Ramit Sethi: The Psychology of Money, I Will Teach You To Be Rich | E220

Ramit Sethi: The Psychology of Money, I Will Teach You To Be Rich | E220

Ramit Sethi: The Psychology of Money, I Will Teach You To Be Rich | E220

When Ramit Sethi graduated from high school, he built a system to apply for 60+ scholarships that earned him a full ride to Stanford University. But when he got his first scholarship check, he invested it in the stock market and lost it all. That’s when he decided to change his money mindset and learn the secrets of money-making. Today, Ramit helps a worldwide community of people who want to create their Rich Lives, their own way. In this episode, Ramit will cover his background and the psychology behind money. He will break down the concept of money dials and how to indulge in guilt-free spending. He will share his advice on how to create our very own RICH life.
Ramit is a New York Times best-selling author of the popular book I Will Teach You To Be Rich. He is an expert on business, careers, negotiation, psychology, and money. Ramit hosts the popular podcast I Will Teach You To Be Rich and is also the host of the new show, “How to Get Rich,” which premiered earlier this month on Netflix.
In this episode, Hala and Ramit will discuss:
– Ramit’s early views on money
– Why Ramit started his finance blog in college
– What it means to live a RICH life
– The “invisible scripts” we believe about money
– The biggest money mistake that couples make
– Four numbers you have to track as a conscious spender
– The psychology of spending
– Using our Money Dial
– Why we shouldn’t feel guilty about buying what we love
– How to land your dream job
– Negotiating your salary
– And other topics…
Ramit Sethi is a personal finance and business expert who studied psychology at Stanford. He started a blog about business, money, careers, and psychology that now has 1 million+ monthly readers. Ramit frequently appears in the media. He wrote the bestselling book I Will Teach You to Be Rich in 2009, and a new edition of the book in 2019. Ramit hosts the popular podcast I Will Teach You To Be Rich. Ramit also has a new Netflix Show called “How to Get Rich,” which premiered on April 18th, 2023.
Resources Mentioned:
Ramit’s Twitter: https://twitter.com/ramit
Ramit’s Facebook: https://www.facebook.com/IWT/
Ramit’s Podcast I Will Teach You to Be Rich: https://www.iwillteachyoutoberich.com/podcast/
Ramit’s book I Will Teach You to Be Rich, Second Edition: No Guilt. No Excuses. No BS. Just a 6-Week Program That Works: https://www.amazon.com/Will-Teach-You-Rich-Second-ebook/dp/B07GNXPP4P
Ramit’s show “How to Get Rich”: https://www.iwillteachyoutoberich.com/netflix/
LinkedIn Secrets Masterclass, Have Job Security For Life: Use code ‘masterclass’ for 25% off at yapmedia.io/course
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[00:00:00] Ramit Sethi: Everybody teaches us how to save, but nobody teaches us how to spend. And the psychology of spending is absolutely fascinating. The frank truth is that most of us will go our entire lives without learning the skill of spending our money meaningfully. If you think of our lives like an orchestra, most of us have only one note, and that is save.

[00:00:37] The way you feel about your money is highly uncorrelated with how much you've got in the bank. Yes, you gotta know how to save, but you've also gotta know when to spend on convenience or safety or even luxury. When you really know what you love, life becomes quite rich for you. Money is not just about numbers. It's really about communication and psychology.[00:01:00] 

[00:01:03] Hala Taha: What is up, Young and Profiteers? You are listening to YAP, Young and Profiting podcast where we interview the brightest minds in the world and unpack their wisdom into actionable advice that you can use in your daily life. I'm your host, Hala Taha. Thanks for tuning in and get ready to listen, learn and profit.

[00:01:35] Welcome to Young and Profiting Podcast, Ramit. 

[00:01:38] Ramit Sethi: Thanks for having me. 

[00:01:39] Hala Taha: I am really excited. We've been wanting to have you on Young and Profiting podcast for a few years now. So Young and Profiteers. If you don't know Ramit Sethi, he is a New York Times bestselling author of the popular book I Will Teach You to Be Rich.

[00:01:52] He's also an expert on business, careers, negotiation, psychology, and money. He hosts a popular podcast, I Will Teach You To Be Rich, and is also the [00:02:00] host of The New Show, How To Get Rich, which premiered earlier this month on Netflix. In this episode, we're gonna learn about Ramit's background and gain insight on the psychology behind money.

[00:02:09] We'll break down the concept of money dials and how to indulge in guilt-free spending. And lastly, we'll get Ramit's advice on how we can all create our own vision of a rich life. So Ramit to kick us off, let's get to know you a little bit better. Your family is from India. Your parents immigrated to the States in the seventies, so your father was an engineer.

[00:02:28] And being a first generation Indian. I have to assume that you grew up with a lot of unique perspectives around money. So tell me, what were your beliefs around money when you were growing up? 

[00:02:39] Ramit Sethi: We had family of six and my mom stayed home, and my dad went to work. And so a lot of the beliefs about money were just absorbed from watching my parents.

[00:02:50] So for us, we didn't talk about frugality, we lived it. And so one of the things I remember most, most vividly is we would eat out maybe [00:03:00] once every six to eight weeks. And we only ate out when we had a coupon. We had a drawer full of coupons and we would look at which coupon is still not expired. And it was usually a pizza place.

[00:03:10] And we would go there and of course we would only order what was on the coupon. We would never order appetizers, never enough drinks for everybody. Most people would get water. And that's how we grew up. And it was a great life. But as I got older, I looked back and I realized, wow, I learned a lot of things.

[00:03:28] I learned that we were not wealthy, which is totally fine, but we were not poor. I learned that my parents taught me, if you really want something, there's usually a way to get it. For example, when they taught me, look, be good enough to get into an elite college and the money will take care of itself, and that is exactly what happened.

[00:03:48] They encouraged me. I applied, I got in, and then I applied to 65 different scholarships, which ended up paying my way through undergrad and grad school. There was luck involved. There was hard work involved, but most of all, there was a [00:04:00] psychology involved of pushing myself. So I learned all those things and those were really valuable.

[00:04:04] I think later in life I also learned that there are probably other ways to look at money. That became the next chapter of my life. 

[00:04:11] Hala Taha: And I definitely wanna get into the mindset of money and the invisible scripts that we tell ourselves and learn from our parents. But first let's continue on with your story.

[00:04:19] And you mentioned something just a bit ago about this scholarship project that you did when you got into Stanford. Your parents couldn't afford to send you to school, so you took matters into your own hands. And I feel like this really displays your grit and your get shit done personality. So I'd love for you to really go in deep and tell us that story.

[00:04:36] Ramit Sethi: There's no way they could've afforded it. And they told us that openly. They're like, look, we don't have, like they laughed. You think we have money set aside for college? And I do wanna share this one story, which was so funny. One time we were all in our van and my parents needed to get like a money order or some sort of thing signed.

[00:04:52] And so they went to the bank and they came back out of the bank laughing and we're all like, why are you laugh? Who comes out of a bank laughing? And they said [00:05:00] that when they went in there, the bank told them, it'll cost like 30 bucks to give you this thing. Or if you have $10,000 in your account, we can waive the fee.

[00:05:09] And they were laughing like, who has $10,000 in their account? It was laughable to them. It was like, not even in the fathom of reality. So when it came to college, the same thing applied, but my parents also taught me there's a way. There's lots of ways to get creative. They're really street smart, and so my mom and dad, it's unbelievable now that I think about it.

[00:05:30] They took me around to different career centers at different high schools. Like for everybody listening. Did you even know where your career center was in your high school? No. And then can you imagine your parents driving you to a rival high school and going into their library and being like, our son goes to that high school, and everyone's what's this guy doing here?

[00:05:48] And they're like, can you show 'em all your scholarships? My parents did that and what they were teaching me was, who cares if it's weird? Like their whole life was weird. They moved to a different country. So they didn't care. And they were like, [00:06:00] we're going to help you pay for college. We don't have the money, but we're gonna help you do it.

[00:06:04] And so I love systems and I think this will come out through how I talk about money. I don't wanna be sitting there tracking the price of broccoli for the rest of my life. I don't wanna live that life, nor do I wanna sit there and just go into college and incur a bunch of debt without even trying.

[00:06:18] So back then, I applied through everything with a typewriter and or a printer. We didn't even do it on the internet. So I had this manila folder of applications. And I built a system to rapidly apply to 65 different scholarships. I started winning. I won the ones where it was an essay, cuz I'm a pretty good writer, but some of them where I started to go in an interview. I kept losing.

