Kind: captions
Language: en
we have to be humble enough to recognize
you do not want to be a professional
money manager you even said you have
somebody you call most people just want
their money to grow they want it to be
relatively safe they're willing to take
a little up and down but they don't want
to think about it they spend more time
looking at a yelp review for dinner on
sunset than they do
picking their investments that is
terrifyingly true yeah and so instead of
fighting that let's just acknowledge it
hey i am never gonna sit here and read
all this stuff and by the way even if i
did that doesn't predict better returns
so i'm gonna pick a simple investment
strategy i'm gonna automate it and i'll
spend one hour per month on my money
done
hey everybody welcome to another episode
of impact theory i am here with
best-selling author and
the most practical financial advisor i
have ever met ramit sethi ramith welcome
to the show man thanks for having me
back dude this is round three yeah
so round two began at the beginning of
the pandemic correct and i had brought a
bunch of financial advisors on that were
like super high level i feel like now as
we're maybe coming out of the pandemic
but maybe not
that a lot has changed from gamestop to
crypto to wall street bets all that
stuff
do you think that we're living through a
unique moment right now or are people
just confused by something and really
it's all the same uh it's definitely a
different situation if you think about
where we were in 1999 2000 with the tech
boom 2008 2009 with the housing bubble
and now people will look back at this
time as well so we have um super low
interest rates we have a bunch of people
on reddit moving markets literally they
shut uh an investment firm down yep we
have uh crypto making
huge news up and down
and we also have a lot of people with
changing jobs um so what does it mean
for
the average person um
most good advice doesn't change over
time so should you be saving and
automatically investing yes should you
be thinking about the long term and
choosing low cost investments yes of
course low cost means low fees low fees
yeah yeah so for example a lot of people
don't know this um but anybody watching
if you go ask your parents this you're
gonna have a very shocking conversation
if you pay one percent in fees like to a
financial advisor a lot of people think
one percent no big deal over the course
of your lifetime guess what percentage
of your gains go to the person you're
paying the fees guess i actually don't
know i know the answer is high it's not
one percent people think oh one percent
one percent compounding correct if
you're paying one percent in fees 28 of
your returns are going to that advisor's
pocket over what period of time it's
about over like 30 plus years it's a
long term
if you pay 2 in fees that's over 50
percent of your gains going straight
into their pocket so this math is really
counter-intuitive a lot of people really
counterintuitive yeah i know it's true
and i still
get tripped up by that so i'll give you
a a quick story of a young woman who
wrote me on instagram
and she's read my book and she goes
ramit i think i'm overpaying for this
financial advisor but i'm not sure i
said okay tell me your information she's
31 she makes about 80k a year and she
was paying one percent i said cool
how much do you think over the course of
your lifetime you will pay in fees
and she had no idea i said just take a
guess she goes 30 grand i said okay how
do you feel about that she said 30 grand
over the next 30 years i feel okay about
it sounds fair
i said great let's do a couple quick
calculations
so
we run the numbers and i told her you
know your income will probably increase
a bit da da da your investments
it turns out she thought she was paying
30k in fees
she would actually pay
000 in fees so i tell her this and on
instagram she's like no no way this
cannot be real i go it's real
and so this is one of those things that
sounds really boring oh fees i'm you
know who really cares one percent
but you could take 300 000 and use it
to go out and have a blast buy a house
invest more spend it on the things you
love and so we want even in a time like
this where everything seems so crazy
it's actually not that crazy we know
what to do when there are low interest
rates we know that what do we do
i actually don't know like i am
horrendous at investing money yeah and i
always i'm good at making money yeah i'm
not good at investing money well you
don't have to be that good are you good
at like breathing oxygen
yes okay i practiced anyway exactly
because you've done it a ton of times
you don't think about it great investing
is not sitting there looking at some
bloomberg terminal and and choosing the
right stock it's actually quite boring
it is setting up automated investing
it's having the money flow where it
needs to go automatically and if you do
it right you don't even think about it
you spend less than one hour per month
on your investments
so here's what i find interesting about
you and this is the reason that i always
love spending time with you you're very
practical it's the advice that people
should do you also have a psychology
background so you know why people don't
end up doing it
the theme that i find most interesting
right now is how much things have
changed so it's interesting to hear you
echo that they really have changed
from the things that i get involved in
it may seem even more sort of
dramatically different than it really is
but i'll walk you through some of the
things that i think you're up against
with this very sage advice yeah but
we're living in a moment now where
investing is attracting younger and
younger people they have a sense the
system is broken
they don't know what that means but that
something doesn't work and so people are
trying to find that like quick flip that
quick buck you get crypto coming which i
heard you say you may have changed you
may have doubled down that people that
invest in crypto are crazy
i think crypto is [ __ ] interesting
yeah as the self-professed guy that is
not good at investing so take that what
is worth um but there's something
happening now between crypto between
gamestop wall street bets the way that
