Money Habits: How to Create a Rich Life with Ramit Sethi and lewis Howes

and this is a key thing I want everybody to pay attention to everyone teaches you how to save money but almost no one teaches you how to spend it so what do high earners do with their money why do some people spend money on business class tickets I used to think it was stupid oh-ho we're all getting to the same place anyway and yet as you earn more you start to change your calculus of spinning and hopefully we can talk about some of that all right welcome everyone to the school of greatest podcast we've got my man we're meet safety in the house it's not good to see you man how are you very excited man I'm back in New York it's always good to be here I have so many memories of us like eight years ago walking around the city yeah basically eating kotti roll cuts here old man - oh my gosh I haven't been there in years McDougal and bleaker check it out so good so bad for you that's so good it's so good and just running around in Union Square just like hanging out with street performers man I miss you out here I know man I got to come out more often I love it here ramita has been on the podcast before we'll link that up but I'm excited about this one he's got a book that's 10-year edition coming out soon but you can get the current edition it's called I will teach you to be rich no guilt no excuses no BS just a six-week program that works and I always talk about how I got out of debt is with this book I read it eight nine years ago and I had college debt I had some credit cards I was still kind of like figuring out what do I do with my money and transferring it over and stuff like that and I read this six week plan got out of debt now I had them cash to get out of debt as well but I also just got structured with my life and my finances and something crazy happens when you get organized with your finances and your money it's like the stress starts to go away or there's new type of stress which is like learning how to make more and learning how to manage it better once you have more but the stress went away from feeling like I don't have the control in my life in this area because they don't teach you this in school no they don't and thank you for sharing that because you know I sit here and I write this and I write my emails to my email list and my social posts but it never gets old hearing a real person in front of me telling telling me how they use the book to change their life game travel around yeah I appreciate that because you know a lot of this money is not just money like it's great that you can have $20,000 in your bank account or many of my readers they use this it came out in oh nine they did exactly what the book said and now they have hundreds and hundreds of thousands of dollars which is amazing but I think the more meaningful part of is they start to realize wow I can use money as a tool to create a rich life money doesn't have to be this thing that's bad it doesn't have to be this thing that everyone tells me what I can't do no lattes no jeans no nothing I can actually use it and if I want to fly business class I can if I want to buy something really nice for my parents I can and you start to almost open up your life and realize oh money's not holding me back it's actually amplifying what I really want to do I want to talk about two different things today one for those who are earning a lot of money what should what should they be doing with their money because there's actually a new problem once you earn a lot of money if it's just sitting in a bank that's actually a bad thing I think totally you know already talks about it yeah no one really talks about it so there's a lot of high earners who are listening so what are some of the things and listen there's a lot of things you can invest in there's a real estate there's stocks there's you know starting businesses you can invest in other people's Lewis Howes conference there you go yes seven of greatness you can invest in a lot of things and then I want to talk about that what are the high earners do with their money how can they manage it at a high level how can they save taxes how can they do all these other things to really earn more and save more and then also for those in the I guess hundred thousand and below range a year what can they really be doing so they don't feel so stressed and overwhelmed about their money because they're probably a little bit in debt using too many credit cards maybe they're buying too many things that they shouldn't be buying at that stage and they're behind in their finances or they feel overwhelmed yeah so I think I want to start with the high earners first okay because you've been good at a teaching this to kind of like the 60 to $150,000 a year earner this is kind of like I think that book is in that range when you say maybe up to 200,000 I think so but then what happened was the people who followed the advice started making more they're ballin they have hundreds of thousands money I don't know what to do that's the challenge it's it is a challenge because you can't really talk about it online no you go on to read it and everyone's like oh I you know I rewarm my oatmeal nine times and I can get a lot out of it it's like I don't want to take advice from your oatmeal warmers all right and then if you talk about it publicly people are kind of like dude boohoo what a jerk and actually you know look if you have been successful if you followed a program whether it's my program or anyone's program you've invested you've saved you now have new challenges and your biggest question is what's next like I sort of won I won that game of personal finance what's next I'm not in debt I'm not in debt so 99% of advice doesn't apply to me and people telling me you know I should I should cut my pieces of bread in three two say no that doesn't apply to me because I have earned and saved a lot so then then you start to say what's next am I missing something and finally and what I think is actually a highly advanced question is what do I do with this money not and this is a key thing I want everybody to pay attention to everyone teaches you how to save money but almost no one teaches you how to spend it so what do high earners do with their money why do some people spend money on business class tickets I used to think it was stupid oh we're all getting to the same place anyway and yet as you earn more you start to change your calculus of spinning and hopefully we can talk about some of that you know what's interesting is I just I used to sit in the back middle seat coach Southwest or like American whatever the cheapest flight is what I would look for and now I look for only first-class or business class I'll just say business class and I look for can I get it for free can I get it with points nice I don't wanna pay still for it but I do sometimes because like for example I just went on a trip to this event called 2902 9 which was you hiked for 36 hours the equivalent of Mount Everest you go 22 miles high he was in Vermont a couple weeks ago and I'm still recovering from it my legs are sore still and I said to myself before I went to this event I was ran out of points I was out of points but I was like I'm gonna pay for a first-class flight or business class cuz I don't think I may be able to move my legs yeah and I'm gonna be so uncomfortable in this five-hour flight and the way back to LA like I need