Mammon Sense Reviews: Ramit Sethi
Ramit Sethi has been a major player on the personal finance scene for years, but I wasn’t very familiar with his work until this year. After creating the Twitter account for this blog, I was bombarded with advertisements for his Netflix show, How To Get Rich. I checked out the show and followed it up with watching several episodes of his podcast, I Will Teach You To Be Rich, available through his website and on youtube. The podcast is best enjoyed in video form so you can observe the body language of the participants and see the numbers laid out on a spreadsheet.
Ramit colors within the normal financial advice guy lines regarding spending within your means, saving for retirement, and avoiding high interest debt. He’s well known for his belief that people should allocate their money towards what’s most important to them as individuals. If you like expensive clothing, lavish vacations, or whatever else, he says go for it… as long as you balance it out with scrimping on whatever is less important to “your rich life.”
This approach to financial planning is more attractive than forcing everyone to use the same cookie cutter spreadsheet. Ramit’s podcast drives home how personal our finances are. Some people are content with living a broke college student lifestyle as long as they can take extravagant vacations annually. Others place outsize value on stuff like their homes and cars. The stickiest expenditures are stuff for people’s kids– the ingrained desire to provide the experiences you had as a child, or conversely to shield your kids from negative emotions you went through, runs deep.
In the podcast, Ramit works with couples in a wide range of financial situations, ranging from multimillionaires who still worry about running out of money to hapless folks up to their eyeballs in consumer debt and student loans. One episode featured his conversation with Mr. and Mrs. 1500 Days, well known members of the FIRE movement.
The structure of the podcast helps make it an interesting watch every single time. Ramit begins with some quick background and points out some things for the listener to pay attention for. We meet the couple and then cut to a short Ramit monologue where he outlines the main issues. He then teases out the money and relationship roles that each person has found themselves in, often without realizing how it happened.
Ramit asks each partner to describe how conversations about money go. Together, they unpack why those talks unfold the way they do. Usually, this goes back to how each person grew up watching his or her parents handle money. Interestingly, whether a person’s first financial role models, their parents, are doing well or poorly, the patterns tend to continue.
After some reflection on how the people developed their money worldview and habits, Ramit pulls up a spreadsheet filled in by the couple. Sometimes this is a crazy reveal, because the tenor of the earlier conversation can be totally divorced from the financial reality of the numbers. It’s not until around the last third of the episode that we find out that the couple who feels pretty good about their money but keeps arguing about ordering an appetizer at dinner is actually in $100,000 of credit card debt…or maybe actually has millions in the bank.
Towards the end of each episode, Ramit guides his participants into asking each other what they want to see happen going forward. At this point, it’s clear that many of the couples have rarely, if ever, had positive and respectful conversations about money. The episodes close with a quick follow up, recorded or written shortly after recording, where the people reflect on what they learned.
Here’s my take on Ramit Sethi’s advice as it applies to the Christian FIRE niche:
The Good Stuff
1) Ramit points out that people often describe themselves as “frugal” to justify their cheapness. The FIRE crowd may be particularly guilty of this. Frugality is held up as a positive attribute– I’m obviously a fan! But some people use “frugal” and its cousins “responsible” and “avoiding waste” as excuses to ignore good spending, like supporting their churches or communities and providing for the reasonable needs and wants of their families.
2) Ramit consistently challenges the myth that buying a house is always better than renting. He likes to remind his followers that your rent payment represents the top dollar you’ll pay for housing, but your mortgage payment is the least. The decision to buy a house is huge and shouldn’t be the default. Many people make the most significant purchase of their lives with less consideration than they would use to plan a weekend vacation. In many circumstances, renting can be the most economically smart choice. Run the numbers before dropping hundreds of thousands of dollars and signing up for a thirty year loan!
