I Will Teach You To Be Rich - 105. What’s the point of tracking every penny?: Ramit’s 3 Lessons from Ep 104

Starting point is 00:00:00 Have you ever wondered why people suddenly seem to be so obsessed with creating generational wealth or all the unwritten rules of money that we have in America that we follow, but no one actually tells us why. Every week I'm going to be writing my new observations about money and psychology on a special podcast newsletter. You can get it for free at iwt.com slash podcast newsletter. You will not find this material anywhere else. So get on the newsletter for free at iwt.com slash podcast newsletter to hear about money and psychology every single week directly from me.

Starting point is 00:00:44 How are you both feeling about today's conversation? I'm feeling hopeful, excited. We were never really good at talking finances. I feel like I'm getting better. I'm definitely the problem. The issue wants me to communicate better, but it's become habitual for her to almost hate keep. This conversation is going to be most helpful for us to continue in the right direction.

Starting point is 00:01:04 I'm excited. Does he and I talked last night to say like, you know, are we on the same page before you jump on this call? Like, what are our goals and our expectations? I think I'm just excited. See if you hear something that we can't see or hear ourselves. A couple days ago, we heard episode 104 with Stacey and Jesse, and I want to share a few key lessons from that episode.

Starting point is 00:01:33 Recall that Stacey makes a lot more money than her partner, Jesse, and she desperately wants for him to be engaged, but she's also set up a system where she controls everything financially related in their relationship. I was struck by how complicated of a financial system Stacy has built. She's got 32 categories. They've tracked everything for over 10 years. And I'm just thinking to myself,

Starting point is 00:02:00 what's the point of all this? What does it get you? Because their system is actually more complicated than my system. So you decide to take control your money, your on top of it. How many different Excel spreadsheets and budgets do you have?

Starting point is 00:02:17 Tell the truth. One Google spreadsheet, but it probably has 20 hidden tabs over the last 10 years. How do I know that? Yep, there's. And how diligent have you been in tracking your spending? Let me guess extremely. Go ahead. Correct. We both have used an app that I love for the last 10 years to track every expense. Anytime you swipe our credit card, it goes in. Wow. That's so cool. That's so cool. expense anytime you swipe our credit card, it goes in and I trained Jesse to do that. Yeah, I am not as diligent as her, but yeah, it will

Starting point is 00:02:52 track down to the penny even on cash. And what does that get both of you? It's very satisfying for me to have the data to tell me what we're spending on. It actually helped us when we were filling in the conscious spending plan. So you track everything. You're tracking like the price of Brussels sprouts over time, so you can trend that from 2010.

Starting point is 00:03:12 No, no, but like how much we spend on groceries per month, clothing, transportation. How many categories do you have? More than we should. How many tell me tell me, oh, hang should. How many? Tell me. Tell me. Oh, hang on. He's going to pull it up right now. This is a me. Oh my God. Look at that.

Starting point is 00:03:30 She's like, finally, it's been 13 years and finally someone asked me a question about my app. Okay. Tell me how many categories? Do you want some categories to as well? High level categories. No, I want all of them. Don't don't be. Oh, wow. She just took like a deep swallows. Probably everybody watch. However, however long this takes, I'm going to run completely dead air. I will burn literally gigabytes right now, just watching them. Look, he's still counting. This is unbelievable. 32.

Starting point is 00:04:06 32. Wow. So simple. You ever hear me say that phrase? Fight for simplicity in your finances? You ever heard me? Yeah. She's going, yeah.

Starting point is 00:04:16 She goes, yeah, that's a great phrase. I chose not to adopt that. That's great for other people, not for us. I'm learning. I'm learning. Okay. What kind of emotions you get when you log in and you track stuff and you change the kind of, what do you get?

Starting point is 00:04:26 I feel satisfied or I feel, I feel better that I just played around in the spreadsheet because it feels like work and the work is never done. It feels like work because what is it that you're actually doing? Working to not a lot of outcome or results. Total $3 questions. Tracking a budget for what? Tweaking a spreadsheet for what? I've said it before I'm going to say it again, the more successful you get with money, the more you have to fight for simplicity. Fight for it. It's got to be a key priority. It's so easy to get a 401k

Starting point is 00:05:07 from that old job and another one over here, a credit card you open up at express because you literally want to fucking percent off of a shirt. Don't ever do that. And all kinds of assorted bullshit in your system. And suddenly one day you wake up, you don't know what flows where you don't even know how much money you have because it's all in a million different places. Fight for simplicity. And you know what else? I have to say, so many people are obsessed with this idea of precision rather than getting the broad strokes right.

