--:-- Mel Robbins: Hey, it's your friend Mel, and today's episode of the Mel Robbins Podcast is rich with tools and strategies to help you make more money. Let's do this thing.
--:-- [Intro music fades]
--:-- Mel Robbins: Okay, I have been counting down the days for this particular episode, because today I have somebody on the show that I have admired from afar for a very long time. I don't know if there are people that you follow online that you're just like, "Gosh, I would just love to meet this person in real life one day." Well, today is that day for you and for me to meet one of the most inspiring experts and human beings out there when it comes to being rich. And not just rich with money, but rich with experiences and happiness and building a life that you just love.
--:-- Mel Robbins: This is a guy that is a *New York Times* bestselling author. Millions of people come to him to help them change the way they think about money, to get out of debt, to start businesses, to retire early, and most importantly, to imagine, design, and create a rich life. He has a brand new Netflix series, *How to Get Rich*, where he is coaching six people, just like you and me, on these exact things. Who am I talking about? I'm talking about none other than Ramit Sethi.
--:-- Mel Robbins: He has a simple step-by-step process that he's going to walk us through at zero cost today for how you can change the way you think about money, how you can design a completely different type of life, and the four simple things that you need to pay attention to in order to make it a reality. I've got sweaty palms. I'm so excited to talk to this guy. So let's just jump into it. Do we have him here?
--:-- [Sound of door opening or mic being adjusted]
--:-- Mel Robbins: Ramit, oh my gosh, I'm so excited that you're here. Ramit, thank you for being here.
--:-- Ramit Sethi: Thanks for having me.
--:-- Mel Robbins: It is so exciting to meet you. I have been a fan of your work for so long. I have stalked your website because it is amazing. I can't believe we haven't met until now. Why is it? I'm trying to figure it out myself, but regardless, I'm excited that we get a chance to do it today.
--:-- Ramit Sethi: Me too. Me too.
--:-- Mel Robbins: And I'm really excited for everybody to hear what you're about to teach us. Because when I think about somebody who could fundamentally change the way that a person thinks about money and the way they use money to live and experience what you call a rich life, you're the one person on the planet that can do it. I mean, they're not just passing out Netflix shows to everybody.
--:-- Ramit Sethi: Well, thank you. I love talking about this. It's kind of weird. Usually you don't think about someone actually loving talking about money. And it's actually—okay, listen, I've written a book about Roth IRAs and automation and all that stuff.
--:-- Mel Robbins: Oh my God, I'm already asleep.
--:-- Ramit Sethi: We're not talking about that.
--:-- Mel Robbins: Hey, me too. And I'm the one who wrote the book on it.
--:-- Ramit Sethi: So what I'm much more excited to talk about now is how to actually apply that money so you can live your rich life. And to me, it's that beautiful tapestry of life: I love eating out or I love travel. And to be able to go deeper on that and to use money to do it—what could be more exciting?
--:-- Mel Robbins: Oh my gosh. And you know what else I love about you? I love that you come at this after messing things up with money. And so I would love to have you take us all the way back to 2004 where you are a student at Stanford, but when you get your first scholarship check, you do something stupid with it.
--:-- Ramit Sethi: Well, I didn't think it was stupid at the time. I thought it was genius. So here I am in high school. It's like late '99, 2000. And I grew up the son of Indian immigrant parents. They came from India, built their life here. My dad worked, my mom stayed home with us. And when it came time for college, they told us, of course you're going to college, but we don't have money, so you've got to find scholarships for it. They just told us point blank.
--:-- Ramit Sethi: And we may not have had a lot of money. For us, eating out was a thing we did once every six to eight weeks, always with a coupon. We would never buy enough drinks for the whole family. We'd have two and we would share it. But they taught us how to work, and they taught us this idea that if you work hard enough, usually the money stuff will take care of itself. So culturally, we grew up knowing education is important. And personally, I love systems. I love building a system and doing the work once so I don't have to do it again. That's why I don't like budgets. I don't have a budget. I don't think anybody should have a budget for that matter. And we can talk about that. Because who wants to track the price of apples for the rest of your life? It sounds like hell.
--:-- Mel Robbins: Does anybody other than a CPA or a controller for a company actually track a budget? Can we just start there? No.
--:-- Ramit Sethi: And in fact, some of the very people who tell America to keep budgets don't even keep a budget themselves.
--:-- Ramit Sethi: So let's just get real. Okay, so here I am. I applied for 65 scholarships, and I built this system. So I ended up doing it pretty rapidly. By the end, it was taking me like an hour an application. I started to get scholarships.
--:-- Mel Robbins: And how many of the 65 did you land?
--:-- Ramit Sethi: I probably got 10 to 12.
--:-- Mel Robbins: That's amazing.
--:-- Ramit Sethi: Maybe 15. Some were small, like $1,000. Some were extremely large, which ended up paying for undergrad and grad school.
--:-- Ramit Sethi: So I was very fortunate. But again, if I hadn't gotten all those scholarships, I still had plan B, plan C, plan D. And I think we all should have a plan B because life doesn't always work out the way we think it's going to.
--:-- Mel Robbins: That's true.
--:-- Ramit Sethi: So here I am. I get this scholarship check, and they wrote the check to me, Mr. Ramit Sethi, high school kid in 1999, when all I was reading was these thick magazines about tech stocks. I go, "Cool. I'm going to invest this scholarship money. Because I'm a genius."
--:-- Mel Robbins: Oh, 1999.
--:-- Mel Robbins: Wasn't that the year that everything crashed?
--:-- Ramit Sethi: Well, it hadn't crashed when I invested. It crashed right after I invested.
--:-- Ramit Sethi: So I learned some really valuable lessons. First of all, I lost half my money immediately. And that humbled me. And I think when these things happen, it gives us a chance to choose which path we want to take. For me, I could have been like, "Investing is a scam and I'm never doing it again." A lot of us feel that way. Luckily, I was so fortunate that my parents, especially my dad, really encouraged me: "Hey, try to figure out what happened. Look, learn." And also, in the grand scheme, losing that money—while a lot of money at the time—ended up being a little bit of money in the grand scheme.
--:-- Ramit Sethi: So here I was at Stanford now. I'm studying social psychology, human behavior, persuasion. And I'm reading all the books about personal finance, investing, compound interest, asset allocation. And I'm looking around and I'm going, "The emperor has no clothes."
--:-- Mel Robbins: What does that mean?
--:-- Ramit Sethi: All the advice that we get about money—tell me if this sounds familiar to anybody listening. "Don't spend money on lattes. Don't buy new jeans. Don't go on vacation. In fact, hoard your money in a little cave. And then one day when you're 93 years old, maybe, just maybe, society will give you permission to go enjoy it." What kind of horrible life is that? And here I am, a young guy in college. I want to go out with my friends. My dream at the time was to be able to buy a round of drinks for my friends, not worry about it. That was a rich life to me.
--:-- Mel Robbins: Without a coupon.
--:-- Ramit Sethi: Not a coupon. Exactly. And so, I love that you said that because as I got a little older and I graduated, you know what my rich life was in my early 20s?
--:-- Ramit Sethi: It was literally to be able to go to a restaurant and order an appetizer without worrying about the price. Because when we were a kid, we couldn't afford to do it. And what is that? $10? Maybe $15? And it felt incredible. So, in fact, let me ask you: When you think about your early formative 20s, what was a thing for you that you were just like, "That feels almost irrationally amazing to be able to do"?
--:-- Mel Robbins: I guess to go on a vacation somewhere warm that I could pay for with my friends. Like I saw—not pay for them, meaning like you see all these kids go to spring break.
