Dreaming Money Into Reality (with Ramit Sethi)

I mean super stoked to have you back on the mark Devine show my friend it's really nice to see you nice to see you again yeah likewise so uh you've been busy you've been bouncing around the country you moved from San Francisco out out of state now you're back in Southern Southern Cal yeah yeah back on the west coast what's new in your life like what what um what what kind of like major movements um both emotionally and relationally have been going on since we last spoke which was pre-pandemic I know I always love your questions I always love talking to you so I've been thinking about this conversation all day today um what's new in my life is being on the west coast and really thinking about using money to live a rich life in a different way than what we've talked about in the past really more on the psychology part of it and the relationship part of it um so and also just being grateful that I could see people in person again I love that I'm with you on that too and I think a lot of people have um noticed either first been forced to notice or just kind of um are starting to become aware that the pandemic had a huge uh positive kind of like underbelly to it which is that has slowed everyone down and got them to take a look at you know some of the things that maybe they've been ignoring or been you know overly distracted about and that is their their relationships and um their well-being and also their commitment to like growing and being being more authentic and being more heart centered and and uh connecting with other humans because man we if anything we got slapped down into a disconnection mode during the pandemic and it's really painful and a lot of people suffered as a result of that yeah so great great work and I love um where you're going with this because I've always looked at money is basically a relationship but it's a relationship with yourself first right because you know what I've noticed about like I don't know about you but the billionaires that I've met the ones who've made their own money they they really had a lot of self uh worth a lot of self-love they their confidence was not arrogant it was from a high degree of self-love really and um and those who kind of like were given their money or inherited it and didn't have to like cultivate the emotional awareness and the relational strength that I think you're kind of we're going to talk about a little bit more you know they they had a little bit of arrogance about it you know and and their confidence didn't come off as like that deep-seated humility type confidence it was more like a almost a sense of insecurity around it and I think one more thing because I want this to frame our discussion yeah the difference in for me in the relationship to money is those who had the high degree of self-love self-care they were all about service and so the the money came to them and flowed through them as a result of serving whereas those who kind of got the hand of the money and this isn't you know I don't want to cast you know a complete blanket because I know there's a lot of really good people who who are navigating that you know um that kind of inherited wealth stuff so it's not an absolute but there's a risk there that um you don't feel like you earned it and you don't feel like um you're worthy and then and then there's also this fear of not growing it or losing it you know yeah and then and then the money energy gets stuck yeah because it's not flowing right it's kind of stuck and it becomes like a stagnant Pawn instead of a flowing river anyways just some thoughts to kind of frame up our discussion this is where my head has been at about my relationship to money is like I want to be on that former category where it's a so it's an energetic flow in my life as opposed I love it and I I completely agree that our relationship with money is something that's not talked about we talk about our relationship with food we talk about our relationship with other people even our relationship with physical fitness but rarely do we spend even one hour per week building our relationship with money if I ask the average person what are the words that come to mind for you when you think of money they always say the same thing guilt stress overwhelm anxiety is it too late for me and so you you see this coming out in very peculiar and interesting ways it's one of the reasons I love money I don't wake up in the morning excited to type into a spreadsheet that's not me but I'll get somebody typically they're around the age of 40 and they'll message me on Instagram or email and let's say we're meat I have a two-year-old son can you tell me what account I should use to save for his college retirement it's very classic and I can already see where it's going but I go I go tell me about your money first tell me about your own portfolio and they almost always say the same thing well you know I'm 40. I don't have too much saved up maybe five thousand ten thousand bucks I didn't really get into this until the last couple of years but you know I want to know what to do for my son and what they're really saying is in code they're saying I believe I've failed at the game of money for myself but I'm not gonna fail for my son or my daughter and of course that is not the right way to think about money money like Fitness food spirituality relationships is a skill that can be learned and sure you may not have learned it until you're 40 or even 50 or whatever the age is but it is skill that you have to prioritize first with yourself before you can help other people right I agree with that 100 and again it's a relational skill I mean I I think you first approached this like when we spoke a few years ago from the Tactical practical material perspective right yeah and so there are very very practical things that