Ramit answers your questions: Recessions, getting married, firing an advisor

now you probably haven't heard something like this but privately I run a money coaching program and once a month I do these calls where we all get online live and I answer questions about money and psychology and how to use a conscious spending plan and even how to stop feeling guilty about money and I realized the general public never gets to hear these questions so I have a bunch of questions that our group has been putting in our slack community and sometimes they can't answer them all and I figured it would be fun if I just get on here and answer a bunch of questions I haven't seen these before my team put them together and so I'm just gonna riff I've got questions today about let's see three dollar questions versus thirty thousand dollar questions starting late the psychology of debt how to fire a financial advisor wow maybe we can do that live so I'm just gonna go through a bunch of these and of course if you want to be able to ask questions to me you can go go to iwt.com moneycoaching again we get on live every month and there's a slack Community where people are asking questions and answering them 24 7. all right first question is from Brian Brian says what advice do you have about combining finances with a partner we're getting married in two weeks well two weeks it's not that long I mean my advice is to have started like a year ago but if you can't do that let's talk about what you can do now getting married is an amazing opportunity symbolically and in all other ways to turn the page and begin the new chapter of your life and I love doing this with money because it gives you an excuse to sit down and talk about things that you normally would not talk about like it's perfectly normal to just go hey babe you know now that we got married I'd love to sit down and talk about how we should set up our accounts whereas if you had done that before or if you do that three years from now it's going to be kind of weird so a good thing to do would be to start using some of the questions in my journal where I sit down and I encourage you to say you know what is our rich life what do we want to spend our money on where do we want to spend our time and there are some specific questions like if you could live anywhere where would it be except the problem is like what if your partner is like I want to live on a farm and I'm like a farm I don't want to live on a farm I want to live in Manhattan then you got a problem maybe you should have this conversation in the next two weeks before you get married uh nobody knew that uh this isn't going to be about finances it's about encouraging Brian to break up with his partner no no no no don't do that Brian I'm just kidding all right you can sit down and you can actually dream it's a lot of fun so you go what kind of house do you want to live in how often you want to go on vacation and one partner is usually more scarcity oriented and they might go well you know we could save maybe when we're 55 we could go here you go okay cool we should do that but what if we could do it sooner where would you want to go forget about when where right you're encouraging them you're dreaming and because this is hard for people that's why you use the prompts in the journal and suddenly you start thinking oh my gosh I never thought of that oh we can alternate holidays when it comes to families oh we could hire a babysitter and go on date night once a week awesome so you kind of start to think about this and you get excited that doesn't mean you have to do all of it at once but I love that exercise and series of conversations that are just pure blue sky pure brainstorming I love that when I'm writing a book I love that when I'm creating a new program with my team it's just pure candy Pure Blue Sky brainstorming no constraints and the question I always ask my team is what if it were Magic what if it were Magic so think about it Amazon for example they started with that question they go if it were magic you'd snap your fingers and you would have the detergent transported to your hand well we can't do that what's the second best magic thing we can do oh we could have a drone drop it on your front yard okay we don't have the technology for that yet what's the next thing we could do we could have it delivered to you within two hours and you just work your way backwards I love this idea of starting from a place of magic and possibility in terms of combining your bank accounts this comes later right so after you start with like what do we want what would it look like what would it feel like you're both getting on the same page this is a series of conversations doesn't happen at once it happens over a period of time then you go hey let's let's look at our numbers what do we have here you know I've got this old 401K in this old account I have my savings account here and you might discover that your partner like what if you find out that they use a Bank of America debit card I would be so disappointed I would be like you do what your parents raised you like that put that aside maybe don't have that conversation we just go hey what do you think our finances should look like and because this is a opportunity where you're basically a blue sky and it's a new chapter you can redesign the whole thing I often find that it's easier to design from scratch than to take pieces apart and I remember this at one point a few years ago I just was overloaded with meetings and I started trying to get out of one meeting after another and it was very difficult like every time I tried to cancel meetings there was some reason for me to go back and so finally after like three or six months of this I just told my assistant clear the entire thing and I'm going to start from completely fresh and so I was like what's important marketing I want one hour a week writing I want two hours a week etc etc and I rebuilt from scratch so that's really helpful in terms of specific tactical advice I typically like to see one joint account both of you contribute proportionally to that joint account that joint account should cover all of your fixed expenses any savings uh joint savings Investments that you may want to make and of course your joint guilt-free spending then I like to see some of the money from your paychecks automatically going to each of your individual checking accounts and this would be for your no questions asked money now if one of you is making 10 times more than the other you're probably going to have more no questions asked money that's okay but you can decide on the proportion uh and I discussed this some of my podcast episodes uh here's the key principles that we are trying to address here number one we want to create a joint future together and you want to do that structurally that's really important that's kind of like saying um I want my kids to love each other but they each live 10 blocks away yeah I mean they could love each other I'm sure they will but wouldn't it be easier if they lived under the same roof that's the same thing with your money you want to set up the structures to encourage the right behaviors so if both of you are trying to take a vacation every year that's a joint expense so you plan for that in your joint account uh now here's you also want to have your no questions asked money somebody wants to eat at a certain place somebody wants to have a hobby cool no questions asked about that you spend that on your own you probably want to have a series of discussions about what falls under what category so think of particularly thorny questions like if we take our parents out to dinner what account does that come out of what if it's your parents my parents uh what if you're gone and I order delivery is that coming out of my personal account or joint account these are kind of issues you can discuss they're not that big of a deal but