--:-- Mel Robbins: And I worked during college, but I needed my parents to spot me the money or I needed the invitation from another person's parents who were going to take their daughter somewhere and she got to bring a friend. And so for me, I think a quote, rich life—which we're going to unpack for everybody so they understand what you're talking about—was like, "Wow, it would be pretty incredible if I could have my own money, not for textbooks, not for gas, but to actually buy a plane ticket and go to a hotel and be on one of those spring break things that I see."
--:-- Ramit Sethi: I love that. Each one of us has something, and it usually is at a formative age for us that we vividly remember. I remember sitting in the back of a taxi in New York. And back then, those taxi ticker things used to tick up every quarter mile, eighth of a mile. And sometimes you're just going, "Oh my God, how high is this going to go before I get there?" And of course, I don't think about that now. But back then, part of a rich life for me was to be able to not have to worry about taking a taxi, especially on a hot August day, walking out of the subway, going to a meeting and dripping in sweat.
--:-- Mel Robbins: Okay, so I kind of love this idea of where we all start from. It's usually something modest and ultra specific, and we can smell it. We can remember exactly what the people around us look like and what we're saying. And that really informs where we came from, which can also inform what our rich life is today and possibly even tomorrow. I would love for you to talk to the person listening and guide them through the process of locating this core memory so that they have that with them as we move forward and you help us define this philosophy that you've created called a rich life.
--:-- Ramit Sethi: I love it. Let's do it. Okay. We're going to start in your early 20s. And we're going to zigzag throughout our conversation today. We're going to go back to childhood and we're going to go to the future. We'll do it all because that's what money is about. It's about understanding the seasons of life and how money interacts.
--:-- Mel Robbins: Oh, I love this.
--:-- Ramit Sethi: Okay. So in my 20s, again, that irrational joy came from being able to buy appetizers. And for everybody here, I want you to think about—you may have been in college, you may have been working at your first job. What was the thing where you said to yourself, "I wish I could do that"? Or "Am I ever going to be able to do that?" And remember, it's not usually a big thing. It's not, "I want to take a round-the-world trip and stay in all these fancy places." It's often an appetizer. It's being able to pay for your own vacation. And it might be—a lot of people joke about getting the guac at Chipotle. It might actually be that. There's nothing shameful about a small, vivid aspiration that you had.
--:-- Mel Robbins: How do you think everyone listening is going along with this journey so far, Mel?
--:-- Mel Robbins: [Laughs] I think good.
--:-- Mel Robbins: My producer's like, "Mm-hmm." Okay, good. This is fantastic. I think we're all right there.
--:-- Ramit Sethi: Perfect. I have a question to ask you to go a little deeper in this. I would love to ask you about the way in which your formative years as a child and what you experienced as your parents' emotion or conversation around money, how that impacts your mindset around it. I'm asking that because I feel like it must be somehow related to this core memory of "I just wish I could go and take myself on vacation. I wish I could buy the guacamole. I wish I didn't have to worry about the needle on the tank of gas getting to empty and not being able to fill it up."
--:-- Mel Robbins: So for me personally, my father was the first person in his family to go to college and he had to pay for it. And my mother also went to college and had to pay for it, and she ended up dropping out to have me. And then my dad got into medical school, and my mom worked nights for the IRS, and we lived in public housing while he was a medical student and when he was a resident in Dayton, Ohio. I was in fourth grade when my parents were able to purchase their first home, and my dad did not pay off his medical school loans until late into his 30s. But here's the interesting thing about it: even though we struggled, we never went out to eat when I was a kid. Not until middle school anyway. And I never remember my parents being stressed out about money.
--:-- Ramit Sethi: What do you remember them saying about money?
--:-- Mel Robbins: Nothing. I don't remember them talking about it. And I just had this sense—because there was this like ease about it—that if you need something, you figure out how to get it. That there wasn't a lot of griping or complaint. And I know they were trying to make the ends meet, and they come from very blue collar, modest families, hardworking. They were very hardworking. And so I just kind of got this thing like money's there when you work for it and you don't need to worry about it. Not like I was spoiled or anything. That was not it at all.
--:-- Mel Robbins: But they didn't pass on the stress to me. Now, Chris's family had plenty of money, but there was this huge dialogue: "You don't deserve that. We don't have it. You're not going to be spoiled." And so his butt is so clenched when it comes to money. Like the guy's like, "How much does the guacamole cost?" I'm like, "Dude, have you seen our checking account? You can afford it." Like he literally adopted this gripping mentality.
--:-- Ramit Sethi: How does that impact the mindset that you have from your early childhood years?
--:-- Mel Robbins: So this—you just gave us a fantastic journey into your childhood. And if you don't mind, I'm going to dive a little bit deep and kind of shine a light on what you just told me.
--:-- Ramit Sethi: A lot of this comes from my work on my podcast, and of course on the Netflix show with individuals and couples. And many people believe that money is simply about numbers. And of course, the numbers are a very small part of how we experience money. So when you say your family never really talked about money, but there was a sort of ease about it, I'm listening, I'm going, "Okay." And then it clicks when you tell me they were blue collar and they taught us that if you work hard, money will come. Okay, that's a cohesive belief. I totally agree.
--:-- Ramit Sethi: Sometimes I speak to couples where one person in the couple grew up—let's say white collar, maybe upper middle class—and the other grew up working class, blue collar. Their beliefs conflict and they can't figure out why. They think it's about, "Oh, she spends too much at Target" or "His truck is too expensive." But really, there's this belief, particularly with different class structures—which we never really talk about in America—which is if something's hard, let's just grind harder. And you can grind harder. There's no doubt about that. But there's a certain point where grinding a little harder just doesn't work. You have to change the way you think about money.
--:-- Ramit Sethi: For example, did your parents talk about investing, IRAs, compound interest when you were growing up?
--:-- Mel Robbins: Oh my God, no.
--:-- Ramit Sethi: Exactly. And so some of the folks who I speak to, they said we were talking about investing at age five around the dinner table. "Here's what happens if you put a quarter in the bank." Now, imagine if a couple is meeting and one of them has been talking about investing since age five and the other has never talked about investment. That's what we discover when we peel back the curtain and we see how beliefs affect us.
--:-- Ramit Sethi: So if you're listening, the question I would ask you is: What conversations do you remember your family having when you were young about money? What phrases? Here's some examples that might sound familiar: "We can't afford it." "We don't talk about money in this family." "We're not like those people." "We don't need a fancy car, vacation, eating out." Any of these sound familiar? You heard these or your friends heard these, Mel?
--:-- Mel Robbins: I'm nodding because I'm like, this is exactly what people need to hear. At least I need to hear this. I mean, my jaw is already on the floor. We have to hear a quick word from our sponsors, but I cannot wait to continue this conversation. And everybody, stay with us because when we come back, I want to ask Ramit: What are the consequences of growing up in a household where you constantly hear the words, "We can't afford this"?
--:-- Mel Robbins: Welcome back. I'm Mel Robbins. I am so loving today's episode. I am here with Ramit Sethi. He's a *New York Times* bestselling author. His book is called *I Will Teach You How to Be Rich*. And his new Netflix show is *How to Get Rich*. Now, he was just starting to dive deep into the topic of your money psychology and how to change it. And Ramit, you had just said that you hate it when parents say, "We can't afford that." You want them to stop saying that. Why?
--:-- Ramit Sethi: Exactly. Here's the consequence of that. So you hear—the most common one is "We can't afford it." Parents just say this, like it just comes out of their mouth. Parents, you've got to stop, because let me tell you what happens. They end up 40 years later talking to me, and they heard "We can't afford it" 10,000 times growing up, just reflexively. "Oh, I want shoes—we can't afford it. I want a Trapper Keeper—we can't afford it." And then this person, hopefully they end up in a pretty nice job. They set up some investments. Maybe they've done well. They have some decent amount of money. They come to me and go, "Why do I still feel guilty ordering a salad when I eat out?" And my partner is saying, "We have the money. Look at our checking account. Why?" Well, trace it all the way back to conversations you had starting at age six: "We can't afford it."
