How much money do you need to “feel” rich?

00:00:00.000 | You don't need to be a millionaire to live a rich life, at least not according to my guest today,

00:00:04.860 | Ramit Sethi. In this episode, we'll go way beyond budgeting tips and tackle the deeper

00:00:09.260 | mindset shifts needed to spend with purpose. Whether it's flying business class, buying a

00:00:14.040 | sweater you love, or saying yes to a vacation without overthinking it, this conversation is

00:00:19.040 | about using your money to create joy. As Ramit says, just spending more money is not always the

00:00:24.720 | best option. Spending money meaningfully for your rich life is really what we're talking about here.

00:00:31.160 | So today we're going to lay out a tactical four-number framework, explain how to ditch frugality

00:00:35.780 | guilt, and show you how to start spending meaningfully. So whether you're in debt or you

00:00:39.960 | have money to spare, this conversation will help you design a life you actually want to live with

00:00:44.980 | intention. I'm Chris Hutchins. If you enjoy this episode, please share it with a friend or leave a

00:00:49.260 | comment or review. And if you want to keep upgrading your life, money, and travel, click follow or subscribe.

00:00:54.080 | Ramit, how much money do you think someone actually needs to start living a rich life?

00:00:59.400 | How much weight do you need to be able to push in order to be healthy? It's kind of a similar

00:01:04.240 | question. You can live a rich life if you have $150,000 of student loans. You can live a rich life

00:01:11.840 | if you have $25,000 of credit card debt. You can live a rich life if you make $40,000 a year

00:01:19.120 | or $450,000 a year. The income matters, of course. It's much easier to live a rich life if you're

00:01:26.940 | making a lot of money. But just having a number alone does not do it. I know a lot of millionaires,

00:01:37.180 | I speak to them on my podcast sometimes, and they are wracked with anxiety and guilt and worry. So it's

00:01:42.680 | not just a number. It's really about a worldview, a way of looking at the world and realizing money is

00:01:49.480 | supposed to be joyful, not just guilt inducing. So then I guess let's rephrase that. How would you

00:01:54.300 | define living a rich life? Well, a rich life can be picking your kids up from school every afternoon.

00:01:58.580 | It can be taking a six month vacation or traveling two months a year. It can be buying a beautiful sweater

00:02:06.940 | because you just love it. But your rich life is yours. So each person listening to this is probably

00:02:12.780 | going to have something very different. I'll just give you some specifics from my own rich life.

00:02:15.960 | Every time I eat out, I have created a rule for myself. I want to be able to order appetizers

00:02:21.040 | because as a kid, I couldn't, we couldn't afford it. And if I'm eating out with coworkers or something

00:02:26.560 | like that, I'm always saying, whatever you see on the menu, order it. Don't even think twice. You see

00:02:31.780 | three things you like, get them all because that was totally abundant to me as a kid. We never could

00:02:36.820 | do it. So that's like a smaller part of my rich life is like the 10 or $15 appetizer. And then

00:02:43.040 | there's the big stuff. It's being able to work with people I like and respect. It's flying business class

00:02:48.620 | on any flight over four hours. It's those kinds of things that are meaningful to me, which might be

00:02:54.340 | very different for somebody else. For someone who hasn't gone through any exercise to even think about

00:02:58.860 | that, how do you encourage them to figure out what their rich life would look like?

00:03:02.320 | I always like to ask people what they love to spend money on. I just love it because like,

00:03:06.760 | look at your face right now. Everybody lights up. They always have an immediate answer. The most common

00:03:12.260 | answer is travel. And that's what I call a money dial. It's something you can turn up or turn down.

00:03:18.040 | We have eating out or food is a big one. Mine happens to be convenience. I love to spend money on

00:03:25.360 | things that make my life convenient. And then there's a whole other list of money dials. So

00:03:30.740 | you can just see people's eyes light up. And then I ask them, what if you could quadruple your spending

00:03:36.260 | on it? People get kind of uncomfortable. They get stuck. They go, oh, I would eat out at Chipotle four

00:03:41.600 | times a week, blah, blah, blah. I go, are you sure you'd still eat at Chipotle? You wouldn't maybe invite

00:03:45.760 | somebody out and pay for their bill? And they're like, oh yeah, actually I would love to do that.

00:03:50.560 | So I start to show them how money can be multidimensional. It's not just doing more of

00:03:54.980 | the same thing. The whole point of this is to get people to realize that money is not something you

00:04:01.060 | just worry about. It's also not something that you try to minimize as much as possible. The hyper

00:04:07.640 | frugality world loves to look at cost only. How much does it cost? How much does it cost? That cost too

00:04:14.100 | much. I could get a 20% cheaper. I'm like, get a life. There's more to life than just saving money on $3

00:04:19.340 | expenses. There's also sometimes where you spend a lot of money because you just want to,

00:04:25.760 | because you want to create a magical experience for your kids, because you know that you're going

00:04:30.120 | to go to a restaurant where it's quiet enough that you can talk to your wife or your husband or your

00:04:34.500 | parents. And you know that there's not going to be people partying next to you doing tequila shots.

00:04:39.040 | There's so many different reasons to spend more money. And of course, sometimes there are reasons to

00:04:44.120 | spend less. Now, I imagine you're talking to a random couple, random person, and they're like,

00:04:48.960 | oh, great. That's what it would look like if I really spent all this money. But not everyone should

00:04:52.880 | just go and spend a lot more money. So how does someone start to implement that rich life without

00:04:58.760 | throwing their finances into shambles?

00:05:00.940 | It's an interesting question you ask because first of all, in the frugality world, there's this very

00:05:07.320 | pervasive concept of, I don't need to spend a lot of money on fancy stuff. I don't need fancy wine.

00:05:14.120 | I don't need fancy trips. I'm perfectly content here. And at the heart of that belief, which is

00:05:20.720 | almost always said in a sort of vaguely superior way, is fear. The fear that if I eat out at a nice

00:05:28.920 | restaurant once, that I'm going to trip and fall and eat there every single day for the rest of my

00:05:34.940 | life. That if I go on a nice trip once, that now I have to only stay at a Four Seasons resort every

00:05:39.880 | single time I travel. No, you don't. I trust myself enough to spend good money on say an anniversary

00:05:45.640 | dinner once a year. And then most of the time I'm eating normal stuff. So I want people to know that

00:05:52.760 | you can begin to trust yourself to spend extravagantly on a few key things and cut costs

00:05:59.440 | mercilessly elsewhere. How do you do it? You got to know your four numbers. You got to know your fixed

00:06:04.460 | costs, your savings rate, your investment rate, and your guilt-free spending number. Those four key numbers,

00:06:09.180 | you need to know them like the back of your hand. You don't need to know how much yams cost at the

00:06:12.920 | grocery store. It's a complete waste of time. You don't need to track every single entry you make in

00:06:17.720 | some thing, some app. You don't even need apps on your phone. That's a waste of time as well. I have

00:06:22.080 | no financial apps on my phone. It's a waste. I have four key numbers. I know them like the back of my

00:06:26.680 | hand, and I am always confident about those numbers. In other words, you need to focus on the big wins in

00:06:33.040 | life. And if you get those right, then the price of a Topo Chico does not affect you in any way.

00:06:39.500 | Okay. So fixed costs seems maybe the most straightforward. Is that fair? You could look

00:06:43.820 | at the things you spend money on, and they're probably big ticket things.

00:06:46.620 | I'll go through them quickly. So the first category, fixed costs, that number ideally should

00:06:50.540 | be 50 to 60% of your take-home pay. That's after tax. So in fixed costs would be your rent or mortgage,

00:06:57.440 | your utilities, groceries, car payment, debt payments, all the stuff you need to keep the

00:07:03.900 | lights on every month. The stuff that even if one of you got laid off, you would still pay it. Childcare.