you can do to you know to to begin early Leverage The Power of compounding avoid all the fees that you know the excessive fees you know and those are all really really good advice and just keep on you know automatically investing X percent yep um and then just don't touch it right so one of the first rules of of making money is don't lose it yep is it Warren Buffett who said that or something yeah and do not unnecessarily interrupt compounding yeah exactly don't try to time the market because that's what it interrupts the company all those are awesome but just like the the person who who wins uh hundreds of millions of dollars in a lottery and is pretty much set can be broke within two years even if you do all this stuff if your relationship with yourself and and the understanding of money isn't right then none of that matters right because a either you're going to get it all and you're not going to spend it and you're going to sit on it and it's going to ruin your life because you're going to be fearful about losing it which happens a lot and I see this all the time people like they save money and they got several million dollars my parents are in this category they're great people they've got tons to go around but they won't buy a plane ticket to come out and visit their grandkids on the West Coast they won't fly first class in their 80s I'm like come on guys yeah money so spend it so I don't know my point is that it's not about the digits in your bank account it's about ultimately it's about love I think right it's about your relationship to yourself yeah this is why I love our conversations because we we operate in different worlds but some of the ways that we talk about are so similar I know people come to you they go uh I'm gonna go into buds training how many push-ups do I need to be able to do and you go okay uh yes you should be able to do a lot of push-ups but it's not really about that it's so much deeper and so they'll come to a great analogy by the way I love that thank you like what credit card should I use or should I do this or that I go okay I'll tell you that but really the bigger questions are the things that are going to help sustain you over the next 30 40 years and so I always tell people we spend our entire lives agonizing over three dollar questions what we really need to be focusing on are thirty thousand dollar questions and some of those are larger ones like asset allocation compounding but at the here's what most people don't get about money at the entry level of personal finance the questions are always about what what can I buy what credit card should I have Etc and those are fine you have to learn those tactics to get you going but at the highest level of personal finance it's always about who who can I take with me who can I show gratitude to who can I be generous to but it's hard for me to start with somebody and talk about generosity when they're just like what kind of credit card rewards card should I get so there's a little of both that we can do at the same time and guide people along to I think a more meaningful plane of talking about money yeah well I love this new Journal that you put together um and your your General brand catchy as all it can be is I will teach you to be rich but but I love that in the journal it's it's like a it's a process so you're giving people a road map and the road map is when I went through this thing I was like this is really cool with such great great questions great um processes to take you through most of it is really about redesigning your beliefs about money um developing new rules you know for habituating behaviors around money um navigating relationships and and how money you know it's like Health money and sex you you either make or break a relationship right those types of things so I'm curious because you you have eight chapters in this journal which is really more of a workbook how did you design the road map and and why and so like walk us through kind of like the road map of like why did you start here in the first chapter of designing your rich life and and end with the eighth chapter of making that even richer yeah how did you come up with that road map and what's the logic behind it you know I've written another book just the I will teach you be rich book which has now been out over 10 years over a million copies sold and it's very tactical you know if you want to know what to do with your money that's the book to get and what I have realized is there are some people who will simply never buy a book that has Roth IRAs in it they're just not gonna do it and that's okay that's like that was kind of like when I when I got Tony Robbins book uh money right what was it called yeah the unshakable yeah yeah um there was a lot of tactical stuff in there and you know you know I kind of got lost in it exactly but I got lost and if you got lost in that book just imagine other people who who may not have as strong of a North star so what I realized is that there are some people who simply want to dream with money just dream they want to have an easy conversation alone maybe with their partner and the perfect example is something that my wife and I did during covet we were there we had a lot of time and we pulled out two sheets of paper and I said let's write down our bucket list but for this bucket list it's what are the things we want to do in the next 10 years that would make us have a meaningful and Rich life so we started sketching it out on our own individual piece of paper 5-10 minutes later we came together and we compared notes and it was a very joyful exercise you know it was like oh you want to learn Spanish that's cool oh you want to go skydiving that's crazy you you could do that on your own I'm out and just like back and forth and what we did from that was we picked two or three that were meaningful