--:-- Ramit Sethi: And it really shows this key principle of money, which is: The way you feel about money is highly uncorrelated to how much you've got in the bank. I'll say it again.
--:-- Mel Robbins: Say that again.
--:-- Ramit Sethi: Yeah. The way you feel about money is highly uncorrelated to how much you've got in the bank. Most of us believe if I have $5,000 more, or $50,000 more, $500,000 more, "Finally I'll feel safe." And I'm here to deliver some unfortunate news, which is that's never going to happen. Now, you can change the way you feel about money—you can—but a number in the bank is never going to change your feelings about it because it's uncorrelated. You've got to work if you want to live a rich life. You've got to do two things at the same time.
--:-- Ramit Sethi: One, you've got to understand the numbers—the basic numbers of finance. You've got to know your savings rate. You've got to understand the rule of 72. This stuff is actually not complicated. It's really fun. We can talk about them. I'll give you a couple of ratios. It's easy stuff. Like a sixth grader could—
--:-- Mel Robbins: I'm already zoning out on that.
--:-- Ramit Sethi: We'll get to that.
--:-- Mel Robbins: First, I want to hear the second part.
--:-- Ramit Sethi: The second one is you've got to simultaneously work on improving your money psychology. You've got to put a practice into place to start feeling good about money because so much of society tries to get us to feel bad. You do those two things, you're going to be doing very well.
--:-- Mel Robbins: I love this because whether you're listening right now and you've got millions of dollars in the bank or you are nearly a million dollars in debt—like my husband and I used to be over a decade ago—starting with changing your psychology around money changes absolutely everything. Ramit's going to teach us how to change our psychology. So where exactly do we start?
--:-- Ramit Sethi: Yeah. Let's imagine that it's the first day and you've decided to join the soccer team. People come with—some people have fancy shoes. Some people have no shoes. Some people are really physically fit. Others haven't run at all in years.
--:-- Ramit Sethi: And for this metaphor, I'll be the coach.
--:-- Ramit Sethi: And what I'm going to say is we're all in this together, and we're all going to start on the same page. I like to start from a place of "We're going to have fun with this." I'll tell you what we're not going to do. I'm not going to say, "Pull out this 46-part spreadsheet and let's go through all your spending." Nah, everyone's going to leave. And I don't even want to know—it's irrelevant.
--:-- Ramit Sethi: Instead, I want to do an exercise together with you, me, and everybody listening.
--:-- Ramit Sethi: About what I call your money dials. So I'm going to ask you—let's do this together. And everybody listening, I want you to follow along. So Mel, if I asked you, what is something you love to spend money on? Not like, but truly love.
--:-- Ramit Sethi: Look at that smile. What would it be?
--:-- Mel Robbins: Oh, I love buying dessert. I like—now that I've started, I've gotten out of debt. I make a lot of money. My favorite thing—and I always joke that this is my version of a Lamborghini—when I go out with a group of people, I order every dessert on the menu.
--:-- Ramit Sethi: Okay. What does that get you? Tell me about that. Why?
--:-- Mel Robbins: It feels really decadent and fun, and it allows me to sample things without committing.
--:-- Mel Robbins: And it's a way to take care of everybody at the table because everybody kind of secretly wished that somebody would order one of the desserts.
--:-- Mel Robbins: And it's a way to relax that kind of grip like, "Oh, I'm only allowed one dessert, so I've got to pick the one." It's just like a playful way that's kind of ridiculous. But every time I do it, everyone's like, "Oh my God, that's so fun." And so I just love doing that. And I'm also a massive gift giver. So I love spending my money on other people and orchestrating gifts and creating experiences for people. Those are my two big things.
--:-- Ramit Sethi: I love it. I hear so many things that I'm so thankful I get to highlight. So it sounds like your—what I would call a money dial—the thing you love is either gifting or eating out desserts. Would that be fair?
--:-- Ramit Sethi: Pick one. Which is the one that gets you really excited?
--:-- Mel Robbins: Gosh, I don't know.
--:-- Ramit Sethi: I kind of think it's desserts because you spent like 10 minutes talking about desserts. It's usually very obvious. Like people light up when they talk about their number one.
--:-- Mel Robbins: Well, because I also feel like it is a gift. It is a gift. Because nobody does it for themselves. And it's ridiculous. Like, why would you order all the desserts knowing everyone's going to take one bite?
--:-- Mel Robbins: Because we can. And because it's fun. It's very abundant.
--:-- Mel Robbins: It makes me feel like a kid almost.
--:-- Ramit Sethi: Okay. I love it. So here we have Mel in like a Willy Wonka chocolate factory, just like we get to get it all. And it's very abundant. So for everybody listening, the most common money dial—or thing you love to spend money on—is eating out. Number two, most common is travel. Number three is health and wellness. Number four is convenience, which happens to be my money dial. And there's a variety of others. You can search online.
--:-- Ramit Sethi: Okay, so that's great for everybody listening. You should identify the thing you love and go into that detail. If you're doing it with a partner, notice how I asked "why." "Tell me what it means to you." Get curious. And then the second question I have for you, Mel, is: If you were able to quadruple your spend on your money dial, what would that look like and feel like for you?
--:-- Mel Robbins: I'd send those desserts to everybody in the restaurant.
--:-- Ramit Sethi: Whoa. Tell me more.
--:-- Mel Robbins: Just kind of spreading that exuberance and joy. And this kind of—psychologically, it's not financially extravagant if you can afford to do it. Like, it's not like you went out and spent $200,000 on a car. But there's this level of surprise and exuberance and extravagance. There's delight, there's surprise, there's the fact that it tastes good. That if I spread that through a whole restaurant, I think the positive vibes that would go out and the positive energy that would swell in that space would be unbelievable.
--:-- Ramit Sethi: Amazing. Okay. I'm going to ask you to take that and extend it even more.
--:-- Mel Robbins: Oh, okay.
--:-- Ramit Sethi: Because I know you're very successful. So, let's say you eat out once a month. You could do that. No problem. It wouldn't even affect your bottom line. Let's turn it up even more. Not quadruple. Let's 10x it. Think expansively. Think beyond the confines of a restaurant.
--:-- Mel Robbins: Well, the first thing that came to mind was the Ben & Jerry's Free Cone Day. They celebrated—it was this year, their 40th anniversary—by having a day where they give everybody a free ice cream cone if they show up.
--:-- Ramit Sethi: How would you do it? And they typically support a charity, right?
--:-- Mel Robbins: Yeah. I think that's pretty cool.
--:-- Ramit Sethi: So you would do that—like a day of, let's say, outside of school or something, or some charity—you're just going to get an ice cream truck and rent it and do that.
--:-- Mel Robbins: Well, when you said school, I was like, "How cool would it be if everybody got dessert at school for free?"
--:-- Mel Robbins: You know, I love your answers. There is a cohesive thread that goes through them. It's generosity, it's surprise, it's delight. And it just happens to be around food, but I'm willing to bet in your life there's a bunch of other things like that.
--:-- Ramit Sethi: Okay. So for everybody listening, take this example we just heard and apply it to yourself. Let me give you some examples that will help. So for most people, like I said, eating out is their number one money dial. And when I ask them to quadruple it, they almost always say the same PG-rated joke. They go, "Well, I'd probably have to watch what I eat because I'd be eating out four times a week. Ha ha ha ha ha." I go, "Ha ha ha." And then I go, "All right, listen, that's very linear thinking. The fact that you eat out once, so you're going to quadruple it—you're just going to eat out four times. That's linear. Like, okay, you could eat out four times a week, but are you going to eat at the same place?" And people pause. They start thinking, "Oh, wait a minute. Okay, so if it's like Chipotle or whatever it is that you eat at—wow, okay."