like
the collective of people can [ __ ] up
hedge funds like there's something going
on right now where there's a casino
mechanic
and people are getting
really into this casino mechanic like
even nfts which
i don't think of as an investment
vehicle but i am very excited about as a
technology but that's drawn me into this
world where i see just a gaggle of
people treating it like a casino
essentially yeah and
now that it's sort of high risk high
reward lots of fun ding ding ding
flashing lights
how many people do you think are getting
pulled in in a way that's
exciting like hey now you've got 17 year
olds creating youtube content around
investments which is real and i am
utterly shocked by that and how much of
this is like oh my god we're heading
towards a cliff
um
that's a great question okay let me
start off with what happened with my
first investments so here it is it's
around 1999 2000 everybody thinks
they're a tech genius you put money in
any stock it goes up 26 the next day
so what do i do i take my college
scholarship money and i put some of it
in the stock market thinking
this is easy guaranteed 20 yeah
guarantee and every day it's going up
and down but mostly up was there a
massive euphoria i wasn't focused yes at
all yes everybody
was
um everybody believed they're a genius
so in a bull market everybody believes
they're a genius and um they all say the
same phrase
this time it's different so far it's
it's such a funny phrase that in the
investment world people make fun of it
it's a they're mocked because it's never
different it's actually the same thing
bubbles expand
uh but over time they mathematically
cannot continue so here we have people
making
millions of dollars who would otherwise
be working in a parking garage and they
are giving stock tips out and telling
everybody you got to get into this jdsu
this you know all kinds of stuff
so i take my college scholarship money
put it in the market
and
i very quickly lose half the money
because of the crash yeah or because of
the crash and so what happens is i
realize oh my god i'm not as smart as i
thought it's not easy to become a
millionaire through investing in two
weeks and so here is where there was a
pivotal moment one i could have doubled
down and said
i just picked the wrong stock let me
pick another stock this is very similar
to what you hear with people in the
crypto world well my investment quote
investment dropped 50
but you know i got to do this coin or
that coin etc
what i chose to do is go different and
say you know what
i don't think i'm that smart about
investing and i actually want to learn
how fundamental basic investing works so
things like
low cost long term things like reading
about
john bogle's philosophy etc
and i started to learn about it and i
realized
you could spend your entire life trying
to trade
but traders
hardly ever make money over the long
term and if we were going to define
trade timing the market yeah it's like i
understand this stock yeah it's
undervalued yeah i'm gonna buy because i
know it's going and i'm gonna do it
short term right so i'm gonna create
this narrative that oh this stock look
at the trading look at the chart and i'm
gonna try to make quick money in in four
weeks everybody now knows somebody who
trades those people almost all lose
money you'll notice
they're your best friend when they're
making tons of money hey bro i made uh
600 in this stock when it goes down you
don't really hear from them okay that's
called survivorship bias those people
simply disappear but they're really loud
when they're making money
and you learn that mathematically even
top wall street investors over 80
percent of them don't even beat the
market what does that mean it means that
you watching this show right now can
pick a simple vanguard fund and you can
be over 80 of these fancy wall street
suits these guys were paid over a
million dollars a year
this stuff is really hard to believe
it's really hard to believe because it's
counter-intuitive like one percent fees
can be 28
out the door
um people also don't understand
compound growth so for example people a
lot of people right now are really
dissatisfied hey i don't have enough
money i'm not gonna ever be able to
afford a house and so therefore
i'm gonna have to invest in these high
risk investments that are pure
speculation
what what's really happening there is
they don't understand how compound
interest works in one year than the last
20 years combined because of the because
of compound interest yeah because of how
it works so is it really as simple as
one doubling to two isn't very
interesting two doubling to four is not
very interesting but when you start
getting to a thousand doubling that
becomes real interesting real fast and
it happens and we know that math
if you plug in your numbers to a
compound interest calculator you can
predict essentially down to the month
and year when you will become a
millionaire and the does that calculate
a doubling every seven years or is that
a made-up thing no that's you can choose
change your assumptions i generally
choose a seven percent return rate seven
to eight percent because historically
that's what we know happens and that
factors inflation in so at roughly seven
to eight percent your money's doubling
approximately every
ten years and people are going to get
that by putting in the stock market and
letting you know about it and just
contributing to it every single month
yeah 50 bucks 500 bucks 5 000 bucks
whatever works for you
that's how it works that's simple boring
so a lot of people watching this going
oh
this old guy this luddite
i prefer crypto it's really exciting
listen investing is not about excitement
you want excitement get a dog get watch
a tnt drama investing is boring it's
like watching concrete dry and it should
be the real fun is what you do with your
money how you live a rich life all right
before we get to that yeah i want to
like really drill down so i'm currently
not taking your advice okay and you can
legitimately just point out all the
things that are stupid okay but this is
my this is my fantasy all right go ahead
i'll give you my sort of thesis the way
that i think about it so um
the
because we're printing so much money
