Money Expert Reacts to Finance TikToks

I'm the host of Netflix's Money show and the author of a New York Times bestselling book with over a million copies sold. And today I'm back looking at financial advice on TikTok. Remember, you really need to be careful who you take financial advice from. Some of it is legit, some of it's really good actually. But some of these people are dangerously misinforming you and should put duct tape over their mouth and never talk about money again. In this video, my team has put together some financial TikToks. Let's see what's good and let's see what you should avoid if you were to invest $500 today in your Roth IRA and subsequently $500 a month for the next 30 years and invest that money into a low cost index fund like Vanguard's VOO or Fidelity's fxaix. Instead of putting that money into your bank account, you would Most likely have $1.14 million waiting for you in the Roth IRA compared to first of all, this video is helpful because a lot of people think that saving is enough. They don't know anything about investing. All their parents told them was save, save, save. And what this person is doing is correctly telling you, hey, don't just leave your money sitting in a savings account. If you want real wealth, you've got to actually invest it. Totally true compared to only $180,000 in the bank account. So $1 million difference.

And the best part, because it's a.

Roth IRA, you don't owe one penny of that 1.14 million to the government in taxes. This is another great point. A lot of times you'll hear people shrieking about all these tax loopholes that the ultra wealthy have, which is a fair conversation to have. But please remember, a Roth IRA is an incredible way to save on hundreds of thousands of dollars of taxes. That's more than all the lattes you will ever buy combined. This is a great video. Now let's look at the comments. Oh boy. First comment lol. People don't have an extra $500 food, gas and housing. And then look at the other comments. $500 a month for 30 years. Relatable. I'll be a millionaire at 87. Cool. This is a real problem and it actually drives me insane. This is the cynical, disaffected young person who simply existed online and all they do is post snarky comments about why this won't work for me. $500 a month for 30 years. Relatable. This snarky commenter just wants people to agree with him or her, when in reality they could say, hey, maybe I can't afford 500, but can I afford 100? And then what about when I get married? If I get married, we have a dual income that will allow us to invest more. What about when I get a raise? What about all these other things that are going to happen in my life, predictably, that will allow me to invest? Keep in mind that $500 a month, $6,000 a year for somebody earning 60, $75,000, that might be a little bit high, but you could still do it, or you can do a fraction of it and as your income increases, you can continue increasing that. The point is, these comments are all people looking for an excuse to not invest. These are the very same people who are going to turn 40, then 50 and start complaining, oh, there's no way for any of us to get ahead. Meanwhile, 15, 20 years ago, they were posting stuff like this, saying, $500 a month, that's impossible. Never realizing that this video, which is a great video, is here to show you what's possible, but you adapt it for your own needs. First of all, if you point blank say you can't do $500 a month, the first thing I would say is, show me your money. Where's your spending going? Let's see if that's true or not. And if you genuinely cannot afford to put $500 a month away in investments, fine. Could you put 400, 350? The median household in America has a net worth of $193,000. That's very important to know. But if you surround yourself with a bunch of people on social media who tell you the economy is crashing, this is the worst economy in history, you will actually believe it. I have created videos before, showing you actual data of how good this economy is. And I just get fresh thousands of people coming and telling me, ramit, you're so out of touch. Mr. Millionaire doesn't have any relatability to anyone. No, I'm actually reading the data and I'm showing you what's going on with the median household and median person in America, including the fact that low wage earners have seen their income go up more than any other group in the last few years, including beating inflation. My point is, don't simply post stuff like this. You may think you've won, but. But ultimately you've lost. Damn, that video was really good. The comments pissed me off, man. Let's look at the next video.

This is the one Thing that I wish I knew about investing when I was in my 20s, and that is time. The difference between you and me and someone like Warren Buffett, sure, maybe a couple billion dollars. But the biggest difference is Warren Buffett is 93 years old and he started investing at the age of 11, which means more.

Okay already. I love this video already. This is so true and so underappreciated. The idea that if you start investing early and you give yourself a long time horizon, you just keep investing consistently in a simple index fund, you'll be very, very wealthy. Now note that the most common response to this is like, not all of us could start investing when we're 11. I agree. Okay? I started investing at 14. I was very fortunate. My dad helped me open up a custodial Roth ira. It was great. However, maybe you didn't start investing at age 14 like a freak. Fine, maybe you started at 25, maybe you started at 30. Some people start at 40, some people start even later. But the important thing is you start today and you understand your numbers. The point of this is not to berate anyone for starting late in life. We're here today. We can't change what happened in the past. But what we can understand is that time is one of the most important factors in how much money you have. But you can change your time horizon by starting right now and investing for the long term. Let's keep going.

