The Money Expert: "Do Not Buy A House!" 10 Ways To Make REAL Money: Ramit Sethi | Transcription

Transcription for the video titled "The Money Expert: "Do Not Buy A House!" 10 Ways To Make REAL Money: Ramit Sethi".


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Intro (00:00)

Ah, this is driving me insane! To make a lot of money, you don't need to be a genius. You're just need to remember a few key things. Ramit Satey, financial expert, the money man. New York Times bestseller. As more than 20,000 documented success stories, this is your chance to never worry about money again. You can live a rich life regardless of where you came from, regardless of your income. How many people are clear on what their rich life looks like? Less than 1%. When I talk to people who have a spending problem, 100% of the time, they always say the same thing. I just need to earn more. If you doubled your income today, do you think your problems would disappear? No. Some of the stats I pulled out from your book, about 25% of people who make $100 a year plus are still living paycheck to paycheck. Makes us realize that maybe the things we think we need are things that we have been socially taught are important. For example, owning a house is the best investment. It means you are successful, but it can be a very bad financial decision. They're far better, far simpler investments. So I've got 100 pounds that I want to invest. Where do I start? I love that we're getting into the nuts and bolts. Let's do this exercise together, and everyone can do it with us. First off, and then-- Got it. Now there's just one more thing you have to do. Do you know the math? I would have $736,000 in my account. Yeah. Remeats 10 money rules. This is where the real wealth is created. Number one. This episode changed my perspective on money. I'm an investor. I've been investing for the last six, seven years at different levels. Big companies, small companies, the S&P 500, funds, you name it. But Ramit changed my mind. He changed my mind on money, spending, investing. And he changed my mind on something that I think 95% of you that are listening to this podcast and they're about to listen to this, need to have your mind changed on too. That if you have the right philosophy towards money, the right perspective and mindset towards money, then there is a path to living our rich life, to becoming rich, that enough people are not talking about. He debunks the myths of money, the limiting beliefs about money. And he confronts all of the unhelpful advice about money that stands in the way of you becoming rich. There's an app on my phone that I now have installed because of this conversation. And there are three big investments that I've now made in my life because of this conversation. And there is one key idea that I now believe will make me 10 times more wealthy over the next three decades because of this conversation. You're going to love it. Enjoy. Remeats.

Financial Literacy And Advice

Why should someone stay and listen to this episode? (03:05)

Someone's just clicked on this podcast on YouTube, on Spotify, on Apple. And they saw the title, they saw the thumbnail, they thought that sounds interesting. Tell me why you think they should stay and listen to what we're going to talk about today, what they stand to gain if they give us their time. Whenever someone hears someone talking about money, they get rigid. They instantly think that someone's going to come in and tell them, you can't spend money on lattes, you can't go on vacation, you can't buy any new clothes, save all your money until you're 90 years old, and maybe just maybe, then you can spend it. And I don't believe in any of that. I think you should spend extravagantly on the things you love as long as you cut costs mercilessly on the things you don't. I think you should live a rich life today and an even richer life tomorrow. And so when you combine money and psychology, you start to understand that there is more to a rich life than just some number in a spreadsheet. People already know they should be saving more. They know about compound interest. They may not know the intricacies, but they understand if they invest some now, they're going to have more later. So what's stopping them? That's been the central question that I'm fascinated with for the last 20 years. That's why when I studied human behavior and persuasion and psychology, I was obsessed with this question of, what are the things we know we should do, but we still don't? You can live a rich life, regardless of where you came from. You can live a rich life regardless of your income. Now, of course, having a higher income dramatically helps, but just like fitness, we can all improve where we are. And that's what we get to talk about today.

The language of money (04:53)

- When you talk about the language, language of money, what do you mean? - I mean understanding the nuts and bolts of money. So just the same way that we all learn how to drive. We learn the rules of the road, when to use our turn signals. Most of us do not have even the equivalent knowledge of money. For example, the basic language of money would be what percentage of your income are you saving and why? What percentage are you investing and why? When will you have $100,000 or $500,000 or $1,000, and what will that money get you? 'Cause just having $1,000,000 in the bank is pointless. What does it get you specifically? This is the basic language of money. You've got to know your key four, six numbers in your life, not many, just a few. But once you understand those numbers, it's like understanding the speed limit. Understanding the speed limit means you understand a lot. There's a rule of the road. If you go too fast, what's gonna happen, why do these rules exist? And these rules are similar in money. You can break them. That's okay, but you gotta understand the rules first.

Numbers we should know (06:03)

- What are those numbers that I need to know? - There's four numbers that I really like to track. I track these myself, and these are the numbers I encourage. The first is your fixed costs. Those would be your rent or your mortgage, your any debt payments, groceries, the money that you are spending every single month that is essentially fixed. And the number I recommend for that is 50 to 60% of your take home pay. So that would be if you're spending 50 to 60% of what you make, what you take home on your rent, your groceries, any debt payments, your car, you're in good shape. The next one is your savings. That would be roughly 5 to 10%. Savings would be things like an emergency fund, savings for a down payment, for a car, things like that. Third is investments. This is where the real wealth is created. And for this, 5 to 10% of take home is fine. Of course, the more you put in, the more you're gonna have. And then the fourth category, the one I love the most, is called guilt free spending. This is going out for cocktails in New York. It's buying a beautiful shirt. It's treating your friends, whatever you love, yoga, 20 to 35% of your take home pay. So if you're watching or you're listening to this, just take 15 minutes. Back of the napkin, jot down your approximate numbers. You don't even have to get them perfect. And you will be able to benchmark how you are spending compared to those numbers. I'll tell you that those numbers tell me a lot. It's almost, if you just show me those four numbers of your spending, I can tell so much. I can tell what you love spending on. I can tell what you don't. I can tell what your priorities are. And I can also tell where you are out of alignment. So I'll give you an example. When I ask people, what is your rich life? One of the common answers they say is, I wanna do what I want, when I want. I go, oh God, not this answer again. I hear it every day. I go, wow, that's so interesting. So what do you want? They go, most people have never thought beyond a trite answer. So then the next answer I often get is freedom. I want freedom. I go, great, that sounds good. What is freedom? I wanna do what I want when I want. I look at their numbers and I see a huge payment that they're making to a 30 year mortgage. I see debt payments, I see car payments. And I go, now this is interesting. You want freedom, but you have essentially anchored yourself down to not be able to travel or to pivot or to move. How can those two be? How can you reconcile those two? And that dissonance is actually a fascinating moment. I love when we experience dissonance, we all do. I say that I wanna work out more, but I don't work out more. Why? And what you'll discover is people often, they simply have never thought about it. What our rich life is, these generic phrases, freedom, flexibility, it's just words. What I really want somebody to say, I want them to go a lot deeper, is to say, I want to be able to travel for six weeks a year. I wanna go to London, I wanna go to New Delhi, I wanna go to Thailand because I wanna visit my family. That's a good start. If we get even more specific, they tell me what seat on the airline they're sitting on. They tell me where they're eating, they tell me who they're bringing with them. But to simply say, I want freedom is so vague that when I look at your numbers, there's often a huge incongruity with how you're spending versus what you claim your rich life is. - How many people from your experience of interviewing people and doing this research are clear on what their rich life looks like down to what you described.

How many people are clear on their rich life (09:47)

