
July 9, 2019
Ramit Sethi: The New Rules About Money & Wealth and What You Don’t Know About Achieving Financial Freedom – The James Altucher Show (Part I)
Check out The James Altucher Show Podcast Page
Key Takeaways
- Stop worrying about the $3 questions (like whether or not you buy a latter)
- Instead – focus more on the $30,000 questions
- If you get the $30,000 questions right, you can buy all the lattes you want
- Run the numbers before you decide to buy a house, it’s not always the best investment
- The easiest way to change a behavior is by taking discipline out of the equation and automating it
- Successful people frequently use the words “always” and “never” (i.e. “never” eating dessert or “always” saving 20-30% of your income)
- Instead of being DERISIVE be CURIOUS
- Think: “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.”
- Spend extravagantly on the things you love, but cut costs mercilessly on the things you don’t
Intro
- Ramit Sethi (T:@ramit IG: @ramit) is the author of I Will Teach You to Be Rich (he recently updated it with 80 new pages)
- His book is one EVERYONE should read
- Check out his website
- For more Ramit, check out these Podcast Notes:
- Ramit Sethi: Automating Finances, Negotiating Prenups, Disagreeing with Tim – The Tim Ferriss Show
- Ramit Sethi: I Will Teach You to Be Rich – The Jordan Harbinger Show
- Ramit Sethi on Living a RICH Life – What Got You There with Sean DeLaney
- How to Create a Rich Life with Ramit Sethi – The School of Greatness
- This episode was recorded at James’ podcast studio above Stand Up NY
Buy as Many Lattes as You Want (worry about $30,000 questions, not $3 questions)
- The media says – “Save money. Stop buying lattes.”
- “This is a perfect example of the a simple lie and misconception that’s spread when it comes to money” – Others include:
- “Buying a house is the best investment” (it’s not… most of the time)
- “This is a perfect example of the a simple lie and misconception that’s spread when it comes to money” – Others include:
- Instead – “Buy as many lattes as you want”
- Spending $3/day doesn’t add up to all that much
- Rather than worrying about whether or not you should be spending money on coffee, focus on the big wins (like getting a great job and negotiating your salary)
- In a sense, whether or not you should buy lattes is a $3 question, think bigger! – focus on the $30,000 questions!
- What are the $30,000 questions?
- Who you marry and your relationship with money between the two of you
- Your job and salary
- Buying a house vs. an apartment
- Whether or not you save for retirement
- “Most people would be better off if they stopped thinking about $3 questions altogether. Spend much more time on the big ticket items.”
- By the time you go to buy a house, for example, you should know essentially everything there is to know about the process
- “If you get the $30,000 questions right… and there’s only 5 or 10 of them in life… you can buy all the lattes you want for the rest of your life”
Buying a House vs. Renting
- “All the incentives in America are designed to get you, the average person, to spend money on a house”
- The NAR (National Association of Realtors) loves to lie
- The government likes to tell people buying a house (compared to renting) “adds to a stable community”
- We have all these home improvement stores
- And then we have the $15 trillion mortgage industry
- “The American dream includes 2.5 kids and a HUGE purchase. Where did that come from??”
- We’re SO OFTEN told – “You’re throwing away money on rent, buy a house for the equity”
- Ramit’s advice:
- Actually run the numbers
- Actively seek out the downsides of buying a house – there are many things you’re likely not considering
The Similarities Between Food and Money
- Ex. – We don’t count our calories, we don’t count our spending
- Ramit talks more about this in his book, but was advised not to do so (but he refunded)
- Why? – Food and losing weight/dieting has become so controversial (>75% of Americans are overweight!)
