Ramit Sethi
Hey, how’s it going?

Melyssa
Hi, good!

Ramit Sethi
Nice to see you.

Melyssa
You as well! Are you in New York?

Ramit Sethi
No, I’m in LA actually.

Melyssa
Oh, you are! Ok, same here. Where are you at in LA?

Ramit Sethi
Santa Monica, what about you?

Melyssa
Well, same here.

Ramit Sethi
No kidding. Are you serious?

Melyssa
We should have done this in person.

Ramit Sethi
That’s amazing. Well, my wife and I just moved out here about a month ago from New York. So yeah, that’s where we were for a long time. But we figured it was time to make a change.

Melyssa
Yeah. Were you planning to move out here previous before COVID? Or is it like a COVID move?

Ramit Sethi
We’ve been talking about it. We’re both from California, even though we met in New York. But we’re from Northern California and Central Valley. So I’ve never lived in Southern California. And growing up, I actually kind of looked down on Southern California. That’s what we do in Sacramento.

Melyssa
Yeah, I have family from Sacramento, too.

Unknown Speaker
Yeah. So but the last few years we’ve been coming to visit when we get here. And you know, everyone’s there smiling. And they have… they’re wearing colors. And we’re like, oh, not everyone is depressed here like New York. It’s pretty nice.

Melyssa
Yeah

Unknown Speaker
I think COVID accelerated our decision. But we’re flexible. You know, maybe we’ll stay. Maybe not. But we’re really enjoying it for now.

Melyssa
It’s been a great time to be here. The past. I mean, there’s been the fires. But lately, the past week or two, there’s been such amazing weather.

Ramit Sethi
It’s like paradise. I mean, the first the first night we were here. We got Mexican food, which we had missed. We sat on it. Well, we brought it back. Yeah, we brought it back from Chillida. And I was new, you know, we’re new to the area. So we’re just like googling around. We ordered everything. We brought it back. We sat on our roof. We watched the sunset. And we were like, wow. We get it. So it’s been great ever since. You know, we feel very fortunate.

Melyssa
Yeah, I’m glad you’re enjoying it. I’ll have to send you some recommendations for restaurants.

Ramit Sethi
I would love it. And then you know, depending on how you feel about social distancing, it would be fun to socially distance and see each other in person too. I think that would be great.

Melyssa
Yes. Yeah. Yeah, that would be really fun. I’ll get you acquainted with the area. I don’t know if you remember. But we think it was like little group of us in somewhere in Manhattan. We got coffee together.

Ramit Sethi
Yeah, I remember. Absolutely.

Melyssa
…was there. I can’t remember who else was there? But yeah,

Ramit Sethi
yeah, that was a while ago. Yeah, I totally remember. When did you come out to California?

Melyssa
Well, I’m from California. So I’ve.. I was just visiting New York. I was actually planning to move to New York in April. But I was like, I flew out in February to look at apartments…

Ramit Sethi
Oh my God.

Melyssa
I know.

Ramit Sethi
That is…

Melyssa
Plans got skewed, but…

Ramit Sethi
Good for you, though, for staying out here. But hey, if you decide to go to New York in the next couple of years, you can get a bargain out there.

Melyssa
Right. Right. So might still make that happen. We’ll see. But yeah, yeah, yeah.

Melyssa
Well, I’m excited to chat with you. I just feel like everything that you share in terms of finance, what I love about you, actually, in terms of finance, and all the things that you teach… two things, is one that you combine the psychology of finance and like your personal story. It’s not just crunching the numbers. It’s who are you as a person? What stories are you bringing to this conversation? And how is that influencing your financial decisions? And then I also just love how outspoken you are about all the things, not even just financial things, but you just really sit in your values as a leader, and I think that’s really noble. I love that.

Ramit Sethi
Thank you very much. I really appreciate you noticing and saying that, so thank you.

Melyssa
Yeah, yeah, absolutely. So let’s dive in. Let’s have a great conversation today. So speaking of money stories, and where we’re pulling our story from and how that influences our financial decisions, what kind of money stories did you grow up with? What were the beliefs that were instilled in you?

Ramit Sethi
I grew up with a lot of good money stories, but, I also grew up with some that I have now outgrown. And, you know, I was raised by two immigrant parents and we have a pretty big family. I learned that a rich life does not have to only be about money. For example, we always were able to participate in sports. Like always. We played a ton of different sports and activities. We didn’t really go on a lot of vacations. When we did, the vacation was driving from Northern California to Southern California to visit family. But it was great, you know, we had a great childhood. I later learned more about how my parents did it. When I was in my early to mid 20s I asked them. And, you know, my mom told me something that I had never known. I said, “How did you pay for all of us to participate in sports? That’s pretty expensive.” And she said, “One year, it was too much, we had like three or four kids in soccer.” So she called up the local AYSO, the soccer organization and said, “Look, these fees are a lot, What can you do for me?” And they said, “If you chalk the fields before the games, we will waive the fees for your kids.” So only in my 20s that I find out that my mom was out there putting chalk on the fields, so that we could play. So those are some of the stories I grew up with, I would say that they taught me resilience. They taught me that, you should just ask. If you want something you should ask. And there’s usually a way. When it came to college, they told me, “Be good enough to get in, and the money will take care of itself.” And that certainly ended up being true. I can talk about scholarships and things like that. But I would also say that I learned some money values that I’ve now outgrown.