They want to travel for a couple of months a year and then even further down to which seat I'm gonna be in, which class I'm gonna be on as I travel. - Less than 1%. - Less than 1% of people know that. - Most people literally say, "I wanna do what I want when I want." That is their extent to which they've thought about a rich life. - Why does it matter to be, what do that less than 1% of people that have that planned out, have as an advantage or a benefit from that meticulous thought that the other 99% don't have? - Because they can craft their rich life that is uniquely theirs, almost like getting a handmade glove. And in fact, the more you craft your rich life, the more bewildering it looks to the outside world. So I'll give you an example from my own life. I love to travel. I spend a lot of money when my wife and I, we go, we'll travel for months at a time. I love hotels. I love the hospitality. I love the details. I love it all. I don't really care about cars. Not at this phase of my life. It's just not that important to me. So when I talk about my money dials or the things that I love to spend money on, I might spend a crazy amount on a hotel per night, just because I love it. But I drive a car that's almost 20 years old. It's just not important to me. And I want that. I want to hear in your life what you spend extravagantly on, but then you cut costs mercilessly on, because I want that duality, which indicates you are intentional about your rich life. What if we're buying things to impress other people? And we don't, 'cause it's hard to, looking in from the outside, especially, it's hard to know if someone actually likes Lamborghinis. Or if they're buying Lamborghinis, because they would beat up when they were nine years old in the playground and they're trying to overcompensate and make the world. And does it matter while they're buying it? Does it matter? I don't know. First of all, how would we even know? How would they know? Is there a difference, do you think? Just in your opinion, on the impact that that purchase has on us, whether we're doing it intrinsically, or we're doing it extrinsically? 'Cause I reflect on some of the things that I spent money on, and I go, that was for someone else. Whereas there's other things I spend money on, which are maybe health related, or travel related, like convenience, flying in a nice class on a plane, which I go, "No, that's actually adding a lot of benefits in my life." Whereas that Manchin I bought out in the countryside when I was 23 or whatever, was a terrible decision. It took me away from my friends because it was an hour and a half outside of the city. And none of my friends ever came to it. So I was just arriving at midnight after work in this fucking mansion with this tennis court, by myself, sleeping for three hours, and then driving another hour and a half back to the city, where all my friends in work were. I go, "That was a stupid fucking decision based on extrinsic, external, you know, motivations." - It's a great question. And, you know, particularly in America, we love this idea of ownership. We are taught, you've got to own. Owning a house is the best investment. It means you are successful. And if you're renting, no one really says this, but what they deep down say is you're a loser. This individualistic strain really runs deep. And it has led a lot of people to make poor financial decisions. First of all, you might be surprised to hear my view is that owning can be a good financial decision, but it also can be a very bad financial decision. In fact, I rent by choice. And living in New York, for example, I lived here for a long time, I knew that if I were to buy, I would be losing thousands of dollars every single month because it actually cost more than twice as much to own than to rent. But can you imagine the type of pressures even I got from people who would come over and say, "Oh, so do you own this place?" The place that I was renting. I said, "No, I rent." And there was this visible moment of confusion. They're shaking my hand. They know that I'm the I will teach to be rich guy, but I rent. How can you be teaching money, but you rent? Isn't renting for losers? And I have to say because I was rock solid confident in my decision, that pressure did not affect me. But I wanna also say that a lot of us buy things based on status. Like the idea that we don't buy things based on what people around us think is nonsense. We buy things based on status. To deny it is absurd, but I do think that for the big purchases in your life, like a house, a car, the big things. You've gotta run the numbers. And if you decide, "Hey, you know what? "I wanna buy a house, even though it's gonna cost me an extra "600,000 dollars in opportunity costs and phantom costs, "but I'm gonna do it because I like it "or it makes me feel good." I say, "God bless." But if you simply make decisions based on what other people around you do, then you will discover like you did, "I thought I was gonna feel a certain way "and I don't really feel that way." And that, for me, is an opportunity for you to interrogate your own beliefs. - And money is a, like a personal zero-sum game, right? So I can't just spend indefinitely. So buying that ridiculous house out in the countryside takes away from something which might have genuinely brought me closer to happiness. Like, I don't know, going with my family or whatever it might have been. - Exactly. - You talk there about buying property. I find that really curious because the popular narrative is for most people, the minute they get any decent amount of money is to buy your first house.

Why people should think twice about buying a houses (15:40)

- Oh my God. - That's what people do. They take 10% deposit or 20% deposit, whatever it might be, and they buy a house. Why is that a poor investment? Why is that a bad thing to do? Because that does kind of sit counter to the popular narrative. - Well, we have to remember, first of all, where the popular narrative came from. In America, if you ask people, what is the American dream? - The answer is inextricably tied up with a single family home with a white picket fence. That's not an accident. That is the result of decades of messaging, some might call it propaganda. First of all, most people in the world do not live in single family homes, like we do in America. That has caused a lot of issues. But to leave that part aside, this is how most people think about buying a house. They think grandma bought a house in Austin, Texas in 1970 for $100,000. Grandma just sold it 50 years later for $1 million. Grandma made $900,000. They go, it's the most profitable thing you can do, buy a house. I go, okay, that sounds really nice. Did Granny factor in how much she spent on maintenance for the past 50 years? No, did Granny factor in inflation and how that affected her return? No, what's inflation? Did Granny factor in the opportunity costs of what that down payment could have been used if invested in the S&P 500? No, and did Granny look at all these phantom costs such as interest on the loan? No, it's not simply the bigger number minus the smaller number. That's wrong. That is simplistic. For the biggest purchase of your life, you've got to go deeper. Again, when I was living here, I kept a very close eye on real estate. And the place right next to me, same square footage, same number of bedrooms, same everything, it would have cost 2.2 times what I was paying in rent. So just to give you an example, if I was paying $3,000 a month, it would have cost about $6400 a month to own, okay? I said, you know what? I like renting. If I have a problem, I just text my landlord. I took the $3400 I would have spent owning when factoring in phantom costs, maintenance, interest, taxes, all that. And I simply invested it. And I made more money doing that than I would have owning. - What about if you're buying somewhere to, for the rental income? - That can work. That can work. So owning real estate as an investment can be part of a well-diversified portfolio if you run the numbers. Right now, there's a lot of hype. People go, I'm gonna buy a house. And if I don't like it or whatever, I'm just gonna rent it out. Okay, fine. But you've gotta remember that if your mortgage is a thousand dollars, that's not just the amount you're paying. There's a lot more. In fact, in my estimations, I add 50% to that price. So $1,500 a month, which would include a roof repair happening 19 years from now. We've gotta amortize that out. Labor costs, interest, all that. If you can rent it out and make a profit, fantastic. It cash flows, that's awesome. What you discover is that most people who buy a primary residence, the place they wanna live in, they buy it because they want it, and then they tell themselves it's an investment. Buying a house can be an investment, but oftentimes it's not. And they're far better, far simpler investments. Here's my key message. I wanna make sure nobody misunderstands me. I've been accused of saying, buying a house is bad. No, I never said that. In fact, I will buy a house myself one day. And when I do, it's gonna be a terrible financial decision, and I'm gonna do it anyway. My key message is for the biggest purchase of your life, you've got to run the numbers. Sometimes buying can be a good financial decision. Often renting can be a good financial decision, run the numbers, and never feel guilty for renting. - As it relates to buying a house, I've always been hesitant because I'm scared to relieve the point you mentioned about being anchored to a location. So the way that I've kind of justified that away is by saying, well, I'll just Airbnb it when I'm not there, or I'll rent it out. If I decide to move to New York or whatever, is there a cost in the opportunity of being less flexible about where you can be that people don't think about, especially when they're younger? - Yes. - And they're probably a little bit unencumbered by life. - Yes. - At that point. - Yes, buying a house is one of the most profound financial decisions that will affect your lifestyle ever. You can sell a car even at a minor loss, but selling a house involves massive transaction costs and labor that most people don't anticipate. One of the reasons that I rent is for lifestyle reasons. Financial, yes, I make more money renting and investing the difference than I would owning, but also lifestyle. I don't know that I'm gonna be in the same place for 10 years, which is one of the key things that I would encourage people to decide before they buy. You wanna know that you're gonna be there for at least 10 years, because then you can spread all those transaction costs, spread 'em out over 10 years. They become much more affordable. Kind of like buying an expensive jacket. If you buy it and you wear it once, that's really expensive. If you buy it and wear it over 10 years, becomes a lot more affordable. Now take that, multiply it by 1,000, and that's a house. Particularly for young people, I don't give a lot of unsolicited advice. I used to do it when I was young, when I just learned about money, and I realized nobody really wants to hear it. They really don't. If somebody comes to me, they come to my blog, my social media, great. Otherwise, I'm not going around telling people, you should do this. Once in a while though, I get a young person asking me, I'm just about to graduate from college, what advice do you have for me? And at that moment, the best piece of advice that I have is move where the action is. And typically that's a big city. So that would be where there's more jobs, where there's simply more people if you're looking for relationships. And there's a lot of tacit knowledge that happens in big cities. Like, oh, have you tried this? Oh, have you seen that musical? Have you tried this thing, this idea that's going around? So often surrounding yourself geographically can be hugely rewarding to you as you grow. You can't do that if you bought a house because everybody told you that it was going to be the best investment. And if I were to say, show me where you calculated the numbers that it was going to be in a great investment, 75 plus percent of people have never created a simple spreadsheet. - How does buying a house compare in terms of returns to something like investing in the S&P 500? - It's quite poor, actually. - Really? - Yeah, over about 100 years, there's great research showing that it has essentially matched inflation. It's been slightly above inflation. People find this mind-boggling. Again, because they think somebody bought a house for 100K and they sold it for a million, so it's 900K, but they don't properly factor in inflation opportunity costs, phantom costs, all that. It's really hard to factor these numbers in, but it's critical because it's the biggest purchase of your life. I'll give you another example of where people don't properly factor it in. Some people pay a financial advisor 1%. They go 1%. It's not a big deal. I'll pay 1%. What they don't realize is that that 1% over the course of their lifetime will take 28% of their returns and hand them over in fees. Think about it, if you make a million dollars in investing over the course of your life, $280,000 are going right out of your pocket into that advisor's pocket. Now that's super counterintuitive. 1% turns into 28%. How does it work? You can simply go online and search for investment costs calculator and plug in the numbers at a 1% fee and you will see. The point of this is that sometimes money is highly counterintuitive, really counterintuitive. It's unlike anything else. If you and I go to Sushi right now and we get Sushi for 20 bucks, it'll be fine. If we get it for 100 bucks, what do you think? It'd probably be a little better, right? And if we get it for $1,000, the fish will have been flown in from Tokyo this morning and it will be served in an absolutely stunning setting. So in other words, you pay more, you get better results. We're used to that. If I spend more on a sweater, it's probably gonna have a different type of fabric. More on a car, it's gonna look cooler, have cooler features. Money's not like that. If you spend more, you don't get better returns. You don't get better anything. In fact, if anything, you get worse returns. People find this mind boggling because it is, it's counterintuitive, but in investing costs matter. In buying a house, you've got to run the numbers because they are totally counterintuitive. Quick one before we get back to this episode. Just give me 30 seconds of your time. Two things I wanted to say. The first thing is a huge thank you for listening and tuning into the show week after week. Means the world to all of us. And this really is a dream that we absolutely never had and couldn't have imagined getting to this place. But secondly, it's a dream where we feel like we're only just getting started. And if you enjoy what we do here, please join the 24% of people who watch this channel regularly and have hit that subscribe button. Means more than I can say. And if you hit that subscribe button, here's a promise I'm gonna make to you. I'm gonna do everything in my power to make this show as good as I can. Now and into the future. We're gonna deliver the guests that you want me to speak to and we're gonna continue to keep doing all of the things you love about this show. Thank you. Thank you so much. Back to the episode.