to both of us and in a relationship what you realize is your rich life doesn't have to be exactly the same that is totally fine she has things she wants to do that I don't want to and vice versa but we picked one thing I remember that was very meaningful for us we had been inspired by a friend of ours who had a 10-year wedding anniversary in a different country and it was beautiful and lavish and they brought their friends and family and we realized we want to do that for our 10-year anniversary so we picked that and then I love dreaming but what I love even more than dreaming is making a plan so that dream happens and so we took a back of the napkin approach how much would that cost us both of us had numbers we kind of shared it with each other and my guideline for this exercise is Whoever has the larger number go with that because I want you to dream big so now what we did was we put a plan in place so every month we're putting money aside and we know that for our 10-year wedding anniversary we know exactly where we're going to be who's going to be with us what we're going to have as an experience that was where the book The Journal began which is to start by designing your rich life right and once you do that it becomes a lot more exciting to start to use money to live it that sounds the same like a visioning process so it's a 10-year Vision but you're including money in that Vision right your relationship to money how how it's going to make you feel what experiences and Adventures you're going to be able to have with it and then you can worry about the tactics of how to get there yeah yeah that's cool yeah it makes sense yeah I mean everything everything worthy really starts with a vision whether you realize it or not and it's more powerful when you can write it down exactly when I ask people what is your rich life I almost always get the same answer they go I want to do what I want when I want I and I I play along oh that's really cool so what do you want silence because most of us haven't thought about those Vivid details and what I'm really looking for when I ask that question is something that is unmistakably you you know right I want to take my parents to Italy I want to sit on seat C2 because my parents are older and I want them to have leg room and I want to eat at this place watching the sunset in Rome that's a beautiful Vision that can only be yours and in fact the more your rich life is calibrated and refined the more it will sound unbelievable or even crazy to other people that's the way it's supposed to be it's a custom made life for you 100 now having a vision um is great it's a starting point and it can take some time to develop that right it says I recognize that it's not as simple as a quick vision board you know correct it does take time especially you know the difference between creating a vision and visualization is visualization is kind of the practice of that so that you're you know you're iterating and you're adding energy to a vision yes creates this like magnetic pull toward it but one of the things that you write about and I think that's really important is that regardless of how strong your vision is if your beliefs about money are in contradiction to that Vision then you're just going to sabotage yourself yeah left and right yeah so how do we rewire our beliefs and how do we even understand what our beliefs are well you know I was just thinking about this yesterday so I was working out and I have a trainer and he pointed out that I have a tendency to overuse my shoulders when I'm doing certain exercises and intellectually I know that so I'm trying to be conscious of it but it pops up in Peculiar ways and I'm doing a certain exercise I'm not even thinking about my shoulders and there they are taking over for me and the same thing happens with money one of one of the most classic maladies with money in Psychology is scarcity I'm not going to have enough I need to save save save save save and when when we talk about it people can intellectually get it they go yeah I'm scared of money my parents were scared of money et cetera Etc but it pops up in Peculiar ways it might be when people think about their Vision they go I want to take a seven day trip to Blink and I might go that sounds amazing why only seven days and and it will just hit that them I never thought I could take a longer trip than that or um where do I want to eat I asked somebody I remember I was in DC I asked somebody what his rich life is he told me he likes to eat out I said what if you could quadruple the amount you spend on eating out and he made this funny offhand comment that I'll never forget he said I'd probably need to go to the gym more because I would be eating out four times a week and I thought that's a very interesting joke because it's very linear the idea that if you spend more on something you're just going to do more of it what about going to a different type of restaurant what about bringing your family or your loved ones or your friends and treating them there's so many different multi-dimensional ways to think about how you would spend money right but if you don't identify what I call your invisible scripts those invisible beliefs that guide you about money you're gonna constantly be ending up in the same situation that you've probably been in right what is um what are some of the other more common beliefs about money that can really hold people back or limit them in seriously I'm not going to have enough that's by far the most I'm not good with money yeah another interchangeable one is I'm not good at math right and the good you don't have to be great at math in fact if you can do basic Edition you know enough um uh that's not for people like me interesting that would be looking at a restaurant Etc and all these can often be traced back to certain phrases that you