The Hidden Truths About Wealth That No One Talks About | Ramit Sethi (Archived Episode)

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We have to be humble enough to recognize you do not want to be a professional money manager. You even said you have somebody you call. Most people just want their money to grow. They want it to be relatively safe. They're willing to take a little up and down, but they don't want to think about it. They spend more time looking at a Yelp review for dinner on sunset than they do.

picking their investments. That is terrifyingly true. Yeah. And so instead of fighting that, let's just acknowledge it. Hey, I am never going to sit here and read all this stuff. And by the way, even if I did, that doesn't predict better returns. So I'm going to pick a simple investment strategy. I'm going to automate it and I'll spend one hour per month on my money done.

Everybody, welcome to another episode of Impact Theory. I am here with best-selling author and the most practical financial advisor I have ever met, Ramit Sethi. Ramit, welcome to the show, man. Thanks for having me back. Dude, this is round three. Yeah.

So round two began at the beginning of the pandemic, and I had brought a bunch of financial advisors on that were like super high level. I feel like now as we're maybe coming out of the pandemic, but maybe not that a lot has changed from GameStop to crypto to Wall Street Bets, all that stuff.

Do you think that we're living through a unique moment right now or are people just confused by something and really it's all the same? It's definitely a different situation if you think about where we were in 1999, 2000 with the tech boom, 2008, 2009 with the housing bubble.

And now, people will look back at this time as well. So we have super low interest rates. We have a bunch of people on Reddit moving markets. Literally, they shut an investment firm down. We have crypto making huge news up and down. And we also have a lot of people with changing jobs. So what does it mean for the average person?

Most good advice doesn't change over time. So should you be saving and automatically investing? Yes. Should you be thinking about the long term and choosing low cost investments? Yes, of course. Low cost means low fees. Low fees, yeah. Yeah. So for example, a lot of people don't know this, but anybody watching, if you go ask your parents this, you're going to have a very shocking conversation.

If you pay 1% in fees, like to a financial advisor, a lot of people think 1% no big deal. Over the course of your lifetime, guess what percentage of your gains go to the person you're paying the fees? Guess. I actually don't know. I know the answer is high. It's not 1%. People think, oh, 1%, it's 1% compounding. Correct. If you're paying 1% in fees, 28% of your returns are going to that advisor's talk. Over what period of time?

It's about over 30 plus years. It's a long term. If you pay 2% in fees, that's over 50% of your gains going straight into their pocket. So this math is really counterintuitive. A lot of people, he'll be counterintuitive. I know it's true and I still get tripped up by that. I'll give you a quick story of a young woman who wrote me on Instagram.

And she's read my book. And she goes, Ramit, I think I'm overpaying for this financial advisor. But I'm not sure. I said, OK, tell me your information. She's 31. She makes about 80K a year. And she was paying 1%. I said, cool. How much do you think over the course of your lifetime you will pay in fees? And she had no idea. I said, just take a guess. She goes 30 grand.

I said, okay, how do you feel about that? She said, 30 grand over the next 30 years. I feel okay about it. Sounds fair. I said, great. Let's do a couple quick calculations.

We run the numbers and I told her, you know, your income will probably increase a bit, da, da, da, da, your investments. It turns out she thought she was paying 30K in fees. She would actually pay $315,000 in fees. So I tell her this and on Instagram, she's like, no, no way. This cannot be real. I go, it's real. And so this is one of those things that sounds really boring. Oh, fees, you know, who really cares 1%?

but you could take $300,000 and use it.

to go out and have a blast, buy a house, invest more, spend it on the things you love. And so we want, even in a time like this where everything seems so crazy, it's actually not that crazy. We know what to do when there are low interest rates. We know that, what do we do? I actually don't know. I am horrendous at investing money. And I'm good at making money. I'm not good at investing money. Well, you don't have to be that good. Are you good at breathing oxygen?

Yes, I'm practiced anyway. Exactly, because you've done it a ton of times. You don't think about it. Great investing is not sitting there looking at some Bloomberg terminal and choosing the right stock. It's actually quite boring. It is setting up automated investing. It's having the money flow where it needs to go automatically. And if you do it right, you don't even think about it. You spend less than one hour per month on your investments.

So here's what I find interesting about you, and this is the reason that I always love spending time with you. You're very practical. It's the advice that people should do. You also have a psychology background, so you know why people don't end up doing it. The theme that I find most interesting right now is how much things have changed. So it's interesting to hear you echo that they really have changed.

From the things that i get involved in it may seem even more sort of dramatically different than it really is but i walk you through some of the things that i think you're up against with this very sage advice yeah but we're living in a moment now where investing is attracting younger and younger people.

They have a sense the system is broken. They don't know what that means, but that something doesn't work. And so people are trying to find that quick flip, that quick buck. You get crypto coming, which I heard you say, you may have changed or you may have doubled down, that people then invest in crypto are crazy. I think crypto is fucking interesting as the self profess guy that is not good at investing. So take that for us worth.

But there's something happening now between crypto between GameStop, Wall Street Bets, the way that like the collective of people can fuck up hedge funds like there's something going on right now where there's a casino mechanic and people are getting really into this casino mechanic like even NFTs which

I don't think of as an investment vehicle, but I am very excited about as a technology, but that's drawn me into this world where I see just a gaggle of people treating it like a casino, essentially. And now that it's high risk, high reward, lots of funding, ding, ding, flashing lights,

How many people do you think are getting pulled in in a way that's exciting? Like, hey, now you've got 17-year-olds creating YouTube content around investments, which is real, and I am utterly shocked by that. And how much of this is like, oh my god, we're heading towards a cliff.

