The Learning Leader Show With Ryan Hawk - 510: Ramit Sethi - How To Think About Money: Saving, Investing, Spending, & Living Your Rich Life

Episode Date: January 30, 2023

Text Hawk to 66866 to become part of "Mindful Monday." Join 10's of thousands of other Learning Leaders and receive a carefully curated email from me each Monday morning to help you start your week off right... Full show notes at www.LearningLeader.com Twitter/IG: @RyanHawk12    https://twitter.com/RyanHawk12 Ramit Sethi is the New York Times best-selling author of I Will Teach You To Be Rich. Millions of people read his work every month which focuses on personal finances, money in relationships, and he shares how you can define your rich life. His team has created online programs on making more money, finding your Dream Job, starting an online business, and mastering your inner psychology. Notes: If you have a partner, "create your journey together." Money is not something to be delegated to one or the other. Both should be involved. Ramit's book-buying rule:  If you've even considered buying a book for one second, then BUY THE BOOK. If you learn just one new thing, it is worth it. The return on your investment is through the roof. When in doubt, buy the book. And Read the book. Ramit describes every detail of the conversation he had with his wife about signing a pre-nuptial agreement before they got married. "You should focus on $30,000 questions, not $3 questions." Top 5 Lessons from one year of interviewing couples about money Ramit shares how to get started with your money: automation, investing, and the other Big Wins of money. How to manage your money Fixed costs: 50%-60% Savings: 5%-10% Investments: 5%-10% Guilt-free spending: 20%-30% How to invest your money Target date fund - Vanguard Index funds Ramit advises that you do not pay a financial advisor based on AUM (Assets Under Management). Pay an hourly rate or a fixed cost. This will save you hundreds of thousands (or millions) of dollars over the course of 30-50 years. Decide what you want to spend your money on... What is your rich life? Create your money rules:  For example, Ramit has unlimited spending on his health. And he has money set aside for philanthropic endeavors

At the beginning level of personal finance, it's always about what. I want to buy this shirt. I want to eat at this restaurant. I want to buy this car. That's the what. But at the highest level of personal finance, it's always about the who. Who do I want to be generous with? Welcome to The Learning Leaders Show, presented by Insight Global.

I am your host, Ryan Hawk. Thank you so much for being here. Text Hawk to 666-866 to become part of Mindful Monday. You, along with tens of thousands of other learning leaders from all over the world, will receive a carefully curated email from me each Monday morning to help you start your week off right. You'll also receive details about how my book The Pursuit of Excellence will help you become a more effective leader. Text, Hawk to 66866. Now on to tonight's featured leader.

Ramit Satie is the New York Times bestselling author of I Will Teach You to, be rich. Millions of people read his work every month which focuses on personal finances, money in relationships, and he shares how you can define your rich life. During this conversation we discuss the top five lessons, Remeet has learned from one year of interviewing couples about money. Then the most common issues that people have with money and how to fix them. And then Rameet's unconventional views on money psychology. As you can imagine, this is a departure from the typical conversation I have on the Learning Leaders Show. We talk a lot about finances, habits, relationships, and money. A lot of

topics that probably aren't covered enough because they're so important. And I imagine, Rameet will make you rethink how you view money. Certainly important topic for us to think Without further ado, ladies and gentlemen, it is Ramit Satie. All right, Ramit, it's great to have you back. Interesting point. We recorded prior to this date, but we released our first time we talked on March 8th, 2020. And three days later is when Rudy Gobert and the NBA tested positive for COVID, and it shut the NBA down and essentially seemed to be the start of the pandemic.

Three days before that man is when this episode came out and then our lives in the world changed. What was going on in your life on that day and what has changed since then over the course of the pandemic? Well, I remember I was living in New York when the pandemic started and we left really early. And I'll tell you why. During college, I took a lot of classes on disasters, trauma, psychology. people getting hijacked, fires at concerts, things like that. And one of the things I remember is if you suspect something bad is happening, move. Because the people who survive move fast. For example, if you see a crowd happening, you know those crowds where there's just wave dynamics happening.

If you see that, by the time you see it, it's almost too late, get out. And so I started seeing numbers. and because of compound interest and the work that I do with money, I understand how exponential growth works. And I saw it and I was like, we got to go. So I told my wife, we're going to go, pack a bag. And we left. And I remember leaving Manhattan on a Friday.

It was early, really early. Because when everybody's leaving Manhattan, there's doorman outside, there's people with suitcases, taxis. None of that was there. We left. We texted our WhatsApp group. We're like, hey, guys, we're out of here. And they were like, what are you talking about?

That seems a little weird. And one week later, everybody started leaving. Or it just everything hit the fan. And, you know, it's a good reminder. We were fortunate enough to be able to leave. We're fortunate enough to have the financial wherewithal and mobility. And it's also a reminder that when you see something happening in your life, sometimes the best thing you can do is make a move.

Wrong direction, right direction, doesn't matter. move because you can always correct your direction later. Interesting. So then what did you do next once you move? Where did you go? How did you set up shop? Like how did it alter your life? We,

I asked my wife to help us find Airbnb. And our only criteria was it's away from the city and near a hospital. Back then we didn't know anything, right? So we ended up staying on this just real secluded area in the middle of nowhere. It's kind of like in those zombie movies. You know, someone finds a little house and they stay there until the zombies come and get them. And our big, like, thing to do was every two weeks, 7 a.m. we'd get in a car, put on our gloves, our mask, go to Walmart, stock up, wash all the packages. Remember we all used to do that? And like, that was the big outing for two

weeks. And then we would not leave for. And so we stayed there for months until finally we felt a little bit more comfortable. And yeah, that was quite an experience. And I did a whole bunch of stuff while there. I mean, we were living in the outdoors. I'm not an outdoors guy. I'm like, where's my doorman? You know, and there's all these weird noises and animals. I'm like, look, I'm a city guy. I'm not used to this. But, you know, we started a fire every night. I did a little fireside chat. I would talk about business and psychology and stuff. And that was fun just to keep the time going. Wow. Well, you've since progressed to now on your podcast speak with couples about a topic that I think I'm super interested in. I think most people are and that's money and how it impacts relationships.