00:07:09.080 | Those are all fixed costs. The next one is savings. This is like money for an emergency fund,

00:07:16.500 | or even a trip you're going to take two years from now. 5 to 10% is a good range. Obviously,

00:07:22.600 | the more the better. Great. Once you hit your emergency fund, you could probably cut that number

00:07:27.600 | down a bit. Investments. This is where the real wealth is created. 5 to 10% of take-home pay,

00:07:33.360 | although the more the better, and I really mean that. It's a little ironic that we spend our entire

00:07:37.760 | life trying to find a discount at Taco Bell. Meanwhile, we don't spend any time talking about

00:07:42.280 | this one number, which literally can be worth millions of dollars. Changing that number by

00:07:48.620 | 1% can be worth hundreds of thousands of dollars over your lifetime. So this category is really,

00:07:54.180 | really important. And then finally, guilt-free spending. This is like eating out, drinks, travel,

00:08:00.300 | nice bag, whatever you want. 20 to 35% of take-home pay. That's kind of a lot of money. When you think

00:08:07.260 | about it, you go, wait a second, I can spend 20 to 35% on clothes, eating out, hair, friends, all that.

00:08:13.680 | Yeah. If you have your other key numbers dialed in automatically, then you have a lot of money

00:08:20.300 | left over to actually spend on the things you love. So once it's like Tetris, you just got to make

00:08:25.820 | everything fit. However you want to do it. If you want to spend extra over here, but less over there,

00:08:30.460 | that's your rich life. You can do it.

00:08:32.980 | So I think probably where I kind of fell off the wagon was just dialed down the guilt-free spending

00:08:38.900 | and dialed up the investing, trying to save more for the future. I can't go back in time,

00:08:44.280 | but would your advice have been stop saving that much, save less?

00:08:48.380 | Wait, are you saying that you saved too much and you didn't spend enough?

00:08:53.060 | I would say that was probably the first 10 years out of college was certainly my MO and

00:08:59.100 | that shouldn't be surprising.

00:09:01.120 | I'm not surprised. How much of this pod, the rest of this podcast is going to be me making fun of you

00:09:05.860 | for being hyper frugal? Hopefully less than the last time we spoke. I feel like I'm getting better.

00:09:12.900 | I love it. I love it. Okay. Yes, there are some people like you who are what I call optimizers.

00:09:19.780 | The four money types, optimizers, one of them. And I actually was an optimizer too. Optimizers love

00:09:25.180 | spreadsheets. You know, we're always planning for like 40 years from now. We calculate all these

00:09:29.860 | different withdrawal rates and stuff. The problem with being an optimizer is that it can actually serve

00:09:34.220 | you really well. Like you, you over save, you set yourself up amazingly well, you've done great.

00:09:39.900 | And every day you look and you're like, oh, the number's going up. Like I'm so cool. Let me keep

00:09:43.700 | doing it. The problem is that if you take it to its logical extreme, optimizers become unbearably

00:09:48.720 | boring and unbearably cheap. Like they literally only live for the future. They look at cost, the price

00:09:55.400 | of a lunch, they go, oh, that taco, we could get it today. But if we actually take the money and invest

00:10:01.020 | it for the next 45 years, that $12 will actually turn into a $1,664. And they just end up doing nothing.

00:10:08.340 | They're unbearable to be around. So I like, I love optimizers because I get them. And it's kind of

00:10:14.160 | funny, but also it's not funny. I want them to realize there's a certain point where you won,

00:10:19.920 | you won the game. And you actually now, the point is not to look at another model or another fire

00:10:26.800 | subreddit. It's actually to have gratitude, give yourself a big pat on the back, celebrate,

00:10:32.420 | and then turn the page and start focusing on the next chapter, which often is learning the skill

00:10:39.820 | of spending money meaningfully. Do we get to talk about that today?

00:10:44.540 | Absolutely. Like you've done it. That's a skill I think I've, I have not mastered, but I've been an

00:10:51.300 | apprentice of for the last, I don't know, five years. And there are things that I used to spend a lot of

00:10:55.640 | time trying to dial in that I'm not. Can you just tell us so that we can laugh for a few?

00:11:00.400 | I really like dram. It's like an, it's like your Topo Chico example. It's like an expensive

00:11:04.960 | sparkling water. Yes. The Kirkland water is cheaper, but like, I just really like it and it tastes better.

00:11:09.160 | And if I go and spend $300 ordering a bunch of cans that last months, I don't care. Like,

00:11:14.760 | and that's a small example that I'm sure you'll make fun of, but I think old me would be like,

00:11:20.380 | why would I spend this much? Like there's an alternative that's cheaper. And I don't think

00:11:25.420 | like that as much on many things. I actually love that example. Um, it is a little ironic that you're

00:11:32.160 | drinking that expensive sparkling water and I have tap water in front of me. That's quite funny. Okay.

00:11:37.280 | Well, that's, that's well done. I think we should talk about how to build that skill.

00:11:41.700 | Also remembering you don't have to be a multimillionaire to build the skill of spending

00:11:47.180 | money meaningfully. Okay. I certainly didn't grow up as one. And you know, my parents are both

00:11:51.860 | immigrants from India, big family, dad worked, mom stayed home with us. We ate out very rarely.

00:11:57.320 | Our trips, we, I don't think we've ever been on a plane, all of us together. We just couldn't

00:12:02.820 | afford it. But we also learned about spending money meaningfully in a way that was relevant for us. Us

00:12:08.600 | going to like, you know, six of us to a movie, never going to happen too much money. However, if it was

00:12:16.640 | some type of sports thing for, you know, club event or whatever for our school, there was money for

00:12:22.000 | that. If it was buying a book because we needed it for school, there was money for that. And I think

00:12:25.840 | that really taught me that you can sharpen the edge on what's important for you. You can actually be

00:12:29.800 | incredibly resourceful if you need money or you want to spend money on certain things.

00:12:34.900 | But then for other things, like I think about all the things we did not do as a kid for financial

00:12:40.500 | reasons. And it actually taught me a lot. I remember walking past restaurants that our family would

00:12:46.840 | never go into. They were simply too expensive. I was not resentful. I was like, you know what,

00:12:52.180 | that's that's not for us. But one day I'll be able to go in there and eat whatever I want. And I am

00:12:56.500 | today. And I feel incredibly grateful. So I think that part of it is like, if you achieve this,

00:13:03.240 | if you save, if you're fortunate enough to have a good job and work hard and you accumulate,

00:13:07.160 | what's it all for? You better learn how to spend that money meaningfully. Otherwise,

00:13:12.300 | it just accumulates. And then what's the point of it all?

00:13:15.420 | Yeah, I think the conversation I had with Bill Perkins wrote Die With Zero really reframed a lot of

00:13:20.340 | things, thinking more about seasons, thinking about when is the time to spend your wealth?

00:13:25.140 | Because a lot of people are like, I'm going to save for this future thing. But I started realizing,

00:13:30.660 | well, maybe the best time to spend the money for the future thing is now. This is probably not the

00:13:35.580 | best advice for how to learn to spend money. But when you have children, somehow it just becomes easy

00:13:41.100 | to spend money on things that seem wildly expensive before. I think it's like a parental instinct where

00:13:46.300 | you're like, well, do I want my kid to be safer in the swimming pool? So private swim lessons sounds

00:13:50.520 | like a really good idea. That would have seemed crazy before, but it's like, oh, the best thing

00:13:56.920 | for the kids. Like, we got to do that. And that's helped. Like, let's allocate more money to this.

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00:16:24.660 | missed customers. So I've learned a little bit of that skill to spend more, but you've said you were an

00:16:30.740 | optimizer. You've jumped way past that. What are some of the things that made it easy to not fall back into

00:16:36.980 | that habit, right? Sometimes I still see things that I know this is a little cheaper over there. Like I still

00:16:43.300 | want the deal. Even if I know it's not that meaningful to my financial picture, it's hard to break that

00:16:48.500 | habit. I have a few ways that have helped me reframe looking at cost alone. Some of them were

00:16:55.220 | these pivotal moments that happened to me. Right when I graduated from college, I wanted to dress

00:16:59.940 | better. And I asked one of my friends who dressed very well, if she could go shopping with me and help

00:17:05.780 | me understand how to do this. So she went shopping with me and I started picking out clothes and then

00:17:11.860 | she started getting really excited. She's like, Oh my God, that looks so awesome. And she was getting

00:17:16.100 | enthusiastic. So I was getting enthusiastic. That was the first lesson learned is when it comes to

00:17:21.620 | spending money, it's actually okay to get enthusiastic. Most of us actually approach money as if spending

00:17:28.740 | money is losing. I don't lose when I spend money. I win. I trust myself. I know I'm not tripping and

00:17:34.980 | falling and getting tricked by some salesperson. If I buy something, whether it's a shirt or a car,

00:17:41.620 | I did it with my eyes wide open. And so I get excited. We have to reframe the entire way we

00:17:46.500 | think about spending money. It's not painful. It's actually joyful. The second thing is I started

00:17:50.740 | looking at the prices. She goes, put that away. I said, what? Because in my family, we look at the

00:17:55.620 | price first. She goes, first decide if you love it, then go try it on. And then we'll look at the price.