hear as a young child like money doesn't grow on trees um we don't talk about money in our family things like that and so one of the exercises when I have a chance to speak to people in detail is I'll say how'd you grow up with money what do you remember about money around your family what did your parents say and that often we are Guided by these scripts 40 years later that we never realized our parents knowingly or unknowingly passed on that's right so you've got to surface those and when you surface them you can poke holes in them and and um and recognize that they've been driving some subconscious kind of thinking and and which then became a set of rules for you correct right and so so first you attack the or route out the the negative or the unhelpful beliefs then you can begin to change the rules and when you do it the other way around it doesn't really work that well and this is kind of like you know the analogy would be back to the Navy SEAL right so if you've got a set of rules or beliefs about your your worthiness to be a Navy SEAL it doesn't matter how what your rules are around how often you do push-ups and you go to the gym and all that kind of stuff because eventually when you hit that Dark Night of the Soul moment you're going to quit that's right or you're not going to have the discipline to stay to stay at it so first come the beliefs and then come the rules what are some of the rules let's talk about rules like what are some of the rules that that keep people locked in poverty or poverty mindset and and contrarily you know how do we develop some powerful lever type rules that move us toward Freedom well so the deeper the well everyone who listens to you and follows you will know this intuitively because you really show people how deep you can get with your beliefs I still remember in San Francisco you're telling me about your mental dojo and how you've spoken to your mentors Dead or Alive thousands of times that's right and and when you interrogate those questions oh my gosh you can create your own vision and so that has stuck with me for many years and and I still come back to that idea um I think even the word rules has connotations typically rules are a teacher telling a child don't go to the bathroom don't do this don't use a black marker that's right and I got a negative energy to it for sure correct my money rules are positive so remember they're my rules I get to create whatever I want so I have 10 Money Rules everybody can Google ramit's 10 Money Rules and as you read these what I love about them is people start reading them and the first couple are very standard they're save 10 invest 20 type of stuff like that have a year worth of cash okay fine maybe that's a little more than most people but fine but then they get into much more of a a sharp edge they are mine one of them says um fly business class on any flight over four hours people go wait a minute what this guy what and that's because at a certain point I made enough money I said I don't want to have to think about it I'm just creating a rule and this is the rule another one I have is spend any amount of money on my health on appetizers and on a friend's charity fundraiser nice now if people yeah if people are watching that they go why why is this guy talking about appetizers that makes no sense he's talking about like all this other stuff and the reason is when I was a kid my parents immigrants from India we never ate out once every six weeks with a coupon and we would never order appetizers never it was not a thing we didn't have the money now when I go out to a restaurant it feels incredibly Rich to see an appetizer and say I can get that or I can even get two yeah and so for me I these are your rules they're not Universal rules that's correct but their build upon a universal rule of generosity of paying yourself of correct you know not fearing money uh experience and I'll give you a generous example too because I want to inspire everyone listening that your rules do not have to only be restrictive you might have a couple restrictive rules out of 10 I think you probably should have one about a savings rate rate and an investment rate I think that would be good for long-term Financial Health but during covid you know my wife and I started looking around at the people who were delivering food and we were like these they're out here taking a risk to their health let's be extra extra generous with them and I remember I ran a little calculation I said I want to tip five thousand dollars a year nice I know when I when I actually reverse engineered that's about four or five hundred bucks a month and if I'm only going out like four times in a month for coffee or to get some pizza or whatever boy that means I need to tip a lot every single time it essentially means I need to be tipping 20 bucks every time I go out and I love that I love that I can create a number for myself that is ultra generous and I can use my money to live in alignment so for everybody here I would ask you what type of person are you are you a generous person do you value relationships and whatever it is and then I say okay show me your calendar and show me your spending does it align with that if you're a generous person you can make a money rule for yourself to align with being generous and once you do that you know better than anyone else how it feels to live in alignment and that is a beautiful thing I love that one principle I think is a complete Game Changer I remember reading a really fascinating book you might have stumbled across a guy named Sheffield it's called busting loose from the money game oh I have not I'm writing it down right now thank you so check it out so he his it's a very kind of spiritual approach to money and and you know he he's fully versed in kind of like quantum mechanics and the holographic field