3) Somewhat related to the buying/renting dichotomy is the idea of “phantom costs”-- the dollars that slip away without notice (of course, FIRE-track readers of this blog track their expenses very carefully and are aware of surprise costs immediately!). Ramit suggests leaving wiggle room in what he calls a “conscious spending plan” (in lieu of the bad word: budget) for costs that come up but tend to be forgotten in the planning phase. Even as an avid financial planner, I know what he’s talking about. Mr. Sense and I have a line on our spreadsheet for “notables” where we put a brief explanation to ourselves for why any given month is a bit different that we figured. And guess what? There’s a note almost every month! I glanced at it today and saw notes for Kid’s community college class tuition (x2), an impromptu Caribbean couple’s trip when we ended up kid-free for a week, a car repair, and that time we bought half a cow with my parents, thereby purchasing all our beef for at least a year in one go. And of course there were the little expenses we didn’t plan for– a school fundraiser for a coworker’s kid, textbooks and art class fees for the kids, and a randomly large electric bill (of course I called the electric company on this one, but Dominion Power makes this experience less fun and much longer than getting a root canal).
4) Ramit does the world a favor by calling out some of the most insidious financial scams, from investment advisors who charge percentage rates that snowball over time to time shares that are nearly impossible to get out of. He’s not afraid to tell people to just take a loss to get out of a bad decision from the past, rather than continuing to pour good money after bad.
Nah, Not For Us
1) Ramit Sethi doesn’t pretend to be a Christian FIRE proponent, so of course some of his advice doesn’t really square with the Mammon Sense philosophy. The most obvious example is his emphasis on “guilt free spending” to create “your rich life”-- allocating a large percentage of one’s income (he suggests 20-30%) for buying stuff you want to make yourself happy. While I understand the idea of leaving room in your budget for fun purchases, this whole concept is at odds with the FIRE movement and doesn’t match up with the Christian ethic of all the money belonging to God. While there is stuff I want, my goal is to find ways to feel satisfied that aren’t reliant on spending money on stuff. As I get better at wanting what I already have instead of craving more stuff, I’m finding myself more content. And as a Christian, striving to grow in faith in God each day, I’m confident that the joy I find in my relationship with God outstrips any material purchase. While I can enjoy a new set of high thread count sheets or a European vacation, those things aren’t the source of my joy. If my financial situation dictates that they have to disappear for a while, that won’t destroy me. And when I have the extra financial cushion to add some luxuries, I don’t experience guilt over them, regardless of what the percentage on the spreadsheet comes out to.
2) Ramit promotes spending 50-60% of one’s income on “fixed costs” like housing and other bills. If you then have 20-30% for “guilt free spending,” then you still have a little leftover for savings, so that’s supposedly a win. But the FIRE mindset questions why your income should dictate how much you spend. For example, Mr. Sense and I love our house. Our mortgage is well below 20% of our monthly net income. We’re not depriving ourselves by living in this house just because it’s way less than the bank, or even a financial advisor, says we can afford. We feel like we live a pretty fancy lifestyle: a home in a nice neighborhood, international travel, cool extracurriculars and summer camps for the kids, and much more. If our income magically doubled, we wouldn’t feel like we were missing out if we didn’t ramp up our spending to match.
3) Finally, while Ramit's attitude towards charitable giving and tithing is pretty normal in our society, it’s out of step with Christian financial stewardship. While there is an interesting debate around whether families with debt should tithe or give to less fortunate people, any spending plan that prioritizes spending on wants before giving is missing something important. Fortunately, we live in a very financially blessed corner of the globe, and both giving and spending beyond basic needs are possible for most of us.
The results are in:
While I Will Teach You To Be Rich is by no means a perfect match for the Christian FIRE community, it’s an entertaining watch. Ramit Sethi consistently comes across as a likable, relatable guy. His advice is a good starting point for the average joe who is bored by financial jargon but also worried about running out of money. His website easy to navigate and his podcast is free online (with some pauses for product promotion). You can check out more of Ramit’s content at iwillteachyoutoberich.com.
