I needed someone to come on the show to provide some tough love and Ramit was the only person for the job.
As Ramit mentioned during our last interview, FIRE people are great at knowing what NOT to spend on but we’re not good at knowing what to spend on.
Spending is going to be a big focus on the Mad Fientist this year and I can’t think of a better way to kick off this discussion than by getting yelled at by Ramit so hope you enjoy it!
- Why we doubled our annual spending (and was it worth it)
- What Ramit did to make me get all clammy and uncomfortable
- Why pay less when you can pay more
- How to imagine your own rich life
- Why you should start wasting some money at a certain point
- I Will Teach You to Be Rich
- I Will Teach You to Be Rich Podcast
- Episode 16 – “We’re worth $8 million but I comparison shop for strawberries”
- Episode 40 – “We’re worth $5 million, but my wife nearly canceled our trip to save $200”
- Money Coaching with Ramit Sethi
- Ramit on Twitter | Instagram | TikTok
Mad Fientist: Ramit, thank you so much for being here again. I really appreciate it.
Ramit Sethi: Thanks for having me back.
Mad Fientist: So, it’s been over three years since our last interview, which is crazy. It seems like yesterday. And you’ve been really busy with some new stuff since then, which I’m excited to talk to you about. But there’s one particular topic that we touched on back in our first interview that I really want to dive into today because I think it’s a huge problem in the FIRE community and it’s a problem that I know I have, and it is the fact that FIRE people aren’t very good at knowing what to spend on.
We’re great at knowing what not to spend on, as you mentioned in our interview last time, but we’re not good at knowing what to spend on. And since we talked, I’ve been really working hard at this over the last couple of years and I want to talk through that. But you are the perfect man to push me further and hopefully push everyone in the audience further because I’m sure this is not a unique problem to me.
What do you think about that?
Ramit Sethi: I think that’s true. I think that a lot of people have been taught well… I think that the world teaches us to save, but nobody teaches us to spend. And if you take that concept of frugality to the logical extreme, then you start to see saving money as a virtue and spending money as a sin.
And it’s not, that’s not how it is. In fact, the point of living a rich life is not to save money. It’s not. The point of a rich life, in my opinion, is to design a rich life that excites you and then use your money to live as meaningful of a life as you can. So I’m all for a high savings rate and aggressive investments and earning more. I’m totally for that. But there’s another side of the equation that too many people ignore and that’s what I’ve been very excited about.
Mad Fientist: This is interesting because your site is I Will Teach You to Be Rich. Your book is, I Will Teach You to Be Rich. And I’ve always read that as I will teach you to become rich.
But it was only recently as I’m getting into your podcast more and I’m getting into the journal you just released, that I realized that it actually is, I will teach you to be rich and that’s very different than becoming rich.
Ramit Sethi: That’s right.
Mad Fientist: And my question is, was that intentional because obviously you started the site way back in the day.
But were you thinking about that way back then? Or were you thinking of it in the same terms as I was as I would teach you to become rich?
Ramit Sethi: It is about being rich and I think that we should live a rich life today and an even richer life tomorrow. So I don’t like the idea of I have to wait until I’m 75 years old and maybe just, maybe I can go take that Alaskan cruise or treat my family to a nice dinner.
I don’t wanna live that kind of life. And so, yeah, it’s about being rich and being rich can happen even if you have credit card debt, you can still be rich. So the next question that naturally comes up is what is rich? And I think this is where it gets really interesting, this concept of rich for a lot of people, the first images that pop up in their head are you know, being chauffeured around in the back of a limo, wearing some fur coat and eating on some table that holds like 70 people with some butler.
I’m like, guys, that’s Hollywood. That’s Richie Rich. That’s not reality. A rich life is so diverse. It could be buying a beautiful coat. It could be traveling two months a year. It could be having the freedom to pick up your kids from school every afternoon. So a rich life is yours. It’s not mine, it’s yours.
And you define what it is. And if we start from that premise that you decide what your rich life is and suddenly it becomes a lot more exciting to be able to use money to live that life.
Mad Fientist: Absolutely. Okay. And I’m, and that’s why I’m so excited to have you on, and you’re the only person that I could think of to get on for this sort of topic.
So over the past couple of years, you’ve released a couple of things that are actually very helpful for this goal. So if you could, since I’m gonna be referencing them so many times, would you just tell the audience who may not be familiar with your podcast and your new journal, what those both are about?
And then obviously I’ll be using those a lot as we continue this discussion.
Ramit Sethi: Yeah. So initially I wrote my book, I Will Teach You To Be Rich. It came out in 2009. I re-released it the 10 year edition in 2019, and I had added about 80 pages of material. A lot of money psychology new material. Also, things had changed in the world, and things had changed in my life.
I had gotten married and I had become much more interested in money and relationships. As I started to talk about this, I realized that I wanted more material on this, and I wanted to help people get more excited about money. I use that word excited intentionally because when you asked the average person what words come to mind when you think of money, they go stress, overwhelm, guilt, am I too late or restriction.
I know you FIRE guys love the word restriction. Oh, I love it. They actually love it. I love it. It’s like someone who has a little scab on their arm and they go, Ooh, I’m gonna pick at this scab. It’s like, stop it, man. You know? Okay. You can restrict a little bit, but it’s not the point of money.
So, a couple of things that I did. First I created a podcast, and the podcast is called I Will Teach You Be Rich. And on this podcast you can actually hear me talking to real couples. I’ll just share one example of a couple who has $825,000 in debt and they’re worried that they can’t afford to have children.
