Ramit Sethi - Personal Finance Basics

I was thinking about money as I was backstage and I was thinking about what we think about when we hear money advice and I don't know is anyone else tired of like 65 year old guys telling us we can't spend money on lattes if I tell you not to spend money on lattes in the next few days please kill me because we're not going to be talking about that what we are going to be talking about is how to use money to live a rich life so today we're going to talk about money management we're gonna talk about the psychology of money stuff that most people don't talk about what we find when we open up a money book what do we see anyone what have you seen when you open up a money book what's the feeling you get what do you read in those money books anybody know boring yes what else chart let me graph charts and graphs as if another mathematical graph is gonna make us be like yeah okay I'm definitely going to change my ways no and yet most people think that what they do is they totally ignore the psychological side of money all right so we're gonna talk about that we're going to talk about why we know we should be doing better with our money and yet we don't then we're going to talk about marketing entrepreneurship we're going to talk about how to take your creativity and turn it into income and then on the last day we're going to talk about careers so everything from interviewing finding out what should I do with my life to negotiating and by the way this works if you have a nine-to-five job this also works if you're negotiating with clients so let's say that you're a photographer or a writer and you are constantly getting clients who are saying like oh okay yeah why don't you build me that website for $78 you're like I don't think so this costs $12,000 so we're gonna talk about how to negotiate with those clients and find the right ones okay so that's going to be over the next three days and today we're going to start by talking about how to dominate your finances all right so let's let's get right into it what we're going to do we can have a lot of time for discussion we're going to talk here in studio we're going to talk with the folks we're watching online as well I wanted to start by telling you what we're going to cover so we're going to cover the psychology of money we're going to talk about how to save money I'm going to show you where you're going to be at the end of today but most importantly we're going to talk about living a rich life and my belief is if you you know you should find the things that you love and spend extravagantly on them as long as you're cutting costs mercilessly on the things you don't love so that's quite different than most advice which is no no no cut on everything and we're not going to be talking about that we're going to talk about how to actually spend more on the things you love as long as you're managing the rest of what you do okay so why are we starting with money one of the things we know has anyone here lost a lot of weight or gotten fit change their life in terms of health okay great did that have any other changes on the rest of your lifestyle done everything like what um what over the last year I lost 91 pounds so it affected the way people talk to me and the way they look at me and judge me just on daily interactions yeah and it changed my relationship with my husband it changed my kids my kids have lost weight now and it affected my fine and I had to buy a whole new wardrobe so it's effective absolutely every area in my life I love that congratulations why wouldn't am losing any one pounds amazing what we know from the world of psychology is that there are these certain areas of life that if we change them called Keystone habits if we change them they're actually able to affect a lot of other areas as well health is definitely one finance is definitely another one so a lot of us who are watching today or even who are in here we have you know full-time creative positions some of us have nine-to-five jobs and creative jobs on the side why are we talking about Roth IRA or automating our money because if we get this right then we when we wake up in the morning we don't have to worry about what am i doing with my money am i saving on this $2.00 entree right or can I actually focus on the things I love to do the things that add value to the world like creating amazing photos writing things that will move people and change behavior that's what we want to do we don't want to sit around worrying about bill pay it's just not worth our time okay so that's why we're starting with money because we get this right everything else can actually have the room to soar all right so let's talk about where we're going to be at the end of it i'ma show you a quick diagram here this is the money system that to me about eight year eight to ten years to build I'm pretty slow that's why I took how long but basically if I ask anybody who's watching I'd say what are you doing with the next hundred dollars you make most people would have no idea they'd say wow it's going into my checking account and then I'll just spend it and what if I said hey I want to take a trip let's go to Thailand at the end of the year most people would have no idea how to actually make that money work for them they'd be like okay I don't know I got a look at that and then they just go look in their checking account see some amount and have no idea what my students can do after going through this is know exactly where their money's going so I'm just going to give you a quick breakdown of this and we're going to go into in detail don't worry about the details right now basically in this system you get paid whatever that may be you may get paid from a client you may get paid from a nine-to-five job it goes into your checking account think of this like an email inbox right