Ramit Sethi – I Will Teach You to be Rich

Personal-finance icon Ramit Sethi from I Will Teach You to be Rich joins me for an episode of the Financial Independence Podcast!

Ramit first published his New York Times best-selling book, I Will Teach You to be Rich, back in 2009 during the depths of the financial crisis.

He just released the second version of the book today so we discuss how his advice has changed in the last decade.

For a full review of the new version of Ramit’s book, check out this post by my buddy J.D. at Get Rich Slowly

We also talk about FIRE (Financial Independence, Retire Early) – a concept that’s taken the financial world by storm in recent years.

This is the first time Ramit has talked about FIRE so it was great getting his opinions on it, especially since he’s often thought of as being on the opposite end of the financial spectrum (my first podcast guest, Mr. Money Mustache, has even jokingly referred to him as his “arch-rival in personal finance”).

Ramit didn’t hold back (does he ever?) so hope you enjoy this one as much as I did!

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Highlights What Ramit likes about FIRE (and what he doesn’t) When you should pay more instead of less How to cure yourself from extreme frugality Why you need to maximize for value instead of cost How to break out of the spreadsheet and start living life Show Links I Will Teach You to be Rich – Blog | Book Ramit Sethi – Twitter | Instagram Money Dials – Why you spend the way you do Buy It For Life Subreddit Financial Independence Subreddit Build the life you want, then save for it Chris Coulson Fitness Leave a review for the Financial Independence Podcast on iTunes! Full Transcript Mad Fientist: Hey, what’s up everybody? Welcome to the Financial Independence Podcast, the podcast where I get inside the brains of some of the best and brightest in personal finance to find out how they achieved financial independence.

Today’s guest is an absolute icon in the personal finance space. It is Ramit Sethi from I Will Teach You to be Rich.com, and I’ve read Ramit’s stuff for years.

He’s been around for over a decade, he released a New York Times bestselling book, I Will Teach You to be Rich and he’s now just released a brand new version of it, which we’re going to talk about today.

I’m also really looking forward to talking to him about the whole idea of financial independence and early retirement because it’s not really something that he’s written about or talked about a lot. But as I said before, he’s one of the most popular personal finance bloggers there is so I’m really interested to get his take on it and if he sees any problems with it, or if there’s any reason he doesn’t recommend it.

I’m also looking forward to trying to bridge the gap between him and Mr. Money Mustache because I don’t know if you are aware of this but Mr. Money mustache, in his early days, used to call Ramit his “arch-rival in personal finance”. Obviously he was saying in jest, because he did recommend this book and things like that, but I’m looking forward to exploring some of the differences between their advice and trying to find common ground with it because I actually think it is more similar than it is different.

So without further delay, Ramit, thank you so much for being here. I really appreciate it.

Ramit: Oh, I am pumped. Thanks for having me.

Mad Fientist: So first, big congrats on the new version of the book, which is out today. I really can’t believe it’s been 10 years since you originally published it.

Ramit: Me either. I mean, 10 years ago, I started actually writing the book in 2007. And it took me two years I would wake up at six in the morning, I would write for two hours, go to work, come back, write for another hour and go to sleep, which took me two years. And I remember getting stuck for about eight months just on the table of contents just to get the structure right. And Funny enough, that book actually came out March 2009.

Do you know what March 2009 was?

Mad Fientist: That was the depths of the worst financial crisis since the Great Depression. somewhere around there.

Ramit: That’s exactly it. And I didn’t, you know, I don’t believe in market timing. And I remember going around to these local news stations for book tour. And these local news directors looked at me like I was a Martian. And they were like, why are you talking about investment? You know, we have 10% unemployment in this country.

And I looked at them like they were crazy. I’m like, yeah, we should talk about saving. But we should also talk about investing. We have 90% employment. And there are a lot of people who are focused on the long term, even despite what’s going on. And history has proven if you bought the book, March 26 2009 and you simply followed the advice in the book, you are financially set for life. And that makes me very proud.

And so I’m excited to come back out at new pages of material, lots of new stuff I’ve learned over the last decade, and hopefully we get to talk about that stuff today.

Mad Fientist: Yeah, absolutely. And yeah, just finished it and it’s fantastic.

Like you said, there’s a lot of new content, but the core message is still there. And the core of the book, I would say, is still there. That must make you feel pretty amazing because things are so different. And yet, the core of your book still applies just as much as it did back in 2009. How did that feel as you were going through this process of making this new version, and realizing, hey, all this stuff is exactly what I would teach people today.

Ramit: Oh, man, thank you for saying that. That makes me so happy because, you know, I love doing things for the long term. There’s a subreddit called buy it for life. And I love buying the best and then keeping it forever. And whether it be something for my kitchen, or a computer, or whatever the case may be, a car, and I feel the same way about books. My favorite books are not the ones written this year. My favorite books have been written 20, 30, 50 years ago.

And when I wrote this book, I wanted it to be timeless. And good investment advice should not change, its long term.

There are some new perspectives that can be offered but low cost long-term investing works, automation works. And I wanted to write it once, spend a ton of time, years and years, writing it and getting it right and then never have to touch it again.

What’s interesting is that my publisher kept on saying, Hey, come on, update it. And I was like, update what, you know, this thing is 98% correct, except for some changing interest rates and bank accounts.

And they had a really good point. And this one surprised me and eluded me for about eight years. They said, people want freshness. And I was like, that’s dumb. Why should they want freshness? This is the book you need. Do this and your life will change. And what happened was every day I would get three or four emails saying, Hey, is your book still applicable today? You know, a lot of things have changed. And I probably went like three or four years just dismissing those emails.

