{"id":4726,"date":"2023-10-26T15:44:50","date_gmt":"2023-10-26T19:44:50","guid":{"rendered":"https:\/\/parmaks.com\/Resources\/spending-with-purpose-ramit-sethi-on-using-your-money-as-a-tool-for-happiness\/"},"modified":"2023-10-26T15:44:50","modified_gmt":"2023-10-26T19:44:50","slug":"spending-with-purpose-ramit-sethi-on-using-your-money-as-a-tool-for-happiness","status":"publish","type":"post","link":"https:\/\/parmaks.com\/Resources\/spending-with-purpose-ramit-sethi-on-using-your-money-as-a-tool-for-happiness\/","title":{"rendered":"Spending With Purpose: Ramit Sethi on Using Your Money as a Tool for Happiness"},"content":{"rendered":"

\"Profit<\/a>
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We often hear that \u201cMoney can\u2019t buy happiness,\u201d and while it\u2019s true that money can\u2019t buy happiness, money can<\/em> buy things that contribute mightily to happiness.<\/p>\n

For one thing, money gives us freedom from worrying about money, which is certainly one of the greatest luxuries that money can buy.<\/p>\n

We can use money to put our values out in the world\u2014by giving to causes we believe in, and supporting our communities and the people we love.<\/p>\n

We can buy experiences, because sometimes when we\u2019re buying a thing, we\u2019re also buying an experience: a bicycle, a camera, a plane ticket.<\/p>\n

We can buy possessions that make our lives easier, richer, healthier, and that allow us to project our identity into our surroundings.<\/p>\n

Money is tool. It can be used to support our happiness, or not, depending on our choices.<\/p>\n

For aims relating to Mindful Investment<\/a>\u2014how we mindfully spend our time, money, and energy\u2014it can be difficult to know where to start, and how to distill aims into concrete steps.<\/p>\n

For the \u201cmoney\u201d part of the Mindful Investment equation, I wanted to talk to a finance expert, so I got in touch with my longtime friend Ramit Sethi.<\/p>\n

\"\"<\/p>\n

Ramit Sethi is a personal finance adviser, author of the New York Times<\/em> bestseller I Will Teach You to Be Rich<\/a>,<\/em> and founder of GrowthLab and I Will Teach You To Be Rich<\/a>.<\/p>\n

I don\u2019t even remember how Ramit and I first met. We\u2019re interested in many of the same subjects; at some point, our paths crossed.<\/p>\n

I was so happy for him when he recently hosted his own Nextflix series: How to Get Rich<\/em><\/a>. Thrilling! Here\u2019s the show: \u201cMoney holds power over us\u2014but it doesn\u2019t have to. Finance expert Ramit Sethi works with people across the U.S. to help them achieve their richest lives.\u201d<\/p>\n

One thing I admire about Ramit\u2019s approach is that he\u2019s very concrete, and he has a strong point of view. I couldn\u2019t wait to talk to him about using money as a tool to help us make our lives happier, healthier, more productive, and more creative.<\/p>\n

He had many ideas about specific, practical steps for people working toward Mindful Investment aims.<\/p>\n

Gretchen: You talk a lot about cultivating a \u201crich life\u201d\u2014what is a \u201crich life?\u201d How does it go beyond money and possessions?<\/b>
<\/b>
<\/b>Ramit: Your Rich Life might be traveling for 3 months per year. Or buying a beautiful cashmere coat. Or it might be picking up your children from school every afternoon.<\/span>
<\/span>
<\/span>Your Rich Life is yours! And yours will look very different from mine. That\u2019s the beauty of designing your Rich Life like a painting\u2014it will be personal and fit you like a glove.<\/span>
<\/span>
<\/span>At this point in my life, my Rich Life is\u00a0 traveling for 2-3 months per year, working with people I like and respect, and spending extravagantly on beautiful hotels and convenience while cutting costs on things like my 18-year-old car that I still drive.<\/span><\/p>\n