Ramit Sethi
For example, the idea that you should always look for the cheapest price. I don’t really think that’s true. I remember once we went to a gym, and there were these people sitting at desks behind glass doors, I said “Who are those?” And I remember hearing something like “They’re just there to take your money.” And there were trainers. And I think a lot of us, even today, believe that people who charge premium prices are there to just rip you off. But the irony is, all of us have something that we pay a huge amount for. It could be diapers, could be where we live, could be a handbag or a beautiful coat. All of us have one thing but we are raised in a culture and a world of frugality where focusing on how little you can pay is the only value that most of us know. And I Will Teach You to Be Rich is antithetical to that. It is about spending extravagantly on the things you love, but cutting costs mercilessly on the things you do.

Melyssa
Right, which seems almost contrary to a lot of the advice that we’re given, which is sort of like prioritizing your home, your car. And that’s about it. And then everything else kind of being more frugal about almost like these external things that other people will see and then being frugal about the stuff that others don’t see. So your method is more of like, a values driven money spending, like what actually do you value?

Ramit Sethi
That’s correct. And some of those values when you truly get honest about them are quite uncomfortable. Because they’re opposite of what the American Dream is. Let’s remember, the American Dream is manufactured. And your American dream is very different than mine. And it should be in fact, the more you define your dream, the more ridiculous it will seem to other people. I’ll give you an example. I created something called “Ramit’s 10 Money Rules”. These are my money rules that I use to live my life. And one of them is, you know, if a friend ever has a fundraiser, donate without question. Okay, that’s one of them. Another one is save 10% invest, invest 20% approximately fine. Everyone kind of gets that. But then one of them is fly business class. If your flights over four hours, another one is marry the right person. That’s probably one of the most consequential financial decisions you ever make. Another one is always be able to buy appetizers. Now why? We’re talking about a business class flight, which could be $5,000 – that’s a lot of money. And then I throw in appetizers. Why is that? Because when I grew up, we never bought appetizers, we couldn’t really afford it. So now to me being able to go and spend $10 is a rich life as well as another one of my money rules which is be able to work with people I like and respect. So, in America, you know, some of the money values and money rules we grew up with. They’re so homogenous. Buy a house because it’s the best investment of all. That’s not always true. Debt is horrible. College debt. Oh my god, it’s so bad. That’s not always true fact, that’s often not true. And there’s a variety of other ones we can talk about. But we should remember that, you know, some of these invisible scripts that we grow up with that were passed down from our parents from our government are not true. And we should question them, and then we should decide what a rich life is for us,

Melyssa
Yes, love that. I want to get into what a rich life is in a few minutes. But I love this Ramit’s 10 Money Rules, is that what you call it?

Ramit Sethi
Yep.

Melyssa
Can people create their own money rules? Like, is this an activity? People could do?

Ramit Sethi
Yeah, this is something I encourage. So I teach this on my newsletter, and on my Instagram. And I show people what my rules are. And it’s so interesting. The reaction, the first thing they say is what what about that one? Why are you doing that? That’s a waste of money. Oh, I would never fly business class.

Melyssa
Yeah.

Ramit Sethi
And I always reply, these are my rules, not yours. It’s really important to know. And I’ve been thinking about this for 20 years, your rules will be when you develop them, they should fit you like a glove. Like the appetizer one. That doesn’t make any sense to anyone who doesn’t know me. And yet, if you did know me and how I grew up, that makes perfect sense. It is like a handmade suit tailor made for me, Ramit. Now, then I challenged them to come up with their own money rules. And guess what people’s first reaction always is when they create their own rules. Can you guess?

Melyssa
Hmm, save money?

Ramit Sethi
Yeah, it’s all restriction, all of it. never spend more on x, then you have to always buy generic y. And I’m like, hey, that’s cool. You know, like, three or four of my three, I would say maybe two to three of my money rules are about you know, conservative stuff, save and invest X percent. Great. We need to have that. But rules, the word rules in our culture is restriction from and that follows perfectly with what we are taught about money. We’re taught that money equals No, no, you can’t spend money on lattes. No, you can’t go on vacation. No, you can’t do that. Sit in a cave. breathe oxygen. And when you’re 90, maybe you can take that trip to Portugal. I will teach you to be rich philosophies about saying yes, yes. I want to travel for four weeks a year or six? Yes, I want to work hard, negotiate my salary, and retire early so that I can do X, whatever it is. Money is about saying yes. And so when people create their own rules, it’s kind of like learning to walk first time. It’s a little wobbly. It’s all about restriction. That’s fine. take a crack at it. But then the second time we go over it together. I say, Why do you see that? What do you get? If you only eat out once a month? What do you get? Then? They’re like, well, I get to save more money. What do you get? What are you going to use it for? What is your rich life? And suddenly it unlocks for them that money can be used to say yes, instead of No.

Melyssa
I love that. And even it’s like, thinking of the story behind why we’re restricting things. Like when you were saying how you always fly business class for flights over four hours. And some people were commenting like, I would never do that. And I could imagine the end of that sentence would be I would never do that. Because I’m a humble person. I’m a good person. I don’t care about things like that. And then it’s really like, Well, why do you believe that humble people can’t fly business class? Where does that story come from? And so we can start to break down and unravel. These beliefs that we’ve carried that actually aren’t really us. They’re just conditioning from, like you said, family, culture, government. Anything outside of ourselves?