But what I finally learned is, guess what…it doesn’t matter what my view on the world is it matters what other people’s is. And it’s true people want freshness. If you haven’t bought a book on money, you don’t understand that core investment advice doesn’t change. And people are like, what about robo advisors? What about FIRE? And so it occurred to me finally, after the publishers pushed me and pushed me it is time to update it. And I had been tracking all the things I wanted to say, over time. And so I had a chance to go back, keep the majority of this stuff the same, but add quite a bit more psychology, insights on relationships, love and money, and share the stories of people who use the book to create their rich life.

Mad Fientist: Yeah, absolutely. At first, I was gonna ask you, is the real reason you did a new version just so you could troll the crypto people in, in print?

Ramit: Well, listen, it’s it’s not trolling. It’s not trolling. If I’m right. You know, these, these lunatics who came to me…

Let me just tell you about these crypto people…

Oh Ramit, you need to do crypto, it’s up to 3,000%.

And then I’m like, hey, that’s cool. If that’s you know, part of your 5% to 10% of discretionary investment, you want to put it in something fun, you want to put in a bar in Brooklyn or crypto, be my guest.

Oh, 5% to 10% You’re such a luddite. Who’s satisfied with 8% returns in the market? I’m talking 3,000% You’re so stupid Ramit.

Now these people have disappeared. Now, instead of their LinkedIn profile, saying Bitcoin expert, it, of course, inevitably has changed. Now they’re a CBD expert. You know, these people jump from one side to another.

And I don’t mind if you take your discretionary investment money and put it in something crazy. I’ve done angel investments, most of them fail. But I know that I’m not here saying Bitcoin is you know, it’s going to be a totally new way to transfer all this stuff. And it’s going to revolutionize and then then you change your story from that to, Oh, that’s not actually working, it’s actually going to be something totally different. And they’re the models, stones and yardstick of what successes changes. Eventually, it was an investment and then when that tanked now they’re not talking about it anymore. Right now, it’s blockchain. I got nothing against blockchain. And I have nothing against Bitcoin, if you want to put your fund money in it. But please don’t go around telling long term investors that this is the new revolution. Those people are all gone now.

Mad Fientist: Right? Yeah. And you said you mentioned your fun money is like something around five or 10% of your portfolio? Is that right?

Ramit: Yeah. And that’s another thing, I would always ask these these Bitcoin people. Hey, you invested in Bitcoin? Great. I always have one question. What does the rest of your portfolio look like? And they looked at me, like I was speaking alien language, they’re like portfolio. They don’t, they don’t have a portfolio. They just took their money, and put it all in this thing that they heard about on the news, or on Reddit, called Bitcoin. So yes, I do think take 5 or 10%. Or if you really aggressive, you can even go a little bit more, but have a plan so that you know where the boundaries of your fun money are.

Mad Fientist: Yeah, that’s great advice. And yeah, you obviously talk about other things that aren’t crypto…The new things like you mentioned, robo advisors. But you also talk about FIRE, which, obviously, the acronym didn’t really exist back in 2009. But obviously, the whole idea of this is gaining mainstream recently over the last couple years, especially. So I would really love to one know your thoughts about it. But what problems do you see with it because Mr. Money Mustache back in the day would call you his arch rival of personal finance, which he’s obviously just saying that in jest, because he respects you and he recommends a lot of your things, including your book. But it was always like a joke that you were sort of two ends of a spectrum. And I actually think you’re, you’re pretty similar in your messaging. It’s just a slight differences. So I’d be really interested to hear your thoughts on this FIRE thing that’s sort of grown exponentially recently. And if you find any sort of faults with it,

Ramit: Okay, I’m excited, because this is the first time I’ve really talked about FIRE. And I think you’re, you’re the perfect guy to talk about, I’ve listened to a lot of your episodes and your story as well. And I know your listeners are pretty savvy.

So I actually think there’s quite a bit about FIRE that I really like. But I definitely think that there are some issues with it that are not as candidly discussed, as I would like.

First of all, anything that gets Americans to save more money, I’m all for. And what I love about FIRE is they took this typical standard financial advice of saving 10 to 20% and they just laughed at it. And they said 10 to 20%, how about 70%. And I love whenever someone takes you to a whole new level you didn’t even know was possible.

So suddenly, you know, we’ve all read the comments on any one of these major national news pieces, they feature some couple who’s FIRE and the comments are all like in total disbelief. Oh, that’s ridiculous. 70%, they must have been given an inheritance. And then the couple very nicely explained, no, actually, we live very modestly, and we’re very conscious about our spending, and then everyone else is in disbelief. But you know, deep down, there are a few people who are reading that saying like, wait a minute, if they did it, maybe we could do it. And it’s no surprise that this is really swept the nation as a movement. And it’s become bigger than any one person.

So I think we have to credit Mr. Money Mustache, and many other, Early Retirement Extreme, many people for really leading the way and just shattering through the ceiling of what Americans thought was possible and most of them didn’t even do that.

So I have to say, I love that. Anything that gets us to save more, I’m all for. And you know, I’m a very avid reader of financial independence, fat FIRE, different FIRE blogs, and you know, any major national press article that goes out on fire, I’m reading it, and I love the comments. I love the disbelief like oh, that’s it possible? No, it’s not impossible, you just haven’t done it. And so I’m a huge fan of all of that when it comes to fire.

Mad Fientist: But…

Ramit: But there are a few issues.

Yeah, let’s get into this.

Alright. So my mixed feelings about FIRE are…

If you are super clear about your goals, and you decide that, hey, I really don’t need to spend on X, Y, or Z, and I’m going to go for a 40, 50, 60, 70% savings rate, God bless. I’m all for it. In fact, I have a whole concept called conscious spending. And from my own life, I will tell you that I am extremely frugal in certain areas of my life.

So I’m going to give you a couple examples because I think that there’s a misconception that I just like overspend on everything. Oh Ramit, that crazy guy. He just spent thousands on everything. You know, he’s so crazy.