That's a great question. Okay, let me start off with what happened with my first investments. So here it is, it's around 1999, 2000. Everybody thinks they're a tech genius. You put money in any stock, it goes up 26% the next day.

So what do I do? I take my college scholarship money, and I put some of it in the stock market thinking, this is easy money. Guarantee 20%. Yeah, guarantee. And every day it's going up and down, but mostly up. Was there a mass of euphoria? I wasn't focused on this at all. Yes, everybody believed they're a genius. So in a bull market, everybody believes they're a genius, and they all say the same phrase.

and this time it's different. It's such a funny phrase that in the investment world people make fun of it. They're mocked because it's never different. It's actually the same thing. Bubbles expand, but over time they mathematically cannot continue. So here we have people making millions of dollars who would otherwise be working in a parking garage and they are giving stock tips out and telling everybody, you gotta get into this. JDSU, this, you know, all kinds of stuff.

So I take my college scholarship money, put it in the market, and I very quickly lose half the money.

because of the crash or because of the crash. And so what happens is I realize, oh my God, I'm not as smart as I thought. It's not easy to become a millionaire through investing in two weeks. And so here is where there was a pivotal moment. One, I could have doubled down and said, I just picked the wrong stock. Let me pick another stock. This is very similar to what you hear with people in the crypto world.

Well, my investment quote, investment dropped 50%, but you know, I got to do this coin or that coin, et cetera.

What I chose to do is go different on saying, you know what? I don't think I'm that smart about investing. And I actually want to learn how fundamental basic investing works. So things like low cost, long term, things like reading about John Bogle's philosophy, et cetera. And I started to learn about it. And I realized you could spend your entire life trying to trade, but traders

hardly ever make money over the long term. And if we were going to define trade timing the market. Yeah, it's like, I understand this stock. It's undervalued. I'm going to buy because I know it's going. And I'm going to do it short term, right? So I'm going to create this narrative that, ooh, this stock, look at the trading, look at the chart, and I'm going to try to make quick money in four weeks. Everybody now knows somebody who trades. Those people almost all lose money. You'll notice

They're your best friend when they're making tons of money. Hey, bro, I made 600% in this stock. When it goes down, you don't really hear from that. Okay, that's called survivorship bias. Those people simply disappear, but they're really loud when they're making money. And you learn that mathematically, even top Wall Street investors, over 80% of them don't even beat the market.

What does that mean? It means that you watching this show right now can pick a simple vanguard fund and you can be over 80% of these fancy Wall Street suits. These guys were paid over a million dollars a year.

This stuff is really hard to believe. It's really hard to believe because it's counterintuitive, like 1% fees can be 28% out the door. People also don't understand compound growth. So for example, a lot of people right now are really dissatisfied, hey, I don't have enough money. I'm not going to ever be able to afford a house. And so therefore, I'm going to have to invest in these high risk investments that are pure speculation.

What's really happening there is they don't understand how compound interest works in one year than the last 20 years combined. Because of compound interest. Yeah, because of how it works. So is it really as simple as one doubling to two isn't very interesting, two doubling to four isn't very interesting, but when you start getting to a thousand doubling, that becomes real interesting, real fast. And it happens. And we know that math.

If you plug in your numbers to a compound interest calculator, you can predict essentially down to the month and year when you will become a millionaire. And does that calculate a doubling every seven years? Or is that a made up thing? No, you can change your assumptions. I generally choose a 7% return rate, 7% to 8%, because historically that's what we know happens and that factors inflation in. So at roughly 7% to 8%, your money's doubling approximately every

10 years. And people are going to get that by putting it in the stock market and getting it out of it. And just contributing to it every single month. Yeah, 50 bucks, 500 bucks, 5,000 bucks, whatever works for you, that's how it works. That's simple boring. So a lot of people watching this going, oh, this old guy, this Luddite, I prefer crypto. It's really exciting. Listen, investing is not about excitement. You want excitement? Get a dog. Watch a TNT drama.

Investing is boring. It's like watching concrete dry and it should be the real fun is what you do with your money how you live a rich life All right before we get to that. Yeah, I want to like really drill down So I'm currently not taking your advice. Okay, and you can legitimately just point out all the things that are stupid Okay, this is my fantasy. All right. Go ahead. I'll give you my sort of thesis the way that I think about it. So the

Because we're printing so much money that scares the life out of me I'm super ignorant when it comes to economics and money So now I'm just operating on emotion and I'm like, okay people are printing just like metric shit tons of money That does not seem like a sustainable thing. So I tell my money manager. Hey

I want to be as close to my money buried in the backyard as humanly possible. She's like, this is a terrible strategy because of inflation. Like, you don't understand your money's going to get cut. But I was thinking sort of that same thing, one to 2% a year, whatever. Like, I have plenty of time to figure this out. Then I start listening to Michael Saylor, who's like, A, that might not be the real inflation rate. It might be substantially higher. And when you get to, I forget the exact number of inflation. But if it's like at 15%, you

cut your money in half in like seven years or something ridiculous. And I was like, what? So then I was like, okay, now I'm paranoid about that. But when I look at the stock market, and it's, and I don't know where we are today, but it's like it was at the time that my money manager was like, you need more exposure to the stock market. I just kept thinking, I've made a lot of money. I believe I will make a lot more.