Ramit Sethi
Yeah, we absorb these, what I call invisible scripts. They are stories that are so powerful, they guide our lives, and they’re invisible. That’s how deeply embedded they are. And you know, there’s this phrase, you’re never as American as when you are abroad. When you go abroad, you start to realize the things that are actually just American, not necessarily true. And having visited, for example, India, many times different parts of Asia, you really see different cultural values that take place. Just as a simple example, how many people live in one house? in a different country versus here in America? What do we love? We love our personal space. That’s such a Western mentality. How about living three generations to a 750 square foot house? How about that? That’s a totally different value. And in fact, if we actually look back at American history, just 50 years ago, our houses used to be running Half the square footage they are today. So we should remember that things that we take for granted – marriages because of love. We’re like that’s a marriage. That’s not true in other countries as well as our own country. Marriage was also an economic construct. So these invisible scripts, some of them are really good. I grew up with invisible scripts, saying, education is the best thing to spend money on. I believe that I agree with that. I think it brings people out of poverty. It socializes us to new ideas, a variety of things. But there are also some that might not necessarily hold true anymore. Like, you need to buy a house, because it’s the best investment and a variety of others. So some of those phrases come out in the subtlest of ways, like at dinner, when you’re with your mom and dad, think back to when you’re five years old, seven years old. What are some of the phrases that we hear around the dinner table? I’ll share one and then I’ll ask you if you can think of one.

Melyssa
Okay

Ramit Sethi
How about we don’t talk about money in this house?

Melyssa
Oh, wow. Wow. And that’s an interesting one, because that’s like, if you can’t talk about something, how can you ever deconstruct it?

Ramit Sethi
That’s right, and think about how that manifests 30 to 40 years later, when potentially you’re in a relationship, but you are too uncomfortable to bring up money with your partner. And so you get married and suddenly you realize, Oh, he or she spends money in a totally different way than I do. Why didn’t we talk about this? But most people can’t trace it back to sitting at dinner eating spaghetti and hearing mom or dad say we don’t talk about money in this household. What’s one that you can think of?

Melyssa
Yeah, I there’s one that comes to mind for me that’s like getting a good deal but on a nice thing like, at this store they really nickel and dime you – I remember that phrase – they nickel and dime you. But I went to this other store found the same thing and got it for 10% off and like almost this like achievement of finding the thing that was the good deal.

Ramit Sethi
The deal? Yes. I love that’s such a great one. The the idea that we should drive around town to find the cheapest gas. Yes, we should spend Saturday evening cutting coupons, etc. Yeah, and again, there’s some good in that. There’s absolutely value in frugality. I want to emphasize that I think sometimes, you know, people think that “I Will Teach You to Be Rich” is just about spending a million dollars on everything. That’s not true. I had a laptop, a MacBook Air for eight years.

Melyssa
What

Ramit Sethi
Yeah, I ran my entire company…

Melyssa
How does it even work?

Ramit Sethi
That’s a charitable word – work. My wife would make fun of me, she’s like, it sounds like an airport in here because the fan feels like really hot. But she was like, get a new one. I’m like, why it works. It’s a good computer, I one of my money rules is buy the best and keep it for life, or as long as the life allows you to. So that’s, I think that that is certainly something that we grew up with, like the deal, the thrill of the deal and hey – for a lot of people, that is perfectly fine. But we should remember. If you find yourself driving around town to save 39 cents, if you’re intellectually honest with yourself, and you say, Hey, I just like a deal. Great. Be my guest. Money can be entertainment as well. But most of us don’t. We construct a logical narrative. Well, I’m actually saving money. Oh, it’s real. We got to use the coupon for this Costco box of 75. Toilet papers? No, that’s that’s actually just mindlessly following a script from when we were five.

Melyssa
Right? Right.

Ramit Sethi
There’s so many of these, you know, at least we’re not like those rich people. Oh, if I had money, I would never do x. I think it’s one of the most uninteresting things in the world is to hear people saying what they think they would do if they had millions of dollars. It’s like you have no idea what you would do. And trust me, I’ve seen people grow their incomes. That’s what I do. I help people make a lot of money, grow businesses, create their rich lives. And it’s remarkably uninteresting to hear people who talk about what they will do one day, when they don’t actually do it today. If you think you’re going to magically save 25% one day, that’s unlikely to happen if you’re if you’re saving zero percent right now.

Ramit Sethi
You know, there’s this phrase, money changes people. Listen to the way that it’s set. In this case, money changes people so scornful. Yeah, money does change people. It should. It allows you to dream bigger. It allows you to be more generous, it allows you to be more adventurous. So I think we shouldn’t shouldn’t be so afraid of what may happen. That who I’m going to turn into this person who has to eat at a five star restaurant every night or buy a new computer every two weeks. That’s not true. You You will define your values, you will adjust them as you grow. And you will use money to live your rich life. I hope everyone listening here takes one message away, which is trust in yourself. As you become more financially successful, you’re not going to turn into some crazy Scrooge McDuck, you will trust yourself, trust your legs know that you will be able to use the money to live your values.

Melyssa
yes, yes. And that it’s not always about the best deal. It’s like, what’s the most fulfilling? What brings you the most joy? If it’s within your means, I know for me, I’m a Taurus and I very much align with being a Taurus. I love my nice stuff. And I had this experience recently where there was like mold growing in my bathroom, I had to get it removed. And they had to like open up the walls, and strip it down to the studs of the house that I live in. And I love my home. And I remember walking into the bathroom and seeing the house stripped down to the studs, and almost feeling like I was looking at a friend who is on the operating table. And I felt this like deep connection to my home almost this energetic exchange of like, we’re not it’s not just a thing, it’s like something that I really value as almost like a being. And to me, that’s the benefit of investing in things, and spending on things that I really value versus like settling for the place to live that I don’t really enjoy, because home is so important to me. And so having that experience it just like it hit me in it in a way I hadn’t felt before of why I value, the things, the material things that I value. It’s like there being that I’m exchanging with

