Ramit Sethi’s Most ‘Brutally Honest’ Money Advice That Can Impact Your Wallet
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Peter Burns
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Levi Leidy
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When it comes to the topic of money management, suggestions can get complicated quickly. Sometimes, the best financial advice is blunt and straightforward, even if it is a bit uncomfortable to hear.
In a recent video, Ramit Sethi, personal finance expert and New York Times bestselling author of “I Will Teach You To Be Rich,” got frank and gave direct lessons that can help you improve your finances.
You’re Not Unique
It’s true that no two people are the same. However, when it comes to personal finance, people have a lot in common. By following basic guidelines, most people can improve their financial situation regardless of how much they make and how much debt they have.
It’s Not About Your Morning Routine
Social media has brought an onslaught of creators explaining exactly what you must do in the morning to make yourself rich. While getting the most out of your morning is important, what you do won’t amount to more savings. The most important thing is to be intentional with your time and figure out what works best for you.
Don’t Blame Inflation
Inflation has become a common scapegoat for individuals with poor financial habits. Rather than blaming inflation, take accountability for your actions. Start keeping a budget and tracking your spending to make a real difference. Then, invest the money you save from cutting your expenses to counter inflation.
Don’t Try To Time the Market
People new to investing will try to execute the age-old adage: buy low, sell high. The advice is correct if you’re trying to profit, but predicting when low and high occur can amount to substantial losses. Sethi said you should ride out market fluctuations by keeping your money in the market long term. Instead of waiting for the market to dip down so you can buy shares, you should invest a bit of your income each month.
Focus on the Right Things
People often focus on the wrong things when they try to get their finances in order. These include things like getting the right finance app, buying the cheaper drink at a restaurant and deciding which budgeting category to put expenses in. While these decisions can help, prioritizing the bigger picture is more important. Focus on being consistent and following the right financial rules to succeed.
You Probably Can’t Afford It
One of the biggest ways people ruin their finances is by buying things they can’t afford. Sethi pointed out that housing and vehicles are the two most likely causes of financial trouble. When people decide to buy houses or cars, they look at the monthly mortgage or car loan payments and decide that it’s something they can deal with. However, there are more than just monthly payments.
For a house, you’ll also need to pay property taxes, homeowners insurance, utilities and potentially homeowners association fees. Likewise, when you purchase a car, you’ll need to pay for car insurance, registration fees and gas. Finally, with both houses and cars, things will break down and need fixing. Maintenance costs won’t be a fixed number that you can plug in, but you’ll need to save up for them nonetheless.
Determining whether you can afford something means coming up with accurate numbers and doing the math. Letting your feelings get in the way and convincing yourself that it’ll be worth it because you want a bigger house or fancier car can feel right in the moment but devastate your financial future.
Be Honest About Why You Buy
Items such as designer clothes, luxury watches, jewelry and high-end cars show your socioeconomic status. Some people rationalize these purchases by calling them investments; but, in reality, those items are luxuries. Sethi said it’s not terrible to make luxury purchases, but you need to be honest with yourself about your reasons for buying them. After you admit the truth, you can determine whether you should get them.
Home Renovations Aren’t a Sure Thing
A common misconception among homeowners is that renovations will always improve property value and build equity. Sethi said renovating something doesn’t guarantee you will make money. He added that most home renovations lose money. It’s essential to research the return on investment before dropping a large amount of money or taking out a loan for home renovations.
Don’t Trust Everything You Read Online
Social media has changed the game when it comes to investing, but not necessarily in a good way. It’s now easier than ever to get financial advice online from thousands of people who are confident that their suggestions are correct. Sethi advised against taking this advice seriously, as everyone providing that advice is just looking to get rich quickly. Instead, build a system for your investments and be patient.
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