You’ve Got Money All Wrong: A Step by Step Guide to Living a Rich Life

(00:31:23):

Now, that is a money dial, that is a vision of what you love today. And it could be modest buying dessert for your friends. That's very generous. Also pretty modest. But when you understand, Hey, where could I go with this? Could I turn my dial up two x four x, 10 x? What would it look like? It wouldn't just be more of the same. I might change the quality. I might change the frequency if I love clothes. As a young woman in Pasadena did, I asked her, are you going to still shop at the same place h and m? She goes, no. And when we really explored and played, we came up with this idea that one day she could fly to Italy with her mom and they could get something custom made together in Italy. Now she can't do that today. She can't do it tomorrow. But now she has a vision of what excites her with money. That's how we get started.

 

Mel Robbins (00:32:17):

Why is it important to start with a vision? That's exciting

 

Ramit Sethi (00:32:25):

Because money is such a drag for most of us. When you think of money, what are the first words that come to mind?

 

Mel Robbins (00:32:31):

Debt.

 

Ramit Sethi (00:32:32):

Yep. Yep. Restriction. Overwhelming

 

Mel Robbins (00:32:36):

Mistakes.

 

Ramit Sethi (00:32:36):

Am I too late? Mistake. It sucks. So are we surprised that Americans have terrible financial behavior? Well, I'm not really surprised when everything around us basically tells us, don't pay attention to this until it's too late. I mean, it's more exciting to talk about flossing than it is to talk about money. It sucks. But if we start talking about, oh my God, I love to eat. I'm unapologetic about spending extravagantly on the things I love, as long as I cut costs mercilessly on the things I don't, well, suddenly it's a lot more fun to talk about.

 

Mel Robbins (00:33:11):

It really is because I think there's so much shame that we carry about money because there's all these expectations that you have about how much you should have, how much you should have by now, what you should have done with it. If only had I had invested back in the day in Apple, I missed these opportunities. I should have done this, I should have done that. And that sort of negative story that you keep reinforcing to yourself, that then has you go, oh, I can't buy the guacamole. I better not get a latte. Fuck, fuck, fuck.

 

(00:33:43):

It keeps you stuck in that story. But when you allow somebody to play and dream again, because money, it's not only psychology, it's sort of a vehicle to do those things.

 

Ramit Sethi (00:33:53):

Exactly. Yeah. And I love what you said about the guacamole example, is that because we feel shame because we feel like it's too late. Our field of vision narrows almost like if you've ever felt like you're about to faint, everything shrinks and we shrink our own desires. So I'll often ask people, what is your rich life? And you know what they always say to me, they always go, I want to do what I want when I want. I go, oh God, here we go. And then I go, wow, that's so interesting. I never heard that one except for the 8 million times I heard it. I go, so what do you want? And they are stumped because we never actually thought about what our rich life is. And so then I'm gentle. I want them to come to it, but I also want to have a little fun with 'em.

Mel Robbins (00:35:17):

And then that cuts off our access to authentic inspiration.

 

Ramit Sethi (00:35:24):

Yeah, nobody's inspired by a tiny vision. Nobody's inspired by the idea like, Ooh, I could save 5% on coffee. Who cares? That's not exciting.

 

Mel Robbins (00:35:33):

It's so true. I want to ask you a question on behalf of anyone that's listening that is up to their eyeballs in debt and is having trouble dreaming and is trying to make ends meet. Or maybe it's not even the debt. It's that with two kids in college and bills to pay and a mortgage, they're just in those crunch years of just grinding it out. What is the concept of a rich life and can you walk us through, regardless of where we are financially, how we start to define it for ourselves? Covered the money dials, but I want to just get a flat definition from you of what a rich life is and what are the steps you walk somebody through regardless of where they are to creating one.

 

Ramit Sethi (00:36:26):

A rich life is when you look at your life and you go, wow, this feels amazing. Now you can have a rich life and still be in debt. That's okay. You can have a rich life and not be exactly where you want to be ultimately. But a rich life can be traveling two months a year. It can be buying a beautiful cashmere coat. A rich life can be picking up your kids from school every afternoon. The key is that your rich life is yours. It's not mine. It's not your friends, not your parents, it's yours. And in fact, the more you carefully define your rich life and really turn those dials up and down, the more bewildering your rich life will be to other people. I'll give you an example from my own life. My rich life is really weird to other people, and that's exactly what it should be.

 

(00:37:23):

I love spending extravagantly on travel. I'm a hotel guy. I I have a list of hotels in all parts of the world. I know the exact room I want to stay in. I love it. I'm obsessed. That's my thing. I also love clothes. I love them. I spend a lot on it. And so those things are things I spend extravagantly. On the other hand, my car is not that important to me. And to give you a point of comparison, I've spent more in one year on travel than I spent in 20 years on all of my car expenses added together.

 

Mel Robbins (00:37:59):

Wow.

 

Ramit Sethi (00:38:00):

So that's crazy. It makes no sense to somebody listening. And that's exactly how it should be. If you love camping, maybe you turn that dial up, you find a way to have a smaller cost for your rent or mortgage, and instead you're going camping. I dunno, X weeks per year. You've got some behind. You've got some place you go that nobody else knows about. Some equipment. That's amazing. You take friends with you. Amazing. Not my thing. I've got a reader of mine who told, he retired in his thirties with his wife. They travel around the country in an rv. I go, that sounds like hell.

 

Mel Robbins (00:38:40):

Yeah, me too. To me. No

 

Ramit Sethi (00:38:40):

Way. But I love that it's their rich

 

Mel Robbins (00:38:44):

Life. Yes. So are there particular questions other than the money dial that you would want us to ask ourselves or answer in order to start to really define it? Because I agree with you. Most people, when you ask them for real, what do you want? It's like,

 

Ramit Sethi (00:39:04):

It's hard. It's a really big question.