that scares the life out of me i'm super
ignorant when it comes to economics and
money so now i'm just operating on
emotion and i'm like okay people are
printing just like metrics [ __ ] tons of
money that does not seem like a
sustainable thing so i tell my money
manager hey i want to be as close to my
money buried in the backyard as humanly
possible she's like this is a terrible
strategy because of inflation like you
don't understand your money's going to
get cut but i was thinking sort of that
same thing one to two percent a year
whatever like i have plenty of time to
figure this out then i start listening
to michael saylor who's like a
that might not be the real inflation
rate it might be substantially higher
and when you get to i forget the exact
number of inflation but if it's like at
you
cut your money in half in like seven
years or something ridiculous and i was
like
what
so then i was like okay
now i'm paranoid about that but when i
look at the stock market and it's and i
don't know where we are today but it's
like it was at the time that my money
manager was like you need more exposure
to the stock market
i just kept thinking
i've made a lot of money i believe i
will make a lot more
i just want to protect my downside i'm
not trying to grow my money i'm just
trying to like
maintain my money and the idea of buying
into the stock market even dollar cost
averaging when it seemed so clear to me
this has to be available like you said
it just cannot go up forever so there
has to be some sort of correction and
the economy shut down so i was like how
the [ __ ] could this possibly but of
course now because i didn't have much
exposure to the stock market i had some
but yeah i didn't have much exposure to
the stock market it's like
up 28 yeah on millions 100 okay
let's talk about this so but am i about
to like be the one who's laughing when
this finally i'll correct well nobody
knows first of all nobody knows and if
you bring anyone on the show who tells
you what's going to happen in the stock
market they're an idiot and and or
they're lying so i'm not going to do
that nobody knows and you'll find this
in politics and money
a lot of people want to be comforted
by essentially a parental figure
somebody who comes in here and tells you
it's all going to be okay or conversely
it's all going to [ __ ]
and they prey on people's weaknesses as
to what's going on the best investors
are humble they know that nobody knows
anything what do we know we know that
over time the market continues to return
approximately seven to eight percent and
that's over a hundred plus years we know
that there are always people on reddit
and twitter who've got these fanciful
narrations of what's going on in the
world
and they all disappear once the
narrative is proved incorrect so people
have been talking about inflation
forever
this is very low inflation and in fact
even the recent inflation numbers are i
think over 30 of us due to used car
prices okay
if you try to
peg your investments to macro economics
you will be potentially losing out on
lots of money now let's talk about your
situation your situation is different
than the people watching this you
already have a lot of capital so if
you're somebody who's 25 30 35 and
you're trying to grow your wealth
that strategy is going to be different
than your strategy tom so let's break
them both down
for the person who's in the wealth
accumulation phase right they have a job
they want to make some more money great
the best strategy for them is low-cost
long-term investing take some percentage
i'd recommend at least 10 preferably 20
of your gross income if if you can gross
well
well i like to be aggressive if you
can't do 20 go ahead and do 10. we're
going to point them to a vanguard just
something real simple really simple no
no i've got feelings no individual
investors should be using rob is that
how robinhood works like their day
trading on your behalf or they're
encouraging you to day trade like they
are encouraging you to trade um and you
can see this through a variety of the
design principles that you use they give
you free shares
we don't want to be engineered into
trading trading is the enemy for real
investment returns we want boring simple
that's where the real money is made so
when i talk to my friends
who are high income earners and i ask
them you know we talk about their
investment strategy and they go yeah i
just have it all in vanguard i'm like
these are the people who have serious
money because the others have a lot of
earnings but they're trading at all and
as we know even one percent fees can
reduce it trading taxes those
dramatically reduce your returns so back
to our 35 year old friend
they want to accumulate some money they
say okay i'm going to automatically
contribute 10 15 20 whatever they can do
aggressively and at first it seems
really boring oh i'm putting like a
hundred bucks a month or a thousand
bucks a month that's not that much
but what they forget is that not only do
you keep adding that but over time the
market tends to go up and we know what
happens so your money isn't just
doubling every 10 years it's actually
much faster than that because you're
contributing more and suddenly they wake
up and they go oh my god that's a lot of
money and in three years i'm going to
have more money from that than i get
from my job
wow now you have some serious
opportunity you can choose whether to
work there start a business go part time
are there different vanguard account
types
so the thing that i really like for
simple investment is called a target
date fund if you're 35 you know that you
can just assume you're going to retire
at 65. you might retire earlier later
but just assume
and so you would pick a vanguard fund
like a
2050 fund what is that imagine you have
a pie chart
in that pie chart you have basically two
different kinds of investments equities
or stocks and fixed income or bonds
equities are more aggressive they tend
to outperform
uh bonds
what a target date fund does is you just
pick one fund that's it just one put all
your money in there and it automatically
um reallocates over how did i pick that
fund is it just like just by hp no no
it's just by age so they do it yeah so
