The Liz Moody Podcast - Ramit Sethi Answers YOUR Money Questions

Episode Date: June 22, 2022

I’m thrilled to welcome Ramit Sethi to the podcast. Ramit is the author of the New York Times bestseller, I Will Teach You To Be Rich. He writes for over a million readers on his newsletter and social channels and hosts the hit I Will Teach You To Be Rich podcast. I thought it’d be really fun and different from other podcasts I’ve heard him on to have him answer YOUR specific money questions. We cover: how to know whether you should rent or buy a home if and when real estate makes sense as an investment how to eliminate fear around investing and spending money a trick to really figuring out what you value and should be spending money on what to do if your salary doesn’t align with your financial dreams how to survive inflation how to navigate an upcoming recession, including exactly how to approach investing and saving the best way to invest for short term goals (things one, three, or five years out) the best ways to save money that no one is talking about how to handle finances as a couple (whether it’s better to pool or keep separate, how to negotiate one partner making more, and more!) whether robo advisors are worth it why you need to fire your financial advisor ASAP how to balance relationship obligations like bachelorettes and weddings with your personal financial goals how to save to eventually have more freedom while enjoying your life in the moment If you want the Conscious Spending Plan he talks about in this episode, head over to iwt.com/liz. This episode is sponsored by AG1 by Athletic Greens. Visit athleticgreens.com/healthiertogether and get your FREE year supply of Vitamin D and 5 free travel packs today This episode is sponsored by Wild Health. Get 20% off with code LIZ at wildhealth.com/liz. This episode is sponsored by Cymbiotika. Get 15% off using code LIZ on cymbiotika.com. Healthier Together cover art by Zack. Healthier Together music by Alex Ruimy. Learn more about your ad choices. Visit megaphone.fm/adchoices

Hello, friends, and welcome back to the Healthier Together podcast. I'm your host, Liz Moody, and I'm a best-selling author and long-time journalist. This podcast is all about helping you live your healthiest, happiest life, whether we're sharing science hacks to be more charismatic, learning the hormonal causes and solutions for things like acne, migraines, and PMS, or sharing the style secrets of the effortlessly fashionable. And yes, those are all real episodes, so if any of those topics sound good to you, scroll on back in the archives. Today's guest was so requested, I am thrilled to welcome Ramit Sati to the podcast. Rameet is the author of the New York Times bestseller, I Will Teach You to Be Rich.

He writes for over a million readers on his newsletter and social channels and host the hit I Will Teach You to Be Rich podcast. I thought it would be really fun and different from other podcasts that I've heard him on to have him answer your specific money questions. I think sometimes we can listen to a whole podcast about money and then come away and be like, okay, love it. Great. But how do I actually apply that to my life? And that's what this episode is aiming to solve. I want you to leave your armed with tools to use in all kinds of real world situations, feeling empowered and ready to live your rich life. On this episode, we talk about how to know when and if real estate makes sense as an investment, how to eliminate fear around investing and spending money. A trick to really

figuring out what you value and should be spending money on. What to do if your salary doesn't align with your financial dreams, how to survive inflation, how to navigate an upcoming recession, including exactly how to approach investing and saving. The best way to invest for short-term goals, meaning things one, three, or five years out, the best ways to save money that no one is talking about, how to handle finances as a couple, how to balance relationship obligations like bachelor's and weddings with your personal financial goals, had a balance saving to eventually have more freedom with enjoying your life in the moment and so much more. He definitely has some spicy takes, but that is one of the many things that I love about him. Talking to her meet

completely changed my view of money and it sparked so many interesting and super productive conversations with Zach. So I am so curious to hear what you think of this one. So please, please screenshot and share any feedback or aha moments that you have as you're listening on Instagram tagging at Liz Moody and at Ramit. That is R-A-M-I-T. I would also so appreciate if you would share this one with anyone and everyone in your life. As a society, we need to bring these money conversations out into the open so desperately so that we can start eliminating the cloak of secrecy and the fear that surrounds this stuff. So please, if you know anyone who could benefit from any of the topics that we discuss in this episode, shoot them a link.

All right, without further ado, let's get right into your money questions. Rami, I am so excited to have you here today. My audience is too, when I told them that you were coming on, I got thousands of DMs from people who are like, oh my God, I'm his biggest fan. So thank you for taking the time. Yeah, I mean, you're changing lives. I love your whole approach to money. You're so no bullshit.

And I don't know, we were listening to your audiobook, the updated version in the car on the way back from Jackson Hole last weekend. And just the way you talk about this stuff really demystifies it. So it's very appreciated. Oh, thank you very much. You know, they made me apply to read my own audiobook. My husband and I were talking about this because you read it so well. And I was like, I wonder if the publishing house gave him lessons on that. And then my husband was like, you've worked with publishing house.

because you know they didn't give him lessons on that. So I wrote the first version of my book in, it came out in 2009. That was the first edition. And we sold the audio rights. And they said, okay, well, you need to record a sample. And I was like, why do I have to record a sample for you? And they were like, well, we need to see if you're good enough to read it. I was like, do you know who you're talking to?

I wrote the. And of course, they were like, no, we don't actually care who you are. We don't even know who you are. So they made me audition. for it. I remember sitting on my bed and using my little rinky-ding headphones. And I recorded, you know, a page. And they were like, oh, okay, you could do it. So it is definitely a skill. When you record an audiobook, you can do it for about four to five hours a day. And then you start to sound like you're drunk. That makes sense. Yeah. It's very demanding. So you have about four to five hours and that's all. And then you

wrap it for the day. You come back the next day in these studios. So anyway, thank you for saying that because, You know, I really enjoyed it. I added some stuff just in the audio version that you cannot find anywhere else, just on my own little rants. And I just, I had a great time doing it. Yeah, it felt so conversational. Well, today we're going to get into, I thought it'd be fun to do a little Q&A where you directly address listener questions. So I put out a call for listener questions. I got way too many for you to answer. But I tried to narrow them down to things that were interesting or widely applicable or things that I just got over and over and over again. So I'm just going to get right into those. All right. First one, can you give me specific advice for

exactly how I can know if it's a better financial move for me to rent or buy? I keep going back and forth. Also, do you believe that there are better or worse times to get into the housing market? Excellent question. Many people have been brought up with the belief that buying is always a great investment and buying is always better than renting. Some of you people need to actually run a simple calculation that will show you that that is not true. Here's the truth. In some cities, it is better to rent than to buy, financially speaking. And you might be saying, well, what do you mean? House prices always go up. My mom told me that. Where else am I supposed to put my money? Let me explain. I could buy a house tomorrow. Why do I choose to rent? Because financially

speaking, it makes no sense for me to buy. And I've lived in San Francisco, New York, and L.A. just to give you an example when I lived in New York, if I were to buy the same apartment that I rented, same area, same square footage, it would have cost me two and a half times what I was paying in rent. That is crazy. So if I were paying $1,000 a month for rent, it would have cost me about $2,500 bucks. Instead, I took that $1,500 difference and I invested it and made way more money than I could ever make owning an apartment. or a house. So what am I saying? Am I saying it's always a bad idea to buy? No, I'm saying you have to run the numbers. Here are some simple guidelines you can use to know if you are ready to buy a house. Number one, you should be able to put 20% down. Doesn't mean you have to put 20% down, but you should be able to. Why? Because if you can't save ahead of time, then you're in for a big surprise when your roof breaks or water heater, et cetera. So that's number one, is a behavioral issue. Number two, I want you to plan to be there for at least 10 years. Why? Because the transaction costs of buying a house are so huge that you need to

spread them out over 10 years. It's funny, you and I and everyone knows this phrase, the minute you buy a car and drive it off the lot, you lose 30%. But did you know the same is true for buying a house? The minute you buy a house, most people have lost money because those transaction costs are huge. And yet, because of the real estate industry's propaganda, we never think about that. So plan to be there for at least 10 years. If you don't know where you're going to be for five plus 10 years, then maybe you should just rent. I do. It's fantastic. Third, your total housing cost should be less than 28% of your gross income. What does that mean? That means you have to include all your costs, taxes, insurance, maintenance, new furniture, sprinklers, all of it. Okay?