The S&P500 & investing (26:00)

So what is the S&P 500 for anybody that doesn't know? Yeah. And what are the returns that I'm likely to get from investing in the S&P 500? I really wanna simplify this for people that are at the very start of their investing journey. You know, because, I mean, this is what you spend so much of your time doing that I just think about my team here. It's in the diavacy, you know, there's about 30 people. And we started talking about money one day. And it was mind blowing how nobody in my team's lives had ever had the conversation with them about investing. We all think of investing as something that rich people after the age of 40 do once you have a million dollars. Or if you don't have a million dollars, then the only other way to invest with taught is to buy a house. Ah, this is driving me insane. It's true though, isn't it? Yes, and that's the central part of my work, is that you can live a rich life, and that rich life can be richer and more vibrant and more personal than you ever imagine. If you wanna travel, you can travel for longer than you ever thought. You can travel, for me, at nicer hotels. You can spend more time with your children, with your loved ones, whatever your rich life is. You can do that. But you've got to learn a few key basic things about investing and money. So let me tell you what I would tell my family when they come to me, they go, "How should I start investing?" The simplest, simplest way that I advise my family is I say, get a target date fund. So let me explain what that is. A target date fund is one fund, just one, and you pick it based on the year that you're going to retire. So if you're gonna retire in 2050, if you're gonna be 65 in 2050, you go and you find that one fund. It's called a Vanguard 2065 fund, or Fidelity 2065, or Schwab 2060. There's lots of brokers. These funds, it's one fund, all you do is put money into it. That's it. The fund, like a pie chart, is automatically diversified. So as you get older, it gets more conservative because somebody who's 75 years old should be investing differently than someone who's 25. One fund, all you have to do is set your money up to go into it every single month. What is a fund? A fund is a set or a basket of stocks and maybe bonds. So we've all heard of companies like Microsoft, Google, whatever. A fund owns lots of these, right? And that's important because we've heard diversification, like you should have diversified your investments. Okay, well, how do I do that? You don't need to go and buy 20 stocks and then figure out how much of each to do. That's too much work. And honestly, most people are not good at that. Even professionals. You buy a fund which automatically owns lots of stocks, like hundreds of them. And over time, all you, the individual investor, like me, have to focus on is putting money into it automatically. So a fund, essentially, I've got 100 pounds that I want to invest. I find a fund. Why do I find these funds? You can go to Vanguard, Schwab or Fidelity. All those are great companies. What you're looking for, regardless of what country you're in, is you're looking for a low cost brokerage firm. So, but there's also apps and stuff that I can-- You can use apps. I don't like a lot of the apps because they gamify you to try to invest. They want you clicking and trading. I hate traders. Trade, you do not want to be a trader. Traders lose money. Investors treat investing like watching paint dry. That's how sexy it is. Trust me, I'm not getting my entertainment from investing. I'm going out, go watch a movie, go watch Netflix. But investing is boring and automatic. That's how it should be. I used a company called Hogrive Lands down in the UK who have an app. When I first started investing, when I first started investing in funds, they had a very ugly app. So I wasn't very compelled to use it. I think it's better now. I would use just do it on desktop, which I do get your point because you don't want to be game-- you don't want to screen all of that notes. I like ugly. It should be ugly. And you don't want it to be too accessible. Correct. I don't want to be able to check it every day. No, look, on my phone, you will see no investing apps. Yes, ma'am. There should not be. Why do you need to log in and check it every day? What's the point? In fact, most people should check it every three to six months. And here's how you check it. You log in on your desktop. Wow, it's up. Wow, it's down. OK, bye. You're not tweaking anything. It's like making Thanksgiving dinner. Once you've put the turkey in the oven, just let it sit. Do not fiddle with it because you're only going to mess it up. And in this case, you're letting the turkey cook for decades. And that fun. So I've got 100 pounds. I go on a website-- Vangard, Fidelity, Schwab, whatever they are. I have no alliance to any of them. Neither do I. There's various ones in the UK. I actually do recommend Harghrie Blansdown, just because it's simple. And I think investing in funds, there's no fee associated with the investment itself. Obviously, they might take a percentage, depending on which fund you're investing in. I take my 100 pounds. And investing in Harghrie Blansdown, there's no minimum, great, from what I understand. And if you invest in a stock, they charge 12 pounds per investment. But if you invest in a fund, it's free. I put my 100 pounds into a fund. The fund is essentially taking one pounds, one of those pounds and investing one pound into Facebook. It's investing one pound into Google, one pound into Shopify, one pound into Spotify, one pound into NVIDIA or whatever. It's doing that for me. It's managing it for me. It's making the decisions for me. I just put the money in every month, whatever I can, and I leave it. Yeah. And let's go even deeper. I love that we're getting into the nuts and bolts here. Because honestly, most people, they do not know how to invest. Literally, what website do I go to? And then what do I do? The fund owns these different stocks, and some will go up, and some will go down. And it's inconsequential to you. All you need to know is you own this fund. Now that you've opened up an account, and you've sent $100 or $1,000, great. You've made one of the most important decisions of your life. Now, there's just one more thing you have to do. Set up an automatic transfer so that every single month, you have a certain amount of money going in. Now, if you don't know how much money, use my conscious spending plan guideline. What did I say? 5% to 10% of take home is a good guideline. All right. You should be able to do 5%. Trust me. Anyone who comes to me, they go, "Rameet, there's no way. "Must be nice. "I can't afford." I go, "Show me where you're spending your money. "I guarantee you I can find 5% to send in every month." Now, you're not trying to send it in. I don't try to brush my teeth in the morning. It's a habit. Investing is even easier than brushing your teeth because you set it up automatically. The investment fund will automatically draw from your checking account. And it will pull in $100, $500, $1,000, whatever your number is. And so, you're not going to log in for three, four, five months. You're going to log in a few months later. You're going to be like, "Oh my God." I didn't even realize that all this money is in here. When you add that plus compounding over many years, that is how real wealth is created. So, I don't want anyone to think that you have to be rich in order to start investing. One of the ways you get rich is by investing. - I've got a friend that's currently actually in this building at the moment, and I had this conversation with them about a year ago, gave the advice that you've just given there. And about two months later, this individual, who I shan't name, came to me and I said, "How's your investments going in that fund?" And they said, "Oh yeah, I had bills, I had a credit card bill, so I took it out." - Oh yeah, she treated like a checking account. Investments for me are places to accumulate wealth. I don't draw from it. That's what a checking account is for. So, what that is, is there's two parts to what your friend is saying. One is, mentally, she's thinking that this investment account is just money I can draw from if I need it. So, I would sort of gently change the way she thinks about it. The second is, I guarantee her account structure is a little subpar. So, here's how I would set it up. This is in chapter five. It's all automation, 'cause trust me, I don't wanna spend time transferring money back and forth. I don't spend any time on that. You get paid, your money goes into your checking account. From your checking account, it is automatically transferred to a savings account. In fact, I have sub-savings accounts for vacation, car, down payment, all that stuff. So, you have money set up for specific goals. Money is transferred to your investment account. It's transferred there. I'm not gonna touch that money. I'm gonna let it cook. And then I have my guilt-free spending, which is going out with friends, whatever I love, and my credit card bill is automatically paid off every single month. That's how you wanna set it up. It takes a couple of weeks to set everything up, and then you never have to think about it again. - How can you prove to me that this is the way to make wealth? What case studies have you got that investing in funds over a long period of time is the path to financial wealth? Because you said earlier about the paint drying thing. The narrative that we see about why people and how people get rich is they sell a company or they have a lottery win, or maybe they buy some cryptocurrency and it goes up. That's what we hear. So, that's what we hear. - That's what we hear. - We try and emulate. - Totally. - We prove to me that this fund strategy is better. - Well, there's a couple of things. First off, the research over more than 100, about 100 years shows the returns of the stock market. And the returns tend to be, at least in America, they tend to be around 11%, 10 to 11%, and if you take out inflation, you get about 7 to 8% per year. Now, for anyone listening, they go, okay, well, what does that mean? That number means nothing to me, 7%, whatever. If you go right now and you Google investment calculator, and you just plug in your age, you plug in, let's say, 200, 300 bucks a month, and you plug in 7% return, and you just watch how that money grows. You will be shocked. - Jack, get me my phone, I'm gonna do it now. - Okay, so let's search for compound interest calculator. And there's a really simple one.