theory that we are you know generally like humans are a holographic projection into this material realm and so so where where I'm going with that is like his belief is that when it comes to money and especially with um like this idea of tipping is that if we're in a holographic world then everything that happens out here actually is happening in my mind and so if I'm it's a projection of the mind so if I'm tipping someone I'm actually tipping myself so why wouldn't I tip myself amazing really well it's so fascinating I love that I have to read this book thank you for the wreck when I started talking about tipping the reactions I got were absolutely fascinating so I started talking about how I really hate cheap tippers I really hate them and I want to encourage people for what might be three or five dollars for you which I know my readers they've done very well financially it it means nothing to them but it can mean so much to the recipient that's right it seems fairly straightforward and the comments that came back many people very supportive very happy especially people from the service industry but one of the most common critiques I got was oh so you're saying that if I get terrible service I still have to tip 25 percent and I thought that was such an interesting reaction first of all if you get terrible service I'm not telling you what to do with your money it's your money you could tip zero sometimes that's okay but what an interesting first reaction to focus on what can go wrong that's right instead of what can go right right when I go because you have to consider that there's there might be a re you might be the reason that you're getting terrible service they don't think of that they don't think that but when I go out by default I'm gonna have a great experience and by default I'm going to tip 25 to 30 plus that's by default now if something goes wrong of course I can change it but for anyone who's a high performer in any field they're going out every night they are going to have an amazing performance whether you're a singer athlete speaker that's what I expect because that's what I've trained for now sure if things go bad fine I'll deal with it but by default I'm going to have an amazing experience every time I go out I love that that's cool there's two rules on this I uh on your on your list of 10 that I think are worth speaking about earn enough to work only with the people who you respect and like and marry the right person I think you're speaking to like how other people can really affect us when it comes to our beliefs about money and uh and so we want to make sure that we align with people who are aligned with our beliefs or rules right yeah exactly I'm not surprised that you picked those two out because there are some very crunchy tactical ones in there which you know they're interesting but if you earn enough then you can say no to opportunities that don't align and that might be having to fly and be away from your family it might be someone you're not philosophically aligned with um it might be a variety of things I feel very proud when I'm able to turn down an opportunity that would have made me a lot of money but it's just not the type of person I want to associate with because my reputation is everything and so to be able to be in a place where I don't have to say yes to everything just for the quick dollar means that I have preserved my integrity and um and then secondly for marrying the right person I mean it's one of the it is the most important financial decision most of us ever make and you don't have to be exactly aligned with a partner you never will my wife and I still see things differently when it comes to money and we work through it and it takes time still but if you are values align for example if you believe that we should save or we should um spend money in these ways but not these ways if you believe that if you work harder you can be more successful those values are really important to have alignment on with a life partner yeah yeah it's the biggest wealth redistribution scheme you know and never invented right there you go so you got to be careful that you you Choose Wisely there I'm curious um you know I think about my relationship um you know ice I could ask you a question let me start with the question what do you think about prenups and even post-nups great question uh I believe in them I have one and it was the Genesis of a lot of work that I started doing on relationships because we had such a hard time with ours um just just having the conversation is really hard for a lot of people it's it was hard for me so I I came my wife and I were both raised pretty similar middle class both our moms are teachers and it's just by virtue of me starting my business almost 20 years ago that I've been very fortunate financially and so when we got more serious um we sat down started talking about money by the way I violated my own rules I should have talked about it way earlier but okay we talked about it and eventually I I said to my wife now wife I said you know it's really important to me that we discuss a prenup not that I don't trust you it's that because of virtue of my business Etc I'm coming into this marriage with an amount and she was quite receptive to it actually I was really nervous and I just tried to explain myself and you know it's funny I I looked for advice on how to have that conversation and some of it really rubbed me the wrong way some some stuff online says that you should just blame it on the lawyer and I go how can I have integrity with myself it's not my lawyer that's telling me this it's me I believe this so we started talking about it and it was good it was good at first and then it was not good and it started getting complicated and the numbers started flowing and both sides had lawyers and at one point my wife now wife said