 

Mel Robbins (00:39:06):

So

 

Ramit Sethi (00:39:06):

What we can do is we can zoom in and out to help people create some context around it.

 

(00:39:11):

So I have this journal, which you can do solo or with your partner, and I'm going to give you a few exercises that are really helpful. Let's start big picture and then we'll zoom really tight down to day to day.

 

(00:39:22):

So this is a fun exercise. I did this one with my wife. We sat down and we said, let's create a 10 year bucket list. So in the next 10 years, what do we want to do that would make this an amazing and rich 10 years? We took two separate pieces of paper, we spent a few minutes, we wrote it down, and then we came back and compared it. And this is a really cool opportunity to recalibrate. The way you talk about money dreamy. It's fun. You don't have to commit to anything. So you want to get curious. One of us is like, oh, I want to learn Spanish. And the other one goes, oh cool. You want to do that online? Or would you want to go to Mexico City and do an immersion? The other one of my things was I want to write a book at a hotel.

 

(00:40:03):

Makes perfect sense. Well, I don't necessarily love writing, but if I'm going to write a book, I'm going to write it in an amazing luxury hotel that I love. Which one? Okay, cool. So there was one in Kyoto that I love and in fact recently went there on a writing project. I achieved one of my tenure books, Eric and the funniest part, my wife was going to Japan anyway with some friends. She goes, Hey, why don't you go and work on your writing project? I know you love that hotel and you've got the time. Why don't you? And I was like, oh yeah, it didn't even occur to me. So sometimes you need somebody to remind you about your,

 

Mel Robbins (00:40:41):

Now if you're single or you're newly divorced or you've just graduated from college, do you recommend that you grab a friend or a sibling or somebody? Or is this something best

 

Ramit Sethi (00:40:54):

Done? No, you can do it solo.

 

Mel Robbins (00:40:55):

You can do it solo. Okay.

 

Ramit Sethi (00:40:56):

Yeah, you could totally do it solo. So you come up with a list of things and it's things that are exciting that you would look back on and be like, wow, that was a really cool 10 years. I remember. That's memorable. Okay, then, so the two of you have, if you're in a partnership, you've asked each other. If you're solo, you're looking at 'em and you're picking one that really jumps out at you, don't overthink it. It's the one that you go, I want to do that above all others

 

Mel Robbins (00:41:21):

In the next 10 years.

 

Ramit Sethi (00:41:22):

Yep.

 

Mel Robbins (00:41:22):

I got to go to Australia for a month in the next 10 years. I am not saying that's mine, but I'm just saying, what are some of the things you've seen from the millions of people that you've helped?

 

Ramit Sethi (00:41:33):

We want to take a family trip to Italy.

 

Mel Robbins (00:41:35):

Super

 

Ramit Sethi (00:41:36):

Common. Everybody wants to go to Italy, and I love hearing it. I then get to help them dimensionalize it. Italy alone is just a word I want to know. What seat on the airplane are you flying? What season are you going? What are you wearing? Where are you eating? I want to know every detail to the point where we can almost smell it, because then it becomes vivid and aspirational.

 

Mel Robbins (00:42:02):

Okay?

 

Ramit Sethi (00:42:03):

So that's what we're doing in this first process. It's actually really fun. Oh, oh my God, we get to go on a pizza tour, whatever. Then you pick that one and solo or together, you go, alright, let's actually make it happen. When do I want to do this? In our case, we decided we want to have an amazing 10 year wedding anniversary. We were inspired by some friends of ours who did it, and we were like, what people actually do that? And then we're like, well, who cares if people do it? We want to do it. And so we said, that's it. We happen to know the exact date we want to do it and the location. If you want to go to Italy or wherever, you got to pick a specific month and year. It's got to now start getting specific, and then you got two more steps and then you're good to go.

 

Mel Robbins (00:42:49):

The next step is to, hold on, let me just clarify something.

 

Ramit Sethi (00:42:51):

Yeah.

 

Mel Robbins (00:42:51):

What Ramit is teaching you to do is to dream again and to attach very positive and aligned emotion with what a rich life would feel like. And I think so many of you are going to have trouble even getting past this part and giving yourself permission to do it because of the amount of mistakes that you made. And I'll just say Ramit, when Chris's restaurant business was really struggling and we had liens on the house and couldn't pay for groceries at times, and I had lost my job, dreaming seemed impossible, but it was actually a lifeline because it made me feel like this was going to be temporary, that we would figure out a way through this. And so I just want to underscore that if you're got crushing student debt right now, if you've gone through a divorce and you're in financial ruin, this is actually exactly what you need to do because if you continue to stare at the debt, you're going to feel disempowered, which means your actions will be disempowered.

 

(00:44:08):

If we can give you a beacon out on the distance to raise your gaze and get you feeling inspired against something to work toward that we know based on the research, that's your big why when it comes to a goal. And so I love what you're doing here because it's the exact opposite of what a financial advisor would tell you, which is you'd sit down, you'd go through the numbers, you'd feel like an IBU soul, you'd basically get somebody politely telling you you're fucked and you shouldn't buy coffee out and you shouldn't enjoy yourself until you get your debt under control and you pay this off and that can come. But let's first get the conversation fun and exciting again, because when you're in that kind of mood, you're going to be more motivated to do the tedious bullshit that any financial advisor can tell you. Correct?

