Money Expert Reacts to Finance TikToks

I'm the host of Netflix's Money show and the author of a money book with over a million copies sold. And you really need to be careful who you take financial advice from. In this video, my team has put together some financial tiktoks. Let's see if they're good, if they're misleading, or if I'm going to vomit on camera.

Okay.

So what are your thoughts on a prenup?

I'm a fan. We have one.

Yeah. What caused you to want one? Can you take the league of mumbo.

Jumbo out so that it's only love there?

He had way more money than I did.

What's the one word you think of when you. When you think of divorce?

Oh, fighting.

No. Thank God we have a prenup.

Damn. This is a great. First of all. I just love the body language. Yeah, we have a prenup. I love that she's smiling and he said, take the money out of it. So we have love. I love this video. A prenup is highly misunderstood. It's usually the idea that some rich person, usually a guy wearing a freaking top hat being driven around like Richie Rich come, comes over, throws a manila envelope out the window, says, sign this prenup. And they're trying to screw over their soon to be partner. That's not the way it works. A real prenup discussion. Both people have independent lawyers. If one person can't pay, the other one pays. They're required to come to an agreement. And the prenup focuses on what to do with the premarital assets, the money that was made before the wedding, and what happens in. In the unlikely circumstance that they get divorced. In other words, think of any business relationship. You have a contract, you have an agreement. What happens if things go right? What happens if things go wrong? But only with marriages, the most important partnership of all, the business of running a relationship and a household together, do we say, oh, no, it's all about love. Love, love, love. I love love too. I love it. But if one person has extenuating circumstances like an inheritance or a pre existing portfolio or they own a house, it makes sense to have these discussions and put it on paper because you want to make these decisions when things are at their best, not in the unlikely circumstances that you have to make this decision when things are at their worst. Great job. Love this couple and love the energy in this video. Let's look at the next video.

Don't invest in the S&P 500 if you want to double your money much faster. The S&P 500 will take you about seven to eight years to double your money. With a stock portfolio, you could double your money in about half the time.

What the what? Hey, everybody, don't fly from L. A to New York. That will take you six hours. If you fly on a military airline jet, you can get there in two and a half. Yeah, I don't have access to a freaking military jet. Going after burner across the country. What the kind of. Let me explain it. I'm going to tell you why I get mad at nonsense like this. Let's say my mom saw this and now she becomes radicalized by the algorithm because she clicks it three times and suddenly she's watching a bunch of jokers like this. You could triple your money. You don't need to get a boring 7%. That's so boring. Why not just pick a stock portfolio? All you need to do is do your research. Do you understand that the highest paid portfolio managers in Manhattan failed to beat the s and P500 over 85% of the time? And you're telling me this guy who's getting out of a car and filming on TikTok is going to do his research and what do you say? Double the returns of the S and P? No. Too many of you want to be the best at everything. All right, now I get it. You want to be the best at squatting. God bless. You want to be the best at relationships. I love it. Stop trying to be the best at investing. You're only going to get subpar results. What you should actually do is say, I love being average at investing. I love paying 0.03% expense ratios and matching the market and getting roughly 7% post inflation. That means your money's doubling every 10 years just sitting there. And you can add more to it and increase that number. So the irony of guys like this, you know, first of all, they're not going to beat the market at all. I can guarantee that. And I would be willing to bet lots of money on that. Just as Warren Buffett bet a hedge fund manager. And of course the hedge fund manager got blown out. Secondly, this person will actually get worse results than AN S&P 500 index fund. Think about that. You're paying more to get worse results. This is basically 90% of TikTok investing advice. Be very careful about what advice you take. You could read chapter six of my book or get at the freaking library where you can read the research showing how no matter how good you think you are, no matter how much you're paid. You will statistically fail to beat the market over the long term. And one last thing. I know a bunch of people can say Warren Buffett did it. Rentech did it. You're not Warren Buffett and definitely neither is this guy. One other thing. I went to this guy's website to see. What does he do? Anyone who beats the market doubles it. Wow. I really want to know how they do it. Let me just read off some of the text. Building and protecting generational wealth through visionary investors. Generational wealth. Oh my God. I want that because everyone on social media told me I need generational wealth. I go, how much is generational wealth? They go, it's, it's enough to pass down to gen. I go, how much money is that? Why does somebody with $25,000 of credit card debt need to be thinking about generational wealth? That's like a 13 year old saying they want to drive a Ferrari. Why don't you learn how to drive a Honda Civic first? Let's continue. One who targets 15 to 20% annualized returns with less calculated risk in the stock market. Using in depth research while taking on less risk. Okay, horrible language aside, notice that he says one who targets 15 to 20%. Yeah, I target running a sub four minute mile and a 6:15 squat. That doesn't mean I'm going to get it. The phrasing is very intentional. One who targets. You could target anything. I could target being a freaking ballerina. Doesn't mean it's going to happen. The core of our method, he says hours. If there's more than one person. The core of our method is based on a proprietary approach to value investing and contrarian investing while uncovering a company's visionary factors. Well, candidly, once you use the word visionary, I don't know how you can lose. With this, I'm gonna move all my money over to this guy and I know that I'm gonna double, double, double and double my money in about three years. Great. Should be good. All right, I want to see what's next.

