Activating Your Brain for Rich Life with Ramit Sethi | Jim Kwik

Welcome back, Kwik Brain. Here's your question of the day. How can you learn to be rich? What does your rich life look like? And you're thinking about this, Jim, this is a brain show, but all our treasures in our life really come from the quality of our mind, the habits of our thoughts, our behaviors, and so much more. So that's the topic of today. This is going to be very, very popular. And I'm excited about having this conversation with a good friend, Ramit Sethi. And he is the author, the New York Times bestselling author of a brand new book, I Will Teach You to Be Rich. And I'm excited about this, Ramit. Thank you so much for being on the show.

Thanks for having me.

Dude, so how do you go from— before we talk about how to actually create Wealth and what rich is for somebody. How do you go from being— going from studying psychology and technology at Stanford to becoming like this personal finance guru written up in Forbes and Fortune and Wall Street Journal and New York Times and all these different places, CNBC, CNN, and now the Kwik Brain podcast?

Yes, yes, I've been waiting 10, 15 years to be on this show, so thank you for having me. I'll tell you what, you know, I think that— you remember the book The Emperor Has No Clothes?

Yeah.

I remember learning about money while I was studying human behavior and psychology, and I remember a moment where I said, the emperor has no clothes. All this advice that people give us about money, like cut back on lattes, I intuitively just said, I don't want to do that. I don't want to live a life where I'm cutting back on $3 expenses and tracking every single penny for my entire life.

Like on a budget.

Yeah, and like living a life of scarcity. Oh, I can't spend money on lattes, I can't go out, I just gotta go in a cave and save money for 80 years, and maybe I can live like that. I didn't wanna live like that. And I looked around and none of my friends did either. And here we are, beautiful Manhattan, a lot of people here don't wanna live like that. So I wanted to live in a way that allowed me to say, I wanna go out and buy a round of drinks for my friends.

Mm-hmm.

I want to spend on the things I love, And I don't want to be sitting there typing in Excel every single day for 3 hours. My rich life is to set up my systems, automate them so that they run beautifully, and then get off my chair and live outside the spreadsheet. That's my rich life. And so I started integrating psychology and money, and it grew and it grew, and now it's got millions of readers. And here I am.

It's incredible because we believe that— you believe that wealth is an inside job. Inside-out process. So it starts with, with, with, with your mind, your, your thoughts. But where do those thoughts— it's funny because when we're born, we're a blank slate. Yeah. Where do these thoughts about money, like money doesn't grow on trees, or money is the root of all evil, right?

Or we don't talk about money in this family. Yes, we absorb those. We absorb them from our parents. And if people just think right now, if you're listening, you're watching, what is a moment in your upbringing when you were 5, 6, 7 years old when you first started thinking about money because of your parents. And usually it's one of those things like, we don't buy those kind of things here, we don't talk about money. And you have to think to yourself, what's the source of these quotes? Usually it's our parents early on, and it's not like our parents went to any formal training about money.

Right.

And so they're just learn— they're just repeating what they heard. And down the chain, it's like a game of telephone, but no one has actually sat down and read one book about money. Not one.

Right.

So they're sitting there saying, well, you could have got that cheaper. Why would you waste money on that? For people watching and listening, let's say that you want to use Instacart because you want to save time and have your groceries delivered. How many of us have parents that might say, what a waste, you could just go do that yourself? Well, you could. But do I want to? Is my time better spent elsewhere? Is that valuable to me? And so when I grew up, you know, my— we had a big family. My dad went to work, my mom stayed home with us. We would never buy prepackaged vegetables. Now it makes perfect sense. It costs an extra $2 or $3. So things change as you adapt, as you make more, and certain things that were valuable back then change over time.

And then so It's interesting because we were not— we weren't taught these things. I mean, they came from our parents maybe, but there was no class on this.

No. And in fact, if there was a class, you wouldn't have attended. So many people say, why don't you teach this in high school? Well, a lot of high schools taught it. You just didn't go. And plus, it's unfair to expect a public or even private school teacher to understand personal finance at a sophisticated enough level to teach students. Guess who Who would actually fund those classes? Banks. And we don't want banks teaching us how to spend money. They're the worst. They have the wrong incentives. So I kind of hate when people say, they should teach this in high school. No, they shouldn't. First of all, it doesn't work in high school.