some space yeah and it's gonna be worth the price for the flexibility and freedom in that moment I don't care if I could have bought a laptop with that money that's why you should think like it's $1,000 for a flight I can buy a laptop with that we can buy a new iPhone now it's more for me about like do I feel good am i recovered is it my gonna feel good when I get home so I can work harder and earn more yeah that's the way I think I love that and I want to unpack a couple of things you just said in that example first off when when anyone says you know I bought a business-class ticket notice the almost instinctive reaction so what a show-off and all these other things that go on with it and I want to challenge people I have this principle I call the d2c principle and it instead of being derisive and saying oh so stupid that's ridiculous I would never do that I actually want to encourage everyone to be si curious why would a guy like Luis intentionally spend money on a business class ticket and he earns good money he has a lot of options he must know something that I don't and I want to understand why so from D to C and if you start to take that perspective especially on high earners and how they spend their money all of a sudden you stop saying that's ridiculous or if I had a million dollars I would never do that instead you say why did that person spend on yeah and I want to know maybe I don't agree maybe you know you become a multi-millionaire and you don't want to spend on business class you just don't care but it's it's interesting that you do it and I'd like to know me yeah that's the reason I did it for that and on the way here I actually didn't have points as well for this flight all my points were used for booking first-class tickets for the the speakers at the summit of greatness so I used it all on that and so I I didn't want to pay for another first-class ticket or actually I think they were full so I said okay what's got the most room so I always do exit row yeah upgrade a little bit to get the exit row and have that legroom I think the question we're all wondering was is giant though when are you gonna get that private plane and then flying me out I was funny I was thinking about this actually last week I was like do I ever desire having a private jet yeah I don't know if I I mean listen I it'd be great to have so much money that you have to think about it you can afford a jet and you don't feel bad about it I think sure if I had that much money I would do it but what I care more about is knowing 20 people that have private jets okay so let's talk about this and having free rides with them whenever I want to yes so that's what I like more and that is actually very revealing so I want to share another principle we have which is this concept of money dials and money dot if you think about ten dials in front of you and each of them represents a different area of life that people spend on it turns out that each of us has one money dial that we love spending on and what you just said is extremely revealing your money dial I would be willing to bet is relationship oh yeah okay so relate so I have a friend Nick ray Nick gray loves hosting people at his house he every day he's trying a different party he's testing stuff he invites people over he does all kinds of crazy stuff he loves relationships that's his money now and a money dial the reason I say it's a dial is you you start off you know you maybe you have a couple people out to dinner and you as you start to get more money and more success you turn that dial until you're totally dialed in you have the perfect appetizer you have them perfect icebreakers you have maybe friends who have jets you're really turning that down there's other money dials the most common one is frugality most people actually focus on cost above all else and you can tell because when they buy something what's the first thing they say look at the price look at the price and then they tell everyone I got this for 60 percent off okay so that's that's right about how discounted they got it if you do part of their identity whereas for you dude I see your photos I see your conference your identity is about relationships now there's a few others there's wellness which is more and more common and you'll see people they have the perfect diet they have a chef they and I'm talking when they really dial it in this is the point when a full-time trainer there this is the point of an advanced personal finance which is you don't have to have a trainer when you start off right you can but you went you searched for five hours you found the perfect program but as you have more money you start to say I want better results I want fast results and I have money I'm gonna throw it at the problem mine my money dial is convenience mmm so I love convenience II - and I wake up everything's delivered to you everything's delivered I have a chef when I leave to travel I have this thing called travel protocol that gets activated with my assistant and my plants get watered my email gets handled differently I mean it's like I've been thinking about this for the last 15 years I'm a psycho but that's my money dial and I love it like so she'll pay a premium for that money dial exactly I could not care less about certain other money dials yeah other common ones that a lot of people watching probably have we're listening is travel so at a basic level people say I'd like to travel but imagine you've truly truly become more advanced and you've become more successful and you want to throw a lot of money at the problem because you value it suddenly maybe you're going three months a year maybe you are leading excursions I mean there's you can just expand your mind as to what you could possibly do beyond the typical eight days of vacation a year so I shared this with everyone because I like to challenge people to do something take a look at your spending from the last two to three months and ask yourself what is my money dial and your money dial is the thing that you love to spend money on it's the thing that gives you joy and it's the thing you you could spend endless amounts of time optimize and feel good about it and feel good about it and so the reason once you know your money dialed and it enables you to do two really cool things one is you can cut back on stuff you don't care about okay so if you just don't care about wellness or if you just don't care about travel that's okay you can cut the spend to that but I think the cooler thing is it allows you to take that money and now spend extravagantly on the thing you love which is your money now so if you're Louis suddenly you don't mind throwing a lavish dinner for your friends with a performer and all kinds of crazy stuff because that's your money time yeah no need to apologize for it so for everyone especially the advanced folks who have money you you got to think now you're at a different level you're not just trying to cut your dad you're not just trying to cut back you actually can spend on the things you love and that to me is really exciting to figure out your money dial and spend more intentionally on those things as opposed to spending a lots on everything exactly yeah well I mean for me it's fun you say that because I almost always pick up the check on every meal it doesn't matter if it's smoothie or like a few hundred dollar meal with a bunch of people it's like I always want to pick it up