I just want to protect my downside. I'm not trying to grow my money. I'm just trying to like maintain my money. And the idea of buying into the stock market even dollar cost averaging when it seemed so clear to me, this has to be global. Like you said, it just cannot go up forever. So there has to be some sort of correction and the economy shut down. So I was like, how the fuck could this possibly? But of course now, because I didn't have much exposure to the stock market, I had some, but I didn't have much exposure to the stock market. It's like,

Up 28% or whatever. Yeah, you missed that on millions. 100%. Okay, let's talk about this. But am I about to be the one who's laughing when this finally all correct? Well, nobody knows. First of all, nobody knows. And if you bring anyone on the show who tells you what's going to happen in the stock market, they're an idiot and or they're lying. So I'm not going to do that. Nobody knows. And you'll find this in politics and money. A lot of people want to be comforted

By essentially a parental figure, somebody who comes in here and tells you, it's all going to be okay. Or conversely, it's all going to shit. And they prey on people's weaknesses as to what's going on. The best investors are humble. They know that nobody knows anything. What do we know we know that over time, the market continues to return approximately 7% to 8% and that's over 100 plus years.

We know that there are always people on Reddit and Twitter who've got these fanciful narrations of what's going on in the world and they all disappear once the narrative is proved incorrect. So people have been talking about inflation forever.

This is very low inflation. And in fact, even the recent inflation numbers are, I think, over 30% of his duty used car prices. There's a reason why I tell aspiring entrepreneurs about a particular tool. It is as close as you're going to come to a success shortcut. It's Shopify.

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just go to netsuite.com slash theory to get your copy. Again, that's netsuite.com slash theory. Okay. If you try to peg your investments to macro economics, you will be potentially losing out on lots of money. Now, let's talk about your situation. Your situation is different than the people watching this. You already have a lot of capital. So if you're somebody who's 25, 30, 35, and you're trying to grow your wealth,

That strategy is going to be different than your strategy time. So let's break them both down. For the person who's in the wealth accumulation phase, they have a job, they want to make some more money. Great. The best strategy for them is low cost, long-term investing. Take some percentage. I'd recommend at least 10, preferably 20% of your gross income if you can. Well, gross. Pre-tax.

Well, I like to be aggressive. If you can't do 20, go ahead and do 10. We're going to point them to a vanguard. Yeah. Just something real simple. Really simple. No, I've got feelings. No individual investors should be using Robin. Is that how Robinhood works? Like they're day trading on your behalf or they're encouraging you to day trade? They are encouraging you to trade. And you can see this through a variety of the design principles that you use. They give you free shares. We don't want to be engineered into trading. Trading is the enemy.

for real investment returns. We want boring, simple. That's where the real money is made. So when I talk to my friends who are high income earners and I ask them, you know, we talk about their investment strategy and they go, yeah, I just have it all in Vanguard. I'm like, these are the people who have serious money because the others have a lot of earnings, but they're trading at all. And as we know, even 1% fees can reduce it. Trading, taxes, those dramatically reduce your returns. So back to our 35 year old friend.

They want to accumulate some money. They say, okay, I'm going to automatically contribute 10, 15, 20%, whatever they can do aggressively. And at first it seems really boring. Oh, I'm putting like a hundred bucks a month or a thousand bucks a month. That's not that much.

But what they forget is that not only do you keep adding that, but over time the market tends to go up. And we know what happens. So your money isn't just doubling every 10 years. It's actually much faster than that because you're contributing more. And suddenly they wake up and they go, oh my God, that's a lot of money. And in three years, I'm going to have more money from that than I get from my job.

Wow, now you have some serious opportunity. You can choose whether to work there, start a business, go part-time. Are there different Vanguard account types? Yeah. So the thing that I really like for simple investments is called a target date fund. If you're 35, you know that you can just assume you're gonna retire at 65. You might retire earlier later, but just assume. And so you would pick a Vanguard fund like a 2050 fund. What is that? Imagine you have a pie chart.

In that pie chart, you have basically two different kinds of investments, equities or stocks, and fixed income or bonds. Equities are more aggressive. They tend to outperform bonds.

What a target date fund does is you just pick one fund. That's it. Just put all your money in there and it automatically reallocates over. How did I pick that fund? Is it just by age? No, no, it's just by age. So they do it? Yeah. So you tell them. I just say, hey, I want to retire by 65. I'm currently this age. Bingo. And then they go, I'm going to put you in China. No, no, no. They say, I'm going to put you in the Vanguard 2050 fund.

So, 2050 means you're going to retire in 2050. But how are they thinking about that? Is this like the world's most diversified portfolio? Is that sort of their basic? It's automatically diversified. So, it has international explosion. Automatically diversified. There's a human in this somewhere, even if it's just a human programming AI. Well, they have chosen to diversify in these target date funds based on this criteria. What they do is they- In Google- Go-head model? Yeah.

Yeah, so they include value investing. It's not necessarily value investing. Give us a 30 second break then. So when you invest, a lot of people will pick some stock. That's like me going over to your house for dinner and you go. Meaning some specific stock. Yeah, they'll pick like this stock. Yeah, they'll pick Tesla. That's like me going over to your house and you go, tonight we're eating salt.

What? That's not a meal. A meal includes your proteins and all kinds of other things. In your investment portfolio, if you just have Tesla, you might feel really good. You might say, hey, Rameet, nice investment strategy, but my investment's up 400%. Cool. I'm glad.

But over time, that cannot sustain itself. And so when that goes down, you want to have other investments that are going up and diversify. And again, yes, you may lose out on a little bit of gains. Like if you had picked Apple or Amazon, that would have been nice. But you have to remember, most people don't pick Apple. They don't pick Amazon. And so the people who pick it, you're usually too late. They're called mom and pop. They just picked something dumb. They were hyped on it for some reason. That's why they're called mom and pop investors. That's an insult.

Ma and Pa are the dumb money. The dumb money are random retail investors who are sitting in their basement using E-Trade or Robinhood. The sophisticated people are on Wall Street and even they can't pick the winners more than 20% of the time.

