Ramit Sethi: The New Rules About Money & Wealth and What You Don’t Know About Achieving Financial Freedom – The James Altucher Show (Part I)

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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)
• 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 
• 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.”

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
• 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 $$
• 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