4 Life-Changing Ideas About Money

There's no shame in wanting to be rich. Money can make you more adventurous, more spontaneous, more generous. It also means you don't have to worry as much. I've helped millions of people figure out how to take control of their money and of course, how to grow it. And on this journey, there are four life changing ideas about money that have guided me. I want you to internalize these ideas so you can live your rich life. Starting with idea number one. You use the 85% solution. You know that getting started is the most important thing you can do to improve your finances. It's important for me to tell you this because a lot of people believe they need to become an expert. I need to get all my ducks in a row before I start investing. No. Too many of us get overwhelmed with thinking that we need to manage our money perfectly, leading us to do nothing. I would rather you take action and get it 85% right than to do nothing. Think about it. 85% of the way is way better than 0%. That's why the easiest way to take control of your money is to take it one step at a time and to not worry about being perfect. My book, I Will Teach youh to Be Rich focuses on small behaviors you can implement that snowball into something way more meaningful. That means you're gonna move towards your goals without even realizing it. So to start taking control of your finances, follow these six steps, which you can easily accomplish one week at a time. Step 1. Optimize your credit cards in the first week. Get an understanding of where you're currently at with your credit and then quickly get on the right path. Here's how you do it. Set up autopay to pay your credit card bills each month and pay them off in full. To do this, you need to make sure you're spending less than you earn. Otherwise you're going to end up with a mountain of credit card debt that's hard to get out from. If you're currently in credit card debt, start paying it off. Not tomorrow, not next week. Today. Give yourself one week to figure out how much you owe. Call your lenders to negotiate down the apr. Sometimes it works, sometimes not. And set up automatic payments for the largest amount that you can afford. I'm not exaggerating when I say that getting out of debt quickly will be the best financial decision you ever make. Once your debt is paid off, or if you are currently debt free, don't forget to use those credit card perks. I'm not saying you should go out and spend on your credit card just to earn perks. If you don't have the money to pay for what you're buying, don't buy it. But if you're using your credit cards responsibly, take advantage of the perks they offer. Credit cards come with perks like warranty doubling, car rental insurance, trip cancellation insurance, and of course travel points and cash back. Step 2 Open high interest, low Maintenance bank accounts. Your bank accounts are like the backbone, the spine of your personal finance infrastructure. So it's important to pick the right ones, optimize them and make sure you're not paying unnecessary fees. Good news is you can do this in just a few hours and once you do it, the accounts will basically run themselves. Let's take a quick look at three banks that I recommend. And just so you know, I don't make any money from these recommendations. My goal is to simply help you avoid getting ripped off. First off, Charles Schwab has a great checking account with benefits like ATM reimbursements anywhere, anytime and free foreign transactions. There is no minimum balance, there's no monthly fees, but you do need to open a brokerage account with them. And don't worry, you don't need to actually put any money in that brokerage account. One thing to note is that they may run a credit check on you. So if you're planning to buy a house or a car or anything in the near term future, you probably want to hold off on opening this account. Next up, Capital One has elements of a traditional bank and online only bank. No monthly fees, no minimums, no overdraft FEES, access to 70,000 plus no fee ATMs. It's a pretty good choice for banking. I like their 360 performance savings account. It has a pretty good APR, although I don't really care. I'm not rate chasing. It's not always the highest interest rate, but it's close and it has a nice ability for you to set up multiple accounts all grouped under one account, such as saving for a vacation, a down payment, car, et cetera. And third, Ally is an online only bank. No overdraft fees, no monthly fees. Mobile check deposits. They have customer service via phone and chat. They don't have physical branches, although for most people that's not a big deal. So moving accounts can seem daunting. But if you set your accounts up the right way, you're not going to have to switch. I keep my same accounts for years and they just run automatically. Step 3 Open up your investment accounts. Look, investing is not scary. Investing is how real wealth is created. I'm going to show you what I mean right now. I call it the Ladder of Personal Finance and it shows you exactly where your money should go into which accounts. Let's start. Rung1 if your employer offers a 401k match, contribute enough to get 100% of the match. For example, let's just assume for easy math that you make $100,000. 