your email inbox is now filtering money where it needs to go automatically you don't do anything you're not sitting around writing checks no way it's happening without you doing anything the thing I love here is you have guilt free spending look at this guilt free means if you really want to buy a $250 pair of shoes 500 are jeans take $1,000 weekend trip to Vegas do it because the rest of everything is happening without you doing anything again you have to be able to afford it but I'm going to show you how to do that today tomorrow and the third day what's the point of this system and why are we talking about systems this is all about psychology because most who has believed and has anyone said this if I just try harder I can save that hundred bucks has anyone said that or they say you know what are the words we use if I just try harder I can lose those last 10 pounds let's actually go to the web as well and as we do it here what are the cold words that we've used to talk about willpower if I just try harder or I really need to get serious this month what code words have we used in the room I just need to figure it out great one love that that took us about six months to crack that code for our dream job course that we were doing I just need to figure it out what do you got I need to buckle down very good anybody else have any code words I've got a couple online we've got vintage Jones who is saying I just have to convince myself mmm good and honky Tonk says if I have someone hold me accountable yes interesting it's interesting that we want to be held accountable and yet when we think about it when was the last time someone actually held us accountable when was the last time someone actually said to you you know hey Mike I really I think you did an okay job but you really could do a lot better and I think you didn't give it your all this time what was the last time someone said that to us when we were kids probably very few people actually hold us accountable and we're going to talk more about psychology and willpower now we have a bunch more coming in yeah what's your share so we've got we have Don Lee photo photography says if I could just learn this stuff we have Portilla 1596 say if I only had a magic wand yeah it's a good code word that's a good one I haven't heard that one hey lipe if only I wasn't working so much oh yes I love that like a lot of creatives I don't have time to do marketing I'm just working too hard right okay this is a great one because I believe everybody has probably said this in their life yeah says if I could just win the lottery yes yes you know it's funny there's a there's a study done and they ask people like do you think you'll be rich and 21% of people believed that they would become rich by winning the lottery I was like why I'm going to kill you okay so so what happens okay so we talked about the system we're gonna cover that now where your friends will be in 20 now this is a half joking okay your friends are probably not going to be waking up and sobbing every morning uncontrollably but what we know is that we tend to put our money off until much later right I'll do it one day I'll do it when I have time I'll learn about this stuff later I'll start investing once I have some money to invest has anyone ever said that right which is so ironic because the way you actually grow your wealth is to start investing you don't just wake up one day I have a million - the bacon - okay I think I'm going to start investing today all of these things are code words for putting it off until another day it's almost like cleaning your garage nobody wants to clean their garage and yet you know what make you feel good will clean up all the cobwebs in your head and even in a garage but there's not some magical day where we're going to want to sit down and do our finances the beautiful thing is it's actually not that hard I'm going to show you how to eliminate most of the noise you hear and when you do it like I spend less than one hour a month on my finances okay and they run automatically like a finely tuned machine it's beautiful and thousands and thousands of my students do the same thing because they use that system so let me just quickly tell you why I'm talking about money what kind of weird Indian kid gets into starting to study about investments it's the kookiest thing so I my parents were very middle-class family we were pretty big family and my parents said okay you want to go to college that's great you need to get some scholarships alright so I am a weirdo in the sense that I love systems I'm not I'm not the smartest guy in the room I've never been but I loved systems meaning I could do a little bit of work and then kind of scale that massively and I think we all have that the dream of being able to do just a little bit of amazing work and then scale it so we can repeat it over and over and over again so I built this system to apply to about 65 or 70 scholarships and I started getting scholarships and I remember the first check I got was for $2,000 they wrote it directly to me I was like oh that sounds pretty good what am I good at salat of money for like a 17 year old kid so of course what does everyone do with their scholarship money they invest it in the stock market and I promptly lost half of it immediately I thought it was so smart so I said oh man I better learn how this money thing works and I started spending a lot of time reading all the books watching all the TV shows etc and at the same time I was studying psychology and persuasion at Stanford so I'm doing these kind of dual tracks I'm learning about money I'm learning about persuasion and human behavior and something doesn't add up it's almost like the emperor has no clothes because I kept reading stuff like keep a budget don't spend money on lattes and I look around and like no one is listening to that