And as you know, I mean, if you're on the same page, it can work amazingly beautiful. And if you're not, which happens from time and time, even for the best of couples, I'm sure. It can be devastating. I'm curious, there's a lot to get into here. What's the biggest misconception you think you had going into it that you've since learned since having so many of these conversations? I thought that our biggest challenge would be finding people who would share all of their numbers. Because the only reason I wanted to do the podcast, the only way I would do it is if people opened up all of their numbers. And they shared openly how much they make, how much they make, how much debt they have, everything.

And otherwise, I just didn't want to just talk to people about random financial stuff. I want to see their numbers. And so we started off thinking it would be really hard. And I remember there was a, this during COVID, there was a veterinarian couple. And they wrote me on Instagram and they were like, can you help us? We're drowning in debt, $520,000 of debt. I said, all right, I'll help you, but you have to share all your numbers, everything. They were like, all right.

I was like, wait, what? You actually said yes? And they came on. They shared everything. By the way, the people who are in the worst financial situation, their profession veterinarians is number one. Physical therapist is number two. Really? You know why?

Why? Because they incur medical school level debt, but they don't make that much. And so they walk out with huge amounts of debt. and many vets are making $60,000, $70,000. They're in an impossible situation. So once I did that conversation with that couple, I really helped them rethink the way they approach money. It was like, okay, this is it.

And so since then, I've now had over 75 episodes. Every couple comes on. They share exactly what their income is, net worth, debt, credit card debt, secret money, everything. And think about it. Have you ever heard a couple talk about having $825,000 of debt? Never. Have you ever heard a couple who has $13 million of net worth and she's about to divorce him because he's too cheap? Never. So it is incredibly juicy, incredibly emotional, also very educational because I think sometimes, I just want to know how are other people like me talking about this? And that's what I created with the podcast. I don't think they are. Right. These conversations, even with my very close friends, like some of my buddies, you'll, if we've, like, we may talk a little bit about the money we make

based on your career kind of arc and how we're all getting promoted or whatever's happening. And what range are we in, that type of thing. But like to get into the deep and dirty of the finances of whatever debts there or whatever secret stuff's going on. Like that doesn't happen, man. It just like even for close friends, you don't hear that. Correct. And with your friends, are they mostly men? Yeah. Yeah, exactly. So first of all, you're correct that almost nobody talks about actual numbers, certainly not couples. Because what is more intimate than money? People would rather talk about their sex lives than their money. That's not a joke. There's actual research showing that. And secondly, when it comes to gendered issues, that also rears its head. So, for example,

my wife, you know, she tells me, like, my female friends and I never talk about actual numbers together. And I go, you should. It's incredibly empowering to know if you're being underpaid or how much, how are you splitting money in the relationship? And, you know, we also see this happening at work. We also see it happening in intimate relationships. So for example, I have multiple couples on the podcast where, for example, there's a higher earner who's a woman and she wanted her husband to pick up the check. And when he did, she said, no, I actually want you to put that money in your Roth IRA. So it's kind of weird. She wanted one thing, but then she said, don't do it. And then we come to discover that she makes $200,000 per month.

Ooh, per month. So you see, yeah, it's amazing. She's an entrepreneur. She's extremely successful. So we see power dynamics, gender dynamics. Again, these things are never talked about. And I wanted to shine a light on this because when my wife and I started talking about money, it started off pretty positive, and then it got negative. It got tough as we started talking about a pre-up. And I wished desperately that I could listen in on how other couples were navigating this, but there was nothing out there. Which you guys did a pre-up, correct?

We did. How did you navigate that conversation? I think, now, I remember before I got married, there wasn't really, I didn't feel like it was necessary because we were both doing fine, but not, killing it. I feel like I think you were killing it before you got married, right? You're a millionaire before you got married. So what was that conversation like?

First, I did a lot of research. I tried to. Everything on the internet is total horseshit. A bunch of broke people on Reddit saying, uh, tell them that the lawyer told you you have to do it. I'm like, this is about to be your life partner.

You can't even have the agency to admit that a pre-up is important to you. Then there's a lot of articles which are very caricatured of what a pre-up is. You know, in America, we think that a pre-up is usually a man driving around the back of a limo with his top hat on, taking his cane and saying, like, sign this or we're not getting married. That's such a preposterous. It's a TV version of what a pre-up is. So I talked to friends and all this happened behind closed doors. And that's what frustrated me.

I go, yeah, I'm lucky to have friends who have gone through this process. But most people do not have access to that. So I wish that this were more talked about. So I sat down with my wife. At that time, we were engaged. And we had a really serious conversation. We had a formal agenda. I still have that agenda in my Google account.

just like, how many kids do we want? What do we want to name these kids? I'm like, I don't want some little kid named, you know, Jack running around this house. I mean, look at me. My name is Rameith. I'm not having a Jack in this house. We had topics about like work, who's going to work, what kind of travel lifestyle do, all that stuff. And at that time, I said, you know, there's something else that's really important to me. Because of the nature of my business, because I've been running it for almost 20 years. And because of hard work and luck, I've been able to accumulate a net worth. And it's important to me that we discuss signing a pre-up. And I was so nervous. Like most people never say that sentence in their entire life. Certainly no one in my family

had ever done this. And so I was nervous. And my now wife is, she was so great. She said, said, wow, okay, I'm surprised. I didn't expect that. I don't know much about it, but I'm open to learning about it and talking about it. I said, great. That's all I ask. Cool. And so we started down this process of learning about it, getting attorneys, things like that. And it was going well until it started to get really hard. And when you start talking about big numbers and fairness and what happens in the case of a separation? Yeah, and what happens in the case of failure, right? Correct, correct.

Yeah, which is, I think, the scary part of saying, why would I plan for failure? I mean, nobody plans to get divorced when they get married, yet not a lot, but what half or close seem to. But nobody wants to plan for that. They don't want to think that. They feel like that almost like will make it happen or that will conjure up this bad event happening,

years from now, right? It's really superstitious. It's funny, though, in America, we have this highly romanticized notion of marriage. I mean, even people listening are like, what is this guy talking about? Of course, marriage is romantic. I'm like, yeah, it is romantic. It's also a business arrangement. It's anyone who's a parent knows it is an arrangement. Who's picking up the kids? Who's responding to the calls from school? Logistics. It's logistic. And that's my favorite word. It's logistics. And if you choose to go into this fairy tale of a wedding without talking logistics, you're going to have a bad time. Whether it is with money, and that could be a pre-up, that could be how you want to combine income.