because I want to be investing in relationships I don't even know where I learned that I think I learned it because I was poor for a couple years and people used to always pick up my tab and I felt bad yeah but I also felt like man they really took care of me and I want to make sure that everyone else feels like they're taking care of around me I feel that way when I was a college student everybody picked up my checks because I would invite a lot of people out like I'd email CEOs and just be like I'm interested in what you do can we grab common poor yeah and you know nobody will ever let a college kid pay for true never and I and the truth is like they had more money than I did too but now I feel really fortunate that picking up a check whether it's ten bucks or a couple hundred bucks makes no difference to me but he can make the difference to somebody else absolutely I love them yeah the money dollar but I'm also always trying to save yeah I'm willing to spend but I want to save a lot if it's gonna be expensive I'm like I'm always telling my assistant like look for the deal look for the deal like even if it's a thousand bucks try to get it half off okay so that's willing to spend yeah but save me money too okay so that's that's a great point that I want to demystify a little bit about hirers a lot of folks think that once you make 250 K or 2.5 million whatever the number is that suddenly you're just throwing money around left to right and that's not quite correct it might seem like that because to spend say seven thousand dollars for a business class international flight just seems like oh my god that's so crazy but I want you to get more nuanced you're telling your assistant see I don't mind spending but save yes what I do with my financial system is I set a target each year this is how much money I'm going to save and invest and those numbers are aggressive there's that's a lot of going hard yeah every 10% 30 yes anywhere between those ranges and we have folks who want to earn correct yeah and and then remember whenever I make any unexpected income let's say I did a speaking gig or something yeah I might get myself some I might go out to dinner but the rest I'm just putting straight in an investment Wow okay so that money grows aggressively and I also want to remind everybody especially the entrepreneurs watching I know you have a lot of entrepreneurs you wouldn't believe how many entrepreneur friends I know who have a good business and they don't invest at all and that's a huge mistake what should we be investing in if you have a good business simple low-cost target-date funds is a great way to go entrepreneurs X long yeah index funds yeah they get a little too smart for their own good they say I could just put that money in my business and I always say look I'm glad you have a business that's throwing off tons of cash that's awesome most businesses don't last 80 years yeah so be smart give yourself a small plan B put 5k a month 10k a month whatever's appropriate for your level of success and hey maybe your business does really well that's awesome but maybe one day something goes wrong you always want to be prepared you never want to have your back against the wall so I just want to encourage everybody whether you're making 250 K or 2.5 million for the high earners here don't get too smart for your own good keep investing in save what are the three or four main things you invest in with that ten to thirty percent a year and does it change the year to year yeah I'll kind of walk you through for the high earners and then we'll talk about people 100 K and less so once you have a certain amount of capital you do have a few opportunities that you probably didn't have before everybody has this idea that you know the rich have all these crazy tax breaks and captive insurance and this and that and I've looked into all that stuff right I know all the insurance companies and all these other things yes here's the truth the truth is is a little sketchy but yeah definitely and I'll say my core values are that when it comes to things like taxes I love your principle on this I'm very conservative I'm like dude only in this country could I have been this successful I love this mindset I'm happy to pay my taxes it means that I had the opportunity to create something great and if I pay an extra five thousand or thirty thousand doesn't change my life at all and I want to be able to give back to the society that enabled me to do what I do that's the powerful mindset and it it gets you away from you still want to optimize tax breaks that are out there but it gets you away from trying to constantly look for some of the shortcuts or like schemes or something it's like yes I've always found that the people especially entrepreneurs who talk about tax breaks all the time are typically the most unsuccessful ones two reasons one why are you talking about tax breaks instead of growing your business and two it's a very scarcity-driven mindset oh I only have this much that I have to protect when really you can just grow the pie and your taxes are simply a proportionate more just make more now yes you do want to optimize and take advantage of all legal tax breaks so as you earn more you do have more opportunities you have not only your 401 K you have all kinds of advanced IRA options you have HSAs you have a variety of things but at a certain point if you're making enough you're gonna max all those out okay so what you do when you're max well so then the next step is to simply create a taxable account it's just a typical non retirement account just that Vanguard or where I use Vanguard whatever you want and you just continue to invest so that's one and that's gonna keep making you money over the long term it's just you're not going to get those tax breaks from a 401 K an IRA etc the other thing is as you accumulate more and more assets you're gonna start to notice a lot of different people are gonna come with opportunities like dude I get text messages from these crazy strike okay I'm opening up a bar in Brooklyn I'm like I don't want your stupid bar I'm not investing in that I could burn my cash easier but you're gonna want as you start to accumulate a lot you're gonna want to do have a little fun with your money when it comes to investing so some people want to do crypto I think a lot of these people are complete nut jobs right okay look you creep put a little bit in there just to like have fun but I was like thank goodness I didn't put more in there because everyone's losing their money exactly and they're you know they're all okay I don't want to get into crypto cuz I'm gonna get a lot of angry emails hey if you want to email me about your angry crypto opinions just send it to trash and I will teach you to be rich but you know what I like what you said you took a little bit you had some fun that's so fun five to ten percent once you've got all your their stuff automated you've got your index funds lockdown HSA your different accounts I don't have any problem I think you should take five to ten percent and you should have some fun with it for me I did angel investing and I basically learned that I suck any money have my deal flow sucks my choices were okay some hit most didn't and basically just wrote that money off but it was fun and it allowed me to have an outlet and you learned I learned to me people and you yeah yeah so if you want to do crypto if you want to invest