And actually, I was raised by immigrant parents. We hardly ever ate out when we did it was once every four to six weeks when we had a coupon. And our vacations involved us driving to family, and like my mom would pack lunches for us. So I get what that’s about. And it’s funny now, you know, my wife was making fun of me because I run my entire business on a MacBook Air, which apparently sounds like an airplane landing because the fan is just like going crazy, 24/7. And she’s like, why don’t you get a new computer. And I was just like, I don’t know, this computer works, it’s fine. And I had to look at it install something. So I had to find out what version I had. And I moved my mouse up to the Apple on the top left, and I realized my computer is seven years old. Right? Like what so I bought the best computer at the time. And I just keep it until the thing stops working. So I get that.

However, if you go into subreddits like the financial independence subreddit, you could look at the top 20 posts right now and you will see people using words like depressed, guilty, anxious, miserable, prison. These are not the healthy words of someone who’s being strategic and conscious about their spending. There’s something else going on with some people. Now I’m not saying all. But I’m saying that when you start to see those words, over and over, and I’ve been reading this subreddit, and many other FIRE sites for years, then you start to say like, “Hey, what’s really going on here?” And I think, you know, all of us have read that classic post, “I built my savings, but I never built my life”. And there’s a lot of that going around in FIRE.

So what I’m saying here, I just want to be really clear, I think there’s nuance. It’s not like saving 70% is impossible. You could do it if you want or 50%, whatever the number is, if you truly want to. But I would also push and say why?

If your dream is to simply quit your job. What happens then? And you look at the answers in the subreddit, or look at the answers on blogs, most people their answer is, “I just want to sleep.” That’s not a healthy response to what you want for the next 45 years of your life. Let’s get honest.

Oh, I just want to rest and not have to go to work. Okay, well, then you see someone I can already tell you the thread. Someone goes well, out of curiosity, why don’t you try to potentially like get a new job? I mean, you say you hate your boss, you hate wearing a suit, you hate having to commute? Have you ever possibly maybe somehow considered trying to get a new job that you like? “Oh, no, I would never do that. Work sucks.”

How do you know, you never tried.

So if you want if you want to quit your job, fine. But it’s a bit of a it’s a bit disingenuous to say that I want to build my entire life to do this one crescendo this moment of retirement early. And then I have no plans afterwards. That’s where you start getting into danger.

Mad Fientist: Yeah, absolutely. And I think you’re the perfect guy to sort of help figure out how to get a healthier relationship with money. You talk about this in the book, you say living in the spreadsheet, and that’s like being obsessed with the game without realizing while you’re playing it. And I think that is a problem. That was definitely a problem on my journey to find it independence, I was just so obsessed with that end goal. But it also, this is a good time to bring up something that you call money dials, and I’ll link to your article on that in the show notes.

Ramit: So money dials are the things that you intuitively and naturally love to spend money on.

Every one of us has at least one money dial. And the way that you can find out your money dial is by simply looking at your spending for the last 30 days.

Every one of us has something that when you talk about spending on this, your eyes light up, you just love it. In fact, there’s seemingly no amount you will not spend on this. And I’ll give you an example…

There’s about 10, you can just google money dials, but some of them are travel, some of them are relationships. A very common one is health and fitness. You see this with people who have a personal trainer or go to a Soul Cycle class.

Mine is a relatively rare one of convenience. So I have spent a truly gigantic amount engineering my life to be convenient. You know, I wake up, my calendar is fully flowed out. Food is ready. My plants are watered when I travel like everything is dialed in completely. I love that.

Now I know I sound like a lunatic to anyone listening. They’re like this guy’s a psycho. You know, he’s gonna he’s going to skin me alive and wear my skin like a raincoat. I get it. That’s a weird one. But there are some common ones, right? There’s self improvement. A lot of people are like, I will spend anything on taking courses and classes.

Now the reason I call money dials is very important. Most people when they think about the thing they love, they have they spend on it, and they’re happy with it. But imagine if like a stereo dial, you turn that number up. So for example, let’s say that you love convenience, and you decide you want to turn that money dial up, what if you doubled how much you spent or tripled or 10x it. For convenience, you might go from, you know, having somebody come over and clean your apartment once a month to having someone come over once a week, you might have a full time personal assistant, you might have someone scheduling all your travel for you instead of you travel hacking it.

Same with health and fitness, you might hire a personal trainer, see that trainer four times a week, join multiple gyms. The reason that I love this concept is that I want people to dream bigger about the things that they love. And I want them to spend extravagantly on that, as long as they cut costs mercilessly on the things they don’t. So when you get clear, like oh my god, I never thought of actually spending more on the thing I love. Well, in order to do that, I need to cut back on some of the things I don’t. And that is the core of conscious spending.

Mad Fientist: Great. And I’m gonna take the other side just for a little bit. I think there’s also more happiness, sometimes when you limit the amount that you do it. So just to give you an example, I ended up working for two extra years after I hit my FI number. And that second year I I said to myself, you know, I’ve been really good with money my whole life, I’ve always, you know, been super conscious about it and this year, I’m just going to relax a little bit, I’m not going to stress about every little expense, I’m gonna, you know, just do what we want to do. And we ended up traveling for three months, we went all the way around the world, then we moved to Edinburgh, and we wanted to experience all the restaurants so we were going out to eat every you know, every other night or something, which is a lot more than we did in the past.

And at the end of the year one, we realized we didn’t spend hardly anything more than we normally do, which you know, lends some support to your latte argument, which I didn’t understand the first time I read your book because I was like No, well, if I save on lattes, I’ll just be able to, you know, reach FI even quicker. But seeing that year, that didn’t really make a big impact on the bottom line at the end of the year. So that was the one thing but also second, we realized it made us like traveling less, because we didn’t have a bunch of time to plan and look forward to it and you know, start getting excited about because we were just on the road the whole time. So then we’re like, oh, it’s another temple or it’s another church. It’s like, who cares? It was more of a hassle than anything. And then same with eating out. We’re just like, we felt less healthy. And we, you know, didn’t enjoy the experience as much because it wasn’t special. So what would you say to that side of the argument?