 

Ramit Sethi (00:44:59):

Correct. A hundred percent. And thank you for slowing us down and really providing the context behind why we are doing it this way. I don't want us to shrink our world to a spreadsheet that's not going to help you. That's not going to help anybody. Instead, what I want to do is expand our vision, even if it feels impossible to dream and to say, look, just in this moment on this piece of paper, let's dream for a second. And it's having a conversation with yourself or your partner and saying, we may not be able to even see how we can get there today, but we've got time and if we put the intention behind it and we marshal our resources, I think we can do this.

 

Mel Robbins (00:45:43):

Yeah, that's beautiful. Absolutely beautiful.

 

Ramit Sethi (00:45:46):

So you've got one powerful vision of what you want to accomplish in the next 10 years. I say powerful because it's not like eating at a restaurant that's not powerful enough. I had a guy once tell me his rich life is coffee. And I just sat there and then I said, that's boring. I just told him point blank, and he was shocked. Oh, somebody's telling me my rich life is, I was like, yeah, that's boring. You can't just say coffee. This guy had a lot of money. I go, okay, if you love coffee, then tell me you want to go to Guatemala and take a behind the scenes tour of a farm. Tell me you want to go to the National Barista Competition and bring somebody tell me something beyond, I want to order an extra Dunkin Donuts coffee shipped to my house. No, that's not acceptable. So sometimes I have to challenge people to think bigger. You got something big. It could be skydiving, it could be a trip, whatever. Alright. You know the date, specifically the

 

Mel Robbins (00:46:44):

Month. So in the next 10 years, you got to pick a date the month and the year.

 

Ramit Sethi (00:46:48):

Yep. You got to be specific. Then this is the hardest part, but it should take no more than five minutes. Approximate the cost. So if you're going to Italy people, they start to freak out because freaked, anytime you start talking,

 

Mel Robbins (00:47:00):

I just freaked out.

(00:47:30):

And if you have two different, my wife and I had two completely different numbers. Mine was way bigger. And my rule is if you've got two numbers, go with the bigger one.

 

Mel Robbins (00:47:39):

Got it. Okay.

 

Ramit Sethi (00:47:40):

Go with the bigger one. And so now you've got a beautiful vision. You've got a month and year, you've got the approximate amount it's going to cost. The last step is to make it a reality. How do you do that? Let's say that it's 10 years away, it's going to cost $10,000. I'm just making it up. That means you need to be saving a thousand dollars a year or roughly a hundred bucks a month roughly.

 

(00:48:08):

Okay, we could do that. Suddenly you start to understand a little concept of time and money and you set up an automatic savings from your checking account to your savings account for $100 a month and you call it dream trip 2030, boom. Every month that you are talking about money in what I call a rich life review. It's like a video game. You see we're getting 3% closer and that is a joy.

 

Mel Robbins (00:48:38):

I love this and I know that you, is that what you call a conscious spending plan?

 

Ramit Sethi (00:48:44):

Conscious spending plan is a little different, but it would incorporate that. Yes.

 

Mel Robbins (00:48:49):

Okay. So can I just ask one more question about this? And I know I'm beating a dead horse, but having been somebody that was in a scary place financially just over a decade ago, I want you to explain what will happen to somebody with crushing student debt or who's having trouble just making the ends meet right now and they don't have a lot of savings. How will doing this exercise change their psychology about money starting today?

 

Ramit Sethi (00:49:25):

Yes, thank you for asking this because if you are in large amounts of debt, whether student loan, credit card, even mortgage, for some people, some of this can sound really airy fairy, and I'm the last guy to get accused of us all sitting around the campfire saying Kumbaya. I'm like, look, I'll talk about psychology, but we're also going to talk about the numbers. And so what I want to emphasize to people is that we often have this belief that we are overwhelmed with money. Okay? It's easy to feel that way, but when I ask people, show me your spending, what percentage of your income is going to housing or investments? I would say 99% of people do not know. Okay, so how can we, I don't know.

 

Mel Robbins (00:50:11):

I literally don't know.

Mel Robbins (00:51:24):

Oh wow. Okay. So what are the four type things that we all need to go through?

 

Ramit Sethi (00:51:30):

Everybody needs these four numbers. This is what I use instead of a budget. I don't keep a budget. You think I'm going to sit around tracking the price of asparagus for the rest of my life? Hell no. Okay. I don't want to live that kind life. I don't live

 

Mel Robbins (00:51:39):

That life either. Okay.

 

Ramit Sethi (00:51:41):

Yeah. Alright, so four numbers that you should know. These are all part of my conscious spending plan. The first is your fixed costs.

 

(00:51:50):

So that would include your rent or mortgage, your utilities, car payment, gas, insurance, anything that's fixed, even groceries every month that goes there.

 

Mel Robbins (00:52:01):

And what about the minimum debt payment or is that part of another

 

Ramit Sethi (00:52:04):

Category? Yeah, that counts there. Exactly. Thank

 

Mel Robbins (00:52:06):

You.

 

Ramit Sethi (00:52:07):

And that number, you should try to get it between 50 to 60% of your take home pay. Let me run through these all and then I'll tell you what they mean. 50 to 60% of your take home pay for fixed costs. Next up your savings, how much money are you saving every month? This should be roughly five to 10% of your take. Home savings would be an emergency fund or money you don't need for at least one to five years. Things like a down payment for a house, et cetera. Next up would be investments, roughly five to 10% of take home, although I like to see it higher because investing early in life pays well, pays dividends later. And then

 

Mel Robbins (00:52:55):

Little shame for Mel Robbins did not invest early in life. I'm just going to let that one go and focus on my dream list. Okay. Just wanted to acknowledge that when you said that because people say that, I'm like, fuck, I didn't do that. Okay,

 

Ramit Sethi (00:53:09):

Well, I wish I started deadlifting when I was 13 years old, but I didn't even know what that was. So we all start from the place we start at.