Starting point is 00:05:36 You know, recently I posted on social media about the conscious spending plan, the four categories, the four numbers you really need to know in your spending, fixed cost savings, investments, and guilt-free spending. I had like 3,000 questions about categories. Ramit, where do car parts go? Ramit, what about cavities? I was like, who cares?

Starting point is 00:05:56 Seriously, these are minute questions. Use the system adapted to what you need and then move on. The goal here is not to get everything absolutely precisely right. That's not the point. The point is that it's simple enough so that you can deeply understand it and move on. Now, there are a couple of ways that I account for little details. I add 15% to fixed costs because everybody forgets about stuff.

Starting point is 00:06:22 I always am conservative with my numbers. But if you want to put cavities under fixed costs because you get one every year or you want to put on your guilt-free spending because you love candy, it doesn't really matter. Get 85% of the way there and then move on with your life. A simple financial system is one where you track a few key numbers. You have room to account for mistakes, late fees, overspending because your college roommate came in from town. All of that stuff. You build a healthy buffer. You have a couple credit cards, a few bank accounts, an investment account, and then you

Starting point is 00:06:56 get on with your life. Before we get back to the episode, I want to give a big shout out to our sponsors who make this podcast possible. They help us support the team that edits the podcast, produces it, creates the videos, and the social clips, all of it together. We are very selective about these sponsors, and I want to give a quick shout out to a few of them that we think are awesome. First, calm, an app that helps you relax with meditations,

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Starting point is 00:07:57 slash sponsors. And thank you again for supporting the show. I don't have any problem talking about death. I really don't. I think sometimes we avoid talking about it as if it's not going to happen, but this is a sure thing. It's going to happen to us. My feeling is we might as well talk about it. You like to worry?

Starting point is 00:08:24 Less so than Stacy, but yes, still. What do you get out of it? Out to worry? Less so than Stacy, but yes, still. What do you get out of it? Out of worrying? Yeah. I, I worry a lot that if she suddenly is out of the picture for whatever reason, I am in a lot of trouble. Because if she were hit by a bus, by the way, I love this morbid conversation where we're talking about one person's premature death, who just happens to be sitting right in front

Starting point is 00:09:00 of us. We're both European. We talk about death a lot. Fantastic. All right, great. So if she were to get, you know, hip-hop bus, you still have $1.2 million and your young able-bodied guy, it's not the number that concerns me. It's that everything beneath it, which is you would have no idea how to

Starting point is 00:09:25 manage it on a day-to-day basis, no idea how life insurance works, no idea what investments are, or how they interact with your savings. None of it. Would you agree? I would agree. See the issue? You have no fingerprints on your finances at all. You're merely a passive observer your prints on your finances at all. You're merely a passive observer in your financial life. And she doesn't like it. And if she gets hit by a bus tomorrow, you're fucked. Actually, he's not that that is a conversation we've had. What do you mean? He can get a big old life insurance check. That doesn't mean he's going to know how to use it. That's true. I'm serious.

Starting point is 00:10:08 You know that I had the same conversation with my wife, right? It's like, look, I could be the money manager in our relationship, but I'm not going to be. We got to both do it. In case I get hit by a bus, because I need a second set of eyes and because it's just more fun. You know, I remember talking to my parents

Starting point is 00:10:23 about setting up a will. And I was encouraging them saying, look, we might as well talk about this now. You don't wanna leave your family with a bunch of accounts where we don't even have login information. You wanna come up with your decisions now. Let's just do it. Get it out on paper.

Starting point is 00:10:38 Be clear about it. There's no problem talking about this stuff. I think a lot of us are afraid to talk about money and death because we are afraid of money. We're also afraid of death and putting those together is absolutely terrifying for a lot of people. I think a lot of you actually believe that if you have some life insurance policy, you're good.