100% match up to 5% of your contribution means that if you contribute $5,000 a year, your company will match it with $5,000. That's free money. There is simply no better deal in personal finance. Make sure you max out your 401k enough to get an employer match if they offer it. Rung2Pay off your credit card and any other high interest debt. I want you to be debt free. Particularly high interest debt like credit cards. Pay it off as quickly as possible. Rung three Open up a Roth IRA and contribute as much money as possible. Please note that there are contribution limits. There are also income limits. You can just google those and find out what the details are. Rung4 if you have money left over after doing your 401k paying off debt IRA, go back to your 401k and contribute as much as possible to it. This time above and beyond your employer match, maybe even up to the full contribution limit. Rung 5 if you have access to a health savings account, also known as an hsa, max that out. An hsa, a lot of people don't know, but it doubles as an investment account with a triple tax advantage. It's absolutely amazing. So if you have access to an hsa, which especially young people tend to have, and you have the money, take advantage of it. It's an awesome investment account. And finally, Rung six If you've done all of these things, amazing job, you're in a great and very enviable financial situation. But you still have another option. See, you can open up a regular taxable non retirement investment account. It's basically just a regular investment account and you can invest as much as possible. I say this because some people think you're limited on how much you can invest per year. That's not true. You do have limits on your retirement accounts like your 401k and IRA. If you have the money, you could invest $10,100,000 $2 million a month. That's totally up to you. There's no limit. Other options would be paying extra on any mortgage debt you have, especially if it's high interest. I would Put that in a higher category. Or you could consider investing in yourself, like starting a business now that we've covered which investment accounts to open and when. That brings me to step four. Create your conscious spending plan. No, you don't need to create a budget and track the price of blueberries and broccoli. It's a waste of time. But you do need to know where your money in general is going, especially for the big items in life. Now, who really wants to track their spending? Nobody. The few people who actually try it find that their budgets completely fail after a couple of days. Because tracking every penny is overwhelming and boring. And frankly, what does it give you? Oh, this is how much we spent on this line item. What's the point? Budgets are backwards looking. I want to give you something that looks forward and that is called a conscious spending plan. What if you could make sure you were saving and investing enough money each month and you would know exactly how much you can spend on guilt free things like eating out, handbags, vacations, anything you want. Well, you can, but the only catch is that you have to plan where you want your money to go ahead of time. So conscious spending is not about cutting your spending on everything. No, I don't believe in hyper frugality. Instead it's about choosing the things you love enough to spend extravagantly on and then cutting costs mercilessly on the things you don't. That's the mindset of a conscious spender and it's the key to living a rich life. There are only four parts of a conscious spending plan. These are the four numbers you need to know. Fixed costs includes your housing, transportation, groceries, debt bills. Those fixed things that you pay every single month. Savings that includes your long and short term savings. Goals would be things like an emergency fund, down payment for a house, vacation, things like that. Investments. That includes retirement and in some cases non retirement investing. And finally, guilt free spending. My favorite category of all. Because you can spend on anything you want guilt free knowing that you've already handled the rest of your money. So if you look at your money through a conscious spending plan lens, notice that it's proactive, it's forward thinking and it's fun because you're in control. It's almost like you get to design the map of your life that is part of a rich life. You can download a copy of the conscious spending plan for free. I created a template. It already does a bunch of calculations and things for you. You. I'll link it in the description below. Next up, step 5. Automate everything and get your time back. Automating your money is going to be the single most profitable system you will ever build. I built my own automated personal finance system over 15 years ago. It runs in the background every single day. It generates more money, and it requires very little time to maintain. I'm talking about like an hour per month. You can do this too. And you can completely change the way that you think about saving, investing, even spending. You know, when I hear people saying phrases like, I need to buckle down, I need to try harder, we just need to stop spending so much. They almost never do. They're just playing defense. They're reacting to something bad that's happened. And a lot of times they've been doing the same reaction for the last 15 years. I don't believe in that. It doesn't work. I don't like it. I don't like feeling bad about money. I want to feel good. The way we do