Compound interest calculator (37:00)

It's called money chimp. - Okay. I can't, I've got it. - All right. All right, so there's four numbers we need to fill out here. Let's take a look. The first is current principle. That means how much you've got in the bank. I'm gonna say $5,000, and I'm gonna start when I was 16. 'Cause if I'd saved my money when I was 16, and not spent, recklessly, I think I could have had that $5,000 when I was 16, annual edition, what does that mean? - How much can you invest per year? So for most people, they think about on a monthly basis. They might say 200 bucks a month, which would be $2400 annual edition. - Okay, so I'm gonna say, I'm gonna say, can I say $5,000? - Yeah, that's, you know, about 400 bucks a month. I think that's reasonable. I often find that with people making median or slightly above median salary that there are hundreds of dollars of money that is unaccounted for, that if properly made intentional, could be invested. So great, $5,000 a year. All right. - Obviously, I could have once I got past a certain age, I could have increased that though. So we're gonna talk about that. - Okay. - Hold on to that idea. - Okay. - So what's the last thing I've done here? Is this was you at 20? - This was me at 16. - Oh, okay. And how old are you today? - 30. - Okay. So 14 years, let's just do it until today and we'll see what happens. - Okay. - All right. - 14 years. - And then it says interest rate. So what should we assume for that? - Is that eight percent? - Yeah, seven to eight. I do seven just to be super conservative because I never wanna be surprised on the downside. - Right. - If anything, I'm gonna make more. So seven percent. All right. Let's calculate it. Okay. What do you see? - Damn. - What do you see? - $133,537. - Yeah. That's what you would have had right now. Now let's add some context. So this is really important. You see a number that says $133,000 at age 30. - Yeah. - Okay. Is that a lot? Is that not? Hmm. I don't know. Let's break it down. At that point, you started with $5,000 and you invested $5,000 per year. We assumed no raises, even though you obviously made more than you made at age 16, we assumed you stopped investing at age 30, which is obviously ridiculous. And you end up with six figures. Let's play it out. Let's take it until 40. So instead of 14 years, you invested for 24 years. What do you see? - I would have $336,000. - It's getting better. - From just $5,000 a year. - Not much. - It's fantastic. - Again, 400 bucks or so a month is very modest. Remember, people's income goes up, typically in their 30s and 40s. And if you already are investing a little bit automatically, all you have to do is just tweak a number and it will take an extra couple hundred, three, four, 500 bucks. Let's do one more. Let's go to 34 years, just 'cause I wanna see what happens. And then we're gonna play with the other numbers. - Okay. So investing from the age of 16 until I'm 50, I would have $736,000 in my account. - Yeah. Now I wanna do the full thing. I wanna do a more realistic number here. So instead of 50, we're gonna go 49 years. That takes you to age 65. - Yeah. - And instead of $5,000 per year, your income obviously went up from being 16 years old. So I'm gonna pick a number out of thin air and I'm gonna tell you how I picked it. I'm gonna say instead of $5,000 a year, it's actually going to be $30,000 per year. Let me tell you why I picked that. In your early years, you don't have as much money, but you were still investing a little bit, which shows that you're dedicated. As your income goes up, you're gonna start proportionally continuing to invest. So at a certain point, your income will be really high and that will bring that average up. That's why I switched it to 30,000 per year. I actually think this is quite modest, but I'm gonna go ahead and do it. So here we have someone starting investing at $5,000. They invest $30,000 per year. Okay. They grow it for 49 years at 7%. Do you know the math? No, tell me. $12,303,000. So that's me starting with 5K, gradually ratcheting it up until I'm investing, well, investing 30K on year, a year per average across those 49 years. Yes, which is a flaw in this because it's so simple. That money invested, you're not actually gonna invest that much early on. You'll invest more later. Yeah. So you won't actually, you'll maybe have a marginal amount less, but we're talking 10 versus 12 million. That's a lot of money. And then if I got 8%, instead of the 7%, I'd have 17.4 million. Yeah, but don't mess with that. 'Cause this is what people do. They go, "Well, if I got 13%, I'm gonna invest in this P.E. fund." I go, "Don't do that. You're gonna lose all your money. Just stop." 7% is safe, it's conservative. That's why I am here. That's why I wanna encourage people. You don't need to juice your returns. I hope you do get 8%. But I don't want you to count on that. I want you to count on safe, stable returns. And what matters for you is the time you started early and the amount you have a considerable amount to invest. What about the richest people in the world? You know, we think of the Warren Buffets of the world or the Charlie Mungers of the world who ended up becoming the richest investors on planet Earth. What was their strategy? I'll tell you, let's talk about Warren Buffet. There's a friend of mine, Morgan Housel. He wrote this amazing article. - I love that book. - Yeah, the psychology money. He wrote this amazing article about Warren Buffet. If you look at Warren Buffet's returns, he started investing at a very young age and the money compounded. Again, it's like putting the turkey in the oven and letting it sit there, not just for an hour, but many hours. In his case, 60 plus years. He has made over 90, I think over 99% of his wealth happened over the age of 60. Okay, think about that. It's all because he started investing so far ago. And what is mind boggling is that you don't need a fancy strategy. You don't need to be picking individual stocks. You don't even need to be a genius. To make a lot of money, you do not have to be the smartest person in the room. You just need to remember a few key things. Start as early as possible. Okay, and if you're not 16 years old, if you're 30, 40, even 45, okay, start now. Second, invest aggressively every single month. That's critical. Third, keep your costs low. 1% in fees is gonna take 28% of your returns. 2% is gonna take over 55% of your returns. Keep your costs low. If you do those things, you will have more money than you ever imagined. - What are the attributes of someone that's probably gonna be poor in 30 years in terms of their relationship and their behavior with their money?

What are the characteristics of someone that will end up little money (44:20)

- The easy, they don't invest. They feel overwhelmed and anxious about money, and they talk about it all the time, but they've never read a single book about money. And there's these deeper attributes they have. Only rich people invest. - They think that. - Yeah, and that's why I'm here. I want everyday people to know, just like me, I started off my parents immigrated from India. I had no special investment knowledge, but I had two parents who were educated and encouraged me and said, "Learn this stuff. "We'll do it together." And that was a gift. Everyday people can build tremendous wealth, which in and of itself is impressive, but it's even more impressive when that wealth is used to live a rich life. A rich life of adventure and spontaneity and generosity. - Some of the stats I pulled out from your book, about 25% of people who make $100,000 a year plus are still living paycheck to paycheck. According to a recent survey of millionaires done by the US Trust, 83% of the wealthy, say their largest investment gains have come from small wins over time rather than taking big risks. - Yes, this is counter to everything we see on TV. Because on TV, it's really boring. What are you gonna look at my Vanguard account? - Oh wow, compounding 7% per year. It went down 8% last year and it went up 9% this year. So boring. So we see these cool stories of business owners and we're both business owners. It is cool, but a tremendous amount of my own wealth will come from low cost, long term, methodical investing. - That's like a rule of life, isn't it? That the real returns, in reality, the great returns come from patience and consistency and things that really aren't sexy. Like they're not Instagram-able. If I post on my Instagram today, hey, I've got some advice for you guys to become wealthy and I go, need to invest in this fund and just leave it there. But if I go listen, I've got this new NFT collection or cryptocurrency coin that's gonna make you a million percent this year, people are gonna go all in. That's just like something within the human condition where we want big returns with little effort and today. - We wanna get rich quick. - Same with a six pack. We want the six pack abs in 10 minutes. We don't want six pack abs with diet restrictions and nine months of work, that's not. - And that is why I have a lot of compassion for helping people unlearn some of the messages about money because we all have them. We all have the equivalent of I want six pack abs, but we also have something in life that we've spent time to get really good at and we know that the secret is basically consistency. If I go ask someone who's an amazing cook, hey, I wanna cook like you, how do I do it? What are they gonna give me some, you cinnamon. No, they're gonna say get in the kitchen and cook every single day for five years and you're gonna learn about when do you salt and when to cook it for longer. Fitness, you wanna ask someone who looks really good or feels really good about their body? They're gonna give you some secret workout? No, they're gonna say, I show up when I feel good, I show up when I don't, I show up. - When you, let's think about the people that might be listening now.

