This YouTube video (Ramit Sethi) identifies seven major personal-finance mistakes that can cost people large sums. In the opening sections the speaker rejects extreme frugality advice as impractical, and presents Mistake #1: relying on willpower instead of automation — recommends automating bill payments, savings, and investments and suggests setting aside at least $50 per month (acknowledging some people may need more). Mistake #2 warns against buying a house that is too expensive and gives a rule of thumb that total monthly housing costs should be no more than 28% of gross monthly household income, explicitly including mortgage, closing costs, interest, property taxes, homeowner's insurance, maintenance, utilities, and HOA/condo fees.
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A lot of your parents old tips on money do not work anymore in today's economy because things have changed. Now to take control of your money, you don't need an economics degree from Harvard. You can pay off debt, start to invest, even accumulate over a million dollars and spend that money on the things you love if you keep it simple. But there's just one catch. You have to avoid the seven money mistakes that cost people hundreds of thousands of dollars. But after watching this video, you won't make the same mistakes. Let's with mistake number one, relying on willpower instead of automation. Now I want to tell you that there are actual, real articles that actual human beings wrote about how to save Money. Separate your 2 ply toilet paper, take short cold showers, and cut your own hair. Are you freaking serious? That's not the life for me. And if you don't want to do that, I want to show you how you can actually save money without guilt, frustration, confusion, or, or constantly being bombarded by terrible money. Advice that makes you play small. People will tell you keep a budget. As if you have to track every single line item. And then what? What are you supposed to do with that information? Or cut back. Cut back on lattes, cut back on jeans, cut back on car, cut back on vacation, Cut back, cut back. And maybe, just Maybe, when you're 95 years old, you will be allowed to spend your money. None of this advice actually applies in the real world, but frugalistas keep touting it like it's their religion. Probably the biggest rallying cry for frugality experts is that you should cut back on your morning coffee every day. $5 a day adds up. You've definitely seen a chart like this. If you save $2 a day by making coffee at home, you'll save $62 a month, which equals around $700 a year. And properly invested, that will turn into $10,000 in 10 years. Why doesn't this work? Because we have to consciously make this decision every single day. Now, for a lot of people, probably you watching this video, the single only joy you have in the morning is going to get your morning coffee. And now these frugality experts are asking you to use your limited willpower every single morning, every day, forever. And what these frugality people are not taking into account is that every decision we make, not to buy something, not to consume, that is an active decision we have to make. It depletes our willpower. And. And the result looks something like this. Yes, your motivation starts high. You're pumped. But Then you quickly realize that cutting your spending by 50% is a lot. It's a drastic change. Most people become unmotivated and they start spending again. By the time you're back to your old spending habits, you get a wave of inspiration to keep going and try again, only to once again fall back into that unmotivated territory. Even if you're successful cutting back on your coffee, the vast majority of people will not invest the money they've saved. You've skipped morning coffee every day for 365 days. You have $730 or more. What are you going to do? Are you going to invest all that money? Almost certainly not. $2 a day, $3 a day, $5 a day actually does not add up to that much in the grand scheme of things. So what should you do instead? Well, I recommend that people set aside at least $50 every month to invest. For a lot of people, $50 is too low. Maybe it's 500, maybe it's 5,000. But what I don't want you to do is to try harder to come up with that money. In other words, it's the 25th of the month, you're sitting there looking at these bills and you're going, should I go out to dinner or should I invest this money? Wrong. You've made a mistake way in the past. Here's the mistake. For things that take a long time and require constant decisions, like investing or like buying a morning coffee, trying harder alone almost never works. Even if you can do it once or twice, it becomes mentally taxing to maintain those decisions over a long period of time. You know what's easier? Just automate it. Set up your automatic money system so you don't even have to think about it. You automatically invest every month. You automatically save every month. All your bills are automatically paid every month. Take willpower completely out of the equation. You know another thing you can do? Hit that subscribe button, turn on notifications. That way I can notify you next time one of my videos goes live. All right, next up, mistake number two. Buying more house than you can afford. Do you all realize that your house is going to be the single biggest purchase you ever make? Therefore, it's really important that you run the numbers before you buy a house. If you don't, you will do what most Americans do, which is to overspend on housing, especially in high cost of living cities. Now, a good guideline is, is that your total monthly housing costs should be no more than 28% of your gross monthly household income. Now, that number seems staggering to a lot of people. Let me break it down. When I say total monthly housing costs, what do I mean? I mean not only your mortgage, but also closing costs, interest, property taxes, homeowner's insurance, maintenance, utilities, and any additional fees, like HOA fees, condo fees, et cetera.