Now, listen, I know I live in a high cost of living city. I know a lot of people listening go, that's impossible, Rameet, must be nice. Well, here's the deal. In a high cost of living city like a San Francisco, New York, you could stretch that number a little. You can make it 32, 33%. If you have no debt, you can stretch a little bit. But the more you stretch and the higher that number is, for example, if your total housing costs is 36% of your gross income every month, you have very little money left over to save, to invest, to go on vacation. And that's when people get into trouble. So you could stretch a little, but I would caution you against stretching too much. Two more things. You'll be okay if the value of your house goes down. Your primary residence is probably not an investment.

For most people, it's just a commodity. When I buy a house, which I will someday, it won't be an investment. It won't even be a purchase. It will be a luxury. It'll be the worst financial decision I ever make in my life. Which brings me to the final one, are you excited about buying? There's so many people, they just sound like such downers when they talk about it. well, I got married, so I guess I got to buy a house now and never go out again. Well, why don't you just not? Why don't you just rent for a while? Invest the difference, if there is one.

And eventually you can decide whether you want to or not. There are different reasons to buy. You might buy, financially speaking. You might buy because of a school district. You might buy because you really want to customize the house. But you might rent because you want flexibility or it's a better financial decision or you just don't want to ever go to Home Depot. You should run the numbers and you can start by go.

going to the New York Times buy versus rent calculator. I love that you talk about real estate propaganda because I think that's a weird. We just assume, oh, because I've heard this over and over and over, it must be true. But pointing out that no, it's messaging from people who have a vested interest in you doing this, I think is hugely important. The people who want you to buy a house or the people who profit from it. First of all, one of the most evil organizations on earth is the National Association of Realtors. They lie. Historically, they've been racist. They even apologized for being racist for generations. You can look it up.

They want you to buy, and so they come out with all kinds of skewed propaganda. Buying a house is the American dream. NAR created the American dream. The American dream for you might be traveling three months a year. It might be hiring a personal trainer. It might be eating certain types of food. It does not have to involve moving away from all your friends and buying a house in the suburbs with a white picket fence.

That is a manufactured American dream. That's not my dream. I don't want that. Why don't I want to live in a place I can't even walk anywhere? It sucks for me. For you, that might be your rich life. But the whole focus of I Will Teach You Be Rich is your rich is your rich life is yours. If you want to buy a massive house and you can afford it, then you should.

If you want to live in an apartment in the middle of an urban city, then you should. But you should really carefully think about what your rich life is, not what the National Association of Realtors tells you it is. I love that. let's talk about buying a house just from an investment perspective. One of the questions that I got, and I relate to this because I've seen these TikToks, is that everyone on TikTok makes it seem like buying houses and then renting them out on Airbnb is a really easy way to make a lot of money, and they show their receipts for actually doing that. So what's your take on that? Well, it can work. So buying property as an investment can certainly be part of a diversified portfolio.

Nothing wrong with that. My critique typically, of real estate is people who buy their primary residence and then delude themselves into thinking it's an investment when in reality it's often not. Now, as for these TikTok people, here's what they typically do. They go, I bought this house for 400K and I'm cash flowing. I got passive income. I'm renting it out. And they show you some numbers. It's quite impressive. But we have to remember, there's a little thing called supply and demand. And when everyone has money saved up from COVID and they want to spend it, then of course you can charge a lot. What we have recently seen in the Airbnb markets is demand is cratering.

People don't want to go to these Airbnbs and there's way more supply. Guess what happens when supply comes up? Prices come down. So I would say this. For some people, it can be an amazing investment if you are careful, if you build your reserves, etc. But it's not as easy as ma and pa go down the block. and buy five Airbnbs and suddenly they're just rich.

That's not true. And you're going to see that as the value of these Airbnb's goes down. How do you know if you're a person that that could be a great investment for? Okay. Great question. So this is a complex investment. You have to factor in lots of things, taxes, a variety of different factors. If you have no diversified portfolio, you're probably not ready to buy property.

Okay. If you have to ask, how am I supposed to do this, then you're not ready to buy property. You should start looking. There are plenty of resources online that can show you, you know, how do I know if I'm ready to buy short-term rentals? What are the ways to maximize it? Have you stayed at Airbnb's? Have you talked to host?

These are like basic things before you commit hundreds of thousands of dollars. Again, the key thing I want everybody to learn when it comes to money. For the rest of your life, you're going to hear fads. Fads. Crypto, Airbnb. You're going to hear things where people go, I made a million dollars in a month. It's all BS. Real wealth is created slowly and it's low cost long term.

It's boring. It's boring. You want to watch a drama. Get an HBO account. Okay, that's not what this is. Money is, it grows slowly. And the most fun part of money is actually spending it. That's what people forget.

They're like, oh, I want to talk about all this fun crypto stuff. Fine. If you want to have a little fun. with a small part of your portfolio, but if you don't have a portfolio at all, then you're going to lose money over the long term. I love that. It's a huge part of your philosophy that I relate to, and I think it's so under discussed by other financial experts, but that we're trying to accumulate wealth for a reason. I mean, my grandpa, when he died, he had all of this money sitting in the bank and he had lived this very frugal life. He didn't buy things he wanted.

He hadn't traveled. He hadn't done anything with any of it. I consider it a tragedy to live a smaller life than you have to. And I speak to people on my podcast frequently. I speak to people ranging from a couple who had $800,000 in debt, all the way to a couple who had $13 million of net worth. And his wife was about to divorce him because he was so cheap. So I speak to all different socioeconomic classes, status, everything. And what you will often discover is that everybody teaches you how to save, but nobody teaches you how to spend. end. One of the most haunting examples was a couple. They called me up and he had a work trip to Manhattan. He asked his wife, hey, why don't you come? We'll have a few days in New York. We'll have a great time. And her first inclination was to say,

which hotel are we staying at? How much is it going to be? And they found this hotel in the East Village. And it was something like 300 bucks a night, which in New York is kind of what you get. She found that price outrageous. And so she insisted on Saturday they go to a different hotel, which is cheaper. So they took all their luggage, moved it over there. And then Sunday, they came back to this hotel. And I asked her, what's your net worth? And she said, oh, I said, could you say that a little louder for me, please? She said over $5 million. And here's what I want to emphasize for everyone listening. A lot of you believe that one day you'll feel better about money. When I have my debt paid off or 50K or 500K. The fact of the matter is the way you feel about money is highly uncorrelated

to how much you've gotten a bank. That means, yes, you should probably learn the basic language of investing, and I can teach you all that stuff, but you also have to work on your money psychology. If you feel scarce about money today, you're going to feel scarce when you have a million dollars. If you worry, you're still going to worry when you have two extra zeros in your account. And that is really what very few people talk about. And that's why I love what I do. You're speaking to my soul there. I feel uncomfortably seen. How would you describe the way you feel about money? So I use attachment. I was raised by psychologists all around. And I use attachment theory

to describe my money philosophies. And I think I'm anxiously and avoidantly attached to money. Ah, okay. My husband is securely attached to money. And he's also securely attached in relationships. and I'm anxiously and avoidantly attached to relationships. So I found a good one. But it's definitely something I've noticed that as my income has gone up, I did think that a lot of my anxieties around money would go away. And they haven't because I'm just like, oh, I really like my life right now.