A target date fund automatically diversifies internationally. Really fast. So follow the incentives. This is very good advice for people. If I'm the guy on Wall Street, like I'll let this person remain nameless, but there's somebody in my life that I know and love, care about, think they're amazing. And they like to day trade. It gives them a sense of purpose. They do a lot of research and all this. And I remember one day I just thought, are you up or down all time? You're like down. I was like, what are you doing?

Like if they had been in it for 15 years? Yeah. So it wasn't even like a brief period of time. And I just thought, that's so interesting. It's like adult baseball cards. Yeah. You know what gives me a sense of purpose? Having a huge investment portfolio.

What does that mean? I want a portfolio that takes basically no time, huge from a dollar perspective. Yeah, huge. So I put it in something really simple. Target date fund or a series of index funds. What percentage of your net worth is in the target date fund? I would say not a target date fund. Now I have index funds, a series of index funds, as well as I've had a target index, meaning people don't fucking day trade it. It's like a group of companies grouped in some way as 500 or whatever.

It's basically what's inside of a target date fund, but just take an outside of it. Simple low cost, et cetera. Over 90% of my net worth is in index funds. So many different ballparkus index funds are you in? Less than 10.

Now, is that because remit is more clever than other people? And you just know which ones? No, it's because I have a larger net worth. And so you don't want to cram it all into one thing. That's correct. Because for 99% of people, a target date fund is a fantastic investment. Why? It's one place that you invest. You do not have to choose all kinds of crazy stuff. Two, and this is really important, it automatically gets more conservative as you get older. Now, if you're watching this right now, you're like, I don't care about that down the road. But think about it.

when grandma and grandpa were in 2008, and we all heard these stories of people losing 50% of their net worth overnight. Those older folks should have never been invested that aggressively. A target date fund will- Into tech high risk thing. Into equities. They should have had more conservative investment bonds. Yeah. And so you- Would you- You do not- Bons like the kiths of death right now?

no there's a big debate about whether or not people should even by bonds or have cash or whatever but you have to remember the average person watching this right now is not reading all the intricacies of bonds versus cash and yields

I just want my money to go where it should go. So we have to be humble enough to recognize you do not want to be a professional money manager. You even said you have somebody you call. Most people just want their money to grow. They want it to be relatively safe. They're willing to take a little up and down, but they don't want to think about it. They spend more time looking at a Yelp review for dinner on sunset than they do.

picking their investments. That is terrifyingly true. Yeah. And so instead of fighting that, let's just acknowledge it. Hey, I am never going to sit here and read all this stuff. And by the way, even if I did, that doesn't predict better returns. So I'm going to pick a simple investment strategy. I'm going to automate it. And I'll spend one hour per month on my money.

done. And over time, I'm going to accumulate a very, very substantial portfolio. I can take amazing vacations. I can provide for my family. I can have fun. That's a rich life.

Okay, this stuff gets really interesting, but I think there is a layer of complexity that it's wise for people to begin to pull back. So, low cost means low fees, so that's an important thing. Vanguard funds are the place to start. Vanguard is great. I'm not pitching Vanguard, it's where I have a lot of my money. Why not pitch Vanguard? I like them. I just don't, I want everybody to know. I don't have a deal with them.

Fair. No, there are other companies that are also great. You can choose, you know, Fidelity has a lot of great low-cost funds. Schwab has a low-cost fund. Schwab has a low-cost fund that they have the same theory as the Vanguard fund? No. Vanguard, in my opinion, the reason I have my money there is that the firm is built on low-cost. So the entire DNA of the firm is low-cost.

There are other firms like Fidelity that did not start off like that. They started off charging high net worth investors a lot of money. Now, because of Vanguard, they had to lower their fees because they were getting eaten alive. And so they did add these things, but they always have this DNA of let's charge higher fees for high net worth people. Now, if you want to pay, let's talk about fees for a second because I think this is interesting.

I have no problem if you want to hire an advisor and pay a premium price. $500 an hour, $5,000 for a review. I have no problem. Pay it. If you have a specific, complex situation or your high net worth, you want a second set of eyes, great. Most people would rather pay $250,000 in hidden fees than pay $10,000 out of their pocket.

Do you realize how insane that is? Yeah. They would rather pay 250 grand in hidden fees. And even when I tell them, hey, look at that 1%, let's do a little bit of math and I'll show you how much it adds up to. It's on paper, it's math. They go, ah, 1%, he's a nice guy. I go, you know, I'm sure he's a nice guy, take him out to a baseball game and save $240,000 and go out with your husband or wife.

That's how crazy our psychology is around fees. So what's broken? What are people doing wrong there? Psychologic. Well, they do not understand the complexity of fees. Fees and return rates. Do you think it's just that? Like, I'll tell you why. I'd make this very positive. Well, you want to delegate out to somebody else? Think about it. Yeah, exactly.

Well, you don't have to think about it, though. I do, though. There are realities to be faced. I mean, that's the crazy thing. This is the root of my obsession with you, is that here's what I want people to understand. I am clinging to your every word. Yeah. But you're still like, there's something that is not hitting you here. What's interesting is it takes seven touches to get a conversion. So this is the third time I've had you on. And now I'm like, fuck, man. Every time that I sit down with you, I'm like,

There's a way, so first I have to understand my own psychology. Okay, I don't want to think about it. That's rule number one. Rule number two is I need a gamified element. So part of what got me into crypto was I had an employee, shout out to David Kim, and he would relentlessly fucking drip on me. And he's like, Tom, are you looking at crypto? This is high to the bull market. Tell me you're looking at crypto. I'm like, David, I don't give a shit about investing.

every second that I spend thinking about the money that I already have, I'm not building something new. My obsession is building. So I'm literally like getting to the point where I'm like, hey, dude, stop fucking bringing this up. But I know that that's not a wise strategy. So he's like dripping on me and I'm like, ah, damn. And then finally, NFTs becomes a thing. And I realize it's going to be hugely important for my business.