Ramit: Well, I think this is a great, I love this.

First off, it’s very counterintuitive, but I’ve always said, you know, buy as many lattes as you want, right?

Saving $3 on a latte is not going to change your financial situation in a material way, it would be better that you focus on the 5 to 10 big wins in life and nail those. And you can buy as many lattes and appetizers as you want if you get the big wins, right.

So those things are things like getting a great job and negotiating your salary. automating your investments, and making sure that they’re low cost, and getting your credit score optimized, if you ever decide to buy a house, etc.

Those things matter way more than the daily requirement of making a decision to stop doing something that deep down you actually want to do. I mean, if you want to buy a coffee, buying coffee, the irony is that I actually make my own coffee. But I’ll buy it once in a while if I’m out for a meeting. And so I think that people treat themselves like they’re robots like they will make these very rational decisions every day of their life. And they do that while sitting in a spreadsheet. And then they go out into the real world. And they desperately try to resist what is out there what they genuinely want to do.

There’s nothing wrong with wanting to buy a cup of coffee, or wanting to buy a really nice jacket. There’s nothing wrong with it. And sometimes I think in the FIRE community, there’s this moral judgment about if you want to buy something nice, you are morally weak.

I disagree with that.

I would say instead, get honest about what you want. And you need to save and invest and automate so that you’re able to do it. But I would actually like to encourage you, once you’ve put all that apparatus in place to actually dream bigger.

You want that coat? How about one that’s even nicer?

You want to take that trip for two weeks, how about four weeks?

So that’s what I want people to do is to live their rich life. Once you are able to do that, you might discover that certain things you thought were really appealing to you actually are not.

In my life, I make my coffee most days.

My wife and I hardly ever eat out, maybe once every month, every four to six weeks, we eat and we live in New York City.

And on the other hand, when we travel, we travel for a long time.

And you know, there are certain things that we spend a lot on and we’re unapologetic about it. So that’s the first thing. The second point you made is also a really good point, I really like it. I do think that there is beauty and there is value in restraint. And I want to give you a couple of examples from my own life.

I moved into an apartment in New York, I rent I rent by choice, you know, I’ve always said real estate is not the best investment that you can make, you need to run the numbers. A lot of people hate me because I say that. And you know, they use the same old things. What about to tax deduction, whatever, we can talk about that.

So, I rented this apartment 10 years ago, I’m in the same apartment. Now my net worth has increased in 10 years. But I stayed in the same place because it continues to provide value for me. I like it. I like the service. I like the views. I like the space. Good. And so I think there’s value in restraint. Could I have upgraded? Of course, I could have upgraded my computer, yes. But those things are valuable to me. So I think a lot of FIRE people are really good at this, they nail this, which is let me decide what’s not important to me. I think they are on top of that, and probably the best in the world. I think the challenge I would make to FIRE adherents is okay, you’ve really nailed what’s not important to you. Now let’s talk about what is important to you. That’s the challenge that I would ask people to think about.

Mad Fientist: Absolutely. And maybe you can help me with that. Because I am still, like I said, I’m a very naturally frugal person. I hate waste. I hate inefficiencies. So I sort of like obsess about making sure it’s like the most efficient way to get somewhere, spend money, or the most efficient use of money and things like that.

Ramit: Yeah, let’s do it. I love this. So you already said some a couple of things that caught my attention. Okay. So first off, we’re working on an addition to the book, which where we’ve got a new course coming out called Wealth Triggers. And this is about the psychology of the wealthy. What do they do? And how do they think differently than everyone else. And you just said something super interesting. You hate waste. Tell me about that.

Mad Fientist: Say my wife and I are going out for the day. And we’re gonna hit up these five spots. In my head, I’ve planned out the exact route we’re going to take because I know the best way to get here the things we can do along the way and stop. And I feel sorry for her because she’ll like throw, she’ll be like, Oh, actually, I want to do this today, too. And she’ll throw that in the mix when we’re already out and about and she can tell my brain is exploding.

But she doesn’t know why. Because why would she know why? Why would she know that? I’ve already planned this whole thing out. And this is the most efficient way to do it. And she has no idea. But now at least we’ve been together for 17 years or something already. So now she can see that my brain is exploding so she now can ask me.

But it’s it’s stupid things like that. So with money, it’s even worse. Like, I searched for flights for way too long for the amount I save on them and all these sorts of things. So that gives you a sort of an idea, but it’s probably way worse.

Ramit: I love this. And by the way, I feel like 90% of people who are in FIRE will resonate.

Mad Fientist: Oh, absolutely. Yeah.

Ramit: So when you think about someone like you, and just like picture them sitting at their computer, they’re like they got 75 tabs open, you know, researching Google Maps, and like some flight options with 10,000 different flight permutations. Like, what do you see that person looking like?

So let me just break it down. First of all, the posture of this person sitting at the computer is like super rigid, just like when your wife says to you, “Hey, why don’t we try like going down this alleyway?” And you’re just like, ah, ok, I can see your body right now. You’re just like, You look like you’ve been struck by lightning. You just frozen? Okay. And and so that’s number one. And number two, how about this? So what if you paid $100 for a flight? And then, and then I told you, Hey, I took that exact same flight, and I only paid 75. How would you feel?

Mad Fientist: Oh, I would know it because I still track the flights after I buy them.

Honestly

Ramit: You are amazing. Okay. Okay. So I love this. So one thing that’s really cool is you just own it, you’re like, Look, this is this is what I am. And this is I realized this is an issue. Do you think this is genuinely a problem?