advice how many people here have her heard someone say don't spend money on lattes 100 percent of people in the room and how many people continue to buy your morning latte okay love it I love it and I approve you should buying a latte not buy lacks is a stupidest advice money people can give let me tell you why first of all it doesn't save you that much money there like if you this is the argument if you cut back on your lattes for the next 40 years that will add up to thirty two thousand dollars yes except I want to commit suicide every morning I don't have caffeine right that's what people say and by the way $3 is not in the grand scheme of things it's a cognitive tax instead of focusing on stuff that could save you a hundred thousand dollars which I'm going to talk about so I just I've sensed this disconnect and I started writing about money and I started trying to teach people money and people look they're like oh that sounds great I'll come to your free class and then nobody would show up why because it took me years to figure this out because we hate going to events about money because it makes us feel bad about ourselves right and if you buy a book on money what does that say about you it says I don't know anything about money I should know this nobody really teaches us this but I somehow should magically know this so I started this site I will teach you to be rich calm and I started writing about money in a different way away like you and I would sit around we'd have a beer talk about it I'd call people I said look that's stupid what you're doing or man like I just I can't figure this stuff out and over time I built the system that I showed you and I learned that like understanding how investments work and stuff that's important but nobody ever woke up in the morning and said yes I want to learn about the difference between corporate and municipal bonds nobody nobody cares right they just want to know what what are the words we use when we talk about money let me give you some examples of the throw to the web as well what do we say when it comes to our money how about I just crossed ten thousand dollars in credit card debt or I just had a son how am I going to pay for his college what are the words we use when it comes to our money anybody with the codewords failure I don't save enough if I don't save enough very good what else what else I go between there's never enough or there's so much abundance yeah where do I focus on reaping that in so I kind of go between listen good okay good so very different dichotomy okay good we think about money in ways that have nothing to do with an encyclopedia of terms I will never give you an encyclopedia of terms the same map because we don't care right it's like nobody wants to learn all the different ways to do an ab workout it's they just want a six-pack right they want the results I will teach you to be rich right we want to be rich we don't necessarily want to learn the difference we incorporated municipal bonds so yeah we got something from the web yes yes there's always that little delay so we have a bunch of users coming in what have we got we've got someone who's saying they're out of control love it out of control anybody here feel like that like your money just out of control limit yeah here's a Donnelly Photography says if the government didn't take out so much in taxes I could save a little bit right okay we're talking about that I believe that uh I don't necessarily agree with that but we'll talk about that okay gee a crystal says some of it just seems so complicated yes it does it does seem complicates it complicated yes again says money is the key word that will make me bury my hand in my head in the sand that's right okay so there's a lot of emotion going on with money and yet when we talk about money it's almost never presented with that background it's always like here's the mathematical chart duh and we just shut down because it doesn't resonate with us so I learned a couple of lessons as I started studying these two parallel tracks right and I want to cover these lessons very quickly the first is that you don't have to be the smartest person in the world to be rich and what why am I saying is because sometimes we think I just need to I need to learn a bunch more before I start investing right it's a very common belief that I need to learn a little bit more before I start it like a lot more like give me a couple years of reading these books of course do we read these books no but we put it off because I need to get smarter what we know from the literature is that even the fanciest Wall Street money managers they can't even the market 80% of the time let me say that again these guys are paid millions of dollars a year they can't even beat the market when they invest 80% of 80% of time they fail to beat the market I want to be crystal clear about that and by the way everyone in this room can actually match the market meaning you can get better returns than professional money investors we're going to cover exactly how to do that okay and I'm actually going to give you a few books by the way who here knows someone who's complained about money for like 20 years they're always complaining like I don't have enough money bla bla bla bla bla has this person ever read one good book on money ever no never they complain about it for their whole lives so like get a life you don't get to complain around me if you haven't read go read one book I'll listen to your complaints or there's everyone who has bought the books but they stay sitting on the show love that because you know what's funny in the self development world is so great people believe often that if I buy a course that that's enough they wash their hair I'm done I bought that course that doesn't do anything you have to take action and today the whole point is the difference between