How much money do you think you need to make in San Francisco to be considered rich? Rich?

Wow. Oh boy. So wait, do you just mean like rich? That's a really, really hard question. I am married with one child who is five. And if I wanted to feel rich and live in San Francisco, I would want an income well over $500,000 a year.

All I know is that $250 here you're basically, you're upper middle class. So double 250,000 a year to be rich, I'd say.

I'd say 500K.

She'd have to be making over, like, probably 350K. Like, you'd have to be making a lot of money. Anywhere above, like, 250, 300,000 would be considered rich, but it's definitely a tough environment to live in.

You gotta make six digits, right? So if you probably make like, 200,000, 250,000, I think you're gonna make it.

So I would have to say that I would be having to make millions, and I would have to have ancestral wealth and knowledge to help me move that income in a way where I could take advantage of all of the amazing opportunities that are here and maintain that wealth.

Okay, so millions of dollars.

Absolutely.

Honestly, I find this video kind of refreshing. A lot of times you ask people, how much do you need to be rich? And they say some insane, like, I'm not going to be rich till I have 50 million in the bank. I'm like, 50 million? You currently have $186 in your checking account. What do you know about $50 million? And that's why I think it's so interesting that you heard one of the women in the video say, in order for me to feel rich. And I just love how people talk about feelings, because when it comes to living a rich life, there is no technical definition of rich. There isn't if you make $100,000, that's different if you live in Cleveland than if you live in Brooklyn, than if you're 20 years old or 70 years old. So rich, there's no technical definition of it. That's why I want you to live a rich life, which you can live on $80,000 a year or $8 million a year. And I've had both of those types of folks on my podcast. But also, people are delusional. They literally just go, how much do I need to be rich? And they just pick a number. Isn't it interesting that all their numbers end in zeros? Like, they're all nice round numbers. 500,000, 250,000. That's when you know that this is all just made up in people's heads and how they feel about money. By the way, the same people who make 500,000 come on my podcast and go, for me, we're just comfortable. We're just middle class. We're struggling to get by, you know, inflation at the grocery store. So inflation. Why are you talking about inflation making half a million dollars a year? Which goes to show the way you feel about money is highly uncorrelated with the amount in your bank account. In San Francisco, the median income is $135,000. What does it mean to be rich? Is it two times that? Three times that? Ten times that? You can tell that when you ask people this question, they're not actually rationally calculating numbers. That's not how people work. They literally have a number that sounds big to them, and that's what they pick. And you all know this is true because when you were a kid, you thought making $50,000 would be incredible, $100,000 would be rich. And then you get older and you start to realize, oh, there are all these things I didn't realize. That is the same way people treat their money for their entire lives. It's less about careful calculation. It's more about feelings that are often anchored by the way that you grew up, the cities you live in, your discretionary expenses, and so much more. Anyway, I kind this video. Even though rich is not a number, I do like hearing what people think will make them feel better about money. Okay, what's next?

Not gonna sign a prenup?

No, I'm not signing.

No freedom.

What you got is what I got.

Okay, but I don't understand. Why would you not want to sign? Basically, our love is your money is my money.

Simple as that.

Okay, why are we going straight to the money?

It don't have any.

All I'm doing is my lawyers are telling me that I have protect myself. And it's not from you, but it's just.

It's just hear that. Everything that you bring in. In the house, I. Is mine too.

Nah, cuz, I mean, what. What did you come with? What did you come with that you deserve the thing you just don't?

Like.

Like, this is for our own protection. You know what I'm saying?

From.

I don't care what you say. It's my money too. Simple as that.

But see, the lawyer said that's what you was going to do, though they were saying you was not. So what's the point of you not signing the pre.

The money that you bring home is mine too. Simple as that in the conversation.

That's crazy. So I guess ain't gonna be no wedding.

It's gonna be a win.

Whoa. All right. As someone who has signed a prenup watching this, I'm very interested in this. I don't know the context of who this is or what ended up happening, but there's a couple things that just jumped out at me. First off, he Said my lawyers are telling me to don't do that, don't do that. If you're the one asking for a prenup, don't blame it on your lawyers, your dad, your mom, your cousin. Don't do that. You gotta take ownership, just as I did when I brought this up with my then fiance. And it was really important. I started off, I was incredibly nervous. I love you. Both of us grew up very similarly. We have similar family values. But because of the business I started, because of a lot of hard work and because a lot of luck, I have accumulated a big portfolio. And because of that reason, I want to discuss a prenup. Here's what it means. Here's why this is important to me. I understand that it's going to take some time for us to both learn about the process, but this is something really important to me and something I wanted to bring up with you early. That is the way to do it. Don't blame somebody else. The other thing I noticed is she had a good point. She said, everything you bring home is mine too. That's actually true. If he had practiced this and if he understood the dynamics and had really good communication, he would have said, you know what? You're right. When we're married, everything we make, you make, I make, we make. That's ours. We're partners. Yes, I agree with that. What I'm talking about for the prenup is everything before the marriage, everything that I accumulated, the house that I bought, the business I started, the investment portfolio I created.