youtube i just say hey i want to retire
by 65 i'm currently this age bingo and
then they will say i'm going to put you
in china no no no they say i'm going to
put you in the vanguard
2050 fund so 2050 means you're going to
retire in 2050. but how are they
thinking about that is this like the
world's most diversified portfolio is
that sort of their basic automatically
diversified so it has uh internationally
automatically diversified there's a
human in this somewhere even if it's
just a human programming a.i well they
have chosen to diversify in these target
date funds based on this criteria what
they do is they google head model yeah
yeah so they include value investing no
it's not it's not necessarily value
investing it is a 30-second breakdown so
when you invest a lot of people will
pick some stock that's like me going
over to your house for dinner and you go
getting some specific stuff yeah they'll
pick like this stuff yeah they'll pick
tesla that's like me going over to your
house and you go tonight we're eating
salt
what
that's not a meal a meal
includes your proteins and all kinds of
other things in your investment
portfolio if you just have tesla you
might feel really good you might say hey
ramit
nice investment strategy but my
investment's up 400
cool i'm glad but over time that cannot
sustain itself and so when that goes
down you want to have other investments
that that are going up and diversify and
again yes you may lose out on a little
bit of gains like if you had picked
apple or amazon that would have been
nice
but you have to remember most people
don't pick apple they don't pick amazon
and so the people who pick it you're
usually too late they're called mom and
pick something dumb yeah they were hyped
on it for summer that's why they're
called mom and pop investors that's an
insult mama ma and pa are the dumb money
the dumb money are random retail
investors who are sitting in their
basement using
e-trade or robin hood the sophisticated
people
are on wall street and even they
can't pick the winners
more than 20 of the time so
a target date fund automatically
diversifies internationally really fast
so follow the incentives this is very
good advice for people if i'm the guy on
wall street like i'll let this person
remain nameless but there's somebody in
my life that i know and love care about
think they're amazing and they
like to day trade it gives them a sense
of purpose they do a lot of research and
all this and i remember one day i just
thought are you up or down all time
you're like down and i was like what are
you doing
like if and they had been in it for 15
years yeah so it wasn't even like a
brief period of time and i just thought
that's so interesting it's like adult
baseball cards yeah you know what gives
me a sense of purpose
having a huge investment portfolio
what does that mean
i want a portfolio that takes basically
no time huge from a dollar perspective
yeah huge so i put it in something
really simple target date fund or a
series of index funds what percentage of
your net worth is in a target date fund
uh i would say not a target day fund now
i have index funds a series of index
funds as well as i've had a target index
meaning people don't [ __ ] day trade
it yeah it's like a group of companies
and grouped in some way 500 or whatever
yeah
it's basically what's inside of a target
date fund but just taken outside of it
um simple low cost etc over ninety
percent of my net worth is in index
funds so many different ballparks index
funds are you in
less than ten now is that because ramit
is more clever than other people and no
it's because it's because i have a
larger net worth so at home so you don't
want to cram it all into one thing
that's correct because at for 99 of
people a target date fund is a fantastic
investment why it's one place that you
invest you do not have to choose all
kinds of crazy stuff two and this is
really important it automatically gets
more conservative as you get older now
if you're watching this right now you're
like i don't care about that down the
road but think about it
when grandma and grandpa were in 2008
and we all heard these stories of people
losing 50 of their net worth overnight
those older folks should have never been
invested that aggressively a target date
fund will protect high risk things into
equities they should have had more
conservative investment bonds yeah and
so you would you do not like the kiss of
death right now no there's a big debate
about whether or not people should even
buy bonds or have cash or whatever but
you have to remember the average person
watching this right now
is not reading all the intricacies of
bonds versus cash and yields they're
like
i just want my money to go where it
should go so we have to be humble enough
to recognize
you do not want to be a professional
money manager you even said you have
somebody you call most people just want
their money to grow they want it to be
relatively safe they're willing to take
a little up and down but they don't want
to think about it they spend more time
looking at a yelp review for dinner on
sunset than they do picking their
investments that is terrifyingly true
yeah and so instead of fighting that
let's just acknowledge it hey i am never
gonna sit here and read all this stuff
and by the way even if i did that
doesn't predict better returns so i'm
gonna pick a simple investment strategy
i'm going to automate it and i'll spend
one hour per month on my money
done and over time i'm going to
accumulate a very very substantial
portfolio and i can take amazing
vacations i can provide for my family i
can have fun that's a rich life okay
this stuff gets really interesting but i
think there is a layer of complexity
that it's wise for people to begin to
pull back so um
all right low cost means low fees so
that's an important thing vanguard funds
are the place to start vanguard is great
i don't want to i'm not pitching
vanguard it's where i have a lot of my
money why not pitch vanguard i like them
i just don't i want everybody to know i
don't have a deal with them fair
no there are other companies that are
also great you can choose you know
fidelity has a lot of great low-cost
funds um
makes them great that they have the same