Which means Warren Buffett has been investing for 82 years. Let's say, for example, you did the same thing at the age of 11. You somehow had $500 a month into a low cost market index fund. Well, after 82 years, if you continue putting in 500 bucks a month, you'd have $41 million.

This bomb. That's awesome. $41 million for 500 bucks a month. That's not even that much over the grand scheme of a lifetime. Now it is a lot for an 11 year old, even a 15, 16, in some cases a 20 year old, fine. But you know, somebody who's earning median wage as they get older and older and older or they have a dual income, that is achievable for sure. So yeah, all right, maybe let's drop it down by half. Okay? 20 million instead of 40 million. That's still a ton of money.

This video is great so far, but let's be honest. Who at the age of 11 is investing 500 bucks a month? Let's say instead you started at 21 and you lived until 93 for 72 years. 500 bucks a month into the market, that's still 19 million.

I literally love this guy.

I hate to be morbid, but also, average life Expectancy in the US is only 77.

So from 21, not for me. I'm going to live forever. So I can see my investment returns go way high.

Went to 77, 56 years. If you did the exact same thing, you'd only have $5.5 million. Now, I say only because relative to the other sums, it's low. But do you see how much of a difference time makes to go from 5 million upwards of 40 million already?

Like, we could be best friends. You can tell, right? He's using the exact same examples I'm.

Using just by being in the market. That's the biggest secret, folks. Start early in the business.

Totally approved. Double thumbs up on this video. Nice work. Before I go on, let me just look at the comments to make sure there's no deranged losers in there. Hold on. I'm glad I saw this. Wow, that's the top comment. I'm glad you saw it. Oh, God. Okay, one other comment that came up. Bruh, what you gonna do with 5mil when 100k is going to be worth like a hundred bucks at that time? Skeleton icon. Let me explain something to you once. I was gonna say once and for all, but I'm gonna explain this for the rest of my godforsaken life. Listen, people, whenever people come to me, they go for meat. Why are you talking about having $4 million? By the time 30 years from now, that's gonna be worth $0.7. We won't even be able to eat a Mexican meal outside my calculations already factor inflation in. Do you understand the difference between nominal and real returns? No, of course you don't. All you know how to do is when you see a percentage sign and a million dollar sign, you come out from wherever it is that someone summoned you like the bat signal and you go, hey, what about inflation? Stop posting this and learn the difference between nominal and real. If I see another one of these comments, I'm going to lose my mind. Basically, the videos are like legit today. It's the comments that are predictably horrible. Let's look at the next.

Some people think buying a home requires a 20% down payment. But in reality, you can put down way less on this. KB already.

Let me just pause this video. Without knowing anything else this. They say that when you eat food, you could choose restaurants that follow regulations, but you don't need to. You could pull meat right out of the ground. It's been sitting there for the last two weeks. You could do that. Yeah, you could. Unless you want to live. Let's continue on this.

KB home priced at $410,000. A 20% down payment would be 2000. But first time home buyer down payments can be as low as 3% of the purchase price already.

Notice what's going on. This is a lesson that most Americans do not understand. Okay? Just because you can do something does not mean you should. And what this person, I haven't even looked at this person's username. Is this person a broker?

Let's look and make sure to follow KB Home in June.

Oh, it's a sponsored ad by KB Home. What a shock. Jesus Christ. It's like a detective show here. Okay, we're going to watch the rest of this video, but let me just tell you something. If you put less money down, you have multiple risks. First of all, if the value of your home decreases, you can completely be washed out. Meaning you can go into the red. Why? Because you know that phrase, leverage. Everyone's like, leverage, leverage, leverage. They think leverage is just a super secret thing that makes you get more money. That's basically what Americans think. Leverage equals free money. No, leverage accelerates your gains on the way up, and leverage accelerates your losses on the way down. So if your house price goes down just a little bit with a tiny amount of a down payment, you're in the red. You've lost all your money.

Okay?

And more. The second risk is that the type of people who buy a house only putting 3% down are likely the type of people that cannot comfortably save enough money for the predictably unexpected home maintenance costs that are going to be coming their way. Tax increases, maintenance, unexpected roof repair, and on and on and on. However, the type of person who could save 10, 15, 20%, you don't even have to put 20% down. But the ones who have at least saved it have demonstrated to themselves that they can save money before they need to.

So, $12,300. This makes homeownership way more accessible.

Again, another tail wagging the dog. Listen, if you want to buy a house, great. You got to be able to afford it. But what, what this ad has done is to assume that by definition, owning a house is the right thing to do. And therefore they've now contorted themselves because we think that the correct end destination is to buy a house. What are all the ways that we can trick our ways into that? Well, it used to be 20%. Ah, forget that only 3%? Well, it used to be, you know, 28% of gross income. Ah, forget that. We'll give you an extra load. Dah dah dah dah. You don't want to be tricking your way into the most expensive purchase of your life. It puts you at immense risk, especially.