I dive into NFTs as a technology, which forces me to learn about cryptocurrency and blockchain and all that. And so all of a sudden, I'm like, wait a second. This is actually really interesting. So that gave me the impetus I needed to get over the initial hurdle of, OK, what is it? Which ones are legit?

how does one get a wallet, all that stuff. So I do all of that. Then I get into the gamification part of it of like, okay, dollar cost averaging, which I think is smart because I don't think of myself as clever when it comes to investing. So I start dollar cost averaging into this. And since I'm looking at any investment as like a 10 to 30 year horizon. So momentary ups and downs, I literally don't care. I only invest the amount of money I'm prepared to lose.

I put it in and instead of looking at how much is my money going up, I started looking at how much is the average price at which I have bought in going down. And so that became my obsession, like buying the dip, like as long as the thesis isn't broken, you buy the dip, you buy the dip. So that's where this gets interesting. So as you're talking about Vanguard, I'm like, okay, how do I gamify this so that I'll actually do it?

add some context around your investment desires. I think that one of the mistakes that a lot of financial people make is they try to make everything about math. Hey, Tom, let me tell you all the reasons what you just said is wrong. And let's look at the return rates. And you might listen to me politely, but deep down, you're like, I don't like what this guy's saying. Let's actually start with psychology. What you just told me is,

Hey, I like gamification. I don't want to think about it, and I have a long, long time horizon. Okay, let's start there. Perfect. And you also said something really important, which is you like to create. That's what drives you, just managing what you've got is not exciting. Are all those things accurate? All right.

So here's what bad advice would be, and then here's I think what would be better advice. Bad advice would be, Tom, sell all that bullshit. It's all like crackpot stuff. Put it in a simple target date fund and get on with your life. Come on, Tom, that's what the investment returns say. And you're going to be like, get the hell out of here. Better advice would be, hey, Tom.

It sounds like you want to have some control over your investments. It sounds like it actually drives you to see at what price you're purchasing it. But it also sounds like you don't want to think much about the basic mechanics. So why don't we do something like this? Why don't we take

80, 90% of your portfolio and put it in low-cost funds. And take 10% and say, this is total play money. In fact, you have to play with it or invest it or spend it in some way. And if it's going to be on NFTs or Bitcoin or whatever,

Great. Suddenly, now you have a real thesis, which is this is long-term stuff. We kind of know the returns there. Great. I'm going to be safe no matter what happens. But I'm also going to be making, giving room for my psychology, my need and desire to track things and gamify it and play with it.

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I've got a personal invite for you guys to join me, Tom Build You Live, on my Twitch stream, where I play the video game that I'm building, Project Kaizen, and Talk Mindset. So when you join the stream, you are getting more than just gameplay, you're getting practical insights into how to shape your mind if you want to achieve something extraordinary in life.

This is more than entertainment. It is systematic growth through gaming. You'll be joining a community focused on having fun playing games together as a community and talking about mindset and the strategies for real success. Each stream is high energy gameplay mixed with real conversations around mindset and success. You can ask me about business mindset. The game itself, we are here to talk about all of the entertainment focus things that we're doing here at Impact Theory.

I am live almost every day from 6 30 a.m. to 8 30 a.m. Pacific time. So make sure you turn on that notification bell. You can find me at twitch.tv forward slash Tom Diliu. That's T-O-M-B-I-L-Y-E-U. All right, guys, I will see you live in stream in the morning's bright, nearly 6 30 a.m. Pacific time.

Yeah, that clarity, knowing what you want, getting people, that's one of the things that you do really well, getting people to be hyper specific. We all have to go on our own investment journey. I did, when I thought I was a genius in 2000, and I put it all in the market, picking individual stocks. And I realized, oh man, I got to learn how this works. And so there are some basic investment truths.

And there are some basic truths in every industry. For example, you have people, they struggle to lose weight, for example. In my case, I struggled to gain weight. I was a really skinny guy. And you could have sat there and told me, hey, Ramit, you need to eat more calories. And I would have said, no, no, no, no, you don't understand. I have a fast metabolism, blah, blah, blah.

And I had to go through this journey. I had to ask friends to help me train at the gym. I had to watch other people read a bunch of books and get trainers. And eventually I realized, oh my gosh, it's actually pretty simple. But to get there.

I had to go like this. So I actually have a lot of compassion for anyone who's on their investment journey or financial journey, whether it's talking about investments in some pretty technical stuff like recovery, whether it's talking about money with your partner, because this stuff is not easy. Once you really get good at it, it's quite simple. And you realize, oh my gosh, I only need to sort of set up 20% automated savings. I need to have these kind of basic ratios.

But the rest of it's just like easy to get there is not easy. So I totally understand that. And for anyone watching, we all start at different places, whether it's on our fitness journey, money journey, spiritual journey. And you know, the goal I think is to find something that fits us is simple and helps us lead a rich life.

Yeah, I love that. And I encourage people to watch episodes one and two. We talk more about the rich life. The love and money stuff that you're doing now, I find really, really interesting. I've watched you with couples, like almost like a therapy session. It's really good, by the way. I've really fallen in love with a lot of the content you've done through the pandemic, that sort of really intimate stuff.

But what do you find in the love and money section where couples are coming together maybe for the first time? What are some common issues that they struggle through and how do you help them get to the other side of that? The most common issue of all is that one partner is a spender and one is a saver.

There are other issues which a lot of people will say, I can't seem to get on the same page. And when I ask them, tell me about a specific time in the last 30 days where you two were not on the same page, they're like, bro. They instantly know and it hits them very deeply. Is this like a personality type thing? Like what's driving these disconnects?