in somebody's bar you want to do angel investing if you're qualified etc be my guest but don't jump to that first get all your stuff automated and at a certain point the compounding is so insane you will start to actually earn more from your investments than you will from your income even if you're making 500k year from the index funds you're talking about if you're investing in that what if the markets going down or up to even worry about that let's say you put a half a million in yeah it went up one hundred thousand over a couple years but then it went back to the original investment should you be like oh my gosh I need to take this out do not do that I'll give you a real example two years of my money into this and it's still the same amount just left in the bank no you shouldn't have left it in the bank all right so this happened to me just about two weeks ago so the market went down and I hardly ever log I log in about once a month tonight and really you should not be checking your investors every ten years once a month is good and like don't you're not a day trader okay so so I happen to log in and I saw that in the 11 days of that month in one of my accounts I had lost $75,000 okay so for everybody listening yeah how would you react if you lost $75,000 in 11 days most people would be freaked out they'd be freaked out they would pull the money out yeah which is exactly the opposite of what you should do that so everyone says this common thing and they just roll their eyes o buy low sell high but in reality they actually buy high and sell low do you know what I did I did nothing I logged in I felt no emotion it wasn't like my life is over it was like watching someone offer me concrete to eat like I felt nothing I'm like that's fine whatever I just closed the window the key there is every month my system is automatically investing it's called dollar cost averaging just automatically investing and you should set the same thing up - you shouldn't be paying attention manually you shouldn't be sending a check it just works automatically and so I knew this month market is down and if you think about any other thing you buy if the price of toothpaste goes down you're happy if the price of milk goes down you're happy the only time we get weird is when the price of the market goes down and then we're like oh let me pull all my money out bad move the price went down if you're young and you have a long time before you need the money you're getting the market energies excited you should get excited so I just said great it went down fine doesn't bother me and I just closed the window and a few days later my system will just purchase it again so it's up its down it doesn't matter in the short term but over the long term we know that the market tends to return about seven to eight percent over time but oh but it can go up you can go down and say you do not want to be paying attention in the short term let's say you've got a half a million to a million dollars extra cash okay laying around you've maxed out all your IRAs you've got five to ten grand a month going to your index funds you've got you've dabbled in the smaller investments and startups and you've kind of you've done it all yeah got a little bit of crypto you've tried everything what you do with that extra million dollars a year okay great question first off this is like somebody saying to a fitness instructor you know I've done everything what should I do next and that you know what that fitness instructor is gonna say they're gonna say when you say everything what do you really mean like show me Dee are you doing foam rolling are you doing this yeah are you all balanced for the person who's doing this I'm gonna give you your answer but I'm gonna first say are you sure have you planned out so you know that ten years from now you're gonna buy a house do you have a 20% down payment set aside I do and I have no plans to buy a house any time soon but I have 20% set aside for a house a moment yeah yeah for when I so I already plan for what I know is coming even though I have no interest in it today what about the first year of your kids life do you have that set aside what about XYZ are you taking care of your parents when they get older one thing that I really love to do is talk about relationships so I love to invite my family once a year for a big big vacation where we can all stay in a house and there's a you know like a chef and all this stuff and we can all be there and the kids can be playing is that something that's important to you or all right so plan for that now if you've done all that stuff you got your six month emergency fund you've got your investments automated on autopilot and you still have money left over you're in an awesome position and now you can do a couple of things one if you want to keep growing that money you can simply invest it in a non retirement taxable account and that money will grow like crazy if you're putting in ten twenty K a month that money will turn into massive amounts and you can if you guys don't believe me just go search for compound interest calculator Bank Rate has a really good one and plug in 20k a month for ten years and that's it just stop and watch what happens and seven eight percent yeah at seven percent returns and watch what happens it is it becomes like an a tsunami you cannot stop it so that's one the other thing is if you want to invest in a little bit of fun stuff if you're like hey I want to take 10% of this and invest in like this crazy investment my buddy's starting a thing go ahead just be prepared to write it off maybe it works maybe not and then from there you should also remember a third thing and nobody really talks about this maybe it's time to increase your quality of life maybe instead of staying in the middle backseat time to upgrade to the exit row right business class business class or maybe it's time to eat at a different restaurant maybe it's time to really think about your money dial and say hey I always claim that wellness is important and yet I'm still eating like the same old thing I used to eat ten years ago maybe it's time to upgrade what I eat and and where I workout and all that kind of stuff my my gear you can do that you've made it you already won the basic game so now you get to benefit from it what about real estate there's a lot of people you're there I hear people that are all-in on real estate investment or they're kind of like all-in on the market yeah I think that real estate so a lot of people gonna hate me after I say this I know you guys have all been told since you were like two years old real estates the best investment ever and it turns out that's not really true a couple of things that might surprise buying one home if you're buying a house and living in it if you're buying multiple you or buying multiple homes and that's your business yeah it might be a better man correct let me make the distinction so most people in America are told that the American Life the American dream is graduate from college get married buy a house white picket fence 2.5 kids and you made it and I think we all just have to look at people who are a little bit older than us to realize that might not be our American dream we might want to travel more we might want to work remotely I mean here we are in the middle of a weekday yeah chit-chatting and sharing with millions of people this is our dream so I want to challenge people