- In terms of losing weight, the arguments have gone from:
- “Losing weight is hard” —>
- “Losing weight is impossible —>
- “I can’t lose weight due to genetics” —>
- “It’s bad and unhealthy to lose weight”
- In summary:
- “We can control out money, we can control the way we look and feel… there are very similar principles involved with each”
- At the end of the day, you can really only understand what you measure
- That’s the only way you know whether to accelerate what’s working/decelerate what’s not working
Discipline and the Future Self
- Our future selves are perfectly disciplined, work out consistently, and save all our money
- But in reality – humans love comfort, watching Netflix, and putting things off until the next day
- Inherently, we’re all lazy – the easiest way to change a behavior is by taking discipline out of the equation and automating it
- But in reality – humans love comfort, watching Netflix, and putting things off until the next day
- Examples:
- Never go to a bar if you want to cut alcohol
- Get rid of all the unhealthy snacks in your house if you’re trying to lose weight
- If you’re having trouble making it to the gym, put a kettlebell in your garage
- Successful people frequently use the words “always” and “never”
- “Never” eating dessert
- “Always” saving 20-30% of your income
Ramit’s Rules
- Fly business class if the flight is > 4 hours
- Never question spending money on books or online education
- Check out Ramit’s 10 Money Rules
On Banks
- Stop using Bank of America
- “Grow up and get a better bank. They’re going to screw you whether it’s today or tomorrow.”
- Same with Wells Fargo – “They’re also terrible”
Know This
- “Most people are generally the same. People love to believe they’re unique and different.”
- “People think they’re a lot more advanced than they really are”
- Many people think their excuses are unique
- Many times “I don’t have time” and “I can’t afford it” are true, but often they’re just stories we tell ourselves
Know Your Money Lens
- On eating out:
- Some people believe the point of eating out is to get full
- Others value a lavish dining experience
- Others want novelty
- There are different lenses to view the world of travel through:
- Most view travel through a frugality money lens and therefore travel cheaply
- Others value comfort/convenience and will happily spend on business class
The D to C Principle
- “My first mistake in my early 20s was being judgmental about how other people spent their money”
- “Instead being disparaging about people sitting at the front of the plane, I should have gotten curious”
- This spawned into the D to C principle
- Instead of being DERISIVE be CURIOUS
- Think: “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.”
- Instead of being DERISIVE be CURIOUS
The Money Dial
- Your money dial is the thing you LOVE spending money on
- So go all out, spend money in this area but save HARD elsewhere
- Spend extravagantly on the things you love, but cut back mercilessly on the things you don’t
- So go all out, spend money in this area but save HARD elsewhere
- For James:
- He’s spent tons of money in the past on apartments aimed at shortening his commute to work
- “I hate travel so much, I will spend just about any amount necessary to make it as easy as possible”
- He’ll actually fly private if he’s taking his whole family with him
- Ramit’s money dial – convenience
- As an example – being able to take a taxi rather than the subway when it’s hot out
- Other common money dials – fitness classes, organic food, dinner parties
- A fun question to think about – “What if I could triple the amount of money I spend on my money dial?”
Additional Notes
- Start an email list ASAP
- ~8 years back, Ramit advised James to do the same
- Around 2015, James started to monetize his list
- Now – he’s making serious $$
- ~8 years back, Ramit advised James to do the same
- Stop looking for the advanced supplements
- Get the basics of health rights first
- Check out Kevin O’Leary’s book on money and relationships – Cold Hard Truth on Family, Kids and Money
- Ramit says he’s a member of the “don’t buy lattes” crowd
- James has found that eating out, rather than grocery shopping/cooking food, makes it much easier for him to lose weight
- How? – Always eating out prevents him from buying processed carbs/sugars at the store
- Everyone has a different idea of a rich life
- Some people would love to drop everything and ride an RV around the country
- Others want to retire in Mexico and spend lavishly
- But here’s the thing – “Most people have never thought more than 2 minute about their rich life”
- “I’d rather be dead than go to Coachella now”
- Ramit says of the people who are in debt that email him, 95% don’t actually know their total debt amount
- Further – 99.9% don’t know their debt payoff date
- Don’t be one of these people – know the total amount you’re in debt and have a plan to pay it off by a certain date