We have to remember that most of us don't even understand money for ourselves. And then when we get with a partner, it's like one plus one equals 20. We really don't understand how to bring our perspectives together. And so here we have one person who says, hey, we have a lot of money. Like we can actually afford to go out to a nice vacation or dinner. And the other person says, I don't feel safe.

And so one person is saying, what? Look at the math. That was pretty much me early on in my relationship with my wife. I don't feel safe. No, no, no. I was like, look at the math. I was like, look at the compound interest. We have a growth rate assumption here. I was like, let living in the spreadsheet. And my wife, she said, I want to use money to feel safe.

I was like, what does that word mean? Safe, because to me, the word I use to describe money is growth. I would guess that that's similar for you. Like, growth. I want to grow. I want to have an impact. And so when we originally started talking, we started to rewind. And we would talk about, you know, what were the things our parents said around the dinner table?

And it was striking. Everyone has money beliefs that they learned as a kid. So their parents might have said, we don't talk about money in this family. Or, oh, those rich people, that's for rich people, not for people like us. Do you have any things that you remember hearing as a kid about money? I don't. I thought about that when I was researching. I thought, God, what did my parents

say about money. It was just more. We couldn't afford that. That I heard a lot. That's a huge one. So think about when you grow up here. We can't afford that. We can't afford that. One day, when you have actually a pretty decent amount of money, a lot of people still tell themselves, we can't afford that.

So they still go on the same type of vacations they would have gone on 15 years ago. They still tell their kids we can't afford that. But when we look at the numbers, actually you can afford that and a lot more. But everybody talks about how to save and nobody talks about how to spend. So when I'm speaking to these couples,

It's really fascinating. They will come to me and we do this podcast and they'll fill out all their information. It's full dossier. I know their net worth. I know their income. And I talk to them about their problem and I go on a scale of one to 10. How big of a deal is this? And they go, you know, like maybe a four out of 10 in their relationship. Yeah, in their relationship. I go.

You came on this show, we're using your real numbers and name and voice, and you're telling me this is a four out of 10? And they go, yeah, they minimize the problem. So what I say to them is, okay, the two of you don't see eye to eye on how much is spent on a car. Now, imagine fast forwarding 30 years. You've got two kids, you've got a mortgage, you've made 10,000 financial decisions.

How big of a deal do you think this disagreement is? And they instantly go, oh, that's a nine out of 10. Because most of us, in the moment, we minimize our financial problems with our partner, but we can easily see how people get divorced over money when it calcifies and amplifies over the next 25 years.

And that's really what I want to work with these folks on this new podcast, where people come in and for the first time ever, you can hear real couples sharing real stories with real numbers behind closed doors. So as you help them work through this is step number one. All right, let's figure out what your money narrative is. Let's get to the things that your parents said. I always ask them, what's your rich life?

And I start there because when people come in to talk about money, they're really nervous and apprehensive. Guess what they think I'm going to tell them? The first thing in this conversation.

Either you can't afford it, you have to save. Yeah. Just like a series of shitty, restrictive things that make them feel bad. You can't go out to eat. You can't afford that car. No, your kids can't go to school. And so they're already like this when they come in. I go, all right, I know your numbers. That's cool. What's your rich life? And this is striking. You can almost hear it. They're visibly affected. They go, I want to do what I want when I want. I go, OK, what do you want to do?

They've never thought about it. They're just stuck. Or they go, I want to have a million bucks. I go, okay, what does a million get you? I don't know. They just pick that number. Or they say, we're in debt and we just want to get to zero. I don't find that very motivation. It's like getting to zero, that's your rich life. So I push them. And a lot of people will say something like, I want to travel. We want to travel. I say, great. Where do you want to go? Want to go to Bali?

Which seat on the airplane do you want to sit on?

And there's looking at me like I'm crazy because no one has actually ever taken an interest in what they want to do with their money. It's always no, no, no. Where do you want to eat? Who do you want to take with you? What are you going to show your kids when you go there? And their face is lighting up. You can hear it. Everybody deep down knows something they want to do with their money. One woman told me, I want to go to Whole Foods and be able to spend without having to look at the price tag.

That was a very modest goal. I said, okay. And by the way, she already had like hundreds of thousands of dollars of net worth. She could already do it. Whole Foods is expensive. Maybe if she was going a few times a week, you're right. But I said, what then? And she was stumped. Here we have somebody in their late 30s who's been very financially successful. And her dream, her dream is to go to Whole Foods and not look at the price tag.

What do you do though when the couples like they each have this really vivid sense of what they want once you pull it out of them, but that they really are different? Okay. The good news is that you don't have to always agree with your partner on certain things. He might want to spend money on a certain thing.

It's fine. If you can jointly afford it or he can individually afford it, that's fine. What do you mean? So these are couples, do you have them separate their money? Well, they just come to me as is. I'm first most interested in their story. So some of them have a joint account. Some of them are totally separate. Or what I like to recommend for couples is they have a joint account.

And they have their own independent word. What do you do? Well, we don't now. But when Lisa and I first got married, that's exactly what we did. We said, all right, we have one account where this is for all the bills. Then we each get an equal amount of spending money in a separate account. So now you can do whatever you want. You can save your money. You can spend your money. And that was the saving grace, like figuring that out early on. What did that do for you?

