Why You Should Stop Listening To These Financial “Gurus”

You really need to be careful who you learn money from. If you click the wrong video, you might end up spending the next 30 years of your life hearing from financial experts who tell you the only way to get rich is to eat rice and beans and use a vacuum cleaner to find nickels in your couch every Sunday. And for the next seven years, you've got to collect that lint from your dryer, all so that you can make a beautiful baby blanket. I don't know about you, but that's not the kind of life I want to lead. I want to buy a round of drinks for my friends. I want to travel and stay at a nice hotel, and I want to be able to save and invest while I'm living my rich life. This bad money advice that is everywhere costs people thousands or millions of dollars today, and I'm frankly sick of it. I want to stop it. So in this video, I'm going to flag some of the bad money advice that you should be aware of. And yes, I'm going to name names and specific bad advice to look out for. I'll break this video down into three parts. The problems with the bad advice, how to spot it, and then who you can actually trust. So let's get right into it, starting with bad money advice that you should watch out for. Now, popular financial personality Dave Ramsey recently casually told people that they can safely withdraw 8% of their portfolio every year during retirement. Do you understand how absurd that is? No, you don't understand. I'm about to break it down for you. 8% means that you will run out of money before you die 60% of the time. This is well understood math. The 4% rule means you can safely withdraw 4% of your portfolio every year and you will not run out of money before 30 years. It's a generally very good rule. You can vary it at 3.8, 3.5, 4.2, but 8%? That's freaking insane. That's like me telling you, hey, man, yeah, you could totally drive your Toyota Corolla 195 miles down the freeway. It's totally cool. No problem at all. What the hell? That's nuts. If you understand the math. Now, how Dave can have a national platform and go out and tell retirees that they can take 8% of their portfolio out is mind blowing. And of course, he got roasted on social media, as he should have. Now, I got to tell you, while I personally enjoyed Dave Ramsey being roasted over his awful advice on 8% withdrawals, we should also remember that this is total Inside baseball, the average person does not know what a safe withdrawal rate is. Half of the people watching this video just stopped watching once I said retirement. You guys aren't even watching this. Is anyone here? No. Because the everyday person does not care about the technicalities of personal finance. They just want to know a few things. Am I going to have enough? Can I buy dinner out at Chili's? And also, why do I have a terrible palate for restaurants? Why the hell would I spend any money at Chili's? These are basic questions that everyday people want to know. Not swr. What's swr? But here's my message. If you've been in the industry for decades and you're out there telling retirees that they can take 8% safe withdrawal rates, that's not just bad advice, that's dangerous. Now another absurd piece of advice that Dave tells people is that you should keep your housing costs below 28% of gross income while at the same time paying for a 15 year mortgage. Now that's pretty conservative advice. I don't mind being conservative with your money. The problem is that might have worked in 1975. It does not work now. Housing prices have exploded primarily because of NIMBYs in every city in the country. Let me show you a chart of America's median household income versus median mortgage prices. Look at this. This chart shows you that housing is unaffordable. In fact, in every city in America, housing is unaffordable as defined by 28% of gross income over a 30 year mortgage. So for Dave to say you should pay that much over over 15 years, not 30 is disheartening. It's also unrealistic. The average person in their 20s, 30s, even 40s finds that incredibly difficult. Now I don't mind conservative advice, but we need to adapt with the times. We need to show people that, hey, sometimes it's better to rent. Of course, Dave might not want to do that because he's making money from lead gen to realtors, but we need to show people sometimes it's better to rent, sometimes it's better to own. Sometimes you need to consider all your options instead of being shoehorned into advice that would have worked in 1984. Now personally, I like a 30 year fixed rate loan. Yeah, you're going to pay a little bit more in interest compared to 15 years, but it's more flexible. You can pay it off shorter if you have money. You can extend it out if you like. So I disagree with holding people today to the exact same standards that would have worked in the 70s or 80s. Times have changed. Housing costs are way up. Health care costs are way up. Incomes have changed, and we need to account for that when. When we make our recommendations. Now, I will say this. If you live in the Midwest, if you have a credit card spending problem, if you need discipline with your spending, I actually think you should listen to Dave. I think he's very good at helping people buckle down with debt. Or if you want to believe that you can, quote, easily get 12% returns in the market. If you want to follow someone who runs a company where they do spousal interviews, if you want to follow someone who downplays