The Common MONEY TRAPS You Need To AVOID To Build Wealth | Ramit Sethi | Transcription
Transcription for the video titled "The Common MONEY TRAPS You Need To AVOID To Build Wealth | Ramit Sethi".
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>> Ramese Sati, welcome back to the show. >> Thanks for having me. >> Dude, I'm excited, as always. What are some of the biggest lies that society and parents tell us that ends up keeping people broke and breaking up relationships? >> We're told that investing has to be complicated, that you have to be some genius looking at a screen with these numbers like PE ratios running through it all day. That's not true. We are told that you have to buy a house because buying a house is always the best financial investment, that's not always true. And we're told that when it gets to a relationship, there's so many lies in a relationship. Some of them are, he's a spender, she's a saver. Or I'm not the money person, my partner takes care of that. And we accept that. And that leads to a lot of disasters in relationships.
Misconceptions & Fundamental Concepts About Money
Biggest lies that society tells us about money (01:00)
So the problem with money is that we're told all these things and because we don't really understand how it works, we just accept it. It's like the way I accept my car. I don't know how it works, I just put the key in and turn it on. That's all I need to know. But money isn't like a car, it cuts across everything in our life. That's why I think it's so important that we understand it.
Why is it so hard to be confident with money (01:20)
>> So how do people begin to figure out how to think about investing, how to get out of what I think you call money propaganda. And because as you well know, because you and I have been discussing this now for years, I've been going on my own journey. In fact, because of you, I'm now going to stop saying that I'm terrible at investing. I'm getting way better. I'll be very honest. In large part because of this show, and so I've got to sit across from people like you a lot. But also putting it into action and having now enough time under my belt to see what works, what doesn't, the emotional side of it, which right now seems to be the biggest problem that people face is to your point, either they're buying into propaganda or they're just the emotion carries them away in the euphoria or they panic when things fall. So how do people begin to tease that out and really get their head right about money and investing? >> It's interesting that by the time people turn 40, the number one thing they're worried about is money. And yet the vast majority of people have never read a single book on personal finance. Think about that. They will believe what any random person on some crazy subreddit tells them. And I read all those subreddits, not for stock tips, just for entertainment. I go, don't do this. They'll listen to podcasts, which can be better, but you're not sure how to tell if it's good or not. They'll do everything but read a good book on personal finance. I'm not just talking my book here because I have my own book. There's a lot of great books on money. So if you want to become confident with money, you have to be competent. That's step one. You have to be able to speak the basic language of money. And it's actually not that complicated. It's fun. You start to realize, oh my gosh, compound interest works this way. So if I put a dollar in today, it's worth way more later. Okay, that's, we all kind of get that. But when I show people a calculator of you're 32 years old, if you put this much a month, and this is how much you'll have, if you put that much, you'll have that much more. It's super counterintuitive. I'll give you an example. If you pay a financial advisor 1%, it doesn't sound like a lot. Ah, 1%, as long as I don't have to worry about my money, over the course of your life, that will take 28% of your returns out of your pocket and into your financial life. This is why I don't like investing. So that'll be the next thing I have to get over. So now I'm willing to admit that I'm getting good at this, but I don't like it because it is the fact, I know that that fact is true, but that is so counterintuitive. My brain cannot handle that 1% compounding becomes 28%. It doesn't make sense. It breaks my brain. So I accept it, but it's so counterintuitive. And I think that's why a lot of people struggle with this. The good news is the punchline ends up becoming really basic. Like just do it slowly over time and it certainly gets that. But what I want to help people start thinking about money in a different way.
What are the core tenets of investing (04:28)
Now, the big breakthrough for me, and this may be something that frustrates a lot of people in terms of the way that I interview and because it's how I have to understand things. So I need to know what is money. Because if I can build the logic up from the most base layer, then now that I really understand the nature of money, I can predict things. Once I can predict things, then I can move intelligently. Well, there are probably people who are much better at the definitions and history of money. I don't want to get into that. What I want to get to is so if you laid out the lies that people get sucked into, what are those core tenets that for the person who doesn't want to do it like I do it, which is like understand the most foundational thing and build brick by brick over three years. And okay, now I finally get where this goes. What are just like, yeah, I don't want to talk about it. I want to read a book. I just want to do it. Yeah, give me some core simple tenets. But why they work. So compounding is one problem. So 1% seems small. But when that stuff compounds, it's one times one, times one, times one. And just like you get that result, sorry, it's not actually one, ten, one, times one. Whatever that number is, times itself. Yeah, it keeps growing itself. Okay. But here's another one. In most parts of life, if you spend more time on it, you get better results. Cooking, to some extent, fitness, certainly time with your partner or your children. In money, that is not true. When you see people tinkering around with their portfolio and trading, they actually tend to have way worse returns than somebody who puts it in a low cost index fund and doesn't check into it for 10 years. There's a famous story. It's not clear if it's true or not about fidelity investors. So fidelity, you know, it's fine firm, whatever. There were people who had forgotten about their money and they had died. So the money was just sitting in an account, just compounding growing. Of course, these people were gone. They were dead. So they didn't log into their account and the money kept growing. And they compared the returns of those dead investors from the average investor. The average investor gets only a fraction of the returns that you and I can get in an index fund. And anybody watching can get in an index fund. Why? Because the average investor is undisciplined. They are emotional. They log in. They get scared. They see the news. They sell. They call their friend. They hear about some land deal. They do all this crazy stuff and they lose their returns. So the counterintuitive thing with investing is the more time you spend, often you get worse results. So set it, set it with the right plan and then forget it.
What is an index fund? (07:22)
Okay. So I think we need to drill into some of why that works. So a dead investor is investing in that scenario. I'm going to guess that they're in index funds like you said. And what is an index fund? It's just a collection. It's a collection of stocks. It is diversified usually. There are index funds that are just in healthcare or tech. But when I talk about index funds, I'm talking about like S&P 500 index funds. It's well diversified. And because it's a index, it's just matching the market. That means there's not somebody in some expensive suit who's charging you 1%. It's just a computer. Your fees will be something like 0.1%, which is very inexpensive over your life. And just so that I understand how this works. So the S&P 500 is the standards and poor... It's 500. They're looking at stocks that meet a certain requirement. They have the biggest market cap. I don't know what their actual requirement is. But at that point, you're basically betting on the American economy. Right. Like as broad as you can manage it. And as a company falls off the S&P 500, a new company comes on. So all of that, the managing just is like, there is a criteria. If you meet the criteria, you're in the S&P 500. If you don't meet the criteria, you're not. And therefore, I assume as a company falls off, you're effectively then selling that and buying the new one that comes in. Here's what people are thinking as they hear this. They go, well, that sounds fine. S&P 500. But what if I have my own idea of what I should invest in? What if I want to pick my own companies? That's the first thing. Again, in normal life, we want control. That's what we're taught in America. We want to take control, manifest destiny. These are deeply, deeply embedded cultural values. But when you apply those same values to invest in, they can often be counterproductive. So people- You're really hedging. They are counterproductive in 99.9999. Yeah, yeah, yeah, yeah. Of course, you can pick an amazing stock and outperform the market. You can. But the odds of that consistently are virtually zero. Correct. And I want people to hear what you just said. Because it is so counterintuitive. Like if I go, I'm going to pick a restaurant. I know what's a good restaurant. I'm not just going to look at the reviews. I know. And I go, odds are pretty good. I'll pick something that I like. With stocks, you cannot predict it over a long period of time. So there are people on my Twitter, they go, "Rameet, index fund is fine for people who don't know that much. But I do my research. I do my research." And I invested heavily in tech. I go, "Okay, tech has been booming for many years. But guess what happened? Tech came down hard. And this is what happens. Things go up. And when they're going up, there'll be companies like Facebook. When it started, it was inconceivable that there would ever be a day where Facebook wouldn't be the biggest social network for us. That day has come. Right now, it's hard for us to imagine that there's a day where Amazon will not be the biggest and most convenient company that day will come as well. History has shown that. And so what savvy investors do is they do not try to make individual bets. And their portfolio, they just acknowledge, "I have no idea. I'm going to bet on an index. Some are going to win. Some are going to lose." But over the course of time, we know that the index, S&P 500, tends to return about 7% to 8%. That's after inflation, by the way. I'm saying that because these days, everybody wants to talk about inflation. That's like I'm getting two questions right now. Inflation and I bonds. I got bonds. I don't even know what that is. Let me tell you. The fascinating thing is there's no real reason that the average person should be asking me about eyeballs. It's basically a type of investment that you can get. Pretty high returns for bond and particularly in high times of inflation, it can be considered to be a good investment. Here's why people are asking because it's all over the news. And I go, "Why are you asking me this? Like do you have a diversified portfolio? What's your asset allocation? Do you understand how much guilt-free spending you have?" Those are big questions. And eyebond is like me coming into this house and saying, "Tom, what finish did you use on your doorknob? Like it's just so esoteric. It misses the point." And so this is why individual investors get poor returns. They are fickle. Whatever's in the news, they start chasing it. And so what savvy investors do is they have a plan.
What are the 3 ask yourself questions? (12:07)
They understand the plan. It's a simple plan, counterintuitively simple, and then they don't deviate from it. One of the reasons that I think that I've achieved is I don't trust myself. I don't trust my emotions. I don't trust my ability to read the future. And so because of that, I'm constantly seeking disconfirming evidence. Here at the company, we have something comes from Ray Dalia, the largest hedge fund manager in the world. And it's called Principles, the dot collector. And what it is, I just had one of my employees write me today. He had critical feedback for me. And he didn't want to put it in the dot collector because it's public and people can see it. And I was like, "No, no, no, please. I want people to see." Because he was like, "I'm just convinced that people are going to get punished in some way for giving critical feedback." And I'm like, "They're not because the reason that we structure it this way, the reason that I want you to tell me what you think I'm doing wrong is what if you're right?" And now, if I can get my ego out of the way, I just got more powerful. So does it sting when you realize you're doing something wrong?
Does it sting when you realize youre wrong? (13:12)
Yeah, I guess a little bit. But I over time have accumulated so many pieces of information that I can then leverage to tremendous success. But it had to start with me being very skeptical of myself, understanding how people trick themselves into thinking they know something.