[00:06:40] Like I would get all the way to the interview and then I would lose. Very frustrating. So I asked my dad, can you pull out that video camera? You know those big VHS cameras? He pulled it out and he filmed me asking me some interview questions. Now in my head, I was Mr. Debanaire. I was James Bond. I got these smooth answers.

[00:06:55] Then when I saw myself on camera, this is how I talked, yes, I would like [00:07:00] to attend this university. And I was like, so with the help of my parents. I did a little coaching improved, started closing those scholarships, and that's what ended up paying my way through undergrad and grad school at Stanford.

[00:07:12] Hala Taha: I love that. And then from my understanding, you also got your first desire to learn more about personal finances from this project as well. You went to invest one of your first scholarship checks, which is pretty risky to do. I shouldn't have done that. It took for turn for the worst, but sometimes, our biggest mistakes end up being blessings in disguise.

[00:07:31] So what happened there? 

[00:07:32] Ramit Sethi: They wrote the check to me as a high school kid, like that's a lot of money. Even a few thousand bucks is a lot of money for a high school kid. So usually they send the money straight to the college. Not in this case. They just sent it to me. I was like, cool, I'm gonna put that money in the stock market.

[00:07:44] Because back then in 1999, 2000, everybody thought they were a genius. The last few years where you have a bunch of Bitcoin nut cases. Thinking they're geniuses. I go all right, we'll see. And of course we have seen, so I said, let me take this money, let me invest in the stock market.

[00:07:59] And I promptly [00:08:00] lost 50% of that money. I was like maybe I'm not as smart as I thought. And that was actually a fantastic lesson because look, we're all gonna be humbled in life. Might as well get humbled early when the stakes are low. Okay? It was a little bit of money relative to now, and I think when that happens, you can choose your approach.

[00:08:19] You can say the world isn't fair, or I hate everybody. Or you can say oh man I don't know what I'm doing. And I think I'm an alert and I chose. Fortunately, I chose the second one. So here I am. I'm now in college. I'm reading every book I can find about personal finance. I'm watching the TV shows, reading the newspapers and the magazines.

[00:08:35] And I was studying psychology, so I was studying human behavior, persuasion and social psychology. And I'm starting to get a different view on money. And I'm starting to realize that most of the advice that you and I are given about money is awful advice, and we don't even wanna follow it. So you have some old guy coming on here with his pocket protector looking down.

[00:08:56] You are not allowed to have lattes, no jeans, no clothes, no [00:09:00] vacation. Nobody wants to listen to that kind of vice. Me too. I don't wanna listen. My college friends didn't wanna listen. We wanted to go out, be able to buy a round of drinks for our friends, be able to maybe take a vacation on spring break.

[00:09:12] We wanted to live a life, a rich life. And therefore I started talking about money in college. I had learned it. I built my own system. I tried to help my friends and that was really the genesis of 20 years later, what I'm now doing. 

[00:09:26] Hala Taha: I love it. So we actually have something in common. We both started blogs in college.

[00:09:31] Ramit Sethi: Oh my god! 

[00:09:32] Hala Taha: So I started a hip hop and celebrity news site in college that became really popular. 

[00:09:37] Ramit Sethi: Awesome!

[00:09:38] Hala Taha: And you started a finance blog when you were in college. 

[00:09:41] Ramit Sethi: First of all, your sounds a lot cooler than mine. Let's just be very clear. I should have done that, but okay. I did my nerdy one.

[00:09:47] Yes.

[00:09:48] Hala Taha: But here's the thing. When I started a blog, I felt like it really gave me a lot of skills, even though I didn't end up making a ton of money. I had a big team and everything like that. It was a great experience, but the skills I learned. I feel [00:10:00] like I took with for the rest of my life and really helped me level up.

[00:10:03] So I'd love to understand the genesis of that blog, like how you first got the idea and maybe how it ended up benefiting you later on in terms of monetizing and skills.

[00:10:12] Ramit Sethi: Wow!

[00:10:13] What a great question. First of all, it's so cool to meet a fellow blogger because we don't really exist anymore. We're extinct, so that's super cool.

[00:10:20] So my blog started out of frustration, because I spent about a year and a half trying to teach my friends in college about personal finance. I had a one pager, it was printed on both sides, and I would hear one of my buddies complaining in the dining hall about their third overdraft fee. And I was like, Hey, I actually know a little bit about personal finance.

[00:10:39] I do this one hour class. It's totally free. Come on, I'll teach you like everything you need to know. And people would be like, okay, like that sounds interesting. And then they never showed up for a year and a half. There I am in empty rooms. I had a handful of people come and I found myself spending more time, trying to convince people to come to a free class than actually [00:11:00] teaching it.

[00:11:00] And I still have some of my college buddies on Twitter. They're like, they have pictures. They're like, oh my God, this is like one of the few classes that you taught. I was in the original. I will teach you to be a rich class. So I did that for a year and a half and it was very debilitating. I think that every one of us, whether you're listening, watching, if you have an idea and you're like, the world needs to hear this.

[00:11:22] But the world doesn't seem to be listening. That's really a pivotal point for you to make a decision. It might be that you're delusional and actually the world doesn't care cuz you have a horrible idea. That's possible. You need to be able to read the cues, read the room. On the other hand, it might be that you have a really good idea, but you're not presenting it in a way that makes people care.

[00:11:41] And so here I was this cocky college kid and I was like, no, the world does need to hear this, but I'm obviously, this is not working. Like I'm beating my head against the wall. It's nobody's coming. So I said, you know what? I think college kids are lazy and I also think they don't want to come to an event about money.

[00:11:59] I [00:12:00] later learned why people don't like to go to events about money cuz it makes 'em feel bad about themselves. And usually it's just somebody telling them all the things they've done wrong. And so I said, all right, I'm gonna write a blog. I like to write like I talk like here we are joking around and maybe these lazy college kids will learn more sitting in their dorm room.

[00:12:16] And that's exactly what happened. So within about a year I started seeing traffic going up. I learned how to make friends with journalists. I remember the Wall Street Journal covered me well. I pitched them hard and they finally covered me. And that was the big conclusion early on. This is like 2004. It is valuable to talk about this, but I'm not doing it in a way that reaches people.

[00:12:38] So let me switch tactics so that I can connect. 

[00:12:42] Hala Taha: It's pretty interesting how you found your passion so early on. If you think about it, you've been on the same track since college in terms of the things that you're talking about. So can you talk to us about the compound effect of sticking to one thing for many years?

[00:12:57] Ramit Sethi: And I'll give you some nuance on it because I don't want anybody to [00:13:00] think that you have to find the perfect idea right? Early on. And if you don't, you're doomed. That's not, that's actually not what happened to me. So my journey has been different and I wanna share the nuances of it. Okay. I don't wake up in the morning and get excited about Roth IRAs.

[00:13:15] Really, I don't give a shit. Like I've taught people how to do it. I think it's great, but what I'm much more interested in is a rich life. And psychology and money just happens to be a really great way to approach that topic, right? That's why we're talking right now because it's hard to talk about money.

[00:13:31] You have to be technically proficient and then you have to also be a communicator and all this. It has to all come together. I love that challenge of putting all these things together and hopefully the people listening have never heard somebody talking about money like I am. Like saying, I actually want you to spend more on eating out, or a beautiful cashmere coat or a trip.

[00:13:50] In fact, why don't you upgrade your flight? Nope. They never hear anybody talking like that. We'll get to that. But I also think that it wasn't money. That was fascinating to me. I like [00:14:00] money. Money enables me to live my rich life, but I wouldn't say I wake up in the morning obsessed or excited about a spreadsheet.

[00:14:08] No way. And I think that shows up in my life. My posts, like I'm not sitting there calculating spreadsheet numbers. I'm showing you like, I took this two month trip, and here's what I love about how I designed this trip for my wife and me. That part is cool. I also think that starting early, it does compound because I've been around the block. 

[00:14:28] I've seen different people come and go. I have friends who have been in the industry for decades. That part is really powerful. There's a lot of tacit knowledge that comes from staying in an industry for so long. You see what's true and what's not. I think on the other hand, I need to constantly reinvent myself and find a way to stay excited.