Covid, minimizes mass, pulls out a gun during a work meeting and tells employees that, quote, sick sex outside marriage is wrong, well, then you know who to follow. Just don't think that an 8% safe withdrawal rate is realistic. Now, let's talk about Kevin o'. Leary. You've seen him on Shark Tank. He gives a lot of advice to people in the press, talking about you shouldn't spend that much on weddings. Oh, I would never buy coffee outside. I'm a humble guy. What makes me mad is the totally absurd advice that Kevin gives in the press, specifically where he blames young people doing that old Gen Z, Gen Y thing of, oh, my God, it's avocado toast. It's really all their fault. He will literally tell people not to buy coffee, not to spend anything on a wedding, and he's literally wearing $6,000 plus custom Tom Ford suits. Look it up in the press. You know, I have a simple rule. Maybe it's just me, little old me, but maybe we can all agree that you shouldn't take advice about cutting back on $3 expenses from a guy wearing $6,000 suits, period. By the way, his net worth is estimated to be over $400 million. You know, I used to think that you can make a lot of money and still be in touch with different people from different professions. And then I saw people like Kevin making the most outlandish claims on earth and then going like this. Yeah, nailed it. What the. Man, how are you going to tell the everyday person, don't buy $3, $5 coffee and you literally have a silk cashmere suit on. In what universe am I living in? Oh, Kevin, by the way, mention to everybody that you were paid $15 million by FTX to be a spokesman for that failed crypto exchange. Oh, I noticed you don't like to talk about that too much in the press anymore, huh? What happened to that? Kevin Any ideas? I've been in business for 20 years and I'll just tell you right up front, you never saw me promote a crypto scam. Why is that? You never saw me telling people, take the one joy you have in the morning, something that represents essentially no effect on your overall financial picture and stop it. Why is that? Why is that? Maybe it's because I actually understand how human psychology works. Or maybe I just want to be intellectually honest and tell you, look, if you want to buy the coffee, get the coffee. That's not going to make a big difference. But make sure that you are investing in low cost long term funds. Make sure that you have automatic savings and automatic investing setup. Make sure that you have a system so you can spend less than one hour a month on your personal finances, but also hit your rich life goals. Yes, you can live a rich life today and a richer life tomorrow. But you need to make sure that you're doing two things. Number one, know your numbers. Number two, master your money psychology. You do those things and you will live a very rich life. Kevin, what the man. Stop this. Stop telling people they can't afford a coffee or a wedding and start focusing on the way that you actually made money, which you and I both know is not grinding your own coffee every morning. Nobody gets $400 million by doing that. Thank you very much. Moving on now to Robert Kiyosaki, who wrote the book Rich Dad, Poor Dad. Now I want to say this. Chapter one of Rich Dad, Poor dad is actually really good. It focuses on a different way to think about money. In other words, making your money work for you. And personally, that first chapter, I think is pure magic. I would encourage you to read it, but after you finish reading that first chapter, immediately stop. Don't even look at chapter. Don't even look at the first word of chapter two. Put your hand over it, close it, get in your car, drive to the library. Immediate. I was going to tell you to donate it, but I really don't want you to subject other people to it. I don't know what to do with this. I don't know what to do. Just don't read any more past that because it all turns into complete dog. I'm not kidding when I tell you that Robert Kiyosaki literally said that the best investment is cans of tuna fish. I'm not joking. He actually said that, according to Robert, you got to buy tuna because this is the end of the world. And remember, I invested all my money in tuna. And yeah, I have this Small little problem of mercury poisoning. But besides that, I'm gonna make a killing on this. Now, of course, I had to have a little fun with Robert. I tweeted him back. Sadly, he never replied. What I want to talk about is why do you financial experts say these absurd things? And there's a few reasons. First off, pure shock value. They are addicted to the algorithm, so they start saying increasingly absurd things. Second, some of them start to be increasingly contrarian. Now, there's nothing wrong with being contrarian. You just need to be right. But once they taste the feeling of being contrarian, many people become addicted to it. And that's why you see them doing things that are just plainly wrong. And honestly, a lot of them get sucked into their own right wing echo chamber and they start believing that because they made it, everyone should be able to make it to the same level they did. They completely discount the fact that they were born to usually two parents, supported by clean air in America, roads and enough food, and so on. I always told myself, the more money I make, the more real I'm gonna keep it. That means acknowledging that I was lucky to be born in America to two educated parents. I was lucky to have the chance to