The perils of calcifying dogma (13:21)
And my big fear that over time, you're going to hold me accountable to this every time you see me. That people's thinking calcifies into dogma. Yes. And so they think they've got it. They think they have everything figured out because it's worked. And so what I'm trying to do is as I get older, I know the tendency is to go towards, I'm like, "Look, look at what I've achieved. I know everything." Totally. And then you die. Well, it's a gift that you give all of us, me coming here and getting to go back and forth through to you. And everybody watching and listening to this because what you do is hard. It's hard to say, "I don't trust myself." And the more successful you are, like you are, easier it is to say, "No, you know what? I actually do know that. And so I don't need to listen to anybody." So I think it's a real gift you're giving us. It's interesting. It's not hard for me. It is out of almost panic. Really? Yes. Panic. What will happen? That I will make the wrong move. I know how easy it is to be wrong and how hard it is to be right and how hard it is to be right consistently. Yeah. And on top of that, dude, other people are smart. And so not everybody, obviously there are more ons. And so you really do have to get good at filtering. So in fact, the guy that gave me critical feedback today, my punchline was, "I think you're wrong." But I'm like, "This is a data point." And so if I keep getting this data point from a bunch of people, I'm going to start to be like, "Maybe he wasn't wrong." I call them seagulls. Seagulls. You know, there's this old story about sailors and they would look for birds when they were sailing to know that they were close to shore. That's a clue. You're close to shore. And so when I hear a seagull, like somebody telling, like they used to tell me, "I used to hear that I was skinny." And I heard it one time. I was a really skinny guy. But I heard it two times and I heard it three times and I was like, "Oh, I must be really skinny." I didn't realize it until I heard these seagulls. And I started listening to them and I hear them in business and I hear them with the economy and in my relationship. And I don't always listen to them because sometimes I'm just like, "Whatever." But sometimes I'm like, "Whoa, what's going on there? I got to lean in and try to figure that out." So it's very interesting that we both have that principle. Yeah, I wonder sometimes. So looking at the way that people invest, they invest like life has taught them that they're right all the time. And I'm like, "Whoa, has life just taught you a different lesson?" But when I look at investing, I think, "Oh, cliches become cliches for a reason. People say that you're not going to beat the market. Ray Dalio is screaming from the rooftops. I have $100 million a year spend in AI.
Why you won't beat the market (16:05)
I'm trading in milliseconds. You're going to try to go up against me and 1,800 people in my company all doing things with AI in the fraction of a second with gazillions of dollars. What on earth makes you think you're going to beat me? How do people look at that fact though and still do it? They don't. Remember when I told you they had to lose money? I know, but listen, remember when I told you they haven't even read a single book about money? Yes. They haven't read that. They have heard Ray on some podcast for five seconds, but they never actually cracked his book. They don't even understand the basic language of money. Is it arrogance though? Like what makes... No. Because we'll get to people that just bury their head in the sand. But what makes the person think that they're going to beat the market? Are they they're a gambler? It's actually the worst combination. It's a little bit of arrogance, but it's ignorance as well. So ignorance and arrogance. It's basically like being a teenager. You're like, God, these teenagers are so dumb. But they're not dumb. We were not dumb. Maybe we were at some points, but it was a combination of ignorance and arrogance. I have ridden in my car a thousand times without the seatbelt. So why do I need a seatbelt? Nothing bad has happened until it does. And when you don't have that experience of being scorched in your portfolio, it's really easy to say, oh my gosh, it all goes up. And we should remember the dynamics of manias. Okay? Like in the last few years, the market has gone up in a huge way. And if you notice the entrance of new investors, they come and people Wall Street pejoratively calls them the dumb money. So most of the dumb money comes towards the end of a mania because your taxi driver is talking about how much money he made in crypto. The news is talking about how everybody's getting rich. And if there's one thing people in America hate, it's your friend who's stupider than you who got richer than you. We just can't accept it. So we go, you know what? I'm getting in. I'm opening up a Robinhood account. You should never open a Robinhood account. And they get in this. They don't understand what's going on. But all they know is the number goes up. So they start pushing some buttons. They take $2,000 or $5,000, whatever they have, and they go, I'm going to be rich. And if you were to stop them right there, you go, Hey, I have a question. Are you trying to get rich quick? What do you think they would say? No. Yeah, they would say no. No, no, no, no.
The dumb money (18:40)
I'm not trying to get rich quick, but everybody's making money in crypto. And like I did my research. I went on three different subreddits and I put my money in here. And look, and this is the craziest thing of all. It actually does go up for a while. So there is no disconfirming evidence until the day their car runs into a tree and they're not wearing a seat belt. Now most people actually do not do this. I don't want to scare people away from investing. Investing is actually not this roller coaster of emotions. You know what it is for me? It's like watching paint dry. I spend one hour per month on my money. I don't, it's like asking me, how do I feel about the two different pairs of underwear I have? One's black and one's gray. I don't care. It's a commodity. It's the same thing to me. That's investing because once you really understand it, it is so simple. It's counterintuitively simple. You almost feel like what's the catch? But just like in fitness, just like in food, just like in relationships, it's counterintuitively simple when you really understand it with relationships. People want to feel heard. They want to feel appreciated. They want time, quality time. Do that. You get the basics right. And that's why I always encourage the 85% solution. With your money, get 85% of the way there and then move on.
The 85 solution (19:59)
You do not have to be perfect to be successful. All right. So I want to go into the detail of what people are combating in their own minds and then what success looks like. For what you call a savvy investor, but I think is a wise investor maybe. So many people think that they know better. Many people are prone to mania. Everybody thinks that buy low sell high will be easy. But the reason buy low sell high has become a thing is because the actual preponderance of activity is the reverse. They buy high panic and sell low. The reason they buy high is the euphoria. I had never paid attention to the markets before until like 2020 through 2021. And I watched it felt awesome. It was so fun at money everywhere. It was rad. And everybody was like, yeah, you can make money. Everybody felt like a genius. I've heard you say that before. And so in the euphoria, you feel dumb if you don't do something. So now you've both got the excitement and the fear of the dumber guy that me is making more money than me. And I'm an asshole for not doing it. Like that I wouldn't actually be able to look my wife in the eye or my parents in the eye or my friends in the eye or my kids in the eye that I didn't take advantage of this moment. I had my money manager was like, yeah, Tom, what are you doing? You're missing out on historic gains because I was so paranoid. I was like, this can't go up forever. So I was like, I'm going to be cautious this moment. So to finish that thought, you're more likely to buy high and sell low. The reason that you buy high is the euphoria. The reason that you sell low is the panic when it starts to drop because you're not realizing the way that you've gotten wealthy, the way that you advise people to get wealthy, which is really about time. Yeah.
The index fund (21:51)
And so the reason that you're not worried about volatility, the reason that you aren't panicking is one, you're investing at the index level. So you're betting on a huge group of things that just meet some criteria, S&P 500. It meets that criteria. And while there will be short term volatility, short term meaning a year, two years, three years, eh, no big deal. Seven years, 15 years, 20 years, we're going to be winning. But most people can't do that. Honestly, everything you just said is a true masterclass in investing. I have to say, and I was here a year ago. And we were not having this level of discussion. It is really impressive. It's amazing. What you just said takes a lifetime to learn. The truth is hitting your career goals is not easy. You have to be willing to go the extra mile to stand out and do hard things better than anybody else. But there are 10 steps I want to take you through that will 100 X year efficiency so you can crush your goals and get back more time into your day. So not only get control of your time, you'll learn how to use that momentum to take on your next big goal. To help you do this, I've created a list of the 10 most impactful things that any high achiever needs to dominate. And you can download it for free by clicking the link in today's description. All right, my friend, back to today's episode. Just to comment about, you're not concerned about volatility in the short term because you have a 25 year horizon. That there are thousands of books that have been written about just that concept. So for everybody, everything you just said is deep. And usually it will take people making their own mistakes to come to the conclusion you just said. But it gets me excited to hear that because if you're saying that and everybody watching and listening is hearing you and if they even pick up on one thing and go, you know what? I don't want to buy high. I want to avoid manious or I'm going to check out this index fun thing. What is an index fun?
Why Remy and Ramit Hate Robinhood (23:55)
That sounds pretty good. That is game changing. It can change your entire socioeconomic trajectory. I talk to these folks all the time. They're Instagramming me. They're sending me emails and they go, I was the first kid in my family to go to college. I use your material. I landed a job. I started investing. I do the 401k match. And I am now 31 and I have $140,000 in my accounts. And I already know that I'm going to be a millionaire by this month of this year. And I go, this is amazing. They have changed the trajectory of their lives and their family's lives. It's amazing. It's incredible. So now getting into the psychology of why I think I'm going to make a hypothesis, you don't like Robin Hood. Yeah. I give you credit, which people need to be very thoughtful. And if the one piece of advice I would give people is supposedly rich people know how to use leverage and all that. As a rich person, I'm just telling you right now, I don't fuck with leverage. Thank you. That is terrifying. Thank you. I'm talking to get yourself into trouble. Okay. Can we just talk about this before the Robin Hood slam? So people have a lot of misconceptions about rich people. It drives me insane. So when you get rich people to actually share openly, it is revelatory. So I wrote a series of tweets about how everybody thinks rich people have these secret investments that they're getting like 10 times the returns of normal index funds. I go, listen, I'm rich. I have access to all this stuff. And I can tell you right now, yes, I do have access to more things than the average person, like private equity, some venture capital, certainly private investments, companies. But guess what? They usually do not outperform an index fund. And so can they? Yes. We both know investors. I know you've invested. There's a lot of investors who have picked a company. It went onkers and they're incredibly wealthy. Amazing. But that doesn't happen every day. And that's very unpredictable. So this enraged people. It enraged them because oddly enough, we have a cultural belief here that the rich get richer, which is true, but primarily because of tax reasons. And therefore, if remit is telling me that the rich don't actually have access to these secret investments, then the entire paradigm for them falls apart. I can tell you, if you look at private equity returns, like if you go look, first of all, most people don't even know what private equity is.
Practical Financial Management Strategies
How to Simplify Your Finances (26:25)
But let's just say you get access to a PE fund. The way PE funds market their returns, they're like, we get like 22%. IRR, but in a tiny little asterisk on page 62 of the prospectus, they will say amount return to the investor is something like 5%. Very often these super sophisticated investments, once you factor in fees and taxes, underperform a simple Vanguard S&P 500 index one. 80 plus percent of VC funds fail to beat the market. 80% of active investors on Wall Street, these are highly paid investors fail to beat the market. So what I'm saying is there's this big myth that the rich have access to these secret investments. Now they do have access to more investments, but that doesn't mean they are better. And I can tell you as someone who has access to these, I basically decided I prioritize simplicity. I want to wake up in the morning and not have a gajillion things around me, simplicity. And I know for my goals, a simple set of index funds, sure, maybe a few different individual investments, some angel stuff, maybe, but tiny. You peel off a certain percentage. Yeah.