With a good town payment that isn't so high that it dropped drains your savings, but is also not so low that you won't be able to afford the monthly mortgage payment since it's National Home Ownership Month.

Oh, who created that? The corrupt national association of Realtors. An organization that was just nearly disbanded for their decades long corruption. By the way, if you don't believe me, look up NAR racist. This is one of the most racist organizations ever. They actually made a formal apology for how racist they are. National association of Realtors.

Let me show you the relationship between the two. So number one, when you have a lower down payment, it does increase the pay monthly. But at least these days the interest rates aren't at all time highs. Like back in the 80s when they were around 18%.

Humphrey, man, what are you doing? I don't even know where to start. Yeah, interest rates used to be 18%. That is true. And house prices were way, way lower. Even taking into account incomes and inflation. The idea that interest rates used to be high but they're actually lower than that's not necessarily convincing. If you multiply the two or you combine them, you get fully loaded. Cost housing is historically expensive. It's more expensive than it's ever been. So interest rates alone are just one piece of the equation.

And second, if you go with a lower than 20% down payment, just be aware that you're going to be adding on PMI. So private mortgage insurance is about 0.3 to 1% of the purchase price per year. That's a lot annual payments as insurance for the lender.

Okay, hold on. I got to talk about this pmi. It's not in the grand scheme of things. It's not that big of a deal depending on your PMI rate and all that stuff. That's not the primary reason. I wouldn't let PMI determine all these other things. It's just one other expense you will have to pay if you put down less than 20%. Why? Because you are a risk to the lender. So that is another reason. I want you to really think about this. Just because you can doesn't mean you should. The bank is recognizing that they're going. Why is this personally putting down 3% I think they probably have a higher chance of defaulting, so I'm going to charge them more. You don't want to be in that position. It's not about the extra 100, 200, 300 bucks a month of PMI. It's really about the fact that are you actually willingly putting yourself at massive financial risk? What if one of you loses your job? What if there's a recession? How long would you last in that house?

So on this home in particular, it's going to be an extra 155 per month. That brings your total payment to 2875 per month with a 6% interest rate. But keep in mind you also saved $69,700 on the down payment in the first place. There's many benefits to home ownership, so number one, real estate often serves as a good hedge against inflation, as property values and rents typically rise with inflation. So having a hard asset as part of your portfolio will be beneficial. And number two, there's a psychological benefit to owning a home. It can provide a sense of pride and accomplishment. And it's your home, so you can do what you want with it. So if you wanted a graffiti wall in your garage, boom, you can do that. Homeownership also provides stability and is the primary way to build generational wealth.

What? I agree that homeownership can provide stability, especially with children. I agree on that. We do need to factor in that, you know, you need to be able to comfortably afford it. You need to have months and months of savings, because if one of you loses your job, how long are you going to be stable if you're not there? But in general, I agree, you know, if you have kids and you want, you know, you want to be there for 10 plus years, okay, I can understand that. Certainly leans towards owning at least one generational wealth. Are we really going to do this right now? Is that what's about to happen? The amount of people on TikTok who go around proclaiming that you need to buy a house for generational wealth drives me nuts. First of all, do you even know what generational wealth is? All these people simply started talking about generational wealth the same way they started talking about quiet luxury. Sitting around wearing an H and M shirt and saying, oh, quiet luxury. That's not quiet luxury, okay? And generational wealth is not simply passing down a house. Let me explain a couple of holes in this generational wealth theory. First of all, do you even know how much you need? No, because no one really talks about what generational wealth is. They simply tie it to an expensive purchase where the person presenting it typically makes money. That is usually why it's brokers, real estate agents, or in this case, what is this? A KB Home ad talking about why you need to buy a house for generational wealth. Second, imagine you have two kids. You want to hand them over your house. What if one of them wants to keep it and the other one wants to sell it? How are they going to decide when you're gone? You have any rules? Have you thought about that? What if one of them can't afford to contribute but they don't want to sell? There's so many different things going on here. Third, would you rather hand them over a large portfolio, or would you rather hand them a house which possibly has to be divided and might be in an area that is no longer popular? Maybe the house hasn't been maintained in a long time. And fourth, and most importantly, you don't need a huge amount of money to provide generational wealth. Do you know that my parents gave me generational wealth?

How?

They didn't hand me over money or an inheritance. They taught me about saving and investing. They taught me about the importance of higher education. They gave me generational wealth. I made the money, but it's because of the generational lessons they taught me. So can we please stop tying the concept of generational wealth to a house? If you want to create generational wealth, the first thing you need to do is understand money deeply. You need to get really good at it, competence and confidence. Then you need to learn the skills of talking to your kids about it and teaching them. Don't hide. Show them.