you do want to kind of come up with a Playbook so over time you both understand and then on the super tactical level you have a joint card which you use when you're out together or if you're buying joint things like uh detergent for the house and then if you're doing your own hobby you have your individual credit card so that is the way that I would set it up uh for your uh upcoming wedding uh Brian I'm so excited for you and your partner and I'm really glad you asked this question congratulations next question comes from Tim how does your money strategy change for a recession I know you're not supposed to time them Market notice there's always a butt after this but if a recession comes I want some money set aside to buy at the more discounted rate okay how does your money strategy change for a recession what changes do you make to your allocation numbers such as saving investing fixed costs and guilt-free spending all right let me give you the headline answer and then let me give you the butt answer the headline answer is overall you really should not change much during a recession if you have a plan and you've been executing on that plan specifically if you have an emergency fund if you've been investing every single month and you have a bunch of the ratios and accounts that I talk about in chapter five of my book but there are a lot of people listening who go yeah I do all that stuff and I want to see if there's opportunities during a recession all right let's talk about it I remember in 2008 2009 when there was a huge recession it was traumatic I mean a lot of people were laid off I was laid off and from my own company and you kind of go oh my gosh is this the end of the world and if you remember there were tons and tons of Articles saying it's over investing is never going to come back Etc I remember looking around and saying a couple things number one I'm thankful that I have a healthy savings account because I never have to make a bad decision because of money so I was very grateful to myself that I had saved a lot of money and kept it aside second I remember saying wow I wish I had a bigger War chest to invest because when everyone was terrified and the news articles were rampant 10 unemployment it's never coming back the world is over I was thinking this is one of the most amazing investing opportunities in my lifetime now I had cash I put it in consistently but I wish I'd had a little extra War chest and so from that day I vowed to myself that I would always have a larger amount of cash sitting waiting for Extraordinary opportunities now does this break my rule kind of but also kind of not let me explain I first of all let me admit that technically I'm a little overweight on cash according to my own basic asset allocation but I also know that the amount that I save and invest already has achieved the financial goals I want to achieve so this is basically play money if you already have a six month emergency fund or Tim if you're in the situation where you're really trying to get aggressive maybe even want to have a 9 12 month emergency fund fine if you already have your Investments uh they're going every month the asset allocation is correct and you are investing enough so that you're going to have more than you will ever need and you've calculated out your compound interest returns over time then you might be in an advanced opportunity or an advanced position where you can take advantage of some opportunities you may want to keep some money on the side now let's acknowledge that the downside of keeping cash on the side is you are essentially trying to time the market and your that cash is going to be like a 20 pound weight fast on you while you're running it's going to slow you down but but but but if you decide you know what I'm willing to accept that I'm going to lose money in the short term but it doesn't matter because the rest of my investments are already sailing then that's what you do you keep money aside your timing is probably never going to be perfect you're never going to know when the bottom or the top is that's just the way timing goes but if you want to keep a little extra aside and when the market goes down you want to be what they call opportunistic you want to invest in certain indexes or even individual stocks sure just remember manage your risk do not keep too much cash because that's going to be a drag on your returns and you're bordering very closely on trying to outsmart the market which is not a good idea but in general if you've accomplished and checked off all the boxes of saving investing Etc you've earned yourself the right to play a little bit so that's how I would do it other questions about planning for guilt-free spending you know Tim I made the assumption that you have a bunch of extra money but I also want to speak to the people who do not have a bunch of extra money and they are looking at an upcoming recession and saying what should I do here's the typical Dynamic of what happens most Americans their savings rate is essentially zero when a recession comes they're caught totally off guard and times are usually good and they go oh it's going to go forever and if I get laid off I'll just go find another job but the problem is when there's a recession you're not the only one laid off everybody around you is laid off so the best thing you can do is of course beyond having a plan and doing all the stuff that I talk about in my book if you start to sniff the wins and say oh my gosh something is changing you have two choices one you can wait until everything hits all at once and your back is against the wall and that's a terrible position that often is when you have to sell cars sell houses at a loss like it's really bad and people die in recessions so you don't want to make light of it it's not good the other thing you could do is start to make proactively aggressive moves now I remember speaking on my podcast to a couple just a few months ago and they were in the he was in the real estate brokerage uh industry and I was like uh dude your job's going away soon you know that right he's like no no the company's gonna take care of me they have a Porsche they have a Volvo they have all this expensive uh marble in their backyard I don't know and I was like you guys have a choice you can either start streamlining right now and accumulate cash or your back will be against the wall and it's not going to be good and you can listen to the episode to find out what happened I would recommend building up your cash reserves and you can do that in a couple ways you can the best way to do it is to cut back on your fixed and guilt-free expenses cut those and redirect those to your savings if you really need to you can slow down your Investments but I would really encourage you not to because people who do that tend to have subpar lifetime returns so lots of different ways to plan for a recession you heard me start off by talking about how to be opportunistic with it how to go on the offense but there's also ways to play it defensively as well uh thanks for the question Tim Jenny says what would ramit say to a single person who wants to marry the right person okay great question so this is one of my 10 Money Rules and if you haven't seen these before you can Google ramit's 10 Money Rules let me give you a quick background on why these are my rules not yours and how you can create your own rules and then I'll talk to you about marrying the right person so I believe that everybody should have their own money rules and a money rule basically takes all your opinions and knowledge and it rolls it up into a single beautiful elegant rule for example one of mine is save and invest 20 of income okay cool that kind of makes sense if you understand compounding whatever yours might be ten percent or five well it shouldn't be five percent might be ten percent or twelve percent but here's another rule I have