Are diversification and concentration mutually exclusive? (27:45)
And I do play with it. Exactly. Just like going to the casino, you go, okay, I'm going to do a hundred bucks and that's it. Cool. You've managed your risk. The problem is when I talk to these crypto bros and they go remit, you're such an old guy who wants 7% returns. That's so boring. I go, okay, so you're into Bitcoin. That's cool. The percentage of your portfolio is in Bitcoin, they go portfolio. What's that? That's the first comment. And then I'll suggest to people, hey, if you want to invest in speculative assets, okay, but why don't we limit it to maybe like 2% or 5% and they just look at me like diversified portfolio? Why would I diversify? And then they use words that really sophisticated investors do the only problems they don't understand them. They go, it's concentration, concentration is how you make your money, diversification is how you preserve it. I go, do you know what the fuck you are talking about? You have $300 in your portfolio and you're talking about concentration risk. Some people cannot be helped. That's okay with me. I do what I can, but the people who are watching and improving for them, there are a lot of simple ways that you can make a lot of money. It just takes time. Here's where it gets tricky. They're not wrong. And I forget who said diversification is for suckers. It was somebody huge. And they're right, but only if you get it right. Exactly. The odds of you getting it right, oh my God, they're vanishingly slim. So this is, it's the same reason that people chase money or fame. There really is utility to it. So money is incredibly powerful and it's why people can't stop themselves from trying to get rich, even though I don't know how many people have to tell you that if you're chasing money, you're going to end up emotionally bankrupt. It's just ruthless. They don't believe you though. They don't. Until they do it. They have to do it themselves and make the mistake. But the reason that that won't go away is because money actually is powerful. The reason that the idea of the crypto bro, whether it's crypto or anything else, is that when it hits for somebody, it really hits man and it is transformational. And they tell everybody about it and it's for that person, it's probably real. And so everybody chases that one. It's like somebody becoming a movie star. You go, I want that. If that, if Tom Cruise sits here and says, well, let me actually explain the statistics of how many people were in my class and how I'm the only one who, everyone's like, whatever Tom, I just, I want to be like you. And so it's okay. If that's what you want to do, then God bless, but you need to understand the game you are playing. Some people go, I am going to give my entire life to try to be Tom Cruise.
Risk vs reward: investing in your business vs investing in the market (30:24)
Okay. Do you understand the trade offs? And maybe it will work one in a million, one in 10 million. Okay. But what if it doesn't work? So this is a common thing for entrepreneurs as well. I have a lot of entrepreneur friends and we talk about what are we doing with our business and our money and you wouldn't believe it, but very few of them invest in the market. And I go, what do you mean you don't invest in the market? You're rich. You have a lot of money. Let's put it to work. And they go, dude, they look at me like, dude, I can make way. I'm going to pay more putting it in my business and putting it in the market, which may be true in the short term. But I go, you're right. You should probably invest aggressively. I mean, your business is great. I have nothing to say about your business, but I also say how many businesses do you know that were around for 60 years? Sears? Even they went out. Like big companies go out. I say, why take the risk of going from here to here? Why not take some of your cash flow and diversify it? It makes you sleep at night. If something catastrophic happens to you or your business, you and your family are taking care of, why not? And that is a productive conversation because I think business owners, they kind of get risk. They think about risk a little differently. Honestly, I don't want to scare people with money. Where it gets most exciting for me is people who go, okay, I'm ready to invest. I just don't understand. Those, that is an amazing conversation because in the course of a couple of hours, you can change the way somebody thinks about money if they're scared of money, if they talk about it with their partner with money. And those are the people that are ready to make a change.
When to invest into crypto (32:09)
All right. So let's get into the person that they decide, okay, cool, I am going to invest. But what I think we're up against, because I think they're going to be drawn to the Robin Hoods of the world, they're going to be drawn to Wall Street Bets. My hypothesis is that there really is something about game mechanics, gambling, that is so enticing and so fun and so innate to the human condition that people cannot help themselves. So as, let's use Robin Hood as an example. I actually don't know them very well, but I know enough that I think I understand why you don't like them, but tell me where I go. Yeah, they have gamified gambling by doing what speculating this specific.
Wallstreetbets / Amc Gamestop Options (32:53)
And you, first of all, where is it advertised? Where is it talked about? In the height of the crypto boom, it was talked about all over the crypto rooms. You don't really want to be in those rooms if you are a long-term investor. You do not want to be. But okay, that's where their marketing was happening. Fine. When you sign up for an account and log in, they give you free money. They go pick, pick something. This is part of the scary. Here's a free token. That is not how investing should be done. And do you have to pay that money back? Is it alone or is it you can lose it and it doesn't matter? Yeah, I think it's free. This is long-term investing. It should be. It should not be speculating because individual investors should not be speculating. And how do you speculate? Because the part that scares me about Robin Hood isn't even that, okay, they're encouraging you to pick your own stocks and make you think you're fancy and you're going to end up losing your money. It's that they get into puts, calls, options where you have infinite downside. Correct. That's where people commit suicide. That's when it freaks me out. Yeah, and things like that have happened. It's quite dangerous. That's a rarity. They do offer it and in my opinion, the individual investor should not be doing it. I don't. Just to give you an example, why am I going to take so much risk to make a little bit more money than I even need? Why? I'm making enough and I have a long time horizon. I'm good. For the individual investor who's just opening an account, they've never invested. They come in. It's like going into a candy store except it's candy laced with drugs. It's not the kind of thing I would never put my family members on Robin Hood. What's the drug in this scenario? Just picking stocks? Well, that is a minor drug. That's like what's worse than caffeine. But it's like a drug. Speed? I'm not the drug guy. I don't know. I don't know anything about drugs. I was like doing spelling bees when I was a kid, not drugs. Better for you. The risks are, number one, you start thinking that investing is picking individual investments. That's individual stocks that crypto should be your entire portfolio. This is a huge risk. Number two, all the advanced things that really you should not be using as an individual investor call options trading. There's no reason for it. And worst of all, once you get into this world, this zeitgeist and you're of course going to search Robin Hood investing tips, you're now surround. It's like you've gone down the rabbit hole and this is your world. It's like you took a wrong turn on the internet. I have a personal theory that people who signed up for Robin Hood during the crypto boom will have lower lifetime returns than the average Vanguard investor. Why? Because if you get used to 300 or even 3000% returns for two or three or four years, how are you ever going to be satisfied with a 7% annualized return? It's impossible. And so this is important. It's like making a decision in your adolescence that can affect the rest of your life. And I know you said that you believe a lot of people are subject to manipulation or being gamified and things like that. I agree. That is very true and it's exploitative. My view is there are also a lot of people who want simple investing. They're willing to put in the time. They don't want whiz bang, fancy stuff. They just want to know how basic investing really works. They want to understand their money psychology. They want to feel good about money.
What is Leverage? (36:42)
Those are the people I talk to. Okay. So tell me a little bit more about leverage. So that's the part about Robin Hood that scares me is that people can get themselves in a situation. So I certainly understand what you're telling people to do. Invest in an index fund, put it in, wait a long time, just dollar cost average and keep adding money and don't touch it. We know though that people get excited. They like the gambling mechanics. So what are the things that they should be on alert for? How does leverage enter it? What is leverage? How do people get themselves in trouble? Would you ever use leverage with the S&P 500? No way. Okay. Leverage is basically, it's putting a turbocharger on your investments. Now, if you... That sounds awesome. It sounds really good. However, however, people forget that leverage works on the way up, but it also works on the way down. So when things are good and you use leverage, they can be really good. You're borrowing money. You're applying that towards your investments. And it's like, oh my gosh, it's appreciating. Fantastic. Of course, you need to manage your leverage. You need to sell. You need to do all these very complicated things that the average person on the street has no idea about. Where it goes really bad is when things start to turn. There's all these famous stories about people who had tons of money and then when do they are wiped out. Those stories terrify me. And they also confuse me because if you have a million dollars or $10 million or however much is a lot, you have to play a different game. You have to decide what is risk to me. Like when I was 22 and I was not making that much money and I was starting my first company, I was like, I'll work really hard. My risk, my downside is low because I live in a house where my rent is 800 bucks a month. And like I'll go with my friends at Google and eat lunch there and take my backpack and stuff it with food to take home. Like great. My risk is much higher now. If I lost it, you know, I got used to these sweaters, man. What am I going to go back to wearing the old sweaters I used to? No. I have a family. I have a lifestyle that I like and I have investments and plans for how I use my money. I have a team, I have employees. So my risk tolerance changes. When you're using leverage, if you are really, really, really savvy and I mean probably savvier than 99.5% of investors. Leverage can make sense. Many borrow money to buy some type of security. It could be a house even. You know, people use leverage for their house and that's great. A lot of people point to that as a great reason for real estate outperforming. True. On the other hand, when prices go down as they are now, leverage can be your enemy. So if you put a little bit of money down and the price of the house goes down just by this, you can be wiped out. Why? How does that happen? I have to show you the math. I don't have it handy, but imagine what is the metaphor here that I can share with you? It's like putting on a heavy weight vest and I get launched into the sky. I'm going to go faster because I have this weight vest. It's just like forcing me up there. Any physicist watching this, please don't write me about how I don't understand gravity. You're right. But when you turn and come down, that weight vest is going to make you come down way faster than you ordinarily would have. That's the best example I can give.
Psychological Aspects Of Financial Decisions
The Dangers of Leverage (40:33)
Let's step out of analogy and go into just the reality. In the housing market, I think the only way that leverage is going to bite you in the ass is the following. Leverage is literally just borrowing money. You have the leverage of somebody else's money. They give you money. Let's say you put 10% down, but you buy the whole house. If the house costs $100,000, you put $10,000 down, you now owe $90,000. When the house is worth more than the amount that you owe all as well because you could sell the house and get that money and you can pay the bank. Where you get into trouble is if your house is worth less than you owe on it. Your payment goes up, let's say, because interest rates change. You had an arm, an adjustable rate mortgage. Now you can no longer make your payments. You can't make your payments. Now the bank is sweating you saying, "Hey, you better give us our money back. You can't sell the house, at least not for what you owe, and so boom, you end up losing your house." That's basically it, although the interest rate doesn't necessarily need to reset. There are a lot of reasons why you can be in a bad position, but that's a priority. You can't make your payment. Yeah, I mean, because if you can make your payment, it doesn't matter. The price of your house or the value of your house could go down, down, down, down, and it wouldn't matter. Technically, yes. There are some psychological wrinkles. People hate to keep making payments on something when they know it's worth less than they paid. That is a minor psychological difference. But nothing is forcing. Correct. Nothing is forcing. But now I want to talk about using leverage to invest in crypto or the stock market, because here's where people get absolutely obliterated. So you're using the value, let's just use Bitcoin. You're using the value of Bitcoin as the leverage to get the loan. So, hey, you have Bitcoin that's worth $100,000. We're going to give you $50,000 loan using the Bitcoin as the collateral. So you then use that to buy more Bitcoin. The problem is if the value of the Bitcoin drops enough, the second that value equals how much you owe them, they force liquidate you to make sure that they don't lose any money. So they're like, "Word, thank you. They sell. They get all of it." You go from having something to having nothing in an instant known as a forced liquidation.