--:-- Ramit Sethi: And I remember this young man in D.C. I was speaking there, and he said the same joke, and I had the same unamused response. And I go, "Where would you eat?" And he thought for a second, and he goes, "You know what? I have a list of every Michelin-starred restaurant in D.C." Young guy. I go, "Wow, okay, cool. You like food?" He goes, "Yeah, I love it." I go, "Who would you take with you?" And he got really quiet. The entire audience, pin drop silence. And he goes, "I would take my family. Why? Because they could never afford to eat at places like that."
--:-- Ramit Sethi: Now that is a money dial. That is a vision of what you love today. And it could be modest, right? Buying dessert for your friends. That's very generous. Also pretty modest. But when you understand, "Hey, where could I go with this? Could I turn my dial up 2x, 4x, 10x? What would it look like?" It wouldn't just be more of the same. I might change the quality. I might change the frequency. If I love clothes, as a young woman in Pasadena did, I asked her, "Are you going to still shop at the same place, H&M?" She goes, "No." And when we really explored and played, we came up with this idea that one day she could fly to Italy with her mom and they could get something custom made together in Italy. Now, she can't do that today. She can't do it tomorrow. But now she has a vision of what excites her with money. That's how we get started.
--:-- Mel Robbins: Why is it important to start with a vision that's exciting?
--:-- Ramit Sethi: Because money is such a drag for most of us. When you think of money, what are the first words that come to mind?
--:-- Mel Robbins: Restriction. Overwhelming. Am I too late? Mistake. It sucks.
--:-- Ramit Sethi: So are we surprised that Americans have terrible financial behavior? Well, I'm not really surprised when everything around us basically tells us, "Don't pay attention to this until it's too late." I mean, it's more exciting to talk about flossing than it is to talk about money. It sucks. But if we start talking about, "Oh my God, I love to eat. I'm unapologetic about spending extravagantly on the things I love as long as I cut costs mercilessly on the things I don't"—well, suddenly it's a lot more fun to talk about.
--:-- Mel Robbins: It really is because I think there's so much shame that we carry about money because there's all these expectations about how much you should have, how much you should have by now, what you should have done with it. "If only I had invested back in the day in Apple—I missed these opportunities. I should have done this. I should have done that." And that sort of negative story that you keep reinforcing to yourself that then has you go, "I can't buy the guacamole. I better not get a latte. Fuck, fuck, fuck." It keeps you stuck in that story. But when you allow somebody to play and dream again—because money, it's not only psychology, it's sort of a vehicle to do those things.
--:-- Ramit Sethi: Exactly. Yeah. I love what you said about the guacamole example. It's that because we feel shame, because we feel like it's too late, our field of vision narrows. Almost like if you've ever felt like you're about to faint, everything shrinks. And we shrink our own desires. So I'll often ask people, "What is your rich life?" And you know what they always say to me? They always go, "I want to do what I want when I want." I go, "Oh God, okay. There we go." And then I go, "Wow, that's so interesting. I never heard that one, except for the 8 million times I heard it." I go, "So what do you want?" And they are stumped because we never actually thought about what our rich life is. And so then I—I'm gentle. I want them to come to it, but I also want to have a little fun with them.
--:-- Mel Robbins: I want to have fun with it too, Ramit. So could you walk us through exactly how you answer that question: "What is your rich life?"
--:-- Mel Robbins: Okay, good. So let's hear a short word from our sponsors, and Ramit, you're going to walk us through that when we come back.
--:-- Mel Robbins: Hey, welcome back. I'm Mel Robbins and I am loving the conversation today with Ramit Sethi, right?
--:-- Mel Robbins: He's helped millions of people create rich lives. And his new Netflix series is called *How to Get Rich*. And he was just asking you and me to define for ourselves, what is your rich life? Ramit, how do most people even answer that question?
--:-- Ramit Sethi: Yeah, they'll say something like, "Well, I guess, like, you know, it would be cool if I had a beach house one day, but it doesn't have to be a big beach house. It could be small. It could be a shack. It could be dilapidated. I don't even need anything." I go, "What the hell? We're talking about your rich life and you already shrunk your desires in five seconds." I don't allow that. I go, "Dream bigger. And then let's figure out if your finances support it, what investments you need to make." And hey, maybe you're not going to get a nine-bedroom place in the Hamptons, but maybe you could get a beautiful place, rent it for a week, or buy it in ten years, etc., etc. So we minimize ourselves unnecessarily, and then that cuts off our inspiration.
--:-- Ramit Sethi: Nobody's inspired by a tiny vision. Nobody's inspired by the idea like, "Oh, I could save 5% on coffee." Who cares? That's not exciting.
--:-- Mel Robbins: It's so true. I want to ask you a question on behalf of anyone that's listening that is up to their eyeballs in debt and is having trouble dreaming and is trying to make ends meet. What is the concept of a rich life? Because we've covered the money dials, but I want to just get a flat definition from you of what a rich life is and what are the steps you walk somebody through, regardless of where they are, to creating one.
--:-- Ramit Sethi: A rich life is when you look at your life and you go, "Wow, this feels amazing." Now, you can have a rich life and still be in debt. You can have a rich life and not be exactly where you want to be ultimately. But a rich life can be traveling two months a year. It can be buying a beautiful cashmere coat. A rich life can be picking up your kids from school every afternoon. The key is that your rich life is yours. It's not mine, it's not your friends', it's not your parents'. It's yours. And in fact, the more you carefully define your rich life and really turn those dials up and down, the more bewildering your rich life will be to other people.
--:-- I'll give you an example from my own life. My rich life is really weird to other people, and that's exactly what it should be. I love spending extravagantly on travel. I'm a hotel guy. I have a list of hotels in all parts of the world. I know the exact room I want to stay in. I love it. I'm obsessed. That's my thing. I also love clothes. I love them. I spend a lot on it. So those are things I spend extravagantly on. On the other hand, my car is not that important to me. And to give you a point of comparison, I've spent more in one year on travel than I spent in 20 years on all of my car expenses added together.
--:-- Ramit Sethi: So that's crazy. That's bewilderment. It makes no sense to somebody listening, and that's exactly how it should be. If you love camping, maybe you turn that dial up. You find a way to have a smaller cost for your rent or mortgage, and instead you're going camping X weeks per year. You've got some place you go that nobody else knows about, some equipment. That's amazing. You take friends with you. Amazing. Not my thing. I've got a reader of mine who told me he retired in his thirties with his wife. They travel around the country in an RV. I go, "That sounds like hell to me."
--:-- Mel Robbins: Yeah, me too. No way.
--:-- Ramit Sethi: But I love that it's their rich life.
--:-- Mel Robbins: Yes. So are there particular questions, other than the money dial, that you would want us to ask ourselves or answer in order to start to really define it? Because I agree with you. Most people, when you ask them for real, "What do you want?" It's like, "Uh, that's hard." It's a really big question.
--:-- Ramit Sethi: So what we can do is we can zoom in and out to help people create some context around it. I'm going to give you a few exercises that are really helpful. Let's start big picture and then we'll zoom really tight down to day-to-day. So this is a fun exercise. I did this one with my wife. We sat down and we said, "Let's create a 10-year bucket list." So in the next 10 years, what do we want to do that would make this an amazing and rich 10 years? We took two separate pieces of paper. We spent a few minutes. We wrote it down and then we came back and compared it. This is a really cool opportunity to recalibrate the way you talk about money because it's dreamy. It's fun. You don't have to commit to anything. So you want to get curious. One of us is like, "Oh, I want to learn Spanish." And the other one goes, "Oh, cool. You want to do that online? Or would you want to go to Mexico City and do an immersion?" For one of my things, I want to write a book at a hotel. Makes perfect sense. I don't necessarily love writing, but if I'm going to write a book, I'm going to write it in an amazing luxury hotel that I love.