On the other hand, you have a couple who has over $10 million of net worth and they still agonize over the price of blueberries, and they still, they can’t go on a vacation that they want to, they only go where the points will allow them. And I go, at what point do you get to actually enjoy your money?
$10 million and can’t even choose the country you wanna go visit. So here’s the thing about this podcast. Most of us have never actually heard a couple sharing real numbers and the fights that they’ve had for 25 years. The tears, the joys and actually getting on the same page. You may have seen a blog post, but you’ve never actually heard a real couple doing it.
And so, because of our reach, we can find these people and they trust us enough to know that they’re willing to come on the show and share it. So that’s the podcast along with a new journal that I released.
Mad Fientist: Yeah, before we move on to the journal, I just wanna say the podcast is incredible.
I would say it’s sort of like being in a psychiatrist’s office and the couple are on the couch and you’re there like assessing it and you’re just eavesdropping on this really personal conversation. And yes, some of the higher net worth episodes have been really, really useful to me, which we’re gonna talk about.
But yeah, the entertainment value and just feeling like you’re sort of eavesdropping on this very private conversation because you have a, you have a psych background a little bit, don’t you?
Ramit Sethi: I do, I do. Although this isn’t therapy. But yes. When I talk about the money with these couples, we will often end up at, you know, what were the words that they remember their mom and dad saying about money?
And oh my gosh, there was a recent episode, there was a couple that lives in the Midwest and they make a very good salary. They make $130,000 and they cannot figure out why they are constantly behind and in debt. And at one point the dad tells me about his daughter coming home from school. And her school had given her like one of those baskets of food that you would give a child who doesn’t have enough food at home, who’s food insecure.
And he was like, full of rage. He was angry. How could they give her that we are not poor. We make $130,000 a year. And so I started talking to him. I said, how’d you grow up with money? He tells me, well, when I grew up, we didn’t have a lot and there were the haves and the have nots. The haves we’re on the other side of the park.
They were the doctors, the lawyers, the people with the big house. We didn’t have anything. Now as he’s grown up, he makes a very good income. The way he talks about money, he still believes he doesn’t have enough. He still acts as if he doesn’t have enough. And there’s a lot of peculiar behaviors that people without money carry into their adulthood.
And when his daughter asks him about spending money, he says, we can’t afford it. So it’s no surprise that when his daughter goes to school and the teachers ask, how are things going? She says, we can’t afford it. And finally, this was the most haunting moment. I asked him, would you talk to your daughter about money?
And he looked startled. He essentially said, why would I talk about money with her? Essentially, I am protecting her from money. Just think about that. In his view, money is a bad thing. It’s evil. It causes problems and stress, and therefore I’m gonna protect my innocent daughter from having to deal with it.
But that’s not how wealthy people treat money. That’s not how someone who’s living a rich life treats money. Think about somebody who’s like very good with food. They love to eat healthy food. They’re gonna talk about food with their kids. Oh, come on, let’s cut this garlic together, we eat this because it tastes good and it mixes well with that.
How come we don’t do that with money? And so when I suggested to him that there are a lot of people who talk to their kids about money, he was bewildered. Why would you talk to your kids about money? Because in his view, money is something to protect kids from.
Mad Fientist: Wow. Yeah. You see people acting how they act with money and even, you know, how I act with money and how some other FIRE people act with money and you don’t really think about what had gone into making them act that way with money and what they’re still carrying around. And it seems like most of our money views and how we deal with having money or having no money all stem from how money was when we were children.
Ramit Sethi: Yeah, it definitely does. And it’s a funny wrinkle in human psychology that even if we are acting in a way that is not serving us, our mind will create a narrative where we end up being virtuous.
So take someone who has 10 million, just as an extreme example, and they are driving all over town to compare the price of gas. And I go, Hmm, what do you think of that? And they’ll say something like this, well, you know, I don’t like to waste money. Or, it’s not that I drive around for everything, I’m just selective.
So we come up with these words that make us seem virtuous when in reality, as a third party, I’m going… you’re nuts! You made more in interest by lunchtime than you would save over the course of five months of driving around to save 10 cents on gas. Why are we doing this? And more importantly, what are you not allowing yourself to do by focusing on these $3 questions instead of the $30,000 questions?
And it’s comfortable because you know, all that one gas station on Main Street always has a good deal and it’s comfortable and you have mastery of it. But actually at a certain point, you have won that game. You’ve won it, and maybe it’s time to turn the page and go onto a new chapter in life.
Mad Fientist: And that’s where your journal comes in.
So please talk about that because that is just recently released and it is pretty much the ideal workbook for coming up with that. So if you could just tell the audience, who may not be familiar with it, what you just released with the IWT Journal.
Ramit Sethi: So, believe it or not, FIRE people, some people actually are never gonna buy a book and compare the difference between a Roth IRA and a Traditional IRA.
I know, it’s crazy. I know. But I learned this myself. I’m like, why don’t you guys just buy this book , and in fact, get it from the library. You’ll solve all your money problems. And there are a lot of people that are just like, mm, I’m not gonna do that. I go, all right, I get it. We have to remember that most people are not buying any book, much less a money book.
And it seems a little ironic because by the time people are 40, pretty much their number one worry in life is money. So you go, well, why don’t you just read this book or listen to that podcast, YouTube. And there’s a variety of reasons people don’t, but I don’t want to sit here and berate people. Well, that’s not true. I do a little bit. But what I wanna do is help them start to live their rich life. And so I created this journal, and it’s called a no-numbers journal. So you get it and I want you to imagine giving yourself the gift of 15 minutes, your favorite cup of coffee, a quiet room, and you get to sit down and dream.