The.

That, from a prenup perspective, would be something that we want to discuss. What happens in the rare unfortunate event we ever get separated. Watching this video, I started to sweat because I remembered my own conversations about a prenup with my wife. And it was one of the most stressful times of our relationship. And I wrote a book on money. I thought it would be easy. Oh, Mr. Ramit Sethi, the money guy. No, it's incredibly difficult. And having a series of prenup discussions. This. That lasts months and involves lawyers and big sums of money. It's one of the most high stakes, stressful conversations you can ever have. So I don't blame this couple for getting heated. I do wish that it had gone a little differently. All right, let's look at the next TikTok my team gave me.

If you ever have cash in a bank account, you can just put it in a bond and you'll get a higher percentage and it's safer than a bank. Banks aren't as Robust as the US Government. Banks pay you zero point whatever percent government pays you four to five. That's all there is to it. And they're almost as liquid because you can sell them in and out whenever you want. That was a huge aha.

No, that's not how I think about this. I like to keep things simple in my finances. I fight for simplicity. If I have cash that I need for an emergency fund or I'm going to need it in the next five years, such as a down payment on a house, that money is going in a savings account. With a savings account I can get basically the same money as I can get on a bond. And it's totally liquid. I don't have to think about it. It's also backed by the FDIC, which is the government, up to $250,000. Now some people are going to go, well, bond will pay you 0.2% more. Hey, do you know how much 0.2% is actually worth on a $10,000 balance? That's $1.66 per month more. Why are we talking about this in your finances? Fight for simplicity. Savings account for money that's one to five years or you need liquidity like an emergency fund. If you don't need it, invest it. Keep it simple. Let's see what's next.

When I bought my house, I felt very lied to after seeing what all the actual prices were. So here's a realistic what my house costs every single month. So I learned that when people say that their mortgage is less than rent, they only mean the mortgage, not everything else that comes with it. And for context, my house is about $200,000 at a 6.25 interest rate. I have a 30 year loan and I put 3% down. My monthly mortgage price is $1,134. My PMI for not putting down the full 20% is $72. My property taxes are about 245. My home insurance is 2750. HOA fees are 280. My home warranty is $30.19. And then my utilities are usually somewhere around 250. And if you weren't keeping track, that was $2,030 every single month. So while I wouldn't do anything differently, I think a lot of people would if they had all the information. So don't let anyone push you into buying a house if you don't feel like you're ready.

Hallelujah. I get to actually react to a good video. Thank you. And by the way, thank you for sharing the actual numbers, what this person is talking about is something I call phantom costs. The invisible or not easily seen costs with any major purchase. Now, cars have major phantom costs. For example, my car payment used to be $350 a month. I actually paid over $1,000 a month. Once you factored in all those phantom costs. So you can see with a house, the phantom costs are huge. This person, their mortgage was $1,134 and their total payments were $2,030. I actually think she's underestimating. She's underestimating because she hasn't really factored in maintenance. When something breaks or even needs to be preventatively maintained, that is going to raise that and raise it in a huge way. For example, let's say she has to do a $12,000 repair, spread that out over a year, or that's an extra thousand dollars a month, or you can amortize it over five years, etc. Here's what you need to know. When you buy, you have to factor in invisible phantom costs. If you don't, you're going to be house poor. This is what so many people in America do. They go, oh, the mortgage is thousand bucks a month. That's how much I'm going to pay. They don't realize that. For example, in my own situation, I always assume a 50% increase from what the mortgage is to what my total cost will be. That 50% allows for maintenance, it allows for renovation, it allows for staff, it allows for all kinds of stuff. Most people don't take this into account at all. So they're always reacting to something breaking around the house. Much better for you to proactively account for all these things. Add a nice healthy buffer and then see how much you can actually afford. One last thing. Notice that she put 3% down. I'm not opposed to people putting down a certain small amount of money, but there's a couple of ramifications. One is the pmi, which frankly, I don't really care about. The second thing is I encourage people to have 20% to be able to put down. Doesn't mean you have to put it down depending on interest rates, but it shows that you have the demonstrated ability to save money overall. I love this video. I love that more people are talking about the actual costs of ownership. Because when it comes to buying and renting, the biggest purchase decision of your life, you need to run the numbers. All right. I hope this video shows you you've got to question the typical money advice that you hear. Make sure you click that subscribe button and turn on notifications so you don't miss any of my new videos. Now check out this video popping up on screen to watch more.