The problem with losing money (42:54)
Yeah. Wait, has this happened to you? No, but I couldn't understand how people were getting into it. What do you mean a liquidation? So because I was used to thinking like a house and I'm like, as long as you can make a payment, what's the problem? But they're not making a payment. It's just the collateralization. So the second that it drops to matching, then they're like, "We can't afford this dropping anymore. We have to sell to get our USD back." So they force you to sell. I didn't know that was a thing. So thankfully, because here's my thing, dude, going back to the first thing, I said, "I do not trust myself. I'm going to be very trepidatious." So even now, with as much money as I have, dude, A, I don't have leverage on anything. But the only time I would ever even consider doing something on leverage is if I understood that thing and had proven to myself that I had performance over long periods of time. Completely. I love that you say that. We have a similar philosophy. There's a spectrum of how risk-seeking you are with money. And people follow these somewhat predictable moves on the spectrum. When you're young, you'll take all the risk in the world. When you have a little capital, you may be getting a little bit less risky. That's normal. But I remember a mentor of mine many years ago. He was a pretty successful Silicon Valley investor. So we were out for launch and he was talking about money. And he said, "Rameet, I have a no debt policy in my family." And I thought to myself, I was young. I thought to myself, "Wow, must be nice. Not have to take any loans. Buy a car or cash." I wasn't even thinking about a house, but he has a no debt policy. Now that I've gotten older, I've grown my own business and personal wealth. I actually admire him even more because as someone who has a lot of money, he could easily leverage himself to buy a house, buy a car, all kinds of stuff. But he doesn't. He knows what enough is. So out of all my friends, well, let me ask you, do you have enough? No. Okay. We can get into why. I want to know why.
Most people will never answer YES to this question but SHOULD (45:04)
So I've actually heard you say, and people say this all the time, you don't want to talk about a money lie that drives me crazy. You've got hundreds of millions of dollars. You could never spend it. What? Dude, I could drop easily half a billion dollars just making one film and marketing it. So to me, it's like, bro, I need so much money to do what I'm trying to do. So even though in the average world, I'm freakishly wealthy, with what I'm trying to build, I feel hamstrung by money all the time. So all I think about is how do we generate more revenue so that we can keep investing in the business? But I don't fall prey to that I don't actually have enough. You know what I mean? What I'm trying to build, I don't have enough. But if I stop having fun, then I just stop and go be rich. So I don't trap myself in foolish beliefs. We could really derail into frame of reference right now, which I actually think is the ultimate thing that you point out for people, but to get into frame of reference, maybe later. Well, first of all, I'll just say I like your answer a lot. I only know one other person besides me who says he has enough. He's a friend of mine. He also studied all my money stuff years ago and he's done very well. And I asked him recently, do you have enough? Yes, didn't miss a beat. I was stunned. I was like meeting a unicorn. I said, what? You're the only person I've ever heard to say that besides me. And we talked about it. He understands money. He understands compounding. He knows how much he has today. And he knows if he does nothing else. He just leaves that turkey in the oven and just lets it sit. It's going to turn into a huge amount of money. He knows how to spend it, how to leverage it, leverage meaning not use leverage, but how to make use of it. So I don't mind if most people would not answer yes to that question. I don't mind it. Your answer is great. It's on a far end of the spectrum. But I do want people to know what is enough. And if I asked somebody what is in it, I asked them this all the time on my podcast. And their answer is a million bucks or three million bucks. I go, okay, how'd you come up with that? And they go, well, I just feel like that's a good amount. I'll feel safe when I have that. And I go, can I tell you something? I go, yeah, I go, you genuinely believe that when you have $2.5 million in the bank, you're going to feel safe. It's never going to happen. The way you feel about money is highly uncorrelated with how much you've got in the bank. And I've talked to people on the podcast who have 100, they believe they need $100,000 to feel safe, a million, 10 million, 15 million. And without fail, when they get there, they're still worried. They're still worried because the two are independent. So we have to understand, first of all, what does a million dollars mean? How much can you generate from that? If you do nothing and you want to keep that money safe, how much can you turn that into in terms of cash flow? That's just basic understanding things like the 4% rule. But then we need to understand the emotional, psychological part of money. That's super neglected, especially among techy guys. You know, they're over here making their spreadsheets and then a fire community, they go, I need my 20 rule, I need to do my spreadsheets. I go, man, you're going to go the rest of your life optimizing your spreadsheet and you're never going to actually feel good about money. And that has been the focus of my work for the last few years.
Dopamine Scared Money w/ Myles (48:55)
It's very interesting. I always find myself drawn to what's the psychology of that person? Because the fire person, they're not focused on the same thing that you are, correct. But they're getting off on really scrimping and scraping and that has become the game for them. And I remember when I was really broke and I wanted to spend money and I didn't have money to spend. And I'm not sure what gave me the idea, but this ended up working amazingly. What if I gamified saving? What if I put all of my dopamine in that basket so that as I watched my bank balance go up, even though it was going up from $115 to $127, could I get a dopamine spike out of that and become obsessive about saving? And it worked. It was awesome. You still do that? No, not at all. How'd you turn it off? I got really rich. But so, I mean, this is like, and okay, so there are things about my brain that I am really grateful for and there's things about my brain that really pissed me off. But I am hyper malleable and I know how to change myself. So when I needed to save, I was like intuitively understood I need to make this a game because then I'll be attracted to that. I didn't. I wouldn't have said, oh, this is about dopamine. But I knew it'll be fun. That was the only way I could explain it. I'll make this fun. So I knew how to make that fun. But the whole point of me getting into business and doing all this was so that I could build the studio. So once I got there, then it just became a question of what do I want to use the money for, which I know is a big thing that you talk about. But I want to talk about safety for a second because as you were saying that I realized I will never having money in the bank will never make me feel safe. There's literally no amount of money because I know how easy it is to spend on something big or take a big risk and it's all gone. The thing that makes me feel safe is that I know how to make money. And so my skill set makes me feel impervious. So I don't, the only fear, I actually do have one fear around losing my money and that's it will really not make me look cool to my wife. If you lose money. If I lost money. Yeah. So that would, I would not feel studly in front of my wife. And so that makes me really bummed out the thought of that happening. But because I know I can rebuild. Yeah. Dude, honestly, like I sometimes fantasize about, I lose it all over. But like not, I can't even start my own company. I have to go and somebody else has come. Do you know how fast I would get promoted through that fucking company? You want to come work for me? You want to come work for me? Yeah. Come on. That would be amazing. Yes. It should all go on. I would come knock at you. Give me a call. But yeah. Okay. So that's amazing. The fact that when I talk to you, it's so interesting. I hear similar things that I hear from other people, but your reasoning and your level of reasoning is just completely different from others. It makes perfect sense. You know, you are as successful as you are and you think about this stuff every single day. It's like a joy to talk to you.
Why Most People Are Afraid of Not Having Enough (52:03)
Most people are scared of not having enough. Most people worry about money. They believe that a certain number will make them feel safe. In your case, you worry about money a little bit. You don't feel safe with money. Those two things are the same. But you're impervious to that type of risk because you know how to make money and you acknowledge it might be embarrassing for you and your wife. Oh, you've definitely been embarrassing. What I want people to do is to go deeper than just saying, "I don't feel safe with money." I want people to go deeper than saying, "I worry about money." And this is what I do. I ask them, "What worries you?" What worries you? And they'll say, "Well, I don't know if I have enough." I'll say, "Do you want to find out right now? Let's just do the math." They've worried about money for 25 years and they've never pulled out a calculator which you can find on Google in two seconds and typed in four numbers. That really tells you that it is deeply psychological and emotional. They worry that... Because they don't have clarity on what they want. And so enough is inherently related to what do you want to do with it. The word enough is just this repository of worries. If I say, "What is enough?" They'll just make up a number. And I say, "Okay, two million cool. Where'd you get that from?" Again, they just pulled it out because it feels right. It's kind of like when I ask people, "How much do you spend on a vacation? How do you decide how much to spend on a vacation?" It's a very interesting question. It reveals a lot. For everybody watching, how do you decide how much you spend on a vacation?
How Much Should You Spend on a Vacation? (53:46)
What people often do is they will say, "Ah, you know, I figure it should probably be around like 5,000 bucks for this type of trip that I'm trying to take." I say, "Cool. How'd you come up with that number?" And we probe and probe and it turns out in their early 20s when they first started having some money, they went on vacation and they have basically imprinted that number. Now, now imagine I'm talking to a 40-year-old, 45-year-old. She and her husband have been very successful. They have $10 million. This is a podcast episode that I had and they're still saying their vacation should be $5,000. And they really value their vacation. They love it. But when they go on it, they're always worried about money. I says, "Something's wrong here." And the answer is you haven't turned the page on your finances in that season of life. Like when you were gamifying finances, that was fun. That was that season of life for you. But at a certain point, your season changes. You got to turn the page and embrace the season that you are in. And that's really hard for people to do.