You get to dream about how you wanna use your money. It’s not about your savings rate, it’s not about the Trinity study, it’s none of that. It’s about, if I could spend more on something that would make my life easier, what would it be? It’s about pulling a pen out and sketching out what your ideal day would be, or even your ideal house.
And yes, there is parts about what should I not spend on, or how should I navigate money in relationships? It’s tactile. And I wanted people to start connecting their money with their lives. I can tell you that most people don’t get motivated by seeing a higher figure in their checking account. I know some people do.
Personally, I love it. Okay. I like it. So that’s why I don’t hate the FIRE community, but I understand a lot of it because I like a high savings rate. I like seeing compound interest. And I get that, but most people are not like that. Most people are like, I actually wanna go out to this really nice restaurant and know that I can pay for it without worrying.
Okay, great. Well let’s start there. And when people start to engage with this journal, it’s just a much more relatable way of clarifying what a rich life is to you. And then for some people they decide, Hey, I wanna start optimizing my money and make it work for me.
Mad Fientist: Yeah, and I have a copy and we actually got some good weather here in Scotland over the summer and I really enjoyed just sitting out there with a cup of coffee in the sun, going through it with my wife, Jill, and trying to really think about it because it is way harder to figure that out especially when, you know, we’re so lucky we’ve reached financial independence we can spend on these things. But yeah, as a frugal person, naturally frugal just my entire life. It is way more difficult to sort of push myself in those areas, but it has been helpful and that’s why the podcast and the journal have been really helpful so definitely just wanted to set those up because I’m going to be referencing them a lot.
But I think before we dive in, maybe just give you a quick update of what’s changed since 2019?
Ramit Sethi: Tell me.
Mad Fientist: Yeah, so we talked in 2019, and I think for the prior 10 years to 2019, I, we averaged the same amount of annual spend.
And you will be happy to know that over 2021 and 2022, it looks like we’re doubling that value for our annual spend.
So I’ve heard you on other podcasts where you’re like, you know, people who say they want to change and like, get better at spending, they don’t really mean it, but I, I actually do mean it.
And we’ve actually worked pretty hard at doing that. 2021, we traveled a lot more and spent a lot more than we would’ve on that travel. We experimented, like we did Premium Economy to the States, and then we did Business Class on the way home just to try those both out and compared them.
And then 2022, we just moved into a new house and I’ve been kitting it out. And even my wife one day, another Amazon box arrived and Jill was like, what is happening? And I was like, this spending thing is incredible. I don’t know what I’ve been missing for the last 40 years of my life, so I’ve been really enjoying it and I feel like I’ve made a lot of progress but there’s still a ways to go because even though we’ve doubled our annual spend, we’re still not even spending what the portfolio could generate at a very conservative withdrawal rate and it doesn’t account for any sort of income that’s coming in.
So I am still trying to push myself, but I just wanted to let you know that thanks to our conversation in 2019, I have been making progress and it’s been so fun and way way more enjoyable than I expected. So thank you for that.
Ramit Sethi: Wow. Well thank you. And thank you for giving me the update. And what makes me happiest to hear that is that you’re having fun doing it, which is the point money is supposed to be fun and that you’re doing it together with your wife. That is amazing. That is the culmination. You know, when it comes to money, I’ve learned at the very beginning levels, it’s all about the what… I made a little money, what do I get to buy or what do I want to do with it? And that’s totally cool. I have no problem. You wanna buy a beautiful coat or take a trip? Amazing. I love it. But at the highest levels of personal finance, it is always about the who. Who do I get to bring with me? Who do I get to surprise or delight, and to hear that you’re doing it with your family is just the culmination of what a rich life really should be.
Mad Fientist: Thanks man. Yeah, it’s been great. And before we dive into some of the, the newer stuff I’ve learned from your podcast and your journal, I want to revisit something you said in our first interview, and it was something that made me think you were a lunatic at the time, but I get it now.
And that was why pay less when you could pay more?
Ramit Sethi: That’s right.
Mad Fientist: And I was like, yeah, you gotta have to explain that. And still didn’t, I don’t think I really got it. And it was only recently that we just moved into this new place and I love pour-over coffee. That’s like my morning ritual. I love making it. I love drinking it. I love buying the beans, I love everything about it. And I’ve been waiting until we moved into a place where I could get a proper grinder, because I thought that was the coffee grounds were the only thing that were holding me back because I couldn’t get a really consistent grind.
So I bought this thing that is probably the nicest you can get without going commercial. And it is amazing. It is the nicest thing to look at, the nicest thing to touch. Like I just love pressing the button. I love pulling out the tray. I love everything about it. And I don’t think I really understood that before. I would’ve just picked the cheapest thing that does the job.
And this has shown me that there’s a whole other level that it’s just like brings you so much joy that doesn’t even relate to the actual functionality of the thing, just the actual beauty of it and the design. And so I get that now and my question to you is, I wanna find more of that, but for me, it’s hard to distinguish between quality and status.
Like, is a Rolex that sort of experience or is it just the status that makes that price so high? So I don’t know if you have any experience with that, but I would like to find more of that, just like pure quality. And something else you said in our last episode was like, focus more on value than cost.
So I do wanna get better at that, but for me, I struggle, I think to sort of distinguish between the two because I couldn’t care less about status, but I do really love that quality. So any insight into that?