00:18:02.180 | It blew my mind. And I realized leading with cost makes you lead with cost.

00:18:09.300 | Leading with experience or joy or delight or just I like to wear the pair of pants looks that changes

00:18:16.180 | your entire dynamic. So it's basically putting a guardrail around yourself that says maybe I shouldn't

00:18:20.980 | be looking at price first. And that applies to restaurants. It applies to flights. It applies

00:18:26.340 | to anything. Same thing with vacations. It's kind of startling to me how, when I ask people like,

00:18:31.540 | how do you plan a trip? It's quite remarkable. Everybody says the same number. They don't even

00:18:35.140 | have a budget. They have no number for it. It's the same number they use when they were 22 years old.

00:18:38.900 | It's $5,000. It doesn't matter if they have three kids. It doesn't matter if they are single. It doesn't

00:18:43.300 | matter if they're going international or going to Texas. It's always the same number. That really shows

00:18:47.140 | you that people don't really actually think about money in the way you think that they're not rational.

00:18:52.260 | They just pick a number that they used to use 20 years ago. And so what they'll do is they'll go to

00:18:56.260 | look at different hotels and this is how they pick it. They'll be like, that's the most expensive one.

00:19:00.260 | We're obviously not going to go there. That one's cheap. I don't know if we want to stay there.

00:19:02.980 | Let's go to something in the middle, maybe a little bit better than just the middle. That's how they pick it.

00:19:06.740 | And I'm like, what is happening right now? You take one vacation a year and this is how you plan

00:19:11.780 | the experience. A different way to do it is to think of it almost like a wedding. What is the experience we want?

00:19:18.020 | When we land, what do we want to have happen? Do we want to take the bus? Do we want to take a train?

00:19:24.100 | Do we have somebody waiting with a placard for us? Let's just put it down. We're not even going to look

00:19:28.100 | at cost right now. It's the same as I didn't look at pants when I was 22 years old. When we travel,

00:19:32.260 | we're going to go for how long? Eight days? Are we out and about every single day? Are we going to take

00:19:35.780 | one day that's just in the hotel? Oh, I would have never dreamed of doing that when I was a kid,

00:19:41.380 | because we only have a limited amount of time. We better go. We don't want to waste it. But we're

00:19:46.660 | not wasting. We're reframing it. Maybe we're recharging. And then finally, after we've crafted

00:19:51.540 | this entire experience, then we start to look at cost. Ooh, we're a bit over how much we put aside.

00:19:57.700 | Let's cut that one excursion or maybe we can stay for one day fewer or a cheaper hotel, etc. In other words,

00:20:05.860 | I would rather you start with the experience you want to create rather than a dollar value. It

00:20:10.820 | totally flips the entire calculus on its head. It's interesting. As you were saying this example,

00:20:16.020 | I was thinking about how some purchases are really easy. Like if I go to a restaurant,

00:20:21.060 | I don't have to think, "Oh, you know, there's four entrees. Why would I buy the $40 one instead of the

00:20:27.220 | $20 one?" Whatever it is. That doesn't seem to have an impact on me at all. And I think part of the

00:20:32.740 | reason is it's very hard to compare. And you didn't say this strategy, but I pulled it out,

00:20:38.260 | which is trying to just highlight the difference between two things. So if I'm at a grocery store

00:20:43.620 | and I'm like trying to buy something, I'm like, "Gosh, I know this thing is a lot cheaper somewhere

00:20:47.140 | else." And I'm using a small example because it's probably both relatable to some people and something

00:20:52.660 | that still gets me at times. It's like, "Well, this thing is not just more expensive, but it's here.

00:20:58.740 | It's in front of me now. It's not a drive away. It's convenient. I've already got things in my bag

00:21:03.380 | and just trying to process all the things that are kind of like bonuses you get, even if it's more

00:21:08.180 | expensive." Now, I know that's probably a little cost first, but it's looking at a thing and thinking

00:21:12.100 | about everything around it actually might help me a little bit in some of these scenarios.

00:21:17.060 | But we've recently gotten better on vacations and taken, "Okay, well, we really want to go to this

00:21:23.220 | thing. We want to have this experience. And the only way to have it is at the Four Seasons. So

00:21:27.540 | we're just going to pay for it." Let's go through this because I want to understand it. First, can you

00:21:31.460 | just describe what you used to do? And then let's talk about what you do now. I'm curious.

00:21:35.860 | We used to go say, "Okay, well, what kind of a trip do we want?" And I think we would start with the high

00:21:40.420 | level of, "We want to go to a beach." And then it might be, "Okay, is there a place that we can go

00:21:46.500 | using points to make the trip a decent amount lower that would meet those criteria? Is there

00:21:52.180 | something that matches it?" And hopefully there is. In this particular case, it was, "Gosh, I want this

00:21:58.820 | trip." And for anyone who doesn't know the Four Seasons, there's no points option. There's no special

00:22:04.020 | deal. Like there might be some promotions. And I did an episode about why I actually thought it wasn't as

00:22:08.740 | expensive as I thought, but I only found that out after the fact. And we were like, "This is just a thing

00:22:13.220 | we're going to make happen. We're going to spend what it takes to do this trip that we want."

00:22:17.300 | Because we decided that that's the thing we wanted to do. Now, would we have been able to do it if it

00:22:21.940 | were five times as expensive? Probably not. But it was certainly two or three times the price of other

00:22:28.500 | hotels in Hawaii. I know you're not a big budgeting fan, but one of the things that really helped, and in

00:22:35.140 | a way it's kind of the same as the four numbers you have, is I know that currently our income allows us to

00:22:42.900 | save enough money that we are saving enough. I probably don't know the numbers as well as you

00:22:47.780 | do. I know my spending amount and I know my take home amount and my saving amount. I haven't really

00:22:52.500 | thought about the rest, but I just knew that if we spent this money, it's not going to derail anything.

00:22:56.740 | We've done a pretty good job of running through. Here's where we spend money. If we were going to

00:23:00.900 | spend a little more, where would we want to spend it? And in this case, that was how we wanted to do it.

00:23:05.380 | And it wasn't hard. Like it was weird that it was easier to spend thousands of dollars more on a vacation

00:23:11.460 | than we normally would. Yet it's probably still difficult to spend

00:23:15.700 | 40 extra dollars to rent an SUV on a trip we're taking right now. Like I'm actually booking a rental

00:23:22.020 | car. And for some reason that I can't explain, I'm like, "God, do I really want to spend the $40 to have

00:23:27.860 | the four-wheel drive car?" We're going to Costa Rica during the rainy season. Like it seems like a smart

00:23:32.820 | decision. But that decision is actually harder for me than spending thousands of dollars on a vacation. I think

00:23:39.220 | part of it is it's one of those things that usually doesn't always matter. It's like insurance. The

00:23:45.460 | other day I bought insurance to ship a package and then guess what? The package got there. You could

00:23:49.140 | say it was a waste of money, but I had the peace of mind going into it. In this case, I'm like, "Do we

00:23:53.380 | really need that?" It's like every time we go visit family in Colorado, it's like, "Well, we probably should

00:23:57.540 | get the four-wheel drive car and 99% of the time it's not snowing and icing and we didn't need it."