[00:14:46] So hence even in the last three years, I have started a podcast. I was late to the game, but I wasn't ready until I had a great idea and then I did it. I have a Netflix show that's out called How To Get Rich. These are all ways of [00:15:00] staying fresh and staying excited, so I can keep doing this for the next 40 years. 

[00:15:04] Hala Taha: I love that. And I'm so happy that you broke that down. I feel like it's a great transition to talk about some of your frameworks that you talk about, concepts. Let's start with a rich life. So it's one of the things you often talk about is how to live a rich life and having to have a vision for your rich life.

[00:15:19] So in your own words, what does it mean to live a rich life and how can we go about creating a vision for one. 

[00:15:24] Ramit Sethi: A rich life can be traveling for two months a year. A rich life can be living in a beachfront house or having a beautiful cashmere coat. A rich life can be picking up your son or daughter from school every afternoon.

[00:15:39] Your rich life is yours. It's not mine. It's not anybody else's. And when you really internalize that, that you can design your rich life just like you would design a beautiful meal for your friends, or even a beautiful house or a outfit you can design and you should design your rich life. Suddenly [00:16:00] all these concepts that we see on social media about, do I need this car or do I want to go to Bora, they just become so obviously transactional.

[00:16:09] It's if you wanna go to Bora, fantastic. Let's actually talk about the best hotel. Let's talk about how long you wanna go. That's amazing, but how does that roll up into something bigger? What is your rich life? And so this is the question I always ask people first. In fact, maybe we can do a little exer.

[00:16:22] Let's do some exercises together. 

[00:16:24] Hala Taha: Sure. 

[00:16:24] Ramit Sethi: So if I ask you what is your rich life, what would you say? 

[00:16:28] Hala Taha: My rich life is being able to travel whenever I want, to be working a job that I love, that helps me buy whatever I want. I love luxury goods, bags, clothes, shoes, fancy cars. I'm, young and profiting.

[00:16:42] So I need a life that makes a lot of money. I work hard and I play hard. 

[00:16:48] Ramit Sethi: Great. Okay, so what I want everyone to hear in my response is I love the vision. No judgment. You love nice cars, nice luxury goods. Fantastic. As we go deeper into it, [00:17:00] we'd wanna understand what do the finances look like? Do you understand your ratios and all that stuff.

[00:17:05] But first, it's always about meeting people with what their rich life is. So rich life's changed, by the way, when I was young and I was just graduated, my rich life was to be able to go to a restaurant and order an appetizer. That's it. Like 10 bucks, maybe 12 bucks. Why? Why was that my rich life?

[00:17:23] Because when I was a kid, we couldn't afford it. And so it felt incredibly freeing to go, I can get that. In fact, I see two. I can get both of them. This is crazy. You see how small my dreams were, but how meaningful they were to me. And then it grew. I moved to New York and it was hot in August. Sometimes I'd go into meetings. I'd come off the train and it would, I'd be dripping and sweat.

[00:17:45] I said, you know what? I wish I could take a taxi whenever I wanted, so I didn't have to get off the subway sweating. And so that became part of my rich life a little bigger. But again, we're talking about modest numbers here. Now, my rich life is much bigger. Okay? My rich life involves traveling for months per year [00:18:00] with my wife, bringing friends or family with us, working with only people I like and respect, et cetera, et cetera, et cetera.

[00:18:06] But the point is, it doesn't matter how much money you earn, at least at the beginning. It's really about designing your rich life for something that is uniquely you. 

[00:18:15] Hala Taha: And I love the fact that you're saying that it evolves over time. At one point, your big ambitious goals for your rich life, looking back, you're like, I can't believe that this is my goal.

[00:18:25] But you keep growing over time and you keep pushing out your marker in terms of where you wanna go in terms of your rich life.

[00:18:31] Ramit Sethi: And remember anyone listening to this who's in their forties, fifties, or sixties, you'll also intuitively know it doesn't always go up in terms of spend. Like your, some people's rich life is sitting on the patio with a warm cup of coffee and just watching people walk by.

[00:18:47] Beautiful. Spending time with your kids or grandkids. Beautiful. I love that. So it's, it can be luxury goods, it can be relationships. Whatever the case may be. Sometimes it involves money, sometimes not, [00:19:00] but it really, in my view, is about deepening that relationship. So if you say, I love to spend time with my kids, I say, fantastic, what would it take in order for you to make that time with your kids magical.

[00:19:11] Not just ordinary but magical. And that is when we really start to explore not just a life, but a rich life. 

[00:19:19] Hala Taha: Let's hold that thought and take a quick break with our sponsors.

[00:19:27] I love that. I think that's a really great point. So let's talk about psychology. So one of the reasons why I love having you on Ramit is because at Young and Profiting Podcast, our two favorite topics are money and psychology. This is what we talk about all the time. 

[00:19:39] Ramit Sethi: Oh my God! This is my home. 

[00:19:41] Hala Taha: So it really is your home like you fit right in.

[00:19:44] You always say that a central topic of yours is at money isn't just about math, it's about psychology. You can give us all the information and knowledge about credit and debt, but until we master our money, psychology, nothing really makes a difference. So you've got this classic book, I Will Teach [00:20:00] You To Be Rich, and you talk about invisible money scripts, and that was originally coined by Dr. Brad Clanks. 

[00:20:06] I might have butchered that name, but I think that's how you say it. And Invisible Money Scripts are unconscious transgenerational, beliefs about money that are developed in your childhood. You mentioned some of those beliefs that you had as a child growing up earlier in the show, but I know that you have this awesome podcast, where you essentially bring on couples.

[00:20:24] You start to unpack their problems around money, and a lot of these couples have invisible scripts. So can you tell us some of the common things that people believe around money and how that can negatively impact ourselves, and the way that we approach life as well as our partners and spouses and our lives together?

[00:20:41] Ramit Sethi: One of the easiest ways to discover your invisible scripts is to answer this question. What do you remember your family saying about money when you were a kid? Does anything come to mind for you? 

[00:20:53] Hala Taha: My dad actually, so also Arab American immigrants. He was a surgeon. He made a lot of money when he [00:21:00] came to America.

[00:21:01] And then he felt like everything was free because he was so not used to making money, that he was very generous and just always gave his money away. So I have a very I'm not cheap, because my dad was like, really not cheap. 

[00:21:13] Ramit Sethi: Wow. And what would he say? Do you remember a phrase he said?

[00:21:16] Hala Taha: He would just say, that's free. If something was, a hundred bucks. 

[00:21:19] Ramit Sethi: Wow, okay. That's free. 

[00:21:22] Hala Taha: If something was a hundred bucks, he'd be like, that's free, Bubba. And like he would, and so like for me, every, nothing is expensive. That's cheap. You know what I mean? So very different. I think for most people growing up.

[00:21:32] Ramit Sethi: I think so, but it, you can already see the connection between your love of luxury goods, et cetera, and trace it back all the way to your families. Good or bad, it just is. And I think a lot of us are startled by the idea that the decisions we are making right now in our thirties or forties or fifties, can actually be traced directly back often to some phrase our parents set around the dinner table.

[00:21:57] Here's some examples. We can't afford it. [00:22:00] Now imagine hearing that 10,000 times as a child and adolescent and maybe you really couldn't afford it. Maybe not. Most people don't even know what they actually can afford. But it's just a phrase we reflexively say. Now imagine you come on my podcast cuz this has happened many times.

[00:22:14] You're now earning $350,000 a year, and your partner says we've saved all this money. We've been frugal. Can we finally enjoy ourselves? Can we finally put some grass in the front yard? It has dirt, and you have all these logical reasons. What? We gotta save and we gotta increase our savings rate by 1%.

[00:22:32] But deep down, it's your mom or your dad repeating in your ear, we can't afford it. Okay? So that's one of the most common things that happens. We can't afford it. We don't talk about money in this family is another common phrase, that then translates into invisible scripts. Money's not to be talked about.

[00:22:46] It's shameful. We keep it secret. We don't learn about it, et cetera. That's for rich people. AKA, we are good people, but those rich assholes, we don't need to be like them. We don't need to indulge in a fancy restaurant [00:23:00] because we're simple and we don't need all that show off stuff. That's one that I think a lot of immigrant families learn.

[00:23:05] I certainly absorb that one. So those are some invisible scripts about money. But we should also remember like they're positive invisible scripts. My parents taught me that money's usually not the primary thing. If you work really hard and you're smart, you can usually find a way to crack the money coat.

