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 today I'm looking at more financial advice on TikTok. Some of the advice is really good, but a lot of people are just plain wrong when it comes to money on TikTok. In this video, my team has put together some finance TikToks for me to review. I have not seen any of these before right now. So let's see which advice is correct and which advice you should ignore. First up, what's the car? What is it?

2021 Toyota Camry.

What's the interest rate on this thing?

11.96.

Total amount two $646.

Wait a minute.

That's 30% of your income.

That wasn't based off of my income. It was based off my ex husband's income.

Oh, the balance. Oh, this is so expensive for your position. Yeah, and I know it was based on his income. We put you in the process of a divorce.

Yes.

Since the car is in my name, I get the car. So, so I make the payment.

It's completely in your name, but it's based off of his income. Great. This was bad. I know this was bad. What was his income? They'll over approve for a car, trust me.

He was making 32amonth, under $40,000 a year.

And they gave you a $30,000 car loan?

Well, this is a tough situation. A 2021 Toyota Camry is not a particularly extravagant car. But we have to understand the context under which the decision was made at the time. Sounds like this young woman was married and her husband, collectively they were making more. Now she's going to be making less. The divorce was probably something she didn't predict, leaving her in this really precarious situation. When you have a car that is representing 30% of your income, it's too much. Especially when you have a low income that is just simply too much. The now the problem is when you are stuck with a vehicle that is too expensive for you, you don't have a lot of good options. You can't sell it for a profit. In almost every case, even if you sell it, you still probably have to buy another car, which when you factor in all kinds of transaction fees, ends up meaning that you're probably going to pay a similar amount, at least for the short term. This is an example of the poor tax, where if you are poor or you have a low income, you. You have certain financial problems that other people with higher incomes might not Face. For example, if you make a really high income and your car gets in an accident, it sucks. Hopefully everybody's safe, but you can go out and buy a new car, okay? That's for people with a very high income. If that same thing happened to somebody with a low income, that is financially devastating. It might even have cascade effects, meaning you can't get to work, meaning you get fired, which means you lose your sole income, and on and on and on. This is one of the problems of having a low income. I can't give this young woman advice. I haven't seen her finances. I don't know what her situation is. But let's try to take her situation and adapt it for ourselves. We want to make sure that as much as possible, we are living beneath our means. And specifically, the two areas where people fail to do this is housing and cars. They spend way too much on housing because housing is really expensive. That's number one. But also, they don't properly calculate the phantom costs. And second, cars are one of America's primary religions. The idea that I bought an F350 because it's cool and I like to go camping, and I ask them, how did you know you could afford it? And they just look at me blankly. They go, chet told me that the monthly payment would be like 750 bucks. I'm like, what? Please remember that when it comes to major purchases, there are lots of phantom costs. When my car payment used to be $350 a month, when I added all my expenses in parking, gas, even parking tickets, insurance, everything, it was over $1,000 a month. So when it comes to you, and when it comes to making a major purchase, you want to be thinking not only about how much you want this item, but also the things that could go wrong. One or both of you could lose your jobs. That's possible. Something could happen with an accident. How would you deal with it? You want to be planning for what can go right and what can go wrong when it comes to major purchases. Because when. Once you get into one of these bad situations, sometimes it can be really hard to get out. Let's look at the next video.

If you want to buy a house in 2024, make sure you do not do these things. To start, you're going to want to hold to that 1999 Toyota Corolla just a little bit longer. Because if you go finance a $50,000 car and have an insane car payment, guess what? That's going to affect how much house you can afford pretty significantly.

True. That is true. It's going to affect your total amount of credit that you have available to you. And it also results in credit pulls. You want to avoid any major purchases before before you go and buy a house. This is true.

Do not quit your job. Yes, that's right. You need income to buy a house. A lender will require W2s pay stubs, tax returns, actual legitimate set in stone proof that you have consistent income in order to qualify for a mortgage.

This is also good advice. And one of the things that goes around in entrepreneurial circles is you can be making a lot of money in a business, but not having a W2 is oftentimes a little difficult to go and buy a house. I'm not saying entrepreneurs can't buy a house. They can. But having a stable income is good for multiple reasons, including just financial stability, but also to show the lenders good.

And if you quit your job, you're not going to have any consistent income. Don't get a new credit card opening any new lines of credit. So getting a credit card or getting a loan always lowers your credit score. And when you're buying a house, you want to have the best credit score possible so you get the best interest rate possible.