Ramit Sethi
Yeah, I love hearing anyone who can talk about what they love. And they’ve been thoughtful about it. It’s kind of like hearing, you know, my wife and I have been asking our friends how they raised their children, because we were curious, what’s their parenting style? What school do they send them to things like that. And when you ask people that, first of all, they love to tell you how to do it. And it’s so interesting, we really love hearing them. Now, we don’t agree with all of the parenting styles, or educational fine, everyone has their different things. But I’ll tell you, one thing I just love is hearing somebody talk about an intentional decision they have made. And it doesn’t matter if you choose this type of schooling or you raise your children that way. If you do it, and you talk about it eagerly, you’ve given that a lot of thought, you are really, really intentional about it. And for you hearing about taking it down to the studs, and how you felt this energetic exchange, it’s kind of clear that you have thought about it and felt it. And so while I don’t have that experience, I love and I respect hearing somebody else sharing their experience. So I think that’s awesome. Thank you for sharing.

Melyssa
Yeah, thank you. And that’s almost like, what’s possible when we’re each so grounded in what we value that there is no judgement, there’s no like, well, I don’t feel that way. It’s like, that’s cool that you feel that way and I feel the way I feel. And that’s cool, too.

Ramit Sethi
I totally. You know what, let me ask you a question, because I’m curious about this. So I have a… I always it’s two questions, actually. The first is, what do you love spending on? Like, not just like, but love and I have a guess from what you just told me? But what would you say would be like the top answer for you.

Melyssa
Anything related to home, so home itself, furniture, wallpaper, anything like that I love adorning my home.

Ramit Sethi
Why is that?

Melyssa
I love being at home, and I get a different and I work from home too. And I think I just get a different sense of like, motivation and inspiration being in a beautiful space and I love having people over and like it kind of the way that people express fashion have like their fashion is them on the inside but revealed on the outside. That’s how I feel about my home is like, this is me as a physical thing. I love this room and it’s different. And yeah, I just it’s a creative project for me too.

Ramit Sethi
So can I guess that you read interior design magazines, Pinterest boards. When you go to people’s houses, you’re noticing little details that maybe others don’t notice is this kind of like how it goes for you?

Melyssa
100%. I’ll even like I’ll even plan trips around visiting places that I know have beautiful design, restaurants that have beautiful design.

Ramit Sethi
Okay, okay, you’re speaking my language. I love it. So now I want to ask you the second question. And the first question was really to get at something I call a money. dial. It’s, every one of us has something we love spending. We love it. And I call it a dial because of the second question, which is, if you could quadruple the amount you spend on your home, what would that look like for you? And what would that feel like?

Melyssa
Ooh, gosh, I mean, even thinking about my home, like the home, I would live in the things that would be in the home, it would just be, it would be the most pure expression of my creativity and myself. Like right now, I feel like I buy some nice things. But if I could buy the nicest of things, then yeah, I feel like every detail, like I love beautiful things, because they’re so detailed in their expression and creation. And like, they use really high quality materials. So I feel like every single thing would be almost a work of art. And the way I would feel in that would be, you know, probably just really content and happy, inspired.

Ramit Sethi
Inspired. Makes sense. Because you talk about beauty. And out of curiosity, you know, some of the furniture you have, I’m sure you bought it at a beautiful design store, or maybe somewhere close by, if your 2 x’ing, 4 x’ing, 10 x’ing your spending, where would you be getting this furniture from? Same stores?

Melyssa
Potentially the same stores? Yeah, maybe just buying. I mean, I feel like the stores that I shop at are nice. There are some more like handmade stores or Scandinavian design stores that are a little bit more like vintage pieces that can be a lot more for pristine vintage stuff. So perhaps those places,

Ramit Sethi
Okay, interesting. So I love this money dials exercise and I hope, as everyone’s listening, you follow along and participate. Because when I asked people this – I’ve asked thousands and thousands of people this – the most common money dial is eating out. That’s the most common by far. The second is travel. And then it’s a sharp decline after that into – Oh, sorry, number three is wellness, health and wellness. And then after that it’s a hodgepodge. Yours is very interesting. It’s not too common. But when you talk about words like beauty and inspire, there’s definitely an element of that that we hear with people, particularly with their homes.

Ramit Sethi
My money dial is convenience. So I love convenience, I track all different types of automation systems. When you open my fridge, everything is like perfectly aligned, you know, I could go blind, and I would know where everything is in my place. That’s what I have an assistant etc. I love that. It sounds like I’m a serial killer listening to this. This guy. This guy spends like 20 hours just optimizing his calendar. But yes, I do. I spend time and money on that. So then I asked the second question, what if you could quadruple your spending? And this is where it’s so interesting. I loved seeing your reaction, because you instantly smiled. And what happens when I asked this question is most people get stuck. They are confused, because they’ve actually never thought about spending more. They’ve only been told to spend less. Oh, I know I spend too much on clothes. I know I’m bad. But no one has ever said, like I do with I will teach you to be rich. What if you could quadruple your spending? And the answers are so interesting. In DC I asked a young man this. And he said I like to eat out. That was his. I said what if you could quadruple your spending? And his answer was sort of like it wasn’t that funny of a joke. He’s like, Oh, I’d have to get a trainer because I’d be eating too much Haha, you know, four times a week. And I was like, Alright, let the guy have his joke for a minute. And I was like, let’s get serious. I said, Okay, where would you eat? And he thought about it. And he said, You know, I actually have a list of every Michelin starred restaurant in the city that I keep. And I said, Who would you take with you? And now it’s getting very quiet in the room. He says I would take my family. And I said Why? He said because they’ve never been able to afford eating in a place like that. To me that is a money dial and that is the rich life where you can spend extravagantly on the things you love. If you like clothes, and you really want to turn the money dial up and of course you can afford it. Maybe you use our earnable program, you start a business and you can fly to Italy get something made custom for you if that’s what you love. But you also start saying wait a minute, if I want to Do that, and it would truly give me joy, then maybe I don’t need this new car, or maybe I don’t need to go and spend on that. But instead, I’m going to actually be intentional about where my money is going. And I’m going to double, triple quadruple down on that. To me, that is such a rich life, where you can spend more on the things you love, versus trying to cut back 2% on everything,