Right.

It's ineffective. There's research showing that. 2, they probably do teach it in your school. You just didn't go. So the right time is now, when people are listening, they're active, they make money, and they're like, what should I do with this? I've got $5,000 in my checking account, or I have $18,000 of debt. I just wake up every morning, spend whatever, get to the end of the month, shrug, and say, I guess I spent that much. But there's a different way where you can automate it and get in control.

So is there a way of rewiring or changing these invisible scripts that are in our minds that we're just not even conscious of?

That, well, that is the question. So I call them invisible scripts because they are so deeply embedded That we don't even realize they're scripts. Here's one that I grew up with. Tell me if you grew up with this one. Education is the best thing you can do.

That's it.

That's an invisible script. I think it's a positive one. I agree with that. However, it can go a little too far. We know people who get graduate degree after graduate degree, and they simply keep going because it feels safe. So that's an example of a positive script that can turn negative. Here's another one. Buying a house is the best investment you can make. That sounds— well, of course, what else would you— you don't want to throw money away on rent, right? So we have all these mythologies and words. Turns out if you run the numbers, buying a house is often not the best investment you can make. And when I say that, people are like, wait, what? What do you mean? You're throwing money away on rent, you're paying your landlord's rent, and on and on, these catchphrases. Do it for the tax deduction. But if we say, let's actually run the numbers, then you might discover that buying a house is actually not the best investment. For example, I could buy a house today, and I've chosen to rent for over 10 years. This is an invisible script, and people should analyze it. You will know that it's an invisible script because, like, you got somebody in Manhattan making $70K a year. Everyone in the media is saying, buy a house, buy a house. You intuitively know There's something wrong with that advice. Or someone saying, keep a budget, don't spend money on lattes. Intuitively, you know deep down there's something that's not right about that advice, because you could cut back on your daily joy in the morning for the next 50 years, you're not even going to save that much. Or you could get a few big wins right in life and you never have to think about lattes and appetizers again.

So what would you recommend? How would How do people reverse that script now that they're more conscious of it? Because I think most people believe buying a home is a good investment, or going to school is the end-all be-all and most important thing.

The first thing you can do is to— this is a really hard exercise because you have to examine inside, and people find it very hard to examine what is invisible to themselves. So what I like to do is to recommend they look at somebody else. Somebody else who they admire and is successful. Let's take you. So we're talking about Jim. What does Jim do that is different than what I do? And then we dig deeper. Why does he do it? Why did Jim move from the West Coast to the East Coast? Now, I don't know.

Right.

I'm just analyzing this, but I can come up with 3 reasons, and I'm probably within 80% accuracy. Why does Jim wear this t-shirt? Why does he dress this way? Where does he eat? Now, of course, you might not know what Jim does on a day-to-day basis, but you might pick someone in your community And when you start to do that, you go from a place of what I call disparagement to curiosity. This is a critical thing. It's really easy for people to disparage someone. I used to do it when I was in my early 20s. I would walk on a plane, all the people were sitting in business class, I'd walk past them to the back.

And you'd judge.

I would totally judge them.

Yeah, it's like, why, why would they spend all that extra money, 3 times as much?

Yeah, for what? We're all getting to the same place. Haha, they're so stupid. It's very funny how in our puritanical society, people feel superior because they save more money or because they don't spend as much. When in reality, instead of disparaging other people who maybe eat at a nice restaurant or take a certain type of trip, it would be much better to say, why do they do that?

They—

if they can afford to be sitting in business class, what's going on that would make them wanna spend 3 or 4 times the price? What do they know that I don't know? And if I had done that in my 20s, I would've been way more open-minded. Instead, I was like, oh, so dumb. I felt superior. But that's not the right way to go. To bust your own invisible scripts, you gotta be curious about why other people are doing what they do.

I love that so much. And then, so, going back to, let's talk about the money lenses. And so I want to talk because this is how you, how you see the world, how you see your personal finances. How— where do we start?

Money lenses. Imagine that I'm wearing eyeglasses right now, and I'm looking at the world through these lenses. The primary lens in America that people use for money is cost.

That's it.