And the idea that I could lose it at any moment is really scary to me. Yeah. There was a couple I just spoke to again. They have millions of dollars. This is the latest episode of the podcast. And they're hiding money from each other and doing a lot. all this stuff. And at one point I go, you two are rich. You two are wealthy. Do you realize that? And they go, no. I go, well, you are. And here I am spending my limited time on this planet convincing two wealthy

people that they're wealthy. I'm like, what am I doing here? So then they go, it just feels like we could lose it all. And I was like, not really. I'm looking at the numbers here. I can tell you right now, you can't lose it all. Mathematically, you cannot lose it all. Now, here's the key. Most people do not think about money mathematically. They think about it emotionally. They feel it. And what the personal finance industry has done with this sort of typically masculine approaches, take emotions out of it. That's the wrong approach. Emotions are real. Let's stop telling people to stop feeling the way you do about money. Let's instead accept those emotions. Let's try to honor them. Okay, you feel anxious. You feel nervous about money. Let's talk about why. Where did that come from? And let's connect that

often to childhood, things that I do on the podcast. And then let's show you a different way. Almost every couple I speak to on the podcast, almost every single one of them, they are fighting over these meaningless $3 questions. Oh my God, you spend too much at Target. I go, do you really want to go the rest of your life complaining about Target? What a waste of time. And the point is, they don't have a vision. Yeah. I said, what do you want to do with your money? What's your rich life? They go, I want to do what I want when I want. I go, that's boring. Everybody says that.

What do you want? And they just look at me. Most of us have gone 30, 40 years, never actually deciding what do we want to do with our money? What is our rich life? I don't mean I want to buy a shirt. Okay, you want to buy a shirt. Go deeper. Give me something big.

And then I can help them use their money to live that life. When it comes to wellness, you're going to get the best results by focusing on the big needle movers. A lot of us spend a lot of time trying to optimize that last 1%, which creates a ton of stress and it actually doesn't help our health that much. At the top of the needle mover list, sleep. And one of the best ways to optimize your sleep is to optimize your mattress, which is why I love avocado green mattress so much. First of all, this mattress is so comfortable. I have the one with the pillow top, which is medium firm, and it's just a dream. I miss it when I travel. It's better than even the fanciest hotel beds. Having a mattress that supposed to be able to be. Having a mattress that

supports your joints and your body and feels good is going to help you get more sleep and better quality sleep. But then, on top of that, avocado mattresses are made with certified organic cotton, wool, and latex, and they are made safe and green guard gold certified. They're also Okotech certified, which is the gold standard. I look for it in any mattresses, sheets, or towels that I buy, which means the materials have been rigorously tested for harmful substances. You can actually look for the Okotech standard 100 label right on the product, and I love this part. It includes a traceable certificate number and the name of the testing lab so you know exactly what you're getting. There are no toxic chemicals. There's no harmful off gassing. It does not smell like it's going to

kill you when you unbox it. This is what I mean. I'm not going to swap out all of my clothing, which is that top 1% of optimization. But by making sure that my mattress and my bedding are as good for me as possible, I literally reduce my exposure during a third of my life, which is a huge needle mover for a one-time swap. I will also note, and this is a me thing, but I sleep super hot and avocado's materials are really breathable and it makes me sweat the least of any mattress that I have slept on. And avocado is a certified B-Corp and a 1% for the planet member because caring for yourself and caring for the planet do not have to be separate things. You can get up to 20% off organic mattresses and more by shopping Avocados President's Day Sale right now at

Avocadogreenmatress.com. That is Avocado. So green mattress.com, no code needed. When you think about strength and resilience, like your ability to feel energized, to recover well, to stay strong as you get older, what do you think that actually comes from? Most people say working out or good nutrition, and yes, of course that matters. But there is a biological foundation underneath all of that that most people are completely overlooking. I have been diving deep into this lately with the team at timeline and what I've learned has

genuinely shifted how I think about my own health. Every single movement that your body makes, every step, every workout, every muscle contraction depends on energy produced at the cellular level. And at the center of that is your mitochondria. Here is the thing that nobody tells you, certainly nobody told me. Starting around age 30, our mitochondria naturally become less efficient. More get damaged, more become sluggish, and over time that impacts your energy, your strength, your recovery, and your resilience.

Most of us respond by pushing more. we're like noticing these things and we're adding in more protein. We're trying to fix it with more supplements. We're trying to do harder workouts. And those things do help. But timelines research suggests that we also need to be supporting the cellular machinery underneath. And that is exactly what their supplement, Mitopure, does.

It contains urolithin A, which helps your body clear out damage mitochondria and support healthier ones so that your cells can produce energy more efficiently. Because this is happening to your cells, it's going to impact. your entire body, your immune system, your muscles. One study found that taking mitochondere increased muscle strength by 12% in four months with no change in exercise routine, it's going to impact your energy, your sleep, your skin, your cell health impacts all of this, and urolithine A keeps your cells healthy. Timeline has done over 15 years of research and testing on this one product, urolithin A, which, by the way, most of us lack the gut bacteria

to synthesize naturally. That's why many of us need to supplement it to get the benefits. This has become a staple supplement for me. It is my top way to sport how I want to look and feel as I age. Support yourselves and how you age with mitopure gummies from Timeline. Visit Timeline.com slash Liz and save up to 39% on your mitopure gummies. That is timeline.com slash Liz. Okay, well, that really goes well with one of the questions that I got, which is I'm having a really hard time prioritizing what makes up my rich life.

Like, I know I should be spending on things I love and relentlessly cutting back on things I don't care. about, but I care about everything. I want to have a nice house and cool clothes and take fun trips and go out with my friends. It's also really hard to evaluate what to save for. Like I don't know whether a sabbatical will make me happier than a big wedding or a dream house. How do we actually evaluate what luxuries will make us happier? Love talking about this because I don't want to guilt anyone for wanting to live an awesome life. There are certain luxuries I spend a huge amount of money on and I love it. I'm unapologetic about it. Yeah, I work hard. I'm going to spend money on this. But then there are other things that I cut cost mercilessly on. I just don't care. And I love this high, low life where you can

choose and splurge on the things you love. And then you go, I really couldn't care less about something like this. It just doesn't mean anything to me. So I'm going to keep a 10 year old thing that I own or 15 years old. Let me give you a quick little exercise that everyone can do to find out what they love spending on. Okay. So let's do it together right now. So what is the thing for you that you love spending money on, Liz? Travel, probably. Great. Love it. And when you spend money on travel, what do you feel? Inspired, creative, connected. I feel awe, which is one of my favorite feelings in the world. Love it. I believe everyone should experience at least one sense of awe per year. At least. Okay, I love what you said. Now, second question is what if you could quadruple your spending on travel?

What would that look like? What would that feel like for you? It would feel really good. We've kind of done that. We live nomadically. So our travel budget is kind of almost all of our money right now, which is something we've dealt with a lot of guilt over. Okay, but hold on. So you spend almost all your money on travel. Great. But what if you could quadruple that amount? I think I would love it. I think that would be great. What would it look like and feel like? It would feel like no part of the world was off limits to me. Like it would just feel like I got to have this experientially rich life at every moment. And can you give me a specific?

What would it look like if you were quadrupling the amount of spending? I would take a luxury safari in Africa. That's like a dream trip I've wanted to go during baby animals. season forever. I would take family members on dream trips. That's a huge dream of mine, and I would love to do it. Would you pay for them? Yes, 100%. Great. What else? I would fly first class because I weirdly feel like the plane is less likely to crash when I'm in first class. Okay. Well, whatever you got to do to convince yourself to get in first class. All right, fine. So I want everyone listening, let me give you the behind the scenes of that exercise. Question number one is,

what do you love to spend money on? The typical most common answers are eating out, travel, and then health and wellness in that order. Okay. And there are many other answers. Mine is convenience. I love spending money on convenience. I just love it. Other people choose safety. Okay. There's also status. Nobody admits to liking status, but I'm like, what shirt are you wearing and what phone are you using? It's like, oh, God, you like stats. So there's a variety of them. I call these money dials. And you can look up this actual exercise. Just Google Ramit Sati money dials.