which is uh unlimited spending on health on books and education and on a friend's charity fundraiser those are all meaningful to me they are all things that I want to spend money on and I don't want to restrict myself whatsoever so if I see a book that looks good even remotely I follow ramit's book buying rule I just buy it done I never even question it because if I can learn one thing from that book it was worth it and sometimes I don't and that's okay I have a couple other rules I really like this one um Fly business class on flights over four hours so this may not be affordable or relatable to a lot of people but for me I find that I don't want to have to make a decision about which flight and should I do this like or that it's just boom here's a rule I can hand it off to an assistant and they know exactly what to book for me yours could be all different right my money rules are mine and in fact the more you turn those Money Rules and and click them like a Lock It just fits exactly with the key you've got in your life the more it becomes almost confusing and bewildering to the rest of the world so if you Google my rules look at them but remember they're my rules not yours they're just meant to inspire and you can create your own 10 money rules in fact if you Google remits Money Rules you'll find a post that we wrote about how to create your own rules now one of the rules I have is marry the right person and this is somewhat provocative because a lot of people write me they go well what does that have to do with money and I go wait a second the person you marry that may be the most influential financial decision you ever make in your life it affects everything how much household income you have how much you spend where you live are you going to have kids if so how are you going to raise them are they going to go to college which college and on and on so I think it really pays to think about what the right partner is for you and I've talked about this on different podcasts I think I went on the Tim Ferriss podcast where we talked about a prenup and one of the things I emphasize is that especially in the Western World recently we have this concept that marriage is simply about love but what's that old song Sometimes love Ain't Enough the concept of a love marriage is a relatively recent historical one we should remember that marriage for Millennia has had lots of different economic reasons political reasons Etc so I believe it's important to acknowledge that marriage is more than just love and even love itself changes over time it is an arrangement in fact in many ways it's a business Arrangement as well as an intimate and romantic Arrangement it's uh it's every kind of arrangement I remember seeing uh uh my sister uh with her husband and their kids at Thanksgiving one year one kid's running around the other one's got to go upstairs to get something and you look at it you go okay this is this is really a partnership and in any partnership you would sit down and you would decide what's important to me what are the rules of the game let's talk about this and you would I mean in business Partnerships you sign up extensive contract so the same I think is something that that should Inspire us for getting married for me when I got married I did not have a checklist but there were a few things that I knew would be important to me um I knew that I wanted somebody who had similar values in the sense that I was raised pretty middle class in California my mom was a school teacher uh she stayed home with us for for most of the time and then she was a school teacher later in life um my dad worked and you know my parents were immigrants that was important to me I could relate to that um another thing that was important was education right education is a huge deal for my family for my culture and I've spent tons of time and money educating myself and now as a teacher educating others wanting to live in certain places like there are certain places I want to live there are other places I don't want to live that was important and I think this concept of self-improvement or self-development it's core to who I am if I met somebody who was just not into it they didn't read or they didn't take classes or they thought it was weird to go to uh book talk at 92y when I was living in New York it might be fun in the short term but I couldn't see the bonds being built long term financially speaking you know what's interesting is when I was dating I wasn't really thinking about money that much I wasn't certainly talking to people about their 401K balance and stuff like that but over time and now being married for years gosh looking back if I started to get more serious it would have been way better to have conversations earlier than even I did I made the mistake of assuming like oh yeah I'll just do the money stuff in our relationship and when I really got serious with my now wife we talked about it and I I made it really clear that I wanted both of us to be involved and I've shared some of the reasons why I told her number one I'm gonna die one day I want you to be fluent in the world of Finance because I don't want anyone take advantage of you I want you to feel super comfortable two I want to partner in this right someone who can provide me a second set of eyes and push me and give me different ways to think and three I think it's just more fun it's just more fun to have a partner and you're discussing and planning and making trade-offs and sometimes you disagree but you're doing it together so it would have been really easy for me to just be the money guy but I insisted even though it's it was tough and it still is tough it would be way easier for me to just do it for us to do it together and it has been a source of amazing growth so in terms of marrying the right person this just my own opinion you know some people they have their checklist I never really had that it was more organic for me um do they have a sense of humor I was never going to question if they thought I was funny either you laugh or you're out uh it's I didn't have that checklist looking back I did have you know this organic sort of set of things I was looking for self-development family values um education those kind of things turned out to be really important um the rest of them like d for example do you want to put up one of those things in your house that says live laugh love I mean obviously the answer is no holy can you imagine if you married someone who wants to put that up and then above the fireplace they put something that says fire I go do we forget that this is a fireplace I don't need someone to remind you in the bathroom pee here no thank you okay um you know what I changed my mind about my entire answer forget it I said don't have a checklist that's the only question you should have on your checklist would you put a live laugh love sign in your house if so we can't be together goodbye next question uh oh this one came from the slack Community uh of our money coaching program again you can join this program at iwt.com money coaching and you can ask tons of questions and get amazing answers this one oh my God it's so good three dollar versus thirty thousand dollar questions I had to mail a few important documents this morning when I pulled up to the USPS print at home shipping options I saw that it was going to be 18 to mail the two large envelopes however after a quick Google search it looked like I could send them for less than four dollars if I first brought them to the post office in person now I have to admit part of me still hated the idea of overpaying an extra fourteen dollars or 3.5 times more to ship it from home but I took a deep breath and realized that the hassle and wasted time of a trip to the post office would cost me way more than fourteen dollars and I went ahead and printed the shipping labels for the two documents which brings me to the thirty