[00:23:20] Wow. That's a really powerful invisible script. I later found out when I was in my twenties, I asked my parents about how they raised us and we played a lot of sports. It's expensive, right? To have kids in sports at multiple kids At one time, I found out in my twenties that my mom had called up the local soccer league and she was like, look, I can't afford like all these fees.

[00:23:40] I have too many kids in soccer. And they said, okay, if you come early on Saturday morning and chalk the field, meaning put the chalk on the field, we'll waive those fees. So little did I know that my mom was going early to chalk the field in the early morning to a soccer field so that we could play soccer.

[00:23:58] We didn't even know that. Talk about [00:24:00] learning an invisible script. Really powerful stuff. 

[00:24:03] Hala Taha: So sweet. I love that story. I know that one of the biggest things that couples fight about is money, and a lot of it is due to communication issues around money. So what are some of the communication barriers around money?

[00:24:15] And what can we do with our spouses to create a vision for a rich life together? 

[00:24:19] Ramit Sethi: So this is why I started the podcast because my wife and I, we were engaged and we started talking about money and I was like, okay, this should be easy. I'm the money guy, it's all good. And we started talking about a prenup and it was going well at the beginning, and then it got really hard.

[00:24:36] And what I wished was that I could hear how other couples talked about it. I don't need some three bullet points about have the conversation. I'm like, what? Fucking conversation? What am I supposed to say? Literally word for word. Of course. Nothing like this is, it exists. And so because of my business and my community, I could create that.

[00:24:56] And so the way that this podcast started was totally [00:25:00] accidental. This couple on Instagram reached out to me just during Covid and they're like, Hey, we have $525,000 of debt. We're drowning. Can you help us? I was like, all right, but you gotta do it live. They're like, cool. I'm like, and you have to share all your numbers.

[00:25:14] They're like, okay. I was like, wait what? You said? Yes. So we did it and it was magic. And that is because none of us has ever actually heard a real couple sharing real numbers from behind closed doors. So I bring on couples and they have to reveal everything. So they have $825,000 of debt.

[00:25:35] I've got couples like that. I have couples that have over 10 million in net worth, and they're. Arguing or they're disagreeing about money and sometimes it's that one person is an overs spender, sometimes it's that they just see money completely different culturally. Like the Pakistani couple that I had on, and he was expected to send money back to his family in Pakistan.

[00:25:55] And they're just a variety of different gay, straight, older, younger, [00:26:00] geographically diverse. So the biggest mistake that couples make with money is they lack a rich life vision together. So they come in and their presenting case is, she spends too much at Target, or he is always using money for X, Y, Z and they really believe it's about the pickles.

[00:26:19] I can't believe that my partner buys the name brand pickles. I was never raised to buy name brand. Generic is fine for me. I go, okay, we're gonna talk about these fucking pickles. All right, fine. So we talk about the pickles for 25 minutes and then I'm like out of curiosity, do you remember anything growing up?

[00:26:34] And they're like, my uncle was smothered to death with pickles. I go, wow, I wonder if that has anything to do with what we're talking about. So what happens really is they're focused on this transactional discussion of pickles or their tires or some target expenditure. But when I ask 'em, what is your rich life?

[00:26:51] They have no answer. It's really generic. I want to travel. I wanna spend time with family. I go where do you wanna travel? How long do you wanna travel? What [00:27:00] airplane seat do you wanna sit on? And so as we start to craft something together, which is their unique rich life, not mine, but theirs, suddenly all these transactional discussions about how much somebody spends at the grocery store become totally irrelevant.

[00:27:13] In fact, for everybody listening, you really do not need to track how much you spend at the grocery store. I don't, I actually only really track four numbers. And if you track those four numbers, you have more than enough to save, to invest, to even use for guilt free spending, which can be date night, travel, et cetera.

[00:27:29] So it's a beautiful illustration of how money is not just about numbers. It's really about communication and psychology. 

[00:27:37] Hala Taha: I have to ask you, what are the four things that you track? 

[00:27:40] Ramit Sethi: The four numbers to track? So if you've got a pen, pull it out, cuz I'm gonna give you these right now. These are part of my conscious spending plan.

[00:27:47] So the first is your fixed costs. Your fixed costs should be 50 to 60% of your take home pay. And fixed costs would be your rent or mortgage, utilities, car payment, gas, [00:28:00] insurance, anything that is fixed and you're paying it off. Even debt payments, that would be 50 to 60%. The next would be your investments.

[00:28:08] So what percentage of your take home are you putting in investments? I recommend five to 10% to start. Of course, I'd like to see that number bigger, but that's a good start. Savings, same thing, five to 10%. That would be money that you don't need for about one to five years. And finally my favorite one, guilt free spending, which is money you get to use for whatever you want.

[00:28:29] Handbags, you want travel, you want face cream, you want go out for drinks with your friends. 20 to 35% of take home, all those, if you just do those things. You're gonna be in great shape. It means you do not need to track the price of asparagus because it's already baked in. You do not need to worry about inflation.

[00:28:45] It's already baked into your plan, and you can get all these in a template for the conscious spending plan on my website. 

[00:28:52] Hala Taha: Awesome. So I think that's wonderful advice and I'd love to move into conscious spending money dials. First, I wanna read a quote that you've [00:29:00] said in the past. It's about anxiety and money.

[00:29:02] You say deep down, a lot of people love feeling anxious about money because it's all they've ever known. I wanna share a little story. It goes along with a lot of what you just said. My brother and his wife are very successful. My brother's a pediatric neurologist. His wife is a nurse, anesthesiologist, okay?

[00:29:19] Together, they're making over a million dollars a year. They just have two little kids. They live in New York area, so it's pretty expensive. But the thing about my brother and his wife that always makes me go crazy is they always act so broke, even though they're well above most people. Some families are not anxious about money and make $150,000 a year. They're making so much more money than the average family, but always think they're broke.

[00:29:46] So why is this a thing and how can people like them become more comfortable spending money? 

[00:29:52] Ramit Sethi: Wow. What a great question. This is one of my most. Fun topics to talk about because everybody teaches us how to save, [00:30:00] but nobody teaches us how to spend, and the psychology of spending is absolutely fascinating.

[00:30:06] The frank truth is that most of us will go our entire lives without learning the skill of spending our money meaningfully. If you think of our lives like an orchestra, most of us have only one note, and that is save. That's it. That's all we know. Save. It's like taking the piano and playing it for every song.

[00:30:23] It's that song sucks. Now we need some drums in here. Gimme something else. What I want for people is, yes, you gotta know how to save. That's a very valuable note, but you've also gotta know when to spend on convenience. Or safety or even luxury. And what's interesting is that we all intuitively get this in other parts of our life.

[00:30:42] We do not measure everything. Do you measure how long you hug your dad? I'm gonna optimize my hug for 3.2 seconds because otherwise it's too long. No, we just intuitively know that we wanna hug our loved ones, we wanna spend time with them. And what I love to see is for people to [00:31:00] combine the rigor of knowing their numbers, like the conscious spending plan and things like the rule of 72.

[00:31:06] These are all things that can be learned. They're not complicated as well as the intuitive, fun side of saying, you know what? Gosh, we have two kids. Wouldn't it be amazing? If we took them to the zoo and we make a million dollars a year, can we arrange some kind of behind the scenes exhibit? And you know what?

[00:31:27] We make so much money. Let's bring a couple of their friends with us. Maybe friends who couldn't afford to do that. Let's bring them with us. What a beautiful way to use your money to create these magical memories. So that's my vision for how spending is a skill, I think with folks like your brother and many others who I talk to on the podcast, by the way, you can actually hear them agonizing.

[00:31:48] Here's the psychology of it. They grew up hearing about saving saving. They've internalized that as their only note. They believe deep down that there's some day where they will finally feel good, and they believe [00:32:00] that day is a number. When I have 1 million, 2 million, 5 million, the truth is the way you feel about your money is highly uncorrelated with how much you've got in the bank.

[00:32:08] I talked to 10 million people with $10 million, and they feel anxious and guilty as my quote said. Some people come to love feeling anxious. It becomes comfortable. If they don't feel anxious, then it's a new uncomfortable feeling, which they then become anxious about that better to go with the anxiety they know than the one they don't.

[00:32:28] And so it's possible to change. And the way that I do that is really by going deep into what they love and encouraging them that if you spend a little bit more, it's not going to destroy your life. And of course I show 'em the math, but the math is irrelevant. It's a feeling. But on the other hand, there are a lot of people who will never change because deep down, they don't actually think it's a problem.