This is another good piece of advice and it's one that I wrote about in my book I Will Teach youh to Be Rich. The advantages of having a good credit score are something that are totally overlooked and they can be worth hundreds of thousands of dollars. I'll actually pull an example right from my book and throw it up on screen. We have to remember that most of us focus on $3 questions. We agonize over the price of a dessert and we worry about overspending at Target. But we really ignore the the $30,000 questions and having good credit by paying your bills consistently and automatically by making sure you're not taking too much credit and on and on and on. All the ways that I cover in chapter one of my book that can save you hundreds of thousands of dollars. Just take a look at the difference between a typical loan as of today's mortgage interest rates, having poor credit versus having good credit on the median priced house. It's a huge difference. And this is why I always encourage people to use the system in my book and because it will automatically help you build good credit.

And lastly, if you can try to avoid changing industries right before a lender likes to see two years of employment history, ideally in the same industry.

Okay, all these are good pieces of advice. I have to say I'm Pleasantly surprised. This person is a realtor. Whoa. All right. I'm pleasantly surprised. This is good advice if you are planning to buy a house. Of course, the most important thing of all is to actually run the numbers. You want to know if you can afford a house to. You want to know if it's a good decision to buy a house. Because it's not always a good decision. Sometimes renting is actually a better financial decision. In my case, for example, it's been a better financial decision for 20 years. I'm going to throw up a link to a guide that you can use to help you decide if you should buy a house or if you should rent. And always remember, your rich life is yours. If buying a house is in your rich life and you can afford it, fantastic. You should do it. And you should use some of these tips. If you decide you don't want to buy a house or you cannot afford it, that's also okay. You can craft your own rich life that fits you like a handmade glove. This is a great video. I would definitely follow the advice here. Okay, what's next?

The stock market is in a full free fall. Dow drops over a thousand points. Nasdaq has lost 3.6% and the S&P 500 down 3.1%. And it's only 9am on Monday. So what is going on? Number one, and the main driver, fear of a U.S. recession. On Friday, we got our jobs reports and the numbers did not look good. Now, we had already revised the expectation and set the new goal at 179,000. New jobs job growth totaled 114,000. So even though we did have a lot of jobs reports where people were praising that, we're doing pretty good when you just look a little bit deeper. The majority of those jobs were government jobs. I didn't find comfort in that. And second, and this is usually what happens with the Fed, they're slow to act. So people think, myself included, they took too much too long to bring interest rates up. Remember that inflation was just transitory, should have acted much quicker, and now it looks like they took too long to bring rates down. So here's what everyone needs to know as an investor. First, this isn't the first time the stock market has crashed and it will definitely not be the last. If the fundamentals are there, you may see good companies where you can buy shares at a discount. Two, stay focused on the long term. Remember, investing should be like watching paint dry. And last, this is the biggest one, don't ever make decisions based out of fear. Headlines today are going to be crazy. Don't get caught up in the hype.

Okay, first of all, I have to say, is that not my line? Investing is more like watching paint dry. Real investing is like watching paint dry. Whatever. Two people can come up with the same thing. Okay, so the funniest part of this whole video is the very beginning where it's shattered. Customers at Schwab report issues. Stock market is crashing. I just want to let you know that I'm recording this a couple of weeks after this video went up, and nobody even remembers this happened. Like, it's gone, wiped from people's memory because something like 24 or 48 hours later, the market was back up again. It's really important that you all understand how to put the day's stock market movements into context. You should not even be checking the stock market on a daily basis. If you have a bookmark logging into some account, stop. Just delete it. You don't need to have any financial apps on your phone. I don't. I'm not logging into my investment account on my phone. Why would I? That's something that's designed to make me money over the next 20, 30, 50 years. I don't care or even need to know what's going on on a daily basis. Now, Americans love information. Give me the information. Tell me the information I need to make an informed decision. And Ramit Sethi is here to tell you that you. We all need to stop getting so informed. Because sometimes too much information can be the wrong thing. For example, if you're logging in every single day and looking at these numbers and checking around saying, I can trade. Should I do? Is it a discount? You're just going to lose money like most investors. Okay, here's some shocking math. Here is the average return of the stock market. Okay? That's after inflation. Now, here is the return that actual individual investors get. Do you see the difference? That difference costs you hundreds of thousands of dollars over the course of your lifetime. And why. Why can you theoretically get this return in the stock market, but most investors get this return? Why? Because most investors are totally undisciplined. They're logging in, they're trading, incurring taxes. They're actually buying high and selling low. They're doing everything wrong. You can actually make hundreds of thousands of dollars more by simply setting up an investment plan like the one in chapter six and seven of my book and then automating it, chapter five, and then leaving it alone. Your rich life is not logging into your investment account and checking it every single day. Trust me, it's outside, it's talking to friends. It's going extremely deep on obscure arcane subreddits, where people reveal increasingly weird idiosyncrasies of human nature. Is this just me, or is it anyone else? So the stock market did not crash. This creator is correct that you shouldn't really be paying much attention to it. You don't need to really be looking at it. This creator said you might be able to buy shares at a discount. That is technically true. The right way to think about it is set up automatic investing every single month. It could be on the 1st of the month, 15th of the month, whatever. And whatever the price is in the market, you're going to buy. If it's high, you're going to buy high. If it's low, you're going to buy. You're going to buy low. It doesn't matter because you've set it up automatically and you're not making a judgment call. I know you freaks want more and more control. Give me control. I need control. I need to know. I need to exert control. Stop controlling it. You actually need less control. The more control you try to exert, the more money you lose. So automate it. Sit back, have a nice glass of wine, or talk to your friends. Call your mom. Do something. Aside from logging in and checking what's going on in the stock market on a daily basis, it will be one of the most profitable decisions you ever make to stop trying to take control on an individual daily basis. Good video. Okay, what's next?