 

Mel Robbins (00:53:15):

That's true.

 

Ramit Sethi (00:53:15):

Okay, the last category is my favorite. One of all, it's guilt free spending. And this is 20 to 35% of take home pay. What? Yeah, that's right. Desserts. Mel, go get 'em. Beautiful cashmere coat. That's for me. Go get 'em. You want to get roller skates? You want to go to your gym? 20 to 35% of take home. Now let me tell you why I love this and why I'm getting excited about, I fricking love this about four numbers, okay? So many of us shrink our lives and we agonize over some stupid $5 purchase. You really think coffee is going to change your life. It's irrelevant. It does not matter how much coffee you buy. So please stop thinking about that. The same people who agonize go, oh, I'm so overwhelmed. I don't know anything. I go, what's your savings rate? They go, what's that? How much are you investing? Well, I try, but I don't really know. Okay, how are you supposed to feel? Not overwhelmed if you don't know any key numbers. So know the four numbers and you will suddenly feel totally in control. Some of you aren't going to be able to hit these numbers. That's okay. At least we can work with it. We got the puzzle pieces on the table. Now we can start assembling your rich life.

 

Mel Robbins (00:54:28):

Wow. Okay, I think I can do this. So you just carve out some time on the weekend and get your arms around these four things,

 

Ramit Sethi (00:54:38):

Which should take 15 minutes. Do not

 

Mel Robbins (00:54:40):

Overthink it. It's going to take me a while. Really? It takes 15 minutes.

 

Ramit Sethi (00:54:43):

Yeah. Here's what people do for how do you do it? Because the biggest challenge is people don't have the right logins, so their logins are spread all. They got their fidelity account or some old 401k or whatever. So I would recommend breaking it up into two days. The first day is just get all your stuff assembled.

 

Mel Robbins (00:55:01):

Love it.

 

Ramit Sethi (00:55:01):

It's like cleaning the garage. And then the second day, 15 minutes and done. Do not overthink it.

 

Mel Robbins (00:55:07):

Love you.

 

Ramit Sethi (00:55:07):

We're going for approximate numbers.

 

Mel Robbins (00:55:09):

That's

 

Ramit Sethi (00:55:09):

It.

 

Mel Robbins (00:55:10):

I love you. I love you. Love you, love you. You have that, what is it? The 85% rule. Get 85% of this, right? You're good.

 

Ramit Sethi (00:55:17):

Yeah. Get on with your life. You don't need to sit there and optimize everything. It's a waste of time.

 

Mel Robbins (00:55:21):

And I also love this because it can feel so insurmountable when you've made major financial mistakes in your life that this gives you a place to start that you can then start to get better from. And I just actually had a huge wake up moment. I realized that one of the great things about growing up with parents who were very just, I didn't ever see any concern about money and I didn't see them talking about it. Actually, that's not true. I would see my mother sitting at her desk with one of those little calculators with the tapes as she was balancing her checkbook.

 

Ramit Sethi (00:56:04):

Hey, that's a really important thing that you saw. You saw a woman taking control of money and being capable and competent. That is a very valuable lesson to learn as a child. That obviously has come through for you. That's amazing.

 

Mel Robbins (00:56:23):

And she then went on to open her own retail store and all the women, my grandmother's a farmer and ran the money and she had a calculator with the tape. And my other grandmother, my grandparents had a bakery and she had the thing with the tape. But what's interesting is that I think the, oh, it's chill aspect has gotten too hands off for me. The fact that I can't answer those numbers like that at this stage in my life. For me, it used to be because of fear and shame and how bad the numbers were. I used to be one of those people that the bills would arrive and I would just not open them.

 

Ramit Sethi (00:57:03):

Common.

 

Mel Robbins (00:57:05):

It was confronting to see the debt and confronting to see how much I had spent because I was basically shopping to escape my life with money that I did not afford, that I didn't have. And then you'd open up the bills and be like, fuck

 

Ramit Sethi (00:57:23):

Yeah,

 

Mel Robbins (00:57:24):

I guess

 

Ramit Sethi (00:57:24):

I spent that much.

 

Mel Robbins (00:57:25):

Yeah, I don't have that money. And so it used to be that, but I think now that I've paid off all the debt and I have savings and I've maniacally saving, I don't look at it at all still.

 

Ramit Sethi (00:57:41):

Okay. Let's talk about a couple of things that are so interesting about what you just said. I love the honesty. All of us have something in our lives that we feel like we should be doing better and we kind of push the envelopes away. And I deeply understand this because for me it was fitness and I grew up half joking, calling myself a skinny Indian guy. And I really wish I had not said that because it became part of my identity. And if any of us say something like I'm bad with money, I would gently encourage you to not say that. Maybe reframe it and say, gosh, I haven't learned the skills of money yet, but I'm changing that now.

 

Mel Robbins (00:58:28):

I want to stop right there. Hold on a sec. I apologize for interrupting you, but this is so important. If you just heard Ramit say, I'm bad with money, I want you to pay attention loud and clear because he is absolutely right. Or if you say something like, I don't understand. It's overwhelming.

 

Ramit Sethi (00:58:53):

I'm not good with math.

 

Mel Robbins (00:58:54):

I'm not good with math. What are other things that your students say, Ramit, that really crystallize a terrible psychology around money?

 

Ramit Sethi (00:59:02):

My family's never been good with money. We're all bad. I'm never going to get out of this debt. We always fight about money and I'm just an overs spender

 

Mel Robbins (00:59:13):

Or my husband took care of the finances.

