Ramit Sethi: How ‘Playing Defense’ With Money Is Hurting You
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Crystal Mayer
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Molly Sullivan
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Ramit Sethi, New York Times bestseller and founder of I Will Teach You To Be Rich, is well-known for providing information on how to build wealth. He regularly talks about the importance of automatic investing and how you can spend confidently without having to cut back on all of life’s indulgences.
On his YouTube channel, Sethi recently broke down the seven most common money habits that hold people back from leading a rich life. He explained in “These 7 Money Habits Keep You Stuck” how many people fall into money traps that leave them unfulfilled and unable to change their financial situation.
He noted that one of the biggest problems most people face is continuing to “play defense” with their money instead of playing offense. Here is how “playing defense” with money is hurting you, according to Ramit Sethi, and tips from our experts on how to play offense instead.
Stop Worrying About Things You Can’t Control
Ramit Sethi told his 453,000 subscribers that playing defense with their money will not help them build wealth. He said he gets “emails from people that are worried about what the Fed is going to do.” They would frequently ask whether their investment would return 7% or 7.1%. But Sethi said consumers are focusing on the wrong thing since it is out of their control.
He added, “Because they spend time worrying about things that are uncontrollable, they neglect things that they actually can influence.”
Don’t Check Your Financial Accounts Daily
Sethi said a major red flag is when people tell him they check their financial accounts daily. He explained that he doesn’t have financial apps on his phone, and neither should the average consumer. He advises that there is no reason to log into your accounts daily if you have set your money up automatically. He noted when people do this, they are “[p]laying small and playing defense with their money.”
If someone logs into their account daily, he said it tells him three things. They:
- Don’t feel in control of their money.
- Don’t have a financial system in place.
- Are obsessed with the minutiae.
“Checking your bills every single day is not going to lead to your rich life,” Sethi said. “That is too small for you to be focusing on, and frankly, a computer can do that better than you ever could.”
Play Offense With Your Money
Sethi believes that money isn’t something you should feel bad about.
“Yes, you should save, and invest, and pay off your debt, but yes, you should also use your money to live a rich life today. Guilt-free. To do that, you have to play offense with your money,” he said.
To play offense with your money, you need a proper financial system in place.
Develop a Budget
“One of the most important financial habits that every person should be implementing is budgeting,” said Jake Hill, CEO of DebtHammer. “Budgeting is inherently not a defending approach to money, instead it is a proactive way to plan out the best way to spend/save/invest in order to remain financially healthy and reach your financial goals. So, if you are playing defense with your money, you aren’t budgeting well.”
Take Calculated Risks
“There’s something to be said for approaching your finances with a healthy sense of caution, but playing defense with your money all the time can lead to missed opportunities,” said Ann Martin, director of operations at CreditDonkey. “For example, if you build your entire investment portfolio around low or no-risk assets, your earning potential will be far less than someone who approaches investing with a sense of balance. Taking some calculated risks with your money can help you build wealth and achieve financial freedom.”
Don’t Worry About Day-to-Day Fluctuations
“The risk you run when playing ‘defense’ with your money, in my experience, is getting too caught up in the tiny day-to-day fluctuations,” said David Kemmerer, CEO of CoinLedger. “It’s an easy way to grow paranoid, essentially, and become too cautious to ever actually get ahead. Financial systems can be very beneficial for peace of mind, as well as phasing out the need to check up on your accounts daily. This could mean setting up auto bill pay or money transfer between your accounts.”
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