Mad Fientist: It is becoming less of a problem now that I’m relaxing more. It’s it is going slowly. But that’s only because you know, I’ve saved more than I expect, to. So I’m finally relaxed in that aspect. But yes, I still think it’s a problem. And it’s one that I’m working on, which is why I was super pumped to talk to you, because I figured if anybody can help me it’s going to be Ramit.

Ramit: Okay. Well, I can definitely help you. And the reason I asked that question is that most people who do this don’t think it’s a problem. They literally go, they don’t understand this whole conversation we’re having right now.

In fact, they probably stop listening to this podcast. Like, what’s the problem? Of course, I’m going to save money, like, what is this guy talking about?

Well, let me give you a quote that might strike you as a little different. There’s a famous marketer named Dan Kennedy. And he says, Why pay less when you can pay more?

Mad Fientist: Why?

Ramit: Everyone on this podcast is like, what is this guy talking about? Let me tell you, there are things in life, where it actually makes a lot of sense to pay more.

And what you have optimized for is the cost, the cost of a flight, the cost of walking from one block to the other, you have maximized for that. And that’s fine. That’s very analytical, you’re living in the spreadsheet, you’re living in Google Maps, that’s fine.

But then you get somebody like your wife, who’s like, hey, let’s go down this little alleyway. And maybe there’s a bistro down there. And she doesn’t understand why you don’t want to do it, you got the whole day free. But in your head, you’re like, you can literally see the Google Maps screen. And it’s not leading you that way. Right? It’s like we’re supposed to go left not right. What happened is you optimize for cost, but you never thought of putting on a different set of glasses, which instead of the lens of cost, instead optimize for value.

And so when Dan Kennedy says, Why pay less when you can pay more, it’s talking about sometimes it actually makes sense to spend more, more time, more money, more resources, and all of this will come together talking about your fear of waste, okay.

As I have become more successful, I have realized that you have to waste money as you get more successful. Now, I’m not saying you should actively go out and just throw dollar bills out the window and light them on fire. That’s not what I’m saying at all.

What I am saying is that I had a co worker who had gotten a contract for us to do some Instagram videos, you know, I think we paid I don’t know, 1000 bucks for 10 videos or something like that. And they sent me one video, and I decided at the last minute not to use it.

Okay, now, this coworker was a little bit like surprised maybe even upset. Hey, you know, it’s okay, if we don’t choose to use that. But that cost us like 20 bucks or 100 bucks. In my mind, that is the cost of doing business, that sometimes we’re going to pay for something and it’s not going to work out. And what I would encourage everyone to do is to remember that cost matters, you need to manage your costs, and you need to have all that tracked. But there’s a whole other lens on life, which is value. And so the value for you and your wife being spontaneous instead, do you think that’s worth more than, you know, saving 10 minutes on your optimized Google Maps route?

Mad Fientist: Absolutely.

And that, yeah, that’s actually really good to try to keep in mind because I would not have even sort of thought that. I would be so in my head, like trying to reroute or whatever, that I wouldn’t even think…You know what, she wants to do this and she’s going to be happy. Who knows what will happen? And I do I do enjoy those types of moments. But I would have never thought of that in that situation. But yeah, if if I can just reframe it as just focusing more on value and not efficiency, and I would be a lot happier.

Ramit: I want to give you one more example. Because it’s easy for us to put someone else first, like this was an easy layup because it’s your wife. So you know, you want to make her happy.

Okay, fine. I think what FIRE people find more challenging is to actually focus that on themselves, and to say, Hey, you know what, I’m just going to pick the first flight that shows up in the search bar. Right? Why would you do that when you could spend an extra 10 minutes and save, you know, 200, or 20 bucks or whatever.

And so what I would challenge people to do is to realize that you can save cost, but what are you losing? While you are optimizing for an extra two or three or $4? And a lot of times, the truth is, most people don’t know what else they would do with their free time. So they say like, hey, it’s either spend 20 minutes optimizing and saving 20 bucks, or I’m just literally going to like, stare at a wall or turn on Netflix.

Yeah, well, that’s sort of a larger issue, which I’ve mentioned about FIRE. If you don’t have anything else going on, then of course you’re going to fall into this rigid spreadsheet driven life, because it provides control and safety for you.

You know, your your spreadsheets are never going to turn their back on you. Your spreadsheets always going to speak logic to you.

But sometimes the most valuable things in life are not simply in the spreadsheet.

I actually think that the most valuable things in life are living outside of the spreadsheet. It’s you saying yes to your wife, maybe even saying to your wife, hey, we’re going to be totally spontaneous today. Who knows what’s going to happen where we’re just going to do it, and I don’t care how much it costs time or money.

Maybe it’s one of the listeners today saying you know what, like, I deep down I really love whatever their hobby is, okay, bowling, and I only go bowling during matinee times. I happen to know bowling because I grew up in suburbia. So I know there are certain times we used to go to save money, Monday nights. You know what, I love it. I’m going to go on a Friday night when it’s full price just cuz I love it. And I’m going to take my own shackles off. Wouldn’t that be amazing?

Here’s one last example. We went on a long honeymoon, when we we got married last year. And one of the hotels we stayed at is a hotel where they they tell us you know, when you’re here, we want you to be treated like family. And I had a chance to sit down with the manager. And I really asked him like, Can you walk me through the guest experience? How do you think about because it is so so well done? And he told me this thing about we treat you like family. And I was like, that’s cool. Like, can you give me an example? He said, think about it. When you are eating with family, would you ever be given a bill to sign? And I said no. He said that’s the same here, you are never signing anything when you are on property. And I said, Well, that’s the first of all, that’s amazing. Like we get up from dinner and we just go back to our room and we don’t have to sign anything they just know. Now, he said, you might think that it might cause conflicts because when they check out they go over the bill. And he said once in a while a guest does bring up something or try to argue the bill. And we almost always credit them for it. So there is a tiny cost to us. But think about the value for the guests who come in and don’t even have to think about signing. That, to me is one of the quintessential differences between cost and value. Yes, they may lose a little bit, but the value they gain is so much more.

