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 then they do Picking their investment so that is terrifying with your yeah, and so instead of fighting that let's just acknowledge it Hey, I am never gonna sit here and read all this stuff And by the way even if I did that doesn't predict better returns So I'm gonna pick a simple investment strategy and then 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've ever met Ramit Satey. 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 it was like super high level I feel like now is where it's maybe coming out of the pandemic But maybe not that a lot has changed from GameStop to crypto to Wall Street Beds all that stuff Do you think that we're living through a unique moment right now or people just confused by something and really it's all the same? Definitely a different situation if you think about where we were in 1999 2000 with the tech boom 2008 2009 with a 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 from yeah 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, so for example, a lot of people don't know this but anybody watching if you go ask your parents this you're gonna 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 fees guess? I actually don't know I know the answer is high.
It's not 1% people think oh 1% compounding correct If you're paying 1% in fees 28% of your returns are going to that advisor's over what period of time It's about over like 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 here 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 for me I think I'm overpaying for this financial advisor, but I'm not sure I said okay. Tell me your information She's 31. She makes about 80k 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 So We run the numbers and I told her you know your income will probably increase a bit that out of your investments It turns out she thought she was paying 30k in fees. She would actually pay 315 thousand dollars 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 I'm really cares 1% but you could take 300 thousand dollars 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 they're low interest rates. We know that what do we do? I actually don't know like I am horrendous at investing money Yeah, and I was I'm good at making money. Yeah, not good at investing money.
Well, you don't have to be that good Are you good at like breathing oxygen? Yes, okay? 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 and choosing to write 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 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 I was loved 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'll walk you through some of the things that I think you're up against with this Very sage advice, you know, 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 like 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-professed guy that is not good at investing so it's worth But there's something happening now between crypto between GameStop Wall Street Beds 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 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 Yeah, and now that it's sort of high-risk high-reward lots of funding being 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 20% guarantee and every day it's going up and down but mostly up was there massive before? I wasn't focused yes, everybody was Everybody believed they're a genius. So in a bull market everybody believes they're a genius and They all say the same phrase this time. It's different So it's such a funny phrase that in the investment world people make fun of it.
It's a 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 I get into this JDSU this you know all kinds of stuff So I take my college scholarship money put in the market and I very quickly lose half the money because of the crash Yeah, 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're here 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, etc 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 Vogel's philosophy, etc 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 if we were gonna define trade timing the market Yeah, it's like I understand this stock. Yeah, it's undervalued.
Yeah, I'm gonna buy it I know it's going and I'm gonna do it short term right so I'm gonna create this narrative that oh this stock look at the Trading look at the chart and I'm gonna 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 mean just 100% and then stop when it goes down. You don't really hear from that Okay, that's called survivorship eyes 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 the show right now can pick a simple vanguard fund and you can be over 80% of these fancy Wall Street suits These guys repeat 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 a compound growth. So for example people a lot of people right now really dissatisfied Hey, I don't have enough money.
I'm not gonna ever be able to afford a house And so therefore I'm gonna 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 Interest because of how it works. So is it really as simple as one doubling the two isn't very interesting two doubling the four is not very interesting But when you start getting to a thousand doubling that becomes real interesting real fast 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 the does that calculate a doubling every seven years? Or is that a made-up thing? No, that's you can choose 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 is doubling approximately every 10 years And people are gonna get that by putting in the stock market and let's get it out and just contributing to it every single month dollar cost Yeah, 50 bucks 500 bucks 500 bucks whatever works for you.
That's how it works. That's simple boring So a lot of people watching is 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 do you live a rich life? All right before we get to that? 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 shits 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 assuming the possible She's like this is a terrible strategy because of inflation like you don't understand your money's gonna get cut But I was thinking sort of that same thing one to two percent a year whatever like that I had plenty of time to figure this out Then I start listening to Michael sailor 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 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 seems So clear to me this has to be level like you said it just cannot go out forever So there has to be some sort of correction and the economy shut down So I'm 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% Okay, let's talk about this so am I about to like 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 gonna happen in the stock market They're an idiot and or their line So I'm not gonna 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 gonna 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 a hundred plus years We know that there are always people on reddit and twitter who 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 Very low inflation and in fact even the recent inflation numbers are I think over 30% of his duty used car prices Let's talk about the most powerful force in wealth building Compounding there's a reason that people have talked about this forever you put an asset to work It generates more of itself over time the curve bends way in your favor every serious wealth builder knows how compounding works Most gold owners though have completely opted out of it monetary metals changes that equation They've built away for your gold to earn yield paid not in dollars But in more physical gold up to 4% per year more ounces stacking every single month compounding and one of the only assets that can't be printed inflated Or debased and storage and insurance are included by the way, so hidden fees don't eat your yield The average person is passively absorbing inflation.