to me we got to talk to somebody because this is not going well and she was right so we went to see a therapist and this therapist was very good she asked us a lot of questions and one of the questions I still remember she asked she said what does money mean to you and she turned to me first and that's the easiest question in the world for me I've thought about money every day for 25 years this is my business I said growth it's obvious compound interest four percent rule like I could see the numbers flowing in front of my eyes you know and then she turns to my wife and she asks the same question and my wife said something I'll never forget she said safety and and I could not understand that word as associated with money like the two words weren't in the same universe right so what do you mean and the way we fundamentally thought about money was different right and this therapist helped us understand that so with her help things got a lot smoother still a number of bumps in the road but at that time I really wished that we had been able to listen in to other couples talk about money because especially for prenups and post-nups there's virtually no good advice online it all happens behind closed doors right and um that's one of the reasons I started my podcast later with couples where I talk to them and you can hear them sharing real numbers and you know crying and laughing but at that time it felt very lonely and um it was a tough time honestly that's such a valuable thing that you're doing there because tell you what money has destroyed more relationships when the relationship wasn't working but maybe had a chance of Salvation yeah and then you enter in the the money that's accumulated through that relationship and all the beliefs like you said around that and boy and all the legal issues and Taxation issues it's a nightmare you know there was there was a a man he was roughly in his early 50s and he wrote me a message and he said ramit all caps please help my wife of 21 years is about to divorce me because I'm too cheap I need your help so I said okay he came on my podcast and I love talking to couples about money when they agree to come on they agreed to share all their numbers and they agree to talk about anything relating to money and you know if you've ever most of us have never heard a couple honestly talking about money we've only hurt ourselves so we're very much in the dark and he comes on and his wife of 21 years they're they're a nice couple he had asked his wife can you find a better mattress for our daughters so she spent like two weeks creating this Matrix with all these features and the mattress was like 400 bucks or something and he goes no that's too expensive now can you guess their net worth I don't know but you know the way you framed it up they're probably fairly well off they're worth over 10 million dollars oh my and you can't yeah so that's pretty classic it's kind of what I alluded to with like my parents like yeah they've got a lot of stuff but it was stuff that was kind of handed down generationally you know family business and some real estate stuff and but they've also saved a lot because they're you know they were they were part of a big boom you know if that we all kind of benefited from the from the you know this whole kind of Bretton Woods post-world War II you know baby boomer generated Capital boom you'd have to be like head stuck in the sand to not make money in the last 40 or 50 years right so they did but they won't spend it this is classic okay so I totally get it and when you when you tell them this they might even begrudgingly acknowledge like yeah you know we've we've done okay you go uh you've done more than okay you know the number of zeros that your parents have right but it's a muscle that has not been exercised in 40 plus 50 years and when you ask them like what are you gonna do with the money a lot of people like your parents generation will simply say I'm gonna you know leave it to you but the last thing we want to see is our parents handing US money if anything I told my parents I want you to spend every last century 100 I said the same thing I don't want anything you know spend it enjoy it enjoy it you have passed along lessons that have allowed you and me to be successful we don't need the extra money but I will say this um another couple I spoke to the um the woman was she wrote me saying should I retire from my job and of course this story becomes much more interesting she um she'd had a double lung transplant and she successfully went through it she has five years five to ten years left to live and she knows that she's concerned about her job should she leave it when she has five to ten years left and she has two young daughters she wants to spend time with I said why do you why do you stay at your job she said I like the income again what's your net worth something around 13 million dollars she can't spend the money if she tried and and so what I realized is you know many of us we have this belief we always our future selves are always perfect we work out in the future we to call our parents every day we spend our money dutifully in her case she has millions of dollars and a terminal illness but even she can't bring herself to spend it because she has never built that muscle up and one of the joys I get to do when I work with these couples on the podcast whether they have millions of dollars or whether they have eight hundred thousand dollars in debt and everywhere in between is to help them realize money is about more than what's in your spreadsheet it is your relationship with money and ultimately your relationship with yourself let's let's talk about debt you know and I I think um a lot of people are trapped with student loan debt you know my my stepdaughter has a lot and she's like it's just a real burden for her and I