 

Ramit Sethi (00:59:18):

Oh, classic. Oh, that drives me insane. Hold on, I'm getting mad, but I am getting mad at multiple things right now, so let me take 'em each in turn. Okay. First off, what you said about not opening envelopes and then now as you've become much more financially successful, it's almost swung the other way is totally common. In my experience, once people start earning around $150,000, they stop really paying attention to the numbers because they basically make enough to not have to really pay attention. And actually I'm a little okay with that. I don't want people agonizing over the price of groceries if they're making 150 K. But what I do want and what I do for myself is I spend one hour per month on my finances. That's it. Just one hour. I review the CSP. My wife and I talk about money.

 

Mel Robbins (01:00:05):

Hold on. The CSP was that conscious spending plan of the four things, correct, fixed cost. What's your automatically savings, your investments? And then the category I love the most, guilt-free fucking spending people let

 

Ramit Sethi (01:00:19):

Go. Well, I love it. You added the F word. That's so good. I got to add that. That's beautiful. It is exciting. Okay, so all those things, when you have money carved out for guilt-free spending, it is literally defined so that if you want to eat and get an extra cheesecake or you want to go to the movies, you don't have to feel guilty because you know my debt is being paid off, my rent or mortgage is being covered. I'm even saving money. I'm not trying to save money just like I don't try to brush my teeth. It is happening automatically. It's even better than brushing. So that is, if you're listening, I hope that's a sense of relief that you don't have to feel bad about having debt. You do not have to track a gajillion numbers that you don't even care about. You do. And I would highly encourage you to focus on four key numbers that will totally transform your life.

 

Mel Robbins (01:01:15):

I love this. I love how easy you're making this. Thank you for that.

 

Ramit Sethi (01:01:19):

It's absolutely my pleasure. I don't want to spend time doing that either. I don't want anyone else to waste

 

Mel Robbins (01:01:24):

Their time on it. So I want to clarify one thing. So these four pillars of the conscious spending plan, and again, I come from the lived experience of crushing debt where you feel that unless you can get to zero balance, you don't deserve guilt-free spending, that somehow you're cheating on your goal to get out of debt, which is what every financial advisor pounds into your head. And you feel like that latte robs you of the opportunity to be out of debt. You feel like spending to go on a trip with your friends robs you of the ability to be out of debt. And what you're saying is, no, no, no, no, no. You can start right now by figuring out these four things and allocating incoming to those things.

 

Ramit Sethi (01:02:19):

Correct. We have a very unhealthy relationship with money in this country. On one hand, we have a puritanical strain that tells us do not buy anything and you're a bad person for having debt, and you should live in a monastery until that debt is paid off. And then maybe you could go buy a pack of gum. Okay? On the other hand, we're like, okay, hold on. Lemme look at Instagram. Oh, my friend's in Bora Bora on Tuesday. Oh, I think I'm going to go take a trip even though I don't even know how much I have in the bank. What a two paradoxical beliefs. And usually it's the consumerist one that wins, but we still feel guilty. We love to feel guilty in this country.

 

(01:03:03):

I don't want to feel guilty with money also. I'm not naturally, I don't feel guilty. I'm just like, lemme just fix this. So when it comes to having debt, here's my belief. Number one, you need to know how much you owe. 90% of people I talked to who are in debt do not even know how much debt they owe. That's number one. You've got to know your numbers. Number two, you've got to know the exact month and year your debt will be paid off. 95% of people in debt do not know their debt payoff plan. Easy way to do it. Literally go on Google type debt payoff calculator, plug your numbers in and you will see. And don't worry if it seems depressing, oh, it's going to take 28 years. What I want you to do is just plug the number in and sit with it for a day. And later you will learn things like, wow, if I add an extra $50 a month, it can shave off three years from my debt. But that comes later. I just want

 

Mel Robbins (01:03:59):

You to know what also I also love that you're saying is I love that you're saying it's okay to have it. Most rich people actually finance a lot of things.

 

Ramit Sethi (01:04:08):

Yeah,

 

Mel Robbins (01:04:09):

Debt. Go ahead. You're the expert. I dunno. Why the hell I'm talking about money. Go ahead.

 

Ramit Sethi (01:04:14):

Well, first of all, whether it's okay or not, a lot of people have debt.

 

Mel Robbins (01:04:17):

Yes.

 

Ramit Sethi (01:04:18):

So let's just accept us for who we are. That's the fact of life. Now, I do want you to get smarter with debt. So when I look at people, I always look at the snapshot of their finances, and I talk about all these numbers on the podcast. By the way, we have folks who come on $800,000 of debt. They're not even really? Are you

 

Mel Robbins (01:04:37):

Serious? Well, that was me over a decade ago. Yeah. When the lie

 

Ramit Sethi (01:04:41):

Hit the out. Wow, okay.

 

Mel Robbins (01:04:42):

No college savings, no 401k credit cards, maxed out home equity line, maxed out, plowed it all into my husband's restaurant. Business did not go according to plan. I lost my job, liens hit the house. He hadn't been paid in six months. Friends and family had invested. Holy fucking hell. That was my life.

 

Ramit Sethi (01:05:03):

Okay, so you really know what it's

 

Mel Robbins (01:05:06):

Like. Yeah. This is not

 

Ramit Sethi (01:05:06):

A joke.

 

Mel Robbins (01:05:07):

This is,

 

Ramit Sethi (01:05:08):

You think about it every day of your life when you're in it.

 

Mel Robbins (01:05:11):

Yes. And in fact, there's research I believe that says that the number is 75 or $78,000 in the United States is what you need to make in order to be relieved of the day-to-day financial stress that you have, that when you reach that number, there's a level of freedom involved. I don't know if that's true or not.