All right, y' all know I hate debt. But there are two reasons why I would tell you to take out a loan. Number one is for your car. Not to go get a car loan, but to actually get out of your car loan. So if you can't pay your car off in 12 to 18 months or it's half of your annual income, you have too much car. So let's say you have a $50,000 car loan, and let's say it's worth $42,000. Well, that's an $8,000 difference that you're underwater. So maybe you go take out a loan for $13,000, and you cover the $8,000 difference. You have 5,000 to go get a crappy car to drive for the rest of the time. I would rather you have a $13,000 loan than a $50,000 car loan. Number two is when it comes to the IRS, if you owe the IRS money, I would say go Take out a personal loan for that. You don't want the IRS in your life. Now, if you can pay it off quickly, that's great. But if you have a major tax debt to the irs, you don't want them in your life. So I'd go take out a personal and pay them off and just have deal with a bank over the IRS any day. So you might be a little shocked. Oh, Rachel Cruz telling you to take on debt, but it's to the point to get you out, because that's the number one key I want for wealth building and for your freedom and for your peace is to be debt free.

Interesting video. What I really like here is that there is nuance to knowing about debt. Not all debt is always bad. And I think that's a message that has been repeated over and over to people. And it's ironic because most Americans don't even listen. They just feel guilty. Because Americans love to feel guilty. We have this puritanical streak that's run through our country for hundreds of years, and yet they go and get into tons of debt anyway. So we might as well treat people like adults, treat them with respect, and acknowledge that there are times where debt makes sense. I didn't hear Rachel mention that taking out debt for a mortgage makes sense, and I think it does because most people cannot afford to go buy a house cash. I think the part about taking out a loan for the difference in a car price is interesting. I don't particularly agree or disagree. I think that it's a little hard these days to get a $5,000 car. Candidly, the used car market is way more expensive than it used to be for a variety of reasons. Should you take out debt? Maybe, maybe not. That's okay. I don't mind. Interesting perspective. The final one about the IRS really surprises me because actually, I know a lot of folks who have dealt with the irs. The IRS is actually surprisingly pleasant to deal with for the most part. They've recently got a ton of funding, which I love. I support the irs. Go, go and enforce a bunch of millionaires and billionaires who are avoiding taxes, you can call them. They now pick up very quickly. And for the people who owe them money, most of the time, it's just an innocent mistake. In those cases, they're actually quite helpful to work with. When it becomes a major problem, there's usually something going on there, and that can often be someone trying to avoid taxes. For the last decade, businesses doing certain shady things, et cetera, et cetera. I'm not blaming it. Of course, the IRS has sometimes been guilty of being overzealous, but in general, for the average person watching one of these videos, if you get a letter from the IRS and you end up having to pay them money, it's not clear to me that you will need to take out a loan. Good video, good advice. We don't always have to agree on everything on these videos, but in general, I think this is pretty solid advice. Let's move on to the next TikTok.

All the girlies want the rich Porsche Pilates mom lifestyle. I know.

Look at this.

How to show you guys something. I drive a pink Porsche. Super cute little. Love her. And I just got back from Pilates, just went panning, got a little matcha. And I know this is like the dream lifestyle of a lot of the girls, so I'm going to tell you how I did it. I'm 22, and I literally live my dream lifestyle. And it pains me to see all of the Tik Toks where it's like, h. Like marry a husband that gives you the Porsche Pilates mom aesthetic because it's like you can give it to yourself, and it's. It's hard. It's a lot.

