Yahoo Finance Ramit Sethi: 7 Money Trends He Can’t Stand and How They Impact Your Wealth
Multimillionaire Ramit Sethi is the personal finance author of the bestselling book, “I Will Teach You to Be Rich,” star of the Netflix show “How to Get Rich,” and creator of the podcast and YouTube channel, “I Will Teach You to Be Rich.”
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He has strong opinions on popular personal finance advice and routinely voices them on social media as well as his podcast and YouTube channel where he interviews couples about their money challenges. Here, discover seven common money beliefs Sethi challenges.
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The Money Advice Ramit Sethi Gets Worked Up About
Here are personal finance theories some finance experts tout as ironclad ways to get rich that Sethi suggests his audience avoid or challenge.
Sticking to a Budget
Whenever one of the guests on Sethi’s podcast talks about following his budget, he quickly interrupts them and says something along the lines of, “I don’t have a budget plan, it’s the ‘conscious spending plan.'”
He wants followers to “ditch the budget” and categorize their spending into the following categories:
Fixed costs (including your mortgage, rent and standard bills)
Savings goals (home down payment, vacation fund)
Investments (401(k), Roth IRA, and an emergency fund)
Guilt-free spending (meals out, celebrations, travel, gifts)
In a LinkedIn post, Sethi wrote that he doesn’t like budgets because they don’t tell you where or how to spend your money and you can easily get caught in the weeds with those $3 and $5 purchases. Instead, he wrote to focus on spending freely on the things you love and drastically cutting costs on the things you don’t.
Have Your Coffee and Still Get Rich
Sethi has said in tweets that you need to spend more time focusing on the $30,000 questions and not the $3 questions. “I’m extremely careful about spending on a house, car and investment fees because these have a massive effect over the long term,” he said. The multimillionaire says he doesn’t spend much time thinking about the costs of coffee, lunch and taxes. If “living your rich life” means buying coffee out every day, then go for it, he said.
Utilize Alternative Investing
Every personal finance expert has an opinion on alternative investments and Sethi is no stranger to voicing his thoughts on crypto, precious metals and any investor who isn’t suggesting a diversified portfolio. Yes, he’s even compared crypto investors to ” mindless, roving hordes in zombie movies,” if that gives you a sense of his level of appreciation for cryptocurrency evangelists.
Basically, he questions the irregular returns on crypto investments-amongst other factors. Sethi suggests his followers don’t put too much money into any one investment and look to David Swensen’s money management model which shows a diversified portfolio.
In general, Sethi suggests you look into “boring” investments, like a target-date fund which is a diversified mutual fund.
Real estate investments can also be lumped into alternative investing and Sethi has some thoughts on those.
Owning a Home as a Path to Wealth
Ramit Sethi has said he doesn’t own a home even though he’s a multimillionaire and certainly could afford one. He believes that people should consider the “phantom costs” of home ownership, like increasing taxes, repairs and a host of other money-sucking problems that can crop up. Basically, he wants to debunk the thinking that renting is a waste of money.
In today’s current economic climate where buying their first home may be unattainable for many Americans, this can ease some of the pressure younger generations feel to buy a home. With mortgage rates hovering around 6.5% to 7%, homebuyers who are purchasing right now might not have extra money in their budgets for those phantom costs. Sethi is here to challenge the belief that purchasing real estate is a great investment. He’s giving you permission to rent, guilt-free, for as long as it suits you.
House Flipping as a Way To Make Money
This holds particularly true if you don’t know what you’re doing. Sethi acknowledges that buying rental properties, house-hacking and flipping properties are ways some people can turn a profit but, for the layperson who doesn’t have a lot of knowledge about the industry, they’re more likely to get burned by the maintenance and repair costs.
He wants people to ensure they have the funds to make these purchases and the extraneous costs associated with them. Go into these opportunities with eyes wide open and the numbers crunched to ensure you will be able to turn a profit.
Using Big Banks That Tack On Fees
The self-made multimillionaire took up a charge against big banks that charge consumers overdraft fees, ATM fees, as well as monthly maintenance fees. (Yes, large and small banks can charge these.)
He suggests looking for banks that are more accommodating, like those that have no minimum balance or monthly maintenance fees, that offer reimbursements for fees incurred on ATMs, no transfer fees or overdraft fees, and good APY percentages.
Timeshares as Investments
Okay, we don’t know of any personal finance expert who says that timeshares are a good investment (you probably heard that from the salesperson), but Sethi is very against someone owning a timeshare. He’s called timeshares “money traps” and walked several couples on his shows through the financial implications of owning one.
In fact, he advised at least one couple in debt to sell their timeshare, even at a loss, so they wouldn’t keep getting hit with fees for a “vacation” they couldn’t afford to go on.
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This article originally appeared on GOBankingRates.com: Ramit Sethi: 7 Money Trends He Can’t Stand and How They Impact Your Wealth