[00:32:48] Hala Taha: Let's move on to money dials, cause I think it fits right into this. And then don't forget to circle back to the rule of 72. I don't wanna forget that. Whenever you feel like it makes sense. So with money dials, you've said in the past, show [00:33:00] me a person spending and I'll show you what they love. So fit people spend time to be fit.

[00:33:04] They spend money on the gym, fashion people, they spend time on shopping and clothes. So tell us about money dials and some of the common money dials out there. 

[00:33:14] Ramit Sethi: Okay. Should we just do it for you? Let's just do the exercise together so everyone can see it. All right. So let me explain what a money dial is.

[00:33:20] A money dial is something that you love to spend money on, not just but love. So if I were to ask you, what do you love to spend money on, what would you say? 

[00:33:30] Hala Taha: Bags.

[00:33:31] Ramit Sethi: Beautiful. So you love bags. I love it. So for everybody listening, think about what your money dial is. The answer we just got is unusual, but I love how quick you were.

[00:33:40] You've clearly thought about it. The most common money dial, the most common area people love to spend on is eating out. Number two is travel. Number three is health and wellness. Number four is convenience, and there's a variety of other ones if you just search for money dials. So you said bags. Fantastic.

[00:33:57] Here's my second question for you. If you were to [00:34:00] quadruple the amount you spent on bags, what would it look and feel like? 

[00:34:05] Hala Taha: If I would quadruple the amount of money I spent on bags, I would look really fly. I would feel really powerful and accomplished. 

[00:34:15] Ramit Sethi: Would you buy the same type of bag you have now?

[00:34:18] Just four of 'em. What would you be getting? 

[00:34:20] Hala Taha: Honestly, I don't know if I would buy such an ex. There might be a threshold to how much I would spend on a bag, but I'm guessing I would buy more expensive bags. 

[00:34:29] Ramit Sethi: Okay, more expensive bags. What else? Turn that dial up. Let's go to five x, six x, seven x. 

[00:34:33] Hala Taha: Maybe I would have a custom bag.

[00:34:35] Ramit Sethi: Okay. 

[00:34:36] What else? 

[00:34:37] Hala Taha: I'm not sure. I love designer shoes. I don't know if I would keep spending it just on bags, but just in general, I'd probably be leveling up all my stuff to be designer ready to wear or whatever. 

[00:34:48] Ramit Sethi: Love it. All right, so let me explain what's going on here. So I call a money dial. A money dial, because just like a radio dial, you can turn it up.

[00:34:55] I always wanna understand what do you love to spend money on? And then I wanna [00:35:00] understand what would it look like if you could actually spend more? Why? Because I believe you should spend extravagantly on the things you love as long as you cut cost mercilessly on the things you don't. And the sad fact is, Most of us have never actually thought of spending more on the things we love, because what's the note that we're taught by everybody?

[00:35:18] Save. And so we do it so poorly, we save, we go I should probably save. And I go, why should you save? They go you just should, right? I go, this sucks. So they go, oh, I tried to save 5% on beans. I tried to save 5% on parking tickets. I tried to save. I go, this is so ineffective. Why don't you take the area you love and spend more?

[00:35:38] And then once you know what you, what your vision is, And you're excited and motivated by it, then suddenly it becomes much easier to look at your expenses and cut back on the stuff that's not serving it. So if I were to come to you and we were to really work together and I were to say, okay, look, you wanna buy this, I don't know, Birken bag and okay.

[00:35:57] And you go, oh my God! I go, okay, let's not just [00:36:00] say Birkin, show me the color. Show me the style, show me the website where it's currently for sale right now. And you're like, oh my God, no money guys ever talked about this. So we're sitting there, we're going, and you're getting excited and I'm like, look, this is a reality.

[00:36:14] It might take longer than you think, but we can model it all out. And you're like, oh my God, this could be mine. Cuz again, it drives you. Then I go, okay, now let's look at your expenses. If you wanna get that Birkin bag, this is what we need to make some changes, what would you do? And suddenly people are totally amenable to it.

[00:36:31] I also wanna point out one more thing. Most people are very linear in their thinking. When I ask them, you like to eat out, what would you do if you could quadruple your spend? And one guy goes, I'd probably have to go on a diet cuz I'd be eating out four times a week. And I go, that's not actually funny.

[00:36:44] I go, when you turn your money dial up. It's not just linear. It doesn't just mean more bags or more eating out. Think multi-dimensionally. For example, maybe as in his case, he had a list of every Michelin starred restaurant in his city DC [00:37:00] and I go, who'd you take with you? He goes, I'd take my family because they can never afford to eat.

[00:37:03] There I go. That's beautiful. Maybe like the young woman in Pasadena who loves fashion. She wouldn't just shop at H&M, she would, if she turned it way up, she would take her mom to Italy and they would go on a shopping trip and get something custom made just for the two of them. The vision can get as big as you want.

[00:37:22] The point is, You've got to have something. You are working for something inspirational, aspirational. Otherwise, life is just a series of episodic transactional decisions and there is no inspiration whatsoever. 

[00:37:35] Hala Taha: Totally. 

[00:37:36] I wanna talk about how society actually demonizes spending and shopping, especially for somebody like me who likes, luxury. 

[00:37:43] Ramit Sethi: I love that you say it too. I'm sorry to cut you off. I just love that you're so open about it. It's actually so refreshing to me, and I think clothes in particular get demonized. As stupid and frivolous and personally. And I think part, there's many reasons for that. Part of it is that historically things that [00:38:00] women have been interested in tend to be trivialized, and I'm fighting against that.

[00:38:04] I love clothes. I love that you love clothes. And I think that if your thing is handbags, like you saw my reaction, I'm like, fantastic. That's your thing. That's your money dial. Let's figure it out. 

[00:38:15] Hala Taha: Exactly. Because everybody has their thing. But let me tell you a story. So on the, my mom was really cheap, my dad was really generous, right?

[00:38:23] So my mom grew up getting two new sweaters a year. And for her, my obsession with clothes is something that she's always struggled with. Even now, I'm a successful entrepreneur, multimillion dollar company. I make money off my photo shoots, dressing nice. I'm an influencer on LinkedIn. I always have to have new clothes.

[00:38:42] And it's part of my personality, my business, but she's constantly giving me, even now, like if she comes over my apartment, I'm like hiding my bag. Like hiding my stuff. I have to give her the parent price for. 

[00:38:53] Ramit Sethi: Oh, these jeans, they were like 40 bucks. I got 'em on sale. 

[00:38:56] Hala Taha: Exactly. So it's like parent price for everything.

[00:38:59] And so [00:39:00] what should we do about people who shame us for the things that we buy? How should we treat those people? 

[00:39:06] Ramit Sethi: I know exactly what you are referring to, and I'll share what I've done. My model, so I remember when I first started to try to dress a little better, and whenever we're trying something new, it could be dressing better, it could be going to a gym for the first time or anything new.

[00:39:22] We are insecure. I was, here I am wearing these pants that I've never worn before. And they're a little different style and it's at that moment where if somebody says something mean to you. It can be crushing and it can actually change the trajectory of your life forever. And I actually remember wearing something new and my friends being like, what are you going to an interview?

[00:39:40] And it actually really hurt in retrospect. I didn't have the words for it at the time, but deep down I knew that I wanted to get to be a better dresser. And I looked around at the folks, I was in Silicon Valley at the time, and I'm like, why am I even listening to you like you're wearing a extra large shirt from Cisco?

[00:39:57] What the hell? Why am I even taking advice from [00:40:00] you? So that my approach was simply to say Hey, like cool, but I'm not listening to this person. Like they're the last person I take fashion advice from as I have become more comfortable with my rich life. And as I have refined it, it's actually become absolutely bewildering to other people, and that's exactly how it should be.

[00:40:18] So people are shocked. I'll give you an example. I have a sweater that costs more than my car. 

[00:40:22] Hala Taha: Wow! 

[00:40:23] Ramit Sethi: People go, what the fuck are you talking about? That's insane. That's exactly as it should be. I have a reader of mine, who is living his rich life. He used my material, he and his wife retired in their thirties.

[00:40:34] They drive around the country in an rv. Okay. That's my personal hell. I don't want to get in an rv. Do you? 

[00:40:40] Hala Taha: No. 

