Ramit Sethi: 3 Financial Gurus Giving Bad Money Advice
Written by
Peter Burns
Edited by
Zuri Anderson
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The internet is full of advice. If you’re trying to get abs, create the perfect travel itinerary for Cuba, grow your own carrots or get your ex back, you’ll find “experts” online who will guide you through the process. Similarly, many “finfluencers” or online personal finance experts offer advice, but not all of it is good.
Ramit Sethi, a personal finance expert and a New York Times bestselling author, called out some financial gurus for their bad advice. In a YouTube video, he broke down who was dishing out bad advice.
Here are some things you shouldn’t do.
Dave Ramsey: Withdraw 8% in Retirement
Dave Ramsey, host of The Ramsey Show, is known for helping people solve financial issues. However, he gave some advice that Sethi vehemently disagreed with.
Ramsey said it’s possible to withdraw 8% of your portfolio annually during retirement. According to Sethi, the math doesn’t add up.
If you take out 8% of your portfolio each year in retirement, there is a 60% chance that you’ll run out of money before you die. Sethi explained that this is basic math.
According to him, it’s safe to withdraw 4% of your portfolio each year. A study by Trinity University also supports his claim, stating that a 4% withdrawal rate generally keeps your portfolio intact for 30 years.
Kevin O’Leary: Cut Back on Small Expenses
Some popular financial advice today is to cut back on small expenses. Financial gurus might tell you to stop buying coffee each morning or to give up avocado toast. Sethi pointed out that one of these gurus is “Shark Tank” co-host Kevin O’Leary.
O’Leary has been vocal about cutting back on small expenses to save for the bigger picture. However, these small expenses don’t amount to much over the long term. The U.S. Bureau of Labor Statistics estimates that between 2019 and 2022, food expenses took up less than 13% of annual spending.
Sethi had a problem with this advice, especially since O’Leary often wears suits and outfits that cost thousands of dollars on TV. He points out that O’Leary’s net worth is over $400 million, which makes it hard for him to relate to the financial problems of normal people.
For Sethi, taking away an enjoyable aspect of your morning, like a cup of coffee, does more harm than good. Getting a cup of coffee in the morning won’t significantly impact your long-term finances as long as you’re taking other steps.
You should invest in low-cost funds over long periods, set up automatic savings and enjoy your coffee.
Robert Kiyosaki: Invest in Tuna
Sethi pointed out a tweet where Robert Kiyosaki, author of the New York Times bestselling book “Rich Dad Poor Dad,” claimed buying cans of tuna was a good investment. This financial advice is very whimsical, and Sethi knew why.
He explained that when these famous finance influencers run out of things to say, they start saying things out of shock value. Claiming that tuna is a good investment will get a lot of interaction and attention, causing tweets, videos and posts to do better in the social media platform’s algorithm.
Sethi’s Red Flags
With so much advice floating around on the internet, it may be difficult to determine who to listen to. As a finance YouTuber himself, Sethi has faced criticism.
He admitted that many users have commented about him getting rich from a book about how to get rich. To clear the air, Sethi stated that his book “I Will Teach You To Be Rich” only nets him $1 of profit per book sold. He said there are many easier ways to get rich than to write a book.
There are ways to figure out who to listen to and who to ignore when it comes to financial advice. These are Sethi’s red flags:
- Someone who isn’t direct about how they make money
- Charging percentage-based fees for financial advice
- Doesn’t follow their own advice
If you’re taking advice from someone exhibiting any of these red flags, looking elsewhere might be a good idea. Sethi suggested having a healthy distrust of anyone who offers you financial advice.
It’s best to do your homework, Google them and look for a proven record before making decisions based on what they say. Bad financial advice could cost you thousands of dollars, so finding someone you can trust is vital.
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