Okay, let's just pause right here because I don't know what's going to happen at the end of this video. I'm curious. Personally, I find it a little distasteful to just get out of your car and brag about the kind of car you want to drive. Like, to me, that's not a rich life. Maybe a car is important to you, but I can't see myself getting out of my car with my phone and saying, like, look at how great I am because of a physical item that I was able to purchase. Like, I could buy a Porsche. Yes. Just because you can buy a Porsche to me, is not particularly impressive. And you'll notice that she does kind of hit these multiple keys. I'm 22 years old. I bought a Porsche. Then I went to Pilates, and you don't need to marry a man. You can do this yourself. It's a very compelling narrative. It's one that's shared widely on TikTok and social media. Again, I don't know where this video is going to go, but I just want to emphasize to you that when you learn about money, entrepreneurship, there are so many people you can learn from. And one of the ways that I would encourage you to be selective is just to ask yourself, is this the kind of lifestyle that I want to be living you might even want a Porsche. A pink Porsche. Fantastic. But can you see yourself filming and then telling other people, like, look how cool I am. I have a pink Porsche. I can't. Sure. I love nice hotels for the craftsmanship. Once in a while I'll post about that, but you really want to ask yourself, is this the kind of person I would want to be learning from? Let's continue.

It's a lot, a lot of work, but it's so worth it. And I'm not saying, like, if your husband buys you a Porsche and, like, makes you, like, not working, you can go to Pilates all the time. That that's a bad thing. Like, dream life, live it. But also at the same time, like, why wait? Also, let's say you're a bad and give yourself this lifestyle and then you get married, your husband can upgrade you. He can get you like a Urus or G Wagon. Also just so much more.

Good tip for all the bad out there.

Gratifying to say you did it yourself and have your own money and have total control over everything.

Okay, I will say one thing I really like about this video is the reminder that you don't have to wait for somebody else to give you your rich life. You can do it yourself. I think this is very powerful. I think it's powerful for different people of different ages. I certainly think it's powerful for young women to hear because for too long, young men have been taught about things like investing and entrepreneurship. And young women have been taught one word. Save. Save, Save, Save. It's playing small to only save because you cannot build true wealth by only saving. You actually have to invest, and that's important. So I appreciate that this creator is encouraging young women to be able to take their rich lives into their own hands. I think that's cool.

The only way I was able to build this dream lifestyle is through sales and being a top sales rep. And you literally need no experience required. It's insane. So I'm making this video to tell you guys the possibilities are out there. The only thing you have to do is work insanely hard. But it's a given that you'll get it if you do work hard.

Okay, What? That's the whole video. Do. Do it yourself. And you can get a pink Porsche and you don't have to wait for a guy to do it. And this video has 1.2 million likes. Obviously, I suck at social media because I don't think any of my videos have this. And I'm like, sitting over here, hey, everybody. Let me break down the way asset allocation works. You don't want to over index on international because historically that has not performed as. And meanwhile this gets 1.2 million likes. Actually some decent lessons in this. I appreciate the idea that she has a life that she loves. I think that's cool. And for her it's the pink Porsche and the Pilates. I respect that. You can love a car, you can love the flexibility and fitness. I think that's awesome. The focus on being able to do it yourself, not waiting for somebody else to come and do it for you. I think that's extremely powerful. Overall, I would say this not a bad video. I'd be curious to take a look at the comments and some of her social media. This is why we need to do more research. Let's look at her personal Instagram account. CEO of she sells Academy. Okay, we're going to look at that. So she's selling a course. I don't mind. Courses in and of themselves are not necessarily scammy. How to step into your dream life through remote closing, breaking down the industry that allows the ladies and I to make money from anywhere. I'm starting to get my antenna are starting to go up because you learn exactly what this hidden sales role is and why it's perfect for women who crave control over their income location. Oh God. This is MLM. I can tell you it's an MLM. MLMs in general target women and they target minorities and they make really big promises. The promise that you can make money working from home, you, you don't have to report to a boss, you can be your own boss and on and on and on. I don't know this person. I don't know if this is a scam or not. I just saw it. But I've been in business for 20 years in the self development, personal finance and business domains and I have seen a lot, a lot of scammers, a lot of plagiarizers, a lot of really good people as well. So let me tell you some of the subtle things that I look for when I'm just trying to go for an instant back of the napkin credibility check. First of all, there are certain phrases that people use that generally reveal they're not someone to be trusted. If someone comes and says I'm a high ticket closer, I'm like block high ticket closer. What they mean is that they're going to go in and close these high ticket or five to $10,000 sales prospects for you. Usually they're 22 year olds who are pitching this to 50 or 100 different people. They've never closed a thing in their own life except for the cabinet in their kitchen. Next up, you have people who use phrases like you don't need to work for the man, you don't need a 9 to 5. And then they intimate that that's for losers. That's a huge red flag. Because think about it. I teach people how to start a side business, okay? And many of those end up turning into full time businesses. I also have a team of people who work with me. These are full time employees who get a 401k, health care benefits, etc. Do you ever hear me going around saying working 9 to 5 is for losers? I don't even believe that. And how could I? Because I have people who work with me with notice that they work with me. They're my coworkers. So when I hear people insulting anyone working a 9 to 5 job, which is a huge percentage of the world, you already know that they can't even scale their business that large because what credible person would want to work for somebody like that? Other signs that make my antenna go up would be if they're not clear about what their business actually is and or how they make money. If you have to get on a webinar to understand that, no good, no good. It's probably an MLM if they say things like we're not looking for anyone who's trying to get rich quick. But then all of the things they talk about are about getting rich quick. That's a scam. One more thing that gets my antenna going up. If you have someone who's talking about how to start a business, how to grow your income, et cetera, and they post 96% of their photos are bikini pics or shirtless pics. I start to go. I know a lot of wealthy entrepreneurs. Not one of them posts 90 plus percent or even 30% of their photos without a shirt on. So maybe I'm wrong. Maybe there's a reason for it. Maybe it's hot. Okay, fine, I understand. I don't like humidity either. But in general, if I'm trying to get business coaching and I decide I don't want to go to Stanford gsb, I don't want to go to Harvard for an mba. I'm probably not going to learn from somebody who's got their shirt off and is showing me their quad exercises for the day.