theory as the vanguard fund um no
vanguard in my opinion the reason i have
my money there is that the firm is built
on low cost so the entire dna of the
firm is low cost
there are other firms like fidelity that
did not start off like that they started
off charging high net worth investors a
lot of money now because of vanguard
they had to lower their fees because
they were getting eaten alive and so
they did add these things but they
always have this dna of let's charge
higher fees for high net worth people
now if you want to pay
let's talk about fees for a second
because i think this is interesting
i have no problem if you want to hire an
advisor and pay a premium price 500
bucks an hour 5 000 bucks for a review i
have no problem pay it for for if you
have a specific complex situation or
your high net worth you want a second
set of eyes great
most people would rather pay
250 000 in hidden fees
than pay 10 000 out of their pocket
do you realize how insane that is yeah
they would rather pay 250 grand in
hidden fees and even when i tell them
hey look at that one percent let's do a
little bit of math and i'll show you how
much it adds up to it's on paper it's
math they go
one percent he's a nice guy i go you
know i'm sure he's a nice guy take him
out to a baseball game and save 240 000
and go out with your husband or wife
that's
how crazy our psychology is around fees
so what's broken what what are people
doing wrong there psychological well
they do not understand the complexity of
fees fees and return rates do you think
it's just that like i'll tell you why
i'd make this very poor well you want to
delegate out to somebody else think
about it yeah exactly
well you don't have to think about it
though i do though there are realities
to be faced i mean that's the crazy
thing this is this is the root of my
obsession with you is that here's what i
want people to understand i am i am
clinging to your every word yeah but
you're still like there's something that
is not hitting you here
what's interesting is is it takes seven
touches to get a conversion so this is
the third time i've had you on and now
i'm like [ __ ] man like every time that i
sit down with you i'm like
there's a there's a way so first i have
to understand my own psychology okay i
don't want to think about it that's rule
number one rule number two is i need a
gamified element so part of what got me
into crypto was i
i had an employee shout out to david kim
and he would relentlessly [ __ ] drip
on me and he's like tom are you looking
at crypto this is height of the bull
market tell me looking at crypto i'm
like david i don't give a [ __ ] about
investing every second that i spend
thinking about the money that i already
have i'm not building something new my
obsession is building yeah so i'm
literally like getting to the point
where i'm like hey
dude stop [ __ ] bringing this up and
but i know that that's not a wise
strategy so he's like dripping on me and
i'm like ah damn and then finally nfts
becomes a thing and i realize it's going
to be hugely important for my business
i dive into nfts as a technology which
forces me to learn about cryptocurrency
and blockchain and all that and so all
of a sudden i'm like wait a second this
is actually really interesting so that
gave me the
the impetus i needed to get over the
initial hurdle of okay what is it which
ones are legit yeah how does one get a
wallet all that stuff so i do all of
that then i get into the gamification
part of it of like okay dollar cost
averaging which i think is smart because
i don't think of myself as clever when
it comes to investing so i start dollar
cost averaging into this and since i'm
looking at
any investment as like a 10 to 30 year
horizon so
momentary ups and downs i literally
don't care i only invest the amount of
money i'm prepared to lose
so
i put it in and instead of looking at
how much is my money going up i started
looking at how much is the average price
at which i have bought in going down and
so that became my obsession like buying
the dip like as long as the thesis isn't
broken you know you buy the dip you buy
the dip so
um
that's where this gets interesting so as
you're talking about vanguard i'm like
okay how do i gamify this so that i'll
actually do it let's let's
add some context around your investment
desires um i think that one of the
mistakes that a lot of financial people
make is they try to make everything
about math hey tom let me tell you all
the reasons what you just said is wrong
and let's look at the return rates and
you might listen to me politely but deep
down you're like i don't like what this
guy's saying
let's actually start with psychology
okay
what you just told me is
hey i like gamification i don't want to
think about it and i have a long long
time horizon
okay let's start there perfect and you
also said something really important
which is you like to create that's what
drives you just managing what you've got
is not exciting are all those things
accurate all right
so
here's what
bad advice would be and then here's i
think what would be better advice bad
advice would be tom sell all that
[ __ ] it's all like crackpot stuff
put it in a simple target date fund and
get on with your life come on tom that's
what the investment returns say
and you're going to be like get the hell
out of here
better advice would be hey tom
it sounds like you want to have some
control over your investments it sounds
like it actually drives you to see you
know at what price you're purchasing it
but it also sounds like you don't want
to think much about the basic mechanics
so why don't we do something like this
why don't we take
90 of your portfolio and put it in low
cost funds
and take 10 and say this is total play
money in fact you have to play with it
or invest it or spend it in some way and
if it's going to be on nfts or bitcoin
or whatever
great
suddenly now you have a real thesis
which is this is
long-term stuff we kind of know the
returns there great i'm going to be safe
no matter what happens but i'm also
going to be
making giving room for my psychology my
need and desire to track things and
gamify and play with it
yeah that um
clarity knowing what you want getting
people that's one of the things that you