Mad Fientist: That’s a great example.

And yeah, I’d like to talk a little bit more about conscious spending before we move on. Because I think I think that’s exactly you know, what the FIRE community tries to do. They try to be conscious about their spending and only spend on things that are important to them.

And to go back to the money dials. Before I hit FI, travel and freedom were the two and I didn’t spend that much on travel because I was good at travel hacking and freedom I spent everything on because I just tried to plow as much as into my savings as I can so that I could hit FI.

Now I seem to be more focused on self improvement and relationships. And I am getting better at spending on those things. Like I just came back from America, I went and saw a family and friends went to concerts with my friends and I booked a festival, it was like a conference that I was really interested in for the self improvement thing. And it was very expensive. And it was a ridiculous trip because we’re going to be back there next month seeing family and I felt absolutely insane to do it.

Ramit: But wait a minute, did you just increase the number of years you’re going to have to work by 28 years? How does that feel to you know?

Mad Fientist: It did nothing. It was not really a big thing. And it’s not even going to really affect anything because, like I said, I worked longer than I thought so I have the money to spend on stuff like that.

But I had to have my wife convince me to do that. Because I was like now this is crazy. I can’t do that. But I did it. So I’m feeling like I’m making progress. And I’m sure you’ve had, you know, lots of readers chime in and, talk about their conscious spending. Are there any like really good examples, to show how people actually consciously spend more on the things that are important to them?

Ramit: Completely. I’m so glad you asked this.

So at the beginning of the book, in fact, the first two pages, I had to really fight the publishers to do this, I’m so glad that I did. I wanted to show people what a rich life can be. And I wanted to show a visual because I think a lot of people think rich looks a certain way, you know, and I wanted to show people that young/old, black/white, men/women, it’s so diverse. And one example right in the front of the book is a guy who wrote me saying he used my book, the material, and I will teach you to be rich, and he and his wife retired at 35 and 36. And they have decided to road trip around the United States in an RV.

Now what I love about this is that’s totally not my rich life at all. That is not my dream, I if I had unlimited funds, I wouldn’t do that. But it’s his. And what I have come to change my view on is a rich life can be different for you and me and all of your listeners, but also how you get there can be different.

So some people might want to push their savings rate to 40%, or 50% or more. And some people might want to just earn a ton more money and start a business like a lot of my readers do or negotiate a $25,000 raise, which is also very possible.

I would say that when it comes to how you get there, I actually think you can save too much. And I think this is something that’s not talked about in FIRE. There’s a steeply diminishing curve of what happens when you save, you know, let’s say from 35%, to 40 to 60. And above 60%. Lifestyle definitely changes. And what happens is ironically, for FIRE people who are so good at controlling costs, they forget to examine the cost of their savings rate. If you’re saving 70%, you are costing yourself opportunities, and you’re just simply not focusing on the cost of that thing.

So you know, would you be better off spending, you know, 50 bucks a month doing something you loved? Or would you know, would you be better off going out saying yes to your co workers inviting you to lunch? If you don’t care about those things, that’s fine. But whenever I hear someone saying, you know, I’m saving 70%, I start to say, wait a second, let’s take a look at the lifestyle here. Because you can save too much, you can invest too much. But of course most Americans save too little and invest too little.

Mad Fientist: Right, that was one of my questions, actually. Because I thought that could be potentially a way for me to relax even more is to say, Okay, this is my normal savings rate, maybe decrease that by 5%, which will obviously make me spend more than I would have otherwise. And then maybe that could sort of just, you know, let me do some of these things and be like, Well, I have to spend it anyway. So I might as well put it to good use and, and do this conference. And maybe then it wouldn’t have been like such a big ordeal to get to that decision in the first place.

Ramit: Well, why not even instrument it further. So I’m a big systems guy. You know, chapter five of my book is all about automating your money, and how to use psychology and systems to automate your money.

Just as an example, I spend less than an hour a month on my money. And if you want to cause yourself to change the way you spend money, why not create a sub savings account called fun money and create a rule for yourself, the rule might be something like this, it might be every month, I’m putting in 100 bucks, and by the 30th of the month, I have to use it, you got to find a way to use it. And if you don’t, you got to throw it outside the window.

Guess what, every single FIRE person is going to find a way to use that money. The thing is, you’re building a muscle that you haven’t built before. So guess what, it’s going to take some time to build that serendipity muscle, maybe a lot of people actually don’t know what they want to do. That’s fine. And that’s just a matter of self discovery. So I would say like go even further, don’t just cut your savings rate, but actually focus in on what you want to do and build a system around that.

Mad Fientist: All right, absolutely. Yeah, I’m glad you brought up systems too, because that’s part of the book that I really enjoy. And once you automate your finances especially, it’s just like, that’s the best thing you could possibly do is just get that all automated and take your brain out of it. Because your brain’s trying to sabotage what you’re actually wanting to do.

Ramit: Totally, most Americans brains are sabotaging them to you know, trade frequently, and to spend a ton of money. I think if you’re hardcore FIRE, your brain is equally trying to sabotage you, but in a different way. It’s trying to draw you back into your Excel model to play you know, some Monte Carlo simulation, and to change your savings rate from this to that plus 1%.

And you got to step outside the spreadsheet, right? Your plan is your plan, you already optimized it move on the rest of your work now is like that book, “What got you here won’t get you there”. You already did the hard work, you built the plan, you have your money being automatically sent over. Now turn the page, you got a new chapter, I’m going to go find some hobbies, I’m going to discover what I love to do. That’s very different than staying in the spreadsheet.