that is playing offense by building a system that acknowledges we're humans, we have normal human behavior. We get bored, we get distracted, we get unmotivated. And we can use technology to make sure that our money keeps going where it needs to go. In other words, do the work. Now, build your system and benefit forever. Automatically. Here's how to set up your automatic money system. If you're paid on the first of the month, your paycheck is automatically deposited into your checking account. Your 401k contributions will be automatically sent to your investment account before your paycheck is deposited. And in addition, I suggest switching all of your bills to arrive on or around this day as well. You can usually change that online. On the 5th of the month, set up your automatic transfer to your savings account and to your Roth IRA. On the 7th of the month, you'll auto pay for any monthly bills you have. That includes regular ongoing bills like cable, utilities, car payments, student loans, etc. You'll also set up an automatic transfer to pay off your credit card. And that's the basic automatic money schedule. Now here's a pro tip. The first time you set this up, leave a buffer amount of money. Like I recommend 500 bucks or so in your checking account just in case a transfer doesn't go right. You can cash that buffer out after a few months when everything is running smoothly. Now that you've got your automatic money system set up, that brings me to to step six. Start investing for the future. Now, I cannot say this enough. Investing is the single most effective way to get rich. Remember, a lot of people think that in Order to invest, you have to be rich. Wrong, it's the other way around. You get rich by investing even $50 a month. So remember that ladder of personal finance that I showed you in step three? That only shows you what accounts to open. Now I'm going to talk about what people invest in. And to keep things simple, I'll tell you my number one investment. This is the thing that when my family or friends ask me, I talk about target date funds. Now I love target date funds. Of course you have lots of other options, including choosing your own index funds. But personally, I think target date funds are the simplest way to get started investing. And they are an awesome investment option for people who want their money to grow with the least possible effort. Let me tell you how they work. Target date funds are basically a fund you choose and they automatically get more conservative over time. So as you get older, that's what you want. You want your funds to be more aggressive as you're younger and a little bit more conservative as you get older. All you have to worry about is putting as much money as possible into the target date fund. It's automatically diversified for you. And when you choose your target date fund, it's really simple. You just look for the year that you plan to retire. For example, if you plan to retire at 65, you'll be 65 in 2060. You would look for a 2060 target date fund. These funds are available everywhere. They have great funds at Vanguard, Fidelity and Schwab. I personally use Vanguard. But it's totally up to you. Most of these are very low cost and they are automatically diversified. Then what you do is you start investing automatically every single month. That target date fund might sit in your 401k, it might sit in your Roth IRA or any number of accounts. One little caution is be careful about having target date funds in your taxable non retirement account because there are some tax implications. But for most people watching this, that's not really gonna apply. Because the ladder of investing show money's first going to go into retirement accounts. And only if you have lots of extra money for a taxable account. You're going to want to think about a more tax efficient investment. If you didn't understand anything about what I just said, don't worry. Come back when you have tons and tons of money and you will be able to look up tax efficient fund placement. Now all you need to do is to make sure that money is automatically being sent and invested every single month. If you follow these six steps, you will easily be able to set up a money system that is good enough or 85% of the way there so you can get on with your life and do the things you really want to do. And remember, I post a new video about money every Thursday on this channel. Make sure you subscribe and turn on notifications so you get every single one of these videos. Watching these quick videos every week will help you become more confident and competent about money. All right, next up, idea number two. You get to decide what rich means to you. And that is a beautiful thing. What is a rich life anyway? Does it mean you have to wear a Rolex and drive a Lamborghini? No. A rich life is your ideal life. One where you look around at your personal relationships, your finances, even your ordinary days, and you say, wow. Now, a rich life could mean buying anything you want from Whole Foods without worrying about the price. Picking up your kids from school every day, Taking your family on an incredible Disney vacation that they will never forget, or buying a thousand dollar cashmere sweater. Your rich life is yours. Not your parents, not your friends, not even mine. It's yours. A rich life is lived intentionally, proactively and abundantly. And a rich life