It could be, what are we going to do if one of us decides to stay home if we have children? What if we have ill parents? Lots of things. And my philosophy has always been, look, these things are going to happen. Like, COVID is going to happen. Let's get out of here. Let's not just pretend it's not happening. I'm going to die one day.

Let's talk about that. What's going to happen when I die? And same with money. Good things are going to happen. I hope bad things don't happen. But in case they do, let's plan for it at our best rather than our worst. You wrote an article about the top five lessons. This is after, I think, one year of entering a couple.

So some time has passed. So maybe these things have changed. But number five on that list was that. they claim that they're bad at money. What is this kind of myth or how to overcome this idea of like, well, I'm not knowledgeable enough or I'm bad at money that you seem to pick up as a lesson from interviewing these couples? Well, I love talking to couples at extended lengths of time because they share everything, right?

We end up talking about their childhood and their view on money. and, you know, I remember this couple where Rebecca, she would send panic texts to her husband in the middle of the workday. I hate where we live. We need to move. It's too small. We have another baby on the way. And we talked about it.

And the irony was they actually really love their neighborhood. It's walkable, et cetera. But when I asked her, how much money do you make? She said, I have no idea. I said, well, guess, is it 50K, 100K, K, 500K? She goes, I have. I have no idea. If I guessed I would be making it up. I said, okay, let's take a look at the document you prepared together. She said, oh, I didn't do that. I said, okay, that's fine. Open up the

document. And she was so nervous and avoidant at even looking at the document. I said, why don't you type in this number here? How do I type it in? And she openly admitted she tried to sabotage their meeting where they were going to work on this together. Why? Because many people love to avoid money. Then they avoid it in very peculiar ways. They don't know how much they owe in debt. Well, that's 90% of people. 95% of people do not know when their debt payoff date will be. But you'll be even surprised that a lot of people don't even know how much they make. That is shocking. How do you not know if you have a salary? This is what they do. They go, well, you know, I'm paid for, I'm paid monthly, but then once in a while I have this RSU or this bonus.

So it's not clear. I'm not sure. And then there's this tax deduction. I go, okay, okay. I'm not trying to get the exact decimal place. Is it 100K or is it 800K? Don't know. And what they are deep down, it would take them 10 seconds to find out.

But what that would unlock is that if they knew that. number, they would have to start opening the other envelopes on their desk, the ones that have been piling up, the ones that say, you're past you, or you haven't been investing correctly, or your financial advisor is taking 1%, which is going to result in 28% of your returns going to fees, and on and on and on. They'd rather simply say, it's fine, I'm not a money person. I'm not a math person. And in our culture, that's actually accepted. Like, you can't say, if you have kids, you can't be like, I'm not a good parent type of person. Everyone would be like, fuck you.

You cannot say that. But we are allowed to say, I'm busy and I'm not a money person. What about for the person, for the couple? I know a few of these that are friends of mine. And sometimes it's the husband and sometimes it's the wife. It's different based on the couples I know. They'll say, she handles all of that. Totally.

I focus on my job. I focus on this. She does all of that stuff. I don't even know what it is. And some are vice versa, right? He handles all that stuff. I just kind of go to work. Right.

And I think this is, you probably know, this is pretty common where the person has no clue. They know how much they make, but that's about it. They don't pay the bills. They don't really look at anything. They just kind of do their work. They're a mom or a dad. and the other one does all the other stuff.

What about for that person? Like, what do you think is wrong with that approach? It seems logical because in every couple, there are certain things that you're better at or your partner's better at. And we see this, you know, one person empties a dishwasher, the other person takes out the trash.

I get it. That's natural. But money is unlike any of those things. Money affects where you live. It affects your ability to have children or an extended family, it even affects who you are. And so it's not something that can be delegated to a partner or simply outsourced. It is more equivalent to parenting.

You would rarely hear someone say today, he or she does the parenting. I go to work. It's a really rare thing. Even a primary breadwinner is playing with kids, talking to them, taking care of them, that kind of thing. So when my wife and I had our early discussions, let me just tell you, point blank, it would have been really easy for me to be the money guy in our relationship. Yeah, would make sense. I mean, that's what I do for a living. I'm really good at it. And I told her, I don't want that. I want us to do it together for a few reasons. Number one, one day I'm going to

die. It's a matter of fact. And if I get hit by a bus or whatever happens, the worst tragedy in life would be for you to be this grieving spouse, left alone, the prey of the financial industry, because you're going to have a lot of money and not knowing how to do any of this. That's number one. Number two, I want us to create our journey together. We have to. That's what a healthy relationship involves talking about it, tradeoffs, what hotel are we going to stay at, all that stuff. And three, it's just more fun. It's just more fun to do it together. Is it harder? yes. My life would be so much easier if we just did it my way. But that's not a relationship, not with money. Yeah. What about people who agonize over $3 questions instead of seeing the big picture, right? The latte example that you've used for years now. But what about those issues?

Well, I'll tell you, my personal hell is going the rest of my life, pulling out a Safeway receipt and checking if I overspent on asparagus. I'm like, I don't want to live on this planet if that's what I have to do. and I think that most of us agonize over these $3 questions when we really should be focusing on $30,000 questions. So you'll see this solo or in couples. You'll see people saying, oh, I don't know. Should I get that dessert? Or I was bad. I got the cheesecake.

I don't know. I shouldn't do it. $3 questions. Whereas people rarely ask questions like, what is my savings rate? can I increase it by 1% every year? That right there is worth hundreds of thousands of dollars over your lifetime. What is my asset allocation? That right there is for many people worth hundreds of thousands, if not millions,

over the course of your life. Am I paying fees to a financial advisor? 1% means 28% of your returns go out the window to fees. Most people have no idea. I need to follow up on that one. You can keep going because I have one, but go ahead. We'll talk about that. And other questions would be my debt.