to really question what you've been taught that's number one number two most people who buy a house and live in it think that it is the best investment but most people have never read my piggy bank yeah they think that they don't understand that when you spend money on a house you've incurred tons of phantom costs you have taxes you have maintenance you have all kinds of things that you don't count and if you actually factor all those numbers in real estate often in fact many times is not a great investment at all it's a place to live and you have these phrases like you're throwing money away on rent it's not true your landlord is making a profit otherwise they wouldn't do it that's not true your landlord can't charge you whatever they want they can only charge you with the Marberry yeah so if you search my name and real estate you'll see all the numbers played out now on the other hand if you are a real estate investor and you're disciplined that's a different story and that can be effective but mom and pop who are thinking that they bought their house in 1970 for $200,000 and now it's worth six hundred thousand they think they made four hundred thousand actually not if they had taken that money and put it in the market they would probably have much much more really yeah Wow and less headache way less headache well depending if they looked at their investment every week maybe they'd be more stressed up through the level that's going up and down yeah yeah so and listen if you I will buy a house one day okay so I don't want anyone to think that I'm telling you never to buy a house yeah if you want to rent for the rest of your life you absolutely can many people in New York San Francisco and other high cost of living no there's no shame in that I rent by choice I could buy a place tomorrow and I choose to rent why do you choose to rent after you've been here for ten years and you've been renting the whole time yeah on purpose and how much is that do you think over half a million dollars oh yeah it's a lot of money I roll over I rent a nice place yeah why do I do it because could have used that money in something else you could have put it in I did I put it in the market and I made more and we didn't put it in a home correct where was a lot more money upfront it was more money upfront I used that money instead I put in the market but there's also other reasons too I couldn't get for the amount I'm paying where I live if I were to buy a place in the same building or it would be four times more expensive so that's the first second is maintenance I'm gonna give you an example I woke up one day and the doorman was knocking on my doors like 8:30 in the morning on a Saturday he's like sir sir do you mind if we come in and take a look at something I said okay and we go into the living room and there's a pool of water just sitting there in your apartment yeah it had dripped down three levels so I was like oh my god they're like sir go back to sleep we'll take care of it that day they came they repaired the floors not just of mine the ceilings for the next two levels down that's probably likely to have costed them let's just say 50k maybe 100k cuz its Manhattan and it's a weekend service who knows that's not my if you didn't pay for it no and I and I said great that's their problem I'm going back to sleep man I got another hour of sleep here so I want every one you don't have to believe me you don't have to believe what someone else says all you need to do is run the numbers that is my only suggestion to you go to a buy versus rent calculator make sure you plug in all the fees not just the taxes the realtor fee if you get a bigger place you're probably going to get more furniture for it the HOAs or the yeah the lawn maintenance er yeah trash service yeah the key thing I think whether it's a house or investments my point to you guys is take your money seriously once you take your money seriously and you put some time in it whether it's this book or wherever you want to get your information you're gonna be better off for it you don't want to delegate this to somebody else I want you to understand it and once you understand it and you automate it you make a few good choices in life you never have to worry about lattes or appetizers yeah how'd you make the emotional shift when your when you started renting an expensive apartment you're like man if I added all this up after a year that's close to a down payment on a nice house and the Midwest Iram then they can buy a whole house in the Midwest you know what I mean yeah how do you emotionally rationalize that where you're not frustrated like oh gosh it's been ten years yep you can rowing this money away because sometimes I feel that way sometimes like man I just spent a lot of money these last few years let me ask you this but I like the freedom and the flexibility of not having to incur all those other yeah what do you like to eat you like strawberries no okay what do you like to eat it's a good steak and veggies okay steak once you when you buy a steak and you eat it do you feel like you just threw your money away on that steak I enjoyed it but it's where is it I don't see it where's my investment right in fact isn't it coming out in the toilet in a couple of hours it is yes so what are we talking about here if you get value out of mistake just like you get value out of renting now if you want to incidentally build equity that's great but remember you can also lose equity right now in Manhattan do you know rents are down yes and so are prices of houses if you want to buy they're going down every month a lot of people like oh my god it's so expensive sometimes but sometimes it goes down 5% 10% some of these neighborhoods are down 15% way yeah so a lot of people don't realize it in fact I did a survey of my readers I said do you think it's possible for real estate to decrease over half people said no they had never even thought about it so I wonder in 2008-2009 memories are short you would think they would remember but they don't I heard people do they had three houses they bought it they were destroyed financially they had their credit was ruined they had to give up these houses and their identity as an investor and three years later they're like I think I want to buy another couple of houses Wow it just goes to show I'm not saying they're stupid it's not that at all because a lot of people have gone through this it's the idea that the propaganda to buy a house more to follow a prescribed set of rules for the American Dream is so powerful that even losing your own houses doesn't change people's perspective so how do you teach people to overcome the emotional rationalization of blowing their money on rent okay it's funny sighs that story you just told what yeah helps me I'll tell you what I I want to acknowledge it it's real because it's a fear that people live with yeah and I'll give you an example like I call it the handshake effect and it's when people would come over to my apartment and for the first time and they would say wow this is an amazing view and then they always say the same thing in New York do you own this place hmm and we're about shaking hands right it's like we just went it just how much you pay yeah how much you pay what it's classic New York and I say no I rent and it's that moment where if I had said I bought they would be like this really cool yeah and you kind of get this price right yeah and