00:24:02.100 | I mean, there's a lot of things we don't need. I think that when I talk to people who are optimizers,

00:24:08.900 | reformed optimizers, there's always a sense of control that's trying to be exerted. And I think

00:24:13.940 | that sometimes we can find more control in playing small than in playing big. So for example, I spoke to

00:24:22.020 | a couple on my podcast. They were in severe debt. They presented it as having $313,000 of debt. I ran

00:24:29.380 | their numbers. They actually have $350,000, $3,000 of debt. So they were under by like 40 grand. They

00:24:33.940 | didn't even know. And she spends three hours a day. That's not an exaggeration. Three hours a day

00:24:40.740 | on a spreadsheet looking through their numbers. And I looked at the spreadsheet and it was incredibly

00:24:46.180 | confusing. All red. Everything was red and just depressing to look at. I said, "Do you like this?"

00:24:53.220 | She goes, "No, I don't like it." Well, she spent her time there every day, over 20 hours a week,

00:24:59.540 | because it gives her a sense of control. Once in a while, I find myself looking for a purchase,

00:25:03.940 | like a $20 item on Amazon. And I've got five tabs open. I'm reading the freaking Wirecutter reviews.

00:25:09.380 | And I'm like, "Oh my God, I got pulled into this." A couple of reasons. One, the world makes it easy for

00:25:15.300 | us to cross compare information. But two, if you're an optimizer, if you're especially good

00:25:20.820 | at crunching numbers and comparing things, you're just drawn to that. The solution is not to beat

00:25:27.540 | yourself up. It's actually just to create a rule. That's it. It's just to say a worry-free number.

00:25:32.740 | And you say in your family, "Any number below this, we're just not going to worry about it. I'm just going

00:25:38.180 | to buy the best, or I'm going to buy the middle." Whatever the rule is for you. For a lot of people,

00:25:42.500 | the easiest place to start is just $20. Anything below $20, we're just not going to worry about it.

00:25:48.500 | Okay? And it could be, "Should we get this thing of fruit? Should we get this? Should we get that?"

00:25:52.580 | 20 bucks, not going to think twice, going to get it. Now, the first question people come back to me with

00:25:57.460 | is, "Oh, Ramit, so you're saying I can spend 20 bucks 10 times a day, times 30? It's going to bankrupt

00:26:02.420 | us." Funny, again, that that's what people immediately jump to, as if they're going to go from frugalistas to

00:26:08.820 | suddenly spending $6,000 a month on fruit. It's never going to happen. What they really are saying

00:26:14.740 | is, "I don't trust myself to give myself that freedom of a $20 worry-free number." Trust me,

00:26:21.940 | if you spend too much, you would catch it, and you would dial it back. We're going to do a worry-free

00:26:27.540 | number. We're going to feel good about money. You might have your own core values in your family,

00:26:31.540 | like personal safety. That's number one for my family. And for a lot of parents, I think that's a

00:26:36.900 | great value. That means if we're booking two hotels, and one looks to be safer, and the other's in

00:26:40.820 | maybe a dangerous part of the state, we're not going to do that. If we're booking a certain car,

00:26:44.260 | and one is safer because there's muddy roads, we're going to get the thing, and that's it. And if it means

00:26:48.900 | that we have to stay one last day, that's what we're going to do, because that's our core value:

00:26:53.300 | family safety first, right? These are kinds of ways that you can actually become more fluid about it,

00:26:58.580 | versus finding yourself cost comparing on $20 or $40. I don't know if you would consider this a

00:27:04.020 | healthy habit or not, but we had a challenge that every time we looked at flights, and almost everyone

00:27:09.460 | probably can sympathize with this, the inconvenient flight is so cheap. It's like, "Oh, do you want to

00:27:15.460 | go to the airport at 5 a.m. and change planes in Dallas?" And it's like, "No, I want to fly direct,

00:27:20.660 | and I want to do it at 10 a.m." So I just filter it out. I am not convinced I have the perfect control

00:27:26.340 | where I'm like, "Wow, it's $400 cheaper to do this thing. Maybe I start to second guess." But I find

00:27:31.540 | that if I just remove it from the search results, like I set the filters on Google Flights to not even

00:27:36.900 | show it, I could basically lock the rule in the software. It's different if you're 21 years old and

00:27:42.580 | you have less money and more time, then you should be looking at those flights. Those are the flights I took,

00:27:48.500 | the cheap ones. I've done it where it was the train, the bus, you know? Yeah, I totally agree. We took the cheapest

00:27:54.740 | stuff when we were backpacking in Europe. I love that stuff. But as I got older and as I had more

00:28:00.100 | money, I turned the page. And I think this is so important for people to realize. I'm not talking

00:28:04.820 | about everyone going and spending $20 million on this and that. I'm saying look at the stage of life you

00:28:09.940 | are at and spend your money accordingly. If I'm 21 and I'm going backpacking in Europe with my high

00:28:15.460 | school buddies, then I don't have a lot of money. I don't even mind carrying a big backpack around and

00:28:21.380 | walking around. I don't mind. I actually love it. And I'm going to do that. I'm not even going to feel

00:28:25.860 | guilty about not being able to stay in the fancy thing. But now, 20 plus years later, if I have more

00:28:32.420 | money and I'm with my wife and I want to have a beautiful time and maybe I'm into hotels and this and

00:28:37.380 | that, then I'm going to spend money differently. And I'm actually going to appreciate it. I want to

00:28:42.660 | share this thing. I went to the train station in Paris. And it was either Paris or Rome. I had gone

00:28:48.820 | there backpacking. And I remember exactly what it looked like. In fact, I remember reading from a

00:28:53.220 | guidebook because we were actually we got there at like two or three a.m. We're just going to sleep

00:28:56.660 | there because we're like, ah, let's save some money. And we opened up our guidebook back then used to

00:29:00.100 | have guidebooks. And it was like, whatever you do, do not sleep in the Paris train station. You will

00:29:04.420 | definitely get robbed. I was like, oh man. So we went to find some cheap hotel, whatever.

00:29:09.220 | 20 years later, I go back with my wife. We had a beautiful time. We came back to that very same

00:29:14.820 | train station. And this time we were taking the train and I guess we had like business class seats. So we

00:29:20.420 | went up to the second floor and there's some like informal lounge or something. I didn't even know that

00:29:25.700 | existed until just now. Because when I was a kid, how would I have? I didn't even know to look up.

00:29:31.620 | And I remember as we went upstairs to the elevator and I was like, oh my God, this is such a powerful

00:29:36.900 | moment for me because I'm sitting there looking at the exact view I had when I was there with my high

00:29:42.100 | school buddies backpacking and we had the time of our lives. And now I'm here with my wife having the time

00:29:47.060 | of our life, but differently. We are in a lounge. It's nice. And I feel so grateful to be able to spend,

00:29:54.500 | I don't know, 30 bucks more on a train ticket or whatever it costs and that I got to do that the

00:29:59.220 | way I did then. So what I want everybody to know is just spending more money is not always the best

00:30:05.060 | option. Spending money meaningfully for your rich life is really what we're talking about here.

00:30:11.620 | And sometimes it can be cheap and sometimes it can be lavish, but I want you to be able to toggle

00:30:18.020 | between all of those without feeling guilty and stricken. When do you start thinking about income?

00:30:24.020 | Because you talked about the four things you keep track of. And I know that you often talk about

00:30:27.780 | spending as playing defense, but is there a stage where it might actually be more advantageous to just

00:30:32.820 | focus on earning money and focus less on where you're spending?

00:30:36.420 | Yes. Keep in mind that all those four numbers are a percentage of your income. So if you have more

00:30:42.500 | income, you're going to have a lot more to play with in those four key numbers, 50 to 60%, etc.

00:30:47.860 | Yes. I think this is overlooked a lot by the personal finance world. It's easy to obsess over cutting costs

00:30:54.500 | on freaking bread. But at a certain point, there's a limit to how much you can cut and no limit to how

00:30:59.140 | much you can earn. I have found increasing my earnings to have been one of the most powerful levers in

00:31:04.420 | my entire financial system. So there's a few ways of thinking about it. One, if you have a job,

00:31:08.500 | learning the skill of raising your salary. That is a skill. That skill can be negotiating your salary.

00:31:17.540 | And I have all kinds of scripts on exactly what to say to your boss, when, what to write in the email,

00:31:22.340 | what to say in the negotiation. Also, if you can't negotiate your salary, switching jobs, learning how

00:31:27.860 | to switch jobs and actually increase your salary. This isn't pipe dream stuff. I feature people who got

00:31:33.300 | $5,000, $10,000, $25,000 raises. This happens all the time at companies all around the country.