[00:40:41] Ramit Sethi: Okay. So I'm like, but I love that's their rich life and they are living it. The more you turn those dials uniquely to fit your life like a handmade glove. The more that the rest of the world will not understand you.

[00:40:56] And at a certain point where you are comfortable with [00:41:00] your clothes or your bags or your decisions on where to go to eat, you go. I actually love it because it's okay that they don't understand. I'm not gonna judge them. They living their own life, but this is my life. My rich life, and I feel great about it.

[00:41:15] Hala Taha: We'll be right back after a quick break from our sponsors. 

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[00:45:10] So I wanna talk about some of the unobvious categories that you have for money dials. So I'm gonna list off a couple of them. Convenience, travel, health and fitness experiences, freedom, relationships, generosity, luxury, social status, and self-improvement. There's probably more, but two of them I think are really interesting.

[00:45:28] Convenience and social status. So I'd love for you to explain how those two can actually be money dials. 

[00:45:36] Ramit Sethi: Convenience is my money dial and I love my life to be convenient. I'm gonna tell you about my life and you're gonna think I'm a serial killer and I don't care cuz this is my rich life. So when I wake up in the morning, I want to know that my coffee, which is my favorite coffee, is in exactly the right place.

[00:45:55] I wanna open up the fridge. Everything is perfectly organized and ready to go. [00:46:00] When I open up my calendar, I can double click and the link is correct, and when I click the link. It takes me to the correct place in the doc. Basically, I wanna have my life running so that even if I go blind, everything is seamless.

[00:46:11] Everything's where it needs to be. Now if you're listening to this, you're like, this guy's a psycho, like what does it matter? To have to click an extra two pages down. It doesn't matter to you. To me, I love the idea of just beautiful orchestra of life. Everything organized like it gets me going. I love it.

[00:46:27] And so if I can use money to do that, then I'm gonna use money. So that means having an amazing personal assistant. That means having all my stuff automated. So I spend less than one hour per month on my finances. It means setting up SOPs, standard operating procedures. So for example, when I fly, my assistant knows exactly what seat, what airline.

[00:46:49] There's no questions. It just runs. And I love that. A money dial is one of those things where you're constantly looking for new stuff and reading magazines, and like social status is a really interesting one. [00:47:00] Zero people admit to social status zero. It's the least popular money dial. Ironically, I believe it's the one that people spend the most money on because when you think about buying a house, and if you ask people like, why are you buying a house?

[00:47:13] And you really unpack it. A lot of people buy a house purely for social status because that's what they think you should do. That's what they think success is. In fact, in Jersey or Manhattan, it often makes no financial sense to buy a house. I've run the numbers. I lived in Manhattan for over 10 years.

[00:47:28] It made no sense. I rented and made more money renting because I invested the difference than to own. So again, people right now are going, this guy's insane. No, I just know how to run the numbers, and that's what I encourage you to do too. Chapter nine of my book, Social Status is one of those things that is demonized and stigmatized.

[00:47:46] But actually, if you wanna spend money for social status and you acknowledge it, I have no problem at all. You want to go to a pay for a nicer gym Equinox or a private gym, where it's always clean and you can always get on the machines. It's [00:48:00] fantastic. There's no problem with that. But let's just admit what we are paying for and then get clear.

[00:48:04] Hey, that's actually important to me and I'm okay with that. 

[00:48:08] Hala Taha: I love what you're saying because basically you're giving us guilt-free permission to spend what we love, spending on whatever's gonna make us happy. We live once. What's the point of taking all that money to the grave or spending it on things that we personally don't care about, and just like what we've been told to care about historically.

[00:48:26] Ramit Sethi: I wanna remind everybody. You have to be able to afford it. Absolutely. That is critical. So you can't just like twirl around three times and be like, rich life and then go buy a private jet. You need to be able to afford it. Same thing with buying a house. You know how many people I talk to buy a house just cause they think they should, but they can't actually afford it?

[00:48:40] Cuz they don't measure tco. That's a problem. But I do agree that when you really know what you love, Life becomes quite rich for you. So that is why when you look at my spending. It's very heavy in certain areas. Travel, convenience, fitness makes perfect sense for me, but it's really [00:49:00] light in other areas like my car and things that I'm just like not interested in.

[00:49:05] In fact, as a good example, my wife and we once had sushi in the city at this really nice place and it was mind blowing. It was amazing. The presentation, the food, all of it. That was for our anniversary and we looked at each other after and we were like, wow, we would love to do this more. And also, why are we going to sushi like once every month or two, just like cheap sushi, which isn't even satisfying.

[00:49:26] We'd rather not do that and then do this once a year. So that's the kind of decisions that you may start to make. Or you may go, look, I don't need all this fancy stuff. I would rather have sushi once every month. Also cool. But I want you to make those decisions for yourself. 

[00:49:40] Hala Taha: And to your point, it's all about balance.

[00:49:42] You can spend extravagantly on your money dials and then pull back on the things. That you don't care about. And so it's all about balance and what you can afford, like you said. So one more question on spending. You've got, spending frameworks. An interesting framework that you have is your book buying rule.

[00:49:57] So when you're thinking about buying a book, you just [00:50:00] automatically buying it. Why is that such an essential spend for you and how does that sort of turn the rule of logic in terms of how to spend on its head? 

[00:50:08] Ramit Sethi: I have a, I call it Ramit's book buying rule. And the rule is simple. If I see a book that I'm even remotely interested in for five seconds, I just buy it.

[00:50:16] I don't question it. I don't bother checking the review, I just buy it. Why? Because I know that to be able to get an author's life work for 10 or 15 bucks is the best deal you can ever get. And if I can just get one thing from it. It could change my life. So my belief with money is we should stop asking $3 questions and start asking $30,000 questions.

[00:50:38] A $3 question is should I buy this book? And let me open up 20 different tabs. It's just get the book. If you want the book, get the book. That's a $3 question. Same thing with should I switch banks to get an extra 0.01%. Or should I get the extra large Coke? It's that's a $3 question.

[00:50:54] You don't need to be asking that. But we ignore the 30,000 and $300,000 questions. What's my [00:51:00] savings rate? What's my investment rate? What's my expense ratio? And asset allocation, like most people don't even know what these terms are. And so we're sitting here fighting over the scraps of cheesecake, and forgetting that you're actually paying 28% of your returns to a financial advisor, whose fees are 1%, and you don't even understand that fee structure.

[00:51:18] I want people to stop agonizing over $3 questions and start asking $30,000 questions. 

[00:51:24] Hala Taha: I love that. Anybody who listens to this podcast. We're all trying to be young and profiting. We're all trying to build our wealth. So this is such a good segue to talk about your advice in the last 10 minutes that we have together about building wealth.

[00:51:37] So let's talk about getting a well paying job because this is aligned to those $30,000 questions. One of the ways to really make a big difference is to get a really good paying job. So what's your advice on getting your dream job? 

[00:51:50] Ramit Sethi: Oh my God! I have so much to say about this, so I totally agree. I think that sometimes getting a job is demonized online.

[00:51:56] Everyone's, only losers get jobs. Entrepreneurs are so cool. I'm [00:52:00] like, it's cool being an entrepreneur, but it's also hard. And a lot of people want to work at an amazing job, where they're respected and challenged and they can contribute more together than they could alone, and they're paid well.

[00:52:11] I have an entire course called Find Your Dream Job. There's a couple things that I would suggest that to extract from that course. Number one, finding a job is a skill. Okay? It's a skill. It's not just like throwing your resume out there. In fact, that's what everyone else does. Like you don't wanna be a loser candidate who just posts their resume and waits.

[00:52:29] That's how. People who get bad jobs, get jobs. Finding a dream job means first start off, identify your dream role, what's the title? Then identify the dream company. At this point, you've narrowed it down to roughly 15 or so companies, maybe 10. Now you can get surgical. You can circle them like a shark. You can start going through their LinkedIn.

[00:52:48] You can start doing informational interviews with employees currently there, or employees, even better, who used to work there. It's better cuz they'll tell you the truth. You can network your way in. Ask them like what's the key strategy. I'm [00:53:00] transitioning from this industry to that. What would you recommend?

[00:53:02] By the time you walk in that room? First of all, your resume has already been forwarded instead of gone through the front door. That's a key distinction. Second, you know what the company cares about, so you can position yourself as such. And third, you're ready to nail the interview. Let's talk about the interview in the negotiation for a second.