--:-- Mel Robbins: Okay, cool. Now, if you're single or you're newly divorced or you've just graduated from college, do you recommend that you grab a friend or a sibling or somebody, or is this something you can do solo?
--:-- Ramit Sethi: No, you can do it solo. You totally do it solo. So you come up with a list of things that are exciting, that you would look back on and be like, "Wow, that was a really cool 10 years. I remember that. That's memorable." If you're in a partnership, you've asked each other. If you're solo, you're looking at them and you're picking one that really jumps out at you. Don't overthink it. It's the one that you go, "I want to do that above all others in the next 10 years."
--:-- Mel Robbins: So what are some of the things you've seen from the millions of people that you've helped?
--:-- Ramit Sethi: We want to take a family trip to Italy. Super common. Everybody wants to go to Italy. And I love hearing it because I then get to help them dimensionalize it. "Italy" alone is just a word. I want to know what seat on the airplane are you flying? What season are you going? What are you wearing? Where are you eating? I want to know every detail to the point where we can almost smell it, because then it becomes vivid and aspirational. That's what we're doing in this first process. It's actually really fun. "Oh my God, we get to go on a pizza tour!" Whatever. Then you pick that one, and solo or together you go, "All right, let's actually make it happen. When do I want to do this?" In our case, we decided we want to have an amazing 10-year wedding anniversary. We were inspired by some friends of ours who did it, and we were like, "What, people actually do that?" And then we were like, "Well, who cares if people do it? We want to do it." So we said that's it. We happen to know the exact date we want to do it and the location. If you want to go to Italy or wherever, you've got to pick a specific month and year. It's got to now start getting specific. And then you've got two more steps and then you're good to go.
--:-- Mel Robbins: What Ramit is teaching you to do is to dream again and to attach very positive emotion with what a rich life would feel like. I think so many of you are going to have trouble even getting past this part and giving yourself permission to do it because of the amount of mistakes that you made. I'll just say, Ramit, when Chris's restaurant business was really struggling and we had liens on the house and couldn't pay for groceries at times and I had lost my job, dreaming seemed impossible, but it was actually a lifeline because it made me feel like this was going to be temporary, that we would figure out a way through this. I just want to underscore that if you've got crushing student debt right now, if you've gone through a divorce and you're in financial ruin, this is actually exactly what you need to do. Because if you continue to stare at the debt, you're going to feel disempowered, which means your actions will be disempowered. If we can give you a beacon out in the distance to get you feeling inspired again, something to work toward, we know based on the research, that's your big "why" when it comes to a goal. I love what you're doing here because it's the exact opposite of what a financial advisor would tell you, which is you'd sit down, you'd go through the numbers, you'd feel like an imbecile. You'd basically get somebody politely telling you you're fucked and you shouldn't buy coffee out and you shouldn't enjoy yourself until you get your debt under control and you pay this off. That can come, but let's first get the conversation fun and exciting again because when you're in that kind of mood, you're going to be more motivated to do the tedious bullshit that any financial advisor can tell you. Correct?
--:-- Ramit Sethi: Correct. 100%. And thank you for slowing us down and really providing the context behind why we are doing it this way. I don't want us to shrink our world to a spreadsheet. That's not going to help you. That's not going to help anybody. Instead, what I want to do is expand our vision, even if it feels impossible to dream. And to say, "Look, just in this moment, on this piece of paper, let's dream for a second." We may not be able to even see how we can get there today, but we've got time. And if we put the intention behind it and we marshal our resources, I think we can do this.
--:-- Mel Robbins: That's beautiful. Absolutely beautiful. So you've got one powerful vision of what you want to accomplish in the next 10 years. I say powerful because it's not like eating at a restaurant. That's not powerful enough.
--:-- Ramit Sethi: I had a guy once tell me his rich life is coffee. And I just sat there and then I said, "That's boring." I just told him point blank. And he was shocked. "Oh, somebody's telling me my rich life is..." I was like, "Yeah, that's boring. You can't just say coffee." I go, "Okay, if you love coffee, then tell me you want to go to Guatemala and take a behind-the-scenes tour of a farm. Tell me you want to go to the national barista competition and bring somebody. Tell me something beyond, 'I want to order an extra Dunkin' Donuts coffee shipped to my house.' No, that's not acceptable." So sometimes I have to challenge people to think bigger. You've got something big. It could be skydiving. It could be a trip, whatever. All right. You know the date, specifically the month and year. So in the next 10 years, you've got to pick a date, the month and the year.
--:-- Ramit Sethi: You've got to be specific. Then this is the hardest part, but it should take no more than five minutes. Approximate the cost. So if you're going to Italy, people start to freak out because anytime you start talking...
--:-- Mel Robbins: I just freaked out.
--:-- Ramit Sethi: Yeah. It's like we revert back to seventh grade math and we're like, "Oh, got to do the quadratic equation and get it perfect." I go, "Listen, you don't need any decimal points." In fact, you could approximate on the back of a napkin. How much is a flight going to cost? Approximately. You know, add 15% because you forgot about tax and all that stuff. What's a hotel going to cost? I don't know. Google "hotel Italy Rome" whatever. Okay, let's double the price because maybe we want to stay at a nice hotel. All right, fine. That's the level that we're talking about here. My wife and I had two completely different numbers. Mine was way bigger. And my rule is if you've got two numbers, go with the bigger one.
--:-- Mel Robbins: Got it.
--:-- Ramit Sethi: Go with the bigger one. And so now you've got a beautiful vision. You've got a month and year. You've got the approximate amount it's going to cost. The last step is to make it a reality. How do you do that? Let's say that it's 10 years away. It's going to cost $10,000. I'm just making it up. That means you need to be saving $1,000 a year or roughly a hundred bucks a month.
--:-- Ramit Sethi: We could do that. Suddenly you start to understand a little concept of time and money. And you set up an automatic savings from your checking account to your savings account for $100 a month. And you call it "Dream Trip 2030." Boom. Every month that you are talking about money in what I call a Rich Life Review, it's like a video game. You see we're getting 3% closer, and that is a joy.
--:-- Mel Robbins: Okay, so can I just ask one more question about this? And I know I'm beating a dead horse, but having been somebody that was in a scary place financially just over a decade ago, I want you to explain what will happen to somebody with crushing student debt or who's having trouble just making ends meet right now. How will doing this exercise change their psychology about money starting today?
--:-- Ramit Sethi: Yes, thank you for asking this. Because if you are in large amounts of debt, whether student loan, credit card, even mortgage for some people, some of this can sound really airy-fairy. What I want to emphasize to people is that we often have this belief that we're overwhelmed with money. It's easy to feel that way. But when I ask people, "Show me your spending. What percentage of your income is going to housing or investments?" I would say 99% of people do not know.
--:-- Ramit Sethi: So how can we feel in control of something if we don't understand the basic mechanics of it? Even when we drive a car, we've got to know how to turn the ignition on or put it in reverse. So we go through life in this very transactional way of, "Okay, this bill came in, I'm going to pay it. This bill came in, that feels really bad." It's transactional. It's reactive. What I'm encouraging you to do is to go from defense to offense with your money. That means once you set the intention of an Italy trip, if you're in crushing debt, you may go, "Hey Ramit, I actually cannot afford to put a hundred dollars a month away." I go, "Okay, well why don't we write that down? A hundred dollars a month towards Italy, but you can't do that today. That's totally fine." Next, we're going to go through your four key numbers in the Conscious Spending Plan. Let's make sure you understand your numbers. And you will be quite surprised that a lot of people discover they have more money than they actually realized once they go on offense with their personal finances.