Melyssa
And what I love about that is that it’s really getting to the core of your authentic self, like who you really are, what matters to you, and releasing a lot of this conditioning of what you think you need to be spending money on. or saving money on. Yeah, so I feel like some people listening to this right now are going to be self correcting in their head. They’re like four times the amount that I’m spending now?! Or like spending more on that area of my life. That sounds ridiculous, even though I know that I want to do that. But I I have so much conditioning, I don’t know how to get through it. And I know earlier, you said that you had some unhelpful money beliefs you got growing up and that you outgrew them? How can everyone listening start to outgrow some of those money beliefs that might be holding them back.

Ramit Sethi
The common way people try to do it is they try to look inside and analyze their money beliefs. And it sounds logical. There’s just one problem, it doesn’t really work. It’s hard to look inside and actually detail the invisible scripts you grew up with, how do you even know what they are? I think a better way to do it, is to start with the end in mind, who do you surround yourself with that has a positive money mindset that uses money in a way you want to, I’ll give you an example. There are certain influencers online who post pictures on yachts and sort of live the lifestyle. And it’s never been my kind of thing. Like, if anything I want quiet luxury. Quiet luxury means I can afford to go wherever I want, take whoever I want with me. But you will never see a logo on my clothing. But the only person who knows what type of cashmere is used in that is me and my wife. And that’s all I need. Perfect. And it feels good to me. But you’ll never see a huge logo ever. Quiet luxury. That’s what I want. If you want to wear Supreme, and you love that lifestyle, awesome! Find those people and study how they did it. So the first is to surround yourself with people who have that positive money mindset and start to really reverse engineering. The second thing I would say is, there are some great sources like you’re listening to right now. Or “I Will Teach You To Be Rich,” my book, where we talk about what those scripts are, and what you can actually change them to for example, we don’t talk about money in this house. That’s your old script. But you may not have even realized you grew up with it until you see it in my book. And then you can rewrite it to the new script. I’m confident in talking about money. And I’m confident in asking for what I want. Right? And then you will notice that once you start to really get into this, you will notice it in so many places, you’ll notice you go out to lunch with your friends. And somebody says to the table, hey, do you guys mind if I order this really expensive thing to share with the table? And and you might be uncomfortable? Maybe it’s not within your affordability right now. But you don’t speak up. Why? Because we don’t talk about money in this household. But now that you’ve acknowledged it, you say, You know what? It looks amazing. Unfortunately, you know, I’ve put myself on a spending plan. So please get it if you like, but I just have to opt out of that. If If it’s not too much trouble. And suddenly you are speaking up for yourself. And that $20 or $30 conversation you just had is actually worth hundreds of thousands of dollars over the course of your life because you’ve started to take control. That is how you do it.

Melyssa
Hmm. I love that. Yeah, I actually read your book maybe five years ago, and I remember using the script to increase your credit score, calling telling them like that you’ve got a big expense. I think I said like I’m moving. I’m buying a washer and dryers something like that, and increase my credit score. Yeah, like works like magic.

Ramit Sethi
Yeah, thank you for saying that. And thank you for using it. So in the book. You know, I studied technology and psychology at Stanford, and I learned about money ever since I was in high school, I took some of my college scholarship money and put in the stock market. And after writing my blog for many years, I decided to write a book and I bought a ton of other money books. I found that almost all of them start chapter one with “Let’s figure out where all your money’s going.” And everyone reading is like, No, thanks, bye. And they just close the book and put it on the bookshelf again, nobody wants to start with that. And if you understood human psychology, you would know that what we want to do with our money is we want to get it quick with something that we’re probably not optimizing. And with just something really easy, we can take control and realize that money is within our control. It’s not just the big banks that can beat us. So in the book, I’m big on scripts, read these words. In fact, I even put the phone numbers, read these words, often, you’ll get your $35 credit card late fee waived. Read this, and your bank overdraft fee will get waived, and then even to chapter nine, where we read these words, and you can negotiate a $10,000 salary increase. So that’s really about the system’s part of “I Will Teach You To Be Rich”, both in the book and in our programs. I’m just, I’m a big fan of that kind of stuff.

Melyssa
I like how tactical you always are, you get into the nitty gritty, which is super helpful. So something it’s kind of like a theme that I feel like we’ve been talking about, but it’s this idea of cost versus value. And I don’t know if it’s something you talk about quite in that way. But I’d love to drill home for people like the difference between the cost of something and the value of something.

Ramit Sethi
Well, yeah, I think we we have money lenses that we look at the world through, and the primary money lens – imagine putting on a pair of glasses, and suddenly you can only see one type of thing, maybe green or blue or something. Well, the money lens that most of us grew up with is cost. And that’s why when you buy something, and one of your family members hears about it, what’s the first thing they ask you? How much did that cost? Right? Well, that’s so ridiculous. I think cost is a good lens, it’s a good lens to have, you should definitely know how much something costs. But just like, you don’t want a musician to only play one note. Similarly, you don’t only want to have one lens through which to look at the world. And there’s so many other lenses, there are lenses like results. For example, I could pay nothing, go on YouTube and get free workout plans, or I can pay a trainer and get faster and better results. Okay, that’s one. Another one is security. Security means I could buy a really, really, really cheap car, used car. Or I can buy one, you know, let’s say I have kids, and I want to protect my family with the better safety features. Okay, that’s security.