What are some of your reasons for owning a home or wanting to buy? Let me know in the comments and make sure to follow KB Home in June and beyond.

I definitely won't be following KB Home. Let's look at the comments. I can't afford a home in California. I mean, that's straightforward. Homes in California are highly unaffordable. All right, I agree. I love how it has nothing to do with the video at all. It's just like, I can't afford a house. I feel you. Elaine says I have zero percent to put down. That's fair enough. However, then you're not ready to buy a house. And it's okay. It's okay not to buy a house. You, you can rent, you can invest the difference. You can focus on building a portfolio, building your income. You do not have to buy just because everyone told you you're a loser if you rent. All Right. I want to see what's next.

This is how to pay off your Chase, Wells Fargo or Bank of America credit card so you can get a higher credit score. I'm a 36 year old self made millionaire and former public school teacher and I'm going to share with you the number one mistake that most people make. Okay.

I, I haven't seen this video, but I'll tell you what. I think the number one mistake people make with paying off their debt. And then I'm curious what this gentleman says. I think that the number one mistake people make with paying off their debt is they don't set up an automatic debt payoff plan. What they try to do is they kind of just pay whatever bill comes in. They pay the minimum. Once in a while they get a little extra money, they pay it, but they don't calculate how much debt do I owe? When will my debt be paid off? What if I put an extra hundred dollars a month towards it or 200 and then set it up, automate it? That's in my opinion, the biggest mistake people make with paying off debt.

First, I want to see my payment due date. So for me it's going to be September 21st. When choosing an amount that I want to pay, I'm never going to choose a minimum payment of $25 because I'm going to end up paying a lot of interest. The mistake that many people make is that they pay the current balance because they think that this is due on the payment date. But what they should do is pay the same ambalance before the payment date to avoid any interest fees. Yes, you never want to pay credit card companies more than you should because they actually use your money to invest for themselves, whereas you can be investing for yourself instead.

Yo, that's pretty good. I'm going to give it a like, that's good. Yes. Pay the statement balance, pay it off. This is great. Keep in mind what he said about your credit score. So it's true, one of the largest determinants is you paying it off on time. You can search my FICO credit score breakdown and you will see exactly a pie chart of how your credit score is calculated. And just remember that your credit score matters for sure, especially when you're taking on debt. But I do find that sometimes people make really peculiar decisions just because of the phrase credit score. Like they'll stay with a terrible bank for their credit score. I go, what does it really matter for you? Just get off.

All right?

I want to see what's next.

Stop acting rich. You don't have any stinking money. Act like a broke person. Why? It's easy. You're a broke person. You make 60 or 90 or 160 a year and you got nothing. Nothing. No money. Payments coming out your ears, out of control, strutting around, acting like you're something. In Texas, they call that big hat, no cattle. Stop it. I'm tired of being broke. I work too stinking hard to be this broke. I put up with too much crap to be this broke. If people aren't making fun of you, you're probably not on track. Because people are stupid. People are broke, they said. And I heard, as the dumbest financial planning firm out there. Because if you look around, 70% of Americans are living paycheck to paycheck.

Gotta stop you right there, Dave. First of all, that's not true. A couple things I want to say. There's some truth in some of this video. You gotta chart your own path for your money. Many Americans are way, way, way too susceptible to marketing and to being influenced by their peers. You can tell in the fact that 48 out of 50 states, the most popular vehicle is an SUV or a truck. You can see these kinds of things fine. You need to create your own rich life. And in fact, the more you dial in your rich life, the more bewildering it will be to the people around you. Where I disagree is a couple things. I don't really think people are stupid. And I think that if you have that view on humanity, then it takes you to a very dark place where everyone is stupid. And therefore I need to protect you from yourself and you're probably a bad person. There's a whole religious aspect of this as well, where people are sinners and therefore we need to protect them from what they would otherwise do. And on and on and on. I don't agree with that at all. My perspective. People are pretty smart. Sometimes we need help. Sometimes we need a coach, a guide, a little nudge. Sometimes we need some real talk. Sometimes we're vulnerable to things. And I am just as much as anyone else's. But I would never go around saying people are stupid. I don't think that, especially after talking to so many people. The other comment I have to make is this. 70% of Americans are living paycheck to paycheck. This is categorically false. Please listen closely. 70% of Americans are not living paycheck to paycheck. You've heard that number repeated over and over. It came from a totally disreputable Source. And. And everyone has seized upon it because it makes them feel like, oh, my God, the economy's in tatters. It's horrible. No, actually, if you look at the actual data, this is real data, not made up by some polling firm, is that the median household has a net worth of $193,000. The median household also has around $8,000 in cash or transaction accounts. This is checking and savings accounts. The median household is doing incredibly well financially. I know a lot of people are starting to get angry. Oh, my God, Ramit Sethi's so out of touch. No, it's very important for us to be honest with ourselves, honest with the people around us. In fact, most Americans admit they're actually doing really well with their money. Look, look at the data. I'm going to cite it right here in the video. But suddenly, when it comes to other people, they go, well. They must not be doing well. How is it that Americans are spending record amounts on travel? That's what we called revealed preferences. When you have lots of money, when you feel incredibly wealthy, you start to spend it on discretionary expenses. When you don't, where there's recessions, those are the first things to go. So the median household has almost $200,000 in net worth. Wages have gone up, even beating inflation, particularly for low wage earners in the last few years. And most importantly, 70% of Americans are not living paycheck to paycheck. That doesn't even make sense because you could say a millionaire is living paycheck to paycheck after they pay their three nannies and they max out every single account, including $300,000, into a taxable account. Suddenly they're living paycheck to paycheck. It makes no sense, and it's not true. Okay, what's next?