I call them dials because of question two. If you could quadruple your spending on it, when I ask people this question, most of them are totally startled because they've never thought about spending more. They've only absorbed the idea that they should spend less on everything. I should cut back on coffee, vacations,

jeans, travel, everything. What a dreary way to live. Just cutting back. indiscriminately on everything. So when I say, tell me what it would look like and feel like. They are the smile and the confusion on their face priceless. You said you would go on a luxury safari. I love that. And you said even better, I would bring my family and pay for them. What a beautiful vision. At a certain point, there's only so much you can buy for yourself. It inevitably involves bringing people with you who might not be able to. That could be

family or friends. It could be donating to a charity. It could be whatever you're rich life is. So if I were to ask this person who came to me and said, I have a hard time prioritizing. Yeah. I would go through this exercise. And her first answer would probably be, well, I want to do it all. And she would laugh. But I wouldn't let her get away with that because there's something that makes each of us really happy to spend money on today. And I would want to get into the specifics. That's why I always press people. And that's why you can hear me on my podcast. They'll always say, oh, I like to eat food. I would, and I say, what would you like to do if you quadruple you spend? Oh, I'd probably have to watch my weight because I'd go on a, I'd go out four times a week. And I go, that's like a funny PG joke,

but it's actually not that funny because it's so linear. You're telling me that if you quadrupled spending on the thing you love, you would just do it four times. I remember I was in DC. I was at a book tour event and I asked this young man and he said the exact thing. I would eat out four times a week. I said, okay, that's funny, but where would you go? And he got quiet. He said, I have a list of every Michelin-starred restaurant in this city. I want to go one by one. I smile. I said, who would you take with you? Now it's pin drop silence. He goes, I'd bring my family. Why? Because they can't afford to eat at places like that. That's a rich life. So when you start with what you love and what your vision is to be able to spend more on it, to spend extravagantly, suddenly it becomes

easier to cut back on things that you don't care about. You probably don't care equivalently about a wedding as a scarf. One of them is more meaningful to you. I don't know which it is, but we can start to spend more on the things you love and cut back on the things you don't. So for this person who wrote in, would it be about thinking about turning up the dial four times on nice house, on cool clothes, on fun trips, on going out with their friends, and then seeing which of those scenarios actually is moving on a deep level? I would start with what does this person love spending money on. And I would quickly get past the,

I like to spend money on everything. Okay, maybe you do, but frankly, your income doesn't allow you to do that right now. You can't have everything. So why don't we start by spending extravagantly on one thing? Now, what would you be willing to cut back on? Well, I don't want to cut back on anything.

Well, right now you're cutting back on it because you're not actually living in a mansion and you're not actually traveling first class or whatever. So why don't we just get honest about what you want to do, Often people dream about doing something, and I would rather start doing it a little bit of it today. Finally, I would work in the numbers with her. This isn't just a visioning exercise, right? People don't come to me because they want to sit around the campfire and sing kumbaya.

They want to know how to work the numbers in. So if this person said, I really want to buy an apartment in Manhattan, okay, great, what's it going to cost you? Three million dollars. Okay, great. How long is it going to take you to have the money to do that? And I guarantee this person has not done that. There are simple ways to know, number one, when your debt's going to be paid off. Number two, when you're going to have $50,000. Number three, when you're going to have a million dollars. So part of it is going from dreaming to reality. Or as I say, going from the clouds to the street.

If you want a mansion or an apartment in New York, perfect. Let's talk about how long it's going to take for you to get there. What if all of your dreams don't ever feel attainable? I got one question and it was, I'm a teacher, which takes up a ton of time so I can't get a side hustle, but it feels like as a teacher, I'll never make enough to live the life that I want. I love teaching and I'm passionate about it, but am I supposed to just give up on my financial dreams? No, you're not supposed to give up. I love talking to teachers. My mom was a teacher. So here's the questions I would ask this teacher. I would say, what are your financial dreams?

And I guarantee she would say, well, I want to buy a house one day. I'd like to travel, etc. I'd say, okay, what does that cost you? I don't know. How much do you have? Not sure. I make this much. I don't really know about my investments. And then I would ask her, how serious are you about this? And there would be a pause. And she would say, well, I really want to do it, but I feel overwhelmed. And I would say, when was the last time you spent a weekend reading a single book about money? Well, I've never done that. Okay, but you just told me you're 10 out of 10 serious. And she would start to realize that what she is feeling is not necessarily reflective of the facts of the situation. If she said in this question, I'll never make enough to live the life I want, I would say, how do you know? And she would say,

well, I only make whatever she makes. I'd say, do you know any teachers who make a lot of money? No, I don't. And I would say, well, I do. Have you ever talked to teachers who make a lot? No, I don't know where to find him. Well, why don't you spend a week in finding them and then come back and talk to me. Here's what I would, in the end, tell this teacher. Teachers can make a ton of money. I have a whole program on starting businesses on the site. It's called earnable. People come and they go, I want to make more money. And I say, okay, let's talk about your skills. Some of them are really good at organizing their apartment. They become personal organizers. Some people have become personal stylists. Other people, dog walkers, Excel consultants, and on and on and on. Many of them make

thousands, even tens of thousands per month. But this teacher, right now is not in the solution-oriented phase. This teacher just feels overwhelmed and almost looks like hopeless. And what I would do is first meet her where she is and say, look, there are a lot of teachers who make a lot of money. Are you willing to learn about this? It's really different than anything you've done. And if she said, yeah, I want to, then I would start to help her with some of my earnable material. Do you think anyone is doomed to live a low-income lifestyle based on circumstances or society. Oh, I do believe that there are some serious structural problems. I don't think everyone is going to be a millionaire, nor do I think everyone can be a millionaire. And I think this is really important.

The financial industry loves to tell everybody, why don't you just pull yourself up by your bootstraps? And if you're not financially successful, it's because you're not trying hard enough. What bullshit. Yeah. I remember going to India. My family's from India. And I remember coming back and I told a couple of entrepreneur friends, and we're talking about the trip, and I said, we got to reflect on how lucky we are to live here and to be able to start businesses like we have and not have people kick in our doors and demand 30 percent or they'll turn the electricity off, et cetera. And one of my friends said, what do you mean?

If I was in India, if I was born there, I would have, I could make it just like I made it here. And I looked at him, I said, let me explain something to you. In my family's house, they have a maid. that maid's mom was a maid, that mom's mom was a maid. And maybe if this young woman is lucky, her daughter might work in tech support. It's not as simple as just try harder and you can succeed when you have structural constraints against you. And so I believe this is part of my IWT philosophy. It is possible to acknowledge personal responsibility while simultaneously

acknowledging the need for structural reform. And that's why when I talk about on politics, I get a lot of people telling me, stick to personal finance. Like, fuck off. Money is political. The reason housing is so expensive is political. The reason tax rates are historically low

for guys like me is political. Healthcare is political. So when people say, can anyone be a millionaire? No, they cannot. And I believe life should be just a little easier for everybody, especially when you're starting out.

And life should frankly be a little harder for guys like me. So would you say it's about balancing the personal responsibility that you do have and taking the steps that you can take without feeling hopeless, reading the books, doing all of that, but also acknowledging that there's systemic reforms that need to happen? Absolutely. What we can do is we can work to our own personal limits. And the bare minimum we can do is read a book on money. Yeah.

I talk to people that are 40 years old, and their number one concern in life is money. And I asked them, when was the last time you spent a weekend reading a book? And they go, never. Well, come on. The books are free. It's out there. It's at the library. Nobody's going to do this for you.

At the same time, they come and they go, well, Ramit, you're talking about 28% of gross income for housing. I can't afford that in my city. That is a structural problem. That's not just them spending too much on avocado toast. Let's talk about some of the things that are happening right now. Everybody's talking about inflation. One of the number one questions I got over and over and over was, what are your tips for surviving inflation? If that's the question, I would say you might already be doomed.

