Ramit Sethi Cuts Down 6 Money Rules That Don’t Matter
Written by
Nicholas Morine
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Zuri Anderson
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Finance personality and YouTuber Ramit Sethi — author of the 2009 best-seller “I Will Teach You to Be Rich” — recently posted a slew of advice to his channel on the video-sharing platform kicking off with a bit of shade thrown at other financial gurus (namely, “Shark Tank” star Kevin O’Leary) regarding the oft-dispensed advice of ditching the $5 lattes if you want to become wealthy.
Sethi noted that this wisdom is often issued by rich people attempting to shame their audience, then pivoted to say he was more interested in asking — and answering — $30,000 questions rather than $3 questions. Here’s a list of commonly encountered money rules (or, as he termed it, “ridiculous pieces of personal finance advice”) that he advised ignoring.
‘Sweating the Small Stuff’
Sethi advised ignoring the trending advice tied to such luxuries as avocado toast or coffee, as well as “extreme frugality” endorsements: Going all-in on taking your own lunch to work, or going wild with coupon clipping. Instead, he emphasized the CEO approach.
“Cut costs, earn more and optimize your spending,” the author said, outlining steps for each category. For costs, look at your top three discretionary spending expenses, then cut them by 20% to 50% over the next six months, easing yourself in.
“There’s no limit to what you can earn,” Sethi began, turning to salary negotiation as a starting position — and freelance work was mentioned as a secondary option.
Finally, in terms of optimizing your spending, Sethi talked about taking advantage of promotions and re-negotiating debt.
Focusing Too Much on ‘Shiny Objects’ Like Sleek Personal Finance Apps
Decrying both a puritanical approach to small expenditures and extensive spreadsheeting — or on relying exclusively on shiny objects such as sleek budgeting apps — Sethi instead promoted what he termed a simple four-step conscious spending plan.
- 50% to 60% of your spending should be on fixed costs (rent, utilities, debt servicing).
- 5% to 10% should be focused on investments, with the YouTuber and author leaning toward the second figure.
- 5% to 10% should likewise be allocated to savings.
- 20% to 35% is yours to spend, completely guilt-free.
‘Moving to a Low-Tax State’ As a Cure-All
Sethi opened up with what he described as a complete myth: If you tax the rich, they’ll leave. Pointing out that taxes are historically low for society’s wealthiest — and that the higher-paying jobs and more robust infrastructure were generally more common in wealthier jurisdictions — the YouTuber made his point clear.
On the other hand, he did admit that housing was a serious problem, but also that wealthier people often targeted by this advice were not as financially precarious. This was part of his stated caveat: It’s not necessarily wrong to move from a more expensive state to a less expensive state if that suits, but rather that it’s reductionist to rely on this narrative from a tax perspective alone.
Other money rules that Sethi skewered or lampooned:
- Vague mindfulness tips: Making fun of morning affirmations, cold plunges, journaling, and saunas as financial levers, Sethi instead advised making a specific plan, with specific goals.
- “Follow your passion”: In a similar vein, Sethi warned against vague advice such as this, instead suggesting that his audience take the lesson of passion being “the result of skill and mastery,” a far more important takeaway that can aid your financial journey. Also: Your passion must be valuable to others, in order to wring wealth from it, per Sethi.
- Buying a house: “You can just ignore anyone who says, ‘Buy a house, it’s the American dream,'” Sethi said. The same goes for “Renting is throwing your money away,” according to the author and finance personality. Equity being “America’s favorite word,” Sethi noted that most people don’t factor in the phantom costs associated with homeownership — and that landlords are restricted to rents which “the market will bear,” making renting a more attractive prospect in certain scenarios.
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