It feels like we have now entered into an era where if you want to buy a house for the first time, you're going to have to accept being house poor. Being house poor is when a substantial amount of your income, more than 30, 30%, is going towards your house expenses.

First of all, this is already true. If you look at how much housing traditionally costs and how much income people made in the last couple of decades, you can see that those numbers have gotten way out of whack. So if you have parents or boomers coming around saying, you know, when, when we were kids, we just ate peanut butter and jelly and that's how we afforded a house, I'm going to give you a couple charts to show. Okay, I'm going To make it easy for you, you say first of all what was the median income when you went to buy a house? Let's say the age of 30. And then they'll tell you something and then you compare it to median income today. You say by the way, how much did your house cost? And then they're going to go well interest rate was 18%. Just how much did your house cost? And then you show them how much the typical house costs in your area. And then finally show them the gap between how much income versus expenses and today income versus housing expenses. And then ask them how would you do it if you had to do it today? What you will discover is they'll just have their jaw hanging because they can't fathom how much more expensive it is for young people or first time house buyers to buy versus what it was like in their day. It is so much more expensive to buy a house, especially in high cost of living cities. But now everywhere.

Four year olds in the US is about 63,000. If we're using the general rule of thumb you shouldn't be spending more than 30% of your gross pay pay on housing and that includes all housing costs. Say you're making that 63,000.

I love this person already. Great, great. Good, good, good.

This is good dollars a year pre tax mind you. That means you can afford approximately fifteen hundred dollars in housing expenses every month. 15.

This is shocking.

It's shocking.

When you use these numbers which we've traditionally used, right? 30% etc etc, the numbers just make no sense. You go it's inc. Impossible to buy a house. And that is true for the median income earner. It is impossible. One of the reasons that I want you to listen to what I'm saying is that it would be one thing if I was in that similar situation. I was a median income earner and I was complaining about how difficult it is. I'm not. I make way above the median. And even I am telling you it makes no financial sense to buy. Especially in most cities in America, right by choice I could go and buy today, but I don't. Because I want you to know it's not just you. There are people who make lots of money and they're looking around saying this is crazy. And as we know the reason for this ultimately comes back to NIMBYs. It's not some government conspiracy. It's not BlackRock or Blackstone. It is as mundane as your mom, dad, aunts, uncles and neighbors down the street. They got their house in the 70s and, and then they decided they don't want anyone else to be able to build any more housing. No duplexes, no apartment buildings, no nothing. And so they froze development in every city in America. In essentially every city in America. It is illegal to build more housing. You try to build a new apartment complex right next door. If the person wants to sell their house, they should theoretically be able to build. It's their house, their property. No, it's illegal. Why? It's NIMBYs. These are not in my backyard. People who bought houses and now want to freeze the neighborhood in amber as if they own the neighborhood. And they've been very successful. But without getting into all that, the result for you is that it is incredibly expensive to get a house. This person is right.

Hundred dollars. That might be doable if you're able to find a home that costs less than $200,000 and your interest rate is about 70. But of course, guess what? The average home cost in the U.S. is right now. It is double. It is $412,000. Let's say somehow you were able to get that 20% down. That means just your mortgage payment on a 6% interest rate would be about $2,000 a month. If you're making about $63,000 a year, that's about 40% of your gross pay. And keep in mind that 30% of your housing cost is inclusive of all housing costs.