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Now. Let's talk about your situation. Your situation is different than the people watching 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, right? They have a job. They want to make some more money great The best strategy for them is low-cost long-term investing takes some percentage I'd recommend at least 10 preferably 20% of your gross income if you can't gross well I like to be aggressive if you can't do 20 We're gonna point into a vanguard just something real simple real simple No, I don't feel no individual investors should be using Rob is that how Robin who works like their day trading on your behalf or they're encouraging you today? Trade like they are encouraging you to trade and you can see this through a variety of the design principles They 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 him, 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 gonna automatically contribute 10 15 20 What 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 gonna 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 Other different vanguard account types.
Yeah, so the thing that I really like for simple investments called 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 2015 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 fix income or bonds equities are more aggressive. They tend to outperform uh bonds What a target date fund does is you just pick one fund.
That's it. Just one put all your money in there and it automatically Reallocates over how did I pick that fund is it just like just like age? No? No, it's just like age.
Yeah, so you tell them say hey I want to retire by 65. I'm currently this age and then they go say I'm gonna put you in China No, no, they say I'm gonna put you in the vanguard 2050 fund So it's 2050 means you're gonna retire in 2050 But how are they thinking about that? Is this like the world's most diversified portfolios? That's where they're basic automatically diversified So it has international 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 go ahead model Yeah, yeah, so they include value investing. No, it's not it's not necessarily value investing Give us a 30 second break down 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're going some specific stuff. Yeah, they'll pick like this stuff Yeah, they'll pick Tesla. That's like me going over 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, we're me 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 that are going up and diversify and again Yes, you may lose out on a little bit of games 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 just pick something dumb. Yeah, mom. They're hyped on it for some reason. That's why they're called mom and pop investors That's an insult mom and pop are the dumb money the dumb money are random retail investors We're sitting in their basement using e-trade or robin hood the sophisticated people are on wall street And even they can't pick the winners more than 20% of the time So the target date fund automatically diversifies internationally really fast so follow the incentives This is a very good advice for people if I'm the guy on wall street like I'll let this person remain Nameless whether 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?
Mm-hmm like down I was like what are you doing like if and 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 day fund or series of index funds more percentage of your net worth is in the target day fund Uh, I would say not a target day 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 Yeah, it's like a group of companies grouped in some way as a hundred or whatever.
Yeah, it's basically what's inside of a target day fund But just take an outside of it simple low-cost etc over 90% of my net worth is an index ones So many different ball parkas index funds are you in? Less than 10 now is that because we're meat is more clever than other people and you know, it's because it's because I have a larger net worth So at how you don't want to cram it all into one thing? That's correct because at for 99% of people a target day fund is a fantastic investment Why it's one place that you invest you do not have to choose all kinds of crazy stuff too. 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 day fund will protect high risk thing into equities They should have had more conservative investment bonds Yeah, and so you you do not like the gifts of death right now No, there's a big debate about whether or not people should even buy 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 They're like 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 gonna sit here and read all this stuff And by the way, even if I did that doesn't predict better returns So I'm gonna pick a simple investment strategy that automated 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 Right low cost means low fees. So that's an important thing vanguard funds are the place to start vanguard is great I don't want to I'm not pitching vanguard. It's where I have a lot of my money.
Why not pitch vanguard? I like I just don't I want everybody know I 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 It's what makes them great that they have the same theory is a vanguard fund. Um, 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 Um, 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 it's interesting I have no problem if you want to hire an advisor and pay a premium price 500 bucks an hour 5,000 bucks for a review I have no problem paying for 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 at 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 what percent 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 Dollars and go out with your husband or wife. That's how crazy our psychology is around fees So what's broken? What what are people doing wrong there? They go logic.
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 make this very well. You want to delegate out to somebody else 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 this is the root of my obsession with you. Here's what I want people to understand I am 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 one and now I'm like Every time that I sit down with you, I'm like there's a 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 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 hide in 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. Yeah, so I'm literally like getting to the point where I'm like hey dude Stop fucking bringing this up and but I know that that's not a wise strategy So he's like dripping on me and I'm like god damn and then finally NFTs becomes a thing And I realize it's gonna be hugely important for my business I dive into NFTs as the 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 the impetus I needed to get over the initial hurdle of okay What is it which ones are legit? Yeah, 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 So 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 know, you buy the dip you buy the dip So, um, that's where this gets interesting. So as you're talking about Vanguard, I'm like, okay How do I gamify this a little actually do it? Let's let's add some context around your investment desires Um, 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 is 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. Okay.