Impacts Of Financial Missteps On Relationships
Where people go wrong when thinking and planning about money (54:53)
How much do you think of this as tied to, "We don't know where we're going to die?" Because if I knew I was going to die when I'm 85, then I just run the math. I've got this much. It'll run out of that point. No, you're a freak. Nobody does it like that. It's more about... Wouldn't they though if they knew when they were going to die? No. Okay. You think they would? Here's the scenario. Yeah. You have received a terminal illness notice. You know that you have five to ten years to live. You know it. Can we make it specific? I know I have seven years to live. Seven years to live. Cool. So now it's very specific. This is a real scenario. Okay. You have seven years to live. You have two daughters. They're like nine and ten years old. You want to create memories with them. But you're wondering if you should quit your job and spend time with them. What's the one bit of information you need to know? How much money I have in savings and how long it's going to last? Okay, very good. The amount of money you have is about eight million dollars. Okay. Seven years to live quit. For sure. Well, I wouldn't because I love what I do. But I would certainly split time or something so that I would have a preponderance of time to spend with the kids. This is a real woman who came to me on my podcast. And her question was, should I quit my job? Wow. She had a double lung transplant. She has five to ten years left to live. She wants to create memories with her daughters. And I'm listening to this and I go, what's keeping you at your job? And she said, I like the steady income. That's the beginning of the conversation. Now, I can't just get in there and be like, look at this. Look at the math. Here's the calculation. This is psychological. We go back to her childhood. And this is where most people are more motivated. They don't look forward with their money. I want them to get there. But first we need to look back. Her mom taught her certain lessons about money, caused her to worry about money. She's continued to worry about it. And at a certain point, like you said, those grooves become really deep. They become a habit. So when I asked people, like, what do you get out of this? They're worrying. They go, nothing. I go, no, no, no, you get something. Otherwise you wouldn't do it. Often it gives them a sense of control, a sense of purpose. So we're talking about this. And to me, the most interesting part of the conversation was she's immunocompromised. So she really has to take care of her health when she travels. She doesn't want to go into restaurants and things like that. I said, no problem. With that much money, you can hire a doctor to come with you. You can have an assistant clear the area. There's so many things you could do. So in this part of the conversation, I asked them, what do you want to accomplish? What do you want to do with your family? What messages do you want to share with them in your time here? And they discussed taking a trip to somewhere like Texas or Arizona or something like that. I said, that sounds great. How would you do it? And we had this 15 minute back and forth about would they drive? Would they fly? Well, she's immunocompromised. And her husband piped up and said, what if we charter a plane? Remember, she's got a few years left to live. Time is of the essence and they have plenty of money. And they talked about it and they talked about it. And then the end she goes, well, that sounds really cool. But of course, we're not going to do that. I was like, wait, what? You have this chance to go on a trip? And she said, well, you know, we're just not the kind of people who would charter a plane. And so I share this because so many of us think that if I just had enough money and if I knew how much time I had left, then of course I would change my life. And my response that is saving money is really important, but spending money is also important. And it's like a muscle. And if you don't exercise it and if you don't learn how to spend on things that are meaningful to you, then you can accumulate a lot of money over time, but you won't actually know how to use it. It's really interesting.
How money tears relationships apart (59:05)
This is frame of reference. I'm the type of person that, right? We're not the kind of people that would charter a plane. Okay. So I find that very in line with what I know to be true about humans, which brings me to how money tears apart relationships.
Collision Points of Money (59:23)
So one of the cool things about your podcast is that you get people to come on and talk about like the real stuff that they argue about. What are the biggest collision points for people in relationships over money? It always starts with a very specific incident. I remember one where she went to Target and she came home and his first question was how much did it cost? And it's just blew up into this fight. Target is a real flashpoint for people. It's like a, there's a Target. That's what I said. I've been to Target. I grew up in suburbia. You know, there's all these memes online about, I went to Target to spend 20 bucks and I walked out with $300. Ha ha. I actually don't find it that funny because as I talk to her, because there's no discipline? Why? Well, for that reason, because your rich life cannot be going to a random store to buy random commodities and then declare that this is all I want in life. There's got to be more to a rich life than buying Formula 409. Because it needs to be intentional or meaningful. So with this, with this young woman, I asked her, like, what do you, what do you buy at Target? And her first answer was, I buy clothes for my kids. That's code for I'm a good mom. I said, okay, what else? You know, things for supplies, da da da da da. Okay, fine. But she spent so much time talking about Target. And I said, tell me about you. What is your rich life? And she was blocked. It's been so long since she thought about herself that she didn't know what to do. And so we probed and I have a whole process. And she finally said, you know what I'd love to do? She said, I would love to get a massage once a month, just time alone. I said, could you do it? She's like, oh, no, no, I can't do that. I have kids. You know, I need to spend time, et cetera. I said, what kind of message do you think that you send your kids now when you don't prioritize yourself as well? And she started tearing up. And I asked her, why Target? Why do you go there? And when she was a kid, her mom used to take her there. So this is often rooted in childhood. Her mom would take her there. Her mom would say, what would you like to buy? She would get a treat. And so now she does the same thing with her daughters. The problem is she has shrunk her rich life to a commodity store. Now if she had told me, like, I love camping, so we go to REI and we go, we get camping stuff and we spend time. Great. I have nothing against big box stores. But it's this idea that she's just buying random things, which she herself admits she doesn't remember later, and she shrunk her rich life to something where she can't even give herself a massage or give order a massage. I said, what if you were to go and once a month you were to get a massage? You were to spend money on it unapologetically and you were to tell your daughters, mommy's going to take care of herself. She'll be back in two hours. What kind of message would you send your daughters then? And she tears up again. She allows us to express our values on a very tactical basis. If you believe you're generous, show me how much you tipped the last time you went out to coffee. If you believe you're adventurous, show me how much you spent on an adventure in the last 60 days. So there are these phrase we use, generous, adventurous, spontaneous, I like to travel. I love them. You choose your rich life. But our money and time is what can actually reflect what our values are. What is up my friend Tom Billie here and I have a big question to ask you. How would you rate your level of personal discipline on a scale of one to ten if your answer is anything less than a ten? I've got something cool for you. And let me tell you right now, discipline by its very nature means compelling yourself to do difficult things that are stressful, boring, which is what kills most people, or possibly scary or even painful. Now, here is the thing, achieving huge goals and stretching to reach your potential requires you to do those challenging, stressful things and to stick with them even when it gets boring and it will get boring. Building your levels of personal discipline is not easy, but let me tell you it pays off. In fact, I will tell you, you're never going to achieve anything meaningful unless you develop discipline. All right, I've just released a class from Impact Theory University called how to build ironclad discipline that teaches you the process of building yourself up in this area so that you can push yourself to do the hard things that greatness is going to require of you. Right, click the link on the screen, register for this class right now and let's get to work. I will see you inside this workshop from Impact Theory University. Until then, my friends, be legendary. Peace out.
Collision Points in a Relationship (01:04:19)
Okay, so how does that end up? Like I want to know where the moments are of collision. So people don't have clarity. They haven't thought about their rich life. Is it when the rich life is different for both of them? Yeah. The biggest mistake that I find with couples, it's common among many of them is they have no rich life vision. So they will come arguing about, you know, I can't believe that he spent $500 to do this car repair. We should have waited or I can't believe she went to Target and I'll ask him, what is your rich life? And they're just like, I don't know, I, you know, we want to take care of our kids and we want to retire. I go, your kids are two years old. You went from two years old to retirement. What happens in between? So there's no shared rich life vision. And if you don't have a vision, it's easy to get lumped into the weeds. It's like you, you had this vision of this studio. If you didn't have this vision, it's just like, I want to make money, make money. Am I paying too much for this? What about that? But if you have a vision, it all kind of crystallizes into everything I'm doing is to make this. Couples don't have that. They rarely sit down and talk about money. Another collision point is when they do talk about money, it's almost always reactive. It's a fight. So 98% of couples do not proactively talk about money in my experience. It will be, why'd you spend that? Or how are we going to afford this? Or some type of reaction, but it's almost never, hey, it's our monthly rich life review. Let me compliment you on something. You compliment me. Let's take a quick look at the numbers and let's talk about what can I do?
Monthly Rich Life Review (01:06:02)
Because when it comes to money, it's almost always a fight. It's almost always negative. So in a monthly rich life review, I always started off by saying something nice about the partner. Money related or just anything? It should be money related. So it would be something like, you know, babe, I really appreciate how whenever we travel somewhere, you always book the right seats and you make sure that we have great flights. I appreciate that about you. Something that connects what they do with money. And it's such a different way to talk about money instead of why you spend that much. I can't believe you did that. There's a therapist, researcher, I forget his name, but he has this idea of the four horsemen of the apocalypse. And he said, you know, I've been doing this for a very long time.
The number one reason that couples get divorced. (01:06:49)
And I've noticed that there are four traits that if a couple shows that odds are that they're going to end up getting divorced and the one horseman that is most predictive is contempt. So if people roll their eyes, if they're huffing and puffing about their spouse, he's like, yeah, the, and this isn't him, he's ball parking. It was like 98% predictive. You have divorce within the next six to 12 months. I mean, it was crazy. The Gottman, Gottman. The Gottman. Yeah. Got me. Is there awesome? Nice. My wife and I took a Gottman seminar. Really? Yeah, we loved it. It was virtual and during COVID and it was an entire weekend. It was like eight hours a day and it was physically difficult because it's pretty emotional and you're talking and you're going through some difficult conversations. How are you doing that virtually? He's like, okay, and now take five minutes to answer these questions. Yeah. Yeah, they give you exercises and there are therapists around in case you need specific help. It was outstanding. And in looking back, you know, at the end of the weekend, we were exhausted emotionally, physically, but we reflected on it and we said, like, what did we like? Would we do it again? And the most valuable thing we did was simply putting time aside for our relationship. And then we also decided we want to do it once a year. So we put money aside in a sub savings account for self development and we use it for a conference, a seminar, whatever it may be for us, for our relationship. It's separate from vacations, but there's just an example of when if couples had a joint set of goals and they actually put money towards it, that is really meaningful. So this, this couple I just spoke to recently, the guy was not interested in money. He was the primary earner, but he just didn't care. He's like, I give it to my wife. She handles it. Big mistake. Classic mistake is to have one person be the money person and the other person is just like, oh, yeah, you do that. That's your thing. That's a huge mistake. So he was pretty disengaged. And finally, you know, I was talking to him, what's your rich life? He didn't have much. Finally, I mentioned a child free trip. The guy's face lights up. I was like, all right, this guy wants to get away from his kids. I get it. He wants to have time with his partner to connect. So suddenly we start building that in to their rich life. We put some money aside every single month. He knows that once a quarter, they're going to go on a child free trip. Now these little skirmishes in the weeds about why do you spend that? Or I can't believe that you didn't do this. Those are out of the picture because they're focusing on something that they both want. That's the way that I want couples to use money. Okay. So I brought up contempt because I want to know, is there a thing like that in money where if I see this, I know there have a problem. Or is it something else? Yeah, if one partner has completely checked out, it's a huge, huge, huge, rich. Why do people normally check out? They just don't believe that change can happen. And you know what's in a bad situation. They don't even want to look at it. Yeah. They're just, I'm out. No, they just go, what's the point? And there have been a few couples I've talked to. Interestingly, most of the couples who are really checked out won't even come on. They'll even tell me on email. I'll be like, hey, I'd love to talk to you. I think I can help. And they go, I spoke to my husband. It's usually the husband's on email. And he doesn't want to do it. And then sometimes like six months later, they'll write me like that relationship did not work out. Boyfriend, husband, whatever. But there have been a couple where they came on and we're talking about it and we're really trying to make some progress. And one partner is just like this. It's checked out like whatever rolling eyes. You can hear the flat affect in their voice. There's no engagement. And everyone can imagine what it's like to be in a relationship for years where nothing has changed and you just lose hope. It's really heartbreaking. I try to get them engaged and sometimes it works. Like I can remember a couple of times where the partner gets engaged and there's a way to bring them, but it is really the responsibility of the other partner. So how do you get people to re-engage?