remember you know I I paid for my um MBA and and I got um halfway through a doctorate program before the Navy called me back to war and all that was in debt there's over 100 Grand and it chipped away over 20 years to pay that off but it was a huge burden yeah so how do we like what should our relationship to debt be is there good debt and bad debt and what is the what does debt do to our confidence and our relationship to money for a lot of people it's overwhelming it's devastating it they think about it every day of their lives right and you wake up and it's just this feeling in the pit of your stomach you open up your phone and you see a friend on vacation on a Wednesday and you go I can never do that because of this debt I have yeah and standards of living have been declining because wage growth is not there and the access to credit has been almost criminal right they used to throw you in jail for being in debt now they they literally push credit on you like it's you know like you have to do it and you're bad if you don't do it yeah so people get trapped they get trapped and you know when I speak to folks who have a lot of debt um and the funny thing is everybody believes they have a lot of debt but the amount they have can vary all over the Spectrum somebody will come to me they'll go you're never going to believe how much I have I go okay how much they go 20 000 of credit card debt like okay I mean I've seen it all I have another couple they have 825 000 of debt so the interesting thing is they both feel the same way overwhelmed right what I want to help them do is understand first of all how did we get to this position and many people so we wanna it's often the case that there are structural issues as you mentioned debt is freely available to 18 year olds Etc it's almost pushed on many but there's also an element of personal responsibility right you signed that document so let's let's understand both sides of this let's not blame anybody let's just accept how we got here and then the most important thing let's make a plan in all almost every case in almost every case I talk to whether it's ten thousand dollars of debt or 750 000 of debt there is a plan forward it may take some uncomfortable decisions but there's almost always a plan forward but what doesn't work is just ignoring it and hoping it goes away the most surprising thing I've learned is that people will worry about debt for 20 years of their life but they will never pick up one good book on personal finance and read it and that's gotta change they keep kicking the can down the road in fact I see you know back to the student loan I did a little study on this as part of my doctorate program it's like you know people will continue to take out loans to avoid paying off loans yeah because they can keep deferring and you know they can stay in school and then also they're hoping with all the talk about forgiveness and debt relief that it'll just go away someday yeah and and like I understand I understand looking for a lifeline and when people will come to me they'll often say do you think I should pay this off because I might get it you know canceled I said look maybe that will happen maybe not but a plan is a plan that you control regardless of external events right and and you should see the relief Mark when we make a plan together even if it might take 10 years even if it might take 15 20 years to pay off the relief in knowing that you have a plan and you can execute on it every single month is it's such a relief to people right and and just like with compounding and investing you got to stick to it because if you if you interrupt that plan yeah or if you get off track then you know oftentimes you'll find yourself right back where you began yeah yeah what about Mortgage Debt do you believe in I think I read that you don't own your own house and and you're a renter and I know it's probably very situational or personal but what do you believe in Mortgage Debt oh I love talking versus rent kind of story I love this because you know we both live in Southern California it's a High Cost of Living area so I have lived in San Francisco New York La I've rented in each of those places by choice all almost impossible to buy a home for a first-time buyer yeah correct for for the average young person it's essentially impossible to buy um and and I like sharing my example because I actually could buy right now if I wanted to but financially speaking it doesn't make any sense for me to buy so when I lived for example in Manhattan the same unit that I rented if I wanted to buy the same type of unit same intersection it would have cost me more than twice as much think about it let's just say in terms of mortgage interest pni and taxes and extraway fees and whatever maintenance all of the above these are what I call Phantom costs and in America we are taught that house prices always go up that's not true we are taught that renting is throwing money away to that I reply do you throw money away when you eat out at that sushi restaurant on Friday no and similarly you're paying your landlord's rent I you wouldn't say the same thing about your paying your restaurant owner's mortgage what what is important to do with this decision is to run the numbers it's the biggest purchase of your life sometimes it makes Financial sense to rent and invest the difference that's the key if you just rent and you don't invest the difference you are doomed you have to invest the difference sometimes it makes sense to buy and sometimes you run the numbers and you go I'm going to make a decision that makes no Financial sense but that's okay because life isn't only about numbers maybe you have a family maybe you want to redecorate whatever but you have to be fluent with the numbers when you're thinking about renting or buying a house it is a huge decision yeah