It's not just the mortgage. You got to include all phantom costs. Your sprinkler breaks, your microwave conks out. You got to have a repair person come and fix X, Y, Z. Or even technically, if you want to factor it all in. All the time and gas required to go to Home Depot two times a month, and on and on and on. My back of the napkin calculation shows that whatever the mortgage payment is, I add 50% to that to account for phantom costs. 50. Remember, it's not just what's broken today. It's the $16,000 repair you're going to make nine years from now. You need to properly amortize that out. And I'm not even getting into renovations. A lot of you all think that if I renovate, I just print money wrong. Most renovations lose money. You could find this with one Google search, but most people never do it. They simply think renovation equals equity.

No, what people forget is when you buy a home, your mortgage is like the minimum that you're going to be paying on a monthly basis. Also going to have you.

Sounds familiar.

Utilities, you'll have. Insurance costs, you're going to have other Costs associated with homeownership taxes will go up and you should be saving a portion of the value of the home every single month for repairs. All of this is to say if you're feeling like, holy crap, I feel like I'm never going to be able to buy a home unless I just literally only can afford to pay for my home. Genuinely don't know how the average American is doing it because even as a high income earner, I'm looking at the housing market and I'm like, I don't know how I'm ever going to be able to afford to buy a house. As a single woman who doesn't want to be house poor.

See, this is the part that actually really frustrates me. I don't think young people expect their first house to be a palace or a mansion. I don't think that at all. I know a lot of young people, I think young people are willing to work, they're willing to save, they want a way to get ahead. They just want to know if I work hard, is there a path for me to somehow be successful? And in America we have a deep invisible script that we should live a better life than our parents. Now the fact is young people are willing to work, but right now there is no path zero for the median income earner in America to ever own a house. Now separate from that is my question of like, should you buy a house? Does it make financial sense? That's separate. But if you work hard, if you show up to work, if you do a good job, if you get promoted, shouldn't you eventually have a way to somehow buy a house? And what we're seeing here is very justifiable resentment that there is no way. And when you actually understand that nobody should be allowed to buy a house and then freeze that neighborhood from development. Neighborhoods change. When you bought a house, you bought that house, you did not buy the ability to free freeze that neighborhood. And so you can see resentment, you can see frustration, you can see fury and rage and rightfully so, because this is not fair. And it's reflected in the numbers.

And what I have had to come to terms with is I suppose that's okay because there are other ways to invest, there are other ways to build wealth. But it is frustrating because like I would like to have another cat, you know, but I'm not willing to move to the middle of nowhere America in order to be able to buy a 200, $100,000 house. You know what I mean?

Yeah, this is great. Totally agree. So in the end. We can be frustrated, we can vote. All those things take time. The most important thing is to not blindly pursue the goal of home ownership. Let's look at the next video.

Here's how I organize my money as a financially responsible 27 year old. And you guys, I've been bringing you along every single month as I budget my $300,000 base salary. But I've never shared how I organize that money. So, Shay, we're doing just that. First of all, we're going to start with my emergency fund. I keep about three to four months of essential spending in my emergency fund and not a dollar more. This is a high yield savings account. And anytime I earn interest on this account, I transfer it into a different one of my savings accounts to work towards a different financial goal. I spend out.

Hold on already. This is very sophisticated. This is great. $300,000. Awesome. But you can earn a fraction of that and still apply the same thing. Notice how she says I have three to four months of essential expenses. This is great. You know, typically we can talk about a three to six month emergency fund. Essential expenses. That's because if you were laid off, for example, you're paying essential expenses only. You're, you're going to cut eating out, you're going to cut all these discretionary expenses, subscriptions. It's just what it takes to keep the lights on. Okay? And I like that she says any interest I earn, I'm going to transfer it out. Personally, I wouldn't do it because the amount of interest you're making, you know, on 40 grand in a month, it's fine. But at $300,000, it's probably not worth your time. But I can understand she wants to be on top of it. It's a personal choice. I don't mind it. Overall, you can already tell this person, highly intentional and sophisticated about what they do with their money.

Spend about $17,000 a month. But not all of that is essentials. In the case of emergency, some of that would be cut. So $40,500 is right at my sweet spot. The next account I have is my fun saving account and I budget $600 a month on personal shopping and spending. That's just fun. But anything outside of that, like a big purchase like a purse or something, would be spent out of this account. And I try to keep it between 6 and 10,000. But since I just spent $5,000 on my birthday, it's a bit low.

Another thing I love, there's so much good stuff in this video. I Love that. She's unapologetic. She's like, yeah, I put money aside in a fun account. I buy a purse, I take a trip, I have a birthday. Great. That's how money should be. When you have already put aside money for your fixed costs, for your savings, for your investment, you should spend it on the things you love. And you should be unapologetic. It can be anything you want. This is why a lot of people, they use words like, oh, I bought this thing. It's like, I know it's kind of frivolous. I go, why are you apologizing? Can you afford it? Yes. Do you have a plan for it? Yes. Do you love it? Yes. Okay then, great. It looks beautiful. That's how I want you to feel about your money. It could be a car if you can afford it, could be a purse, could be a trip, could be a special cake. It's up to you. But in order to get that, you need to first hit your other numbers, which she clearly has.