Ramit Sethi
Could also be where you choose to eat. When you’re taking your parents out, you know, you choose a restaurant where you know, there’s not gonna be yelling, teenagers, just so that everyone feels safe and comfortable. Their speed, there’s etc. Value is one of them. And all of us actually intuitively know this. Because if you just look in your kitchen, everybody, just think about your kitchen, just mentally go to your kitchen, and look through your cupboard. Look through your fridge. I guarantee you. There’s something in there. That is not generic. It’s a name brand. It costs 30% more, maybe it’s triscuits. Maybe it’s cheese. It’s maybe it’s topo Chico, I don’t care what it is, you know, you’ve got something where you could technically spend half the price and basically get the same thing. And yet you don’t. Why is that? And that’s when we all admit to ourselves, oh, wow, maybe my only view on life is not cost. Maybe I buy cheese. It’s because mom used to serve me cheese. It’s when I came home from school. It’s fine. We’re not talking about a lot of money here. But what that starts to really show us is a cost isn’t our only lens. It’s not our only note. And so therefore, like, for example, when I was younger, I used to try to build my own computer, let me put this part together and read PC Magazine, right? I think a lot of sort of techie guys go through this when they’re younger. And then and then as I got older, I’m like, I think I’m just gonna buy a Mac. The value is saving a lot of time and not getting it wrong. And convenience, like convenient and exactly aligns with my, my money dial. So that is the difference between cost and value. And again, there’s nothing wrong with paying less. But there’s also nothing wrong with paying more. And we should emphasize when it makes sense to pay less and when we intentionally want to pay more and that’s the difference between cost and value.

Melyssa
Hmm. I like that distinction you made at the end to that it’s okay to pay less but it’s also it’s okay to pay more to, especially when it’s something you value. Like there’s some sort of feeling.

Ramit Sethi
There’s a famous phrase by a guy named Dan Kennedy who says why pay less when you can pay more? Isn’t that amazing? What a counterintuitive statement? And if I think about the things that are truly important in my life, truly important, why would I pay less? If I’m going to buy a beautiful gift for my wife? Why would I, when I can pay more again? Can you afford it? Does it fit within all your plans, your money rules all your system from chapter five of my book, but assuming it does, why pay less when you can pay more. And again, it’s so counterintuitive, because it goes against the basic precepts of our money lens, which in America is primarily cost. But again, we all have it, whether it’s your Heinz baked beans, or whether it’s your whatever other product, you buy your shampoo, there’s something in our lives that we happily pay more for. So we should really go deep on what that means to us. What is the value to us? And then we should decide intentionally about the other things we spend our money.

Melyssa
What are the things that you pay less for that you don’t really care about spending money on?

Ramit Sethi
Computer. Car, I’m just like, not really into a car. I read by choice. That one really surprises people. They’re like, wait, I thought your that I will teach you be rich guy. And then you know, they then I tell them I could buy tomorrow. But I choose to rent because for me the value is flexibility. It’s knowing that I don’t have to repair anything, anything’s broken. I make one phone call. Now, of course, I’m sure that will change in the future. And I’ve already planned for that and saved and all that stuff. But that’s my value today. Anything sort of relating to TVs, or I didn’t have a TV for like over a decade. Although I did watch a lot of TV, I have to admit I’m not going to act like I’m some saying I watched like every TV show just on my laptop.

Melyssa
Oh, yeah. As a kid, I was real into TV.

Ramit Sethi
Yeah, yeah. Those are some of the things that are not really critical to me. And I think, you know, kind of what you hear if you deconstruct that is if you can be intentional specifically about the big things in life. I do believe in a concept called big wins. Most of us, I think, ask $3 questions. But I really want people to ask $30,000 questions. And so the amount of money I have saved by renting is so tremendous that it pays for hundreds of years of buying lattes. And that is what we’re talking about. So when people are sitting here fixated and feeling this puritanical guilt about, oh, I shouldn’t buy that latte. I’m bad. I shouldn’t spend extra on this extra chicken for my salad. I’m really bad. In reality, they should be asking about, you know, how much am I paying for my investment fees? Is my asset allocation. Correct? Most of us don’t even know what that means. But that’s where we lose hundreds of thousands of dollars in our lifetime. Am I what kind of interest am I paying on a house? These are the kind of questions that are 30,000 or $300,000 questions. You could buy as many lattes as you want. If you get those three to five questions in life, right?

Melyssa
Mm hmm. Yeah, yeah, I know, you have this philosophy around, like, what is the deal with cutting out the $3 latte.

Ramit Sethi
It’s a waste of time to think about it.

Melyssa
right? And what you were saying about this, this response that people often have of like, I’m bad, if I spend $5 on a latte or I’m bad if I buy the name brand thing at the grocery store. I feel like even good and bad in so many ways, is operating from this conditioning to of like, what’s bad to you? And was bad to me might be totally different. So remembering that it’s the story rather than this truth. And I think if you know that then you don’t have to be bad for spending $5 on a latte.