Societal Influence On Financial Attitudes
The reason why people are so resistant to engaging with money. (01:11:13)
If one person, because I've obviously heard a bunch of your episodes, if one person is like, nah, I don't get involved. That's her. Let her deal with it or let him deal with it. The key is to raise the stakes. So most people don't believe that the stakes are real. So what I mean by that is they're in a relationship, in this case for 21 years they were married. And he's cheap, really cheap. This is the episode with Charles and his wife. And he's made millions of dollars. He has a net worth of $13 million. He wrote me saying, "Help all caps. My wife of 21 years is going to divorce me because she says I'm too cheap." Whoa. So I get on the call and I'm talking. And when I ask him, like, how bad is it? People do this thing where they minimize how bad it is. And I go, so what's it like? He goes, "Well, it's not that I'm cheap. I'm selective." And I go, "Oh, okay. So I do. Okay, what other words do you use to describe yourself that are not actually what you are?" And what I do is I raise the stakes because I need them to understand what is going to happen. I go, "What happens if this goes on for another month?" He goes, "Basically nothing. It'll be fine." He goes, "Oh, five years." He goes, "My wife's going to be pretty sick." Meanwhile, his wife is over there checked out. Because she's given up. She's given up. And you can hear it in her voice. It's really, really sad. But I knew that if the two of them were really committed to it, that I could help them and that they could do it. I said, "What happens in 10 years? Their kids will be out of the house," etc. He goes, "He starts to realize it. But he really starts to process what the future is like if he makes no changes. He will have 26 million plus dollars and he'll be divorced." And all this work that he put into making money and building a successful family will have been destroyed. Why? The need to save $200 on a mattress purchase. And he's smart. He even says, "I'm getting it intellectually, but I can't bring myself to do it here." So that's, I take that. I say, "Great. Okay, you get it intellectually. I'll work with that." I get his wife on board. She's checked out, but I say, "Talk to me. What would it look like?" And I do a little work where I basically say, "What if he said something like this?" And I say it in my own words. Sometimes couples just haven't modeled it ever. They don't know how to actually say it in the way that would connect with their partner. So I do it for them. And then I say, "Now you try it." In the end, his wife wanted landscaping for their front yard. She said, "We have the worst landscaping on the whole block." And the landscaping was like modest for their income. She wanted a Peloton. And I think when they travel, she did not want to only sit in economy, which I loved. She was like, "We don't have to sit there anymore. We worked really hard. We get to sit in the front of the plane." I was like, "Good for you." He sent me a picture of their Peloton. And he said, "I bought it and it actually feels good. My wife is happy." And more importantly, they were talking about money together, not about how to spend less but about how to create their rich life together.
The problem of cheap people (01:14:28)
Interesting. I do wonder how much of that is about control as well. If you feel like because this person is constantly complaining, paranoid, whatever, they just refuse to get on board, we have this money, but I can't do what we think we should be doing with it. For instance, if you have two cheap people, is there a problem? There's a problem if they come to me. Because they're coming to you because they have a problem. Yeah, they realize there's something deep down. So with cheap people, they'll say little clues. Like they'll go, "I'm not cheap. I'm just frugal." "Oh, okay. You're cheap." But, okay. I go, "How do you know or what seagulls, what clues do you have that you're cheap?" They go, "Well, our friends don't invite us out anymore. Everybody comes over to our house. I go, "Why?" We don't have a table. Whoa! This is classic. Classic. This happens all the time. We don't have a table is classic. Yeah. Cheap. They're really cheap. I'm not getting somebody on the podcast who's like, "Oh, I really prefer generic Saran wrap." No, they have money and they have not bought furniture in five or seven years. There's something going on here. And remember, this isn't just rich people with their rich people problems. There's also couples who have like $825,000 of student loans. Oh, my God. So they come to me and they go, "I don't think we can afford to have children." But that's a whole 'nother conversation. And so with cheap people, if two people are cheap, it becomes a self-reinforcing thing. But if they don't think they have a problem, then I'll never talk to them. Because only people who believe they have a problem and want help will come on a podcast where they have to spill the beans about all their numbers. Right. It's interesting to me, as you were telling that story, I was like, "Okay, the way that Lisa and I solved that problem early in our marriage when we didn't have a lot of money was, "All right, you have your spending money. I have my spending money." Now, that doesn't help with things like the lawn, which is a shared expense, which is what got me thinking, "Maybe this is a control thing. If you both have this amount of money, but one of you becomes a roadblock, I can see how that would be really frustrating. You get a collision of values where she's embarrassed by the lawn. She's embarrassed that, or not maybe embarrassed, but irritated that other people get a sit in first class and she has to go to the back of the plane. So I can see that resentment building up. And when you have a collision of values, the other person seems legitimately crazy to you. It's like, "Why? What are we doing here? This doesn't make any sense." Let me give you an example. Let's say that we have a couple and they're married for five years and they have kids and they're talking about their kids, newborn. And one of them goes, "Well, we should probably start putting some money aside for him to go to school, college one day." And the other one says, "Why would we do that? He could just go to the military." Now, that's a collision. So that is a collision of financial values. That's what class, something we don't talk about in America a lot, what class were you raised in, what culture were you raised in.
What class were you raised in (01:17:38)
And how do you have that conversation? How do you have that conversation? So they come on and they're just bewildered. One of them's like, "Of course our kids going to go to college. Of course we're going to save because that's what my parents did for me." And the other one goes, "Well, I don't need that." And do you think one of them is right? Sometimes I have strong beliefs when couples come on. Sometimes I tell them, "Point blank." That one in particular, what do you think the play is? The play with them is to spend the bulk of the time, letting them talk out loud about how they were raised and why they believe, for example, the guy who wanted them to go to the military, he had actually gone to art school and he thought it was a total waste of money, total scam. But he got a good job and he was doing quite well. He was the primary ear. She had been raised in a family where they super value education. She was, her college was paid for it. In the cultural milieu that she grew up in, it was everybody's parents take care and she wanted to do the same thing for her kids. Personally, I think that if you have a lot of money, it probably makes sense for you to at least partially, if not fully fund, your children's education for a couple of reasons. I'll say this because my education was not funded by my parents. They were middle class. They told me, "Point blank. You need to apply for scholarships." And so I did. And those scholarships paid my way for undergrad and grad school at Stanford, entirely. So I went into college thinking, "Oh yeah, I paid my way through. It's so cool." And I also had this belief that if parents pay for their kids, their kids are going to be spoiled. And within the first two weeks, I realized I was totally wrong. The first two weeks are what? College. Because at the school like Stanford, a lot of kids have their parents paying. Not all. There's a lot of financial aid as well. But there's a lot of kids who have their parents paying for it. It is indistinguishable. There are kids who went to private school and then went to a school like Stanford. They're not spoiled. Some of them are. They're kids who have their parents paying. Some did not. You can't tell one way or another. And so what I realized was, for example, for my future kids, will we pay for their education? Yeah. Yeah. Especially Indians. We pay. That's a cultural thing. You help your kids in any educational related things. So now we're seeing education. But financially speaking, what if my kids had to make a trade-off with what school they go to? And then they find out at age 25, how much money we have. Oh, I couldn't go to this study abroad program because my mom and dad didn't give me $5,000, which is like a rounding error. Not exactly what I want to communicate to my kids. Now, do I want to teach them the right values and hard work? Of course. But I do think that, you know, again, sometimes on the podcast, it's just point blank clear. Someone is saying something that's just not fair. And I'll say it. But sometimes it's not my job. It's my job to let them come to their own conclusion. I get that for sure. Out of curiosity, if everybody had to follow your advice around college debt specifically, what would your advice be? Because $825,000, I'll just tell you right now, that was a mistake.
Veterinarian and Physical Therapist are Some of the Most Debt-Ridden Careers (01:21:22)
That was a mistake and they admitted it. Do you know the two? You didn't rack that much up. What are you doing? A good question. What do you think the two occupations that are in the most debt are? I would have thought doctor and lawyer architects, something like that. Actually, those are good guesses. Lawyers are a good one because law school is super expensive and not all lawyers make a lot of money. But no. Number one, veterinarian. That's right. What the fuck? Because they take out medical school level debt, but they don't make that much money. That's number one. And number two, which is what this couple was, physical therapists. So it's crazy. They said, on the last day, they basically got an envelope that said, "Here's how much you owe." And they were honest too. They acknowledged that they had personal responsibility. They had not done their due diligence. They basically just walked in and didn't care about debt as so many students do. So we spend a lot of time talking about the difference between personal responsibility and systemic and sometimes predatory things that colleges do. Regardless of all that, they're like, "We can't afford to have kids. We're going to be in this debt forever." Should they have gone into that much debt for that job? No. What's your advice to them? How the hell did they get out of that debt?
His Advice for This Couple to Get Out of Debt (01:22:47)
So when they walked in, it was hopeless. And they were just like, "We don't know what to do." And they loved their job, but it's not working out. Meaning that they're just not making enough to make the interest payments. So the amount that they have has grown. It's just growing. And they're not happy with where they are, but they feel trapped. Okay. So we talked about it a lot. And two things happened. First, on a personal level, I felt that everything was just a little too hard. So they had gone to college, their responsibility. They signed the papers, they admitted it, and they took responsibility. I appreciate that. But nobody had educated these 17 or 18-year-olds about what interest means. Nobody tells these kids that. So that's number one. It was a little hard. Number two, when they got their jobs, they were not informed about certain things. Then they had, I think, one daughter, COVID hit. They lost their childcare. I thought you were going to say they lost their child themselves. No, no, they lost their childcare. So now she was staying home, which cuts into their earnings, which makes it harder to pay off the debt. The interest was growing. Why is it growing on a student loan? Isn't there something we can do for the students in America that have taken out debt? Okay. So a variety of things. In the end of our call, we were really getting to a really good place. She had to leave early because I think the babysitter had to go. So even in that moment, I thought to myself, gosh, this is, everything is just working against them just a little bit. I wish it was just a little easier for them. And I felt that way before when my wife and I spent a lot of time learning about fitness and there's so much counterintuitive stuff in fitness. So many fads and all this stuff. And when we travel, we try to eat, right? But it's hard. There's like a lot of times just junk food and we go, wow, I wish it were just a little easier to be healthy in this country. Just a little. We're willing to do the work, but I wish it were just a little easier. The packaging being clear, not deceptive, the portion sizes and on and on and on. In their case, we're able to reach an amazing result, which was if they worked in their certain jobs for something like 10 or 15 years, they get some bunch of loan forgiven. So they were like, yeah, we get the loan forgiven, but we're still going to have to pay something like $200,000 in taxes. And I said, well, guys, show me your numbers. We always look at their numbers on the podcast. And they had actually been to their credit investing a little bit every single month since they were in their twenties. I said, guys, yes, you have this huge debt, but by the time you become 50, you'll have hundreds of thousands of dollars, hundreds. So when you get that $200,000 tax bill, you can pay it off and you'll still have money left over. And this blew their mind because they had been playing defense for so long that they forgot what it was like to go on offense. But they have to pay that down and stay in that job. And this all doesn't come to fruition until they're 50.