And then I have a personal checking account where I try to keep one month worth of expenses in there.

Another good thing. So $300,000. Very important for me to make a note of this, I recently had a podcast where there's a high earning couple and they're always feeling like behind, oh my God, why is there no money left? And it turns out that they keep a tiny amount in their checking account. And I'm like, listen, I understand if you made $30,000, but you make a lot of money similar to this woman, and it's okay to keep a little extra in your checking account. I think in their case, I recommended they keep 15 to 30 thousand dollars in their checking account. A lot of people when I posted this, freaked out because they go, what about the interest? What about the interest? I need to optimize, optimize. I go, you know what? There are sometimes higher values than optimizing. Not everything needs to be optimized. If you constantly feel overwhelmed and like you're running out of money at the end of every month and you make a good income, you probably just need to give yourself a little bit more of a buffer. You need to look at the bigger picture. So this person chooses to keep one month of expenses. I don't mind that. If she feels good about it, great. Depending on your income, sometimes I recommend for people to keep even more as long as they've got all their other buckets covered.

And then I have different investment retirement accounts, but we don't have enough time to get into that today. So we will do that next time. I'll see you guys.

10 out of 10. This video is great. Love what she's doing. You are an inspiration. I'm so glad you're doing it. This is awesome. 122 Comments by the way, look at these comments. They're so cool. This is so motivational. I need this type of content in my life. Only great things to say about this. I love it. All right, I want to see what's next. Women and money.

Can you talk a little bit about that? So when I was feeling inferior on money, I was like, well, I never went to college. What do I need to know? He's like, elena, money is simple. There's only three things you need to know about money. One, you got to learn how to earn it. Two, you got to know how to store it, which is different from save it to you store it until you have enough to put into number three, which is most people don't know how to do, which is to put it into an income producing asset. How do you make your money? Make babies? How do you make it grow? So earn it, store it and multiply it. And the multiplying it is by investing it into an income producing asset. So it doesn't depend on my work. That's the only way to go to wealth. You don't earn your way to wealth or save your way or save your way.

Okay, there's some things I like and there's like a little. My antenna is going up a little bit. I agree that at a certain level of analysis, money can be quite simple. My three, if I had to break it down would be how to earn money, how to manage money, and how to spend money, which is a skill that almost nobody talks about. See, everybody tells you how to save money, but nobody teaches you how to spend it meaningfully. The video is correct that real wealth is created from investing investments. Yes, the phrase income producing asset is almost always part of a sales pitch. You don't need necessarily an income producing asset. An index fund can build a massive amount of net worth which you can then convert to income. You just sell a little bit of your index fund every single year. So keep in mind that the phrase income producing asset is almost always part of a sales pitch which typically leads to something in real estate. Could be good, could be bad, or whole life insurance, which is always bad. First of all, if anyone tries to sell you whole life insurance, just get up, don't say a word, turn around like you're in some video game and walk out of the door. You don't need to say anything. If someone is selling you whole life insurance, that is not a person you want to buy anything from. Remember this whole life insurance itself is garbage. There's no reason to buy whole life insurance. And second of all, insurance is not an investment. An investment is an investment and insurance is insurance. They are two separate things. This is why it is so important to understand how money works. Most people can manage their own money, but if you need an advisor, you should look for one who does not charge you a bunch of garbage fees to sell you a bunch of garbage investments. You want to look for an advisor who will charge you a flat fee and they will prioritize you first instead of paying their freaking BMW payment. Just listen in on what one of my podcast guests, Taylor, told me in a recent episode.

My dad passed away when I was nine. I always had this understanding that there was going to be money for my.

Brother, my sister and I.

There was no money left. I learned over the years a financial advisor who depleted the funds with doing.

All these trades and stuff and she genuinely believed that, right? She didn't know what the financial advisor was doing. Yeah, this makes me so mad. An advisor should have your best interests at heart. They shouldn't be trying to pay off their BMW by selling you a bunch of horrible investments. Thankfully, there is a financial planning service that decided they're not going to follow this old model of charging a percentage of their clients assets, which typically costs hundreds of thousands of dollars over your lifetime. They decided to do things different. They're called Facet and they are today's video sponsor. With Facet you get flexible access to a team of financial professionals, CFP professionals, and a team of professionals providing guidance across retirement planning, tax strategy, estate planning, and more. Instead of taking a percentage of your portfolio, they charge an affordable flat membership fee. Facet CFP professionals are fiduciaries, meaning they are required to prioritize what's best for you. Check out their new membership options below@f facet.com ramit or click the link in the description below. All right, now let's look at the next TikTok that my team showed me.