 

Ramit Sethi (01:05:37):

I know the research.

 

Mel Robbins (01:05:38):

What is it?

 

Ramit Sethi (01:05:41):

People have wildly misinterpreted it. Let me put it this way, and I want to correct it, because people listening who are making $75,000, they're like, wait a second, why do I still feel so stressed? What's wrong with me?

 

(01:05:51):

And there's not something wrong with you. Nobody is broken with money. Nobody. There are ways for you to get informed about money. So the basic language of money, which anybody can do, you do not have to be a math genius. I'm not. And second to work on improving your money psychology. I spoke to a couple on my podcast and they were in a lot of financial trouble and they think about it every day and they were so stressed out. And I asked them, have you read my book? Not judging. It. Turns out almost nobody who comes on my podcast reads my book, 

Mel Robbins (01:07:28):

I'm going to read your book. I've never read a financial book in my

 

Ramit Sethi (01:07:31):

Life. Oh, okay. I love it. There's audio version too.

 

Mel Robbins (01:07:34):

I'm just admit it. I'm just admitting it. I have never,

 

Ramit Sethi (01:07:36):

I love your honesty. It's so

 

Mel Robbins (01:07:37):

Good. I read a financial book in my entire life. I have read plenty of blogs and listened to podcasts. I've never read a book. And the truth is, I am intimidated by Investing. And the irony of this is that this is the one area of my life where I have goals and I want to get more into investing and also investing in startups as an angel investor. And I don't know the first fucking thing about it, and there is this, I don't know, self-doubt or whatever that I realize in talking to you is keeping me from starting. And yet one of the things that if I make that 10 year list that you're talking about of dreams, it is to have advised, invested in and nurtured a number of startup companies, particularly by underrepresented founders in spaces and categories that I deeply care about. And it's almost like what I just realized is doing that would help me fulfill in an amazing way that ripple effect of sending desserts to people.

 

Ramit Sethi (01:08:57):

There you go. That is the money dial. The desserts are beautiful, but they are such a small example. You are so much bigger than a table full of desserts. That is it.

 

Mel Robbins (01:09:08):

Yeah, it connected the dots between those two. And so you've given us so much to do and so much to think about. And I want to recap kind of what we've covered so far for everybody so that you can also ee tell us what else or where to start, or we're going to link to absolutely everything, all your resources where people can listen to your podcast, where people can find your website, of course, your new Netflix series where you are following a number of people that need their mindset about money changed in a show where you've got like six weeks to turn people's financial life around. And so this is something where you can get coached by Ramit not only through his programs, but through this new zero cost Netflix show. So make sure to tune into that. But I want us to just make sure that we have everybody leaving in action. You've just poured so much into us.

 

(01:10:10):

Number one, take two days, everybody, one for your logins, for your financial thing, the other to get the numbers straight and don't overthink it. You got to get your conscious spending plan together, which Ramit taught us has four aspects of fixed costs, savings, investments, and your guilt-free fucking spending people. The other one is you're going to do this 10 year dream plan where you get to just get your 10 year bucket list on.

(01:11:51):

Of you having a different psychology and relationship to money and somebody truly taking control of their life. Is there something else that we haven't talked about?

Mel Robbins (01:13:09):

What are some of the things that you typically see with the people that you work with that are costs that they, I can't even pronounce that

 

Ramit Sethi (01:13:17):

Word. They mercilessly cut.

 

Mel Robbins (01:13:20):

Yes.

 

Ramit Sethi (01:13:20):

Well, I'll tell you what they overspend on.

 

Mel Robbins (01:13:22):

Tell me

 

Ramit Sethi (01:13:23):

Because it's always the same.

 

Mel Robbins (01:13:24):

Okay.

 

Ramit Sethi (01:13:25):

The number one area that people overspend on is housing costs. And so in their fixed costs, that is the first, there's a reason it's first their housing costs. A good guideline is that your housing costs should roughly be 28% of your gross income. Now, I will tell you that that's really hard number, especially because housing has gotten so expensive,

 

(01:13:49):

Especially if you live in New York, la, et cetera. So if people come and they go, well, hey, mine's like 31%. I go, okay, we can approximate. It's like adding a little more salt to your dish, fine. But sometimes they look at it and it's 42%. Now I'm going to tell you what that means because again, most of us do not have the full picture of our finances. We simply pay the bill that comes in and they're wondering, why do we keep fighting about Target? Why doesn't my husband or my wife want to go out to dinner once a year? I'm so annoyed. I go, well, I could tell you right now, it has nothing to do with Target, nothing to do with dinner out. It's that your housing costs is 42% of gross. And because you're spending all your money up there, there's nothing left trickling down the waterfall. You can't save, you can't invest, you can't go out. And when they realize that, then suddenly they have the knowledge and they can go, okay, do we actually love this house? Do we need to live here? Fine. Then what are we going to cut back on? Or do we actually need to live here? Could we downsize? Could we move? Do we have options? Could we rent out a DU in the back if we've got it? Et cetera, et cetera.

 

(01:15:02):

That's number one. Number two, overspending is cars. You get somebody, I get this all the time and I always get mad at them, and then everyone gets mad at me because in America, we love trucks. So I have nothing against, well, that's not true. I have a lot of things against trucks including safety and a variety of other things. But what I really have a problem with is somebody making 75,000 who buys an $80,000 truck because their buddy Chet at the dealer told them, oh, you can afford the monthly payment. And then they forget to factor in what I call TCO, total cost of ownership. That $80,000 truck actually costs you 120 grand once you factor in insurance, tax, gas, and on and on and on. They can't afford it. So I asked one guy, he comes on the show, they're struggling with money. He goes, it comes out way late.