Just me right now is a good time to rent. Because the house that costs you $5,000 a month to buy. You could rent it for $3,000 a month.

Save already. I love this video. I know some of you go, ramit Sethi, don't you have anything else to talk about besides renting? And let me show you what I recently told somebody on Twitter. I'm going to talk about this for the rest of my godforsaken life until every single grown adult in the United States, and in fact across the globe, does one and only one simple thing. They run the numbers before they make the biggest purchase of their life. Let's keep going.

Save the difference. Invest it. How much money will that be worth over 10 years?

Let me explain what he means. Most people in America believe that you buy a house as quickly as you can, you magically become wealthy, and then one day you can sell that house, make a ton of profit, move to Florida, get skin cancer and die. That's fine if that's your rich life. That's not really understanding how housing truly works, and that's also adopting what works for our parents and in fact, even their parents. Let me tell you what's really going on right now. In the top 50 metro cities in America, that's 100% of the top 50 metro cities in America. It is cheaper to rent than to own. And let me explain how this works in terms of you building wealth, because this is exactly how I have done it over the last 20 years. If you rent in a city like Manhattan or Menlo park or Palo Alto, it might cost you, let's just say, $3,000 a month to rent. But to buy that very same or equivalent property would cost you 6,000, sometimes 7 or $8,000 a month. So imagine you have $3,000 a month to rent this place or to buy the exact same place right next door would cost you $6,600 a month, which is when you factor in not only interest, taxes, but also maintenance, transaction fees, and importantly, the opportunity cost of investing your down payment. Almost nobody factors that in. I did this. I ran this calculation many, many times when I lived in New York, San Francisco, Louisiana, et cetera. And what I did was, in that case, I took the difference, 6,600 minus 3,000, $3,600. And I invested it in the stock market. Now imagine investing 3, $3,600 per month. A lot of people going, you, Ramit, I don't live in Menlo Park. This is irrelevant to me. No, it's very relevant to you because I'm showing you how the principle works. If this is the case in really expensive Cities, then at least you know that it's possible that sometimes it's a better financial decision to rent. That is all I want you to know. I'm not saying buying is bad. I'm not saying you should never own, I will buy one day. But I'm saying in certain situations it is a better financial decision to buy. Then the next step is of course to say, well, hey, if I don't live in Menlo park or Malibu, does it apply to me? And that's when you start to run the numbers in your own area. You go, you look up houses that are renting, you find nearby equivalent places that are selling, and you start to run a simple mortgage calculation that'll get you 85% of the way there. If you want to really dial it in, you want to of course, factor in your opportunity cost, you want to factor in maintenance, you want to factor in all kinds of stuff. You can find lots of models online to help you do these calculations. I want to understand the numbers for the biggest potential purchase of my life. I want to also factor in all the non financial factors. Things like, do I want to live in a certain school district, do I want to renovate this house? By the way, have I factored in those numbers? And on and on and on. Sometimes it might not make any financial sense to buy, but you do it anyway because you can afford it and it's important part of your rich life. But I have to tell you that in my experience, less than 5% of people even run a simple buy versus rent calculation. Less than 5% on the biggest purchase of their lives. Anyway, I don't want to get into this whole thing for the next eight years of my life. What am I talking about? I've been talking about this for 20 freaking years. Like I'm not going to be talking about this for the next 40 years. See me on my deathbed, friends and family gathered around and the family asking, is there anything you look back and wish you'd done differently? And I struggle with my voice and I say, I wish that everyone on YouTube ran a God buy versus rent calculation that's on my deathbed. That's why save me from having regrets many years from now, please just run the calculation. All right?

The only exception to that is if you know you're going to be in the house for more than 10 years, in which case buying starts to look.

A little bit better.

Better.