And you know this because we have convenient phrases like, how much did that cost? Oh, I could have gotten it cheaper, could have done that myself. Why would you waste money on that?

Mm-hmm.

Cost drives everything. And think about the average person in America when they go to take a trip to Disneyland. Their primary lens: cost. Now, that's perfectly fine. When I was growing up, we didn't have a lot of money, so cost is by necessity the money lens they use. What happens is, as people get older, maybe they get a little bit more financially successful, they don't change their lens. And at a certain point, the pattern becomes so deep that they are basically a one-hit wonder. They have one note that they play, cost. But if you look at the world through this lens, certain things don't make sense. For example, walking here in Manhattan, beautiful neighborhood here. Why does this restaurant charge $40 for an entree? Well, if I'm looking at the world through a cost lens, that makes no sense. In fact, what a scam! Such a scam! I could eat at Taco Bell and get full. Cost. But what if I put on a different lens? Security. Security means if I were to bring my parents there, I know I'm gonna get in because it's not gonna be that busy. It's gonna be quiet. There's not gonna be a bunch of frat guys taking shots.

Mm-hmm.

Security. Or results. Why would you hire a personal trainer when you could just go on YouTube? You want better results. So there's all different types of money lenses. Experience is another one. And we intuitively understand this for kids. You take kids somewhere, you wanna give them a magical experience. But for ourselves, oh no, no, no, I could do it myself. I don't wanna waste money. We talk ourselves out of it. So the point of money lenses is to reexamine and say cost is a fine lens, but let me put that aside for just a second. And let me try to imagine what life would be like if I put on the experience lens or the results lens or the convenience lens. It completely changes the way you think about spending.

Because how you see the world affects also how you're going to interact with the world also as well. So there's different points of view.

Exactly.

And most people can't step out of their, their own mind because let's say they need to make a decision and they look through it through just one lens as opposed to these other Goals.

Yeah, it makes you so much more adaptable. You don't have to spend a ton of money. You don't have to get a personal trainer or a personal chef or anything. I'm not saying that. What I am saying is I want you to be adaptable, to be able to, with your mind, play with different abilities and different opportunities. Oh, I'm going to buy a suit today. I could optimize for cost perfectly fine, but what if I want to optimize for convenience? I want the tailor to come to me. Or quality, or just personal extravagance.

How many money lenses do you think there are, like main ones?

I think there's about 10 core ones, and then there are more, and some people have their own. Classic common ones are results, experience, security, convenience, and cost. Cost by far is the biggest one. And what I want to encourage people is, again, you don't have to use all of these. But be adaptable. And I would encourage you to use each of them at least once per year. It will change the way you think about money.

And that would create a different kind of result that you have also.

Yes.

And so like the cost lens, our mutual friend Michael Fishman says, you know, something can't be expensive and also valuable at the same time. Something like that, meaning that if you're just looking through the cost lens, you're not looking at, you know, the value that you're going to receive from that.

Yes, and Dan Kennedy has this beautiful quote that I love. He says, why spend less when you can spend more?

Why spend less when you can spend more?

It totally blows people's mind, but we all intuitively have an area where we just get it. If you have children and I said to you, why don't you just optimize and get the cheapest baby food and the cheapest— they'd be like, this is crazy. So why is it different for ourselves? Why do we talk ourselves out of that? And that is the thing that I want people to do with money lenses, is to say, you know what, it's okay to just play with the concepts in your mind. And then when you find something you love, go and spend just once and see what it feels like. I had a woman I was speaking to yesterday. She said that when she took a trip to London recently, her, her first money lens was cost. And so she saved money, she got sort of these seats that were the cheapest, she got to the hotel She was hungry, everything was closed. She called downstairs, closed. So she remembers that trip being hungry, tired, cramped, all costs. The next time she took a trip, she started asking herself a question: what would it take to make this a spectacular experience? So she was using the experience money lens.

Okay.

She said it cost her a little bit more, like a couple hundred bucks more, but this time she planned better. She spent 2 or 3 hours planning her seat. She had a list of restaurants ready to go. She got to her place, she was refreshed, she felt great, and now the whole memory of that second trip is, as she put it, spectacular. So it doesn't have to cost a lot, but you have to be intentional about what money lens you're using.