Starting point is 00:10:57 Wrong. Handing over money to a grieving family without the wisdom to go along with it is actually doing a disservice to your living family members. Talk about money now. Get good at money. Build habits and rituals together with your family. That is how you create a rich life for multiple generations. You know, when I was studying persuasion in college, we studied a lot of health psychology.

Starting point is 00:11:25 And health psychology has this concept of adherence. How many people actually take the medication that's prescribed to them? You would think that if it's a life or death situation, 100% of people take their medication wrong. The adherence numbers would shock you. Sometimes they're 30 to 40% of people actually taking their medications. Some of it has to do with cost, convenience, some people forget, some people just don't want to take it. But when I understood this,

Starting point is 00:11:49 I became a lot more compassionate. Because if people aren't even willing to take life or death medication, then we realize how hard it is to stick with a gym routine. And that's why my entire life's work has been focused on simplicity and focusing on the high leverage areas, not 300 categories of budgets. He was debating to get a gym membership, so he's had some physical ailments in the last couple of years. His physiotherapist recommended a gym or rather a treadmill. We don't wanna buy a treadmill to fit in the house. There's a gym here, our house, and we are Jesse's business that he can easily go to.

Starting point is 00:12:31 It's like 15 bucks a month. And he hemmed and haught about like, whether we could afford it. And I was like, we're not poor anymore. We can afford that. It made me realize, A, he doesn't understand that and be that such an insignificant amount of money per month. You're not really going to find a cheaper gym. It's already a discount gym. He felt like he had to figure a way around not spending it instead of just talking to me about the expense.

Starting point is 00:13:03 We had like a discussion about it. I was like, we're not poor anymore. You can get this. And I think it still took him two weeks to actually buy the gym membership. I drag my feet on a lot of like random expenses because I'm always trying to save money. Why? I just have it in my head that, well, I mean, I don't personally make a whole lot. So I feel like the household doesn't initially make a whole lot, which is not really the case. So about a week later, I did finally pull the trigger, got the membership, and I've been trying to do as much stepping or walking, sorry, as I can to heal my ankles. Cool.

Starting point is 00:13:40 I'm glad you got the membership. Thank you. Would you consider that discussion or series of discussions a success? Yes. Oh, 100%. But I want you to see if you're losing me like, I'm getting this gym membership. It's $15. This is the decision I'm making and just buy it. What you want to do is not depend on willpower because that fades away. What you want to do is not depend on willpower because that fades away. You want to build systems so that by waking up, breathing oxygen and drinking water,

Starting point is 00:14:10 you are basically doing the right things. For example, if you don't want to worry about tiny little questions, then use my concept of a worry-free number. Anything below 20 bucks, you don't even think twice about or 50 or 100 or 5,000 depending on your level of net worth. You want to build systems so that if you claim health is important to you, that you actually pick a number and you say, okay, every year, I'm going to spend 3% of my gross income on health or 10%. Whatever your number is. And suddenly, it's not, should I go to the gym or not? It's, I need to spend $300 a month on health.

Starting point is 00:14:48 Where am I going to allocate that? If you are interested in health, by the way, we've got two sponsors I want to draw your attention to. Methodology is this amazing meal delivery service with Michelin quality ingredients. The food comes to you. It's absolutely beautiful and delicious. The second one is Ness, a credit card where you can be rewarded for spending on your health and wellness. You can get access and special deals to these programs at iwt.com slash sponsors.

Starting point is 00:15:16 Thanks for tuning into this Thursday episode of Lessons Learn. Don't forget to go back and listen to the full episode with Stacy and Jesse on any podcast player or of course on YouTube. I'll see you next week and I will also see you on my podcast newsletter this Saturday where I share material that is never shared publicly at iwt.com slash podcast newsletter. Thanks for listening to I will teach you to be Rich. I'm Remedie Saiti. Please follow the show on Apple, Spotify, or wherever you listen to podcasts. If you haven't read, I will teach you to be rich. My book, pick up a copy. You can get it at any bookstore or any

Starting point is 00:16:00 library and it will show you the specific tactics for how to build the I will teach you to be rich system into your personal finances.

I Will Teach You To Be Rich - 105. What’s the point of tracking every penny?: Ramit’s 3 Lessons from Ep 104

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