do really well getting people to be
hyper specific we all have to go on our
own investment journey i did when i
thought i was a genius in 2000 and i put
it all in the you know in the market
picking individual stocks and i realized
oh man i got to learn how this works and
so there are some basic investment
truths and there are some basic truths
in you know every industry for example
you have people you know they struggle
to lose weight for example in my case i
struggled to gain weight i was a really
skinny guy
and
you could have sat there and told me hey
ramit you need to eat more calories and
i would have said no no no no you don't
understand like i have a fast metabolism
blah blah blah
and i had to go through this journey i
had to ask friends to help me train at
the gym i had to watch other people read
a bunch of books and get trainers and
eventually i realized oh my gosh it's
actually pretty simple but to get there
i had to go like this so i actually have
a lot of compassion for um anyone who's
on their investment journey or financial
journey whether it's talking about
investments and some pretty technical
stuff like we're covering whether it's
talking about money with your partner
because this stuff is not easy once you
really get good at it it's quite simple
and you realize oh my gosh i only need
to sort of set up 20 automated savings
i need to have these kind of basic
ratios
but the rest of it's just like easy
to get there is not easy so i i totally
understand that and for anyone watching
we all start at different places whether
it's on our f fitness journey money
journey spiritual journey
and you know the goal i think is to find
something that fits us is simple
and helps us lead a rich life yeah i
love that and i encourage people to
watch episodes one and two we talk more
about the rich life the love and money
stuff that you're doing now i find
really really interesting i've watched
you with couples like almost like a
therapy session it's really good by the
way
um i've really fallen in love with a lot
of the content you've done through the
pandemic that sort of really intimate um
stuff
but
what do you find in the love and money
section where couples are coming
together maybe for the first time what
are some common issues that they
struggle through and how do you help
them get to the other side of that
the most common issue of all is that one
partner is a spender and one is a saver
there are other issues which
a lot of people will say i can't seem to
get on the same page and when i ask them
tell me about a specific time in the
last 30 days where you two were not on
the same page they're like
like they instantly know and it hits
them very deeply is this like a
personality type thing like what's
driving these disconnects well
we have to remember that most of us
don't even understand money for
ourselves and then when we get with a
partner it's like one plus one equals
20. we really don't understand how to
bring our perspectives together and so
here we have one person
who says
hey we have a lot of money like we can
actually afford to go out to a nice
vacation or dinner and the other person
says
i don't feel safe
and so one person's saying what look at
the math
that was pretty much me early on in my
relationship with you i don't feel safe
no no i was like look at the math i was
like look at the compound interest we
have a growth rate assumption here i was
like living in the spreadsheet and my
wife
she said i want to use money to feel
safe
i was like wow what does that word mean
safe because to me the word i use to
describe money is growth
i would guess that that's similar for
you
growth i want to grow i want to have an
impact and so
when we originally started talking
we started to rewind and and we would
talk about you know what were the things
our parents said around the dinner table
and it was striking everyone has money
beliefs
that they learned as a kid so their
parents might have said we don't talk
about money in this family or oh those
rich people that's for rich people not
for people like us do you have any
things that you remember hearing as a
kid about money
i don't okay i thought about that when i
was researching i thought god what did
my parents
say about money it was just more we
couldn't afford that that i heard a lot
that's a huge one
so think about when you grow up hearing
we can't afford that we can't afford
that one day when you have actually a
pretty decent amount of money
a lot of people still tell themselves we
can't afford that so they still go on
the same type of vacations they would
have gone on 15 years ago they still
tell their kids we can't afford that but
when we look at the numbers
actually you can afford that and a lot
more but everybody talks about how to
save and nobody talks about how to spend
so when i'm speaking to these couples
it's really fascinating they will come
to me and we do this podcast
and they'll fill out all their
information it's full dossier i know
their net worth i know their income and
i talk to them about their problem and i
go
on a scale of one to ten
how big of a deal is this and they go ah
you know like maybe a four out of ten
in their relationship yeah in their
relation i go
you came on this show we're using your
real numbers and name and voice and
you're telling me this is a four out of
ten and they go yeah they minimize the
problem so what i say to them is okay
the two of you don't see eye to eye on
how much to spend on a car
now imagine fast forwarding 30 years
you've got two kids you've got a
mortgage you've made 10 thousand
financial decisions
how big of a deal do you think this
disagreement is and they instantly go oh
that's a nine out of ten
because most of us in the moment we
minimize our financial problems with our
partner but we can easily see how people
get divorced over money
when it calcifies and amplifies over the
next 25 years and that's really what i
want to work with these folks on this
new podcast where people come in and for
the first time ever you can hear real
couples sharing real stories with real
numbers behind closed doors
so as you help them work through this is
step number one all right let's figure
out what your money narrative is let's