Well, first of all, awesome to hear. I love, I just love hearing your voice and I love hearing anyone’s voice when they get excited about their primary money dial in their rich life.
So coffee and the way you talk about it, the ingredients and the tools, you can tell this is a passion of yours. I think first of all, that quote you know, why spend less when you can spend more? That’s a Dan Kennedy quote, and it is profound. All of us intuitively get this. Especially if you’re a parent, there are certain things you are going to spend anything on.
It could be the right type of diapers. It could be a car with certain safety features. We all intuitively get it when it’s about our kids or our dogs. My goal is to normalize spending as much on yourself as you do on your kids and your dogs. Okay? Everyone looking around right now at their little golden retriever at their side, like, yeah you give your dog the best food.
How come you think 10 times about how much you spend on yourself? It doesn’t make any sense.
So the fact that you have tasted that is awesome. Now distinguishing between higher quality. Well, first of all, my fantasy has always been to take one of my friends who made some money and I just go, Hey, come visit me in New York and I’m gonna take you out for three days and show you how to spend your money. I’m literally gonna show you the skill of how to spend money.
You’re not gonna like all of it. Some of it you’re going to be like, okay, that was not worth it for me. But some of it, you’re going to go, oh my God, now I get it. For example, there are certain things that you can only understand once you experience or touch them.
A certain type of sweater, a picture doesn’t do it justice. A certain type of food. When you see it being made in front of you and you understand where the ingredients came from and how it was sourced. Oh my God, I never knew that much work went into this, and how it tastes is incredible.
On the other hand, I’ve eaten certain meals where I go, okay, I mean, that was fine. It’s not my taste. I’m probably not gonna come back here. But anyway, that’s my fantasy. Unfortunately, no one ever takes me up on it, no one. Maybe the key is that I go, well, there’s just one catch. You have to have an unlimited budget and they go, what do you mean unlimited? They get really scared I’m going to like make ’em spend like $500,000 in three days. I’m like, I’m not gonna do that, but it is gonna be more than you thought, and they’re not ready for it, which is totally fine. I’m not gonna force anyone into spending it. Here’s what I would say as a real answer to your question, which is most people have spent decades viewing the world through the money lens of cost.
That is their primary and sole money lens. When they go to eat somewhere, they look at how much it costs. When they go to book a flight, they look to the right of the screen to find the lowest cost. They sort by cost, cost, cost, cost. And so there’s a couple of isolated things in people’s lives where they’ll spend more.
Okay. But it is very difficult to extend that to other parts of their life. But the way you’re doing it is the right way, which is you find something you’re passionate about and you start to explore.
If I were gonna encourage that, what I would do is I would look at your finances with you and I would say, okay, let’s pick a number that you have to spend every single month on this hobby of yours, coffee. And let’s just, what would be the number that you’d spend every month to make this like a serious hobby for you?
I feel like I, I feel like I’m spending it because the beans, I get high quality beans shipped in from around Scotland. And, and that was the last piece of kit. Maybe there’s something I could do where I could actually like go and learn the espresso stuff and the barista stuff that I don’t do. I just do a pour over, a V60.
Ramit Sethi: So how much?
Mad Fientist: Whew. Maybe another a hundred pounds a month. Not even that much, I guess.
Ramit Sethi: Mmm. Try again. Don’t you have a lot of money, like, oh, I’m not even spending what I should be in my model. And we’re debating over a hundred pounds. I don’t think so. Try it again.
Mad Fientist: Geez. I don’t even know what I would spend a hundred pounds on. That was like…
Ramit Sethi: Well, we’re gonna get to that . Okay. Just pick a number.
Mad Fientist: 250 pounds.
Ramit Sethi: Okay, fine. 250 pounds. Okay. Alright. I know you can afford it. Okay. Cuz I saw you send over some numbers before. So, cool. Now we have a number that’s quite aggressive for what you’re currently spending and, and I love your comment, I don’t even know what I would spend on .
Okay. Well let’s take a second to dream. Coffee is one of the things that makes you passionate. You love it and you wanna get more experience with it. So how would you discover how to go deeper into that hobby of yours?
Mad Fientist: So Edinburgh is a really big coffee city actually, and they have great cafes who have lots of people that are passionate and lots of roasters. So I’d maybe go down there and chat to them about potentially learning more from them in some way or if they had any recommendations for what to do for somebody in my situation, I guess.
Ramit Sethi: How would you use money to make what you just said easier and better?
Mad Fientist: Oh boy. I’m not used to using money for anything, so…
Ramit Sethi: Hold on. Everybody in the FIRE community, just listen, I’m not used to using money for anything. Just except to keep me warm at night as I wrap myself in my Excel model. Yeah. Oh, I love my 52% savings rate. So good. All right, well, we’re gonna learn that skill right now.
Okay. So you just said I might talk to some of the baristas and learn from them, get some recommendations. How could you use money to make that easier and better?
Mad Fientist: I guess I hire somebody to do that?
Ramit Sethi: Yes. That’s a, that’s one thing. Mm-hmm. great. What else?
Mad Fientist: The only other, the only other thing after I said the 250 was like maybe just a weekend in Italy with Jill and you know, compare the Italian coffee and then go to France a couple months later and try their coffee.
I don’t know. I’m struggling.