then I and then when I don't say that they get really confused cuz this is the I will teach you to be rich guy but also he rents and I thought renting is for people who can't afford it but you know if they don't understand and they give me this look and I realized that so many of us are looking for somebody to approve of us while we are shaking their hands someone we don't even know Wow and so instead of getting your approval from somebody you just met 10 minutes ago or from your parents who probably are not the most sophisticated investors if you're watching this show you know you talk about greatness and being great means choosing your own path sometimes you might choose to buy I have no problem with that if you ran the numbers and you consciously decided sometimes it means you don't but if you want to live the life of greatness you need to be comfortable making different choices than what other people expect mm zing I like it man what do you have like a spreadsheet I'm just curious about how the way you think about your money you have a spreadsheet or some type of system where you're kind of have all these things logically mapped out where you know exactly where all your money's going and where you want to put it in five or ten years yeah in fact it's even more its scientific it's like yeah it's like Minority Report like I wake up and I just go yeah yeah this is what I did so my money dial is convenience okay so as I became more advanced I realized it was time to put on a new lens and I think this is really important for people many people when they're starting out they think that growth is linear that basically you know dribbling the ball I'm gonna use the sports analogy sure I'm on thin ice because I don't know anything about sports you know I dribble ten times a minute and as I get faster I'm gonna dribble 20 times a minute okay this is a horrible analogy just go with me at a certain point you're not just counting the number of dribbles you're actually counting ball handling you're you know you're counting whatever else you're doing with money it's the same you're not just creating a more sophisticated spreadsheet as you grow you're actually changing the way you think about money so I'll tell you what engine is you're reinventing you're not even using a spreadsheet so I'll tell you what I did I started off doing everything myself and that's what's in this book it shows you exactly how to go from I don't even know where my money's going or I have 5,000 bucks hitting my savings account to everything is running automatically and I spend less than 60 minutes a month on investing that's in the book but what happens when you get to the next level I'll tell you what I did I realized that it wasn't a good use of my time to be manually tracking anything even for 60 minutes a month because things had become complex I had multiple investments I have a business different account so everything you know all that so I found what what I call a personal CFO and what I did was I worked with them and I said here is exactly what I invest in here are my core values here's how I want you to deliver me information once a month so they created a basically a dossier they hand to me every month they said and it's in the format that I want why because I'm the boss and they're there working for me so it shows me a couple of core things what's my net worth what were any spending areas that I need to be aware of I typically have two spending areas that I track that that are more variable like sometimes I'll go out and buy more clothes that's a variable area for me I said look I love cashmere what am I gonna do this okay and then another one I think is eating out or travel aside from that all my expenses are very stable like I spend the same amount on stuff I've had the same apartment for 10 years like I'm not going crazy I'm I'd rather save my money and invest it and spend a little on the stuff I love we talk for 15 minutes each month and if anything needs to be changed they handle it so for a lot of people the next step is not necessarily just doing what you're doing but better it's actually a whole different way of looking at the problem where does someone find that personal what is it a professional CFO CFO for a lot of people the basic thing you can do to start with is to get a bookkeeper and you know we have this advanced personal finance course and we talk about how to find them a bookkeepers a good thing to start with if you've got a business or if you've got you know a few hundred thousand dollars a year coming in and you've just got a number of accounts and maybe have kids and stuff like that okay they can help you organize things as you get more sophisticated a personal CFO which can be part-time or if you're really sophisticated it can be full-time they can help you do more sophisticated things and they pair they work directly with your accountant your bookkeeper okay interesting yeah just going Craigslist look-see yeah you can do that the best place you do it is honestly you ask your friends your friends who have sophisticated networks right ask them what they ask them before we get into the the strategy for those who are making a hundred fifteen thousand a year and less on how they can really optimize everything I'm curious who are the high earners that you talk to for advice privately behind the scenes in the special secret rooms on the private jets who are those mega earners that you learn from I have a CEO group a CEO counsel that I belong to and we're really candid with each other about where we spend our money some of them are married some of them are divorced how does that play in relationships all kinds of stuff so that's one it's like it's like a New York group result of all over the world that's distributed we're all over the place talk Alon you mean a person both we meet in person twice a year and we talk on the phone about once every month and a half and I think that's important for everyone listening and watching which is have a group of folks that are ambitious and that want to succeed what's interesting is these guys aren't in my field at all I actually prefer that we're not talking about you know online stuff that's not the point we're talking about culture we're talking about life we're talking about relationships I think that's great I also have a lot of entrepreneurial friends who will share stuff just off the cuff we're hanging out and then finally you know my audience like a million readers a month and they're emailing me the craziest stories really they're telling me everything people are they crave talking about what's going on with money because no one else will Wow and so I hear the best stories from my readers and that's what I get to kind of bring to everyone else why is it hard for us to talk about money why is it scary and why don't we talk about it enough with our friends or family why is that there's one great study showing people would rather talk about their sex lives than their amount of credit card I think that's totally true it's three hundred percent and think about what money means it means that you were successful in this culture and I am here you know know people know me as the I will teach you to be rich guy and I have always said money is an important but small part of living a rich life just because you make more or less doesn't mean we're better friends not at all has nothing to do with that but it is important