get to the things that your parents said
i always ask them
what's your rich life
and i start there because when people
come in to talk about money they're
really
nervous
and apprehensive
guess what they think i'm going to tell
them the first thing in this
conversation
either you can't afford it you have to
save yeah just like a series of shitty
restrictive
things that make them feel bad you can't
go out to eat you can't afford that car
no your kids can't go to school and so
they're already like
this when they come in i go
all right i know your numbers that's
cool
what's your rich life
and this is striking you can almost hear
it they're visibly affected they go i
want to do what i want when i want i go
okay what do you want to do
they've never thought about it they're
just stuck
or they go i want to have a million
bucks i go okay what does a million get
you i don't know they just pick that
number or they say
we're in debt and we just want to get to
zero
i don't find that very motivational it's
like
getting to zero that's your rich life
so i push them and a lot of people will
say something like i want to travel you
know we want to travel i say great
where do you want to go
want to go to bali
which seat on the airplane do you want
to sit on
and there's looking at me like i'm crazy
because no one has actually ever taken
an interest in what they want to do with
their money it's always no no no where
do you want to eat who do you want to
take with you what are you going to show
your kids when you go there and their
face is lighting up you can hear it
everybody deep down knows something they
want to do with their money one woman
told me i want to go to whole foods
and
be able to
spend without having to look at the
price tag
that was a very modest goal
i said okay and by the way she already
had like hundreds of thousands of
dollars of net worth she could already
do it whole foods is expensive
maybe if she was going a few times a
week you're right but i said what then
and she was stumped here we have
somebody in their late 30s who's been
very financially successful and her
dream her dream is to go to whole foods
and not look at the price tag
what do you do though when the couple's
like they each have this really vivid
sense of what they want once you pull it
out of them but that they really are
different
okay
the good news is that you don't have to
always agree with your partner on
certain things he might want to spend
money on a certain thing it's fine if
you can if you can jointly afford it or
he can individually afford it oh what do
you mean so these are couples do you
have them separate their money well some
of them they just come to me as is i'm
first most interested in their story so
some of them have a joint account some
of them are totally separate or what i
like to recommend for couples is they
have a joint account and they have their
own independent dude
yes what do you do that's well we don't
now but when lisa and i first got
married that's exactly what we did we
said all right we have one account yeah
where this is for all the bills then we
each get an equal amount of spending
money in a separate account so now you
can do whatever you want you can save
your money you can spend your money and
that was the saving grace like figuring
that out early on was what what did that
do for you
it freed us up because the things i
wanted to spend money on she thought was
dumb anything she wanted to spend money
on i thought was done yes so i was just
like hey you do you but look at the
approach you took it's so important for
everybody to catch this you could have
fought about it you could have discussed
it and we started there yeah yeah but
people do this for their entire lives
and they're they're basically
asking three dollar questions
the thirty thousand dollar question they
should really be asking is how do we set
up a system
that lets us honor each other's
financial desires so again you could sit
there and fight about cosmetics or cars
or suitcases or whatever and you do that
for the rest of your life that's what
most people do oh my god it's horrible
it's awful to sit there and you're
fighting the same battle you fought 20
years ago you're doing it today or what
you and lisa did which is amazing you
set up a system okay joint now we got
our mortgage or rent covered etc
independent accounts and now the problem
vanishes
so money
always is going to be complicated
especially when you have two people
different earnings different money
philosophies
but the solution is not to simply
fight and talk each other into seeing
your perspective yes you should talk
about it but sometimes you need to add
some systems and psychology which really
solves the problem let's get into a
problem that i have to imagine is
becoming a thing
where
the woman is making more than the guy
yeah and he's not feeling great about it
is that a thing yeah oh yeah more than
ever in fact in urban areas uh in their
20s women earn more than men which is a
little known fact yeah it's interesting
it's very interesting and more women
graduate from college so that number
will continue to become skewed
so i think that there are a lot of
different issues that get brought to
bear
in these couples conversations and a lot
of times we're not aware of them so i
spoke to a
couple and
they both were earning about 150k
each so they're a high earning couple no
kids
and he had decided
as he put it he said
i'm the man of the house and so he was
paying for everything so i said to him
even though she's making the same
correct that's interesting very
interesting so i said and he's young
they're both young i said what does man
of the house mean to you
okay and
he stop he'd never thought about it he
said well i guess it means you know
providing
financially for my family
and
yeah that's it i said okay man of the
house means you provide financially okay
and then i asked his partner
what do you think about this she goes
i want to contribute i make basically
the same amount i've tried to
he won't let me
and now he's anxious about money because
every month he's in the red
so let's get this
he created a scenario that he now has to
live in where because he's the quote man
of the house he's got to pay for