00:31:40.020 | So it's really important for you to understand how this works and to be able to build that skill.

00:31:44.580 | Then of course, they're starting a side business. We talk about that in my earnable program all the time.

00:31:48.820 | Take the idea you already have. I know people who are professional dog walkers,

00:31:52.900 | who teach kids how to paint, teach a second language, are Excel analysts. There's all kinds of stuff.

00:31:59.620 | Taking that thing you're already good at, being a personal stylist, and turning it into a business

00:32:04.580 | where you can make $1,000 a month, $2,000 a month. At a certain point, you may even decide to go full time on that.

00:32:11.620 | That becomes incredibly powerful.

00:32:14.340 | Yeah. I think one of the things I learned is to try to divert that optimization energy

00:32:20.340 | on bigger and different problems. So it's like, look, I don't have to just worry about how do I get

00:32:25.620 | a deal on this, but maybe I'm going to try to divert it to, we're going to buy a car.

00:32:30.580 | What's the most optimal way to do that where it's a much bigger purchase than a dinner or some

00:32:35.540 | groceries or a house. And so I think in the first interview we did, you talked about solving the

00:32:41.860 | 30,000 foot view or problem or- Focus on the $30,000 questions,

00:32:46.180 | not the $3 questions. Let me give you an example. $3 questions is optimizing the price of pomegranate.

00:32:50.660 | Who cares? $30,000 questions are things like, what's the exact month and year my debt's going to be paid

00:32:57.700 | off. Can I add 1% every December to my investment contribution rate? So instead of 5% next year,

00:33:04.980 | it's 6% then 7%. What is my asset allocation? Is that properly set up? Am I paying too much in

00:33:12.100 | investment fees? That matters a lot. These are 30,000, sometimes even $300,000 questions.

00:33:18.020 | So I would rather we take that energy exactly as you said, I think it's really smart and focus it on

00:33:22.820 | these big wins. Because if you do that, then you don't have to worry about, you know,

00:33:26.500 | how much your grand slam breakfast costs at Denny's. It's irrelevant.

00:33:29.620 | I've been fortunate to learn that if you have that joy of optimization, you can find other areas to

00:33:35.460 | tackle it and not like you mentioned, sometimes it's fun, right? Sometimes you get caught trying to save

00:33:39.780 | money on Amazon. If you can find a place to channel it, that's better. Or if it really is fun, right?

00:33:46.980 | If you're trying to buy something on Amazon for $20, and you're not saving the money because you're

00:33:50.980 | necessarily trying to save $3, but because you just want to get that itch of just playing the

00:33:55.140 | game of trying to find the right deal. And I assume that's just okay. Like it's okay to spend

00:33:59.780 | your time in the way you want. No, no, no, no. See, it's one thing if you do it because you have to,

00:34:06.020 | okay? If you really have a very limited income, maybe you have a big family, you have to,

00:34:11.540 | you're sitting there freaking looking at which place has the specials for tomatoes. Okay, great. When I ask

00:34:16.980 | people, what is their rich life? I have never, ever gotten someone saying, I want to sit around all

00:34:24.180 | week and optimize the price of printer paper. Not once, ever. And yet they spend literally hours per

00:34:31.700 | week doing it. When I ask them, what is your rich life? They will always say things like spending more

00:34:36.900 | time with my family, traveling, new experiences, just going out with my partner and going out for a date

00:34:41.620 | night, those kinds of things. Okay. One of the, I think core principles here is to really get honest

00:34:47.860 | about what your rich life is. Your rich life does not have to be what mine is. In fact, it never will

00:34:51.940 | be. Ours are going to be completely different. That's how it should be. But then once you know what

00:34:55.700 | your rich life is in crystal clear clarity, you ask yourself the questions, get your partner involved.

00:35:00.420 | Then you look at what you're actually spending your time and money on. You go, wait a second. Am I

00:35:06.420 | actually aligned with what my vision is? You know, we claim we want to travel, but the last time we

00:35:12.100 | traveled was like six years ago. What's going on here? We claim we want to be more in touch with our

00:35:17.700 | family, but when was the last time we actually spent money and time seeing them? So I get the urge to want

00:35:25.460 | to optimize and to look at, you know, it's fun. I get that. But I find it once you get past needing to

00:35:32.820 | do it. I find that almost every single person is doing it because that is what they've always done.

00:35:39.060 | That is what they know. And they have never dreamed bigger than that. And I simply will not watch people

00:35:47.060 | play small for their entire life. It's just not going to happen in the, I will teach you to be rich

00:35:50.980 | world. So you asked me, is it okay? I love it. Can I do what? No, you can't play bigger, turn the page,

00:35:57.060 | turn the chapter to the next meaningful part of your life and start spending and saving money in a way that

00:36:01.460 | is meaningful to you. Okay. This episode is brought to you by Notion. Now I'm always juggling everything

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00:37:13.860 | easy to use Notion AI today. And when you use our link, you're supporting the show,

00:37:18.820 | notion.com/allthehacks, or find the link in the description. This episode is brought to you by

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00:38:22.100 | shipping on your order and 365 day returns. Let's move on to something bigger, which is some big financial

00:38:39.060 | decisions. I think sometimes the big decisions matter, right? Here's an example that I'll throw

00:38:45.300 | out. And I want to kind of hear your perspective on it. Someone's thinking, "I want to decide if we

00:38:50.420 | can take this trip," right? We listened to Ramit. We thought about this rich life. We said we want to

00:38:54.820 | travel. We're not. But we thought about how much of a safety net or emergency fund we want. And I think

00:39:00.180 | we're behind. How can we decide whether we take that trip now or we need to prioritize these other things?

00:39:05.940 | Great question. This is the type of questions I wish people asked more of. "Hey, we actually decided we

00:39:12.260 | want to do this, but like, can we afford it? How do we know if it fits?" These are great questions. So,

00:39:16.740 | you know, there's some simple guidelines that I will give, and then we'll get into a bit of the nuance.

00:39:21.140 | If you have high interest debt like credit card debt, you're not taking a vacation. It just makes

00:39:26.420 | no sense at all. Bar none. End of story. Boom. 26.99%. And I have people putting aside, you know,

00:39:34.020 | 500 bucks a month for a vacation fund. I go, "Not in my world. I move that money right to their credit

00:39:38.740 | card debt. Pay that freaking thing off." And then we start to say things like, "Hey, we want a six-month

00:39:46.100 | emergency fund. We currently have four months. Should we fill that up before we go on vacation or should we

00:39:55.140 | go on vacation?" Now, this is where I think you can apply your own decision-making skills. Personally,

00:40:01.540 | if you have four months and you can afford to wait like six months, fill up your emergency fund, wait,

00:40:06.260 | then go. On the other hand, I recently saw a post just a couple of days ago. Somebody said,

00:40:10.420 | "My mom had cancer and she did a family vacation to Hawaii. We decided it wouldn't have blown our budget.

00:40:21.860 | It would have stretched us a little. We decided not to do it." And it was the last trip she ever took. And

00:40:26.020 | this person said it was a huge mistake. And we realized like we have been over focusing on money.

00:40:32.740 | To me, that is putting dollars in front of love. And this person said it themselves. They were not going

00:40:40.500 | to break the bank. They simply were playing a game that was playing too small. They were living in the

00:40:45.700 | spreadsheet. So that to me is an obvious, "No, don't do that." That is how I start to think about it.

00:40:51.540 | Then to get into some of the nuances, you want to make sure that, "Hey, do we have money set aside for

00:40:56.340 | this vacation? Or is it going to go on a credit card?" That determines it. Are we hitting all the

00:40:59.860 | rest of our numbers? If we're not, like if we don't have savings, if we don't have investments going

00:41:03.940 | automatically every single month, we're not going on vacation because we need to set that up first.

00:41:08.740 | That's just the way you think about it. It's less like lick your finger and put it up to the wind

00:41:14.420 | and decide like, "Oh, should we go on vacation?" No, it's actually quite methodical. And you can make

00:41:20.340 | decisions. It's not restrictive because all the systems that I have in I Will Teach You Be Rich,

00:41:25.860 | they're all set up for you to live a rich life. You want to go on vacation or you want to go out for

00:41:29.700 | drinks or you want to get food delivered three times a week? It doesn't matter to me. It's your money.