Have I prioritized my debt and do I know my exact debt payoff date? And finally, just what is my rich life? Most of us have never asked that. We argue over you spent too much at Target. Why did you not fill up the car with gas this time? $3 questions. When really, if we get the big five to 10 questions in life, right, It doesn't matter if you buy an extra coffee or extra dessert.

What about, I'm with you 100%. I feel like it's easier, though, to be in a place when you're a millionaire, to not think about the target purchases or whatever that you hear fights. Now, I feel fortunate to be in a relationship where we both work and do well that we don't have to really look at that stuff. And if you need something, you buy it. It's like at Christmas time, what are we supposed to do? There's nothing to buy.

Well, because any time you need it, you just go buy it. And we still try to live way below our means. But that's a different story when you're making, I don't know, less money. I don't want to put numbers on it, but you're making less money. It can be more of a challenge. I could see where fights would arise. If someone's like, hey, I'm going to stay home and take care of the kids, you go and work and you're still not really killing it yet.

I could see where that's where fights come up probably pretty regularly because you're like, man, I'm at work and killing myself here and you're wasting the money at Target or whatever. You know, we don't need that stuff. That type of thing comes up. I can imagine, what about for that person? It's absolutely true that different, look, if you're making 50K, it's going to be hard to be sitting there and investing 20% of gross income. Right.

That's just the fact of the matter. And even still, At 50K, it's very clear there are certain things that you can be doing with your money, including focusing on one of the big wins, which would be increasing your salary, versus feeling guilty and agonizing over a daily coffee. Now, do I look at someone who's spending 50K, and I look at all their numbers? I speak to them routinely on the podcast. People making 50K, people making a million dollars a year.

I see it all. at 50k I can tell you right now the two biggest expenses that people overspend on can you guess what they are I wish I could junk food nope what not even close 50k yeah 50k going out to eat going out to eat yeah that's a pretty good one although it's it's number three not number okay what are the first ones The first one is housing. They dramatically spend more than they can on housing. And number two is cars. So let me quickly give people four key numbers that you should be looking after with your finances.

And it doesn't matter if you make 50K or 500K a year. There are four numbers and four numbers only that are critical to tracking. The first is your fixed costs. These should be roughly 50 to 60 percent of your. take home or after tax pay. Fixed costs include your rent or mortgage, utilities, cable, subscriptions, any debt payments, anything that is fixed like groceries even, okay? 50 to 60%. The second is your savings. Five to 10% is a good starting place of take home pay. Next would be investments, five to 10%, although I like to see that number higher. And finally, my favorite one,

guilt-free spending. This is going out, eating out, gifts, travel, whatever, 20 to 35% of your take-home pay. Okay. So to summarize, fixed costs, 50 to 60, savings 5 to 10, investments 5 to 10, and guilt-free spending 20 to 35. If you know those four numbers, a lot of things become clear. I talked to a couple last night. They showed me their numbers. They make sort of what we're talking about a little bit more but in that ballpark and they are spending 88% of their take home pay on fixed costs okay now let me tell you the way that that manifests in their relationship is they fight over target and groceries and they're always like oh we shouldn't do this we shouldn't i go guys none of that matters because your fixed costs are too high and so what most people

don't want to do is look at the real problem they simply look at the symptoms and that's why they end up nitpicking each other about these tiny expenses. But my contention and what I've seen over 20 years is you focus on these big things, get these numbers in order, and the rest of the details become mere trivialities. I think one of the ways it helps, and so I will bring in the financial advisor conversation now, and you can walk me through this. One of the things that I like is we sat down, looked at both of our incomes, and then allocated a person. percentage, it's around that 10 to 15% of both of what we bring home, that it immediately is, this is automated. We don't have to do anything. It's set up automated that goes to both

savings and investments. And then there's an additional amount that goes to 529 plans. And this way, we're paying our future selves first before anything else. And I like the auto part of this because we don't have to think about it. We think about it about once or a couple times a year because our goal, the only goals we kind of set for ourselves is to increase that amount regularly, right? We're just increasing the numbers so that the percentages stay in line, assuming that we're progressing in our careers. And that's, and that is a very comforting feeling that no matter what that part is done. There's no thinking, there's no writing checks, there's nothing. It is just happening automatically without us thinking. And that was sat down and done with a financial

advisor. What do you think that's probably two-parter because the financial advisor is separate from that, even though that person was involved? What do you think about that methodology? Overall strategy is great, fantastic. I'm a huge fan of automation. I have an entire chapter in my book, I will teach you to be rich about automation chapter five. I spend less than one hour help me with this. Oh, good. Good. I'm thrilled. I heard some echoes. of my systems in your talk. That's great. I think everyone should target spending less than one hour per month on their money. That's everything. And you often find these very peculiar beliefs people have, which is like, I'm the one who manages money in our relationship. I go, okay,

what does that mean to you? Oh, I make sure the bills are paid on time. I'm like, listen, a robot can do that. You don't need to do that. It's actually below, it's beneath your time. So you can automate pretty much all of those. Yeah. The more valuable thing is what you said. creating a set of rules that serve you both. Every year we want to increase our savings rate by 1%. Amazing. That's more valuable than any amount of coffee you can cut back on. The fact that you have a joint system and you both know their percentages, incredible.

That's multi-millionaire status guaranteed. It is going to happen. It's just a matter of time for most people. So I love everything you're saying. As for the advisor, you want to talk about that? Yes. Unless there's anything else we're missing from the automation that we've set up. No, it's great.

Fantastic. Okay. How much do you pay your advisor? I think it ends up being 1%. All right. So let's talk about this. By the way, is another part of this that's kind of hard to fully know, as you know. Like what the, they had this AUM model, right?

Their assets under management and a certain percentage and you kind of, yeah, anyway, let's say it's 1%. Let me explain my thoughts on this. First of all, there can be good reasons to use a financial advisor. Those reasons would be if you have a complex financial system or situation like stepchildren, close to retirement age, things like that. Most people can do it on their own. That's exactly why I wrote my book.