Why? Because people, for the rest of your life, you're going to be fed questions to make you feel bad about money. Think about it. Four years ago, it was the deficit. Remember everyone's talking about the deficit? How come nobody talks about that anymore? I actually don't, which probably shows how fast this cycles. Yeah, it was number one topic for a while. And now it's inflation. Let's just talk about how inflation should be handled in your financial system. A much better approach instead of worrying about inflation and reacting to it is to have a system that automatically handles

inflation, whether it's high or low. So here's what it means. The typical person who's hearing about inflation, you know what they do? They will make these transactional short-term decisions. We probably shouldn't drive to visit Grandma this weekend because gas is really expensive. Okay, maybe you're right. Maybe you shouldn't. But what did that really save you? Four dollars? That's not going to make a change in the overall scheme. If you ask that same person, what is your savings rate? How much money do you put aside every single month for savings and investing. They will have no idea. What is your asset allocation? How do you currently invest your money? They will have no idea. Do you take advantage of your 401k match? No idea. For everybody listening, you can spend the rest of your life chasing these $3 questions like

gas prices to grandmas. I personally think it's a waste of time and it's a terrible way to live. I want you to focus on $30,000 questions. And if you get those questions right, inflation is automatically handled. Here's why. When you have money automatically getting invested every single month, those investments over the long term crush inflation. They beat inflation. And so if you're reacting to inflation by not buying a sandwich, then you have already forced yourself into $3 questions and you are doomed. That's what most people are doing. They are stuck in the weeds without realizing that there's bigger questions they should be talking about. Here's a few things you should be thinking about right now as some tactical takeaways.

At least 10% of your income should be going towards investments every single month. When people say pay yourself first, that's what they mean. You start there and all the rest of your spending fits around that. You should be saving money automatically. I recommend 5 to 10% for savings. That's money that you will use for an emergency fund or money. you'll use in one to five years, like for a down payment or a car, etc. You should have your money broken down into four different categories. I use what's called a conscious spending plan.

It's not a budget because it looks forward. It tells you where you want your money to go. Those four categories are fixed costs, like your housing, things like that, savings, investment, and my favorite, guilt-free spending. So when you go out to eat at a restaurant or you buy a beautiful sweater, you don't have to feel guilty about it. You've already planned for it. If you do these things, inflation is irrelevant to you. You keep an eye on it. You might need to adjust something once a year, but you should not be reacting to inflation. You should be building a system that automatically handles it. And can I just clarify when you say investments, you mean largely index funds? Correct. In investments, I talk about how to think about opening up an investment

account in chapter three of my book and then how to invest in chapter seven. There's a common myth that to be an investor, you have to be looking at some screen with all these green letters and reading CNBC every day. It's all BS. Investing is boring. I spend less than one hour per month on my investments. They all happen automatically. And investing, I love target date funds. They are one single fund based on your age, and that's all you need to do. You just keep putting money into it automatically. If you want to get a little more complicated, you can choose your own index funds. But yes, I'm talking about low-cost, long-term investments, not picking individual stocks, et cetera. The number one rule of habits is to make the things that you want easier and the things

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tips for navigating a potential upcoming recession? Should I still be putting money in the market? Is there anything else I can do to prepare or come out of this time in better shape? This is a great question. First off, I want to emphasize something to a lot of people. This is very counterintuitive, but you cannot time the market. So a lot of people go, I'm just going to wait until the market goes down and then I'll put money in or why would I invest right now? It's too high. And this is a classic mistake that beginning or even advanced investors make.

They think they can time it. You can't. History has shown that. What you can do is very simple. Every single month, you have money automatically going in to your investments, just like I talked about. 10% is a good guideline. When it's expensive, it's up.

It's 10%. When it's down and cheaper, it's 10%. Think of the funny psychology of this. When the stock market goes down, we all freak out. Right now, there are headlines saying it's a grim day. It's grim. Grim! How come it's not grim when the price of your toothpaste goes down 25%.

Oh, no, it's only grim when investments go down 25%. If you are a young investor, you should love when the price goes down because you're going to be able to pick up investments cheaper and you're going to hold them for a long time. So in terms of navigating a potential recession, the other thing I would recommend is really think about having your emergency fund. Everybody laughed about emergency funds. Ha ha, yeah, I know I should do that until COVID happened. And all these people got laid off and they go, oh my God, now I understand what it's for. A good guideline is you want to have three to six months of keep the lights on funds. So keep the lights on does not mean, you know, how much you make,

but it means how much does it cost to pay your rent or your mortgage, to pay any minimum amounts on debt, et cetera. Put aside three to six months. It'll take you a while to do that. You might want to start with $100 a month or $250 a month. It'll take you a while to get there. But that's a great way to prepare. And in case you unfortunately lose your job, you will have reserves to lean on. So the reason to be clear that you're like, just keep putting your money in is because the idea is that it will always eventually go back up. And our investments are for such a long term period that it doesn't matter whether it's high or low or whatever that we're putting in because over time it's going to go back up. Do you have any fears that something unprecedented will happen? COVID was unprecedented.

This recession is being caused by things that haven't necessarily been seen before. One of the questions I got was, I want to invest, but I'm so terrified to lose all of the money I've worked so hard for. I know you can be more or less conservative with your portfolio, but they have anxiety around investing. Like, what if the stock market crashes and then it never recovers? Do you feel confident that no matter what, the trajectory is always upward over enough time? Okay. This question is a great question because it's shared by so many people. And I want to start off with a metaphor because this person is right to be scared, but they're scared of the wrong thing. Imagine if you're in a little canoe and you're out in the ocean and you're rowing and you go,

I'm really worried about running into that oil tanker a mile away. I'm terrified. I'm going to capsize. But what you don't realize is you have 30 tiny little holes in your boat and it is slowly sinking. Every minute you're out there, it's just sinking a millimeter. So you're worried about something that might happen that's extremely unlikely. Meanwhile, you are guaranteed to sink. This is the same thing with this person asking the question. They are worried about the stock market collapsing, but in reality, the actual fear that they should be worried about is they are guaranteed going to run out of money because they're not investing. Okay. That makes sense. There are so many people who are scared of investing, but these are the same people who have never read a single book about personal

finance. Now, like I said, I want to honor emotions. It's okay if you're scared, but it's not okay to let that fear run your investments. You're actually losing money every single day you're not invested. And it drives me crazy. That's why you can hear me. It makes me mad and it makes me sad because these are the same people who write me at the age of 50. They go, I know I should have started investing early. But I didn't. It's okay to be scared, but it's not okay to let that fear control your investments. And so if you look at the history of investing, everything that we've gone through, yeah, they were scary. Yes, they showed up in different ways. But over time, there's a generally fair, predictable number that we can assume for investments. Does that

mean that's going to happen every year? No. Does it mean it's always going to be the same? No. but if you don't invest consistently, are you going to run out of money? Guaranteed you are. Okay. That makes sense. Pragmatically, would you say that we should just avoid reading news articles about the financial situation since your advice is kind of to do the same thing no matter what? Well, okay, I want people to have a diversity of opinion.

I want them to read other people besides me. Absolutely. You should not only be taking your advice for me. And frankly, this person asking, Ramit, what do you think about a recession? Why are you asking me? Nobody knows what's going to happen to a recession. So you should stop putting your faith in a person, whether they're on CNBC or whether it's me or whoever, stop that.

You need to understand how personal finance works and then start to develop a bias for action. Instead, it's like many people are looking for some parental figure to reassure them it's going to be okay. It's never coming. Take control of your money. Now, as for should they stop reading the news, the news in many ways is meant to sell, not to convince you of good advice. That's why I always post on my Instagram account, these outrageous news articles. They'll go, it's a grim day. Housing prices are decreasing.