00:41:33.940 | You just have to know four key numbers. And as long as you fit in those numbers,

00:41:38.340 | you're good to go. I noticed the fixed cost number is relative to your income.

00:41:43.620 | Yeah. I feel like there's this counter story, which is as you raise your income,

00:41:47.860 | you don't need to necessarily increase your cost of living and have lifestyle creep go all the way up.

00:41:52.580 | On the fixed side, it sounds like maybe you should. I don't believe in lifestyle creep.

00:41:57.460 | Lifestyle creep is this idea that I'm going to make more money and I'm just going to blindly spend it

00:42:03.220 | on whatever comes in front of me. And I will grant that a lot of people do that.

00:42:07.060 | When I say I don't believe in lifestyle creep, I don't believe in it for me and for my readers.

00:42:12.100 | Because when I go and buy something really expensive, I'm not creeping anything.

00:42:15.540 | I'm not lifestyle creeping anything. I am running my numbers. I am always leaving a fat buffer

00:42:21.700 | because I don't ever want to get close to the red line. And I'm going to buy it. If I make more money,

00:42:28.180 | of course, I'm going to spend more money. That's the point. The point is not to save this money like

00:42:33.460 | freaking Scrooge McDuck. No, I'm actually going to be methodical. I even have a number for every bit of

00:42:41.300 | unexpected income that comes in. My wife and I have a plan. This percentage goes to investments. This

00:42:46.900 | percentage goes to travel. This percentage goes to permanent lifestyle increases, like going out for an

00:42:52.980 | extra date night, something like that. So again, it's planful. It's thoughtful. But you better believe

00:42:59.860 | if I work hard and if I make more money, my life is going to get better. That's the point.

00:43:05.460 | I love it. Okay. In the example, you talked about the family that didn't take the vacation.

00:43:09.780 | It kind of hit on the fact that sometimes money decisions aren't rational. They're not financial.

00:43:16.260 | They're emotional. Yes. So I want to come back to this decision that I got your advice on a few months

00:43:22.020 | ago. So we had bought this eighth of a vacation home and it was up in Napa. We'd gotten some great use

00:43:29.540 | out of it. And we found with our kids schedules, which for anyone who has young children that aren't yet in

00:43:34.500 | school, don't make the naive mistake I did, which was not realizing that your entire life will revolve

00:43:40.260 | around a school calendar as soon as they are in school. And so we had an eighth of a home. It was

00:43:44.420 | awesome. I'm so glad we bought it. Then we had six weeks a year that we had to spread over a school

00:43:50.100 | schedule and it meant we were going to take every vacation up there. But the fractional real estate

00:43:54.900 | market in Napa wasn't great. And we got an offer that was so-so and we were trying to figure out what to do.

00:44:00.580 | And I called you and I said, "How should we be thinking about this? Because it's not a slam dunk

00:44:05.220 | to sell. We're going to lose some money, but we're not necessarily getting the value out of it." Maybe

00:44:10.020 | share a little bit about the advice you gave me and then we could talk about what happened and how I'm

00:44:14.740 | feeling now. Okay. I'm very curious to hear what happened, but can you actually share what you heard

00:44:20.260 | me tell you? What was your experience? What'd you end up doing?

00:44:23.220 | Okay. So I did say, you know, I was worried like once you've bought this house, you kind of have

00:44:27.460 | this fixed cost. You're committed to it. Would we be able to spend that same amount on a vacation if

00:44:32.660 | we had to think about it every single time? And you said, "Don't keep an investment that you don't

00:44:38.660 | think is a great investment because you have an unhealthy relationship with spending money."

00:44:43.540 | That was the takeaway. And I remember I called my wife right after and she was like,

00:44:46.740 | "Oh, what did Ramit say?" And I said, "If you have trouble spending money on vacation and you have

00:44:50.900 | the money, you need to fix that. And don't keep a house you don't want because you can't fix this

00:44:56.740 | obvious problem." And at that moment we were like, "Yeah, that is true. We shouldn't keep doing that."

00:45:03.060 | And the other advice, and maybe you weren't the one that gave me this piece that I talked to friends,

00:45:06.740 | is they said, "Hey, every time you talk about this house, you're like, well, we're trying to sell it.

00:45:11.540 | You're never calling me to tell me how amazing the house is and how awesome it is.

00:45:15.700 | You're calling about some problem." That's every American homeowner. All they do is complain about

00:45:19.220 | their godforsaken houses. That doesn't sound fun, my friend. Anyway, yes, I agree.

00:45:23.860 | And so we did. We negotiated a little bit of the offer, right? I think everyone should negotiate as

00:45:28.740 | much as you can. And we sold it. You sold it. I love this.

00:45:32.900 | I love it for so many reasons. I love that you were decisive. That's amazing. You and Amy, like kudos.

00:45:38.500 | That's awesome. I love that you recognize like not every financial decision results in profit,

00:45:44.820 | not even investment decision, and that's okay. And I love that now you have the flexibility to not look

00:45:52.180 | backwards, but to actually look forward. I'm curious, what are you going to do now that you have

00:45:57.140 | more flexibility? Well, it was funny because this summer and next summer, one of the things that's

00:46:01.860 | not great about owning a fractional piece of a home is we had to kind of schedule it out.

00:46:06.100 | So we were like, well, we have this week in August. We had next summer booked out. And now we were like,

00:46:10.900 | oh, what should we do in August? Like we could do whatever we want. We are not constrained by

00:46:16.340 | anything in terms of where we go and what we do and what the schedule is. We don't really want to

00:46:21.620 | go on a big long trip because our daughter's having this surgery. And so we just found a place down in

00:46:27.620 | Carmel and we're like, we're just going to book a trip there. We're going to go do the things that

00:46:31.300 | we want to do and not be constrained by this house. The other thing that I think is really hard for a

00:46:37.620 | lot of people to process, especially when it comes to owning stock in a company or owning property,

00:46:43.780 | things that have value that you resell that I think this wasn't my problem, but I know a lot of

00:46:48.980 | people that have it is, oh, well, the house is down. We're going to lose money. And maybe in

00:46:52.740 | the future, it'll go up. My argument is like, there were two separate decisions we were making.

00:46:57.860 | One was, do we want to sell this house? And it has a market value, right? You could say you think it's

00:47:02.660 | worth more because you paid more, but it's only worth whatever someone else is going to pay you for it.

00:47:06.900 | And so holding onto the house so it appreciates is the same as buying another. Like if I think it's really

00:47:12.500 | going to appreciate, I should buy out all the other owners and own the whole thing. And then the other was,

00:47:16.580 | we want to pay the monthly operating costs of the house, which we could choose. That was in our

00:47:21.140 | control, what the price of the house wasn't. And so I don't actually feel like we lost money on the

00:47:27.220 | house in that we bought it. It's worth less. We didn't sell it for a loss. We sold it for the market

00:47:34.100 | rate now. Like it didn't feel like we were losing money in the moment. It just felt like we lost money

00:47:39.220 | in the long run, but we didn't accept a bad offer. In fact, we accepted a great offer. We negotiated it up.

00:47:44.100 | We didn't really lose on the price because we got a market price and we'd waited a year for

00:47:48.900 | an offer. So it would be hard to imagine that waiting a year for someone to buy something.

00:47:52.980 | And you're like, well, I think it was worth more. No, it's probably worth about what it was paid for.

00:47:56.500 | So it feels great. It feels freeing. It seemed so obvious talking to you and a few other people that

00:48:04.980 | what we should do. And I actually use this advice with a friend today. He was like,

00:48:09.300 | someone made an offer to buy this company I've been building. And it wasn't a huge offer,

00:48:13.220 | but he'd been building for a long time. And he's like, how are you thinking about it? And I was like,

00:48:17.140 | every time you talk about this company, you're talking about trying to sell the company. Like,

00:48:20.820 | what is the holdup? You've been asking for this thing for years. Now it's here and you're wondering

00:48:24.740 | whether you want it, you know, you want it. And he was like, you're right. I do know. So it was so hard

00:48:31.140 | for me to know I wanted it and for Amy and I, but then when we talked to other people, they were like,

00:48:35.140 | we've heard you talk about this thing. You want to move on.