thousand dollar part of this update because the documents I had to mail were two copies of the prenup my fiance and I just signed one copy going to each of our lawyers the process of making the prenups not only helped us decide what to do in the event we separate in the future but more importantly it helped us figure out a lot of the critical details for how we wanted to manage our finances and assets while we're married hopefully forever and those are the types of decisions I want to keep taking up the majority of my attention and money not fourteen dollars of postage oh my God amazing so Brian congratulations first of all I'm so happy for uh for you you two getting married and I think this to me was just an awesome comment because I mean 14 bucks for postage is a lot all of us kind of like uh yeah and and then we start convincing ourselves like yeah I could go to the Post Office like it's not that big of a deal but when you have a bigger vision and you really internalize this idea of three dollar questions versus thirty thousand dollar questions suddenly Things become crystal clear to you and that's why I love elevating our conversations above merely the Tactical if you're stuck in the Tactical then every single day you are looking at a million different decisions and you're just going oh no no no no I can't spend that much oh my gosh um uh Beats cost an extra two dollars I can't do that oh my gosh peanuts really got expensive oh my gosh gas oh my gosh postage it's it's overwhelming and that forces us to retreat to shrink ourselves to worry about everything what kind of life is that here Brian very successful Brian's been in the iwt community he's been in a bunch of different programs for a long time he's focused on the 30 000 questions he knows he's destined for bigger than worrying about the price of celery and so to him and his partner I I'm just thrilled to hear it and I'm glad you shared your lesson with all of us thanks Brian congratulations Jenny says I'm a late starter how do I calculate my contributions after age 50. for late starters is there a calculator that can include the age 50 increase option for Roth IRA and HSA the max goes up blah blah blah blah blah okay so Jenny's asking a question because as you get a little older you get the opportunity to invest more in different accounts that max contribution you can make in accounts like an HSA goes up so where can I calculate that and I appreciate the question Jenny but I want to zoom out and look at the big picture in very simple terms if you want more money you're going to need to save and invest more so let's just assume that Jenny is 40. she calls herself a late starter but I've heard people at 28 call themselves a late starter so I'm going to just assume Jenny's 40 years old if Jenny sits down and says oh wow I get to contribute an extra thousand dollars after the age of 50. does that really make that big of a difference in the overall scheme of things not really not really and so I want to emphasize here should you max out your contributions if you're able to of course do you need to worry about the Precision of every single additional dollar you can contribute after the age of 50 but but you have to stop by 65 No in fact if anything I would just say save as much as you possibly can right now it's kind of like being late making Thanksgiving dinner it's like uh should I I didn't I didn't buy it as you can tell it's kind of like ramit doesn't even cook Thanksgiving dinner ever let's just play along and pretend that I'm a turkey master all right you you didn't buy the turkey you're worried you finally start the oven three hours late and meanwhile you're asking the question should I use the Paisley tablecloth forget that just put the turkey in the oven and get it going that's how I want you to think sometimes we overvalue precision and we forget the major thrust the major thrust if you want more money save and invest more do you need to calculate every Last Detail probably not should you Max it out when you turn over 50 of course but it's not that important to get Ultra precise that's my opinion uh May has a question how do I balance funding an emergency fund and contribute to retirement every month so she further uh says if you don't have a fully funded three to six month emergency fund and you also started contributing towards retirement you have less than ten thousand dollars how would you recommend prioritizing funding those two areas put another way if you had two thousand dollars to allocate between an emergency fund and Investments What percentages would you recommend for the split okay all of these questions first of all are straight from my money coaching students and if you have specific questions about your finances that you want me to answer you can join me and the rest of the students in the money coaching program iwt.com money coaching so let's talk about this question about allocating your money between emergency fund and Investments so this depends on a lot this depends on things like um how old are you because if you're younger you you know that's one option another one would be do you sense that there's a recession coming in your industry if so you might want to double down on an emergency fund uh debt might play a role here if you have a lot of debt this may not even be the right question you may want to pay that debt off if it's at 22 percent but speaking generally I'll tell you how I think about it I've always thought to myself I want to be more aggressive with investing because I know how much it can turn into I understand the power of compounding and time and therefore I really want to do that with that said I never ever ever want to have my back against the wall when it comes to money foreign some of you have been in this situation I mean think about it or your parents have been they get laid off they've got a mortgage they've got debt it is a terrible terrible place to be in and in my opinion you never want to be in that position so I do everything possible in my life to live with a very healthy margin of safety what does that mean it means my housing costs are below what I can technically afford my car I haven't had a car payment in decades uh yeah I spend a lot on the stuff that I love but on the big big big things like housing cars debt those things I am ruthless about now in terms of the emergency fund I want you I want to emphasize something for you may it often takes years for people to build up an emergency fund so I wouldn't mind again speaking generally and without knowing your exact situation if you said okay um out of two thousand dollars I'm gonna take 1800 and invest it and put 200 a month towards my emergency fund notice the key there a month this is less about one-time decisions financial success is about doing the right thing consistently every single month doesn't mean you have to be perfect every single month but because you're doing it every single month you will get massive compounding rewards over time so this is a lot of different ways to think about the answer in general I do want you to have an emergency fund I don't like people to basically take all their money and pay off all their debt and end up with nothing because if they get laid off the day after they're debt free they're still in trouble I want you to have savings I want you to have Investments as for your allocation like I said it depends on a lot but if I were in your situation without knowing anything more I would Pro and I had let's just say two thousand dollars per month again without knowing anything else my guess is I would probably take 1500 and put it towards Investments and 500 and put it towards my emergency fund every single month all right uh Audrey says what is your recommended asset allocation all right well the answer is read chapter seven of my book let's see here we have a question from Julian who says I'm curious this is in