There's plenty of DIY systems you can do it. But some people need a little help. I have no problem with that. However, I would never, ever pay a percentage of assets under management or AUM. Let me explain why. When you go to get your oil changed, I have no problem paying Jiffy Loub 50 bucks. If I want somebody to mow my lawn or be my lawyer, I had no problem paying a lot of money, even premium prices. But I don't see myself paying a percentage.

of my net worth for somebody to change my oil. Do you? It's a good point, man. Fucking crazy. It makes no sense. So do you have an advisor? What do you do? I have used an advisor for an ad hoc situation. I'm glad you asked because a lot of people think that I'm totally against advisors. It's not true. I've hired an advisor. I wanted a second set of eyes on my asset allocation. I was like, all right, I know this stuff, but everybody needs a coach at some point. I took it to this advisor. I said, I want to pay you to look at my asset allocation and review it and see what holes or things I missed. Now, I paid him, I think it was an hourly fee. And whatever he quoted, I paid it. Also, some advisors quote a per project fee. Once a year, they'll sit down

with you, charge you a thousand bucks or whatever. Great. I had no problem. In the grand scheme, that's money well spent. But let's talk about your AUM. One percent for a guy, like you, young guy, affluent, high earning going up, will cost you hundreds and hundreds of thousands, if not millions of dollars. Just to give you an example, I had a young woman, 31 years old, she DM me on Instagram. She goes, Ramith, I've heard you talking about advisors. I think I might be getting ripped off. I don't know. I go, okay, tell me your numbers. She makes 80K. She's, like I said, about 30. She was paying 1%. And I said, okay, cool, I ran her numbers. I said, over the course of your life, how much do you think you will pay in fees to this advisor?

She goes, I have no idea. I go, just guess. She goes, like, 50 grand. I go, how do you feel about that? She goes, I feel okay. Turned out to be over $300,000 in fees. And that's conservative. My estimate was actually a lot more.

It kind of tells me I'm in the wrong business. Probably. I mean, people love getting financial advice. People love getting. A-U-M. They fucking love it. Because think about it. Think about it. It's amazing. You are, you're charging customers an amount. They don't even know how much they're paying. Right. Okay. And they think like, oh, this magical advisor is getting me better returns in the market, which is not true. Your advisor will not get you

better returns over the long term. Chapter 6 of my book will show you the research on that. I think that's the big part. I talked this over with my dad who is, I think, very good with money. He got a financial advisor when he was like 22 and had zero dollars. The guy was cold calling and was getting a start and they grew together. And so he's probably made millions off of mine now, I guess over the course of four years. Is it the same guy? So I have worked with him. I work with somebody else now, but I have worked with him before. Both amazing, amazing people. I think they listen to this show. So I'm sure they're very nice. Let me ask a couple other questions. Okay. Did they by chance sell you life insurance?

I have a different person for that. But they have tried, yeah. And your other person, was it like universal life insurance or variable? I don't know the details. I should know this better. That's okay. It's fine. So, again, a lot of people go, hey, I just, I don't want to think about this.

And my encouragement for people is this is as important as parenting or the love you have with a partner is your money. And I don't mind, again, if you even wanted to pay somebody $500 an hour, there's a lot of great advisors who charge fee only and they're fiduciaries. They have to look out for you. In my opinion, this is what I tell like a family member. I've had a family member who said, look, Rameet, I know like I can get your help, but I just want to pay somebody to do it.

I said, fine. I understand. Pay an hourly fee, even a high hourly fee per project fee. All so good. But the math on an AUM or percentage-based model is so counterintuitive. Here it is. 1% per year doesn't sound like a lot. But because of compounding, which is highly counterintuitive, that means over the course of

your life, over 25% of your investment returns will go into their pocket. If you're paying 2%, which often is happening because your 1% advisor is putting you in loaded mutual funds with high expense ratios, basically they're making money on the front and the back end. 2% fees means you will pay over 50% of your returns will go to fees. So if you had to buy salt for the rest of your life, just this commodity, salt. And it was really fucking expensive, like hundreds of thousands of dollars. Would you buy the cheaper one or the one that costs $500,000?

Yeah, you're right. So costs matter in. So what do you do? How do you, what's your DIY method real quick for me as well as anybody else who I, because I don't want it sitting, I want it to grow. I wanted it properly invested, right? I wanted to, I read the psychology of wealth, or I'm a big Morgan-Hausel fan. I want to let the market do its work because I know how powerful compounding is over the course of my career.

Yeah. So what would you do to avoid fees then? Well, first of all, what do you do? What do you do, I guess? I'll tell you what I do. First off, I love your mindset, which is I have a long-term focus. I want the market to do its thing. You're basically saying, I'm cooking a turkey for Thanksgiving, but I'm willing to let it sit in the oven for 40 years.

Yeah, I'm not going to touch it. We had not touched it since I was 23. Nor should you. Perfect. Same with me. All right. So what I do is, well, let me start off by saying what I tell my family members to do, and then I will tell you what I do, which is just slightly different.

Okay. For family members, they go, hey, what should I do? I go, the simplest thing you can do is called a target date fund. You literally go to Vanguard, Schwab, or Fidelity, all great low-cost companies, and you look up their target date fund. That fund, you choose it based on the year you're going to turn 65. That's it. So it might be called Vanguard 2050.

And that's it. That is your one fund. It is automatically diversified. It includes stocks, bonds, large cap, small cap, all of it. It's one fund. That's it. And it's low cost. And as you get older, it automatically becomes more conservative, which is what you want.

When you're young, you want a little bit more aggressive. When you're younger, older, you want a little bit more conservative. In general, let me tell you how I do it. So I have an asset allocation. Just to make it really simple, let's say 90-10. 90% stocks, 10% bonds. Okay, really simple. People have heard of things like 80, 20, 60, 40.

What that means is 60% equities or stocks and 40% bonds. Okay. I'm younger. I'm a little bit more risk seeking, et cetera. So mine is 9010, which is fine. For a lot of young people, that's basically what they do, 90 or even 95, 5. Fine. So within that 95,

you want to diversify large cap small cap international domestic all that stuff now truthfully the average person is not going to sit here and like oh i need to put this stock here you don't need to be picking stocks the average person is not even going to do that with index funds they're not going to be like i should have 17 percent international etc the average person is should buy a target date fund which does it for you and then get on with their life When you give this advice, what is the pushback you get and how do you handle pushback from people? Because one of the things I'd say is, hey, an advisor kind of is like a, it's like this comfortable blanket. It makes me feel at ease that somebody who is a professional who does this for a living, who I like and is a good guy, is, is like in, is a fiduciary, is in charge of,

a very important thing in my life. It's nice to have a pro helping me so I can focus on my career and my family. You know what I mean? Like I think that's this, that that's why that profession exists. You know what I mean? So like, oh, it's, okay. All right. So a couple of things.