Why is that grim? That's great for young people. It's great for minorities. It's great for poor people. I want housing prices to go way down. Don't you? You know who it's bad for? Old entitled homeowners who have used laws to protect scarcity and protect the value of their houses. So no, I'm not really buying into what the news is slanting the decrease in house prices. But if you don't understand how all this stuff works, here's what you hear. Oh my God. It's so scary. What should I do? I'm going to do nothing and retreat. And that is the worst thing you can do. I totally agree. I think having an eye out for that bias and being, I feel like we're almost taught that because stuff has numbers and finances and stuff like that in it, it must be fact because the numbers mean that it's fact.

Totally bullshit. Yeah, totally. I talk to people on the podcast. and we look over some of their numbers and I go, how do you feel about those numbers? And it is mind-blowing what they say. So some people, they have literally millions of dollars and they go, I don't know, I just feel terrible. Like we're never going to make it. I go, what the fuck is wrong with you?

I'm looking at these numbers. You're doing great. This person, she paid off $78,000 in debt. I said, wow, how do you feel about that? I just feel, I feel awful, you know, I have 22,000 left. I go, are you ever going to feel good about money? And here's the truth. Two people can be looking at the same numbers and feel completely differently. And the fact of the matter is most people don't know how to feel about their money because they're not educated about their money. So all they do is feel bad. You feel bad because you were taught to feel bad. You were taught to shrink yourself and shrink what you want in life. You were taught that anytime something goes well, uh-oh, it could turn. It could go bad. You could lose it all. And so you've only learned how to feel bad about money. What about feeling happy? What about feeling joy? There's this old phrase in American culture, money changes people.

Yeah. Listen to how I say this. With the sneer on the face, money changes people, okay? They say that as if it's a bad thing. Yeah. Money should change people. Money allowed me to be more adventurous, more generous, more spontaneous. So if you go through life thinking that if I make money, I'm going to turn into an evil

asshole, then it's no surprise you're terrified about learning how to manage your money. And the reason that I showcase on my social media, my newsletter, that I can spend extravagantly on vacations and donate politically and be generous is that I want you to see you can choose how you want to use your money. I'm just one example. I love that. Okay, a few sort of quick takes. I'm investing in index funds for long term, but what's the best way to invest for short term,

something that I want to save up for in one, three, or five years. Just put in a savings account. Don't worry you're not making interest. It doesn't matter. If you have something you want to spend on in the next five years, just put in a savings account and let it sit there. And just to clarify, and I know that we're not supposed to be making decisions based on inflation, but even if it's like you're saving for a down payment on a house and inflation

is like it is right now. Yes. And I'm glad you asked that because, see, here's the thing about money. It seems like a simple answer. Well, why would I put in a savings account? This Indian guy, Ramit's, Looney Tunes, he doesn't understand you're losing to inflation. Oh, really? Have you also considered that if you invest it, what if it goes down 20%?

How would you feel then? And this is the key thing about money. Most people, they don't understand how money works, and so they simply react to marketing slogans. So some unscrupulous investment company is going to tell you, you need to invest your money. We have a three-year option. What they don't tell you is that in exchange for return yield, you might actually lose money in that same time period. If you need the money in three years for something like a down payment or a car or a vacation, just put it in a savings account. You cannot take the potential

risk of the short-term volatility that might happen in two to three years. Can you share a few of your favorite ways to save money that you don't think people talk about enough? Well, what do most people talk about? Oh, why don't you disable the oven light so you can save 11 cents per year? That's an actual tip. Somebody once gave. I have no interest in counting pennies. What? a terrible way to live life. Okay, I have a few things. Number one, once a year, you should set up a series of negotiation calls. You should call up your cable company, your cell phone company. I have word for word scripts in my book in the first three chapters. You call them up, you say, look, times are tough. I would hate to have to switch. I've been a customer for six years.

What kind of offer can you give me? Right. And a lot of times, especially in the retention department, they will offer you $100 a month in savings. That's a lot of money. And quick tip for everyone, if you are able to secure these savings, you can often save 500 bucks just with one call. Make sure you use that money for something productive. It could be a beautiful meal out. It could be investing. It could be saving.

You choose, but don't just let it sit there because it will get sucked up and spent if you don't make a conscious decision. You can negotiate rent, although now is not a great time to do it because landlords have all the power. But I will tell you that when I lived in New York for about 11 years, my rent went down. four times during that. Now, I had to negotiate. They didn't just come to me and say, here's some free money, but you want to be sensitive to the market. While you probably can't negotiate your rent right now, you know what you can negotiate? Your salary. So people talk about

saving money. And the only way that they've been taught is to cut back on X, Y, and Z. All right, yeah, you should get my conscious spending plan, just Google for it. And it will quickly show you where you are overspending and even underspending. But one thing I love for people, to focus on is to earn more. And that can be negotiating your salary, which you can find me on YouTube, or it can be starting a side business like the previous questioner. And that can make a massive change in your personal finances. I will also say that your strategy, the like starting six months out to negotiating your salary is one of the most genius things that I have ever heard. It's in your book. I don't know if it's on your YouTube as well. So I highly recommend that

people look that up. Okay. What are your thoughts on dividing expenses when moving in with a new partner or couples in general. Is it better to pool or keep separate? Oh, love this question. I love talking about relationships and money. That's what my entire podcast is about, especially because when my wife and I started combining our finances, it was very challenging. And I said, wow, if it's this hard for me, it's got to be hard for everyone else. You know, I wrote a book on money and it's still tough. So a general suggestion is, in terms of setting your accounts up, have one joint account and at least two individual accounts with no questions asked money. Many people have heard that. Fine, it works. I like when couples spend proportionally on joint expenses because if one person makes more than the

other, they should probably take on a higher burden. So there's something to consider there. I find that once you understand the basic structure of how accounts should be laid out, there's a lot of murkiness in the details. So for example, it might be, well, I make a lot more but I also have higher student loans. How do I handle that? Or I think we should buy organic food and my partner doesn't think it's worth it. How should we handle that? All these murky details.

That's where I love talking to people because it's never ending and it's always fascinating. That is where I wanted to be able to hear other couples talking about this stuff, like actually talking, fighting, crying, debating. And that's what I started with the I Will Teach to Be Rich podcast. Yeah, because it occurs to me that, a huge problem is that your rich life might not match up with your partner's rich life, but you're still having to live your life together. Yeah, the good news is you don't have to have the exact same ingredients in your rich life. So I'll give you an example. We did this exercise.

My wife and I did it together, and I would encourage anyone who's in a partnership to consider doing this. You sit down, two pieces of paper. You say, okay, what's on our bucket list for the next 10 years? Like, if we did these things, we would live a very rich life. and you take five, ten minutes, you write them down, and then you compare. And when you compare, I want you to each get curious with the other one. So, for example, maybe my wife says, I want to learn Spanish. I go, wow, why Spanish? Where would you learn it?

Would you go to Mexico? Would you take a class online? How long do you think you wanted to take you? Most partners are not curious at all about, in fact, if anything, they denigrate them. Oh, you want to buy a handbag that's so frivolous. I hate when I hear that. Yeah. Okay, why? Why should somebody's desire be frivolous? And typically, by the way, the things that are frivolous are

handbags, clothes, things like that. I don't think so. If you want to buy a beautiful bag, buy it. Okay? I don't think there's any reason to dismiss that. So you get curious. Then you do the same thing, vice versa with the other partner. Then you pick one or two things that together you want to do jointly as a couple. Remember, if my wife wants to do something that's just her rich life, go ahead. Totally do that. interest, that's fine. But we picked one thing for us that we wanted. It was a big thing. It was about eight years out. And we actually built it into our financial system. So it's not enough to just say it's on our bucket list. That's just a dream. That's just a wish. I don't believe in wishes and dreams. I believe in systems. So we said, okay, how much is it going to cost? And just back of the

napkin, we approximated it. And then we said, okay, how much do we need to put aside every single month so that we can achieve that in eight years? And it became a line item on our conscious spending plan And every single month, when we do what we call a rich life review, it's like a video game. We're just getting 2% closer to it every single month. At risk of sounding like a fan girl, was that your vow renewal trip? Correct. That's our, yeah, thank you. I'll tell you what it is.