what we know and what we do that's that Nexus that we're going to be exploring today so I'm gonna give you actually three book recommendations that I really like these are not my books I think my book is great too but I want to give you three other books that I really liked as well okay so one is the smartest investment book you'll ever read it's a very short book great book on investing and it really exposes a lot of the hypocrisy of Wall Street it also shows you how individual investors should behave very simple stuff and the way you can actually significantly grow your wealth without getting scammed or tricked or having to learn a million different things about investing I love this book next one The Millionaire Next Door now this one is a bit at odds with my philosophy but I still like it and it talks about how many people think that to get rich or to grow your wealth you know you have to be running a hedge fund and you have to be doing all this evil stuff and that's actually not true that these researchers did studies of millionaires and they discovered how they grew their wealth and it turns out that it's very counterintuitive most people who are wealthy did it through systematic slow growth they didn't just inherit their wealth from someone etc they actually did it very slowly and they spent less on average than their neighbors like they draw it well you know for me you guys already know what kind of car I Drive right Indian people we only drive two cars Honda Accord Toyota Camry boom we only have two choice Honda Accord for me so they actually drive they drive these like very simple cars compared to their neighbor who actually drives like a much better car but they're in debt now my point of my system was when I said spend extravagantly on the things you love that is assuming you can afford it okay a lot of jackasses they're like well come on man I'm 26 I need to be driving a Mercedes like no no you don't okay that's a good book and the third one why smart people make big money mistakes this is a good one as well touches a lot on the psychological side of money okay again something that's totally ignored by most money people and I think we know that if we're honest with ourselves we think about how do we feel when someone talks to us about money it's almost feels like you know it's our it's like a parent lecturing us about something and it just doesn't connect right a lot of nods here why is that anyone could anyone resonate with that sarah has like a really nice freelancing career makes tons and tons of money and whenever he talks to me about these things I just feel terrible the conversation never goes anywhere because I'm not I have successful as he is in that way and so it's always sort of like hard to listen to one because I know that I can do it and I'm not doing it yeah um and so it always feels like oh it's it's something that he can do you know and it's sort of something that I can do very good who else who else feels like they've been lectured to yeah Megan but when that happens I feel so far removed from where that person is it's hard for me to kind of connect the dots and say oh this is the trail I could follow to get where you are right there like just put 25% your assets into a trust but like what what I'm gonna understand what those words mean what you talking about yeah we've got some from the web um actually this is from me personally um I generally feel like it's something because money is so ingrained in our lives it's something that I feel like I should just know right so when someone tries to tell me something I'm like get defensive like oh I should already know that and I don't open myself up to actually learn it and so that's the older we get the more we feel that way which is so weird yeah drew you know is now a professional photographer and I look at myself I'm like well why didn't I just do that or why didn't I have that idea and I kind of set you back even further than you already were because you you know you beat yourself up over an idea you think you should have had write something that may have never come to you in the first place a lot of what I'm hearing is comparisons we make to other people right and why didn't I do that or I should be able to do that or I'm smarter than that guy why is he making more than me right tons of stuff especially guys we love to compare ourselves to our stupid friends like this jackass that's just the way it goes right and women we women also love to compare themselves to other women in different ways I'll tell you a very interesting example I have a friend of mine who lost a ton of weight and she actually had two kids and lost more weight than her pre-pregnancy so she looks great and she went to her reunion just a couple days ago she texted me afterwards and said you're not going to believe what people said to me she said three independent women came up to her and this is what this is the exact phrase they used they said I just have to tell you I hate you you look so good now that's a very gendered look at all the women in here like kind of smiling it's a very gendered language to use a guy would never say that to it would I come up to you hey dude I just want to tell you I hate you you look amazing no never it's a very gendered thing to say so money and gender we're gonna tackle that later today but there are differences in money and gender that's that's I know that's so shocking to say but it's actually very true we'll cover that as well okay so three great books I recommend but those are very good start with that

Channel: CreativeLive

Views: 292,321

Rating: 4.6119404 out of 5

Keywords: cL, 1210, RAMIT, D1S01, Intro, HD, Ramit Sethi (Person), online classes, online courses, online training, business strategy, Personal Finance Basics

Id: wvLafhB_xBU

Length: 21min 17sec (1277 seconds)

Published: Thu Oct 18 2012