Mad Fientist: Yeah, absolutely.

And, obviously I want to move on to some other things. But there’s one more thing that I wanted to get your opinion on, because it’s something I’ve been thinking about recently that I haven’t written about yet, but I’m sort of just you know, thinking about the idea a lot before I do.

It’s the concept of sort of like staying in your lane.

So I grew up in middle class, not rich in any way. But I’d never felt like we needed anything. And my parents are divorced. So my mom was raising us. So I’m sure she didn’t have a lot of extra money. But you know, she made it seem like we were always fine.

And so I’m a middle class guy. And I think maybe when is it when people get in trouble is that when they’re trying to go up to the next sort of bracket.

Obviously, if you’re don’t have any money in your you grew up poor, then getting to that next bracket is going to be life changing. But getting from middle class to upper middle class or beyond. It seems like that’s when the spending can get out of control. Whereas if people were just content with staying in their lane, they could live the most extravagant middle class life, and be so much happier than sort of getting to that next level.

Do you agree with that? And do you have any thoughts on if that’s something to stay focused on, as you you know, have more wealth than maybe you expected to have?

Ramit: Well, I, I’ve come from a similar situation. You know, like I said, my parents middle class, my dad worked, my mom was home with us. Andhaving been fortunate with my business, and with my investments, and also a lot of luck. I think that’s definitely a part that’s played a role. I’ve had to really re think the way that I approach money in life, I have to say, I think what you say is potentially true.

Like if you wanted to stay in a middle class life and just live very well in that middle class life, you absolutely could.

But I think that there’s, it’s perfectly fine to say you know what, I actually do want to live in a beach house in Malibu, or I actually do want to, you know, travel for a month and a half every year. I think that’s perfectly fine.

What I think is important here is deciding what do you like, what is important? And like, what are the true costs of those things?

I think that most Americans, you know, they simply spend mindlessly to keep up with the Joneses. But if you if you know your savings rate, and if you have like a target date fund, you’re ahead of 95% of people.

So I would say that don’t be afraid to try certain new things. And this, this raises something I’ve been wanting to talk about for a long time. I see in the frugality circles, this idea that if I had a million dollars, I would never do that I would never eat at that restaurant, or I would never fly business class.

And I have to say, How do you know what you would do? Because guess what your values do change over time and with more money, and they should.

So the idea of the hedonic treadmill is most people’s responses, oh my god, we need to not move up on the hedonic treadmill. My answer is you’re naturally going to move up, accept it, and plan for it don’t deny it.

So guess what, if you have a million dollars, it’s not going to make sense to cut coupons anymore. It just doesn’t. It doesn’t make financial sense. Brian Tracy, this famous self self development guy said, the more successful I became, the less I became able to afford certain things. Why? Because he was making so much he would rather spend time with his daughter than mow the lawn. That’s perfectly rational. So when somebody says, oh, if I had that much money, I would never do it. Ultimately, to me, there’s a lot of fear in that statement. fear that, oh, if I try eating at this nice restaurant once, that I’m actually going to like it so much that I know trip and fall over and have to go there every single day of my life.

Guys, trust yourself, you can eat at a really nice restaurant once a year for your anniversary, and not end up becoming addicted to that place. Like trust yourself, have some confidence. And I think that it’s okay to try these things. Because guess what you might discover you love it. And if you do, again, have the confidence to know that you can earn more, you can adjust your system you can cut back on other things. Truly Go for it.

And guess what, most of the time you don’t like it, like I’ve eaten it nice restaurants, fine. It’s fine once in a while, but I hardly ever go there. So but I like knowing that I tried it, I gave it a fair shake. I enjoyed the experience. And that’s cool. Like, I have total confidence in myself that I can go in or go out. And that’s fine.

Mad Fientist: I couldn’t agree more actually, I think trying things out is is an amazing way to do it. And I think maybe where some people get into trouble is they commit themselves to this big decision before trying it out, like buying a huge yacht and think you’re going to sail around the world and selling their house to get the yacht and then they don’t like it. But if you can try in low risk, low cost ways, then why not?

Ramit: Rent it or, you know, if you’re thinking of getting a trainer, that perfect example, because, you know, the common thing is like, why would I pay for a personal trainer, I can get all the workouts on YouTube. That’s true. So why is it that I’ve paid for a personal trainer to go four times a week for the last almost eight to 10 years?

Mad Fientist: Motivation, coaching, encouragement? Yeah, there’s there’s lots of benefits that people probably don’t think about when they just think about the upfront cost.

Ramit: The cost, but the value is tremendous, right?

Mad Fientist: Absolutely.

Ramit: And so I would say like, again, rethinking your perspective of this idea, a lot of people feel comfortable, saying, if I made more money stay exactly the same. That’s not the way it’s supposed to work. When you make more money, you will and you should change you’re spending. Now you can save way more, the more I have made, the more I’ve saved, I have a high savings rate. And when my wife and I sat down to talk about money, that was one of the first things I said, I said, Look, I’m super, super, super flexible on most things with money. One thing that’s important to me, though, is that we have a savings rate of between this and that. And as long as we’re doing that, I’m good. Like I’m good with everything, because that means we’re really nailing it.

So, really thinking about if your earnings went up, like went up significantly, a lot of the courses I teach teach you how to start a business or negotiate a salary, and a lot of people grow their earnings in some cases, $250,000 What would you do? It probably should not look exactly the way it does today.

Mad Fientist: You mentioned personal trainer, which will allow me to quote one of your best lines in the book, in my opinion.

You say you were “six feet and 127 pounds into your mid 20s, looking like a hairy Indian Gumby”.