So all the listeners know, thank you for knowing that. We were inspired because one of our friends told us about a couple that was having a 10-year wedding anniversary in South of France. And we're like, what? Who the hell does that? That seems very extravagant. And then as we've been married, we realized life is short and we want to take any excuse we can to celebrate.

Any excuse. Birthdays, 40th, anniversary, whatever. Because what's the point of all this money if you're not actually using it intentionally? And so we had an amazing wedding. We loved it. It was just this opportunity for the two of us to bring our two cultures together and friends, family food, all that. So we said, why don't we do it again?

And this time, we know who we're going to bring. We know our friends and family. Many of them would never be able to attend something like this on our own. It gives us this vision, this beautiful dream that each month we get together and we can talk about, oh, you know what, I found this. Let me show you this picture I saw. We should work this in. And it just allows us to use our money to dream and then to bring it down to earth.

So, yeah, I think money can be fun and adventurous. And that's how I want to hear all of your listeners talking about money. I remember it because it's very much a dream for me too. And I'd never heard anybody else even talk about it. And it validated it for me. It made me feel like it was something I could actually give myself permission to dream about, which I really liked. I love that you said that. The validation. The irony that you need validation on your dreams from me is thick, isn't it? You don't, nobody listening needs me, some random guy to tell you that it's okay to dream what you want to dream. My job is to actually encourage you to dream bigger. You know, it's amazing how many people shrink their dreams.

I go, what's your rich life? They go, I'd like to have a house. It doesn't have to be a big house, you know, just a small house with a little patio. I go, how come your first answer is you justifying and minimizing your dream? Why don't you tell me what your rich life is? Take away all the constraints. And then we'll work it together. If you can't afford the beach house, okay, we'll do something else.

but how can your first answer be minimizing yourself? So my job is to actually unlock what all of us already know inside of us. We have our rich life. We know what it is, but we don't give ourselves permission to talk about it out loud. I very rarely get genuinely excited about skin care, but this is one of the most innovative products that I have come across in years, and I am so obsessed with it. I've been telling all of my friends to get it, so now I need to tell you guys.

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So I'm protecting them too. Branch basics is now available at Target.com, Amazon and Branch Basics.com, so it's easier than ever to make the switch. And if you want to grab their premium starter kit, you can use code Liz Moody for 15% off at branchbasics.com. That's code Liz Moody for 15% off the premium starter kit at branchbasics.com. And when they ask you where you heard about us, please make sure to mention the show. That is branch basics.com and use code Liz Moody. I love that. Okay, a few more super fast robo advisors. Are they worth it? They charge a percentage fee, which I know that you don't like, but they say that they make up for it in tax loss harvesting. What is your take?

If your choices between a low-cost broker like Vanguard or Robo Advisor, honestly, they're all fine decisions. Personally, I don't think that the charge they have is worth it. And I think that the statements they make about tax loss harvesting benefits are highly overstated. Okay. But if it were me, I recommend specific accounts to use in Chapter 3 and 7 for investments. I don't use robo advisors.

But if you're like, look, I really like it and it's worth a tiny percentage to me, okay, fine. I'm not going to fight a battle on that one. It's not going to swing the pendulum in a huge direction either way. No, but I'll tell you what will. People who tell me they're paying a financial advisor 1%. Let me quickly tell, because there's a lot of listeners right now, your parents are paying your, their friendly little financial advisor, Chet.

Chet's so nice. He's been with us for 30 years. Chet's ripping your ass off. Okay, Chet, if he's charging what's called AUM assets under management, here's how you'll know that you are overpaying. If your parents or you have a financial advisor, text them, send them a message and say, how much do you charge? And what is your fee structure?

If they say, I charge $250 an hour or even $500 an hour, great, fine, perfect. But typically they will evade your question and they're going to say, let's get on a call. Now you know you're getting ripped off already. Because as you press them, they're going to give you more bullshit. They're going to go, well, we don't really try to necessarily beat the market. We're here to preserve capital. And you say, listen, how much do you charge me and what is your fee structure? And as you press them, they are obligated to tell you, and they will tell you a number with a percentage after it.

And this is where you get to get really mad. A lot of people listen to this is like, why this guy Rameet so mad? I'll tell you why I'm mad. Listen to this. You think, oh, paying 1%. That's not so bad. 1%. I don't mind.

I don't have to pay attention to it. but this person's responsible, they keep an eye on the market. Oh, really? Okay, do you pay the person who mows your lawn 1% of your net worth? No, do you pay your waitress or waiter 1%? No, why not? Because it makes no sense. Let me explain the numbers to you. One percent doesn't sound like a lot, but over the course of your life, that 1% equals over 25% of your returns going into that advisor's pocket. Let me say it again. If you think over the course of your life, you're going going to make $100,000, roughly $28,000 of that money will go to your advisor's pocket. That makes no sense.

For somebody who's listening and maybe isn't very good at math, how does 1% turn into 28% in the simplest of terms? Because 1% is compounded every year. So it's very counterintuitive. The human mind is not equipped to understand these compounding numbers. Compounding works. How do I say it? It's like a wave that just gets bigger and bigger and bigger.

When you start off, you have $10,000, it's not that much money. But as your portfolio grows, they're taking 1% of that total asset value every single year. That 1% is not just $1,000. It gets bigger and bigger and bigger. And so I remember this haunting conversation on Instagram, this young woman wrote me, she's in her early 30s. And she goes, Ramith, am I getting ripped off? I said, how's your advisor charging you?

Uh, 1%, da, da, da, da. I go, how much do you think you'll pay this advisor over the next 25 years? And she had no idea. I said, just guess. She goes, I don't know, 35,000. I said, okay. And I ran the numbers and it was actually $316,000. Now think about this.

She's sitting there agonizing over ordering a cheesecake or should I get the large coffee. And in the meantime, remember I told you that canoe with those little holes in it? She's sinking by over a quarter million dollars. And she's feeling guilty every time she goes out with her friends. What a waste of a life. all because she was financially engineered against. It's no accident that these companies obscure the way they charge you. So if you're paying a 1% advisory fee, stop it.

Take control. You can do this yourself. You can actually get better results than these advisors will get you. Do you have time for two more? I have all the time you want. Let's keep going. All right. I have a budget, but it keeps being blown up by weddings and bacheloretts that I don't

feel like I can say no to. How do I balance relationship obligations and trying to get my fight? finances in order. Okay. First off, I don't love budgets. Nobody does because they're backwards looking. So exactly as this person says, I have a budget, but it doesn't actually fit my life. And so they stop using it after a while. The irony is people blame themselves. They go, I didn't try hard enough. But it's not you. It's the whole structure of it is wrong. Here's a different way to look at it. So we shift to looking forward. Out of the next hundred dollars you make, where do you want the money to go? Most people have.

never thought about this. Okay. So I have recommended guidelines on the four major areas of your money. Okay? This person, we're really talking about bachelorette parties, which should fall under guilt-free spending. I guarantee this person is not proactively planning for these bachelorette parties. So here's what I would do.

I would sit down with that and be like, listen, how many weddings do you have to go to in the next three years? They go like, I don't know. I go, come on. Give me an 85% guess. And they would go, okay, probably two each year. Okay, cool. So two each year, how much to each of these things cost?

And they would say, 500 bucks. I'll go, come on. You got to get the dress. You got to get the Uber. Yeah. Let's factor it. Let's get real. Okay.

And so many of us are reluctant to get real. But part of a rich life is being honest, honest with yourself and honest with the people around you. And so I'd go, just be honest. Okay, it's $1,500 each time. Oh, my God, that's a lot of money. well, at least we know it now so we can put it down on paper and plan for it. So now this person has $3,000 a year they need to plan for.

What does that mean? It means roughly $300 a month approximately. Every single month, they should be putting $300 a month aside into their bachelor, bachelorette fund. Now, they might go, well, that's crazy. I've never done that. Why would I do that? I go, it's only crazy until you get the next invitation in the mail.

