long game.
    • Ramit just lost $75,000 when the market recently dipped
    • DON’T take your money out when the market dips
      • DO Nothing
    • Set up automatic contributions to your investment accounts and don’t touch a thing
    • “It doesn’t matter in the short term, but in the long term we know the market tends to return 7-8%”
  • Say you have an extra $500k-$1,00,000 lying around (after you’ve maxed out your IRAs, you have $5k-10k going to your index funds, you’ve dabbled in crypto, did angel investing etc.) what should you do with the extra $1,000,000 per year?
    • First ask yourself – Did you really do everything?
      • Did you consider setting aside a down payment for a home you’ll buy in the future?
      • How about the first year of your kid’s life? What about your parents – have you taken care of them?
    • Invest it in a non-retirement taxable account
    • Spend more on your money dial
  • Real Estate
    • Really question what you’ve been taught
      • Most have been taught real estate is always a good investment – but that’s just not true
    • Most people don’t understand that when you spend the money on a house, you incur thousands in phantom costs (taxes, maintenance etc.)
      • When you factor this in – real estate turns out not to be such a great investment
      • You are NOT throwing money away by renting
    • Even if you bought your home 40 years ago for $200k, and it’s worth $600k today – you’d probably have made much more investing that $200k in the market
    • Really run the numbers using a buy vs. rent calculator
Talking About Money
  • “People crave talking about money, because no one else will”
  • People would rather talk about their sex lives, than their credit card debt
More on Ramit
  • What does greatness mean for Ramit?
    • “Deciding what kind of life I want to live, and creating it, unapologetically, even if it means making different choices than other people.”
  • Ramit’s 3 lessons for the world
    • You can create a rich life through planning and unconventional choices
    • You have something to say, and the world needs to hear it
    • You could probably eat spicier food than you think 😉
Random
  • Rent is Manhattan is going down
  • Ramit has had the same apartment in NYC for 10 years – he plans to buy a house one day
  • “So many of us are looking for someone to approve of us, while we are shaking their hand”
  • “If you want to live a life of greatness, you need to be comfortable making different choice, than what other people expect”
  • You are the average of the 5 people you associate with most
    • Instead of closing the door on old friends (who aren’t as successful), why not open the door to some new, successful people
  • “No one is coming to rescue you. It’s not a Disney move, it’s only you. Take control.”
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