Correct. And also, why are we wearing the same shirt? What the is going on right now? Was this planned? Let me explain what he meant because it's really important. When you buy a house, there are very high transaction costs. That means it's really expensive to buy. You have closing costs, moving costs, furniture costs, and on and on. It's a lot of money coming out of your pocket. Now if you were to simply put that money down, let's say that it's 30,000, 50,000, could be 100,000, depending on the area that you live in, and then you move out the next year, you've basically lost all that money. But if you live there for a minimum of what I recommend is 10 years, then you can spread those costs out. So a $50,000 one time fee in one year is a lot of money to lose. You spread that out over 10 years, it becomes manageable and it sort of gets absorbed into your total housing costs. Remember that most people don't think like this. They literally look at how much money is in their checking account and in order to determine if they are doing well or not. But to really understand your numbers, you have to become much more sophisticated with understanding where money is, what amortization means, those kinds of things. And if you're wondering, do I expect you to understand all of this before you buy a house? The answer is yes. This is the biggest purchase of your life. I expect you to run an amortization calculation. I expect you to know that as of now, it's going to take you over 20 years to be paying more towards your principal than, than towards interest. You got to know these things is the biggest purchase of your life.

But in the short term, for the next 10 years, it looks as though renting is the more favorable option. In a lot of cases, people should take their budgets and then minimize it as much as you can. So if you're approved for a $500,000 home, look at 350. If you're looking for a $700,000 home, look at 450, you know, 500 grand.

Another really good point. Let me give you some specific numbers that you can use to calculate how much house you can afford. Now, lenders use 28% of gross, and what that means is your total housing costs total should be less than 28% of your gross income. Now let me tell you a couple of things. First off, it's really hard to hit that number, especially today. Housing is historically expensive. So when things are historically expensive and old rules tend not to work, what you'll find is a lot of people on social media, particularly young people, just saying those rules, they don't make any sense. At all. I'm gonna buy anyway. And I'm like, hold on a second, maybe ask yourself, does any of this make sense right now? Does it actually make sense to buy? Or what if I stretch instead of 28%, what if I go to 29, 30, even 32? What would the ramifications be? I'll tell you, if you are paying more than 32 or 33% of gross income towards total housing costs, I can already tell you you're going to be stressed out about money. You're not gonna be able to save as much as you ordinarily would. You're not gonna be able to invest as much. You're not gonna be able to spend as much on guilt free spending like eating out. We all know people who are house poor. They bought a house, they didn't realize how expensive it's gonna be. Now they can't go anywhere, they can't eat out. All they do every week is go to the worst place on earth, Home Depot. That's it. That's it for the foreseeable future. It's just constant stress. And a lot of times they start to wonder, like, why did we do this? But they can't really talk about it because it's in the American culture. Real estate is religion. So better to understand all these things before you make the purchase. And one way to simulate that is take the total price of what your housing might cost if you were to go buy and try to save that much every single month. See how it actually affects your lifestyle. Can you do it? Is it comfortable? Is it stressful? That will prepare you before you buy. The second thing I want to emphasize is what does total housing costs mean when, whenever I say this tco, total cost of ownership, people go, well, hey, wait a second. Does that include. Yes, that's the answer. Does it include the sprinklers you have to get? Yes. Does it include taxes? Yes. Does it include the roof repair that's going to cost $16,000 but hasn't even happened and it's going to happen within 10 to 15 years? Yes. It includes all housing costs. And even if you're getting technical about it, the gas that you use to drive to Home Depot on Saturday. And if you want to truly count for everything, count your labor costs as well. But almost nobody does that. And it's fine if you don't want to everything. Take the down payment you made. Let's say it's a $50,000 down payment. Invest that in the stock market over the next 30 years. You got to count that as an opportunity cost that is included in your total cost of ownership. You got to include everything. Most people never think about that. They just feel guilty. They've been told by everyone around them, including their parents, grandparents, et cetera, don't spend money on coffee. And they feel this guilt, even though for many people, it's the one source of joy in their day. Okay, fine, but you decide to save it. I appreciate it. I like to discipline. What do you do with the money?

And I think it's so worth it to invest in a coffee machine. 100%.

That's.

The next thing is food. And I don't mean, like, don't go out and get food. I'm definitely budgeting for at least one to two really nice going out dinner, meals a month, because that's just what I like to do. You should have a budget for groceries, and you should make sure that you get food to last you the entire week, like breakfast, lunch, and dinner, because the worst thing that you can do is run out of money. And then you go out and spend $3 for. For each meal for, like, breakfast, lunch, and dinner, and that's like $60 in one day, which I feel like was the biggest money grabber for me.

Clothes.