First off, it's very intuitive to want somebody looking out for you. Yeah. I mean, we want that since childhood. Okay. So I totally get it. I want somebody looking out for me in lots of areas of life. And I think that's important. If you find value in having somebody looking out for you, being able to text them or get on a call twice a year,

awesome. I support that. Just pay an hourly fee. Hell, pay them $1,000 an hour. You would still be saving about a million bucks over your lifetime if you do that. but if they are not willing to do that, then they are not actually aligned with your goals. Costs matter. Costs matter.

Again, there are a reason. I have a lawyer I pay. Happy to pay a high hourly fee would not pay a percentage of net worth. By the way, the other pushback I get is very similar to the pushback you get in fitness. So you ever have friends ask you for fitness advice? Sure. All right. And so, you know, you probably say like, well,

you know, first off, just like build the habit, go to the gym, and then you can get on a program. It doesn't really matter at the beginning. But over time, you can choose power lifting, bodybuilding, whatever. Yeah, but like, what about onions? Can I eat onions? Like, you get these very tactical questions, right? And that is the same with money. When you really understand a topic, you realize that at its core, it's pretty simple. Like, get in the gym, progressive overload, follow a program, set a goal, blah, blah, blah, blah, blah. It's the same with money. When the biggest pushback I get is it can't actually be that simple.

You're telling me that I can set up my money to automatically come from my paycheck to be moved into a 401k, an IRA. I just buy the same fund. And then that's it. I literally just, that's it for the rest of my life. I go, yeah, and you're going to be rich. They go, no, no, no, what's the catch? I go, the irony is I'm not charging you 1% AUM.

I'm actually telling you how to do it yourself. And you are suspicious of me. But if you understood the mechanics, which is why I wrote my book so people can truly understand how these work, you would realize, oh my God, I just cracked the code on this. For the skeptics saying, I've never heard of this guy. Where does he get off giving me this advice and having a book titled, I will teach you to be rich like I don't know you know like you face this all the time like yeah faces all the time right so what do you say to the skeptic who this is the first time hearing of you and this saying hey I feel

pretty good about my setup dude chill out you know what it what about those I'm not asking you to give me your credentials but just maybe a little bit more of the background of like how you've come to this place that you feel very comfortable sharing this advice with the world well I'm not going to convince anybody who doesn't want to change. So let's start there. Let's also start by acknowledging that the name of my book sounds like a huge fucking scam. I know that. You know that. Everybody knows that. It's called I will teach you to be rich. Come on. No, I think I think us authors are jealous of the fact that you've got a title that hit when we try so hard and struggle. Well, thank you. I'm flattered. You know, I think that part of my answer is that what matters most

is that my students' results speak for my work. So if you go to Amazon, there's over 12,000 reviews, and you should read them, and you should Google me. But more importantly, what I really want to challenge people to do is to realize that so many of the things we have been taught about money and believe about money are not actually necessarily true. Now, my credentials are out there. I went to Stanford and all that stuff,

But what's more important is if you hear what I'm saying and you go, wait a minute, I never actually did learn about money. Or wait a second. I do know somebody who bought a house and actually lost a bunch of money, but they never talk about it publicly. And I don't know how to invest. Then you start to want to learn a little bit more here. What do you think of a guy like Dave Ramsey? I think he's really good if you have a spending and debt problem. some of his strategies are pretty rigid, but there are a group of people who that resonates with.

I don't have a lot of respect for some of the promises he's made such as 12% returns on investments. That's not true. History has shown you don't get 12% returns. I think there's a bit of bias towards, like everybody should be. buy a house and by the way, no debt. And by the way, your house should cost what it used to cost in 1998. Like times have changed. Housing is expensive. And then politically, we disagree strongly. But if you are in debt, that could make sense. I think the larger question is, who can you find that aligns with your vision of money? So when people come to me, they don't, there's not a lot of

Midwest parents with $45,000 of credit card debt who are like, oh, okay, I really connect with this guy who lives in L.A. and is talking about a rich life and, you know, whether it be traveling for two months a year or buying a cashmere coat, et cetera. That's, I'm not for everybody. Neither is Dave Ramsey. Neither is a lot of people. But if you hear me talking about a rich life could mean picking up your children from school every afternoon or buying a beautiful jacket, guilt-free, or being able to train for an hour and a half every day with a trainer. And I go, that's your rich life? I love it.

Let me show you how to earn money and spend money to do that. Then I might be for you. I love the idea of designing your rich life. So two-parter is, one, can you explain that a little bit deeper about what it means and how others can do it? And then I'd love for you to define your rich life. Yeah. I love asking people this question, what is your rich life?

And it's funny because there are certain questions you ask and almost everybody answers in the same way. It's like we all heard it somewhere, but we don't know where. And so the most common answer I get is, I want to do what I want when I want. With who I want. Yeah. I go, so what do you want? And then they get really quiet because they never actually thought about it. And I love this.

I love the peculiarities of human behavior. That's what I studied undergrad and grad school. and what I realize is that so many of us are living in the weeds most days. I got to answer this email, got to get paper towels, got to pick up the kids, that we rarely stop to ask what is our rich life. Most of us have never asked it. And for a lot of people, it seems like a pontificating. It's like rich life.

I'm just trying to get by. But especially for the people listening right now, you know, they're fairly affluent. they have good jobs. It's like, okay, what did I work the last 25 years for? What's the purpose of this? And so, you know, I probe them and this is what I do on the podcast. I help them design it. And a bad answer would be, I want to travel more. I just want to be happy. I go, it's kind of boring. Can you get more specific? And a good answer after I spend 15, 20 minutes with him is my husband and I want to take a three-week trip to Italy, and I want us to be watching the sunset in Rome while drinking amazing Italian wine and eating cheese. And I want to take our sisters, brothers, kids, parents with us. Wow. Now that is vivid. That is personal. Fits you like a glove. So I'm looking for vivid details in your rich life. Vivid.