for people to be in control of their money whether they're making fifteen dollars an hour or $15,000 an hour and there are people I know who make that so that just simply shows are you in control of your life at whatever level you are it's embarrassing for people mmm they're never taught this and then suddenly they graduate and they're supposed to know what tax withholding is and what if a 529 and 401k and all this crazy stuff is nobody taught it to him so my goal here the reason I'm talking about this is for people to feel more confident about their money for them to take control and for them to stop being afraid and listening to random people giving them advice because I feel like it's hard when you're making 150,000 or less it's hard to talk about it and feel comfortable talking about it with your peers who are in the same category because everyone kind of feels embarrassed I know I felt that way for sure and if you stay in that space it's gonna be hard to get past it yeah so what's the conversation starter that someone who's making 150 K or less or very little what's the conversation starter they can have with a peer or a family member or a parent or a friend or a co-worker that's not gonna throw someone off but that's going to activate the conversation about money okay having the conversation if you most people don't want to most people don't want to and that's okay if you simply want to improve your own money do that and you'll become a role model to other people and I think that's probably the most effective way but if you do want to have a conversation you know what I would do honestly not to plug my own thing get my book get somebody else a book it doesn't matter get a book and say hey I I realize I need to learn about money read any book about my any book okay and does anybody here want to join me and let's do a little book cool so suddenly it's not it's not you and me talking about our money which really reflects our value in this society okay I use value in quotes it's let's talk about this book which is a third party in this dynamic and we can say I agree with this guy I disagree I really like to try this let's try this and like let's see him so suddenly it becomes an experiment as opposed to your worth X or my values why and that's really something you can move on together I like that yeah bring something else into it to the mix okay let's talk about the 150,000 a year and under people they've been you know working hard jobs they've been trying to save their money but it just seems like they haven't been able to get past whatever it is 50 grand a year hundred grand a year hunter 50k they've been kind of stuck or they've crossed 100 grand a year and more problems have come to them because they're making more and spending more yeah and they feel more broke than ever because they have no clue what they're doing with their finances still it's the end of the year they're about to start a new year soon and they feel overwhelmed or just clueless still about and educated about their money and what that what their options are for just being having peace of mind structure organization and knowing that they don't distress about it and they can go earn more and it's got to pay off for them what's a few simple things that they should be doing right now to have a checklist to do before the end of the year to then crush for a whole 12 months moving forward alright I'm gonna give you something called the ladder of personal finance which tells you where your money should go okay this is just step by step put your money here and if you want to know all the details about it you can check out the system so the book - it's in great detail in the book so if you've got some money lying around what should you do with it first of all if you've got a 401k match at work you shouldn't max that out that's free money take advantage of it and if you're not sure what that means go to your HR person and say does this company match any 401k contributions if they say yes do what I said next if you've got debt pay it off pay it off aggressively you know what's interesting is that most people in debt who I talk to you don't actually know how much they owe and that's shocking you would think of course they would know no they don't because who wants to proact aren't they're dead all day yeah and just feel bad about it yeah but you know what you feel much better when you have a plan and the number one question I ask folks when they tell me they have debt I say number one do you know how much you owe they never do number two for the rare people who say you know 15,000 or 70,000 whatever I say what is your debt payoff date you can actually plug it in you can pay plug in a debt payoff calculator online you can map it all out and you will be able to know the exact month your debt will be paid off based on how much you're spending right now based on how much you're contributing to that debt payoff now you will be able to see that if you add an extra 50 bucks a month or a hundred bucks a month that thing will actually oftentimes shorten by years because of the interest it doesn't matter if it's gonna take you three months or four years to pay off your debt doesn't matter to me what matters is that you know the date okay so that's number two pay off any debt you've got three if you've got money left over go to your Roth IRA and if you can max that out that's a great tax advantage to counseling grows tax-deferred right yeah yeah okay so that's three that's three okay it's actually post tax money and then four if you still got money you're gonna go to back to your 401 K which is another tax advantaged account you're gonna max that out if you still got money you're going to create a non-taxable non retirement account and just put your money in there now there's a few other wrinkles to this there's HSAs available there's also your emergency fund that's talked about in the book and all these things they're details but that just shows you when you've got money this is where you go there's a structured way of thinking about it latter towards a lateral success exactly and if you follow the steps it's almost like though like a waterfall it just goes from step one to step two to step 3 and your money's going where it needs to go automatically and you will feel great you'll feel great which is so important and also you're gonna look at your accounts and see debts going down investment and savings are going up and all of a sudden you wake up six months from now you're like oh my god I didn't realize I have that much saved in my savings account that's because of the decision you made today let's say you're you know working a job making decent money but you're not really breaking through and you're struggling to earn more to get out of that 50k year type of range maybe around there and all your friends are making the same amount all your peers are in the same boat and everyone's stressed about money and you hear someone say well you know you may earn the average of the five people you spend the most time with yeah should they cut all those five friends out of their life because like well you know my peers are holding me back if they're having those negative conversations or how can they start to level up yeah without cutting people out of it yeah I never encourage anyone to cut off their friends and I think that's a common misconception that you have to close all the doors to your friends look