isn't only about accumulating money. No, the point of a rich life is not to just hoard it. It's to actually decide what your rich life is and then use money to fuel it. But in order for you to live a rich life, you have to understand what rich means to you personally. So what are some signs of a truly rich life? Well, first, your rich life should fit you like a handmade glove. Part of creating your rich life is the willingness to be unapologetically different. And that's really what I want for you. The more you design your rich life, maybe it's traveling three months a year or driving an old car so that instead you can buy organic groceries. It's whatever you want. The more you turn that dial and really personalize your rich life, the more other people around you are going to look at you in a confused or even bewildered way. That's okay. It's your rich life, not theirs. A rich life puts you in control. Life is not a Disney movie. Nobody's coming to rescue you. But the good news is you can take control of your finances and build your rich life exactly the way you want it. And finally, I believe that a rich life is generous. The truly rich have enough to give back through their time, money, resources and talents. That is why I always encourage people to think not just about what they want to accumulate but who they can share it with. To live your unique rich life, you got to have a vision. What does it look like? Where will you go? Who are you going to take with you? Figure out what really lights you up. Is it freedom? Adventure? Connections? Then you can start putting your money and time and energy towards it. One of the concepts that I share is money dials. What are the areas where you really love to spend money? Take a look at some of the money dials out there. Which one of these gets you excited? And then think about the examples where you could spend time and money to. To make you really light up. Remember, true wealth isn't just about accumulating money. It's about personal growth. It's about building relationships, staying healthy, having an impact, getting rich and living a rich life means making your money work for you in a way that aligns what your rich life vision is and how you're actually spending your money. That is my favorite part of money. So remember, we're not here to live as small of a life as possible. We're not here so that our rich life is how little we can spend and how little we can do. No, this is about living abundantly. What a tragedy to live a smaller life than you have to. I think instead, we can live a big, full rich life. Idea number three. There are two ways to get more money, and one of them is a clear winner. Look, fundamentally, two ways to get more money. You can spend less and you can earn more. Since we were kids, a lot of us have been taught about cutting back, and we really internalize these messages. Don't spend money on lattes. No coffee, no jeans, no vacations. No, no, no. That is one of the primary words that we associate with money, because that's all we've heard. No. But I think that even though we should control our money, I don't want to only focus on no. And while I do believe that we need to control our spending, I don't want to live a life where I only look at the world through the lens of saying no. I think instead we can use money to say yes. That's important because there's a limit to how much you can cut, but no limit to how much you can earn. For example, I have readers earning $50,000 a year and others earning $150,000 a year. Guess what? They eat the same bread, but the price of that bread feels very different to someone earning 50,000 versus 150,000. So listen, I'm not saying that you should go out there and just Magically find a job that pays you triple what you're making. No, what I'm saying is you need to understand the two core strategies in personal finance. Cutting costs, which is what most people obsess over, but there's a limit to that versus spending time and effort to build the skill of increasing your income. And yes, it is a skill. See, most of our income comes from work, so it's an excellent place to optimize and earn more. For example, negotiating your salary is a skill that can be learned. In fact, I teach it, and it's one of the fastest ways to make money. Your starting salary, for example, is even more important than you think because it sets the bar for future raises and in all likelihood, your starting salary at future jobs. Another example is that a thousand or $2,000 salary increase can be invested and turn into way more over the course of your lifetime. Now, let me actually show you how to earn thousands of dollars more by negotiating for a better salary. You know, most people don't even negotiate, they're so scared. Oh, that doesn't work. I know. You're all writing in the comments already. Oh, Ramit Sethi. What about this? What about teachers? What about this industry? You're such an elitist. I think it's very easy to tell me all the reasons something won't work. I'm much more interested in hearing from people who go, wait a second, I never thought about that. How would it work? Could I adapt that to my own situation? Because there are lots of options and even if it doesn't work for you, there's still many other ways to earn more money. Let's talk about interviewing and negotiating your salary. You know, a lot of people walk into an interview and they think that