--:-- Mel Robbins: Oh wow. Okay. So what are the four things that we all need to go through?
--:-- Ramit Sethi: Everybody needs these four numbers. This is what I use instead of a budget. I don't keep a budget. You think I'm going to sit around tracking the price of asparagus for the rest of my life? Hell no.
--:-- Ramit Sethi: I don't want to live that kind of life. So there's four numbers.
--:-- Mel Robbins: I don't want to live that kind of life either.
--:-- Ramit Sethi: Okay. Yeah. All right. So four numbers that you should know. These are all part of my Conscious Spending Plan. The first is your fixed costs. That would include your rent or mortgage, your utilities, car payment, gas, insurance. Anything that's fixed, even groceries every month, goes there.
--:-- Mel Robbins: And what about the minimum debt payment? Or is that part of another category?
--:-- Ramit Sethi: That counts there. Exactly. Thank you. And that number, you should try to get it between 50 to 60% of your take-home pay. Let me run through these all, and then I'll tell you what they mean. 50 to 60% of your take-home pay for fixed costs. Next up, your savings. How much money are you saving every month? This should be roughly 5 to 10% of your take-home. And savings would be an emergency fund or money you don't need for at least one to five years, things like a down payment for a house, etc. Next up would be investments, roughly 5 to 10% of take-home, although I like to see it higher because investing early in life pays dividends later.
--:-- Mel Robbins: And shame for Mel Robbins, who did not invest early in life. I'm just going to let that one go and focus on my dream list.
--:-- Ramit Sethi: I just want to acknowledge that when you said that, because yeah, I mean, look, not everybody... I'm like, "Fuck, I didn't do that." Well, I wish I started deadlifting when I was 13 years old, but I didn't even know what that was. You know? So we all start from the place we start at.
--:-- Mel Robbins: That's true.
--:-- Ramit Sethi: The last category is my favorite one of all. It's guilt-free spending. And this is 20 to 35% of take-home pay.
--:-- Mel Robbins: What? Yeah, that's right. Desserts, Mel. Go get them. Beautiful cashmere coat? That's for me. Go get them. You want to get roller skates? You want to go to your gym? 20 to 35% of take-home.
--:-- Ramit Sethi: Now let me tell you why I love this and why I'm getting excited about four numbers.
--:-- Mel Robbins: I love this.
--:-- Ramit Sethi: So many of us shrink our lives and we agonize over some stupid $5 purchase. You really think coffee is going to change your life? It's irrelevant. It does not matter how much coffee you buy. So please stop thinking about that. The same people who agonize, "Oh, I'm so overwhelmed. I don't know anything." I go, "What's your savings rate?" They go, "What's that?" "How much are you investing?" "Well, I try, but I don't really know." Okay. How are you supposed to feel not overwhelmed if you don't know any key numbers? So know the four numbers and you will suddenly feel totally in control. Some of you aren't going to be able to hit these numbers. That's okay. At least we can work with it. We've got the puzzle pieces on the table. Now we can start assembling your rich life.
--:-- Mel Robbins: Wow. I think I can do this. So you just carve out some time on the weekend and get your arms around these four things.
--:-- Mel Robbins: Which should take 15 minutes. Do not overthink it. It's going to take me a while. Really? It takes 15 minutes?
--:-- Ramit Sethi: Here's what people do. The biggest challenge is people don't have the right logins. Their logins are spread. They've got their Fidelity account or some old 401k or whatever. So I would recommend breaking it up into two days. The first day is just get all your stuff assembled. It's like cleaning the garage. And then the second day, 15 minutes and done. Do not overthink it. We're going for approximate numbers. That's it.
--:-- Mel Robbins: I love you. I love you, love you, love you. You have that, what is it? The 85% rule?
--:-- Ramit Sethi: We'll get 85% of this right. You're good. Get on with your life. You don't need to sit there and optimize everything. It's a waste of time.
--:-- Mel Robbins: I also love this because it can feel so insurmountable when you've made major financial mistakes in your life. This gives you a place to start that you can then start to get better from. And I just actually had a huge wake-up moment. I realized that one of the great things about growing up with parents who were very... I didn't ever see any concern about money and I didn't see them talking about it. Actually, that's not true. I would see my mother sitting at her desk with one of those little calculators with the tapes. She was balancing her checkbook.
--:-- Ramit Sethi: Hey, that's a really important thing that you saw. You saw a woman taking control of money and being capable and competent. That is a very valuable lesson to learn as a child. That obviously has come through for you. That's amazing.
--:-- Mel Robbins: Oh, yeah. And she then went on to open her own retail store. And all the women, like my grandmother is a farmer and ran the money. And she had a calculator with the tape. And my other grandmother, my grandparents had a bakery, and she had the thing with the tape. But what's interesting is that I think the "oh, it's chill" aspect has gotten too hands-off for me. The fact that I can't answer those numbers like that at this stage in my life, for me, it used to be because of fear and shame and how bad the numbers were. I used to be one of those people that the bills would arrive and I would just not open them.
--:-- Ramit Sethi: Yeah, common.
--:-- Mel Robbins: Because it was confronting to see the debt and confronting to see how much I had spent because I was basically shopping to escape my life with money that I didn't have. And then you'd open up the bills and be like, "Fuck. Yeah, I guess I spent that much." I don't have that money. And so it used to be that. But I think now that I've paid off all the debt, maniacally saving, I don't look at it at all still.
--:-- Ramit Sethi: Let's talk about a couple of things that are so interesting about what you just said. I love the honesty. All of us have something in our lives that we feel like we should be doing better, and we kind of push the envelopes away. I deeply understand this because for me, it was fitness. And I grew up half-joking, calling myself a skinny Indian guy. And I really wish I had not said that because it became part of my identity. If any of us say something like, "I'm bad with money," I would gently encourage you to not say that. Maybe reframe it and say, "Gosh, I haven't learned the skills of money yet, but I'm changing that now."
--:-- Mel Robbins: This is so important. If you just heard Ramit say, "I'm bad with money," I want you to pay attention loud and clear because he's absolutely right. Or if you say, "I don't understand. It's overwhelming. I'm not good with math." What are other things that your students say, Ramit, that really crystallize a terrible psychology around money?
--:-- Ramit Sethi: "My family's never been good with money. We're all bad. I'm never going to get out of this debt. We always fight about money. And I'm just an overspender." Or, "My husband took care of the finances."
--:-- Mel Robbins: Oh, classic.
--:-- Ramit Sethi: Oh, that drives me insane.
--:-- Mel Robbins: Hold on, I'm getting mad. I'm getting mad at multiple things right now, so let me take them each in turn.
--:-- Ramit Sethi: Okay. First off, what you said about not opening envelopes, and then now as you've become much more financially successful, it's almost swung the other way, is totally common in my experience. Once people start earning around $150,000, they stop really paying attention to the numbers because they basically make enough to not have to really pay attention. And actually, I'm a little okay with that. I don't want people agonizing over the price of groceries if they're making $150k. But what I do want, and what I do for myself, is I spend one hour per month on my finances. That's it. Just one hour. I review the CSP. My wife and I talk about money.
--:-- Mel Robbins: Hold on. The CSP was that Conscious Spending Plan of the four things.
--:-- Ramit Sethi: Correct.
--:-- Mel Robbins: The category I love the most: guilt-free fucking spending. There you go.
--:-- Ramit Sethi: I love it. You added the F word. That's so good. I've got to add that. That's beautiful. It is exciting. So all those things. When you have money carved out for guilt-free spending, it is literally defined so that if you want to eat and get an extra cheesecake or you want to go to the movies, you don't have to feel guilty because you know my debt is being paid off, my rent or mortgage is being covered. I'm even saving money. I'm not trying to save money, just like I don't try to brush my teeth. It is happening automatically. It's even better than brushing.