everything he can't afford to and so
each month he's going red and now he's
really anxious about money
so okay what's the obvious solution it's
for them to
uh
you know have a joint expense break it
down she contributes basically equally
to what he does that's the easy part
that's what most people think okay done
were they married or dating
i believe they were married they had a
mortgage together yeah
but the more complicated thing which we
talk about in this episode that's on my
podcast is
how did you get there why did you think
that you have to be the quote man of the
house where'd that come from so what we
unwind it and i ask him a lot of
questions guess what he tells me he goes
his parents were
immigrants they didn't speak very good
english he said that he had to help deal
with the collection calls that were
coming in because his dad would
overspend i asked him what age he was
dealing with collection agencies you
know he told me
elementary school whoa so since
elementary school he's been fielding off
these
collectors
he sees money as a series of problems he
has to fix
no joy there's no joy in money for him i
asked him you know would when you go on
a trip would you ever stay at a place
that's a little bit nicer he goes why
would i i can stay at
like basically a motel 6. this guy has a
substantial asset base so does she
and
i find that heartbreaking you know
they're both working so hard they're
very diligent they spend less than 11 on
their mortgage wow and there's no joy so
she wanted to go on a trip and we worked
and worked and finally he agreed to let
her take the lead on it
when you listen to this episode you
realize
it's not just the math and the
spreadsheet that's the first temptation
is well they should just split their
assets and expenses
okay that's easy
it's really saying
how did we come to thinking about money
like this how did you grow up with it
when you describe money is it a sense of
joy or purpose or is it something i'm
scared of and anxious of
these are the things that nobody really
talks about because you have to know
money and psychology at the same time
man that is
really interesting when lisa and i first
got together i definitely wanted to i
wouldn't have said be the man of the
house but i liked that i was able to
make enough that i could take care of
both of us i mean we were dirt poor but
at least we had a roof over our heads
and
you know as she became more interested
in business and like really got into it
it's a really big transition like if you
come in with a certain mindset
it's going to be hard to shift but she
in the beginning anyway couldn't work i
don't if she were making money i never
would have said oh i'm gonna still pay
for everything and be stressed the [ __ ]
out all the time and wow so do you think
just hypothetically
you would have had a conversation or a
series of conversations how do you think
that transition would yeah well so one i
can tell you what we did is so we'd been
married for about eight years when she
stepped into a true entrepreneur role
um and it was very difficult because it
went from she would facilitate my entire
life so she
set my clothes out she made my food she
like paid the bills she just made sure
that i didn't have to think about
anything other than building a business
yeah and that was extraordinary i
cherish that gift more than you can
imagine and so when she stepped into
being an entrepreneur she very quickly
realized i cannot do both this isn't fun
and so she was just like look i'm not
going to be able to keep taking care of
this stuff for you and she put like a
timeline i don't remember how long but
like for the next month i'll still help
but hey at the end of that like you're
really gonna have to deal with all the
stuff on your own yeah and there was
friction in the marriage through that
moment like really changing roles
changing like what this dynamic is going
to be but we're very communicative
and i have very strong rules in my life
and so one of my rules around my wife is
that i only do things that elevate her
so i don't shut her down i don't make
her feel less than so it was like if she
wants to be an entrepreneur first of all
she's quite good at it and by the time
she made that decision it's pretty
apparent she's got some [ __ ] skills
on it so
i just said look by my own code of
ethics like i want you to live whatever
life you want to live and to become like
the most joyful powerful version of
yourself and so if this is direction you
want to go in
then you know we'll figure this stuff
out but then i also put limits on it and
said look i don't mind you not cleaning
anymore but don't expect me to clean so
we'll create areas and if it's a common
area i will do my half of it you do your
half but there are going to be areas
that are mine and they're going to be as
[ __ ] messy as i want them and as long
as you never come give me a hard time
about my own areas and i never [ __ ] you
up in common areas then i will expect
that we are fine yeah and so that was
stuff where i think for a while there
was friction there for her where it was
like well i don't like that you're part
of the closet is messy and i'm like hey
homie like i
we both have to come to
a shared understanding of you know what
works for you and what works for me
so so many things i heard in that
example thanks for sharing that i didn't
know that but i think
every couple has gone through some sort
of financial series of conversations not
as elegantly as you did honestly i think
the things that i hear are one there was
a pivotal moment where something changed
lisa decided to become an entrepreneur
two would cause some pain
it had to cause pain in order for you to
make a change three you sat down and had
a series of conversations doesn't sound
like it was just one no no no yeah it
was probably months or even years of
conversation same as my wife and i have
continued to have
um and then for you came up with some
agreements you mentioned that you have a
rule
for for how you relate to your wife
i love when people have rules for their
life i don't even have to agree with
them but when they tell me you know i
have
four rules for parenting or three rules
for eating in my case i have ramit's ten
money rules that shows that so