On today’s episode of the Financial Independence Podcast, I welcome back Ramit Sethi from I Will Teach You to Be Rich!

I needed someone to come on the show to provide some tough love and Ramit was the only person for the job.

As Ramit mentioned during our last interview, FIRE people are great at knowing what NOT to spend on but we’re not good at knowing what to spend on.

Spending is going to be a big focus on the Mad Fientist this year and I can’t think of a better way to kick off this discussion than by getting yelled at by Ramit so hope you enjoy it!

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Highlights

Why we doubled our annual spending (and was it worth it)
What Ramit did to make me get all clammy and uncomfortable
Why pay less when you can pay more
How to imagine your own rich life
Why you should start wasting some money at a certain point

Show Links

Full Transcript

Mad Fientist: Ramit, thank you so much for being here again. I really appreciate it.

Ramit Sethi: Thanks for having me back.

Mad Fientist: So, it’s been over three years since our last interview, which is crazy. It seems like yesterday. And you’ve been really busy with some new stuff since then, which I’m excited to talk to you about. But there’s one particular topic that we touched on back in our first interview that I really want to dive into today because I think it’s a huge problem in the FIRE community and it’s a problem that I know I have, and it is the fact that FIRE people aren’t very good at knowing what to spend on.

We’re great at knowing what not to spend on, as you mentioned in our interview last time, but we’re not good at knowing what to spend on. And since we talked, I’ve been really working hard at this over the last couple of years and I want to talk through that. But you are the perfect man to push me further and hopefully push everyone in the audience further because I’m sure this is not a unique problem to me.

What do you think about that?

Ramit Sethi: I think that’s true. I think that a lot of people have been taught well… I think that the world teaches us to save, but nobody teaches us to spend. And if you take that concept of frugality to the logical extreme, then you start to see saving money as a virtue and spending money as a sin.

And it’s not, that’s not how it is. In fact, the point of living a rich life is not to save money. It’s not. The point of a rich life, in my opinion, is to design a rich life that excites you and then use your money to live as meaningful of a life as you can. So I’m all for a high savings rate and aggressive investments and earning more. I’m totally for that. But there’s another side of the equation that too many people ignore and that’s what I’ve been very excited about.

Mad Fientist: This is interesting because your site is I Will Teach You to Be Rich. Your book is, I Will Teach You to Be Rich. And I’ve always read that as I will teach you to become rich.

But it was only recently as I’m getting into your podcast more and I’m getting into the journal you just released, that I realized that it actually is, I will teach you to be rich and that’s very different than becoming rich.

Ramit Sethi: That’s right.

Mad Fientist: And my question is, was that intentional because obviously you started the site way back in the day.

But were you thinking about that way back then? Or were you thinking of it in the same terms as I was as I would teach you to become rich?

Ramit Sethi: It is about being rich and I think that we should live a rich life today and an even richer life tomorrow. So I don’t like the idea of I have to wait until I’m 75 years old and maybe just, maybe I can go take that Alaskan cruise or treat my family to a nice dinner.

I don’t wanna live that kind of life. And so, yeah, it’s about being rich and being rich can happen even if you have credit card debt, you can still be rich. So the next question that naturally comes up is what is rich? And I think this is where it gets really interesting, this concept of rich for a lot of people, the first images that pop up in their head are you know, being chauffeured around in the back of a limo, wearing some fur coat and eating on some table that holds like 70 people with some butler.

I’m like, guys, that’s Hollywood. That’s Richie Rich. That’s not reality. A rich life is so diverse. It could be buying a beautiful coat. It could be traveling two months a year. It could be having the freedom to pick up your kids from school every afternoon. So a rich life is yours. It’s not mine, it’s yours.

And you define what it is. And if we start from that premise that you decide what your rich life is and suddenly it becomes a lot more exciting to be able to use money to live that life.

Mad Fientist: Absolutely. Okay. And I’m, and that’s why I’m so excited to have you on, and you’re the only person that I could think of to get on for this sort of topic.

So over the past couple of years, you’ve released a couple of things that are actually very helpful for this goal. So if you could, since I’m gonna be referencing them so many times, would you just tell the audience who may not be familiar with your podcast and your new journal, what those both are about?

And then obviously I’ll be using those a lot as we continue this discussion.

Ramit Sethi: Yeah. So initially I wrote my book, I Will Teach You To Be Rich. It came out in 2009. I re-released it the 10 year edition in 2019, and I had added about 80 pages of material. A lot of money psychology new material. Also, things had changed in the world, and things had changed in my life.

I had gotten married and I had become much more interested in money and relationships. As I started to talk about this, I realized that I wanted more material on this, and I wanted to help people get more excited about money. I use that word excited intentionally because when you asked the average person what words come to mind when you think of money, they go stress, overwhelm, guilt, am I too late or restriction.

I know you FIRE guys love the word restriction. Oh, I love it. They actually love it. I love it. It’s like someone who has a little scab on their arm and they go, Ooh, I’m gonna pick at this scab. It’s like, stop it, man. You know? Okay. You can restrict a little bit, but it’s not the point of money.

So, a couple of things that I did. First I created a podcast, and the podcast is called I Will Teach You Be Rich. And on this podcast you can actually hear me talking to real couples. I’ll just share one example of a couple who has $825,000 in debt and they’re worried that they can’t afford to have children.

On the other hand, you have a couple who has over $10 million of net worth and they still agonize over the price of blueberries, and they still, they can’t go on a vacation that they want to, they only go where the points will allow them. And I go, at what poin...