Ramit Sethi: That sounds pretty awesome. . Okay. That’s amazing. So there’s so many things we could do. First of all, yeah, you could hire some researcher to schedule a bunch of meetings with you and baristas. Second, let’s say you met a barista, you really like him, him or her and they’re like, oh yeah, you know, next time you try to make your morning brew, do it this way. Do it that way. Try this, do. And you’re like, oh, that sounds really good. And you don’t really feel that confident about it you could say, you know what, can I hire you for two hours to walk me through how I make my morning coffee?
Mad Fientist: You know what that’s a fantastic idea because sometimes it just doesn’t turn out and I don’t know why. And I’m like, how am I gonna figure this out because it’s not something I can YouTube or something. Because I don’t really know why that’s not as good as it should be.
That’s an incredible idea.
Ramit Sethi: That’s what money’s for! You use it to get help, to do things easier and better and more joyfully. And all of us intuitively understand hiring a personal trainer or whatever or we pay somebody to cook food for us if you go to a restaurant. How come we don’t just take the thing we’re interested in and say, I’m gonna go find somebody who’s pretty good at this, can you come to my house and help me understand this for two hours? Of course. And then your idea to go to Italy with your wife is amazing. And while you’re there, you can do a coffee tour. And you can go behind the scenes and you can do your own brew and all kinds of stuff. That is how you start to use your money to really experience what is important to you.
That’s a rich life.
Mad Fientist: Now, I’ve heard you do this sort of thing with people on your podcast a lot, but I did not expect this sort of like clammy reaction that I just experienced. So this isn’t even a question on my list because I wasn’t expecting this sort of reaction to those pressing questions.
Why do you think that is? Why do some people just like sort of get all weird when they think of spending 250 pounds on coffee when they have absolutely no idea to do it. Like, it was a really physical reaction I just had, which I was not expecting.
Ramit Sethi: I know. I love it. I wish we could be in the same room right now. It’s quite striking when you see how people physically react to conversations about money, they shrink. I’ll see someone who’s extremely confident and the minute we start talking about money, they physically shrink into the couch . It’s quite interesting. But you know what, I have a lot of empathy for that cuz I shrink when we talk about a couple things in my life that I know I need to do and I’m not.
So for you I think that it is fascinating that most of us have lost the ability to dream about money. That’s really the crux of why I wrote the journal because think about it, day-to-day, again, I’m speaking generally about most people, you get a paycheck, you pay your bills, maybe you have a little bit left over and then you repeat for the next 45 years, or if you’re a little bit savvier, you take your money, you read all the FIRE blogs, and you do your investments and you do another Monte Carlo simulation and then you just repeat that.
But there’s a skill that most of us have atrophied at, which is learning how to spend meaningfully. I’m not saying you go out there and just drop money everywhere and stuff you don’t care about. I don’t do that. I have a very old car, my computer, my phone, they’re not particularly new. Those things are not that important to me.
But there are things that are really important to me, and so I actively seek out how to go deeper and make my life easier. And so I’m not surprised that you had that reaction and that you almost kind of seem to go blank when I asked you how would you do it? But that’s okay. It takes a little bit of coaching.
That’s why I started the podcast and the journal. I want people to see that you can be inspired to spend money even if you haven’t really done it meaningfully in a long time.
Mad Fientist: Right. And this sort of made me think about one of your episodes, episode 40. I loved it. It was someone in a similar situation, they just couldn’t spend their money. It didn’t seem real to them. Which actually is something that a couple of your episodes had that sort of same experience where you’re talking to them and you’re saying, what would a rich person do in this situation? And they can easily explain that. And then you’re like, well, that’s you. That’s, you are that rich person.
Why aren’t you doing that? And it’s a disconnect between, what you have in the bank, because that’s just some number on a computer screen. It’s meaningless. It feels meaningless to me. And I was listening to these episodes like dreaming with them and being like, wow, what an amazing position they’re in.
They could just dream and they can do all these things. And then I kept having to snap out of it and be like, I’m in that position too.
Ramit Sethi: That’s me.
Mad Fientist: It was amazing to hear because, it was more than one episode. And they’re able to give advice to a rich person, but they don’t believe it themselves that they have anything in the bank really.
Have you come across that a lot?
Ramit Sethi: It’s frequent in a couple of different ways. First, for people who are not very savvy with money or not connected to money, it, whatever they have anywhere besides their checking account does not feel real. So people who are fairly rudimentary with money or new to money, the way that they define how much money they have is literally how much is in my checking account.
Okay. And one of the things I try to do is dissuade people from thinking like that. There’s a few little beliefs that people who don’t have a lot of money really follow. One of them is however much is in my checking account, tells me if I have enough money. That’s not how you should be thinking about money.
Another way is I should buy something based on the monthly payment. You know, car dealers know this and they prey on people. We don’t want to think like that either. We wanna do tco, total cost of ownership.
So some of the things that I do on the podcast and in my work is simply showing people a different way to think about money, such as that dad who thought money was bad and he should never talk to his daughter about it.
Well, actually, money can be really good. And a simple way to do it would be to sit your daughter down if they’re really young, you say. Daddy’s gonna log in and pay our bills so we can keep the lights on. Would you like to help me? Don’t you like light? Oh, do you wanna push the button with me? Go ahead, push it and make it like, oh, let’s celebrate. That was so cool. And then as you get older, it can be things like you know, we’re gonna stay for one night in this town. Can you help us pick a hotel? Here’s the criteria and here’s the budget. And of course, by the time they’re teenagers, if you’re taking a trip, they should be planning an entire day on that vacation.
Mad Fientist: So we’re going to get into some some of the stuff that’s really been useful from your podcast and journal for helping me and then some of the other things that over the last couple years that have been really helpful.