If Someone's Broke and Not Making Progress at 50 (01:26:08)
Youch. If you could give, because that is not the advice that I would give them, I would be like, well, all right, listen right now. Tell me. You are going to need to make more money. Yes, you need to cut your costs down, but you need to make more money. So let's talk about how you make more money, whether that is getting a better job, whether that's a side hustle. Like I'd be asking, what are you doing every day to get a skill that you can monetize? Yeah. Well, I agree with you. When I'm having these conversations, there's, I have to decide really carefully how far to push it. Yeah, you're so much kinder than I am. Man, I would just, let me just, let me just soak this in. I've never been told I'm kind before in my life. This is a moment for me. Wow. Great job, Rameet. You're so kind. I mean, I have to, I, these podcasts have made me more patient because if I were to come out guns blazing, like, boom, I look to your numbers. Let's do this. Look at the ratio and then let's earn you an extra $10,000 a month. Like technically I can see the full picture for them, but what I realized is if I come in guns blazing and drop the bomb on them and then I say, well, goodbye, nothing changes. It has to be from them and I have to slow it down, like really slow it down. So we take hours, we talk about their childhood. Sometimes they'll make this, they'll make decisions that I don't agree with, but I have to know when to let it go and when to be like, guys, this, we need to decide this right now. Are you a money therapist? I'm not a therapist, but I do love the psychology of it. The more I hear you do it and the more I hear you talk about it, the more it really does feel like you're a money therapist. This is interesting. It may be that my approach is just fundamentally flawed, but I can't bear the thought of these guys, like dragging ass until they're 50. And look, I get it that most people are not going to respond to what I'm saying. And so you're a better man than I can do. No, no, that's not true. Your audience, when they come to you, if they come to you and they go, just tell it to me straight, you're going to tell it to them straight. That's what they want. And that's your idea. Come to me and say, "soft shoot." I'm still going to tell it to them. I know. That's why I know that you're a much nicer human. No, I'm not nicer, please. But I mean, although I do love to hear it, and I'm going to make sure my wife watches this repeatedly, I am nice. It's that, you know what, I think for whatever reason, I take a lot of joy in watching people put the pieces together for themselves. I think I've done, I've been doing my business for 20 years. I've done a lot of the stuff where I'm like, "here's the answer." Like here's how you do it. Here's how you set up a Roth IRA, and these are the accounts to use, and it all works together. I like that stuff too. But to me, this is the new challenge of how do I help other people come to the conclusion themselves? And it pushes me in a lot of ways. I am not naturally patient. I want sometimes to just tell them the answer, because the math or the thing is just like jumping out to me. But I'm finding a lot of joy, maybe just the season of life and just like slowing it down and trying to help them come to the answer themselves. Okay.
Unraveling Personal Financial Myths
Helping Clients Unpack Their Money Propaganda (01:29:27)
So here is how I think you get them there. You first are trying to get them to unpack their money propaganda, the things that they have come to believe that they don't realize. So talking about the childhood, figuring all that out, you try to help them understand that they need that people have talked to them about money, but never how to spend money. And so getting them to realize, "Oh my God, I've never even thought about my rich life. I don't know how to spend money well." There is a lot of tactics, so helping them understand what tools are available to them. I'm thinking about our friends that are way in debt. Like I had no idea that there was a loan forgiveness program or anything like that. I would not have been able to offer any assistance here. And you, what else? What does feel like the big things you give people to do? But what am I saying? There's always an inciting incident. So from their childhood? No, no, no. Like why are they here? What happened? Like he went and got the car repaired and he just like spent 300 bucks without asking me. And that's or the target thing or whatever. I want to get into the contours of that example. So I make them walk. It's right at the beginning of the episode. What happened? Who called whom? What'd you say? Where were you eating? I want to know the rich tapestry of their life because most people start getting really abstract when they talk about money. And they just say things that they think people want to hear. They go, "Well, I'm like pretty frugal." Or like my philosophy with money is I kind of set it up and I don't really want to micromanage it. What are we talking about here? Tell me where you ate last Thursday and why you guys fought at that Mexican restaurant. I want to get micro. And then we go super macro to talk about how they grew up. What are you teasing out with the micro? Why make them go so specific? Because when somebody tells me we were sitting at the restaurant, we go on a date night once a month and the check came and he didn't offer to pick it up or she didn't offer to pick it up, I go, "Oh, okay. So what does that mean to you? Who normally picks up the check? What kind of restaurant were you at?" And when they tell me, "Oh, you like sushi? Oh, you like omakase? What were you guys eating sashimi?" "Oh, that's fancy. What are you guys? A coastal elite?" I'm joking. I'm building rapport. I'm showing them that I'm not Mr. Money Guy with a suit and tie. Like I can speak their language. But I'm also trying to understand, I'm trying to meet them where they are. And to meet them where they are, I need to go into their target conversation or their sushi dinner. That's where people live. People do not normally live in a spreadsheet. They certainly don't live talking about money every day. Money is like the tiniest part of their life. They don't think about it unless they're fine. I'm trying to give people to understand why they do what they do. With the micro example, I'm trying to meet them where they are so that we all have a shared bond. "Oh, okay, you guys went out to sushi and you fought over the bill." Cool. Then that's just sort of like chapter one. Then I want to zoom back. I want to ask them each about, "How do you think about money?" I asked somebody recently, "Do you like money?" You know what he said? Not really. I said, "Really? Tell me why?" And we talk about that. Sometimes I have a couple of wild cards I pull out if I'm just stumped.
How to get people out of the weeds? (01:32:52)
So you're stumped, you can't figure out why they're derailed? Sometimes they just, every avenue I go up is a dead end. I think of myself like a detective. I'm trying to find out what's going on. By the time they get to me, I have some basic information about them. I have their finances. But do you have go-to wild cards? Yeah, I do have one. If I'm really stumped, and they will not acknowledge the stakes of what they are doing. They keep playing small, they keep fighting about little $5 expenses, and they're like, they just don't seem to want to get out of the weeds. I go, "What messages do you think your kids are picking up from you?" Instantly, for parents of young children in particular, it cuts very deep. Because we can excuse a lot about ourselves. Well, you know, it's not that bad. We can even excuse it about our partner. That's fine, you know, whatever. But when it comes to our kids, every parent wants to do the right thing. And so in order to teach your children about money properly, you have to understand money yourself. And that really reaches people if I'm stumped. Interesting. So we're trying to find the point of friction, I'm assuming. So my wife and I talk a lot about this idea that we call getting beneath the teeth. So the biggest argument we've ever had was over a cup of tea. Of course, it wasn't actually a cup of tea that we were arguing about, but it took us hours to figure that out. We were yelling and screaming and almost ruined the one vacation that we had taken in like six years. So I have a feeling that's what you're trying to suss out. Okay, where are you guys colliding? And then why are you colliding? Is it a story that you're telling yourself? Is there a discrepancy in value system? Yeah. Okay. So we start getting under there. The thing about the kids is interesting because it's like showing somebody a mirror. It's hard to act like an asshole in front of a mirror. It's all of a sudden you see the way that you hold your face and what you look and you're just like, "I've got it." And they know it too. They know. And they'll even tell me the ages. They're like, "Well, you know, our youngest is a little too young to understand, but like our seven year old, like, you know, he knows. I think he's starting to know I go, "Really? What does he do when the two of you fight about money?" And they look and I can see them. They look at each other and they look down and they go, "He goes into his room and he plays on his iPad and he puts his headphones on." I mean, every parent is feeling that. And when you understand that the couple that I was talking to in that scenario, the guy had done exactly the same thing when his parents fought. You start to see how money messages are passed down from generation to generation. They really are. It's unbelievable. And this is something that's just not talked about that often. That many of us believe we wake up in the morning, "I'm rational and logical. I'm going to make decisions because of my financial ability and what I like." And often the decisions we're making today, what we wear, what we eat, is because of something our parents set around the dinner table 40 years ago. And repeatedly, we see this on the podcast, which is the decisions we make, the way we think about money, the way we talk about it with our partner, our expectations about who picks up the bill are often totally misaligned with how much money we have in the bank. And to me, that's the beautiful part of it. It's incoherent. It's illogical. But that's exactly how we are as human beings. Speaking of illogical and incoherent, do you ever ask him about sex? It comes up, but I don't really ask. Sometimes they'll tell me our sex life has suffered. Yeah. Yeah. And usually when it's exactly what you would think. It's when in a heterosexual relationship, she feels that she's taking care of him. It's that. And so it's come up a couple of times. I rarely ask about it proactively, but it's clear from tones of voice with certain couples.
A cultural definition of power. (01:37:19)
You have been thinking about this a lot lately. So I was doing a Q&A and talking about basically how you live a good life. And one of the answers was you need to be having sex. And I was filming in front of several people and they were all like, are you sure, man? I don't know, because I will map out here the seven things I'm going to cover, whatever. They were like, oh, you sure about that one? And I was like, yes, I am very sure about that one. Because part of it is becoming the kind of person worthy of a sexual relationship. And when I think about money, I do, do you know way more about this than I do? But if I had to guess what I would find under the hood is a lot of self-worth, is a lot of feeling certainly for the guy, and let's just see how many people I can unintentionally piss off because I actually don't mean this to be controversial, but I know it will be. So there's a famous quote. Everything is about sex except for sex. That's about power. And when I think about for guys feeling powerful, you want to make a guy lose an erection, make him feel not powerful, like instantly. And if there's money woes and you feel like you're not able to take care of the situation or your wife is making more than you, I can see how that becomes very difficult. Is that largely culturally defined yes, but I think that that's an echo of something that's innate. So it doesn't have to be money, but that's a proxy for hunting, being good at fighting. Like dude, I've been on a history kick. I'm really going to derail this here. I've been on a history kick. History is a long sequence of humans just absolutely murdering each other. It's crazy. And it's when you were in a situation where people can just roll up on your house and slaughter you and your whole family, it's just do you have enough upper body strength to fight them off. And it just is what it is. And so you've got millions of years of evolution informing that guys need a way to express no, I'm powerful. I can do this. This is why I said my one fear around money is not being studly in front of my wife. That fuck I lost this all. Now my wife has been there for all of the building. And so when I say that she's earned her half, but at the same time, I feel really powerful for having contributed as much as I have and having helped build everything and feeling. And I think she would agree being in a leadership position and all that. And so there is so much complexity.