But I don't just mean, like, clothes. Like, I mean, like, stupid clothes that you literally do not need. If it's for an event that you're going for, fine, Budget for it. If you're gonna pay people by Ventmo, you should probably keep track of it, because the amount of times I paid people vinmo and thought, I've had so much money, and then, like, two days after the Venmo transfers come in, and it completely screws you over, which is, like, so annoying. And I wish they would, like, fix that. So I thought I didn't spend a lot of money this weekend, but the venmos just didn't go through yet.

So, I mean, there's some good stuff here. Like, should you be spending unconsciously on eating out? Probably not. Especially when you're starting out your career. Should you be buying coffee? You know, my opinion is it's really a small question. It's a $3 or $5 question. But if you decide, hey, I don't want to do it, I want to make coffee at home, I enjoy it more, and I'm going to take all the money I would have otherwise spent. In this case, it seems like $9 a day, and I'm going to set up an automatic investment. 9 times 30, 270 bucks a month. That's good. That's thousands of dollars every year. That could be going into something like a Roth ira. I love that. One thing I notice is, is sometimes when people think about money, their reflexive behavior is to try to go and cut 10% on everything. Oh my God, I'm panicking because I don't have enough money. At the end of the month I got to stop, I got to buckle down. And what do they do? Their approach is very brute force. It's just to slash 10% on everything. Groceries, coffee, clothes, going out, everything. That doesn't work because you just rebound two months later, you forget the urgency you had. It was a very instinctive reaction. And when it comes to money, we can't simply yo, yo back and forth, especially not for the rest of our lives. I want us to be cool, calm and collected. And the way you do that is by taking a systems approach. You zoom up, you look at the big picture. The $30,000 questions. First off, you say, what are my four key numbers? These are the numbers from my conscious spending plan. I'll put a link so you can download the template for free. What are my fixed costs? They should be between 50 to 60%. What is my savings rate? It should be roughly 5 to 10% of take home pay. What about my investment rate? 5 to 10% of take home pay. Of course, I'd love it if you put more in there. And finally, guilt free spending 20 to 35%. That's a lot of money. And you can spend that money guilt free on coffee, eating out, drinks, whatever, because you know that you, that you've hit all the three numbers above. So I don't love this idea of just slashing back indiscriminately on everything. I do like the idea of spending extravagantly on the things you love as long as you cut costs mercilessly on the things you don't. Now how do you do that? This is why I wrote my book I Will Teach to be Rich. And in chapter four, I talk about conscious spending. If you love shoes, fine. Let's figure out how you can use your guilt free spending to, to buy those shoes and never worry about it. If you love traveling, let's figure that out as well. We can figure these things out. We probably can't do all of it, especially in the beginning of your career. But the way that you do that is you focus on the big picture, those big four key numbers. And once you know those numbers, which you can figure out in about 25 minutes by plugging your numbers in, then you can take a really strategic approach. Okay, what's next?

If you got a house under 4% in 2020, 2021 to whatever you need to keep that house forever, depending on inflation, you essentially got financing on that house with completely free money. You probably for the rest of your life will never see a 3% interest rate until the day you die. So you have to keep it. If you decide you want to move, you want to buy a different primary, you have to turn that into a rental property, put it up for rent after a year. You can do that. It's not mortgage fraud. Even if you never thought about being a landlord in your life, hire a property manager, keep it as a rental property, and you will be glad that you did. In 30 years, that house will be paid off. You're going to have a tenant paying you two or three thousand dollars a month for the rest of your life, and you will be fired up that you kept it as a rental property.