--:-- Mel Robbins: If you're listening, I hope that's a sense of relief. That you don't have to feel bad about having debt. You do not have to track a gajillion numbers that you don't even care about. I would highly encourage you to focus on four key numbers that will totally transform your life. I love how easy you're making this. Thank you for that.
--:-- Ramit Sethi: It's absolutely my pleasure. I don't want to spend time doing that either. I don't want anyone else to waste their time on it.
--:-- Mel Robbins: So these four pillars of the Conscious Spending Plan. And again, I come from the lived experience of crushing debt. Where you feel that unless you can get to zero balance, you don't deserve guilt-free spending. That somehow you're cheating on your goal to get out of debt, which is what every financial advisor pounds into your head. And you feel like that latte robs you of the opportunity to be out of debt. You feel like spending to go on a trip with your friends robs you of the ability to be out of debt. And what you're saying is, "No, no, no, no, no. You can start right now by figuring out these four things and allocating incoming to those things."
--:-- Ramit Sethi: Correct. We have a very unhealthy relationship with money in this country. On one hand, we have a puritanical strain that tells us, "Do not buy anything, and you're a bad person for having debt, and you should live in a monastery until that debt is paid off, and then maybe you can go buy a pack of gum." Okay. On the other hand, we're like, "Okay, hold on, let me look at Instagram. Oh, my friends are in Bora Bora on Tuesday. Oh, I think I'm going to go take a trip even though I don't even know how much I have in the bank." What two paradoxical beliefs. And usually it's the consumerist one that wins, but we still feel guilty. We love to feel guilty in this country when it comes to having debt. Here's my belief. Number one, you need to know how much you owe. 90% of people I talk to who are in debt do not even know how much debt they owe. That's number one. You've got to know your numbers. Number two, you've got to know the exact month and year your debt will be paid off. 95% of people in debt do not know their debt payoff plan. Easy way to do it: literally go on Google, type "debt payoff calculator," plug your numbers in, and you will see. And don't worry if it seems depressing. "Oh, it's going to take 28 years." What I want you to do is just plug the number in and sit with it for a day. And later you will learn things like, "Wow, if I add an extra $50 a month, it can shave off three years from my debt." But that comes later. I just want you to actually acknowledge it.
--:-- Mel Robbins: And you know what else I also love that you're saying? I love that you're saying it's okay to have it. Like most rich people actually finance a lot of things. Go ahead. You're the expert. I don't know why the hell I'm talking about money. Go ahead.
--:-- Ramit Sethi: Well, first of all, whether it's okay or not, a lot of people have debt. So let's just accept us for who we are. That's the fact of life. Now, I do want you to get smarter with debt. So when I look at people, I always look at the snapshot of their finances. And I talk about all these numbers on the podcast. By the way, we have folks who come on with $800,000 of debt. They're not even sure.
--:-- Mel Robbins: Really? Are you serious?
--:-- Ramit Sethi: Well, that was me over a decade ago.
--:-- Mel Robbins: Yeah. Okay. So no college savings, no 401k, credit cards maxed out, home equity line maxed out. Plowed it all into my husband's restaurant business. Did not go according to plan. I lost my job. Liens hit the house. He hadn't been paid in six months. Friends and family had invested. Holy fucking hell. That was my life.
--:-- Ramit Sethi: So you really know what it's like.
--:-- Ramit Sethi: This is not a joke. You think about it every day of your life when you're in it. Nobody is broken with money. There are ways for you to get informed about money so you know the basic language of money, which anybody can do. You do not have to be a math genius. I'm not. And second, to work on improving your money psychology. I spoke to a couple on my podcast and they were in a lot of financial trouble. They think about it every day and they were so stressed out. I said, "Okay, you're a new parent." She was a mom. I think her baby was about six months old. I said, "When you first had your baby, did you know how to hold her?" She goes, "No." "Did you know how to feed her?" "No." "Did you just wing it? Did you just try your best?" "No. I got help. The nurses, my mom. I read a bunch of books." And on and on and on. And that is so normal. There are things in life we don't know. That's okay. But we do have to say, "Hey, this is important to me. My rich life is important. I deserve to dream bigger than a box of pickles. And therefore, I'm going to prioritize learning and also improving my psychology."
--:-- Mel Robbins: I'm going to read your book. I've never read a financial book in my life.
--:-- Ramit Sethi: Oh, okay. I love it. There's an audio version too.
--:-- Mel Robbins: I'm just admitting it. I'm just admitting it. I love your honesty. It's so good. I've never read a financial book in my entire life. I have read plenty of blogs and listened to podcasts. I've never read a book. And the truth is, I am intimidated by investing. And the irony of this is that this is the one area of my life where I have goals and I want to get more into investing and also investing in startups as an angel investor. And I don't know the first fucking thing about it. And there is this self-doubt or whatever that I realize, in talking to you, is keeping me from starting. And yet, one of the things that if I make that 10-year list that you're talking about of dreams, it is to have advised, invested in, and nurtured a number of startup companies, particularly by underrepresented founders in spaces and categories that I deeply care about. What I just realized is doing that would help me fulfill in an amazing way that ripple effect of sending desserts to people.
--:-- Ramit Sethi: There you go. That is the money dial. The desserts are beautiful, but they are such a small example. You are so much bigger than a table full of desserts.
--:-- Mel Robbins: That is it. Yeah, yeah. It connected the dots between those two. You've given us so much to do and so much to think about. Is there something else that we haven't talked about? I would love for people to have an answer to this question: "I spend extravagantly on ______ and I cut costs mercilessly on ______." And that really is the capstone of a lot of what we've talked about. You spend extravagantly on tipping or on clothes or whatever it is. To be able to write that down and be unapologetic about it. You're really standing in who you are, and that's okay. Not everybody has to agree with it. And it also means you have to be honest about what you are willing to cut costs mercilessly on. Maybe I'm actually overspending on my house. Maybe I didn't know about the 28/36 rule and all these different things that you can learn over time. But you have to be willing to also say, "If I want to live my rich life, then what am I willing to say this is not part of my rich life?"
--:-- Mel Robbins: What are some of the things that you typically see with the people that you work with that they mercilessly cut? I'll tell you what they overspend on because it's always the same.
--:-- Ramit Sethi: The number one area that people overspend on is housing costs. A good guideline is that your housing cost should roughly be 28% of your gross income. Now, I will tell you that that's a really hard number, especially because housing has gotten so expensive.
--:-- Mel Robbins: Yeah. Especially if you live in New York, LA, et cetera.
--:-- Ramit Sethi: So if people come and they go, "Hey, mine's like 31%," I go, "Okay, you know, we can approximate. It's like adding a little more salt to your dish. Fine." But sometimes they look at it and it's 42%. Now I'm going to tell you what that means, because again, most of us do not have the full picture of our finances. We simply pay the bill that comes in, and they're wondering, "Why do we keep fighting about Target? Why doesn't my husband or my wife want to go out to dinner once a year? I'm so annoyed." I go, "Well, I could tell you right now, it has nothing to do with Target, nothing to do with dinner out. It's that your housing cost is 42% of gross. And because you're spending all your money up there, there's nothing left trickling down the waterfall. You can't save, you can't invest, you can't go out." And when they realize that, then suddenly they have the knowledge and they can go, "Okay, do we actually love this house? Do we need to live here? Fine. Then what are we going to cut back on? Or do we actually need to live here? Could we downsize? Could we move? Do we have options? Could we rent out an ADU in the back if we've got it?" Et cetera, et cetera. That's number one.