[00:53:16] People mistakenly think that their job in an interview is to answer questions, if you believe that you've already lost. Nobody wants a transcriptionist, when you're interviewing. Your job is to deliver your key messages. So if they say, why are you interested in this role? You better have a crisp answer.

[00:53:31] You better be able to nail that, and you should be able to do it in about 15 seconds. If they ask you, tell me about your last position, you better nail that. And you're not just answering that, I walked in the door and I unlocked the door, and then I sit down on my desk. Nobody cares.

[00:53:43] Tell them your key messages. There's three reasons that I'm really interested in this role. First, I've always demonstrated an interest in psychology and money, and that's why at my last company. I helped improve conversion rates by 16%. Looking at this company, one of the things that most interests me is blank.

[00:53:58] You better have those answers [00:54:00] ready to go. I show you how to do that stuff in the course. And then finally, of course, you can negotiate your salary. That's a skill. And please do not say Ramit. How are you gonna negotiate in an economy like this? People have been saying that for the last 15 years.

[00:54:13] The economy's actually fantastic. Unemployment is unbelievably low, and so maybe the same people who constantly talk about this economy, when things are good, bad, or in the middle, are actually just talking about themselves. You can learn the skills of finding a dream job and interviewing and negotiating, and you can land that dream job. Which will pay you well and potentially change the trajectory of your life.

[00:54:36] Hala Taha: Totally. And once we have that job, another way to really move the needle towards our rich life and do those $30,000 questions or moves that you talk about is getting a raise. So what's your advice in terms of increasing the frequency in which we get raises? 

[00:54:51] Ramit Sethi: I love this too. So I love talking about salary negotiation.

[00:54:54] Also part of the program, let me tell you what I would do. The common way that people do it is they wait until their [00:55:00] review and they go in there and they go and they shrink in their seat and they go do you think that maybe I could possibly, potentially get a raise? It's okay if you can't, but like maybe.

[00:55:07] And the boss was like no. Get the fuck outta here. Who wants to give anybody like that a raise? Sitting out there with their handout begging. No, you take control of your career. You set up a meeting with your boss and you say, you know what? I'd really love to discuss my career. I'd love to get some advice from you.

[00:55:22] Your boss says, great. You go in there, you say, you know what? I think I'm doing a good job based on what we talked about in my last review, but I wanna be a top performer. I wanna do an amazing job. Can we discuss what are the three things that would make me be a top performer in this role? In fact, in other words, I wanna make your job easier.

[00:55:38] Your boss is oh my God, she's loved it. No one's ever come in there and said that to her. So you discussed this, you agree again, if your boss says something like just do better, don't accept that your job is not to transcribe it. Your job is to push back and say, can you get specific? I wanna make sure that I can quantify that.

[00:55:52] So you walk outta that meeting, you send an email, Hey, I wanna summarize. And of course, at the end of that meeting, you go, by the way, Over the next six months, I'm gonna drive these numbers. I'm gonna drive these [00:56:00] goals assuming I can. I'd love to come back and discuss a compensation adjustment. But first, let me just hit these numbers.

[00:56:05] Your boss goes, oh my God, I'd never heard anyone talk like that. So you summarize, every two weeks you're sending a written update. By the time six months rolls around, you actually have to hit the numbers, okay? You can't just ask for money for no good reason. You walk in there, and this is what I love, it's theatrical.

[00:56:18] I call it the briefcase technique. You can Google it and see my video on it, but the brief, you could either literally use a briefcase or just a little folder, and you sit down, you go, you know what? I was so happy to talk to you six months ago. Six months ago. As we agreed on these three things, I've been updating you.

[00:56:31] I'm so pleased to report that our goal was a 6% improvement in conversion. I've actually affected a 7.2%. Boom, theatrically, pull it out, show this beautiful chart. Next is blah, blah, blah. Pull this chart out, and then this is my favorite part. You go, as we discussed last time, I'd like to discuss a compensation adjustment based on my research/ which of course, you've done salary research to see the comps.

[00:56:51] I should be getting paid, let's just say 75 to 82, and that's what I'd like to discuss today. Boom. You've laid [00:57:00] the groundwork, you've done the work. It's very difficult to say no to you now, and if they do, you can go work at another company. But the point is you have to put the work in and do it strategically in order to get a raise.

[00:57:11] And this is why top performers get the lion's share of the raises and everybody else gets the scraps. 

[00:57:18] Hala Taha: Totally. And one thing that I wanna call out, especially to my Gen Z listeners out there, and even like younger millennials who are quiet quitting, quiet quitting is the last way you're ever gonna get any sort of promotion or raise in your job.

[00:57:30] When you decide to do the bare minimum and you're not going above and beyond. Like me as an employer, I frequently give raises, well before anybody asks because it's actually really expensive to hire from the outside, and you wanna keep your top talent. And so going above and beyond is really important in order to continue increasing your income.

[00:57:48] Ramit Sethi: I wanna point something out about what you just said. It's really cool. A lot of people like my boss doesn't do that. My boss never gives a raise. I wanna respond in a couple ways. First off, I always ask people, have you ever asked for a race? Most people right [00:58:00] there go, no. I go, how did you ask for a raise?

[00:58:03] Most people just walk in and they just say I'd like a raise, and they have no rationale or justification. Finally, if your boss really does not give you raises. Then that tells you it may be time to move on. And when you are interviewing, you wanna be selective. Remember, you're, they're not just interviewing you, you're interviewing them.

[00:58:18] So when you get to the actual manager you're speaking to and they go, do you have any questions? Don't be like, you know what do you eat for lunch? No. Ask real questions. Hey, I'm a top performer. In my last role, I was a top performer. I generated X, Y, Z, and my boss wouldn't comp increase my compensation.

[00:58:35] Compensation is important to me. I'd love to understand your compensation policy for top performers, and if they say what we just heard. I love to proactively pay my top people more. That may be the right manager for you. And if not, you may need to keep looking. 

[00:58:49] Hala Taha: Okay. A couple last questions on how to build our rich life.

[00:58:52] This one is about saving. So there are high inflation rates. Everybody is struggling paying grocery bills, higher cost of living high [00:59:00] gas prices. I was doing some research in preparation for this interview. And according to go banking rates, 57% of Americans have less than a thousand dollars saved in their bank account going into 2023.

[00:59:12] So this is really scary and I'd love to understand what's your advice for people who are currently living paycheck to paycheck? How do you think they can break out of this cycle? 

[00:59:22] Ramit Sethi: Okay, let's talk about two things. So first of all, if you are living paycheck to paycheck, then it's incredibly difficult. And right now the things that are most affecting people are housing costs.

[00:59:32] That is number one by, it dwarfs everything else combined. So if your rent has gone up by 300, 400, $500 a month, or mortgage has gone way up because of property taxes, et cetera. It can be very difficult. So if we boil it down, there are really three ways to get ahead in that situation. And I call it the CEO strategy.

[00:59:50] Cut costs, which we're all familiar with, earn more, which most of us don't really think about. And then optimize your spending. That would be things like negotiating the [01:00:00] interest rate on your credit card, which can happen, making sure you've got the right loan amount, insurance, all of that. But ultimately, your biggest lever will very likely be to earn more.

[01:00:11] That's just the way it works. There's a limit to how much you can save, no limit to how much you can earn. I will also say that when I talk to people, this happens all the time in my podcast, they go, inflation's killing me. Groceries are just so crazy. I go you track your grocery spending? They go, no.

[01:00:25] They go, so what are you talking about? Inflation is one of those things that's just being thrown about in the air, and we use it as a reason to justify why things feel difficult. Things are difficult for a lot of people. There's no doubt about that. But in a recent Wall Street Journal article, there was a quote of a woman who said, inflation is so terrible.

[01:00:42] It's so hard. And then one paragraph later they mentioned that she recently took a massive vacation to Disney World with all of her family. It's like we need to actually be honest. So in a rich life, you've gotta be honest with yourself and honest with the people around you. Now, please trust me for everybody listening.

[01:00:58] I'm not one of those guys who's pull yourself [01:01:00] up by your bootstraps. It's so easy to become successful. If anything, I'm proud of the fact that I've not become a one of these center right blowhards, who just tells everyone, everybody can make it. No, there are structural problems and we need to address them.

[01:01:12] That's why I'm such a fierce advocate for housing. But if you are living paycheck to paycheck, the first thing is to build a buffer so that you can psychologically and financially extricate yourself from that cycle. 