a slack group I love this I'm curious how others think about different kinds of debt I have lots of different types of debt right now significant credit card debt significant student loan debt a mortgage a car payment a loan to pay for a new furnace yikes it sounds scary when I list them all like that most of the time I'm only stressed or embarrassed by my credit card debt the rest of them seem like debt you're supposed to have or you're allowed to have as an adult does anyone else have that script I'm sure it's something I will reevaluate once my credit card debt is gone I'm making progress okay this is really interesting uh in the I will teach you to be rich book there's a page where I identify invisible scripts that we all have about credit card debt and it is really fascinating so I researched thousands of people and I distilled down their key beliefs and key phrases and one of them is everybody's got credit card debt or the credit card debt companies are evil they're out to get you or it's not so bad at least I don't have twenty thousand dollars of credit card debt I don't love these invisible scripts but I do think they are important to acknowledge and I think Julian does a great service by sharing their invisible script that these types of debt are okay except for the credit card debt so again let me read off these types of debt significant credit card debt significant student loan debt a mortgage a car payment a loan to pay for a new furnace all right how do I think about it years and years ago when I was an intern I had a mentor of mine who took me out to lunch and we've become close friends and he uh we're just talking about stuff and he was telling me about money and he said ramit in my family we have a no debt policy and he was very wealthy and very he was very successful in Silicon Valley and I thought to myself that phrase that I now hate must be nice it must be nice to not have a debt policy no debt policy in your family no you know we're normal people and um and now I actually respect his policy even more because he's very wealthy he could easily take on debt for a variety of reasons if you are on Tick Tock you hear all these Cuckoos saying what's the way that the wealthy staying wealthy they use debt poor people don't know anything about that but wealthy people use debt so strategic shut the up you don't know what you're talking about why am I taking advice about wealthy people from some guy on Tick Tock who doesn't know your shoes aren't even clean okay I think that in general I don't like debt I don't like it for the majority of people because the majority of people have a zero savings rate so why would it make sense to say the majority of people should use optionality and debt and they should exercise debt and exploit debt like the wealthy they're not wealthy they don't have the sophistication that someone who's wealthy and has advisors and accountants all kinds of stuff to be and Float to be able to handle debt so I understand there are sometimes that the average person needs to use debt most people don't have 20 30 50 000 to buy a car probably need to finance that okay most people cannot afford a house cash virtually everyone is financing that fine but there are certain things that I would just never ever ever take debt out for that would be vacation that would be um wedding these are things that you pay for what you can and if you can't afford it that's that you don't go into debt for it now Julian from looking at your notes you know the real question for me would be the significant credit card debt uh I can understand why you probably bought a house I can understand why you bought a car I can understand that you probably didn't predict you'd have to buy a new furnace but those Phantom costs come up but the significant credit card debt really speaks to a behavioral issue and what that suggests to me without knowing anything more is that once this debt is paid off you're probably going to go back into it again unless you tackle what actually caused you to spend and exceed what you could afford on that credit card well that's one of the reasons you're in the money coaching program so we're going to work with you on that for the next several months and hopefully years to come so every month when you come onto these calls you know wow this is my time my gift to myself to stay focused on improving my money psychology uh overall if I were you I would rewrite some of these scripts like I would much rather you say I have a zero debt policy except for a house and a car that might be more amenable to the to the average person versus you know my extremely wealthy Mentor um and if you did that in general then you would be in a real big hurry to pay off that credit card debt now one other thing you mentioned is that you feel stressed out and embarrassed by your credit card debt I get that but the last thing I want you to do is feel bad about your money if anything what I would hope and what I want to help coach you on in the coaching program is to say okay I made a mistake here's what led me to make those mistakes I've spent a lot of time working on myself I've acknowledged it here's what I'm doing to pay it off aggressively and once I pay it off I'm never going to go back into credit card debt notice the difference in tonality it's accepting responsibility it's saying yeah I made a mistake but I learned from it and here's what I'm doing differently and that is different than feeling stressed or embarrassed stress or embarrass does not lead you to good decisions it leads you to bad decisions and so what I want to do Julian and I hope uh make sure you uh speak up on the next coaching call we have I'd love to work with you live is to reframe the way you think about your debt sure we've all made mistakes in different ways in life that's okay let's acknowledge them let's do what we can to fix them and then let's move on with our life Graham says how do I fire a financial advisor is it Christmas for ramit Sethi gets to fire a financial advisor the question is I have a relationship with a financial planner that I've become convinced is no longer in my best financial interest probably never was one consideration is that I also have life and disability insurance through him what a surprise and I'm relatively happy with this part of the relationship do you have any advice for how to cut ties oh do I have advice yes but you're probably not going to like to hear it first a little background years ago uh somebody in my network told me I need to talk to these uh wealth managers you see rich people they don't call them financial advisors because rich people want to feel different so they call them wealth managers first of all off okay I don't need to be pandered to by you serving me fancy coffee in a silver tray and calling yourself a wealth manager and taking 1.75 percent that's ridiculous but okay I told the person no I was like I know how to do this they're like no no it's really important our wealthy clients speak to them blah so that I got the little gleam in my eye here's the problem I'm very vindictive when I find out someone's taking advantage of someone else and I love it you know some people like oh it's something I'm working on I go no I love it so I emailed the person back I go yes actually you're right I would like to talk to them and I just have this gigantic smile on my face so get on the call it's these two wealth managers from Wells Fargo wealth management first of all are you kidding me okay that's like going into Target and asking for financial advice why would I get a Wells Fargo wealth manager okay and these two have these beautiful British accents you know Americans we can't tell the difference between the different British accents but it was like a good one this what they do is amazing I remember because I was in the back of a car and I was on the call with them and they uh they introduced