
October 30, 2018
The School of Greatness – How to Create a Rich Life with Ramit Sethi
Key Takeaways
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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.
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The Latter of Personal Finance – This is where your money should go, step by step
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Take full advantage of company matching for your 401k at work
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If you have debt, pay it off aggressively
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If you have money leftover – max out a Roth IRA
- Then go back and max out your 401k contribution
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If you still have money, create a non-taxable, non-retirement investment account
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Intro
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Benjamin Franklin once said – “An investment in knowledge pays the best interest”
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Ramit Sethi (T: @ramit, IG: @ramit) is the New York Times bestselling author of I Will Teach You To Be Rich
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Note from Podcast Notes – if you haven’t read this, it’s highly worth the read
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He is also the author of Your Move: The Underdog’s Guide to Building Your Business
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Check out his website
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If you’re ever in NYC, go to Kati Roll
“Money is not just money”
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You can use it to create a rich life
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If you want to fly business class, you can
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Money amplifies what you really want to do in life
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Everyone teaches you how to save money, but almost no one teaches you how to spend it
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As you earn more, you change your spending habits
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It’s common for someone who can’t afford business class, to wonder why anyone would ever pay extra for that
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But people who can afford it, don’t tend to mind the price, for the benefit of increased comfort
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The D to C Principle
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When someone says – “I just bought a business class ticket” – Notice your instinctive reaction…
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“Wow what a show off” or “That’s ridiculous” ” etc. etc.
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Instead of of being DERISIVE, be CURIOUS
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“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.”
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The Money Dial
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Each of us has one “money dial” that we love spending on
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This is the thing you love to spend money on, the thing that gives you joy, and could spend endless amount of time optimizing
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As you earn more money, you turn the dial up
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Ramit’s is convenience
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He has a personal chef and an assistant
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Wellness is common for people
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Certain wealthy people will pay for a personal trainer, a dietitian etc.
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The Latter of Personal Finance
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This is where your money should go, step by step
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Take full advantage of company matching for your 401k at work
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If you have debt, pay it off aggressively
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Actually know how much you owe, and have a debt payoff date
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If you have money leftover – max out a Roth IRA
- Then go back and max out your 401k contribution
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If you still have money, create a non-taxable, non-retirement investment account
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Financial Advice
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Spend on your money dial, but save hard elsewhere – invest the difference
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What should you be investing in? – Simple low cost target date funds
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Most businesses don’t last more than 80 years
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If you’re doing well. Be smart – put $5k (or whatever is appropriate for your level of success) away each month.
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“I am happy to pay my taxes. Only in this country could I have been this successful”
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What should you invest in after you’ve maxed out your 401k, your Roth IRA, your HSA etc.?
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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)
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“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.”
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Only then….after this…have fun with 5-10%
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Ramit did some angle investing
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Or, invest in crypto
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Stop checking the market – you’re not a day trader. It’s all about the long game.
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Ramit just lost $75,000 when the market recently dipped
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DON’T take your money out when the market dips
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DO Nothing
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Set up automatic contributions to your investment accounts and don’t touch a thing
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“It doesn’t matter in the short term, but in the long term we know the market tends to return 7-8%”
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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?
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First ask yourself – Did you really do everything?
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Did you consider setting aside a down payment for a home you’ll buy in the future?
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How about the first year of your kid’s life? What about your parents – have you taken care of them?
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Invest it in a non-retirement taxable account
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If you invest $10-20k per month, that money will turn into massive amounts – try using a compound interest calculator
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Spend more on your money dial
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Real Estate
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Really question what you’ve been taught
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Most have been taught real estate is always a good investment – but that’s just not true
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Most people don’t understand that when you spend the money on a house, you incur thousands in phantom costs (taxes, maintenance etc.)
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When you factor this in – real estate turns out not to be such a great investment
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You are NOT throwing money away by renting
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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
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Really run the numbers using a buy vs. rent calculator
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Talking About Money
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“People crave talking about money, because no one else will”
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People would rather talk about their sex lives, than their credit card debt
More on Ramit
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What does greatness mean for Ramit?
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“Deciding what kind of life I want to live, and creating it, unapologetically, even if it means making different choices than other people.”
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Ramit’s 3 lessons for the world
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You can create a rich life through planning and unconventional choices
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You have something to say, and the world needs to hear it
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You could probably eat spicier food than you think 😉
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Random
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Rent is Manhattan is going down
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Ramit has had the same apartment in NYC for 10 years – he plans to buy a house one day
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“So many of us are looking for someone to approve of us, while we are shaking their hand”
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“If you want to live a life of greatness, you need to be comfortable making different choices, than what other people expect”
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You are the average of the 5 people you associate with most
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Instead of closing the door on old friends (who aren’t as successful), why not open the door to some new, successful people
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“No one is coming to rescue you. Life is not a Disney move, it’s only you. Take control.”