00:48:37.380 | - It's actually a profound point you make of people will talk about something for years. They

00:48:44.020 | will want something for years. They want it deep in their soul. And then when presented with the

00:48:50.660 | opportunity to get the very thing they have talked about, dreamed about, agonized about,

00:48:55.540 | they will become skeptical. I see it all the time. I have people in my community. They talk about starting

00:49:01.620 | a business. They've wanted to start a business for six years. They followed 13 people on social,

00:49:06.420 | three on newsletter, two on podcast. And they'll say, I don't have an idea. I don't have this.

00:49:11.460 | I don't, we have a program that does exactly that. And they'll get to the sales page has literally every

00:49:16.500 | single question they could ever conceivably come up with. And then suddenly they start going, will it

00:49:21.300 | do this? Will it help a left-handed person who lives south of the equator, but only between September

00:49:26.820 | and October? And what's really going on there, whether it was your friend, with you, with people who are

00:49:32.660 | facing a decision. Even with me, when I first started like trying to get fit, I had thought

00:49:39.220 | about it, talked about it, played around with weights. I didn't know what I was doing. Finally,

00:49:43.780 | when faced with the opportunity to actually get a personal trainer and learn how this worked,

00:49:47.380 | I started debating it. Oh, should I do this? Will it be hard? What about injuries? Blah, blah, blah.

00:49:51.780 | It's just a human thing that we do. I love your example because it shows us it happens to everybody.

00:49:57.060 | It happens at every stage. It happens with big decisions, small ones, all of the above. I actually

00:50:03.380 | think that's why one of the most crippling traits of somebody is to be indecisive. I see it all the time.

00:50:08.740 | And to be decisive is like a superpower. Decisive does not mean erratic. It doesn't mean you just do

00:50:16.580 | things on a whim, but decisive. You have the information you have, you know what you want,

00:50:20.980 | what your core values are, and then you make a decision. One out of 10 times you get it wrong,

00:50:24.340 | but decisive people can catch that, correct it, and then get back on track.

00:50:29.300 | And what do you think holds people back? I am not, in some areas I'm decisive and in some I'm

00:50:34.500 | horribly indecisive. What advice do you have for people who know they want to be decisive but aren't?

00:50:39.460 | Practice. It's a skill. I'll get on Zoom and I'll be like, "All right, I have a clipboard. Take me

00:50:44.420 | around your apartment or your house." When you're in your own house, you have all kinds of stuff that's

00:50:48.340 | broken or there's a smudge or something. You just learn to live with it. All the light bulb is out.

00:50:53.060 | And go, "What are the things that annoy you?" Walk around with a clipboard and tell me what annoys you

00:50:57.620 | right now. And it's like, "Ah, there's freaking kids Legos all over the place. They're always throwing

00:51:02.260 | it here. I stub my foot every day I come home from work." You're okay. Let's pick three things you're going to do

00:51:07.860 | in the next 24 hours to make these problems vanish. And you'll discover going from problem orientation,

00:51:14.820 | where you constantly talking about problems, sharing problems, commiserating on problems versus

00:51:20.260 | solution oriented. Hey, you have to fix it. And then you really put a time constraint, 24 hours and it's

00:51:26.180 | going to be fixed. Suddenly it's like, "Oh, I don't have time to, you know, compare five different storage

00:51:31.620 | containers because I need one here in the next two hours. I need to go to the store right now and get one."

00:51:35.860 | Light a fire, pick something, and people will realize they've agonized over a freaking laundry

00:51:42.180 | basket for three years. And when you light a fire, you say, "Look, we're going to become decisive. Go

00:51:47.620 | get any laundry container right now and come back in 20 minutes." And they do it. And then they realize,

00:51:52.020 | "Oh my God, why was I playing so small? Why was I agonizing over this? If I can become decisive over a

00:51:57.220 | laundry hamper, then I can become decisive over what we're going to eat for dinner tonight. I can become

00:52:01.620 | decisive over my finances." So it's a skill that you can practice.

00:52:05.380 | I love it.

00:52:05.940 | One of the things that I've found when it comes to these things around the house

00:52:09.700 | that makes it easier for me to make a decision, because I probably had the same problem,

00:52:14.980 | is I always ask myself, "Before we sell this house, are we going to fix it?" And if the answer is yes,

00:52:20.740 | then I'm like, "We've already decided we're going to fix it. We had this window and it wouldn't actually

00:52:24.660 | like you could open it and it would just fall down. You know, it wouldn't stay up." And we're like, "Well,

00:52:28.900 | before we sell the house, we've got to fix this window." So we've already committed we're going to

00:52:32.500 | fix it. So let's fix it while we can enjoy it." I totally agree. If something is going to have to

00:52:38.100 | get done anyway, why not do it sooner? Now, if it were hundreds of thousands of dollars and you didn't

00:52:45.460 | have it, of course. But you know, I imagine most of the people listening have been in a situation like

00:52:51.780 | I was where it was not about that. It was dollars. In fact, so many of the things we're talking about

00:52:56.500 | today are not about the actual dollar value. You hear Chris talk about the four seasons or whatever.

00:53:01.140 | It's not about that. It can be a very modest hotel or a very modest trip. It doesn't have to be one

00:53:06.420 | eighth of a house. We're talking principles here. If there are things that you are indecisive about,

00:53:12.900 | you can fix that. If there are things that you spend time on that are not serving, you don't like it,

00:53:20.020 | then come up with a solution. Maybe it's doing it less frequently. Maybe it's delegating it to

00:53:25.460 | someone. Or maybe it's just accepting right now I have to do this until I get my savings rate up to

00:53:31.780 | seven percent. And then I will take one percent of that and put it towards having some help around the

00:53:37.300 | house or whatever it may be. In other words, apply the principle. Don't get hung up on the examples.

00:53:41.380 | Are there things as people climb up the wealth ladder you see pop up like common traps that come

00:53:47.460 | up as people solve some of these problems, new ones arise? Definitely. This is a great question.

00:53:53.060 | The biggest trap I see of people moving up the wealth ladder, they actually don't adjust their

00:53:59.220 | spending. So they keep doing things that they used to do, which they simply cannot afford to do. There's an

00:54:05.540 | old Jim Rohn quote, "The more successful I got, the less I could afford to do certain things." He's talking about

00:54:09.860 | like mowing his lawn on Saturdays. He got so successful he couldn't afford to do that because

00:54:13.860 | he had a limited amount of time he wanted to spend it with his family. So as you get more successful,

00:54:19.060 | you constantly have to be thinking, where am I turning the chapter? What am I doing more of? What

00:54:23.780 | am I doing less of? And less of is really hard for people. The next thing that people do is because

00:54:29.460 | their worldview for most people is I'm going to do it all myself. They are highly inexperienced at

00:54:34.580 | delegation. And so what happens is they're making good money, but they're still grocery shopping two times a week,

00:54:40.580 | they're cleaning their house, they're doing all this stuff. And they're just like overwhelmed.

00:54:43.780 | They're busy at work, taking care of kids, family, spouse. And like so much of this stuff is so easily

00:54:50.820 | outsourceable now, especially now, you know, whether it be Instacart, whether it be having somebody come to your house once a week.

00:54:56.580 | And their worldview is often I can't have somebody come and do that for me. That's for rich people.

00:55:03.780 | Two problems. Number one, the people I'm talking to sometimes are rich. They just don't think of

00:55:07.940 | themselves as so I shake them. I tell them point blank. You realize you're rich, right?

00:55:11.780 | They're like, no, I'm not. I'm not Jeff Bezos. That's not who we're comparing ourselves to.

00:55:15.540 | You're rich. I had this person who told me they thought that the average income in their neighborhood

00:55:20.420 | was like $150,000 or something. So I looked it up right on the spot. They were making two times the

00:55:26.580 | average income in their neighborhood. And they, they were like playing boo. Who is me? I will never

00:55:33.940 | let a rich person get away with telling me that they're, they don't have enough money because it's

00:55:38.180 | disrespectful to people who don't have that kind of money. The second problem is they don't know how

00:55:42.180 | to hire anyone to do this. So they have, have somebody come over. One person told me, oh,

00:55:45.780 | she doesn't fold my clothes the same way I do. I'm like, okay, why don't you take a video and video

00:55:51.620 | how you fold your clothes and then anyone will be able to follow it. In other words, be a good manager.