themselves werewolf managers let us tell you a little bit about what we do you know I'm sure that you're a busy you're really busy so you want to focus on what you do and we focus on what we do it's like having a pro in your corner and like if you could see my hand it was just curling up into a fist but at the same time I had this little smile on my face I was like what is happening to my body right now so they keep talking and I played really dumb I was like oh oh I I just own this business you know I don't know too much about money so like how would you guys help which was just catnip they go oh well first of all I'm sure that you don't want to pay that much in taxes so we specialize we have a special Consortium of tax advisors I was like okay wow that sounds so good I'd really love to minimize my taxes and then uh they said I said but what about investing you know seems like gambling [Laughter] so of course they love that because that's exactly what unsophisticated people say and they were like well you know what we do is we take care of all of it their eyes light up because that's where all the fees are in Wealth Management in investing they typically take about one to two percent which in my case would be millions and millions and millions of dollars in fees for them over the course of their lifetime I said but like you know I hear about these things there's these Robo uh something and you know there's like these mutual funds is this any different than that God I love playing dumb it's so good and they were like oh well you know here's our approach we don't try to match the market but we do focus on keeping your money safe and they had some exact phrase they used which I was just dying I put this in chapter six of my book the entire conversation because if you caught what they said you realize what they really meant and it was very quick very fast very off the tongue but it told you everything you need to know what they said in plain English was we don't try to match an index fund which costs approximately 0.05 percent in fees 0.05 write that down so you can compare to one instead we keep your money safe now let me explain what that means in plain English if you want to keep my money safe you can invest it in bonds you can essentially return me basically nothing and you will eat up essentially all of my returns in fees but you can go back to the dumb celebrity client and go your money's safe you haven't lost anything because their clients I asked them who are your clients they're primarily two people they're business owners and celebrities and what do we know about business owners and celebrities they're pretty stupid when it comes to money if if the truth must be told they like to focus on either their business or if your celebrities you know like ruining hotel rooms or whatever it is you do they and partying they do not want to get into the intricacies of asset allocation well literally this wealth management team did not realize that they're talking to the only guy who stays up Saturday nights reading asset allocation journals okay of course I didn't let them know this so they can tell me we're going to keep your money safe because most people they simply worry about losing money they don't actually worry about how much money they are leaving on the table through fees and opportunity costs so I laughed and the funniest part of all was that I asked him for some more specific recommendations they told me all about the stupid Bond stuff and I'm like these guys are so dumb I'm at that time I was 30 years old I'm like why on Earth would a 30 year old be in that heavy of a bond mix and did they even ask me one question about what's my business do I plan to run it forever what is the business about oh if I told them or I wrote a best-selling book on Personal Finance where I cover asset allocation uh taxes automation they might have had a slightly different tune but they didn't ask a single thing they just launched into their pitch so first of all what are the lessons we can take away from this number one don't ever work with Wells Fargo wealth managers you suck second of all don't ever work with Wells Fargo they're a predatory bank they in fact there's a discussion right now about how they're about to be finding another billion dollars they are awful three if you have to fire a financial advisor do it mercilessly you can be polite but they are taking money and giving you nothing in return so I'm going to tell you how to do this Graham I'm also going to tell you one of my other buddies I wrote about this in my book too he uh he called me and was like hey I think I'm getting ripped off by my financial advisors what should I do I was like send me all the paperwork I'll look at it I did he was definitely getting ripped off he made a lot of money and over the course of his life he'll have tens of millions of dollars so he had some you know nice lady who was managing his money and I was like okay look you have do you want me to tell you what you should do or do you want me to tell you like 20 different things that are going to be nice to you he's like just tell me what to do I was like okay fire them they're not looking out for you they're taking fees you could do way better at like a low-cost Vanguard index fund and it's going to be hard because when you fire them they're going to use all different emotions to try to keep you there he goes okay fine great I'll do it I said do it by email so it's on record so that I can see the emails and laugh while eating popcorn and then put them in my book he goes no problem and I did the emails are in the book if you're wondering why I will teach you be Rich has sold over 1 million copies it's because I basically took all my vindictive fantasies and put them right into the book and they're all true all of these things happen to me and my friends and you my readers and I just said send me the documentation I put in my book here's how you fire the financial advisor Grant do it in writing because if you do it on the phone you're gonna watch like a basically manipulative narcissist come to life you don't want that get it documented you say you know what uh hi John Jane Doe I wanted to let you know that I I've appreciated our financial Arrangement but I've decided to move on and uh uh direct my own money I'd like to get any details on transferring funds away as well as any other details that I need to know when you send this it's going to be like a bomb dropped in their office you're going to get text you're going to get voicemails you're going to get phone calls multiple replied emails you know the ones where they don't even wait for you to reply and they just reply again they start getting increasingly frantic with more and more caps I love it as always remember to forward me all these details I'll anonymize them and share them so they're going to try all kinds how could you I thought that we were friends I took you to the pumpkin patch 10 years ago there's that then they're gonna say um what are you planning to do well why would you do that this returns better and if you look at the risk adjuster returns all this nonsense these financial advisors typically never even tell you how much they charge until the very last minute where they will if you press them they'll admit that it doesn't actually make any sense for you to stick around but that almost never happens they just usually Rage Quit all you have to do is remember this gram your job is not to answer their questions your job is to Simply stay calm and redirect back to your questions your questions are please send me instructions for transferring my funds uh to another account and what you're going to want to do is an in-kind transfer that's in dash k-i-n-d in-kind transfer so that they don't sell anything but they just transfer it over I have one piece of bad news for you Graham if your financial advisor and I use that term uh Loosely