their job is to answer questions wrong. I say this as someone who's landed job offers at places like Google, Intuit and a multibillion dollar hedge fund. Your job in an interview is not to answer questions. It is to communicate your key messages. The interviewer wants to know why they should hire you over everyone else. And that means you need to stop focusing on what you want and instead think really deeply about what the hiring manager wants. For example, if they ask, why should I hire you? Do not give the classic me focused, rambling answer. Instead, say something like this. Well, based on the things we've already talked about, I know there are three main challenges you're looking at. The first is getting new leads. The second is increasing conversion, and the third is retention. My experiences in email marketing, I've done a Lot of work on the conversion side of things. I think I could help you in Areas 1, 2, and 3. In fact, the last company I worked with increased their conversions by 26%. I'd be happy to walk you through how we did it. Boom. This is the complete opposite of what most people do. I call this the briefcase technique. You show up to the interview already having done your research, prepared to offer solutions to a problem you've researched for the company. You can theatrically pull the ideas out of your briefcase, literally or figuratively. And, and you can impress the interviewer with your preparation and problem solving skills. Now, I have had lots of people who have done this. Some of them have even used the briefcase technique on me. Many people have gotten massive raises. I'm talking 10, 20, $30,000 plus raises. And more importantly, you're separating yourself from 99% of other people, whether you are interviewing, negotiating your salary, et cetera. This works. And guys, I'm not making this up. Look at the result from one of my students who used the briefcase technique. He says, quote, I used a variety of your materials to land what I would consider my dream job and then implement your negotiation techniques to nearly double my salary. The briefcase technique worked perfectly. Prior salary, 80k. New salary, 150k. I'm applauding myself. This is my technique. Great job, Ramit. But more importantly, great job, Don. Amazing work. And Don is one of many people who, who has used this technique. That brings me to the last life changing idea about money. Idea number four. The ultimate goal of money is not to hoard it, you Scrooge McDuck freaks. Money is meant to be enjoyed. I think too many of us go through life feeling guilty about money. I think a lot of you like to feel guilty because if you didn't feel guilty, what else could you feel about money? Many people don't even know what it's like to feel guilty. Good about money. We feel behind. Then we start to hoard our money because we feel guilty so that we can get to this mythical number that we just artificially created in our head. But what's the point of money? What is it all for? We go to work, we save, we agonize, we compare prices at the grocery store for peanut butter. What is it all for? Most of us have never really thought about that simple question. I'll tell you right now. I don't think your rich life waits until you're 65 years old. I don't believe in that. I believe you live a rich life today and a richer Life tomorrow. That's my wish for you. I think that money is meant to be used. It's meant to be enjoyed. And that means that yes, you have to have some goals, but you also have to have fun along the way. That means that you need to design your rich life, almost like designing a beautiful piece of art. And then you get to use your money along the way. Nobody wants to end up being a 85 year old multimillionaire who regrets not actually using their money. So don't do that. So how do you enjoy your money while still working towards your savings and investing goals? Well, my suggestion to you is to start being conscious about your spending. You don't need a budget. You do need to decide what your rich life is and how you are going to use money to get there. That means you can spend extravagantly on the things you want as long as it's hitting your four numbers in the conscious spending plan. If it's eating out and you love to do it, please be my guest. If you love clothes like I do, be my guest. I love that too. But it also means that when you spend extravagantly on things you love, you got to cut costs mercilessly on the things you don't. And ultimately that means knowing yourself and being unapologetic. Here's what I love. I have the money, I can afford it. Of course I'm going to spend. I'm not going to feel guilty. On the other hand, this thing isn't important to me, so I'm not going to spend a lot on it. Doesn't matter. That's the way you become a conscious spender. This is the fun part of money. You get to craft your own rich life vision and then use your money to live it. Otherwise, what's the point of money now? There are so many different ways to to master the skills of money. But how you think about money is going to determine how you act with money. So I want your mindset to be working for you, not against you. And changing your mindset is something you can do. That's why I created a video showing you exactly how to master your money psychology. If you follow the advice in this video, you will never view money the same way again. Check it out right here.