It freed us up because the things I wanted to spend money on, she thought was dumb. And the thing she wanted to spend money on, I thought was dumb. So I was just like, hey, you do you. But look at the approach you took. It's so important for everybody to catch this. You could have thought about it. You could have discussed it and debated it. But people do this for their entire lives. And they're basically asking $3 questions. The $30,000 question they should really be asking is, how do we set up a system

that lets us honor each other's financial desires. So again, you could sit there and fight about cosmetics or cars or suitcases or whatever. And you do that for the rest of your life. That's what most people do. Oh my God. It's horrible. It's awful to sit there and you're fighting the same battle you fought 20 years ago. You're doing it today. Or what you and Lisa did, which is amazing, you set up a system. Okay, joint. Now we got our mortgage or rent covered, etc.

independent accounts, and now the problem vanishes. So money always is going to be complicated, especially when you have two people, different earnings, different money philosophies. But the solution is not to simply fight and talk each other into seeing your perspective. Yes, you should talk about it. But sometimes you need to add some systems and psychology, which really solves the problem. Let's get into a problem that I have to imagine is becoming a thing where

the woman is making more than the guy, and he's not feeling great about it. Is that a thing? Yeah, oh yeah, more than ever. In fact, in urban areas in their 20s, women earn more than men, which is a little known fact. Yeah, it's very interesting. And more women graduate from college, so that number will continue to become skewed. So I think that there are a lot of

different issues that get brought to bear in these couples conversations. And a lot of times we're not aware of them. So I spoke to a couple and they both were earning about 150k each. So they were high earning couple, no kids.

And he had decided, as he put it, he said, I'm the man of the house. And so he was paying for everything. So I said to him, even though she's making the same money, that's interesting. Very interesting. So I said, and he's young, they're both young. I said, what does man of the house mean to you?

Okay. And he thought he'd never thought about it. He said, well, I guess it means, you know, providing financially for my family. And yeah, that's it. I said, okay, man, the house means you provide financially. Okay. And then I asked his partner,

What do you think about this? She goes, I want to contribute. I make basically the same amount I've tried to. He won't let me. And now he's anxious about money because every month he's in the red. So let's get this. He created a scenario that he now has to live in where because he's the quote, man of the house, he's got to pay for everything he can't afford to. And so each month he's going red and now he's really anxious about money.

So, okay, what's the obvious solution? It's for them to have a joint expense, break it down, she contributes basically equally to what he does. That's the easy part. That's what most people think, okay, done. Were they married or dating? I believe they were married. They had a mortgage together.

But the more complicated thing, which we talk about in this episode that's on my podcast, is how did you get there? Why did you think that you have to be the, quote, man of the house? Where'd that come from? So what we unwind it, and I ask him a lot of questions. Guess what he tells me?

He goes, his parents were immigrants. They didn't speak very good English. He said that he had to help deal with the collection calls that were coming in because his dad would overspend. I asked him what age he was dealing with collection agencies. You know what he told me? Elementary school. So since elementary school, he's been fielding off these collectors.

He sees money as a series of problems he has to fix. No joy. There's no joy in money for him. I asked him, you know, when you go on a trip, would you ever stay at a place that's a little bit nicer? He goes, why would I? I can stay at like basically a Motel 6. This guy has this substantial asset based, so does he.

And I find that heartbreaking. They're both working so hard. They're very diligent. They spend less than 11% on their mortgage. And there's no joy. So she wanted to go on a trip. And we worked and worked. And finally, he agreed to let her take the lead on it. When you listen to this episode, you realize,

It's not just the math and the spreadsheet. That's the first temptation is, well, they should just split their assets and expenses. Okay, that's easy. It's really saying, how did we come to thinking about money like this? How did you grow up with it? When you describe money, is it a sense of joy or purpose or is it something I'm scared of and anxious of? These are the things that nobody really talks about because you have to know money and psychology at the same time.

Man, that is really interesting. When Lisa and I first got together, I definitely wanted to, I wouldn't have said be the man of the house, but I liked that I was able to make enough that I could take care of both of us. I mean, we were dirt poor, but at least we had a roof over our heads.

You know, as she became more interested in business and like really got into it, it's a really big transition. Like if you come in with a certain mindset, it's going to be hard to shift, but she in the beginning anyway couldn't work. I don't, if she were making money, I never would have said, oh, I'm going to still pay for everything and be stressed to fuck out all the time. Wow. So do you think just hypothetically,

you would have had a conversation or a series of conversations. How do you think that transition would have been? Yeah, well, so one I can tell you what we did is so we'd been married for about eight years when she stepped into a true entrepreneur role. And it was very difficult because it went from she would facilitate my entire life. So she set my clothes out. She made my food. She like paid the bills. She just made sure that I didn't have to think about anything other than building a business.

Yeah. And that was extraordinary. I cherish that gift more than you can imagine. And so when she stepped into being an entrepreneur, she very quickly realized, I cannot do both. This isn't fun. And so she was just like, look, I'm not going to be able to keep taking care of this stuff for you. And she put like a timeline. I don't remember how long, but like for the next month, I'll still help. But hey, at the end of that, like you're really going to have to deal with all the stuff on your own. Yeah.

And there was friction in the marriage through that moment, like really changing roles, changing like what this dynamic is going to be, but were very communicative. And I have very strong rules in my life. And so one of my rules around my wife is that I only do things that elevate her.

So I don't shut her down. I don't make her feel less than. So it was like, if she wants to be an entrepreneur, first of all, she's quite good at it. And by the time she made that decision, it was pretty apparent. She's got some fucking skills on her. So I just said, look, by my own code of ethics, I want you to live whatever life you want to live and to become the most joyful, powerful version of yourself. And so if this is direction you want to go in, then we'll figure this stuff out. But then I also put limits on it and said, look, I don't mind you not cleaning anymore.

But don't expect me to clean. So we'll create areas. And if it's a common area, I will do my half of it, you do your half. But there are going to be areas that are mine, and they're going to be as fucking messy as I want them. And as long as you never come, give me a hard time about my own areas, and I never fuck you up in common areas, then I will expect that we are fine.