I've got friends from high school junior high that I still hang out with and I'm not judging them based on their bank account even know how much they make or how much they're worth that's not why I'm friends but the average of the five people you're surrounded with that is a very powerful idea and instead of closing the door on the people you hang out with why not open the door to some new people why not find people who go to your conference for example or who are on my side people who are ambitious who have gone through these programs and say you know what can we set up a weekly check-in it could be five minutes it could be over text but let's set up this check-in and just say what you want to do last week did you execute why or why not every week 9:00 a.m. Monday let's do it that's how you suddenly meet a group of people who are unapologetically in and that will change everything for you because instead of having to drag people to these self-development conferences and they say that's weird I don't want to do it the people you actively seek out gonna be like yeah I'm in let's do it let's do it that's powerful yeah so finding new communities that you can have these conversations with yeah and don't cut everyone out of your life but just start having those conversations with people that are more aggressive yeah like do you know what I told people to do on my Instagram account so I told people it's important to find other people who support you a lot of you are waiting around for some like millionaire to fall off from the sky and invite you to their private group it's never gonna happen never instead why don't you start it yourself and I said go into my comments write who you're looking for and then invite someone to join you like that you don't need to wait no one's coming to rescue you it's not a Disney movie nobody's coming it's only you so take control and go find someone and then build that together hmm I like that Cody working on the cameras here asks a really good question does my opinion on investing in real estate change if you live in the Midwest and I think the answer is yeah it can the calculus on buying a house in the Midwest is different than cities like Manhattan San Francisco and so again the message here is not don't ever buy a house but it's run the numbers to make sure that you're making the right financial decision because in Columbus Ohio you can buy a house for 200 grand yeah got a nice one there you don't you may it may be better do that just to have the peace of mind of your own space or whatever maybe yeah so another question from Cody here great one what is my opinion on Dave Ramsey's concept of the debt snowball so I think Dave Ramsey is really good for people who are in debt that's not really the folks that I speak to that often but I think he does a great job with them and what he talks about is the debt snowball is encouraging people to pay off their highest balance first right their highest bounce so if you have four different credit cards you're paying off the one with the highest balance whereas the mathematically correct answer is to pay off the credit card with the highest interest so he's actually taking advantage of a peculiar cork of human psychology which is that we want to a win right we want to get a win and it doesn't matter if we're paying a little extra in interest once you get that first credit card paid off you're gonna want to do the next one it's gonna snowball I happen to think it's actually really smart and one of the reasons that I think my book has done well is that it factors in human psychology yeah so I'm not telling you in the book don't spend money on lattes in fact I want you to spend as much money as you want on lot timers yeah one right after this exactly get your credit right negotiate your salary get a good job automate your money you can buy 10,000 lattes it doesn't make any difference at all and so whether it's the debt snowball or whether it's earning more whether it's automating your money you want to make sure that this advice is something you're actually gonna follow and that means you need to bake in psychology yeah I love it and if you guys want to learn more about how to earn more about how to negotiate whether it be rates or the other different things and other things that were meat talks about then post an Instagram story right now and tag out Lewis Howes and a true meat and say yes I want more of this and we'll do a follow-up interview sometime in the future talking about how to earn more how to build a side hustle how to do all those different things and negotiate rates better as well so post that in the Instagram stories right now at ra MIT and at Lewis house and let us know and also connect with us final thoughts man what's uh what's your definition of greatness my definition of greatness is deciding what kind of life I want to leap and then creating it unapologetically even if it means making different choices than other people mmm that's good that's good what's yours greatness is discovering the unique gifts and talents within you pursuing your dreams and using those gifts and making an impact on the maximum number of people in that pursuit love it wow that's more powerful did I ask you your three truths before I'm not sure if I asked you this in the last time you're on but I'm gonna ask you again okay if you could only share three lessons with the world you've got all these books and programs and courses on so many different things but if you had to take all that with you and no one had to it anymore you can only write down three lessons or principles or truths and this is all the world would have of your information left in physical form what would be your three truths man you put me on the spot here I know I like prep no okay I like it three principles our truce for the world on anything in life anything Wow okay my first one would be you can create a rich life through planning and unconventional choices my next one would be that you've got something to say and the world needs to hear it and the third one would be you could probably eat spicier food than you think I guarantee that I've had some spicy food with you that's good like Knology man I appreciate our friendship I've known you for what eight nine years yeah long time it's been it's been such a fun a journey and I'm excited for all the many fun times ahead but again I would not be debt-free as fast as I wore it was without your book so again I appreciate you as always I always talk about this make sure you guys get a copy I will teach you to be rich powerful game plan if you guys are looking to get out of debt but also a lot of those things that we didn't cover are in here so check it out tag us an Instagram atra meet at Lewis house thanks again appreciate is awesome appreciate you you

Channel: Lewis Howes

Views: 270,483

Rating: 4.842032 out of 5

Keywords: ramit sethi, lewis howes, the school of greatness, i will teach you to be rich, personal finance, ramit sethi interview, ramit sethi i will teach you to be rich, success advice, self help, finance tips, business success, self improvement, financial freedom, how to make money, wealth, cash flow, cash, finance 101, investing 101, how to invest, how to be good with money, money saving tips, how to become rich, how to make passive income, money advice, money interview, success

Id: Kaqe594uJIM

Length: 54min 54sec (3294 seconds)

Published: Sun Oct 28 2018