How do I increase my income? (47:44)

So there's gonna be someone that is a, they're a bus driver or they are a social media manager, they are a cleaner, they're a teacher, they are a personal trainer. If your job was to make that person a millionaire in 20 years from now, whatever your age they are right now, what is, and you were their financial advisor. In fact, you were controlling all of their personal professional decisions. Talk me through what you would do with that individual at a very detailed level. - I would do a few things. Number one, that the most important things I would do would be set up automatic investing and be aggressive about it. Two, they have to increase their income. - Okay, I'm gonna be that person, I'm gonna embody that person, I'll just describe. So increase my income, I'm a personal trainer. - Perfect. - Okay, so what should I do? - All right, you're a personal trainer. So first off, I would say, how much are you charging? How are you finding your clients? We talk about that. And let's say you're charging 100 bucks an hour and you have clients that say, "How long do they stay on average?" - That's exactly what I'm charging. - Perfect, great. - They stay longer than two months, I'm very good. - How long do they stay? - Three months. - Three months, wow, okay, you're very good. All right, so your average client is worth for a few thousand bucks. - Yeah. - Great, so you're making, let's say, 60, $70,000 a year, all right. The first thing, after I understand all this information, I would say, all right, we're gonna double your income. How are we gonna do that? The first answer everyone gives is I gotta find more clients. Okay, you should ask your clients, "Hey, I've got a few slots available. "Who would you recommend?" So you should get more clients. Second, you're gonna listen to your clients and you're going to say, "What else are you looking for? "I know you've got your fitness journey, you're going on. "They're gonna tell you, "I've got a 10-year reunion. "I wanna plan for that." Another person's gonna say, "Gosh, I know I should be "eating healthier, but it's really hard for me." So you're thinking about it. Here's what you do. You create, you package up meal planning services. You can either do their macros for them and charge them a little bit extra, let's say an extra 200 bucks a week or 200 bucks a month. You can also partner with a food delivery service and you coordinate with that company to feed over their macros and it gets delivered to them and you take a small cut. Right there, you've added thousands and thousands of dollars per year per client as long as they stick with you. In addition to that, you can do group sessions. So you go, "Hey, I'm gonna do a weekend session. "I'd like for you to invite your friends." Invite them for free. And of course, of the people who come, let's say you get 15, 20 people to come, you do a free little session on Saturday, you go, "I'm a trainer, I work in Soho. "I have three open slots. "That's how you're finding new clients now." So you're doing two things. You're finding new clients, you're increasing your average lifetime value per client. Okay, that's two things. Now let's do one last thing. Let's increase the duration that they stick with you. They're sticking with you for three months. Give them a special offer to stay with you for six months. So when they sign up, they work out with you for a month, you say, "Look, it's 100 bucks right now. "If you stick with me for a six month plan, "I will give you my sessions at $95 per plan. "You'll save X 5%. "1, 2, 3, you've increased. "And if we did the math, you may have doubled your revenue, "you certainly boosted your profit in a huge way." - A lot of that's about making sure you're getting a better return per hour you spend at work, but also making sure all of those hours are full, then doubling down and making sure each hour, 'cause that's your currency when you're a personal trainer. You're trading in your time. I need to make the most from every hour I spend. I've thought about something recently, as I was writing my new book, The Dirova CO, which I've written these 33 laws for building and becoming great, essentially. It goes across marketing and business and whatever.

Optimising your skill sets (51:47)

And one of the chapters that I investigate is this idea of making sure your skills are on the right market. So my company went public. And one of the things that I came to learn from sitting with investment bankers for many, many years was that if you put a company, the exact same company, let's just say it's the company that make these silver mugs in front of me, if I take this company public on the London Stock Exchange, I might get, for example, four times revenue. If I take the exact same company, and I list it on the New York Stock Exchange, it will be valued at eight times revenue. It's the exact same company, exact same people, exact same business, just moving it to a different market. And what, upon leaving the social media marketing world, when I was 27 years old, one of the first calls I got was from a biotech company ran by a billionaire friend of mine that was going public. And they brought me in. And on the first week, when we were discussing what they might pay me, I'm thinking, they can't really pay me in cash because I've got enough cash, I don't really need that. They can maybe give me some stock. Their offer to me for my skillset was $8 million, roughly $8 million in options that I would earn in nine months from taking the company from where it was, building out the marketing team, handling the storytelling, and taking the company public, which we did at about 3.2 billion valuation. Their offer was $8 million in options. I reflect on that. And go, I'd spent the previous 10 years using the same skillset to sell consumer goods, like dresses and iPhones for Apple and Logitech and big fashion brands. I took the same skillset and applied it to a market and industry where it was rare. biotech people know nothing about Reddit and Twitter and Facebook and social media. So my skillset was rare, scarce in that market, so it was incredibly valuable. And I think about this a lot with, especially as this AI thing rolls in, I think people should be looking at their skillsets and going, where is my skillset as a writer gonna yield the greatest returns? I could be a social media manager, I could be a blog writer, or I could add a little boat string to my bow and become a scientific writer, or like a writer in biotech. And you'll get paid, if you can add that little bit of knowledge to your writing skills, you'll get paid, I'm gonna say five times, potentially five times more. And people don't think about the fact that they need to place their skillsets in the most lucrative market where it's scarce. - Yeah. - And so, yeah, just throwing that out there 'cause it's really front to mind for me at the moment. Like, it's great. - It's great. - You know, like, you could be at a gym and you lose 75% of your income to the gym, or you can do it virtually, you can specialize on just preparing people in the beginning of the year. It's like your best year. And every January, that is your focus. It can be celebrity clients. It can be uptown, mid-career executives. That's a very lucrative. You choose, but you choose carefully. I agree. That's a bit of an advanced concept. I think most people, they start off, they go, just how do I make more money? I'm a trainer, I have free hours, but once you kind of master that and you go, like, for example, there's a trainer I know here who charges 175 bucks an hour. That's very good. After you get that and you fill up your entire calendar, you go, okay, I'm making $305,000 a year. I wanna make more, how do I do it? Now you need to get creative. You move to different markets. You add in package things that scale when you sleep. You have video courses, et cetera. There's so many different ways, but I think everyone would do well to listen to what you're saying, which is think about how to move up market or potentially to a totally different market. - Well, your skill set is really scarce. And that's the problem a lot of people have. Their skill set might be too abundant in the industry. - Like social media managers. - Social media managers is one thing, but that's a slightly different skill set because there's a wealth of knowledge there that is unique to that. Knowing the algorithms, knowing the platforms. There's a real creative element to it. But I think about my friend, Anthony, he was a graphic designer. The greatest graphic designer I ever knew in Manchester, but he was designing nightclub flyers. And he's talked about this publicly before. For every nightclub flyer he designed, he got $50, the equivalent, $50 to $100, right? I had a conversation with him a couple of years ago about this and I said, "You're really specifically good at luxury design." He's got that really beautiful chic, simple, but elegant design style. You always go to him whenever any design work like that. So I said to him, "Move to Dubai." And go with there and help design luxury brands. And this guy did it. So he went from Manchester where he was doing nightclub flyers to moving to Dubai. And without revealing his financial position, what I can say is the same hour per piece of work is now yielding him tens and tens more in returns. Instead of getting $500, he's getting $50,000 for a project. And it's just moving his skillset, the same thing, designing on the same software to a different industry which would appreciate and pay him all for the same skill. - The lesson I take away from that, beyond his willingness to actually make a change, which is amazing, is that most of us do not think in terms of discontinuous jumps. We think, "Okay, I'm making, I have $100 a month. What if I had $120 a month?" Well, 20% is quite good, that's amazing. But what if I had $500 a month or $5,000? That's a discontinuous jump. And to get those kind of numbers, something big has to change. In business, moving markets, developing a new skill, partnering, all those things. But it's different in investing, it's primarily time. And that's where we're not attuned to it. We go, "Well, I only have like a couple hundred bucks a month to invest, that's nothing. It's only gonna turn into a few thousand." You go, "No, you're not thinking about time because the human mind is not made for compounding. So plug it into a calculator and you will be blown away." Same thing, buying a house. You're only thinking of how expensive your rent is, which granted rents are very expensive, but you're not actually factoring in how much time and money it costs to pay taxes and maintenance and interest on your loan. You've got to get smart about running the numbers. And when you start to sit back, when you learn the basic language of money and you understand how you feel about money, whether it be, "I like status," or, "I like luxury," or, "I don't really care about XYZ," when you understand your own feelings. Suddenly, you can almost look at the chessboard, dispassionately, you sit back, you go, "Okay, I see what's going on here. I even see how I am a player on the game of life when it comes to money." And then you start to say, "The most powerful question of all, what if? What if I earned more? What if I spent less? What if I decided I actually love traveling two months a year or buying a house because I can decorate it the way I want? What if, what if, what if?" And then you can start to make moves that line up with your rich life.

Should I invest in cypto (59:11)