But before we do, I want to pick out something that’s in your journal. It says your prime spending years are from ages 40 to 60. So this was a big slap in the face in two ways to me, because one, it made me actually realize that I’m 40 because in my brain I’m still 20. And it was only when I read that and thought about it again that I was like, I am 40.
This is my prime spending years. And two, it was like, all right, I really do need to get serious about this because yes, I feel like I’m 20, so I should just keep saving, but this is my prime spending years.
Ramit Sethi: It’s deeply counterintuitive and uncomfortable to acknowledge that you do have prime spending years.
So let’s talk about this concept because I like that it’s uncomfortable. I like that it makes you think about your vision for spending.
So in your twenties, you have a lot of time, probably not as much money.
And so, I remember for example, we took a backpacking trip with two of my college buddies one summer, and we stayed at the cheapest places. And we were about to sleep in the train station and our guidebook said, don’t do that. You’ll be robbed. And I just remember that trip.
It was amazing. It was full of adventure and sure we didn’t have a lot of money, but it was great. Then in your thirties, you know, again, following a general pattern, people start to earn a little bit more. They do start to spend a little bit more. Forties tends to be focused around family, but in forties people start to have higher incomes.
And in fact, their incomes will peak in a few years after that. But we should also acknowledge that it’s not just about money, it’s also about time. And it’s also about ability or mobility. So you may have a lot more money when you’re 75, but it’s unlikely you’re gonna be going to Everest.
It’s even unlikely that you may even be traveling abroad depending on health. And these are the kind of conversations that people don’t really wanna have. We have a deeply puritanical society, but interesting society that says, save, save, save until someday, but no one ever really talks about that someday.
It kind of reminds me of Indian culture, which is don’t date, don’t date, don’t date. Okay. It’s time to get married today.
And everyone kind of rolls their eyes at that in the Indian culture, but how come we do exactly the same thing in America with money? It’s actually preposterous when you think about it.
So 40 to 60, in my opinion, is the prime spending years. You have money, you have health, and you do have time. Now, if you accept that, listen, you could disagree with me. You could say, I don’t believe that. I think it’s gonna be 65, or, I’m really healthy. Okay, fine. First off, I wanna say it’s not just about you.
I know plenty of people who are healthy, but they have a sick parent or a, a partner who can’t travel for whatever reason, or can’t do the things they wanna do. So sometimes life is not just about you. We have to keep that in mind. But second, what I want you to do using the journal is to create a list of things that you want to do now, in the next decade, et cetera.
So when you do that, you can start to actually visualize what’s meaningful to you and you can start to do ’em. I just don’t want people to live a life of, I will do that someday. And then, I mean, what a tragedy to live a smaller life than you have to. What an even greater tragedy to end up 70, 80, 90, with millions of dollars in the bank if you follow the FIRE community, never actually having done the things you want to do.
Mad Fientist: Yeah, I completely agree. And we’re gonna hopefully help all the FIRE people out there that are like me and who are probably really uncomfortable with this conversation already.
Ramit Sethi: They already turned this podcast off, by the way. This is gonna be your worst listen to podcast of all. They see Ramit Sethi, they’re like no thanks
Or the minute I start making a joke about, you know, their Monte Carlo simulation. Yeah, it cuts too, it cuts too close, doesn’t it, FIRE people?
Mad Fientist: Ah, that’s what we needed. I need the tough love today. That’s what I brought you on. I knew you’re the only one that could do this. So yeah, the journal definitely there’s a lot I want to touch on in there, but before we do the podcast, episode 40 was really helpful in the sense that, like you said, we can spend on our kids or spend on our dog or spend on somebody else.
And in this episode, there’s a woman who really struggled to spend any money on herself and she was worth millions and millions, but would really rarely ever spend on herself And she went to New York with her husband, which that was a whole ordeal trying to even get her there because she had to spend $300 one night on a hotel.
And anyway, they wanted to go see a Broadway show. So she went down to the Times Square Broadway Ticket Office for like the last minute tickets or whatever, the half price tickets.
And she went there because she’s just so used to spending money and you flipped it around on her and said, you know what, you’ve taken tickets from a family that really does need to only pay half price and that’s all they can afford.
Ramit Sethi: I love this story.
So Rachel and Jack, episode 40, they’re one of my favorite couples. He had invited her. He was taking a work trip to New York, and he’s like, come along. She goes, cool.
They were gonna stay at the Moxy Hotel in the East Village, which is a pretty affordable hotel. And she looked at the price and it was $297, which is, for Manhattan, fairly reasonable. And she goes, that is outrageous. I’m not coming. She was just gonna cancel the trip. And he goes, no, come on. I want you to come.
And so she made them stay at a different hotel in Chelsea. And then when the price lowered, the next day, they moved all their suitcases back to the Moxy Hotel. Remember, work was paying for part of this anyway. So I asked, Rachel how much are you worth? And she said, $5 million, I said, could you say that a little louder for the mic, please?
$5 million. Okay, now everyone listening goes, oh my gosh. That’s, that’s so weird. Why? Why doesn’t she just enjoy it? But most of us do exactly the same thing. We do the same thing, whether it’s with a restaurant or a hotel. The way that we act with our money is often rooted when we didn’t have any in our childhood, teen years, or early twenties.
In fact, if I ask people like, how do you decide how much to spend on a vacation? And we really get into it, they, the answer really emerges that they basically have a number in mind. That number was born when they were basically 20, because that’s what they remember about how to plan a vacation. And they have not adjusted that number as they have made more money.