they're not an advisor they're a salesperson if they were selling you life and disability insurance they're not a financial advisor you're definitely getting ripped off there as well they make money on their investments from you they made money on their insurance from you they make a ton of money I have very little uh regard for insurance sales people the only person that I might regard lower than them would be Realtors oh my God there's gonna be so many people mad at me ah whatever go on Tick Tock and complain to me there I'll roast you there myself so you probably you're getting ripped off on your insurance you're going to need to look into that as well get the fee structure on that and you will need to calculate if you should continue paying or not I can almost certainly guarantee that you have been sold uh universal life insurance or whole life insurance and you would almost certainly be better off with something like term life insurance as usual when we talk about financial advisors we end on a depressing and hopeless note thanks for your question uh Rebecca should I continue contributing to my Roth IRA even when the market is doing so poorly yes Rebecca should you keep buying strawberries when the price keeps going down every single week yes it's great we need to rethink the way that we approach our investments in almost everything else in life when the price goes down we're thrilled but when the price in the market goes down we get scared and I can almost guarantee Rebecca you are reading news sources that are using words like Market slammed Market crashes risk of market crash increases I want you to stop reading these um sites that rage Farm uh clicks for engagement I want you to stop and I want you to come up with a simple plan you can come up with it on your own or you can just use the one in chapter three four and five of my book you invest every month when the market is up you invest when the market is down you invest you invest rain or shine and you simply decide not to play the game that's tens of millions of Americans do which is I'm gonna try to figure out what's going on in the economic markets you know most of the people trying to do this can't even figure out how to put together a decent order at Cheesecake Factory and they're over here trying to figure out macroeconomics and then relate that to their personal finances no no no sidestep the entire thing every month you're gonna automatically invest a certain amount into your Roth IRA ideally the maximum you can contribute divided by 12 so it's every month you're maxing it out and that's what you do I want to encourage you to go back to chapter uh three and six especially six to look at why you cannot time the market in fact why even experts on Wall Street cannot time the market and then I want you to decide not to play the game of timing the market one way or another every month your money goes in you don't have to think about it uh Jenny asks what is something about psychology ramit wishes more people knew and took action on wow that's a good question what is something about psychology okay this is a good one so I remember when I was in college you remember those cup of noodles that we all used to eat well I did as a college student so they came in like a six by six box you get it from Costco and I really love these cup of noodles and so so I hung it up on my wall directly above my desk and it was just like I could literally pull out one and it would automatically come down like a Pez dispenser and I thought that I was a genius back then and now looking back I think I was even more of a genius this is the greatest show on Earth I just come in here and glorify my past self and then my current self what a great show I love it thank you ramit Sethi Round of Applause for ramit seiti well done by ramit Sethi okay the key principle there was I didn't even want to have to get up and go in another room to get my cup of noodles because that small barrier would have been enough to dissuade me from doing it ironically even if I were hungry and this is true for so much in our lives so many of us believe that if we want it enough that we will do it and psychology shows us that even the smallest barrier can cause us to not do something that we genuinely want to do there have been people reading my material for 10 plus years who haven't opened like a the right checking or savings account because they can't find the password to their old savings account and you laugh and you roll your eyes how stupid you're so lazy but it's deeper than that it's the fact that small barriers can really hold us back I was reading an article today about voter restriction and how even the smallest barriers can quantitatively affect how many people vote so if they close voting one hour early you think oh why don't they just go a little earlier well maybe or maybe they didn't realize it maybe they didn't have transportation to go there and on and on and on and that is exploited by a certain party that starts with are I'm talking about Republicans who uh restrict voters particularly minority voters using that same principle so what I wish we could learn about psychology the psychology of ourselves is to be brutally honest about what we need to succeed if you don't go to the gym in the morning because you feel cold or you you're like I used to be I don't want to have to get up and go to the other room to get my clothes out of the closet I wish that we could be honest enough to just put our clothes on the floor before we go to sleep if we want to drink more water I wish we could simply fill up a bottle of water the night before and put it right next to our bed and with money I wish that we could acknowledge we are not going to do it someday we need to do it now and the best thing of all is we're just going to automate it because we are intellectual we are cognitive misers we don't want to pay attention we're going to give up on keeping a budget after two months and that's okay that's human nature therefore let's use technology and whatever else is at our disposal to make the right decisions even if we don't make them all the time for ourselves Veronica uh she asks how do I protect my kids and think about where I want my money to go when I die she said I'm about to have a second kid want to start the estate planning process it's such a black box I've never learned about my dad died without a will and a ton of debt my husband's dad lives off a trust that's been really well managed I don't know where to start I want to protect my kids but I also don't want to leave them much thoughts on getting started with the process and how to be creative with leaving money for social causes okay this is a great question so first off Veronica I would say that I want to know about your finances whenever I get questions like this it's almost always from parents within two years of being 40. they're like 38 to 42 and they go oh my gosh I just had a son or a daughter and I want to start saving for them what should I open up I go what does your Investments look like and they go oh I mean I don't have a lot but but I I want to put something aside for my son I go listen your kids have time you do not and so if I were to walk you through how much time you have left and how compounding gets increasingly difficult as you get older you might go oh my gosh I need to start saving money now and an extra two three four hundred bucks a month would be better served going into your investment account rather than saving for your kids now if so that's my first comment I would say literally 90 plus percent of the time when people ask me about saving for their kids they don't have enough for themselves ninety percent of the time but let's just assume that you do have enough you've used all my material you know you're in the money coaching program so you've put aside money for yourself I would say okay what how do you think