- Someone comes to you and they say, "What about crypto?" I get that question a lot. - Oh, God. - "What about crypto? Should I be investing?" And my friends told me about this new coin and I'm thinking of putting a couple of thousand pounds into it. I get this all the time. Should I invest in that coin that my friend told me about? - So I get this question a lot. I got it a lot a few years ago. - Yeah. - Let me tell you what happened. People read the book. They know that I'm a fan of low cost, long term investing. And then all these crypto nuts grow up and they grow up to be 19 years old and they go, "Oh, remeats safety. Such an old guy, such a luddite. He doesn't understand investing. This is the new future. Fiat is dead." - I go, "I have a couple of questions for you. Number one, what does the rest of your portfolio look like?" They go, "Ha, ha, ha, ha, portfolio. I put it all in on crypto." I go, "Oh, God, okay." Second, "Do you think that it's normal to get 4,000% return per year when over about a hundred years the stock market has returned approximately 7% per year?" They go, "Yeah, that's 'cause Fiat is dead, you idiot. It's gonna be, "We're going to the moon!" I go, "You're going bankrupt." And many of them did lose a tremendous amount of money. My view on crypto is if you have a well-diversified portfolio, well-diversified, and you want to have a little bit of fun with one, two, even 5% of your portfolio, go ahead. And that could be crypto. It could be an individual stock. It could be investing in your friends bar in Brooklyn. It could be whatever you want, but you gotta limit your risk. And what you find is that the type of people who tended to be attracted to crypto tended to be extremely risk-seeking. And in fact, they saw diversification and risk management as boring for old people. This game is a marathon. You want to live a rich life. You want to be living it for 60, 70 years. I'm not trying to get 10,000% returns and then blow out. And that's what happened to many of them. - I mean, part of the problem here is that when we do get our 10,000 returns, 10,000% return moment. - Yeah, we think it's gonna be 10 million percent if we just-- - But we also could tell everybody. - Oh, of course, you never hear anyone saying, let me tell you something. Thank you for saying that. I went on Twitter 'cause I mess around with these crypto guys a lot on Twitter. I have a great time doing it. I go, "Hey, where'd all the crypto bros go? "Everyone seems to have disappeared in 2023. "Where'd you guys go?" And there's just like crickets. We're in 2020, they were really coming out, guns blazing. I said, "If you have lost a lot of money from crypto, "send me an email. "I wanna share your story, I'll keep you anonymous." I have a lot of people who follow me on social media. I got less than three responses. We love to share our successes. We love it. We do it with crypto, we do it with buying a house and selling it for a profit, we do it with business, we do with all that stuff. But you almost never hear anyone saying, "Oh my gosh, I bought this, I sold it for one fifth price." Oh, and by the way, because of the transaction fees associated, I actually lost like 80% of my money, or 85% of my money. You never hear that. It's deeply shameful for people to admit that they lost money. It's the opposite of status, isn't it? And we're not wise to seek the opposite of status. Exactly. We're not, why to voluntarily bring ourselves down in the tribe. Exactly. We are safety seeking, we are status seeking. And so this is what happens with money. That's why I talk about prenups and why I talk about investing and mistakes. And all of the above is that I wanna shine a light and show people if you are only seeing the top of the iceberg, all the successes. Of course you feel like you're behind. Of course you feel like everyone knows something you don't. But it's complex. Some people make good decisions, some make poor decisions. We gotta look at them all. And then we will understand what's right for us. So my position on crypto is, I believe in the underlying technology of the blockchain. And I've been a big Ethereum holder for a very, very long time. But it does represent less than 5% of my portfolio, although I am a very big holder in Ethereum. And I've held it for so long that, although I'm at a point of profit right now, I'm well aware that I could go into a huge, into the red. Irrespective of that, it has is inconsequential to any decisions or my financial portfolio at large. And B, because of that, I have such a long-term time horizon that I could hold it for 30, 40 years and I've never flinched. I don't check the price. Sometimes I just check my password works, but I'm not in, I've never traded. I have no interest in that.

Always have 1 year of emergency funds (01:04:13)

It remeats 10 money rules. I just wanna go through these 10 money rules 'cause you mentioned prenups there and I was quite curious that number 10 in these rules is marrying the right person. But let's start at number one. Always have one year of emergency funds. - Yeah. So for me, one year of emergency fund is conservative. It's more conservative than most. Let's me sleep at night and I just keep the cash in a savings account. It's not under my pillow. Cash does not mean it's sitting under my bed. Please don't try to rob me. It's cash in a savings account, totally liquid. And that's what it's for, emergencies.

Investment Tips And Luxury Budgeting

How much to invest & what you shouldn't question spending money on (01:04:52)

- Rule number two, save 10% invest 20% of gross and your income. - Yeah. This is all about the numbers that I shared and being more aggressive with them. I know that paying myself first now turns into way more later so I invest aggressively. - Rule three, pay cash for large expenses like engagement rings or big holidays or weddings. - Yeah. - This one is controversial because for the things that are important to me, I don't want price to be the number one concern. So I'd rather save up for it. When I was in my twenties before I ever met my wife, I knew one day I would get married and because I'm Indian, I knew we would have a big wedding and I wanted it to be amazing. So I started putting money aside every single month automatically. I do the same thing for trips, house, et cetera. - Rule four, never questions spending money on books. Appetizers, health, what dates into a friend's charity fundraiser. - Yeah. So the books and the appetizers are a little weird. I have something called remeats book buying rule which means if you ever see a book that you're even remotely interested in, just buy it. Don't ask a question, don't equivocate, just get it. Because if you can learn one thing from that book, it can transform your life. Appetizers, when I was a kid, we couldn't afford to eat appetizers. So we would eat out every six to eight weeks. If we had a coupon, we'd usually go to a pizza place getting appetizers was inconceivable. So now when I eat out to be able to see one or even two appetizers that look good, I go, yeah, I'll take them both. It feels incredibly rich. And this is just an example of how our childhood sticks with us. It feels awesome to be able to do that.

Business class flights (01:06:30)

- Rule number five, business class flights on flights over four hours long. - Yes, again, my money rules not for anyone else. When I used to, when I was in my early twenties, I would get on a flight and I would actually, in my head, scoff as I was walking from the front of the plane to the back. I'd be like, why would anyone spend four times the money paying for a first class ticket makes no sense. We're all getting to the same place, ha, ha, ha. I wish instead of disparaging that, I would have gotten curious. And I wish I would have said, wow, if somebody can afford to get those seats, why would they? I wonder what they're spending money on. Aren't we all getting to the same place? And if I had gone from disparagement to curiosity, from D to C, I would have understood that some people have their office paying for it. Some people do it for health because they wanna get there, they want their back to feel good, they maybe need to go to a meeting. And some people just have enough money that they can do what they want. And when I started to become more curious about money, that opened up my eyes to be able to spend on certain things and spend extravagantly, but also to realize, wow, maybe I try this certain type of food once, cool, I don't need to do it again. So for me, my money rules so that I don't have to decide every time I take a flight, boom, this is my guideline, it's done, it's written, never have to think about it again. Rule six, buy the best and keep it as long as possible.

Always buy the best (01:07:54)

Yes, I love this. I think we all intuitively have this idea of quality over quantity, but if you look in somebody's closet or you look at the things in their house, there may be some incongruity. So for example, my car is 17 years old. It's a good car. I mean, for me, it was a fine car. I don't care, it rides fine. It's a four-door Honda Accord. I told you, very sensible, long-term, great. Buy the best, keep it for a long time. It's the same with clothes. Those things matter to me, I like that. And so I'll buy something that might seem very expensive, but I'll keep it for a long time. Good for the environment as well. Yeah.

Always spend on these 2 areas (01:08:38)

Rule seven, no limit on spending on health or education. Yeah, this one is important. I learned when I was in my 20s and I started training and learning from personal trainers and nutritionists that I really loved it. And I also realized that I needed help. I needed great teachers. And so eventually I just realized, I'm gonna give myself unlimited spending on this. Same for education. So I'm a teacher, I teach different programs. Of course, I'm a student as well. I wanna learn from great teachers from taking accounting classes here at Columbia to buying every conceivable book and digital program there is. I've given myself the freedom to do that. And all that came from, I had a scholarship, I had many scholarships that paid my way through college. And one of the scholarships set up an account for me at the Stanford Bookstore. So when I walked in there, I could get literally any book I wanted. It was like Willy Wonka and the Chocolate Factory. For a guy like me to have unlimited books, it was like unbelievable. And when I graduated from college, I realized that would be going away. And then I remember having this conversation with myself and saying, how much would it really cost to recapture that feeling, that feeling of being able to get anything I want? To see a book on the bookshelf, I'll get it. The answer is really not that much. So over time that then expanded to health and education. - Health I find really compelling because it's clearly, clearly the most important foundation of all of this. It's clearly the most lucrative investment any of us could make, because everything we've described, the rich life, doesn't exist without that foundation. So it's all good investing in your van guy, but it doesn't matter at all if you're gonna die. - Yeah. If you ask people what's important to you, they'll often give you the same answers. They'll say relationships, health, maybe travel. - Korea maybe. - Yeah. I go, okay, let's take a look at your spending. Show me where you spend on those things. It gets really quiet really fast. Now it's one thing to spend time on relationships, and we should, but we can also spend money to enrich those things. It might be surprising your niece at a showing of Michael Jackson, or it might be surprising your family by going home and visiting them. There are lots of ways you can use money to enrich those experiences. Same for health. It could be what you buy at the grocery store. It could be training or a gym membership. It could be whatever it is that's meaningful for you. But if we claim something's important to us, it sure better show up in our time and our spending. - Rule number eight, earn enough to work only with people you respect and like.

Work only with people you like (01:11:16)

- I love this one. I decided long ago that I only wanna work with people that I like and respect. And so I earn enough money so that I can do that. And to me, who you surround yourself with matters profoundly. Ideas seep into your consciousness, values seep in. If I'm around people who when I look at the calendar, when I have a meeting with them, I dread it. I already know it's the beginning of the end. - Most of us have to work with our souls though, right? Like we, I say have to, I shouldn't use that word. I don't like saying have to, but most of us spend most of our lives, especially the early part of our lives working with our souls. - We work with people that we may not particularly choose ourselves. I think that's probably. So yes, I built a life where I could make that decision for myself. I'm the CEO of my business. But I think what is important there is the intentionality behind it. It's like even if I worked at a company, I would be deciding on which division I wanna work in, which boss I want to transfer under based on do I like and do I respect them. That's it. The intention is there. Again, these are my rules, not anybody else's, but if this one strikes you, then the way that I would interpret this is, wow, who in my life do I not like? Who do I not respect? Do I need to be around them? Maybe it's not work. Maybe it's the friend that I hang out with socially on Saturdays. Again, we have a choice, not on everything, but in the things we do have a choice, what a shame if we don't use it. Rule number nine, prioritize time outside the spreadsheets.

don't get caught up in the numbers (01:12:59)

Yeah, too many nerds love a spreadsheet and they go, I gotta optimize cell B43. B43 never talked back to me. I go, all right, look, yes, you need to know your numbers. Yes, you should be automatically saving and investing, all that, yes, do the conscious spending plan. But at a certain point, you won. The turkey is cooking. You won, you know your numbers, turn the page, get out of the spreadsheet, a rich life is lived outside of the spreadsheet. So on a personal level, that means I spend less than one hour per month on my finances. It all runs, it's a machine, it's a system. I speak to my wife, we talk once every couple of weeks about money. Besides that, do not spend time tweaking because the rich life is lived having conversations like this, seeing friends, seeing my family. That's where I wanna live, not tweaking things endlessly for no marginal gain. Number 10, you mentioned your wife there, marry the right person.