 

(01:15:46):

They're like, oh, we tried everything. We buy generic. We buy generic macaroni and cheese. I go, I don't care about macaroni. Tell me about your car. They go, we have this big nice truck. I go, oh, okay. That's so interesting. By the way, why do you have a truck? And he looks at me like I'm crazy. He goes to pull the trailer. I go, what? You can't afford any of this. So anyway, those are the two areas people overspend on. It's house and car. And if you can just avoid that, if you can just get your numbers in line and fit your fixed costs, the rest of your life will be so much easier.

 

Mel Robbins (01:16:24):

Wow. Wow.

 

Ramit Sethi (01:16:26):

Do you have a truck Mel?

 

Mel Robbins (01:16:28):

My husband drives a pickup truck. Yeah.

 

Ramit Sethi (01:16:30):

What kind?

 

Mel Robbins (01:16:33):

I think it's a Chevy.

 

Ramit Sethi (01:16:34):

Well, I don't really mind. I know you can afford it, but let's assume you and your husband made one 10th of what you made now, and you had that Chevy. What do you think about that?

 

Mel Robbins (01:16:50):

It costs $125,000. That's a lot of money.

 

Ramit Sethi (01:16:53):

Well, just another thing,

 

Mel Robbins (01:16:55):

Everybody, well, I guess, but I also live in Vermont and I would not be able to get up my driveway. That's a quarter mile long. During mud season, if we didn't have a pickup truck, we literally have to shuttle people up and down this driveway. I drive a 9-year-old car that just shit the bed. And now I drove it in to get repaired and was told it needs to be towed out somewhere to be sold. So I am currently without a car, so this is very timely, but I'm not a big car person.

 

Ramit Sethi (01:17:23):

Well, good, I like that, that, see, now what I want to hear is that, and it could be car. I don't need a fancy house. I don't need fancy clothes. Fine, but I also want to know what you are into. And once people start to define those two things, that really helps create the dimensions of their rich life. Also, never buy anything expensive based on a monthly payment. That's a trick. People do this with their house, their car, and they forget all about the phantom costs that are not included in their monthly payment.

 

Mel Robbins (01:17:56):

So if you've been guilty of that, do you then have to have an honest conversation with yourself? That's like I, and again, I want you to leave us with this rich life concept because while Ramit is a financial advisor, he's the host of a hit television show. He's a New York Times bestselling author, and he is helped millions of people change their thinking and mindset and psychology and relationship with money and launch businesses and get out of debt and create and build the life, the rich life of their dreams. I really want to make sure people leave with a paradigm shift. What do most people without realizing have if they don't have a rich life already? If you think about the people that came on the Netflix show or any of the millions of students that come to your website every month, what is the current mindset that most people have? And then I want you to leave us with a definition of what is possible if you apply these tools and you listen to reit.

 

Ramit Sethi (01:19:09):

The mindset that most of us have is what I would equate to being at work and getting one email after another and simply being an order taker. Okay, this person emailed me. Oh, I got to get back to that person. And that is life. And that is most people's lives forever when it comes to money. I got this bill. We got to get diapers, ohoh, the car broke down. How are we going to respond to it? It's just one arbitrary problem after another, and I don't wish for those problems to go away. Cars break down. Sometimes we go into debt. That's life. Instead, I want to give you a whole new way of looking at them, which is to say agonizing over some tiny thing at the grocery store is actually never going to go away, and it's never going to change your life. And you spend the rest of your life worrying about it.

 

(01:20:10):

And in my paradigm, that's a tragedy. What a tragedy. To live a smaller life than you have to, what a tragedy, to defer the rich life until some mythical day, which you don't even know when it's going to happen. And if I ask you, you apply an arbitrary number, no, we're not going to do that because you've listened to the two of us talking today. Instead, we're going to define it right now. What is our rich life? What are my money dials? What do I want to spend extravagantly on and therefore cut costs mercilessly on? And am I comfortable saying to myself and perhaps other people, I'm going to live my rich life today and an even richer life tomorrow. That's the vision I want to leave everybody with.

 

Mel Robbins (01:20:58):

I fricking love that. Oh my God, you're amazing.

 

Ramit Sethi (01:21:03):

This is the thank you. This is, I love doing. I love seeing people's lives change when they see money in a different way.

 

Mel Robbins (01:21:13):

Fantastic. Because when you see it in a different way, you act differently. And that's why this matters. REIT's not saying Think about a rich life and all of a sudden will be a million dollars in your bank account.

 

Ramit Sethi (01:21:26):

That's not what

 

Mel Robbins (01:21:26):

He's fucking saying. No, it's notations.

 

Ramit Sethi (01:21:28):

No,

 

Mel Robbins (01:21:28):

No,

 

Ramit Sethi (01:21:28):

No. You got to be competent. You got to know your numbers. Absolutely. I hold people to that. But when most people think about money, they see stress and overwhelm and debt, and when I look at numbers, I see a trip to Disneyland with your kids. I see an amazing food tour in India. I see the ability to never have to look at the price when you're at a restaurant, and that is what you can get when you understand how to use money.