Ramit Sethi
Yeah, it’s not bad. I don’t like the moral judgments of spending. You know, it’s the same with food. I think there’s so many similarities between money and food and actually outlined those in the introduction of my book. And this idea that, for example, like eating pizza, or a fudge sundae is bad, that is not true. You can eat pizza, if you love it, of course, you need to be mindful of the other things you’re eating, and you know, your activity levels. But the same is true with spending if you want to buy a MacBook Air, or you want to spend a little extra on a face oil. That’s not good or bad. It’s simply a matter of what are your values. How much do you earn, can you afford it? And hey, if you can’t afford it, that’s okay. You say okay, I can’t do this today. Here’s my plan so that I can start to afford it in x days or x weeks or months. And then I will have something to look forward to achieving but I don’t like them. moral judgment. And I think people appreciate that I will teach you to be rich is very permissive. If you want to spend a truly a lot of money on a beautiful jacket, great, let me show you how to negotiate your salary and start a business and optimize and do that. If you want to travel, I’ll show you how to do that. It’s not wasteful, it’s what you want to do. And you know, I will add one thing, which is I am strongly in favor of being generous to the people who also can’t afford it. So living a rich life is not simply about materialistic and buying nice jackets and furniture. That’s not it, it’s actually about the more you make it as you giving more, and bringing everybody with you. I always said from day one. When I make it, I’m bringing everybody with me. And that is exactly what I’ve tried to model for my community so that they can see you can be financially successful. You can have nice things. But you can also help a lot of people, you can be happy to pay your taxes, and you can bring everybody with you as well. So that’s what I’ve tried to model with my business. And you know, how I demonstrate my philosophy? Mm hmm.

Melyssa
Yeah. And I love that I love the generosity behind it. And like you were saying earlier, too, it’s like, you can start doing that now to like you, the way that you’re operating in your life. Now, wherever you’re at in your money journey, is kind of how you’re going to be operating, at least from the mindset when you earn more money. And so how can you be more generous now? How can you serve and bring others with you now and then carry that belief in that way of being into your life as you grow?

Ramit Sethi
Yeah. You know, today on Instagram, I had an interesting comment. So I asked people, what does your rich life look like? And people tend to give really generic answers when you ask this question. They’ll say words like freedom, or, you know, generosity. And I always I love that answer, but I pushed them. What does that look like? What does it mean? One person said, I want to travel more with my wife. I said, Okay, how often were you going? And what seat on the airplane are you flying? Because it’s easy to have these general generic words. But when you say I want to travel three times a year, and I want to sit on C two F, suddenly, you realize either one, oh, I can already do that. It’s very specific. Or in my case, I want to have appetizers when I go out. Ohf, 10 bucks done. or two, Oh, wow. That’s not within my possibility yet, but two years from now will be. So this person responded to me. And he said, I like to be generous. And I like to help. I want to tip more. And I want to do this, and I want to do that. And I said, How much do you tip? And he said, Oh, you know, I’ll try to give like $10 more or something. It makes people so happy. And then I asked him even more. I said, What if you created one of your money rules to be “always tip 30%?” And that is how we use I will teach you to be rich combining values and systems. So he doesn’t have to think about how much to tip every day. Oh, should I tip $3 or that was really $6. It’s just you know what blanket, I’m going to tip 30% if it was great service. Or just always. Whatever. The point is, you take these tiny little decisions out of your head, you systematize it. And now you’re being generous. You’re helping people as you yourself said you want to do, but it’s automatic. And that is when you really start to leverage all the AWT principles. And imagine 30% tip is really meaningful to a lot of people who are going to receive it and he can do it all day long. I hope he does it. I really do.

Melyssa
I love that kind of adopt that. I want to make my money rules today to I don’t have them.

Ramit Sethi
That would be awesome.

Melyssa
Yeah. Sounds fun.

Ramit Sethi
Let me know what you come up with. I’m really curious. I have a I have a sense of a couple of them. But it is so revealing. You know, when you see someone’s money rules, I would love to see yours.

Melyssa
Yeah, I will definitely send them your way. I want to talk about because you have some, I guess you could say controversial beliefs about money, especially as it comes to home buying and taxes. Can you share more about how maybe you go against the grain of typical beliefs in those ways.

Ramit Sethi
In America, real estate is religion. And we have grown up with everybody telling us that you’re throwing money away on rent, and buying a house is a great investment and do it for the tax deduction. They’re not making land anymore, all these pithy phrases.

Ramit Sethi
What I encourage people to do is simply to run the numbers. If you run the numbers in a city like New York or San Francisco, you will often discover that it does not make financial sense to buy. And notice what I said very carefully. If you run the numbers, you may notice that it does not make financial sense to buy. How can that be? Well, let me give you an example. If you have a house that costs $1,000 a month for the mortgage, and you have nextdoor, a place you can rent for $1,000 a month, what would you do? Most people would say I buy because I’m going to build equity, leverage all kinds of this these words, but what they don’t account for is a couple of things.

Ramit Sethi
Number one, the Phantom costs involved with buying a house. And these are everything from your closing costs to repairs, maintenance, etc. And as you know, from you know, opening up down to the studs, you know that some of these costs are quite large. And you may be great, you know, first year, second year, third year, nothing, and then you may have a huge unexpected maintenance fee. If you properly amortize or spread those costs out over the course of how long you own your house, you discover Whoa, it actually took my return rate way down.

Ramit Sethi
Second thing most people don’t realize is that you can actually get quite good returns in a diversified fund in the stock market. So let’s pretend back to that example. $1,000. In your mortgage, you take $1,000, excuse me, 1500 dollars, it would actually be because you’re going to factor in all those costs, and you’re putting it towards your house, great. In the rental, you take that thousand dollars, you pay it, you take that extra 500 bucks, and you invest it in the market every month, which I talked about in chapter three and seven of my book. Turns out that the market in general, handily outperforms real estate as an asset class. So to put it very plainly, people think oh, my grandma bought her house for $300,000 in 1970. And she sold it for $700,000, she made a $400,000 profit. Just two problems with that, number one, you didn’t factor in all the costs grandma spent going to Home Depot redoing her roof, termites, all that. And second, had you taken that money and put it in the market? You could have made way, way, way more.