And suddenly you have this big smile on your face because past you has been saving for present you. And now you thank yourself. That's the key to where rich life is planning before you need it. This is a little bit more nuanced. But in that scenario, what if your rich life is therapy and group fitness classes, but your best friend is having a bachelor at in Nashville and you feel like you have to go so that you can show that you love her? Is there a way of balancing those obligations to show love and to do things that are important to other people with what our own personal rich life is?

Of course. So you have the options. And first off, it's up to you which choice you want to make. You can say no. I wish I could be there. I love you, but I can't be there. That's certainly one option. Another option is to say, I can be there and I will be there.

and I'm going to adjust part of my other goals so that I can make it. What most people don't do is they don't have a system. And so they are arbitrarily making 100 different tiny decisions every single week and never seeing the big picture. So this is why you get questions like, listen to the word that she used. I have a budget, but it keeps being blown up by weddings. And doesn't that tell you everything you need to know? Why should it be blown up?

Here's an example from my own life. When I lived in San Francisco, I would get parking tickets, things like that. And I felt like I was getting blown up. But then I just got honest with myself. I said, okay, every year I get about two parking tickets. So I'm just going to put money aside for it. And I call it a stupid mistakes account. Like, I'm just being honest.

I make stupid mistakes. I'd rather just be honest about it and plan ahead. So this person is reactive with their money because that's the only way they know how to treat money. But if we sit down, you go through the exercises in my book and some of the programs that I have, you can actually shift from being on your back foot to leaning forward. In your case, if you decide you want to go, you might go, okay, I'm going to cut back on one of my fitness training classes for two months per week. Cool.

That pays for that. Done. Or I'm going to reduce going out to eat. or you technically could cut your investing rate by like 1%, but I don't want you to do that. That would compromise your financial future. But you have lots of options. I also like that you pointed out that it's a choice.

I think often we feel like, oh, my friend is having this bachelorette, I have to go. You spend the money, but you kind of feel resentful the whole time. And I like the idea of either you choose to go. That's your choice. And then you can enjoy it. And then you shouldn't berate yourself or be frustrated with your friend. Or you can choose not to go.

That's also within your power. and then you have to be comfortable with that choice. Absolutely. That's why I love the IWT philosophy because it's very non-judgmental. If you want to buy this amazing car or trip or piece of clothing, fantastic. Let's make sure you can afford it, but you should do it guilt-free. And you should be proud of it. Nobody should ever make you feel bad about buying the things you love.

On the other hand, if I had a very old computer, I have a very old car, it's just not important to me. And that's fine. So I want everyone to be really unapologetic about what they love and what they spend a lot on and also what they don't care about and what they cut mercilessly on. I'd love to end with, this was a question that I think really speaks to balancing happiness and spending in the present versus happiness and spending in the future. It uses fire, which is kind of an extreme example, but I think there's a lot that we can talk about there in general. So doing fire, which is financial independence, retire early, makes me miserable. But my job also makes me miserable. So I want to be able to retire and enjoy my life as soon as possible.

What should I do? I don't believe in being miserable with the hope of one day being happy. I just don't believe it. And I believe in living a rich life today and a richer life tomorrow. So I've talked extensively about the fire community. I think there's a lot of good things in it. But I think there's a lot of problematic things as well. You can search that episode of Rameit Sati fire, there's a few different things. Here's what I would say. A lot of the fire folks, they'll go 15 or 20 years at a miserable job, saving 40, 50%, with the hope of one day being happy, but they will never spend one week learning how to find a better job. Do you know you have options? If your job makes you miserable, there are actually a lot of amazing job. I have a whole

program called dream job. Find a dream job. Get paid $30,000 more. Switch industries. We're remotely. We teach how to do this. Negotiate your salary. But most people in these situations don't believe it's possible. And because you've surrounded yourself with other people who think all jobs are horrible, it's now become an echo chamber. Now, it's possible you don't want to work at a job. Okay, maybe you want to start a business. But I simply don't believe in mailing it in and then living for a future day, well, you will be happy. That's not how it works. In fact, we all know people who were, you know, planning to hike Mount Kilimanjaro when they retired and two weeks after they retire, they're dead, right? Or they're injured. Yeah. I don't want that for anyone. So if you feel

miserable at work, then I would highly recommend you build the skills to find a dream job. Start there. Those jobs exist. You can work remotely. You can get paid very well and do things where your boss actually respects you for working on challenging stuff. Then you can start to make more long-term decisions for yourself. I love that. That is so empowering. We've talked about so much stuff in this episode. Could you just leave us with one homework assignment, something that you can turn off the episode and go do immediately to take control of your financial health? Yes, everyone listening, I would love it if you do the money dials exercise. And then send me a note on Instagram at Rameet or get on my newsletter, Iwt.com slash Liz. And you can go there, sign up, send me an email. I read them all. I read all my

messages. Just tell me what did you love spending money on? And if you quadruple your spending on it, what would it look like? What would it feel like? I love that. And you've talked about so many programs and you obviously have your book. Do you want to just kind of say in your own words a little bit of all of the offerings that you have in the world? Absolutely. So if you come to IWT.com slash Liz, you can get that template for the conscious spending plan that I talk about. Wait, you made a URL for slash Liz? Of course. Like for me?

Of course, for you and all your listeners. Oh, my gosh. Oh, wow. We come prepared. That's very flattering. Well, I knew that we were going to talk about how to rethink about money. And because we spend so much time with these transactional questions about should I buy coffee or should I buy those pants, I want to help everybody elevate.

Right? Like, let's think about bigger things. where should my next $100 go? How do I invest so that one day I'm making more from my investments than even from my job? This is possible. So set up your money, use the conscious spending plan template. It should take you less than 20 minutes. Like just put in the basic raw numbers.

I don't need decimal places. And you're going to quickly discover, oh my gosh, I'm spending way too much over here, but I'm also spending way too little over there. Now I can rebalance my money how I want. Oh, I love that. You can find me on Instagram at Rameet. My podcast is called I Will Teach You to Be Rich. I actually think your listeners will love it because just pick the juiciest episode.

You want to listen to the millionaires. You want to listen to the people with 800K of debt. Start wherever you like and you'll quickly get a flavor for how money and psychology really work together. Do you have a favorite one if you were going to send us to start at the juiciest one? I do love the episode with Charles. He's the one who has $13 million and his wife is threatening to divorce him. And what I love about it is we all think that one day when we have more money, that we will

change the way we feel. We'll feel less tense and stress. And Charles is many people's future. Maybe we won't have 13 million, but Charles shows us what can go wrong. And Charles is just so amazing and his wife through that episode. Amazing. Well, thank you so much for taking the time to answer all these questions. I love your approach.

And I just love everything you're putting out in the world. Thank you. I really appreciate it. I hope you loved this episode with Ramit. If you are new here, make sure that you're subscribed so you don't miss out on any future episodes. We have amazing ones coming up, including an episode with a revolutionary approach to being happier at work, and a mental health hacks episode with easy, quick wins for your productivity, anxiety, depression, and more. If you love this episode, I would so appreciate you sharing a link on your social media or with someone in your real life

who you think would benefit. Like I said at the beginning, bringing these conversations, and tools out in the open is wildly important. And I so appreciate you spreading the message. It is the single best way that you can support the podcast. And I am massively grateful for it. Also, if you did love the episode, I would so appreciate a quick rating or review on Apple Podcasts or Spotify. I am so close, so close, you guys, to my goal of 2000 reviews. And if only a teeny, teeny tiny fraction, like less than 1% of the people listening took a quick moment of their time to write one. We would far surpass that goal. Ratings and reviews really help other people find the podcast and I read all of them and they make me so happy and I am so grateful for every single

person who took that little bit of time out of their day to write one. Okay, I love you and I will see you next week on the next episode of the Healthier Together podcast.