And they should be personal to you. The way to do this is to add, let's do this quick exercise called the money dial. Ryan, what is the thing you love spending money on? I thought you're going to ask a different question. Can I answer a different question? Like what do you love to do? Okay. So, because I've defined my rich life as working extra hours when it's cold.

So that in June and July, I will go home at 3 o'clock. on almost every day so that I can take my eight-year-old daughter Charlie to the pool and throw her in the air until my arms fall off. Amazing. Because you won't see a bigger smile on a human than when she's in midair.

We take pictures, we take videos. And, Rumi, I know there's this finality to it because she's going to grow up and get bigger to the point where, one, she's not going to want to do that anymore and I'm not going to be able to do that anymore. I realize this, this, like, narrow window of time.

I started this last year. So in the winter months, which we're in right now, I work extra and get my projects done, whether it's books or additional podcast or everything that I'm doing so that when it's hot here in Ohio, we're at the pool and it's usually not that crowded. And I'm launching her into the air. And I don't know if there's a better thing in the world. I mean, I truly don't know if there's anything better than that. And so to me, it's planning and doing the work necessary so that that that's what I'm doing,

that I'm living my rich life in those moments, knowing that I'm not going to be able to do that forever. And I think I've gotten very clear on that. You've been to help with that without you even fully realizing that because I don't think there's any possible way I will ever regret those moments, you know? And I think that's, that's what's important. And like, you asked me what a rich life is, there is nothing more rich than that. There's nothing I can buy.

There's nowhere we can go. It's that part of my life, I would say. So I love your answer. What a beautiful. I could picture it. Yeah. It's so beautiful. It's a very advanced answer you just gave.

And for everybody listening, I want to break apart why that was so advanced. So first, you knew it right off the bat. It was instantly accessible. You've clearly thought about it. That's advanced. Second, you understand that time matters when it comes to certain things in life. When you're 30, you might be able to climb Everest or 40. Unlikely at 80.

When you are your daughters at this age, having a great time, unlikely to do the same activity five years from now. Right. Highly advanced. And then finally, to know that, um, this is what you want to do with her. See, at the beginning level of personal finance, it's always about what. I want to buy this shirt. I want to eat at this restaurant. I want to buy this car. That's the what. But at the highest level of personal finance, it's always about the

who. Who do I want to take with me? Who do I want to be generous with? So all those ways you did was a very advanced answer. And for everyone listening, I think they would love to get to an answer like that. But how to get there is not clear. Because if I ask people, what do you like to do, it generates very generic answers. Oh, I like to travel. I go to the gym, whatever. So I have a couple of different exercises that help them connect it to their money. I'll ask them first, what do you love to spend money on? Almost everyone has an answer. The most common answer is eating, eating out. That's number one. Number two is travel. Number three is health and wellness. Number four is convenience. And there's a variety of other money dials. I call them dials because my second question is,

what would it look like and feel like if you could quadruple your spending? Almost turn that dial up. So if somebody loves to eat out, they'll usually say something like, oh, I guess I'd have to go to the gym more because I'd be eating out four times a week. Ha ha ha ha. But let's actually think about it. That's a very linear way of thinking. If you love to eat out and you spent way more money on it. What would you do? What would it look like and feel like? And we start to talk about it. Start to realize, oh, maybe I wouldn't be eating at the same restaurants. Maybe I would save up and go to this amazing restaurant that I've had my eye on. And maybe if it was like a really big thing, a five year, 10 year anniversary, I would fly with

my partner and we would sit at the special chef's table and who knows. There's all kinds of crazy stuff you could do. So I see their eyes light up because they're finally realizing that they have permission to spend more on the things they love as long as they cut costs on the things they don't. And that is one of my philosophies. I want you to spend extravagantly on the things you love as long as you cut cost mercilessly on the things you don't. What would be an example of that, though, because that's a, that's a, I mean, usually people aren't just, they're trying to blow money on stuff that they don't love or they don't like. They do it because it's a necessity.

Oh, we have this bill or we have this thing broke in my house and we've got to fix it, you know, that type of stuff. I'm not so sure about that. I think that when I look at people spending, they spend on random things. And I'm talking about whether you're making 50K or a million dollars a year. I see their numbers. They're spending on a bunch of Amazon orders or spending on a bunch of stuff for their kids. They're eating out, et cetera.

Of course, they're spending on housing and all that, those required things. But when I asked them, what is your money, doll? What do you love to spend money on? They'll be very honest about it. Oh, I love going to yoga. I love it. Okay. What do you love about it?

They tell me, I go, where does it show up in your spending? well, you know, I don't get to yoga that often. I go, if you could quadruple your spending, what would it look like? I would go to yoga four times a week with an instructor. Okay, what if we can do that on your spending? What would you take away? And suddenly they realize they have agency to actually spend more, but they have to make tradeoffs.

I know we've covered it before, but it's too important not to bring it up again. I have uttered your name and your book buying rule a thousand times. Thank you. Has this been updated or what is your book buying rule? I named this modestly titled concept, Ramit's book buying rule, which is if I ever see a book that I'm even remotely interested in, I just buy it. No questions, no equivocations, just instant buy. And I'll tell you the reason for this. When I was in college, I had scholarships paying for everything. I needed it to pay for college. And I had this account set up at the Stanford bookstore. And I could just walk in there and buy any book. And like, imagine Willie Wonka's Chocolate Factory. That's what it was for me. I would just

see a random book be like, yep, taking that one. And I would just walk out with stacks of books. I felt like I was truly in Willie Wonka's Chocolate Factory for five years that I was in college. And after I left, I wanted, because I love books. I love them. And I wanted to retain that feeling. And I said to myself, all right, I'm starting out, even though I'm not earning that much when I'm starting out, I'm creating my own rule. Anytime I see a book, I'm going to buy it. And I would encourage people to do that. But more importantly, I would encourage you to make your own rules. So I have my 10 money rules. Some of them are logistic. like how much I'm going to save every year. Some of them are a lot of fun, you know. Unlimited spending on health. Unlimited spending if one of my friends is doing a charity fundraiser. Unlimited. And, you know, one of my money rules is marry the right person. It's really important. So those are my rules. They're not yours. But I love to hear everyone creating their own money rules because it helps you develop your point of view with money.