I'll guarantee you this, 95% of you listening to me right now do not do a unique written budget every month.

I guarantee that as well. Nobody keeps a budget that doesn't mean that you tell them you're all bad and wrong. It's just that budgets don't really work.

Unique to that month. Almost no one does. Those that do, however, find all kinds of money that's being lost.

Okay, I agree. Doesn't mean it's the right strategy. But I do think if you were to track your spending for a month, you would learn a lot and you would discover that you are spending way more on a lot of things in ways that you did not expect. Yes, I agree with that. Dave is right. Okay, no disagreement from me there. I think Dave has a lot of wisdom. He's been around for a long time time and he's certainly very good, particularly if you are in debt. He has some very simple, straightforward rules, laws. I don't know what you want to call him, but I agree with that. It's just what happens after that that I might not agree with. His conclusion would be, therefore you got to keep a budget and track everything down to the price of asparagus. Mine would be, yeah, budgets don't work. Therefore, let's focus on the big picture. Get the big wins. Set your target savings rate, set your target automatic investment rate, set your guilt free spending rate, feel good about it, make sure your fixed costs are within parameters, and then get on with your life. There's more important things than to live in the spreadsheet. Different philosophies, different approaches. All right, I want to see what's next. So if you're really a millionaire, why are you eating a packed lunch? Look, the average McDonald's lunch costs $15 a day and you can't afford that.

Well over a year. That cost you $3,900.

My lunch is healthy and it only cost me $6 per week. Saving me $3,588 per year. If I invested that in the S&P 500 at a 10% average annual return.

That will become over $1.9 million in 40 years.

Oh, now I see why it tastes so good. I've seen some of the videos from this guys. He has some funny stuff. All right, let's talk about this example because we see it in various permutations across America. The idea that that daily coffee is if instead of spending five bucks, you were to take it and invest for the next 30 years, then blah, blah, blah, blah, blah. The math is true. There's no disagreement about the math. If you put $5 a day or $10 a day at this return rate, this is how much you'll have. Yes, it's a lot. I have a problem with the actual psychological implications here, which is that for most people, if they buy a coffee, it's a moment of joy in their life. Most people are not robotic attractions, automatons. They don't sit there and run a cost benefit analysis every morning at Starbucks. They buy the coffee. It's ritualistic. It's something they enjoy. Number one, I think that we spend an awful lot of time in America making people feel bad for making individual decisions when those have arguably a small effect on why people are so behind financially. It's not that you can't afford a house because of your daily coffee. It's because NIMBYs have prevented housing from being built and therefore housing is historically high. It's not simply that you decided to buy this fancy, super expensive suv, although that is part of it. It's also that because of government regulations, cars have an incentive to build bigger and bigger cars and then charge you more for them. That's why you can't find any small trucks like there used to be in the 80s and 90s. They simply are not made anymore. That's not an accident. That is because of government regulations, not coffee. So I don't have a problem with the math. I do have a problem with the implication that, number one, you should make the choice to deprive yourself every single day for the next 30 years. In exchange for what? Having a million dollars. Which to most people doesn't even mean anything. They don't even understand what a million dollars means. And second, that it's your fault that you can't get ahead because of the coffee page purchases. No, I don't agree with that. I think that the vast majority of people can actually live a far richer life than possible if they focus on the $30,000 questions instead of the $3 questions. The $3 questions? Buying a coffee, making a peanut butter sandwich, etc. The $30,000 questions. Do I know my four numbers? Fixed cost, savings rate, investment rate, guilt free spending. Do I know my debt free payoff date? Do I know my asset allocation? Have I mastered the skill of increasing my income? That stuff matters far more than any of this sandwich stuff. Now, should you probably change some of your daily consumption? Probably. I've seen what people spend on. It's crazy and I love it. You know, I love this. I see it in my podcast all the time. But if you can afford it and you've planned for it, who am I to tell you what to do with your money? It's your rich life, not mine. So I don't love the idea of preaching at people and telling them you're not doing it right. Get the peanut butter and make sure you get the cheap one. Why I'd rather show you how to focus on the big wins, let you decide what your rich life is, and then if you want to buy lunch every day, go ahead. If you don't, make a change. But you make that decision, not me.

All right.

I hope you learned something from this video and it gets you to start questioning the typical money advice that's all around us. Make sure you click that subscribe button and turn on notifications so you don't miss any of my new videos. And now check out this video popping up on screen to watch more.