Of the 10 categories of habit loopholes I\u2019ve identified,<\/b><\/a> which ones do you see people employing most often, in an unhelpful way, when it comes to their finances?<\/b>
<\/b>
<\/b>False choice loophole<\/span><\/a>\u2014or, \u201cI can\u2019t do this, because I\u2019m so busy doing that.\u201d With money, we say: \u201cI don\u2019t want to have to track how much I spend on carrots for the rest of my life\u201d (you don\u2019t).<\/span>
<\/span>
<\/span>Tomorrow loophole<\/span><\/a>\u2014or, \u201cIt\u2019s okay to skip today, because I\u2019m going to do this tomorrow.\u201d With money, we say: \u201cI\u2019ll start investing later\u201d and \u201cMy Rich Life is traveling once I retire\u201d (even though we would never say \u201cI\u2019ll wait until I retire to start making friends\u201d).<\/span>
<\/span>
<\/span>Lack of control loophole<\/span><\/a>\u2014or, \u201cI can\u2019t help myself.\u201d With money, we say: \u201cI\u2019m not good at investing\u201d (even though money is a skill we can learn).<\/span><\/p>\n

You emphasize the value of automating finances. In the context of spending with purpose, is there room for spontaneity?<\/b>
<\/b>
<\/b>Automation gives us room to be spontaneous! For example, if I\u2019ve set aside money for a vacation, I\u2019ve added an extra 15% to account for unexpected things that come up. When I sit down for dinner, I\u2019m not thinking about how much an extra appetizer costs\u2014that\u2019s already been saved for months before! If we decide to take a spontaneous food tour or even extend our trip, automation allows that to happen.<\/span><\/p>\n

You talk a lot about setting up simple money systems and routines. What are some regular habits, practices, or \u201cmoney rituals\u201d you\u2019ve heard of people using that reinforce mindful, intentional investing and spending?<\/b>
<\/b><\/p>\n

    \n
  1. They talk about money regularly, positively, and proactively. Most people only talk about money when they fight about it\u2014or something goes wrong. If you feel bad about money, why would you ever <\/span>want<\/span><\/i> to engage with it? But if you set up a regular time to talk about money\u2014I recommend once per month, with a pre-set agenda, and always starting with a compliment for the other person about how they handle money\u2014you\u2019ll make money a regular part of your life.<\/span><\/li>\n
  2. They create Money Rules.<\/span> Here are my personal money rules<\/span><\/a>. These are just for me! They might not make sense for you. But people who are savvy with food or clothes or travel create their own back-of-the-napkin rules. We should do the same for money.<\/span><\/li>\n
  3. They automate money. I spend less than 1 hour per month on my finances\u2014and you should too! Here\u2019s my money automation system:<\/span><\/span>\n

    \"\"<\/p>\n


    For people feeling overwhelmed by their finances, what\u2019s one small, concrete step they could take today to address their situation?<\/b>
    <\/span>
    <\/b>There are 4 key numbers that really matter in your finances. You can come up with these in about 15 minutes and get 85% accuracy. Here they are:<\/span>
    <\/span><\/p>\n

      \n
    1. Fixed costs (should be 50-60% of your take-home pay). Includes mortgage\/rent, car payments, debt payments, groceries, subscriptions, childcare\u2014any expenses that are fixed, or required, each month.<\/span><\/li>\n
    2. Savings (5-10%). The money you save for an emergency fund, vacation, etc. This is money you typically don\u2019t need for 1-5 years.<\/span><\/li>\n
    3. Investments (5-10%, the higher the better). This is where real wealth is created. All investments count towards this number.<\/span><\/li>\n
    4. Guilt-free spending (20%-35%). This is my favorite category. It can be clothes, travel, eating out\u2026whatever you want!<\/span><\/span><\/li>\n<\/ol>\n


      By looking at your finances with this bird\u2019s-eye view, you can see how you stack up. And then you can start to be intentional about where your money goes. <\/span>      You can use this template to make your tracking easier<\/span><\/a>.<\/span><\/p>\n

      How might you approach spending, saving, and investing money in a way to achieve your aims for yourself? It\u2019s an important question.<\/p>\n<\/p><\/div>\n