Money Talks In Relationships And Wealth Traits

Talking about money with a partner (01:14:02)

Maybe the most important one of all. Marriage is the most consequential financial and relational decision we ever make. And people, they're a little weirded out by this rule. They go, what does this have to do with money? I go, what do you mean? The partner you choose will affect where you live, what you spend on a day to day basis, what type of house you buy if you do, how often you travel, the values if you have children that you pass down to kids. Of course it's important. And so these are conversations that if you are starting to date, it's a great time. There's natural moments in the dating process or even the relationship process where you can bring up money. So it's like the first time you take a vacation together, take a trip, you go, hey, just wanna, this is all my mind, I'd love to just put it out on the table, love that you invited me on this trip. I'm so excited to go. I'm just curious, how were you thinking about paying for the trip? Who in your mind pays for it? How would you see us splitting this? That's a great way to bring it up and you learn a lot about your partner. There are questions you can naturally ask. How were you raised with money? What do you remember your parents telling you? Here's what I remember about my parents. Genuine curiosity, it also tells you a lot about your partner. And then there's a few other natural moments in a relationship where it just makes perfect sense to talk about money. When you get engaged, when you get married, if and when you move in together pre or post marriage, if and when you have children, there are these natural moments where you get the gift of being able to talk about money. - The people talk about money, couples. They talk about it when something goes wrong. - Outside of that, what sort of percentage of people, couples do you think talk about money? - Rarely, it's very low. I know, I speak to them all the time. I ask them, when do you talk about money? They go when we're fighting. Or when they talk about it, it's like, it's these grooves that have been created for 40 years. Oh, every time she goes to Target, she spends too much. Ha, ha. And I'm like, that's not that funny. Like the running joke between you is that she spends too much at Target. - Sounds like resentment. - Yeah. Why not it be something different so that when you talk about money once a month, proactively, you always start off complimenting your partner and you go, you know what? I really appreciate that when we travel, you always pick the best flights. I've total trust because you always get us there on time and you pick the flights that are so comfortable and I just love you for that. That's a great way to reframe how we talk about money. But instead, we often simply do not talk about it proactively. We only talk about it when something is a problem. - Do you think our partner should know how much money we have? - When you're married, probably a little before that as well. Like, I'll tell you what happened with my wife and me. So in my book, in chapter nine, I talk about how to talk about money and when to talk about money. And first of all, there's a lot of personal finance experts that are like, you should talk about money on date one. I'm like, have you guys ever been on a first date? - Can you mention? - Who's talking about their asset allocation on the first date? I'm like, get a life. So she had asked me like years into our relationship, some 401 question and I was like, read this book. Learn it, it's in there. So I knew all about her money. We had talked about her finances. And then as we started getting more serious one day, she came to me and she said, I don't feel comfortable because you know everything about my finances and I don't know anything about yours. And that was it. A sobering moment because I realized I had violated my own rules in chapter nine of talking about money early and proactively. - Why didn't she feel comfortable? - She didn't feel comfortable because she felt like I knew everything and she didn't know anything about me. Being in the dark about your partner and their finances is very uncomfortable. You're planning, we were planning to get married. So what does that mean? Does he have debt? Does he not? Does he have this much money or not? Does he expect me to pay the exact same amount for this apartment because I don't know if I can afford that? They're a mill. What does it mean for children? What does it mean for our elderly parents? All that stuff. This is what money means. Money is not just a amount in a spreadsheet. It's where do we live? - Security. - Security. Who do we get to be? And you know security is a really good, that word haunts me because we, I realized to my horror that I had not shared about my finances. So we had a series of conversations and as we got engaged, we had more. We started talking about money a lot and I mentioned to my now wife, I said it's really important for me that by virtue of me running a business for so long, I've accumulated this business, these assets and I love you, but it's important for me that we talk about a prenup. And I was very, very scared. I had talked to a lot of friends and I'm sharing this because prenups are another thing that always happen in the dark. And I don't want that. I want people to shine a light and to understand how these conversations happen because nobody talks about this. I'm gonna talk about it. So I was nervous and all the advice online is awful. It's like have the conversation. I'm like what conversation? What do I say? Or some people, they tell you to blame your lawyer. My lawyer insisted I have a prenup. I'm like, if I can't be honest to my soon to be wife, what kind of relationship do we have? So that's what I said to her. And she responded like awesome. She was like, wow, I didn't expect that. I don't know much about prenups but I'd be willing to learn more. I said fantastic. So we start talking more about it. We both get lawyers as you're both required to. And it was going pretty well until it didn't. And we started really disagreeing about money. And we were just like fighting and she finally said, we should go see somebody because this conversation is not going the right direction. And I totally agreed with her. So we literally went on Yelp and we searched like therapists near us. And we found one right there, we went. And we sit down and this therapist was great. She asked us, what does money mean to you? And she asked me first, so obvious. Money means growth. Like I could literally see the compound interest charts in front of my eyes. I know about the rule of 72 and expense ratios. Growth, of course. She asked the same question to my wife. My wife says, safety. Like what? That's like somebody saying, metal. Money means metal to me. I go, huh? And it was that that we realized we saw money completely differently, completely. It explained to me why my wife wanted more money in just sitting in a checking account. When I go, but that checking account is losing potential interest, why would we lower our yield blah, blah, blah? We were looking at it through two totally different lenses. So that single question was very helpful in us, reframing our conversations. It didn't change everything overnight. We still had a lot of conversations we had to have. And even once we got married, we still have conversations now they're different. They're about spending and investing and prioritizing. But it was a new way for us to look at the way we related to money. - Where did her lens come from? - Childhood like most of ours. Same for me. In fact, every time I talk to couples who are now in the seat that I was in, I ask them, what do you remember about growing up with money? And they always tell me similar things. My parents never talked about money. That's very common. Or they said certain phrases like, we can't afford it. Money doesn't grow on trees. We don't talk about money in this family, et cetera, et cetera, et cetera. Imagine you hear, we can't afford it 100 times, a thousand, 10,000 times growing up. And you turn 25, 35, you start to make decent money. But every time you go to buy something, you feel guilty and you feel anxious and you feel like I should be saving this money. And you can't figure out why because on paper you make more money. If you came to me on my podcast, we would trace it back. And you might realize it is something as simple and vivid as sitting around the dinner table and hearing mom or dad saying, we can't afford it. Our childhood sticks with us and we could change, but it's so important for us to acknowledge that it sticks with us. - If I approach my partner and I say, I wanna get a pre-enup and they say, what? You don't trust me? - Yeah. - And they say no. - What do you do, is that the question? Well, I would say first of all, I wouldn't start off like, I think there's, that is one of the most important conversations you're ever gonna have in your life. And the subsequent conversations. So take it seriously. You show up and you explain it. - I explain it perfectly and they turn around and say that. - And they say no. - Well you don't trust me, no. - Okay, that's a contingency you might have to plan for. So you might say, okay, can you tell me why? Tell me what's going through your head. I wanna understand your perspective. This is a conversation, it's not a dictate. - Trust, you don't trust me? - Yeah. - Would you marry that person? - I would have a lot more conversations. I can't say yes or no, because you can't judge someone based on their reaction in a situation they've never been in. How am I gonna react if I got in a car accident and I start crying? Can you judge me my entire life based on that? No, but let's say that we extend it. And you and I are in a relationship and I ask you, it's important for me by virtue of this and that. And you go, you don't trust me. If you are unwilling to even discuss it, if you're unwilling to talk to friends, to talk to lawyers, to talk to people you can find on your own or I can introduce you to, then I think we have a bigger disagreement about values. And the way that most of us think about a prenup is it's usually some rich asshole telling someone who has way less money, like sign this paper or it's over. And again, that's Hollywood. Prenup, which I learned, is all about if the marriage ends, what you had before or any agreed upon assets stay with that person. So if you have a business and you're a partner and you get married, there's no prenup and for whatever reason, God forbid, you separate. Suddenly that business might be at risk. The portfolio that you accumulated before you ever met your partner might go to them. And that, when you explain it that way, most people go, oh, that doesn't really seem fair. But the money that you accumulate together as married partners, yeah, there definitely should be an agreed upon, that money needs to be split, et cetera. And no person, especially the partner who earns less should be left out in the cold ever. Do you notice any differences when you speak to these couples or on your podcast in gender differences as it relates to people's relationship with money? 'Cause I've read a lot of stuff about men being more prone to gambling addiction and gambling generally. - Yeah, yeah, I think there are a lot of differences. I think gender is one of the axes that people differentiate on. I see typically more aggressive investing from men. I typically, if I see a gender difference in investing differences, it would be much more conservative with women. I might see words like safety and security used more commonly by women. But I think there are also other axes. Socioeconomic class is a huge one that we talk about. And that's something that's very under the covers, particularly in America. But we talk about it, point blank. If somebody tells me I've been poor before and I can be poor again, doesn't bother me. I can tell you how they were raised. I can tell you probably to some geographic area, in fact. If they tell me, my parents said, be seen and not heard. That tells me a lot about someone in their financial behavior. So there are different axes that you see different behaviors on. - This is the best product that you'll have released in recent times. Many of you will think of alternatives to this, but I've tried those alternatives. And none of them are as tasty as you'll's daily greens. It was out of stock because of the demand. It's now back in stock for everybody in the USA. Right now it's not available in the UK, but when you get a chance, just try it. That's all I'm gonna say. Just try it. And I think once you try it, you'll understand why this is such an essential part of my life right now. And will probably become an essential part of yours. I'm someone that understands, probably from doing this podcast, the importance of having greens in my diet. But do I achieve that every week in the chaos of my life? Do I achieve that? Sometimes the answer's no. With Hules Daily Greens, the probability of me achieving that is now almost 100% because of its convenience and because of the ease of preparing this. One scoop, 10 second shake, and you're ready to go. Over the last few years, I've realized that my first foundation is my health, something you've heard me talk about a lot. Nothing matters more than that first foundation. So that is why I'm so excited to be involved with a company like Woop, who are leading the charge when it comes to bettering your health. All my friends have received free loops from me because once you've tried Woop, I think it's like lights turning onto your health. That's the only way I can describe it. My sleep, my performance, my recovery, my stress. It's like someone turned the lights on. I'm sure you guys know, but for those that don't know what Woop is, it's a wearable health and fitness coach that provides you with the feedback and actionable insights into your sleep recovery, training, stress, and overall health. And I have become entirely utterly obsessed with it. If you know me well enough, you know how obsessed I am with the smallest details. I think there's small things compounded together that produce the biggest gains in our life. And that is exactly what Woop does in my health and fitness every single day. Being able to see my 1% gains on Woop has had a profound impact on my health journey. I highly recommend you try it. All you have to do is search to get a three months Woop membership on me. And if you do, send me a DM and let me know how you get on. I'd love, I'd love, I'd love to know.