So you’ve obviously been able to gain a lot of muscle mass over the years because you’re not a skinny, hairy Indian Gumby anymore,

Ramit: Just hairy

Mad Fientist: So I’d like to ask you, if you found any particular sort of diet that has been good for that, because I’m I think I’m a similar age to you. I’m 37. I’ve been working out consistently for the last two and half years, I definitely see a lot of really good improvements, a lot of definition and stuff that I’m happy with. But also, I still feel like I’m on the skinny end of the spectrum. But I am older. So I don’t want to sort of do anything that’s going to get the balances the other way. And then I’ll be in my 40s and not able to deal with it. So any recommendations on that?

Ramit: Totally. Well, you know what, it’s so funny. I love, love, love talking about fitness and health. Because if I had followed my traditional life path, I would never have done this. And so I’m actually more proud of the fitness journey that I’ve taken. Then, like the career journey, like I was, I was raised, my parents are educated, they taught me well, I went to a good school, I felt confident that I would get a good job.

So that was like, Okay, fine. But you know, I should be this skinny Indian dude wearing an oversized extra large shirt. That’s where life should have taken me. And I really had to fight my way out of that. So I think a lot of people listening can hopefully resonate with something that, you know, if you had just followed your traditional life path, you would have been doing it but you had to move heaven and earth to change it.

So for me, just being like skinny and not knowing how to eat was a huge thing. And then I finally got the courage up to ask one of my friends. And they started taking me to the gym and showing me some stuff. And you know, workouts and a little bit of eating stuff. And it turned out that a lot of the stories I had told myself, were not true. I had told myself I have a fast metabolism. No, I don’t, I just didn’t eat a lot. And he’s like, track what you eat.

Turns out that most people are chronically horrible at tracking what they eat, they either overeat dramatically, or they under if you’re skinny dude. And if you track it for seven days, and you actually use like a food scale, you will be absolutely blown away.

I think that the number one surprise in life for people is tracking their food for a week. The number two is tracking their money. Food, though, is by far bigger.

So then I moved to New York, and it took me four months to get the courage to walk across the street into a gym and ask for a trainer for months. And I had the money, it wasn’t the money problem. It was just this, this concept of like, well, if I go there and ask, then that means I’m going to have to do this. And it was easier to just ignore it. And I was nervous. Would he looked at me and laugh?

And I walked in and I met a trainer and the first trader I met, I just signed up with him, you know, just like, didn’t know, I was like whatever and I, I put myself in his hands. He’s like, you’re going to do this and this, and you’re gonna have to do that I was like, I’ll do whatever you want. He goes, it’s going to take at least a year to hit your goals. I was like, I’ll be here as long as I need to. I stayed with that trainer for about seven or eight years, and three times a week eventually for and what happened was about halfway through, I was gaining strength, and I was looking a little better.

But I was on Instagram. And I would look at these guys who were like super ripped. And I was like how come I don’t look like that? You know, I trained hard, how come I don’t look like that. And I think that at its core, there was two things I want. One was vanity, you don’t want to look like that. And two was the craft. I wanted to know how to crack the code of this. So I took a real honest look at what I was eating. And the fact of the matter is I was training. I was training, okay, pretty hard. But my food was horrible. I was ordering seamless delivery every day.

So I then learned how to eat better. And from an eating perspective, I’ve gone through a lot of bodybuilding stuff. And now basically I do what’s called macros. So every week or two, my new trainer will send me macros. And I basically tell them this is the look that I want.

So it’s funny, I like went online with my wife, and we searched like hot guys fitness. Okay, so we’re like sitting there and I’m like, this is the weirdest Google search I’ve ever done. We’d like literally looked through all these pictures, and then we’re like, yeah, okay, that’s a good one. And we both agreed on one. And it was hilarious, because my wife picked this this guy. And she’s like, Yeah, I like it, because it doesn’t look like he works out that much. I looked at this guy. I’m like, this guy definitely works out!

It’s so hilarious that she says that even though she works out herself.

So now every week I get a macro update. It’s basically just three numbers, protein, carbs, fat, and then I plug it into My Fitness Pal. And I can eat whatever, whatever I want that fits the math. I think for FIRE people, it’s actually really good.

Mad Fientist: Nice!

Ramit: Because, it’s just a formula. And then if you want to eat yogurt, or fruit, or pizza, you can eat all that stuff. Of course, you discover over time, it’s better to eat more healthy, you know, lean meats, stuff. So I work with a trainer Chris Colston fitness, he’s awesome. But any good trainer can recommend macros to you. Okay? So you can choose and you can definitely check you out. When you do this. After one month, you will see visibly a change in your body.

Mad Fientist: Wow, that’s cool, ya know, cuz it’s like I said, I’ve been enjoying it so much. It’s been life changing. And just like you like my life would be in such a different place if I had not made some of these changes to do this, but yeah, just I feel like I may have plateaued a little bit and but that’s perfect that I will put some of that stuff in the show notes.

And I will definitely try that one week of tracking my macros because I know it’s going to be low. I know it’s going to be not enough.

I know your time is extremely valuable so I don’t want to keep you on for too much longer.

Where’s where can people find you? Iwillteachyoutoberich.com the best place for everyone to go? And then obviously I’ll link to the book in the show notes as well.

Ramit: That’s awesome. And then I’m on Twitter @ramit and I’m also on Instagram @ramit.

Mad Fientist: Excellent. Since I started this podcast way back in 2012. I’ve asked every guest, what’s one piece of advice you’d give to somebody on the path to financial independence?

Ramit: I would say spend extravagantly on the things you love and cut costs mercilessly on the things you don’t.

Mad Fientist: Perfect, Ramit, thank you so much for being here. This has been a real pleasure.

Ramit: It’s been a pleasure. Thank you.

Mad Fientist: Alright man, talk to you soon. Bye.

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