--:-- Number two, overspending is cars. I get this all the time and I always get mad at them. And then everyone gets mad at me because in America, we love trucks. So I have nothing against trucks. But what I really have a problem with is somebody making $75,000 who buys an $80,000 truck because their buddy Chet at the dealer told them, "Oh, you can afford the monthly payment." And then they forget to factor in what I call TCO, total cost of ownership. That $80,000 truck actually cost you $120,000 once you factor in insurance, tax, gas, and on and on and on. They can't afford it. So I asked one guy, he comes on the show, they're struggling with money. They're like, "Oh, we tried everything. We buy generic, we buy generic macaroni and cheese." I go, "I don't care about macaroni. Tell me about your car." They go, "We have this big, nice truck." I go, "Oh, okay. That's so interesting. By the way, why do you have a truck?" And he looks at me like I'm crazy. He goes, "To pull the trailer." I go, "What? You can't afford any of this." So anyway, those are the two areas people overspend on. It's house and car. And if you can just avoid that, if you can just get your numbers in line and fit your fixed costs, the rest of your life will be so much easier.
--:-- Mel Robbins: Wow. You have a truck, Mel? My husband drives a pickup truck.
--:-- Ramit Sethi: Yeah, what kind?
--:-- Mel Robbins: Uh, I think it's a Chevy.
--:-- Ramit Sethi: Well, I don't really mind because I know you can afford it. But let's assume you and your husband made like one-tenth of what you made now and you had that Chevy. What do you think about that?
--:-- Mel Robbins: I would be... It costs $125,000. That's a lot of money.
--:-- Ramit Sethi: Well, this is another thing. Everybody gasps, but I also live in Vermont and I would not be able to get up my driveway. That's a quarter mile long during mud season if we didn't have a pickup truck. We literally have to shuttle people up and down this driveway. I drive a nine-year-old car that just shit the bed. I drove it in to get repaired and was told it needs to be towed out somewhere to be sold. So I am currently without a car. This is very timely, but I'm not a big car person.
--:-- Ramit Sethi: Well, good. I like that you know that. See, now what I want to hear is that. And it could be car. I don't need a fancy house. I don't need fancy clothes. Fine. But I also want to know what you are into. And once people start to define those two things, that really helps create the dimensions of their rich life.
--:-- Mel Robbins: I really want to make sure people leave with a paradigm shift. If you think about the people that came on the Netflix show or any of the millions of students that come to your website every month, what is the current mindset that most people have?
--:-- Ramit Sethi: The mindset that most of us have is what I would equate to being at work and getting one email after another and simply being an order taker. "Okay, this person emailed me. Oh, I got to get back to that person." And that is life. And that is most people's lives forever when it comes to money. "I got this bill. We got to get diapers. Uh-oh, the car broke down. How are we going to respond to it?" It's just one problem after another. Cars break down. Sometimes we go into debt. That's life. Instead, I want to give you a whole new way of looking at them, which is to say, agonizing over some tiny thing at the grocery store is actually never going to change your life. And you could spend the rest of your life worrying about it. And in my paradigm, that's a tragedy. What a tragedy to live a smaller life than you have to. What a tragedy to defer the rich life until some mythical day which you don't even know when it's gonna happen. Instead, we're gonna define it right now. What is our rich life? What are my money dials? What do I want to spend extravagantly on and therefore cut costs mercilessly on? And am I comfortable saying to myself and perhaps other people, "I'm going to live my rich life today and an even richer life tomorrow." That's the vision I want to leave everybody with.
--:-- Mel Robbins: I freaking love that. Oh my God, you're amazing. Thank you. I love seeing people's lives change when they see money in a different way.
--:-- Ramit Sethi: Fantastic. Because when you see it in a different way, you act differently with it. And that's why this matters.
--:-- Mel Robbins: Yeah. But it's not saying, "Think about a rich life and all of a sudden it'll be a million dollars in your bank account." No, it's not affirmations. That's not what you're saying.
--:-- Ramit Sethi: No. No. No. You got to be competent. You got to know your numbers. But when most people think about money, they see stress and overwhelm and debt. And when I look at numbers, I see a trip to Disneyland with your kids. I see an amazing food tour in India. I see the ability to never have to look at the price when you're at a restaurant. And that is what you can get when you understand how to use money.
--:-- Mel Robbins: For those people that have a mindset, "I'm terrible with money. I'm bad with money. I'm never going to get out of debt," please tell them what they should start saying to themselves all day long about money instead.
--:-- Ramit Sethi: The new phrase that I want you to use is: "I haven't always been great with money, but now I'm learning." It's so simple, such a simple reframe. Nobody's expecting you to become a multi-millionaire overnight. We don't even need that. But day by day, you put a little bit of time and attention into reframing your identity. "I haven't always been good, but I'm starting to learn about money now." That can be listening to this episode, listening to my podcast, watching the Netflix show, having some conversations with a partner. Maybe saying, "You know what? I realized that when we talk about money, we're always stressed out and I don't want that for us. I actually want us to feel good about money and I realize I've got some work to do, but I'd love to do it together with you. Would you be willing to do that together?" That's how you reframe it, solo and with a partner.
--:-- Mel Robbins: I love that. "I used to be stressed about my money, but now I'm learning how to enjoy it." Ah, so good. I love that you add that positive emotion.
--:-- Ramit Sethi: Deep down, most of us don't need the fancy villa, but we do want to feel good day to day with our money. We want to know that if our kids ask us for something for school, we can get it. We want to know that if a friend comes into town and they say, "Hey, would you like to meet for lunch?" Yeah, we can go. We don't even have to think about the numbers. That's a rich life. To not have to always be tight and restrictive, but to be fluid and accepting. And I love the way you put that: enjoy money. That is so good.
--:-- Mel Robbins: Well, and here's the other thing that I love if I had to put this all full circle. One of the things that we talk about all the time on this podcast, and you talk about it too, is the fact that we're all obsessed with getting to someplace. "I got to get that beach house. I got to get out of debt." Because we presume that we're going to feel a certain way when we achieve it. And what you're offering is a very clear, simple, step-by-step roadmap that helps you change how you feel about money and how you think about money so that as you're creating this rich life and as you're taking responsibility, you feel more freedom.
--:-- Ramit Sethi: Yeah. You feel happier. It starts today.
--:-- Mel Robbins: It starts today.
--:-- Ramit Sethi: Yeah. That is what we really want to create. A rich life today and a richer life tomorrow.
--:-- Mel Robbins: Amazing. Thank you so much. Congratulations on all your success and all the people whose lives you've made richer and more enjoyable. I really appreciate you taking the time today to hang with us. And I hope this is the beginning, day one, Ramit, of our rich new friendship.
--:-- Ramit Sethi: I hope exactly the same thing. Thank you for having me. This was a blast.
--:-- Mel Robbins: Awesome. All right, we'll talk soon. Thanks.
--:-- Mel Robbins: Wow. I cannot wait to hear your feedback on this episode. And I also want to remind you that there is another zero-cost resource for you to help you take control. If you go to melrobbins.com/takecontrol, I have a three-part free training with a workbook. And now that you're inspired to create a rich life, I know that melrobbins.com/takecontrol is going to help with that too.
--:-- In case nobody else tells you today, I wanted to tell you that I love you. I believe in you. And I believe in your ability to forget the balance sheet for just a minute and create that bucket list. Ramit gave you and I this huge gift. He's taken everything that we've learned in other areas of our lives and he's applied it in a financial roadmap. And I love that getting out of debt and enjoying your financial life begins with dreaming and with aligning it with what really makes you come alive. And there is no doubt in my mind when you and I both tap into that, the sky is the frickin limit, baby.
--:-- All righty. I love you. I'll talk to you in a few days.
--:-- Oh, one more thing. It's the legal language. This podcast is presented solely for educational and entertainment purposes. It is not intended as a substitute for the advice of a physician, professional coach, psychotherapist, or other qualified professional.