Character traits of people that will never get rich (01:29:09)

When you look at really successful rich people that are living their rich life, that might be billionaires, millionaires, or just living their rich life, what are the unobvious things? The character traits, the philosophies towards life that you see. Whether it's, I don't know, confidence, whatever that means, whether it's patience, what are those like character traits? - They're really good at multiple things, like really good. When I was at Stanford my first year, there was a Nobel laureate professor and the professor next to him was making a joke, but it wasn't really a joke. And he said, you know, you'll hear stories about a person being an amazing chemistry professor, but they're just a disaster at home, et cetera, but not him. He's a Nobel laureate, I think it was in chemistry. He's at the tapas field in chemistry. And by the way, he's published papers in music and he's an accomplished father. That was the first time that I had been exposed to the idea that you can be absolutely amazing in multiple domains, because it's a comforting story we tell us that, oh, this person's really good at this, but they're probably a disaster in everything else. What I find is that the people who are really good at something, they're actually good at a lot of things. They take those skills and they transfer them. They show up on time, they prepare, even though they didn't need to. Look at all the preparation you've done. That's cool, you didn't need to, but you did it. And they're probably good socially skilled. There's a lot of things they're really good at. So for me, that is inspirational, because it means that I have a lot I can work on. Flip that coin then, on the other side, people that you would bet on, give me three character traits of people that you would bet on never living their rich life in terms of character traits. Number one, they're surrounded by people who keep them down versus build them up. So that would be phrases like, why do you need to do that? That's weird. Don't get too big for your britches. Number two, impulsive. They make decisions based on what's in front of them versus stepping back and looking at the entire chessboard and having a long-term perspective. And if I were to ask them, tell me two things in your life that you do with a long-term perspective. You would probably struggle to answer it. Whereas a long-term thinker would be like, "Oh my God, I could talk about this for four hours." Investing, parenting, travel, what I wear on my feet and on and on, health, perfect. And three, no personal vision of a rich life. So if I ask them, what is your rich life, they go, I wanna do what I want, what I want. I go, yeah, yeah, what? I want, you know, I want the house and I want the car and I go, okay, what type of car? Like a Ferrari, okay, like how come a Ferrari? Oh, it's just cool, like a red Ferrari. Like no personal connection to it. If they were to say, I want a Ferrari because, you know, my uncle once had a Ferrari and I saw the race in Italy and blah, blah, blah, go, wow. But if it's just things, objects. - Driving without a sat-nav. - Yeah, yeah. - Super interesting. I wish I'd had this conversation when I was 18. I'd certainly be in a much different position now. I think about if I'd been even more savvy with my money and I had it compounding sooner in my life, my life would be, would be a lot different. I actually, I pondered it and that's why there was such a pause that whether it'd be happier. 'Cause I don't even know. - Well, your story brought you here, what you did. And look, I wish I'd started squatting when I was 14 years old. I didn't know what a squat was. And so we all deal, we play the cards we're dealt with that we make the best with what we've got. And I never want anyone to feel like it's too late. There's always something you can do. Honestly, your life has turned out obviously very fantastic, but I love that you grapple with these questions just like anybody. We all wonder, is it too late? What if I'd started five years ago? And of course we can't do anything about that.

Audience Interactions

The last guest's question (01:33:18)

- We have a closing tradition on this podcast where the last guest leaves a question for the next guest. And the question that's been left for you without knowing who they're leaving it for is, oh, okay. What is other people's biggest misconception of you? - I think the biggest misconception is that I have a very specific way of telling you what your rich life is, but that's not true. That comes across because people often interpret what I say about buying a house that I'm telling you, don't buy a house, not true. I'm gonna buy a house one day myself. What I crave is encouraging someone to build their rich life with intentionality. Don't do it like me. My rich life is mine. Your rich life is never gonna look like mine. Nor should it. The misconceptions that I'm telling you follow this exact formula and you will be rich. No, follow this formula and you will have a lot of money. But building a rich life takes your unique creativity and only you can do that. - Do you see that as a piece of work that we all need to do? Like the kind of the exercise that you ran me through there, do you think that everybody needs to do that initial piece of work to really sketch out what they're doing? - Of course. - Otherwise, what are we working for? You're saving money blindly. That's what the whole journal is about. You've got to know down to the intimate detail, what is my perfect Saturday? What do I not want to do? I guarantee you when I ask people what their perfect week looks like, 0% say I want to spend three hours doing laundry. I go, great, can we use money to solve that problem? Easy, luggage in the airport. Can we use money to solve that problem? Done, we never have to think about it again. So we've got to design our rich life. It doesn't just happen to us. Nobody trips and falls and lives a rich life. It is intentional and it is ongoing work. And in my opinion, it is one of the most important pieces of work that we can ever do. - And that's, you're right, exactly what this journal does. I will teach you to be rich journal. And throughout this journal, you kind of hold people's hand through those exercises, but-- - With a solo or you do it with a partner and you get to dream about money. Most of us feel so nervous and rigid and scarce about money. We feel ashamed. This has almost no numbers. It's all about what does your rich life look like. And if anything, you finish this and you are dreaming bigger, not smaller. - When I look at this journal as I go through it, there's a real emphasis here on just heightening peoples, telling the lights on in terms of what money is, but really heightening their self awareness about their relationship with money as well. Which seems to be the foundation of getting good at money. And your other book, I will teach you to be rich, which is the second edition of this book. The first one came out, I believe in 2009, just after the financial crash, which is fucking perfect timing. This one came out in 2019. So this is an updated version of the book. I mean, millions and millions of people have bought this book. - The nuts and bolts of money. If you don't know how to get started investing, if you have debt and you're not sure what to do, if you even have questions about, should I buy whole life insurance? The answer is no. Should I buy it or lease a car? It's all in there. - No guilt, no excuses, no BS. Just a six week program that works. You're referred to as the new finance guru. And I think we do need new finance gurus because there's not enough financial literacy from the very start of our lives. As you saw from my story where I just, my relationship with money was catastrophic. And I could be in a much, I'm very aware that I could be in a much different position because of those early mistakes I made and mishaps and my early relationship with money. So people do need to start getting educated with their money because as I said at the start of this conversation, it is about living your rich life. And that is the subjective thing. For me, it was having the freedom of choice broadly across every facet of my life about where I spend my time and who I spend it with. But it is the foundation of that freedom of choice. And that's what your book and your work does so brilliantly and articulately. It gives us the path to freedom of choice. And we get to choose what our rich life looks like. So thank you so much for your time. Thank you for being an inspiration and being a loud voice in the conversation around money. I know so many of the people listening to this podcast are completely in the dark about money. And so having these kinds of conversations and having the practical roadmap to how we can improve our relationship so we can unlock the future we want is incredibly important now. And I'm sure it will remain incredibly important in the future because there's going to be a lot of influences like Instagram and TikTok that are trying to tell us a story about money and aspirations and what we should be aiming at that are unhelpful and counter-proteicative to our happiness. So thank you, Rameet. Thanks for having me.

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