Yeah. And to build on the book Buying Rule, as you've said before, if you only get one, one idea, it is way, way, way, way worth it to buy that book if you only get one. And the chances of you getting at least one idea are very high. What you're doing with that rule is you are

changing your worldview from playing defense to play offense. Defense is, uh, it's 1695. Should I wait? I don't know. I'll put it on my list and then I'll come. And offense is, I'm going to buy this book. No questions. I'm going to scrape every bit of meat off the bone from this book. And if I get one idea, it's going to be worth it. Now, some of these books are not actually going to be good. Quit. That's part of life. Yeah. Some things are just not going to. You spent your money. It wasn't good. That's okay. But you're playing offense, not defense. And I love that with money. I think from a rule perspective, unlimited spending when it comes to health and wellness and exercising your mind, for me at least, it's the top of the list because I get one body.

So that's why I go to the gym every day. And my brain is a muscle. And if I don't work it, it will atrophy like every other muscle. And the best way to work it, I think, is to have deep, long form conversations with a wise person like you as well as reading books all the time. Usually those go together because I got to prepare for these conversations. And to me, it's, it's, it seems like these universal rules that would make sense. You get one body, man, try your best. I mean, life happens.

I know, I've seen it. You know, as you get older, you see what happens. But I'm going to try my best at least to take care of this thing and have it get better as well as my mind. I feel like that that seems like universal laws almost like that's what we should do. It's not easy. It takes some discipline. It takes work. But those things, those things seem like.

seemed like a good idea to give us a better chance for things to go well. I agree. And from my perspective, talking about money, if I can throw money at a problem and make it easier for myself, amazing. Happy to do it. Now, remember, when I was starting, I didn't have that much money. So my dreams were smaller. My dream when I was in my early 20s was to be able to buy appetizers at a restaurant because we couldn't when I was a kid. Then it was to be able to get in a taxi instead of having to take a subway on a hot August day. And then it got bigger. So we start with where we are.

That's okay. But we have a vision for ourselves that is bigger than the mundane. One more. Before we go, you're meeting with someone who's 24. They just graduated from a good university and they want to leave a positive dent in the world. What are some general pieces of life slash career advice you give to that person? Are they asking me? Because I don't like to give.

They are asking you. They come to you. They show up. They're aggressive. They want to do good. I love that. Well, first of all, I say you're already ahead of the game by asking for advice. Almost nobody does.

Yep. So well done. Keep doing it. The second thing I would tell them, a little unconventional, I would say move to a big city. Do it right now. I would encourage that, especially in the early days, because there is cultural capital. There are ideas that are shared. There's more people if you're looking to date or meet people, meet friends, business contacts. And I would push them. That's an unconventional piece of advice.

Not everybody agrees with me. That's okay. But I would say get out there into big city or two and start learning all you can. Of course, I'm going to tell them, automate your money. Even if you're putting aside 50 bucks a month, it doesn't matter because the half. is so important. And as your income increases, you will be able to turn that number up to 100, 500, even 5,000 or more. And you will be so far ahead of people by the time you are 30, 35. Get that going. And then finally, I would tell them something that I would have given myself advice in my 20s would be, have fun, have a little bit more fun, which is there's only the next few years, you can do certain things. Do it. Go backpacking. Don't care where you stay. Do that stuff now

because it's extremely difficult, if not impossible, to do it even by the time you turn 35. Love it, man. Where would you send my viewers, listeners, to learn more about you online? You can come to my podcast, which is I will teach you to be rich. And I also host it on YouTube so you can see the couples. And of course, you can go to my newsletter, IWT.com. You can sign up right there. And I sent all kinds of material on making money and investing money and using your money to live a rich life. Thanks again for doing this, dude. And making it so personal, I think this is a candid, real conversation we have whether it was on the mics or off. So I really appreciate it. And I absolutely want to continue our dialogue as we both progress, man. Absolutely. Thanks again for

having me back. This is such a blast. Thanks, dude. All right. That was definitely a different conversation that I normally have on the show. Quite candidly, I was thinking throughout, I wonder if people are interested in this. We got personal. We talked about money quite a bit, a healthy amount of back and forth. I hope you found it useful. I certainly did. And I think it's good for us to have conversations with people that make us rethink important topics and maybe discuss areas where we don't normally go. These aren't really conversations I have with my friends. I wonder if you do. If you do, I'd love to hear about how you tackle these subjects. Email me, Ryan at learning leader.com. I'd love to hear a few takeaways from my notes. If you are in a relationship,

I loved when Rameet said, create your journey together, define what a rich life is. And I think money's not something to be delegated to one or the other. And I think that's actually quite common where it is delegated to one or the other in a relationship and that is not useful. We both should have knowledge about this and do it together. And then instead of agonizing over $3 questions to find what your rich life is, I know that phrase sounds a little woo-woo, but getting clear on what you want, I think is a useful exercise. And then I have to bring up again, as I did with a Mermit's book buying rule.

I've shared it with lots of people. if you've even considered buying a book for one second, then buy the book. If you only weren't learn just one thing, you've gotten a huge return on investment, and you may learn more than that. And every once in a while, it'll be a dud, and you'll put it away, and you won't read it and won't even pick it up again. But there's a chance you could learn something that will change your life. And if you can get that for 20 bucks, wow.

such a great return on your investment. Again, I hope you enjoyed this one as much as I did, even it was quite a bit different. If so, I'd love it if you would tell a friend or two. Hey, you should listen to this episode of The Learning Leader Show with Ramit Satie. I think he'll help you become more effective when it comes to your money and relationships. And because you continue to do that and you continue to go to Ryanhawk. dot net, which will launch you into iTunes and you write reviews and rate the show, hopefully five stars.

You are giving me the opportunity to do what I love on a daily basis. And for that, I will forever be grateful. Thank you so, so much. Talk to you soon. Can't wait.