I think a lot at least um you know when 10 or 15 years ago this may have made more sense but a lot of people looked at buying just as kind of like a force savings plan to know that just you know get a long-term amortization it's hard to you know find debt that was that cheap that had a 30-year amortization and uh if you you know you know and again 10 or 15 years ago it was probably easy to think well real estate will always go up yeah because it was and if you buy in the right place you know if I just stay at it and maybe down the road I pay off you know start paying two you know twice a month or two uh payments a month yeah and in 20 years and I'm going to own this thing free and clear and that's like gives me a lot back to people who are security and safety yes conscious with money that that feels good to them you're right there's a lot of feelings again in America real estate is religion and that involves feelings um I I love everything you said is true I'll just point out that 99.9 of people in America do not know what the word amortization means so you know they don't and if I pointed out that the first 15 years of their mortgage they're essentially paying interest it would blow their mind right but these are things that we've got to learn before we make these huge decisions yeah and that's that's where people got really tripped up with the refinance boom you know before the 2008 crashes that's correct kept keep refinancing keep resetting the clock and so but you know we haven't paid any interest off you own the house for 10 years and and you gotta you've still got a 30-year loan on it because you thought it was a good idea refi and you haven't paid any principal now see everything you're saying is quite complex to the average person they don't what they know is very simple it's almost childlike I buy a house I pay the house off and then it's free that is essentially how people think about housing and that's what the industry preys on they don't talk about amortization they don't talk about refi's they don't talk about Phantom costs and total cost of ownership they say you want to have your own house it's the American dream and what I would say is you decide what the American dream is for you you don't let anybody else certainly not a mortgage broker tell you what the American dream is I love that that goes back to kind of creating your vision and your relationship with money and be careful what you're told because there's a lot of misinformation and myths like you said about that's right so to get to the bottom of it understand your relationship develop a positive relationship with money which means you have to have a positive relationship with what you were taught about money and to eradicate the old negative beliefs that were handed to you by your parents like a gift and they're not serving you and um and then set up some new rules and then and that's where you get into the tactics and once you do all that work then you get into the tactics then it's easy it's fun at that point you go oh my gosh yeah exactly if I fiddle with this if I increase my savings rate one percent per year I can be a millionaire seven years faster and it starts to become a game that part it's fun for most people when they think about money on the first time it's it feels heavy it feels like an obligation it kind of feels like going to the gym for the first time but once you have a vision of what you want to look like and feel like going there is the easiest part of all right right I love that that's awesome really appreciate you doing this you know it's um I mean you dedicated a large chunk of your life to teaching people about money and and now that you're doing it with relationships I think it's really valuable a lot of people are gonna you can find a lot of value in that so thank you for doing that thank you very much it means a lot to hear that from you yeah I mean where do you um where can people learn about the journal and and where uh where can people learn about you if they want to work with you and come on your podcast and such you can find me uh the name of the journal is I will teach you to be rich the journal you can find it at any bookstore including Amazon Independence tours I'm on social media at ramit r-a-m-i-t and my website is iwt.com and if you liked listening to this I would encourage you to check out the I will teach you to be Rich Podcast I think once you listen to a couple of episodes you will really fall in love with the voyeuristic part of listening to other people's conversations about money and do and the podcast do you just like invite people on or kind of like train wrecks with money or do you invite people on who have done a good job with it as well no no we talked about well they're not all train wrecks no I some of them listen to me some of them don't because that's reality um but there's always something at stake um there's something there's a reason for them where they come to me for help and bear all their numbers so that's cool if you do like a before and after you know I was recently on um Daniel eamonn's um Tick Tock show hilariously I love that but he does like a brain scam in here do this do that to fix your brain and then six months later he has your back I could see you doing that oh I love that formulaic here you know here's your your assessment and then six months later come back and and you know tell us how you did that's we do follow-ups but six months later is one of our most requested and I think you've given me a great idea I think we'll do that right no extra charge thank you very much thanks so much for your time I appreciate it brother always a pleasure talk to you soon

Channel: The Mark Divine Show

Views: 17,807

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Id: h7ANTLDj2JY

Length: 48min 1sec (2881 seconds)

Published: Tue Apr 11 2023