Okay, this could be true. And for a lot of people, this could actually be a fantastic strategy. Let's talk about the nuances here. If you got a house with a low interest rate, let's call it anything less than 4% as you do defines it. And you decide for whatever reason you need to move, maybe for a job, maybe for family, maybe you're just need a bigger place. Theoretically, you could rent that out and this person is right. Over 30 years, you will probably be happy that you did that. However, let's talk about what might not be being talked about in videos like this. Let's say that Your mortgage is $3,000 a month. Okay? So you go, hey, I want to rent this out for 3500amonth. Now if you can get that, that's fantastic. Financially speaking, that's awesome. You're making a profit every single month. That's called cash flowing. And over time, that's likely to be really, really good for you. However, a lot of landlords are discovering that they can't simply charge whatever they want. This is one of the most misunderstood concepts in America. People think that landlords simply take their costs, add on a healthy profit margin, and and then pass it along to tenants. Guys, that's not how it works. If they could simply charge 3,500, then why wouldn't they just charge 4,000 or 40,000amonth if they can just charge whatever they want? The answer is tenants don't care about your costs. All they care about is the market. So the landlord doesn't really set their rates. The market Does. A landlord can try to charge whatever they want, but the market is going to tell them how much somebody will pay. Sometimes landlords are discovering that they can't actually charge $3,000 a month, which would be their costs. They can only charge 2,800amonth or 2,500amonth. In that case, you would be losing $500 a month. And that does not even account for things like maintenance, which most people don't account for in their expenses. So as a landlord, you need to know if you can break even or make a profit. You might be surprised. You should find out what the market will pay. You'll notice that a lot of videos like this encourage you casually to just hire a property manager. Property managers are expensive. Most landlords, especially those with multiple properties, will discover that these property management companies are not that effective. And they're certainly not efficient. You're paying a lot, you're constantly frustrated, et cetera. Again, it can be done. It can be done. There are good property management companies out there and. And for some people, they don't mind going and doing the repairs themselves. That's fine, too. But just remember, it's not as easy as just hire a property management company. It's a lot of managerial skill. You're often not finding the best talent. And on and on and on. Suddenly you wake up one day, you go, let me get this straight. We're spending all this time, all this money, we're losing 500 bucks a month. We could be taking $500 a month and investing it and actually growing that money for almost zero cost. But instead, we're focused on this old property that we don't even want to talk about anymore. That might be a time for you to reevaluate whether you keep it or not. Now, I have no horse in this race. If you have a property with a low interest rate, this person is correct. You will probably never see that interest rate again in your life. So you want to be very thoughtful and methodical about your next move. You could sell it. Sure, sell it. Take the gains. You can decide what to do with it. If it were me personally, in my own lifestyle, I. I would probably invest most of it, let that grow and compound over the next 20, 30 years. I'd probably take a little bit of it and go on a really nice vacation. Or you can keep it. And you can keep it either as yourself, as a landlord, or with a property management firm. But you really want to be thoughtful and methodical. You want to read a bunch of other landlord Forums. You want to understand what you're getting into because this is a big decision and it's worth considering before you do it. Good video. Let's look at the comments. Oh, this is a good comment. The first one says, but how do I buy the second house without selling the first one? Yeah, that's another thing that's commonly just skimmed over. Hey, you got this property, just go buy another one. And everyone's like, I have 350% of my net worth is locked up in that highly illiquid asset. What am I just going to money come down from the sky for me to go buy another property? The next comment says, you find renters to sell, sign a rental agreement and show it to the mortgage company so they won't count it against you. And then the person says, okay, but wouldn't you still need the down payment, closing costs, etc. And then a lot of people are like, no, you have with your 14th business and your 87 tax exemptions, you should have $87 million to use on the down payment. Okay, you guys want me to really tell you what's the fallacy of some of these videos? It's the same videos like this and the same videos that say, I had a young daughter. I've decided that Instead of a 529, this is her college savings. I bought a house. And by the time she goes to college she will have a fully paid off property. And I'm like, what the are you talking about? You're talking to a bunch of people watching TikTok as if they already have a primary house that they live in and they just happen to have an extra hundred thousand dollars sitting around for a down payment where they're just going to go and buy another house for their daughter. Oh, no problem. And then I magically get free money for the next 20 years and when she goes to college. Here you go, little daughter. It sort of lacks a little bit of intellectual rigor, wouldn't you say? You know, like, where are people getting just the money for a down payment? How about even just the money to move, which in and of itself is expensive. What about the furnishing? So some of this stuff is a little bit hand wavy and it really is designed to get people to think, oh, like, oh, there's all this free money in real estate, what are we missing? And I don't want you to feel that way. There's no free money, there's no free lunch. You gotta understand that. Can I just ask, like, what does this person do Are they a mortgage broker? Oh, I wholesale a house a day. Well, I don't have anything else to say. I certainly wanna learn how to flip houses wholesale. So I'll be signing up myself. Thank you. Bye. Let's look at the next video. For the vast majority of people investing.

In an S&P 500 ETF is all you need to do within an IRA.

Or a Roth IRA. It's basically the top 500 US companies all encompassed in one fund.

And on average, it's been returning about 10% per year since 1923.

Okay, hold on, hold on. This is good advice already. Now, I know I critiqued Humphrey in a previous TikTok video because he read a freaking KB ad. And I got a lot of comments from Humphrey's community saying, hey, he actually has really good stuff. Check him out, etc. I read all your comments. I appreciate them. Humphrey has been around for a while, so I wanted to make sure that I went back and pulled another video of his. Now, I like this already. We haven't even gotten to the end, but I want to point out what he's saying. Within a retirement account like a 401k or an IRA, often the only investment you need to make is one fund, which, which would be a fund that tracks the S&P 500. It's called like a S&P 500 index fund. And the S&P 500 has been returning about 10% per year for the last hundred years. Now, let me give you a little bit of nuance on that 10% number. That 10% number is basically correct. It's actually a little bit low. Depending on which measure you take. 10% is the nominal rate. That's the amount you would see in your bank account if you invested there. But a lot of people rightfully worry how.