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 or all those factors 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 day fun and get on with your life Come on, Tom. That's what their investment returns say and you're gonna 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, you know 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 percent 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 gonna be on nft's 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. They are great I'm gonna 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 and play with it 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 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 you know every industry for example You have people you know, 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, Ramee, you need to eat more calories and I would have said no no no no no You don't understand like 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 That'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's 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 um a lot of people 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 Instantly know and it hits them very deeply because it's like a personality type thing like what's driving these disconnects Well 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 person back to 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 saying what look at the math that was pretty much me early on in my relationship with you I don't feel safer. No, no, I was like look at the math I was like look at the compound interest. We have growth rate of silks in here I was like living in a 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. I grow.
I want to grow. I want to have an impact And so when we originally started talking We started to rewind and 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 okay. I thought about that when I was researching. I thought 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 though So think about when you grow up here. We can't afford that we can't afford that one day when you have actually 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 full dossier I know they're not worth. I know their income and I talk to them about their problem And I go on a scale one to ten how big of a deal is this and they go You know like maybe a four out of ten in their relationship 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 a four out of ten and they go 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 ten 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 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 there are you like this when they come in I go all right. I know your numbers at school 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. Okay.
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.
You know, 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, right? That 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 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 if you can jointly afford it or he can individually afford it That's what you mean So these are couples do you have them separate their money? Well, some of them they just come to me as is I'm first most interested in their story So some of them have the 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 dude. Dude, what you do that's 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 what did that do for you It's really just that because the things I want to spend money on she thought was done And the thing she wanted to spend money on I thought was done Yes, so I was just like hey, you do you 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 I was just like there. Yeah, but people do this for their entire lives And they're they're basically asking three dollar 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 will 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 right 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, that's interesting It's very interesting and more women graduate from college so that we 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 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 correct 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's 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. That's okay.
Man of 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 uh, you know 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?
Um, I believe they were married. They had a mortgage together. Yeah But the more complicated thing which we talked 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. Yes, 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 he told me elementary school Whoa, so since elementary school, he's been fielding off these collectors He sees money as a series of problems.
He has to fix and 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 say it like basically a motel six This guy has a substantial asset base. So did you and I find that heartbreaking?
You know, 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 da da da da. Okay, that's easy It's really saying how did we come to thinking about money like this?
How do 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 and You know as she became more interested in business and like really got into it's a really big transition Like if you come in with a certain mindset, it's gonna be hard to shift But she in the beginning we couldn't work. I don't if she were making money.
I never would have said Oh, I'm gonna still pay for everything and be stressed about 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 be? 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 gonna be able to keep taking care of the stuff for you And she put like a timeline I don't remember how long but like in the next month I'll still help it Hey at the end of that like you're really gonna have to deal with all the stuff on your own And there was friction in the marriage through that moment like really changing roles changing like what this dynamic is gonna be But we're very communicative Yeah 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, she's pretty apparent She's got some fucking skills on it So I just said look by my own code of ethics like I want you to live whatever life you want to live And to become like the most joyful powerful version of yourself And so if this is direction you want to go in then you know, 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 messies 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 Yeah 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 Like I we both have to come to a shared understanding of you know, 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 Or at least I decided to become an entrepreneur To a cause of 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 No, no, no, it was probably months or even years of conversation Same as my wife and I have continued to have And then for 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 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 bandaid 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, 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 Take 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 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 am I 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 She had the whole thing laid on her head, great And I said, 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, etc 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 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 a better financial decision 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 realized that Yeah, the story of money right there Dude, I can talk to you about this the fall day So the new podcast, where can people find it, what's called?
It's called I Will Teach You To Be Rich with Ramit Sate 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 and see what others are doing And then reflect on how you think about money in your relationships Word, dude, I'm so glad you're doing that Like 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, like this applies no matter what your net worth So take his advice, put it action I know I'm going to be, it took me three times But we have three episodes now, so make sure that you watch all three And speaking of things 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, please It's so important to be really incorporating your own psychology when you think about money And part of that is where 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 rich life? Let's talk about a pattern that is guaranteed to be killing your progress You know what you need to do, you need consistent nutrition We all do, you need vitamins, probiotics, greens We all know that we should be doing more of it When your morning gets chaotic, you skip it, when you travel, you skip it When your routine breaks, everything tends to break And that inconsistency compounds against you every single day AG1 is designed to solve the execution problem One scoop, eight ounces of water and you're done You're getting 75 plus ingredients, vitamins and minerals, pre and probiotics Nutrient dense superfoods, everything that used to require six, seven different supplements And perfect planning now happens in one drink that takes about 30 seconds to make Right now, AG1 is giving you 87 dollars worth of free gifts with your first subscription You get a welcome kit, travel packs, vitamin D3 plus K2 and flavor samples Click the link in the show notes or visit drinkag1.com slash impact to claim this offer