Ramit Sethi Breaks Down 5 Money Rules That Miss the Point
Ramit Sethi, finance personality and author of the 2009 best-seller "I Will Teach You to Be Rich" posts a slew of advice to his YouTube channel. In the past, he has even thrown a bit of shade at other financial gurus like "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 recommends not taking seriously.
Read Next: 4 Rules Modeled After Warren Buffett's Philosophy To Keep Everyday Spending Low
Explore More: Start Growing Your Net Worth With Smarter Tracking
1. '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 such as going all-in on taking your own lunch to work or 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.
2. Focusing Too Much on 'Shiny Objects' Like Sleek Personal Finance Apps
Instead of relying exclusively on shiny objects such as sleek budgeting apps, Sethi 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
3. 'Moving to a Low-Tax State' as a Cure-All
Sethi described the notion of "if you tax the rich, they'll leave" as a complete myth. 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 you, but rather it's reductionist to rely on this narrative from a tax perspective alone.
4. 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.
5. 'Follow Your Passion'
In a similar vein, Sethi warned against vague advice such as this, instead suggesting 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.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
More From MoneyLion:
Discover a Smarter Way to Keep Unexpected Expenses From Derailing Your Budget
Got $20 To Spend at Dollar Tree? Consider These Fine Spring Items
Be Honest — Do You Have Enough Cash at Home in Case of a National Emergency?