And so that was stuff where I think for a while there was friction there for her where it was like, well, I don't like that you're part of the closet is messy. And I'm like, hey, Homie, we both have to come to

a shared understanding of what works for you and what works for me. So, so many things I heard in that example. Thanks for sharing that. I didn't know that, but I think every couple has gone through some sort of financial series of conversations, not as elegantly as you did, honestly. I think the things that I hear are, one, there was a pivotal moment where something changed, at least they decided to become an entrepreneur.

to cause some pain. It had to cause pain in order for you to make a change. Three, you sat down and had a series of conversations. Doesn't sound like it was just one. Probably months or even years of conversations. Same as my wife and I have continued to have. And then four, you came up with some agreements. You mentioned that you have a rule.

for how you relate to your wife. I love when people have rules for their life. I don't even have to agree with them, but when they tell me, you know, I have four rules for parenting or three rules for eating. In my case, I have remeats 10 money rules. That shows that someone has really thought about it. And by the way, I love that you elevate your wife. I think that's awesome.

So lots of examples in there that I would love for others to learn from. And this is some of the stuff we talk about on the podcast, which is when partners think about money, the way that they usually relate to it is they know something that they disagree about. They try to

Band-Aid over it, paper over it, until it blows up and then they try to basically extinguish the fire and then they just go back to living life the way they were. And it works. It works for a while. Many of us have parents or relatives that have been fighting the same fight for 50 years.

But I don't really think that's a joyful way to live with money. I think that when you and your partner, in your case, you and your wife, are financially aligned, then instead of, you know, I'm a spender, she's a saver, or vice versa, you're both rowing in the same direction. And life becomes way more fun. You can live the kind of life you want. You can have a beautiful house, eat it the places you want, spend money in the way you like. That is a really joyful way to use money to live your life.

So after you have the rich life definition, and you've got one person as a spender and one as a saver, how do you help them? So separate spending accounts sounds like one thing. Well, again, I spend 70% of the time listening to their story. I want to first understand it. They don't even understand their own story. Most people are behaving a certain way about finances. And when you ask them, why do you do that, they actually have no idea.

And in less than 10 minutes, we can trace it back to something they learned in college or as a child, and they go, oh, my God. For example, I spoke to a young woman who was obsessed with buying a house. She was obsessed. And in America, real estate is religion. A lot of us believe, God, I buy a house. It's the best investment ever. That's not true. But I started probing her. How come?

And first of all, I said, what kind of house do you want to buy? She lights up. This is in New York. She goes, I want to have an apartment on the Upper East Side, two bedrooms, da da da da da. She had the whole thing laid down her head. Great. And I said, you know, tell me more. What do you want to do with your money? She said, well, I want to be able to go out. I want to eat, travel, et cetera. So the house thing really interested me because she was so deep on what type of house she wanted.

And she felt frustrated because she couldn't afford it. I asked her why. It turns out that she, she grew up fairly upper class and in high school during the recession, her dad lost everything and they lost their house. So what do you think a house represents to her?

safety, security. And so she was sacrificing all kinds of things she could have been doing today so that she could buy a house. And when I asked her, why do you want a house? She didn't even connect that with safety. Now that she understood that,

She said, oh my gosh, now I can make better financial decisions. I can save and project exactly when I'm going to get a house. I don't need a two bedroom. I could have a one bedroom. It's fine. So I spend time unpacking their story. And often, almost always, you find that there's some way they're behaving, that when it's pointed out to them, they go, oh my God, I never

Yeah, the story of money right there. Yeah. Dude, I could talk to you about this stuff all day. So the new podcast, where can people find it? What's it called? It's called, I will teach you to be rich with Ramit Sethi. And you can find it on Apple, Spotify, any podcast place. And I think you will love to hear these stories because

I mean, none of us have ever been given permission to sit in a room and hear a couple talk about their money disagreements, share the amount they have. And I have people on the show who have $30,000 incomes. I have people who have over $8 million in net worth, and they're sharing everything. So it's an opportunity to listen in, see what others are doing, and then reflect on how you think about money in your relationships.

Dude, I'm so glad you're doing that. Your content is fantastic. Thank you so much again for coming on. Guys, when it comes to money, I'm telling you, I have talked to some of the most famous people in the space of finance. And there are a few people that can ground it the way that he can in terms of what you should do right now today. And speaking from experience, this applies no matter what your net worth. So take his advice, put it to action. I know I'm going to be. It took me three.

three times, but we have three episodes now. So make sure that you watch all three and speaking of things that you should do immediately to improve your life. If you haven't already, be sure to subscribe. And until next time, my friends, be legendary. Take care. Peace. It's so important to be, to be really incorporating your own psychology when you think about money. And part of that is, what do I want? Where did I get these beliefs from? Whether it's a movie or a family friend. And then what can I do today to start moving along and developing my ritualized?

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I've got a personal invite for you guys to join me, Tom Build You Live, on my Twitch stream, where I play the video game that I'm building, Project Kaizen, and Talk Mindset. So when you join the stream, you are getting more than just gameplay, you're getting practical insights into how to shape your mind if you want to achieve something extraordinary in life.

This is more than entertainment. It is systematic growth through gaming. You'll be joining a community focused on having fun playing games together as a community and talking about mindset and the strategies for real success. Each stream is high energy gameplay mixed with real conversations around mindset and success. You can ask me about business mindset. The game itself, we are here to talk about all of the entertainment focus things that we're doing here at Impact Theory.

I am live almost every day from 6.30 a.m. to 8.30 a.m. Pacific time. So make sure you turn on that notification bell. You can find me at twitch.tv forward slash Tom Dilieu. That's T-O-M-B-I-L-Y-E-U. All right, guys, obviously you live in stream. In the mornings, bright, nearly 6.30 a.m. Pacific time.