So then she tells us about this Time Square thing and she goes, we actually have no problem spending money on restaurants. We ate out, we ate well. We went to see a show. I said, tell me about that show. So she waited in the line for last minute tickets. This is basically way cheaper discount tickets.
And at this point, I’m like, oh my God, Rachel, you have $5 million and you waited in that line. You didn’t just go to the box office and buy the ticket you wanted. And she goes, no, I needed a deal. So then, you know what I realized? I’m a master of Indian mom guilt . Okay? And so I had to bust it out.
Anyone who grew up with a Indian mom, Asian mom, many types of moms or dads, they go, you know what, it’s my time. I’m gonna leverage this. I’m gonna weaponize this. So I, I did it. I was like, I’m about to become a guilt driven Indian mom. So I was like, Rachel, you realize that there was a family in New York for the first and only time with their kids and as they saw you getting that last Lion King ticket, they saw this multimillionaire woman snatch the tickets outta their kids’ hand.
How do you think those kids felt? And she looked like she was gonna cry. And I was just like, I had the biggest grin on my face. Cause I’m like, gotcha.
Mad Fientist: It was absolutely perfect.
Ramit Sethi: So you know, listen, we have a little fun on this podcast, but the point is I told her, Rachel, you make too much money to do that.
And I said, Rachel, you cannot afford to do that anymore. If you have $5 million, you’re not allowed to be shopping or standing in line for the discount tickets and taking away that scarce commodity from someone else. Now people get a little mad when I say, how dare you Ramit this America? We could do whatever we want with our money.
Okay, you can, but first of all, is it right? And second of all, is it actually serving you? At what point do you get to walk up to the box office and pick the ticket you want? At what point?
Or in episode 16 when Amy and Chris are choosing their vacations based on where they have Marriott points, I go, at what point do you get to choose where you wanna go just based on where you wanna go?
Mad Fientist: That was really good because he said, let’s go to Italy. She started looking into everything she wanted to do in Italy. They have $8 million in the bank. And then I guess last minute he realized that his points weren’t gonna work or something. So they ended up going to Greece and the poor wife was like, I just got my heart set on Italy and here we are in Greece. And yeah, just ruined the whole experience. And I feel for her, because I think I’ve, I’m sure I’ve done that to my wife, numerous times.
Ramit Sethi: Should we get your wife on this call? Is this about to turn into my podcast? This is gonna be amazing.
Mad Fientist: Well, we’ve moved hotel rooms mid trip many times and she hates that so much.
Ramit Sethi: Why do you do that?
Mad Fientist: So, yeah. She would be great to chat to because she would be echoing a lot of the same things that have been echoed in episode 40 and 60.
Ramit Sethi: Here’s the thing, I think that sometimes there’s absolutely virtue in using cost as your money lens, right? Like, if I’m going to buy some commodity, I don’t know, nails or something, well, I don’t go to Home Depot, but if I ever did in a like alternate reality, which is my hell, and I walk into Home Depot, yeah, I want the cheapest nails.
What do I care? It’s a commodity. But I think that sometimes there are higher or different money lenses you can use. If you’re going on a trip and it’s something special, maybe the extra 50 bucks or a hundred bucks actually doesn’t make a difference. In fact, maybe it’s not even about not making a difference. Maybe it’s something you can turn into an amazing experience. You could turn to your partner and say, you know what? For this trip, I really wanna do something special. I know that you’ve always wanted to get a massage at a hotel. I wanna arrange it. So the day we arrive after that long trip, I’ll take care of all the bags, and you just go and get that massage. And when you come back, we don’t have anything scheduled for the rest of the night. You just take a nap and we can just relax. Wow. So notice the difference, not only in spending, but in positioning. To yourself and to your partner. I’m not going there and saying, hey it’s, it’s no big deal. Instead I’m saying, this is going to be amazing and I’m gonna do it for you.
And for Rachel, sometimes what I wanted her to do in Times Square was to be generous to herself. Rachel and Jack had done an incredible job saving money. The classic I Will Teach You to be Rich, way, low cost, long-term investments over a long period of time. They had made it.
And so we find it much easier to be generous to other people than to ourselves. But Rachel and Jack won the game. And so they need to take their winnings and in their case, their winnings might be seeing The Lion King or whatever show with better seats, with more ease to walk in and say, we don’t have to spend two hours of our valuable time in New York waiting in line.
And that’s really what I want people to imagine is the possibilities of using money and actually embracing money as a good thing, not an evil thing that we need to minimize and avoid or hoard.
Mad Fientist: No, definitely. And, since listening to that episode… I have this stack of old t-shirts that I’ve been carting around the country for the last, who knows, 20 years. Because I’m like, maybe one day I’ll need a rag and you know what I mean?
And now, after listening to episode 40, I was like, well, you know, somebody could actually wear this shirt and actually provides a lot of utility here I am storing it for the last 20 years because I think I need a rag. And it’s like, I can buy a $2 rag if I need a rag. You know?
So it’s like, I think that’s really helpful for people that aren’t used to focusing on themselves to sort of like get a little gateway into that and be like, well actually, you know, yeah, this will benefit me because that stack of shirts is finally out of my life and I don’t have to keep carting them around. But then also it’s like, okay, somebody else is going to benefit a lot more from these shirts than I will.
Ramit Sethi: Yeah, that’s a great example. It includes so many elements of some of my philosophies, you know, one of them is $3 questions versus $30,000 questions.