Sexual intimacy (01:39:49)
And if there is bed death in a relationship, that is going to increase the amount of friction in everything else because you don't have the bonding mechanisms. And do you think that that comes at the front end or the back end? Do you think that having a healthy sexual relationship drives that feeling of power and connection or do you think that having connection drives a healthy sexual relationship? They are so intertwined. It's a little bit chicken in the egg. You probably need the sense of power first to be in that aroused state. Like I find this funny now that I'm quoting Will Smith, though there was a time where I would have jumped right to it. Where he said that I work this hard for the way that my wife looks at me. And I instantly understood that. And when you first get into a sexual relationship, that look of like, I really desire you is intoxicating on both sides of the fence. Now it comes from very different things. So I would want the person that I'm about to be intimate with to have that kind of reaction to me. Now what does that reaction come from? A myriad of things. But in a long term committed relationship, one of them is going to be just, do I see you as a high functioning person in this relationship? Money is certainly going to be a part of that high functioning. I like what you're saying because what it really reveals is that relationships, particularly marriage, is not just about love. It's not. It's a business arrangement. It's a practical arrangement. It may be an economic arrangement. And for most of history, it was. And I think about seeing parents with their kids at a restaurant somewhere and one of them has got to take the crying kid outside and they just, they intuitively know who's going to do it this time. That is more than just romantic love. Like that is a partnership and money is a part of that. So that's why I like talking about money because it's one of those core tenets in a relationship that drives things and is driven by those things.
You have money and you're on the same page, you're connected. When you're connected, you can also talk about money, earn money together, et cetera. You said a word that I love. It's a huge word in my world. It's the C word, contribute. Who contributes? I find that couples where one person earns way more than the other, the lower earner is obsessed with the word contribute. They're obsessed because in America, we value that which we can quantify. If I can put on a spreadsheet, it must be valuable. How many hours did I work? How much money did I make? That's valuable. But did I take the kids out for a walk today? Not quantifiable. Therefore for whatever reason in our culture, less valuable. So imagine you're in a relationship and you are not earning as much or even anything. Your partner is, where do you find your value? That's question number one. Now question number two, what if you are a man in a heterosexual relationship and your partner earns more than you? This is becoming more and more common. In urban cities, in their 20s, young women earn more than young men. So what does it mean for a man who, they almost always use the same word too when I say, what does a man mean to you? What do you think their answer is? Providing. Bingo. He's a provider. Always. Every guy just like, boom, I get it. And so I say, okay, well, let's just look at the numbers. Right now your partner is making two times what you're making, three times, four times. In one case, 100 times what he was making. I said, so what does that make you? He was at a loss. This is a big challenge that is going to grow and grow because incomes will change, who earns it is going to change. And we're not having those conversations yet. They're showing up on the podcast. They're showing up in private conversations, but we're going to have to really rethink what contribute means, what provider means, even what being a man or a woman means. And I welcome those conversations. I think that the beautiful part is in a relationship, you get to choose what your relationship is. And the only person who it really matters is your partner. If the two of you have a relationship that's working for you, fantastic. That's good on paper. But we are both the shout and the echo. It matters most what our partner thinks. I think that is for sure. But it is going to be the rare person, not that it won't happen and everyone's going to point to the exceptions, but it'll be the rare person that can be mocked and derided by their friends, family, and if you have a social media account, social media. And they do exist and I know some of them and they certainly let it roll off their back. Now, does it get to them? Even though they say no, I'm going to say that it's a problem. You're talking about, for example, a guy who's the lower ear. They stay at home, stay at home. Yeah, they have terms, right? Oh, what are you just a house husband?
Don't believe your own narrative (01:45:17)
Things like that. Okay. So it's like, what do we do about that? I don't even know that it's what we do. It's just it's an acknowledgement. Yeah. People need to understand that you are going to be influenced by what other people say. And so you're going to have to have a strategy for coping with that. Okay. So this couple where she wanted him to pick up the check for dinner and he was like, yeah, okay. But when he tried to pick up the check, she goes, no, I want you to save that money and put it in your Roth IRA. Oh, God. So then, wait, then it gets even better. Yeah. We find out the incomes, they don't live together. They're dating. He has a business. He's starting to pay himself a modest amount. He pays himself $2,000 a month. Okay, great. His expenses are low. He lives with his parents. Guess how much she makes per month. I know the punchline because I've listened to so much. You listened to, okay. She makes $200,000 per month. Okay. She's an entrepreneur as well. So just think about the dynamics that are wrapped up. He was a weld. He is a welder. And the dynamics here of gender expectation, income expectation, relational expectation, you know, we've been together a year, but we're not married. So we actually came up with a strategy just like you said. You have to come up with a strategy that works for the two of you and you have to plan for what's going to happen because we don't live on an island. We live in the world. So in their case, they agreed on how much they want to spend each month going out to dinner. They agreed on how it was going to be distributed. She agreed that some of the dinners would be paid with her money, but she still wanted him to pick up the check when they were at a restaurant. Interesting. That is so fascinating. And guess what? Guess what happened when she was a kid? Guess who picked up the check when her parents went out to dinner? Dad. Dad. And interestingly, in that case, her mom made more than her dad. Wow. Very interesting. I mean, this is crazy, right? These are real people. So I orchestrated. I helped them practice. I said, how are you guys going to get this credit card handed over? Because he's going to have to pay with your credit card. You don't want to have to do it at the restaurant. It might be awkward. They planned it ahead of time when they go to pick each other up. So interesting. Map it out. So some of these rituals seem like crazy, but at least they're being honest. Exactly. Like I love that she's like, I know this is dumb, but I want you to pick up the check. That is so fascinating. Isn't that half of life? We're doing some dumb shit, but we're not even honest about it. If we're going to do dumb stuff, let's at least be honest about it. Hey, I probably don't need to buy this sweater for this price. Does it really cost, is it five times better than the sweater I can get five times cheaper? No, but you know what? I just want to. Okay, fine. I'm being honest about it. It's valuable to me. So fascinating. So my wife went through something interesting with that where when we first got together and I was the only one working, but she loved it that I was paying for dinner or I would buy something. I got to the point where she was making her own money and she was like, I still want you to pay for it. And so I was like, oh, that's fascinating. I'm like, but you've earned half the money. She's like, yeah, I know, but it's still, I just really like it. And then she got to the point where she'd been an entrepreneur for long enough and leading teams and all that where she was like, actually, I want to pay for it myself. And I'm like, that's so interesting. So watching as her internal identity changes, the things that she wants changes and, but you have to communicate that stuff because it was really, I loved that I was the only one working and making money and that I could take care of her. And it was, you know, friction filled.
Importance Of Shared Financial Values In Relationships
Values in a relationship (01:49:10)
We talked about this last time. It was friction filled when she then stepped into an entrepreneurial role and I had to reorient that I didn't have somebody at home taking care of anything anymore. I had a business partner and it was like, okay, that was an interesting transition. It never really meant a lot to me to be like, oh, I'm the one paying for it. So that wasn't, there was no friction when she said it, but I was like, it's so interesting. Did you like when steps two and step three happened when she said, I'm making money, but I still want you to pay. And then the next step where she said, I actually want to pay. If I, it really wasn't big in either direction, but if I had the 5149, I was 51 more into when she was like, would you pay for me? Oh, you like that? Yeah. Because what? I'm a marketing provider and I can actually boil this down and I feel really bad for guys that don't have any physical prowess because my wife is far more petite than I am. And that makes me feel some kind of way like I like that. And so even though we're now completely equal in our earning potential and our contributions to the business and all of that, I still do like have that while I'm bigger and stronger and that makes me feel some kind of way. And I, dude, I get it. People are going to be freaking out, but I'm my whole thing. The epitaph on my tombstone ought to read. You're having a biological experience. And there are just realities to be faced about where we start. It doesn't mean that's where we end up. I'm actually, I have an effeminate personality. And so I'm way more on the female spectrum in terms of traditional temperament. My wife is more on the masking. So it's utterly fascinating to see even in that we break in fairly traditional ways. So that's interesting. So stuff is fascinating. I just like hearing the progression or the change that you and your wife had in terms of something as specific as who picks up the check. I think that's, to me, the magic is in the details. That's always why I always start with a specific example. Where were you eating? What happened? What happened with the car? Because to me, that's where the truth is revealed. When the check comes and the bill gets slid, what happens? And for me, I will say that your values really come into play. I really appreciate financial generosity in my relationship. I'm generous. I like to be generous. I like to pay for my loved ones and all that. But I also like my partner to be generous. And that's a conversation we had. So I guess I just love hearing couples in the way that they navigate money and their values together. It is so specific. It's always different. But the general ideas are very similar. It just makes you feel connected to other people when you can hear that, you know, I'm not the only person who's had this conversation with my partner. You've had it and other people have had it.
It makes you realize we're all human and we're all dealing with money in our own ways. Yeah. And it's so important to pull this stuff into the light to talk about it, to acknowledge whatever weirdness that you have, for whatever reason, you like this thing. Be honest about it. Don't judge yourself or worry about it because that's going to create a problem. All right, man. I think that you're one of the most practical people out there. I love that you are out there putting out content. Where can people engage with you? The podcast, it's called I Will Teach You to Be Rich. You can find it anywhere and pick the episode that looks the juiciest to you. You don't have to start in any particular one. And I think within 10 minutes, you will be hooked. I like it. I agree. Boys and girls, speaking of being hooked, if you haven't already, be sure to subscribe and until next time, my friends, be legendary. Take care. Peace. For more money myths, you must avoid it. Be sure to check out this episode with Jaspreet Singh. No. Before we move on, so this is the part that people need to understand about why the rich get richer. Because I'm super, as a rich guy, I'm like, "Oh, I'm going to get richer?" Great. So what happens? I never understood how.