[01:01:26] Hala Taha: I love that. Okay, last question. And this has to do with side hustle. So I started my business as a side hustle.

[01:01:32] Now I have over 60 employees, so also a big advocate of side hustles. And so in your research of over 5,000 people at IWT, you found that the number one barrier to making more money with a huge margin was actually finding the right idea. So what is the key to finding a good money-making idea? 

[01:01:50] Ramit Sethi: It's funny, I have people who have been following on my newsletter for over 10 years, and they want to make more money.

[01:01:56] They want to start a business. And the number one [01:02:00] barrier by far is finding an idea. And my response to that is 10 years is way too long to be sitting around waiting. It's like they open their mouth to the sky. Where's my idea? That's not how it works. Ideas don't fall down from the sky. You gotta go out and find them.

[01:02:13] A better reframe is, I don't need an idea. I need 20 ideas. And then I'm gonna test those ideas. I'm gonna chop 'em up and find out which ones are profitable and which ones are not. So many people are holding themselves back waiting for the perfect idea, and I say waiting because they're just like, subscribe to a bunch of people on social and newsletters, just waiting.

[01:02:35] That's not how it works. There's a process which you can do in a couple of days. I teach this in my unable program, and you can find 20 ideas and then you can rapidly test them for profitability. Basically. Don't let that excuse get in the way. It should not take you more than approximately six months to find an idea and be generating revenue from that idea.

[01:02:58] Hala Taha: And it goes back to what we were saying in [01:03:00] terms of your career, even mine and your career journey, us starting blogs and then pivoting into courses and launching a podcast, having a book like, it's like it's, you have a similar idea, but you're constantly evolving the way in which you monetize it.

[01:03:12] Ramit Sethi: You gotta just, you gotta get moving and you learn more from that first step and that second step than from pontificating, and sitting back and strategizing and drawing grids like enough. There's, yes, we should learn absolutely, but let's get in the game and we're gonna learn a lot more doing it.

[01:03:29] Hala Taha: For me, this has been such an incredible interview. I always end my interview asking two questions that I ask all my guests that come on the show. You've been so insightful, so I appreciate your time. The first question is, what is one actionable thing our Young and Profiteers can do today to become more profiting tomorrow?

[01:03:46] Ramit Sethi: Automatically set aside 10% of your income to be invested in low cost index funds. If you do that, especially if you are young, you'll be a millionaire and you can still earn more. You can still go out and buy a [01:04:00] round of drinks. You can still do all the things you love. When you set it up to happen automatically. It will limit your risk and it will add up to much more than you can even possibly imagine.

[01:04:10] Hala Taha: Very good advice. And what is your secret to profiting in life? 

[01:04:13] And this could be beyond financial. 

[01:04:16] Ramit Sethi: My secret to profiting in life is that I love my vision of a rich life, and I have amazing people, including my wife and my teammates, and my family around me who make it fun to pursue. 

[01:04:28] Hala Taha: Amazing!

[01:04:29] And before we go, tell us about your new Netflix show.

[01:04:32] Ramit Sethi: So this show's out, it's called How To Get Rich. I'm I think the magic behind the show is that all I knew about these couples and individuals was their name, and I had their financials. That's all I knew. And I then traveled around the country to meet them like a detective. You're gonna come along with me and we try to figure out what's the problem, what's really going on, and can we actually help them?

[01:04:56] And money's money. It's complicated. It's [01:05:00] emotional, it's not sitting around a spreadsheet. It's actually dealing with people's real rich lives. And a money show has not been done on a network in decades. So I'm very excited and I want everybody to go and check out how to get rich on Netflix.

[01:05:15] Hala Taha: Amazing. I'm sure it's gonna be incredible. You're so charismatic, so smart. I can't wait to watch it myself. And where can everybody learn more about you and everything that you do? 

[01:05:24] Ramit Sethi: You can find me at iwt.com/netflix. I'm actually doing a whole behind the scenes like what it was like to shoot the show, and you can find me on social media.

[01:05:33] My name is Ramit Sethi. 

[01:05:35] Hala Taha: Amazing. Thank you so much for your time. 

[01:05:37] Ramit Sethi: Thanks a lot.

[01:05:43] There you have it. Young and Profiteers. Ramit is so awesome and I really enjoyed this conversation. I enjoyed learning about the concept of a rich life and a rich life is your ideal life. It's one where you're looking at your personal relationships, your finances, and even your ordinary days, and you sit back and you say, wow, [01:06:00] I'm really living the life of my dreams.

[01:06:03] And your rich life is yours. It's not your parents. It's not your friends. It's not even my rich life. This is your rich life. Money is a tool for designing, enhancing, and enjoying the life that you are meant to live. You should spend your money in a way that makes you happy. And part of creating your rich life is the willingness to be different and unique.

[01:06:20] Spend your money where you wanna spend it, and don't worry about being judged. And the other thing I wanna call out is that many of us are playing defense with our finances. We're waiting till the end of the month. We're looking at our spending habits and then just shrugging it off. I guess I spent too much money.

[01:06:35] Maybe I'll try to do this a little differently next month. We're not taking control, we're not being proactive. And so I want you to take this episode as a sign to be proactive and play offense with your finances. Embrace automatic saving and investing. That is such an easy thing that you can do today to take control of your finances.

[01:06:52] Set aside money for specific goals and outline your top money dials to manifest your rich life. Just like we were talking about with Ramit earlier [01:07:00] today. And one of the best ways to fund your rich life is by running your own business. Once money isn't a primary constraint anymore. You'll actually have the freedom to design your own rich life.

[01:07:10] Personally for me, it wasn't until I became an entrepreneur, that I really had money to spend on the things that I loved, and I had true control over my earnings potential. When I worked corporate, I was doing all right. I was making over a hundred K, but I didn't really have flexibility to buy the things that really made me feel happy and like I accomplished something in my life.

[01:07:28] These luxury items, luxury travel, that's what speaks to me. Everyone is different. I had a salary and it was fixed. And I had to stay within those lines. I was spending like everybody told me to. I was investing the way that everybody told me to, and I really had a scarcity mindset. I was thinking about the future.

[01:07:46] I was saving for retirement instead of enjoying my life right now because I just wasn't earning enough, and money wasn't really a tool that I could explore yet. I've been an entrepreneur for almost three years now, and I'm truly living my dream life. I'm [01:08:00] coming up with new ideas every day to make more and more money.

[01:08:03] I'm profiting with an abundant mindset, buying all these luxury items that I still have to hide from my mother. I'll jokes aside, money is a tool, and being a business owner makes sure that I have full access, and my earnings potentials unlimited. It's just directly correlated to how creative I am, how hard I work, and that's such a good feeling to feel like you have control over your earnings potential.

[01:08:26] And as a bonus part of my job is teaching others how to run a successful business too, with the content I put out on Young and Profiting podcasts. And now my LinkedIn masterclass. So that's super rewarding. And I have to say that wasn't always like this as an entrepreneur, entrepreneurship is a lot of hard work.

[01:08:42] When I first started my companies, it was as a side hustle. So I was working two jobs, and then in the beginning, I was trying to get things off the ground. I was basically just reinvesting and putting all my time into it and not having any fun, and I really had to sacrifice. But now fast forward.

[01:08:56] Three years later, I'm really settled in as an entrepreneur. We're making a [01:09:00] lot of money, and now I get to take weekends off. I take nights off. I travel everywhere that I wanna go. I'm buying all these cool things that I always dreamed of having, and I really get to live my rich life. But it started with sacrifice to make sure that I could acquire money as a tool to live my rich life.

[01:09:17] So I hope I inspired you guys to live your own very rich life because I'm living mine right now and I have to say it is a really good feeling. And thank you guys all for helping me live my rich life. Thanks for listening to this episode of Young and Profiting podcast. If you listen, learned and profited from this episode, be sure to share it with your friends and family and drop us a five star review on Apple Podcast or wherever you listen to your podcast.

[01:09:41] If you like watching your podcast on video, we're on YouTube. All of our episodes are on YouTube. In fact, you may be watching us on YouTube right now, so shout out to you if you are. And you guys can also find me on Instagram @yapwithhala or LinkedIn by searching my name. It's Hala Taha. Big shout out to my amazing and hardworking YAP team.

[01:09:58] Thank you for all you do behind the scenes. [01:10:00] This is your host, the podcast, princess Hala Taha, signing off.

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