go to public school and then to go to college. I was lucky to be able to have all these things. Yeah, I worked hard, of course, but I was also set up in a way to succeed. All right, so, Robert, just two questions. First, why are you posting all this weird on Twitter like, what happened, man? And second, what happened between chapter one and chapter two of Rich Dad? That's all I want to know. Hit me up. Just let me know the answer to my two questions. I'm good. Now, what should you look out for when you are researching these experts? Well, that brings me to part two. Red flags to look out for. Let me tell you exactly what red flags to look out for. But first, what about me? What about my red flags? Of course I have them. If you don't like a charming Indian guy with a taste for habaneros and ironing clothes who went through his own fitness transformation, you should probably stop watching this video right now. Definitely do not click, follow and subscribe, because that's what you're gonna get. Now, there are other things people accuse me of. For example, I love comments from people who say, ramit, you got rich writing a book on how to get rich. Let me just respond to this once and for all. First off, I make about $1 per book now. Trust me, there are much easier ways for me to make Money. Second, if you genuinely believe that you can get rich writing a book about getting rich, you should do it. Please. I will even buy your first copy, I promise you. Please, please, please try to do it. So you want to know the real red flags? Let me tell you three you should look out for red flag number one, someone who's cagey about how they make money. They should be very direct with you on how they make money. Let me tell you how I make money. Over 30 years, I have consistently invested in low cost long term index funds. I started investing when I was a teenager. My dad helped me open up a custodial IRA account. This is exactly what I teach in my book, I Will Teach youh to Be Rich. I didn't grow up wealthy. I'm the son of immigrant parents. I applied for scholarships to attend college and I started my business out of my dorm room. Now, over the years, as my business grew and my earnings increased, I also kept increasing how much I was investing. Now, that's not a sexy answer, so people don't really want to believe it. Ramit, how'd you get so rich? How do you travel like that? Well, the answer is I started investing a long time ago. I let it cook for decades and I keep on investing. That's life. I don't keep any of that secret. But if someone you're following does, if they're reluctant to provide details on how they made their money, that's a bit of a red flag. Red flag number two, percentage based fees for financial advice. Any of these sound like you? I don't have time to invest. I don't understand. Investing money's not for me. Why don't I just pay a financial advisor to do it for me? First of all, there are tons of specific great books on how to invest. I cover it in my book I will teach you to be rich. I have a video right here on YouTube. Just search for. I've made millions of people rich. Here's my playbook to find the video. Second, that 1% fee, do you know how much it will cost you? Take a look at this chart. It's important to know that financial experts are often no better at getting investment returns than amateurs. Meaning you right here watching this can essentially get the same returns as a fancy Wall street portfolio manager. If you invest in low cost long term index funds and you let it ride. Chapter six. I have all the research in my book to show you exactly this. I'll give you an example right now. Putnam Investments studied the performance of the S&P 500 over 15 years. And during that time the annualized return was 7.7%. They noticed something amazing. During that 15 year period, if you missed the 10 best days of investing, your return would have dropped from 7.7% to 2.96%. And if you missed the 30 best days over 15 years, your returns would have dropped to negative 2.47%. What does this mean? It means that a few days over a huge period of time have everything to do with how much money you will make. But here's the catch. Nobody knows what those days are. Nobody. Not me, not you, not anybody on Wall Street. Nobody knows. That's why the key is to keep investing every month automatically. Just like I show you in my book and in my automation system. Let me give you the actual dollar values. If you'd invested $10,000 and kept your money in the market over those 15 years, you'd end up with just over $30,000. If you missed the 10 best investing days, which again, nobody knows what they would be, you'd end up with $15,000. And if you missed the 30 best investing days, you'd end up with $6,873. That's less than you began with. This math is startling. It makes you wonder about the certainty of experts who say it's obvious the market's going down. We gotta retrench, we gotta take profits. Ignore them. It may feel good to try to predict where the market's gonna go. But candidly, when it comes to investing, your feelings will lead you astray. You know what kind of feelings I have when I look at my investment portfolio? It feels like I'm looking at concrete. Oh wow. Concrete. Oh, portfolio. There it is. Close. I don't even log in that often. That's how you should be treating your portfolio. Now the vast majority of you can earn more than the so called experts by investing on your own. No financial advisor, no fund manager. Just