You know, a stack of old shirts, what should I do? That’s a $3 question. Just stop. Let’s not deal with these anymore. The next thing is generosity. Could someone else benefit from these more than I could? Yeah. And the third is being decisive. So many times when I talk to people who have money and struggle to spend it, there’s a lack of being decisive.
And in fact, I think much of what guides the frugality world is a sense of fear. There’s this idea that I’m not gonna go eat at that nice restaurant. That’s not the kind of person I am. And anyway, if I did go eat there, deep down now, I’m afraid I would like it so much that I would trip and fall and have to eat at that nice restaurant every night for the rest of my life.
And I don’t believe that. I think you can have a nice experience and you can also trust yourself enough to know what is enough. And that is really important in a rich life. I’m not saying everyone here just twirl around three times, repeat rich life and then go buy a private jet. That’s not how it works. You need to be able to afford it. I talk about the numbers. I’m not just out here doing some woo-woo life-coach BS. But I also think that you can trust yourself enough to experience something amazing and know that I will never let myself spend more than within our margin of safety.
Mad Fientist: Yeah, absolutely. And that leads nicely to the money rules because actually one of my money rules that I developed after going through your journal is to not limit spending on one-off experiments.
Because like I mentioned before, we flew premium economy to the States and then we flew business class home. And now one of my money rules is to fly premium economy on all flights over five hours because that was well worth the double the price of economy. But then business wasn’t really worth it to me for three times the price of premium economy.
Maybe one day it will, and maybe, you know, I’ll do another experiment once we travel with our new son, which that may change everything. But that’s one of my money rules now because yes, I know I’m not gonna go crazy and just start living this lavish lifestyle that then bankrupts me. And those one-off experiments are really important for pushing my boundaries and finding what it is that it is worth spending on.
Ramit Sethi: Yeah. I love that. It is an experiment. I think we shouldn’t be so worried about getting all of our spending decisions right. I had a program where I talked about the psychology of money and I cover this now, we have a new money coaching program. And one of the principles I shared is that it’s okay to waste money.
Let me explain what I mean. I’m not saying just go out and just throw money around. That’s not what I’m saying. But I’m saying that when you’re in your early twenties, you don’t have a lot of money. You have to make sure that you are being extremely careful. So you might be looking at menus before you go out. You might be declining invitations because you just can’t afford it. Okay, great. That makes perfect sense. But as you make more, certainly in your case, as you have made more and you have a handle on how much you can afford, once in a while you’re gonna spend money on something and it’s going to be a waste.
And that might involve, you got some late fee on some account, and as much as I hate late fees, you discover that it might take you like six hours to get that thing reversed. In your twenties, you’re like, yeah, I’m gonna spend it. I have nothing else to do, and I’m gonna make this company pay. At your stage, you might go, you know what? It sucks and it’s not fair, but it’s not worth my time. Or you might try a certain restaurant or a certain product and it’s just not for you. And so instead of letting the tail wag the dog and saying, wow, I spent a hundred dollars on this thing, I’m going to make it work for me. I’m going to, for example, carry those things around with me to every country, you go, you know what, it’s just not for me. I’m done with it. I’m selling it or donating it. So the more money you make, the more money you will waste. That is natural if you are not wasting a little bit of money, that means you’re probably not thinking about the possibilities of how you could actually be spending it.
So again, just to reiterate, I’m not encouraging anyone to go out and waste money. I am saying that at a certain point it is okay if you incidentally waste a little bit of money because you have a bigger purpose than eliminating all waste of your personal finances.
Mad Fientist: That’s a great point. Because efficiency and lack of waste is what drives a lot of people like me, I would imagine. But you’re right, I’ve wasted far too many hours that I can’t get back on things that obviously don’t matter now in the scheme of money at least.
Ramit Sethi: The efficiency thing always gets me because you’re right, there’s a lot of crossover with efficiency and FIRE, and people they’re like, how dare you not be efficient?
And I just go, are you efficient when you give your husband or your wife or mom or dad a hug? Like do you literally measure how long it’s going to produce the maximum happiness? And they’re just like, no, that would be psycho. I’m like, you’re a psycho by looking at everything through the lens of efficiency.
Maybe sometimes it’s actually not meant to be efficient. There are other virtues besides efficiency… safety, security, a lot of things and so I want people to be more adaptable. If you’re playing the game of life with money, you don’t only have one money lens – cost. You have others, and you use them in the right situations. To do that, you need to be well practiced with all of them.
Mad Fientist: That’s fantastic advice. And I can’t believe it, we’re already coming up to an hour that has gone so quickly. So I don’t want to keep you too long.
I can’t thank you enough. Like I knew you were the only person for this chat and I’m so glad we were able to make it happen.
Obviously I’ll link to your new podcast and the journal and iwt.com. Anything else I should put in the show notes just so people can find you?
Ramit Sethi: For anyone who has questions and wants to stay focused on their money. We have a money coaching program as well. We do a coaching call every month and we have this amazing community. We’ll send you the link for that.
Mad Fientist: Nice.
Ramit Sethi: Maybe you can post it. We’d love to welcome more people into that program too.
Mad Fientist: Excellent. Well thank you so much, Ramit. Really appreciate it. And yeah, hopefully I’ll touch base with you in another three or four years and I’ll have made even more progress.
Ramit Sethi: That sounds great. I always love coming on your show. I love talking to you. Thank you for having me back.
Mad Fientist: All right, buddy. Talk to you soon. Thanks, bye.
Ramit Sethi: All right, bye.