about putting money aside for your kids well you have lots of options um if it's a relatively modest amount so we're talking about you know maybe a few thousand dollars or even if you let's say ten twenty thousand dollars you know options would include things like a 529 for Education that would be a really good way that a lot of parents do it that's pretty straightforward if if I were if I had some extra money that's what I would do um if you want to get even more sophisticated and we're talking about larger amounts certainly you can set up a trust uh and a will and or trust you're gonna you should do a trust you you want to talk to a lawyer they can walk you through it I will share a few things that I have read uh when it comes to leaving money because I've thought about estate planning as well quite a bit so I used to think that you basically I made all the mistakes that people make uh in growing up thinking how I would leave money to my kids I thought to myself um let's just say I have two kids and one is doing really well and the other is struggling I should probably leave more money into the kid that's struggling because they need it more wrong that's a great way to make your kids hate each other and make your other kid resentful of you because that that kid might say I went to medical school I worked hard every single day and now I get punished and he or she gets it because they didn't even go to school so that's that's a cause for resentment a better solution split it equally next what if you pass along a house that's a huge opportunity for fighting leaving your kids to hate each other uh because how do you split an illiquid asset one person wants to keep it the other person doesn't one person wants to use it on Christmas the other doesn't or does better to just clarify these things up front uh either liquidate the house and give them the cash or agree on who gets the house and make it relatively equal value three another thing what if you pay for uh one person's wedding at age 22 and another person's at age 37 what if the amounts are different you want to account for this so there are lots of these little wrinkles that have been well discussed by advisors so this is an example where if you have a very large portfolio you definitely want to engage with a lawyer and specifically an estate planning attorney who can walk you through how to do this right uh another common mistake people make they'll say I will give money to my kids but they have to marry this type of religion or they have to go get this type of degrees this is this used to be much more common than it is now now it's highly um it's taboo uh lawyers don't like it they like they don't want you they call it don't control from the grave and finally and this is the most important one this really blew my mind a lot of parents don't pass along money to their kids until they die but imagine you die at 90 and your kids are 70. 70 years old and they haven't gotten whatever million dollars you're going to give them there's a lady at my gym I overheard her talking one day and I was like oh my God this is crazy and she looks to be in her 60s or 70s and she mentioned that she uh basically her parents are still alive and she will get something when they pass away but she doesn't know how much I thought to myself that money would have been so much more valuable when she was 30 40 even 50. and now at 70 it takes on a different meaning it's not nearly as meaningful so again what used to happen in the past was uh parents would simply say when I die this will go to you but that has become way less popular and now it's much more popular to give partially throughout the decades so you know at 30 here's a little bit learn how to manage it Etc at 40 here's another chunk of it that money is more meaningful at those ages than 60 or 70 years old so those are some basic thoughts all this should be discussed with an attorney if you have a large enough portfolio I would say that again 90 of the time most people need to focus on themselves before they worry about their children because your kids have time you do not all righty let's see here we have a comment from one of our students in the slack community oh okay this is we have a we have a bunch of different channels in the slack community and this one is uh called money wins and humble brags so I love people to brag about something great that's going on with their money because it's so rare usually we only talk about bad stuff that happens uh Graham says this is definitely in the humble brag category but I'm giving myself a pass because I think it could help some of the folks having trouble seeing themselves make more money as time goes on I recently went to ssa.gov and downloaded my earnings history with the intent of showing my son how my money Journey looked because he doesn't understand the grind it took to get here when I saw this it even surprised me a little bit but it made me proud of putting in the work every year and he shows his actual Social Security earnings and he says 1994 was a job making pizza at Little Caesars I think that's amazing I think that's awesome so Graham thank you for sharing that congratulations and for everyone else you can go to ssa.gov and look at your earnings history is quite amazing uh let's see here this is another comment from the community okay oh I love this one this one is from Michael Michael says I have oh he this is about invisible scripts on spending money Michael is a member of our money coaching program iwt.com money coaching where you can share these Amazing Stories you can see how people are talking some of the categories we have in our slack Community are money psychology podcast discussions people talk about the podcast the comments are amazing rich life moments saving earning more credit cards Community asks and on and on so Michael says I have taken my family my wife and two boys to a nice restaurant this evening and for the first time ever I wasn't checking prices me and my wife ordered a set menu good stuff my younger son kids meal for starters and one more for his main my older son went oh can I have a steak and in that Split Second I faced my old money scripts is it worth it for him Etc is it too expensive his one course is more than the set menu and after this large amount of thoughts which lasted a split second I said sure if you want to try it he also got a nice starter on top of it by the way he is 13. the evening was great food was great we spent time together and had a really good time when I asked for the bill I was not surprised I was ready for it without anxiety everything was planned reflecting now I think I am evolving in the right direction I love love love hearing that this is a great example just that one moment of being seated at a table with your family you've done all the work to be able to get to this point worry free and to use money to live your rich life to to see the joy in the people's faces around you your loved ones and to say yes we can afford this and have the confidence to be able to do that I love it I hope you've enjoyed today's call uh I love being able to answer some of these questions from my money coaching students and if you are interested in connecting with more students like this you can join at iwt.com money coaching thanks very much [Music]

Channel: I Will Teach You To Be Rich

Views: 73,792

Keywords: Ramit Sethi, money coaching, finance coaching, how to spend, how to save, how to invest, investing, investing podcast, finance podcast, Ramit Sethi podcast, money author, money psychology, money podcast, Conscious Spending Plan, Ramit’s Money Coaching Program, asset allocation, emergency fund, Roth IRA, combining finances, i will teach you to be rich, ramit sethi podcast, ramit sethi interview, ramit sethi solo episode, ramit sethi best of, ramit sethi

Id: EHbtU5XN63I

Length: 68min 21sec (4101 seconds)

Published: Fri Dec 09 2022