 

Mel Robbins (01:21:59):

I love this one final question. For those people that have a mindset, I'm terrible with money. I'm bad with money, I'm never going to get out of debt. If you could drop in new programming, please tell them what they should start saying to themselves all day long about money instead,

 

Ramit Sethi (01:22:26):

The new phrase that I want you to use is, I haven't always been great with money, but now I'm learning. It's so simple, such a simple reframe. Nobody's expecting you to become a multimillionaire overnight. We don't even need that. But day by day, you put a little bit of time and attention into reframing your identity. I haven't always been good, but I'm starting to learn about money now that can be listening to this episode, listening to my podcast, watching the Netflix show. It can be putting some time during your commute to listen to the audiobook and certainly having some conversations with a partner maybe saying, you know what? I realize that when we talk about money, we always stressed out and I don't want that for us. I actually want us to feel good about money, and I realize I've got some work to do. Absolutely. But I'd love to do it together with you. Would you be willing to do that together? That's how you reframe it solo and with a partner.

 

Mel Robbins (01:23:35):

I love that. I love that. And I want to add one more. I'm thinking about my husband

 

(01:23:41):

And one of the reasons why I love your reframe. I haven't always been great with money, but now I'm learning to be great with it. I love that because as you know, those sort of mindset reframes only work if your brain accepts it as true. And by leading with the fact that you acknowledge the fact that you haven't always been great. It's not a make wrong, it's a stating a fact. It now opens the door for your brain to go, oh, yeah, but now you're learning to be creative. Okay, I got that. And so I could say, for those of you that are on the spectrum, have always been stressed, but you have it. I haven't always been free with my money, but I'm now starting to enjoy it. I used to be stressed about my money, but now I'm learning how to enjoy it.

 

Ramit Sethi (01:24:27):

So good. I love that you add that positive emotion because deep down, most of us don't need the fancy villa, but we do want to feel good day to day with our money.

 

Mel Robbins (01:24:41):

Yes.

 

Ramit Sethi (01:24:41):

We want to know that if our kids ask us for something for school, we can get it. We want to know that if a friend comes into town and they say, Hey, would you like to meet for lunch? Yeah, we can go. We don't even have to think about the numbers, because we've already built in a margin of safety, we've built in some ability to take these spontaneous things that happen in life. That's a rich life, to not have to always be tight and restrictive, but to be fluid and accepting. And I love the way you put that in joy. Money. That is so good.

 

Mel Robbins (01:25:16):

Well, and here's the other thing that I love, if I had to put this all full circle, is that one of the things that we talk about all the time on this podcast, and you talk about it too, is the fact that we're all obsessed with getting to someplace. I got to get that beach house. I got to get out of debt because we presume that we're going to feel a certain way when we achieve it. And what you're offering is a very clear, simple, step-by-step roadmap that helps you change how you feel about money and how you think about money, so that as you are creating this rich life and as you are taking responsibility, you feel more freedom, you feel happier.

 

Ramit Sethi (01:25:59):

It starts today.

 

Mel Robbins (01:26:00):

It starts today.

 

Ramit Sethi (01:26:01):

Yeah, exactly. And I never believe in living a life of I'll start doing all these things when I retire. It's about the journey, and I want you to also get to where you want to go, but it's even sweeter when the journey has been intentional.

 

Mel Robbins (01:26:17):

Amazing.

 

Ramit Sethi (01:26:18):

And that is what we really want to create a rich life today and a richer life tomorrow.

 

Mel Robbins (01:26:23):

Amazing. Thank you so much. Congratulations on all your success and all the people whose lives you've made richer and more enjoyable. I really appreciate you taking the time today to hang with us. It's great to finally meet you in person, and I hope this is the beginning day one ramit of our rich new friendship.

 

Ramit Sethi (01:26:45):

I hope. Exactly the same thing. Thank you for having me. This was a blast.

 

Mel Robbins (01:26:49):

Awesome. Alright, we'll talk soon.

 

Ramit Sethi (01:26:51):

Thanks.

 

Mel Robbins (01:26:52):

Hey, it's Mel, and if you've ever thought, gosh, I just wish I could get Mel to coach me. Well now you can. Once a year, I offer a live coaching program called Launch and it is open for registration right now. If you're interested, I invite you. No, I urge you to check it out. Last year it sold out. It has a 7,000 person wait list. But being a fan of the podcast, I know you're not just the listening type, you're the doing type. You are going to love this. It's 42 lectures. That's the curriculum. It's all new. It is a private premium app driven community. I am the professor. It lasts for six months. There are 11 live coaching calls. You are going to love this. The information is in the link above, and I would love, love, love to coach you. I'd love to empower you to launch a new chapter in your personal or professional life. If you've ever wanted me to coach you, this is your chance. Do not wait. 5, 4, 3, 2, 1. Let's go.

 

(01:27:57):

Wow. I am so excited to get my logins and go through my numbers. I feel like I have a whole new relationship with money and I'm going to start really enjoying it and feeling more competent. I cannot wait to hear your feedback on this episode. And I also want to remind you that there is another zero cost resource for you to help you take control. If you go to mel robbins.com/take control, I have a three part free training with a workbook, and now that you're inspired to create a rich life, I know that mel robbins.com/take control is going to help with that too, in case nobody else tells you. Today, I wanted to tell you that I love you. I believe in you, and I believe in your ability to forget the balance sheet for just a minute and create that bucket list. You're learning so much about the science of dreams and goals and mindset, and Ramit stepped in today and gave you and I this huge gift.

 

(01:29:03):

He's taken everything that we've learned in other areas of our lives, and he's applied it in a financial roadmap. I love that getting out of debt and enjoying your financial life begins with dreaming and with aligning it with what really makes you come alive. There is no doubt in my mind when you and I both tap into that. The sky is the fricking limit, baby. Alrighty, I love you. I'll talk to you in a few days. Oh, one more thing. It's the legal language. This podcast is presented solely for educational and entertainment purposes. It is not intended as a substitute for the advice of a physician, professional coach, psychotherapist, or other qualified professional.