automatic investments in low cost funds. Now if you still want to hire a financial advisor, fantastic. Make sure that you are paying a flat rate or an hourly fee. And remember, financial advisors can provide some really good behavioral coaching, especially when the market goes down. But don't pay a percentage based fee. Red flag number three. Says one thing, does another. Now if your so called financial expert is running around telling everyone they can double your returns if you follow their advice, but then their company files for bankruptcy as certain financial experts companies have, that should alarm you. A good financial expert will know how to run their numbers. They will know how to Plan and manage risk. And they might not always get it right. Nobody does. But there shouldn't be any huge flashing red lights going off. Now, again, remember, things happen, markets change. I don't mind that some business have tough times. I've had tough times in my business. But we don't want people promising unrealistic returns. Somebody out, I've seen these guys on TikTok. Oh, do this thing. I only work five hours a week. I make $10 million. Not true. You're not going to do it. I could tell. I'm looking at these guys, I'm like, the. The nicest meal they ever had was red Robin. These guys don't earn $10 million a year. I once had a guy DM me on Instagram and tell me he could give me financial coaching. Of course, I was like, okay, tell me what you got. He tells me he's running a business and it makes $10 million a month. Let me say that again. $10 million a month. That's over $100 million business. Now, I was looking at his Instagram page because, you know, I had to roast this guy. He's sitting in a little backyard, you know, like those starter homes that have the little patch of grass for your dog and, like, one or two of the slats are missing. And I'm sitting there looking at him going, Nobody who makes $100 million a year has that fence. And I know that because that's the fence I grew up with. And we didn't have anywhere near $100 million. So, little buddy, who's telling me you make $10 million a month? You. And I know you're. You should have a healthy distrust of anyone who says they have all the answers. Google them. Look at their photos. Do they follow their own advice? Do they represent how you want to live your life? Are they always solo, taking pictures on a boat? Are they with their family or friends? When they talk about stuff, how do they talk? Are they respectful of people who have less money than them? Are they understanding that not everyone can start a successful business. Please, I'm begging you, take advice from people who understand what it's like to be you, not people who are going to shame you for wanting to buy coffee or tell you that the reason you're not a multi millionaire is that you buy avocado toast. Please do your research. It's a very important decision, who you trust when it comes to your finances. And I do want you to know there are some good people giving good advice out there. In fact, that brings me to part three. Who you can trust. Now, if you're watching this, maybe you've read my book, you've seen my show on Netflix. I hope you are following some of my advice, applying it to your situation, which can get you real results. But I also want to recommend three other people I think are doing a great job in the financial world. Because you shouldn't just follow one person, you should follow multiple people. One person. I recommend you take a look at Nick Magiulli. You can find him on Twitter if you search for at Dollars and Data. Nick is a data scientist and he shows people really surprising ways to look at money by running real numbers. You know, he recently asked this pretty provocative question. Imagine you meet someone who claims to be a financial expert. If you could only ask them one question to determine if they're legit, what question would you ask? I love his answer. How do you get rich without getting lucky? People don't want to hear about how to get rich from someone who had super rich parents. They want to know how they can do it with their background. So Nick Magiulli, great guy and great advice. Another person I want to recommend to you is Katie Gatti Tassan, AKA Money with Katie. Now, I like her Instagram account and I love her on Twitter. She covers a lot of awesome financial issues, including cultural and gender issues with a totally fresh take. And I really enjoyed being a guest on her podcast, which I would encourage you to listen to finally. I also recommend Tiffany Alice AKA the Budget Nista. You can find her on Instagram or Twitter if you search heBudgetnista. Tiffany has written multiple finance books, including a financial education book for children. She has a blog, she co hosts a podcast, and she's part of a Netflix documentary. I like what Tiffany's doing because she's getting more people of color to learn about money and take control of their financial future. I recently saw her at a Nashville event and she was telling me what her business business is like and how many people recognize her on the street. It totally blew my mind. So if you have made it to the end of this video, you now know what kind of advice should trigger your red flags. You should know what to look out for and also some people you can trust that have your best interests at heart. Make sure you click that subscribe button and check out this video popping up on screen right now to watch more.