00:55:56.580 | If you want things done, remember my money is good money. I will find somebody who will take my money

00:56:01.780 | and they will do things the way that I want it done. And if the first person won't, that's okay.

00:56:05.780 | I'll pay them and I'll find somebody else. So these are the ways that I see people getting stuck in

00:56:10.980 | traps. They play small. They don't change the work that they're doing. That's the way they're

00:56:16.260 | spending their time. And I see it. I see it happening in lots of different areas of life,

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00:57:41.460 | off your first order plus a free $60 gift. We didn't talk at all about points and miles in

00:57:47.380 | this episode. That was somewhat intentional. But the one thing that I found when it comes to making

00:57:51.460 | big decisions about travel that points has really helped me get better at in being decisive is that

00:57:59.140 | it's very reversible. And so we're thinking about taking this trip to Europe. Oh, we found some flights.

00:58:05.460 | We knew we could cancel it with no fee. So let's just do it. And in the case of the trip to Europe,

00:58:10.100 | we ended up canceling it. But in nine out of 10 times, we don't come back and think,

00:58:15.300 | oh, could we have changed this? Like we're able to be decisive because it's refundable,

00:58:19.860 | which I think is a big decision that people stress out about. And it's not only with points.

00:58:23.860 | A lot of airlines will give you credits now or hotels are refundable. Rental cars are refundable.

00:58:28.740 | So a challenge I'm going to give people around decisiveness with travel is if you find something

00:58:34.820 | that kind of works and it's refundable, just book it now. Like you don't have to

00:58:38.740 | wait until you finalize things. It's kind of out of sight, out of mind. And I think the

00:58:44.580 | thing I love about points aside from the deals is that it makes me more decisive because it makes

00:58:50.580 | things more refundable. Yeah.

00:58:52.900 | You wrote the book, I don't know, 10, 15 years ago, you came out with a new version

00:58:58.100 | in the last few years. Do you think AI or technology is going to make some of this

00:59:03.460 | financial decision-making process easier for people?

00:59:06.020 | I think AI is actually changing it in a really powerful way. So a lot of people, they don't want

00:59:12.180 | to have an entire system operating. I want them to. I love a good system. I know you do too. Some people,

00:59:19.860 | they just don't operate that way. And when it comes to questions like, can I afford to go on this trip?

00:59:24.020 | How much car can we afford? When are we going to be debt free? If I ask somebody who's a full,

00:59:30.580 | I will teach you to be rich reader, they know those answers like the back of their hand. They know the

00:59:34.820 | exact month and date they're going to be debt free. They know it 24 years in the future.

00:59:38.500 | But most people don't. And so to be able to go into an AI tool like one that we're developing and just

00:59:45.940 | be like, tell me the exact month and year that I'm going to be debt free. Whoa, that is pretty cool.

00:59:52.420 | It allows people to make ad hoc specific requests, get an answer. And then of course,

00:59:59.700 | be able to stitch it all together and see the big picture.

01:00:02.900 | I've been pretty amazed at the ability, even if it's not tied into your financial information,

01:00:07.620 | to just start asking questions. Like, you know, if you haven't had a financial planner,

01:00:11.220 | you haven't had a financial advisor, but you just want someone to talk to about your financial situation.

01:00:15.700 | Other than it, it's overly biased seeming to please you. I remember I was trying to come up with a good

01:00:22.020 | question to ask a guest once. And I was like, you know, give me a good couple ideas, gave me a couple

01:00:26.660 | ideas. I was like, I don't like these. What about this? And it's like, Oh, that's great. And I was like,

01:00:29.620 | maybe this sucks. Like, it's not good at pushing back, but it is good at kind of digging around and

01:00:35.620 | answering things and asking questions. I had a friend who told me that she asked it to be nice

01:00:40.820 | to her. And I was like, revolted. I'm like, nice. I told it to stop talking to me. Like, don't use extra

01:00:47.620 | words. Just be terse as possible. I don't need a new friend through my AI tool. Like, give it to me

01:00:54.340 | straight. And that's it. She was revolted. She was like, that's so mean. I'm like, wow,

01:00:58.740 | we are really two different people. Yeah. I mean, I probably just need to say like, Hey,

01:01:03.140 | be critical. Like I'm not, I'm thinking of it like an employee where I'm like, if you see me doing

01:01:08.100 | something wrong, an employee over time is gonna be like, Hey, maybe there's a better way. And

01:01:11.620 | wait, what if you had your AI be me? And you were like, I'm thinking of these purchase decisions.

01:01:17.460 | What would Ramit say? I mean, I think I told you this once. I was like, if you took all the

01:01:20.980 | transcripts of all your episodes and fed it in and say, Hey, here's Ramit. And maybe you could do this

01:01:25.220 | with Gemini with Notebook LM be like, take Ramit's channel and berate me like Ramit might berate me.

01:01:30.660 | Great. It's all love over here. It's all love.

01:01:33.300 | Awesome. So, so one thing I want to leave people with, is there a challenge you would give people,

01:01:38.820 | myself included, as a parting part of this conversation to go focus on and think about over the next week?

01:01:45.860 | I would challenge everybody to whether you are solo or you're with a partner is to sit down and say,

01:01:53.860 | what is one magical thing that we want to do this year and get specific? It's, this is not a dream.

01:02:01.220 | This is actually something you're going to make happen. So it could be as small as we want to both

01:02:08.180 | take a half day off work three months from now. And we're just going to go see a movie in the middle

01:02:14.580 | of the day and go have lunch outside. It could be as small as that could be as big as we want to take

01:02:18.740 | an international trip for a month, whatever you want. I want you to pick something that you can achieve.

01:02:25.780 | It can have no dependencies like, Oh, we need to have this happen. And that happened. Nope.

01:02:32.260 | If that's what you've picked, go smaller so that you could guaranteed make it happen.

01:02:36.740 | I want you to put on the calendar and I want you to make sure that you have some money assigned to it.

01:02:42.660 | Again, it could be as small as $10 to go see a movie, or it could be as big as tens of thousands for a trip.

01:02:48.340 | And when you do that, the time between now and then I want you to start using it to get excited about it.

01:02:53.700 | So if you're going to take a trip, you or you and your partner are sending each other articles,

01:02:58.740 | oh my gosh, we can go on this hike, or I think we should eat at this restaurant. If you're going to

01:03:02.740 | see a movie, you're sending like, which theater are we going to? This might seem theatrical. Why do

01:03:09.220 | we have to talk about movie theaters? We always go to one of the two ones. The point is, you have now

01:03:14.100 | created a vision of what you're going to do. You are now getting excited before you ever get there.

01:03:20.660 | And finally, when you do it, you're going to experience another moment of joy. Whenever I do

01:03:26.180 | something in my rich life, I get three moments of joy. One of them is planning it. One of them is

01:03:32.340 | being there. And then the third one is actually sharing it afterwards, whether it's with friends,

01:03:38.260 | family, just looking at my own photos. This is how we really start to appreciate these moments of awe

01:03:44.900 | that we are engineering for ourselves. That is my challenge.

01:03:48.740 | I love that. I will take that challenge as well. This has been great. Where can people who want to

01:03:53.780 | go deeper on all the things you talk about, all the things you're working on, find it all?

01:03:57.860 | I have a new book out called Money for Couples. You can get that book anywhere. I also have a podcast,

01:04:03.380 | Money for Couples, where every week I go behind closed doors. I have real couples on YouTube and audio.

01:04:11.300 | They show real numbers, how much they make, how much debt they have, where they are spending money.

01:04:16.420 | Sometimes we have people in $500,000 of debt. Sometimes we have people who have millions and

01:04:20.100 | millions of dollars and the stakes are high. So you can find that and any of my other material on any

01:04:25.620 | social media channel. Awesome. Ramit, thank you so much for being here. Thanks a lot.

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