Ramit Sethi
Now I show you all the math in the book chapter nine. But what is the key message here? The message is not, don’t buy a house. Okay, I’m not going to tell you what to buy or not to buy. Except I will tell you don’t use Wells Fargo and Bank of America because they suck. But aside from that, if you want to buy a house fine, but I will show you how to calculate correctly. And I want people particularly young people listening to this to never feel guilty about renting. And there’s nothing wrong with you for renting. There are lots of structural reasons why housing has gotten more expensive for people like you and me. And most importantly, if you decide to make the biggest purchase of your life, that’s fine. There might be many reasons you buy, you might love to redecorate, you might truly value tearing it down and building this inspiring place where you find, but you should also factor in the math. And you should know the numbers cold, because this is the biggest purchase of your life. On a final note, I’ll just tell people I know these numbers very well, and I have chosen to rent for now. Doesn’t mean I’m going to do it forever. But it has been a great financial decision for me. And if anyone is curious about this, because it sounds so counterintuitive, from everything we’ve been taught. You can just Google my name Ramit Sethi, rent versus buy. There’s a ton of articles, I’ve written posts. And again, whenever I bring this up, because real estate is religion, people get really mad. It’s like me telling them, you know, the church you’ve gone to for the last 40 years is bad. That’s not what I’m saying. I’m simply saying run the numbers. And then you can decide.

Melyssa
Yeah, yeah, that’s great advice. And just to add an example to that, for my own self, I, I bought the house that I live in now I have a rental property and I have my personal property and I was looking at like Zillow or something for my home. And I saw that in the last year it increased 4% in value is what Zillow said, I was like, that’s actually kind of sucky. My stock portfolio is up like almost 15%, which has been a really great year. But even if it was like an average year, that would still be way more than 4%. And so it got me thinking to of like, this home isn’t really an investment. It’s kind of increasing with inflation. It’s not even really increasing in value in that sense. So yeah, I was I my original plan was to invest money in more homes and real estate and renters. And I’m like maybe I’ll just double down on the stock market and put more emphasis in that direction instead of having all these properties,

Ramit Sethi
That’s very interesting, you know, many people would disagree with that. There’s a whole real estate contingent. Interestingly, the real estate folks don’t really talk to the stock investors and the stock investors don’t really talk to the real estate folks. I will tell you that my philosophy is much more in line with low cost long term, stock market investing, and I have the math to show why I cover that in the book, I will eventually buy. And so I think I just want to share how I think about this. Eventually, I will buy, we will buy. But when we buy, we will know for a fact this is not an investment. This is purely its consumption. It’s like buying a really nice sweater, except a lot more expensive. And we’re not going to delude ourselves into thinking, oh, we’re going to get a return on this. And like, oh, if we redo the kitchen, we’ll make it back. No, this is just pure desire. So that actually helps us be really intellectually honest with it, you start to get to ask questions like, how much should we pay for something that we’re just getting purely because we want it? And, okay, now you have an honest conversation with yourself? Is it worth having 10% and 20% 40% of your net worth in a consumption? Good? These are the kind of questions that you know, I think about and we think about, but overall, I just want to encourage people to really run the numbers and get intellectually honest, this is a really hard one to absorb for people, because we’ve been taught the opposite most of our lives. Mm hmm.

Melyssa
Yeah, I’m hearing this more and more that your home is not really an investment and to consider renting over buying. So, yeah, something that I’m seeing circulating a little bit more. So I know that we’re running short on time, and I want to be conscious of your time. I just have one more question. I love to ask all of my guests. And that is just what is one piece of advice. And I know you’ve given so much in this conversation, but one piece of advice that you give to people on how to live a life with no limits.

Ramit Sethi
Well, see… going back to our money dial exercise. My dream would be if people would do the money dials exercise question one, what is something you love spending on and why? And question two is, what if you could double or quadruple that? I would love it. If people come up with that. And they post it on Twitter or Instagram, and they tag us both. I think that would be so cool to hear what people have to say. And I like hearing people get excited about spending their time and money on something that they value. I like that. Sometimes you discover you could do it today. Oh, it doesn’t cost that much to get a nice shampoo, I’m going to do it. Other times you hear people say I can’t quite do that yet. But I’m on the path to being able to do it. And that, to me is equally rewarding because it helps us have something to look forward to. So that’s how I would encourage people to live a life with no limits.

Melyssa
I love that. Yeah, I would love to hear people’s money dials, please tag us. That sounds fun. So you’re amazing. Thank you. I just love everything that you share and that you teach. Where can people go to learn more about you buy your book, all of the things?

Ramit Sethi
You can find me online at iwt.com. We have a newsletter, which I would encourage you to check out. If you want to learn how to earn more. We teach people how to start a business. Even if you’re not sure about your business idea. You can go to iwt.com/earn. And I’m on Instagram and Twitter @ramit. And yeah, I hope to connect with everybody and please send me a note I do read every message I get I can’t reply to everyone but I read every single dm and email that I get. And when you get on my newsletter, you will quickly learn how much I ask to hear from you. And I appreciate everyone who writes it.

Melyssa
Beautiful. Thank you so much, Ramit. I appreciate you.

Transcribed by https://otter.ai