Their money worries are misplaced
“This couple is going to be extraordinarily wealthy in their lifetime,” Sethi said in the newsletter. “If they just left that money in the market and did nothing else, it would turn into several million dollars at a conservative 7% rate of return.”
This couple is far from being in a precarious financial situation. So why this fear?
Their attitudes toward money do not match the reality of their objectively secure position. Anything can happen and the couple spoke of fears such as artificial intelligence making their work obsolete. Yet “they are gambling with their lives on defense,” Sethi wrote.
“They are so far ahead of almost everyone and yet they still feel worried.”
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“They have already won the game”
Their living expenses, including mortgage payment, childcare, food costs and more, totaling $18,305, represent about 40% of the couple’s take-home pay. Since they have about $70,000 saved, they don’t regularly contribute more to their emergency savings. This, says Sethi, is very good.
Most of their income goes into their investments, to the tune of about $25,000 a month, between retirement savings, taxable brokerage accounts and a 529 savings plan for their child.
At the time of writing, their investments were worth approximately $1.5 million. Since they still don’t feel financially secure, Sethi thinks it comes from their cultural background. The partners are both Indian immigrants, a culture Sethi says he understands well.
“They will probably spend the rest of their lives worrying about money, thinking they are behind, agonizing over small expenses, never really turning back and recognizing that they have already won the game,” he wrote. “They could be fired and everything would fall through, and that’s unlikely to happen.”
They don’t yet know “how to spend money meaningfully”
The couple told Sethi they use about $1,862 a month on guilt-free spending, like going out to dinner or going to the movies. This amounts to “an appalling and pitiful 4%” of their monthly take-home pay, Sethi wrote. Blaming as much money as possible is not what Sethi wants for his readers.
“This couple lacks the creativity to spend their money meaningfully,” he wrote. “Making $850,000 a year and only spending $1,800 a month, or 4 percent, is not something worth applauding. It’s actually something that requires a lot of work.”
Sethi’s whole money philosophy revolves around the idea that money is a tool to provide you with the things you are most passionate about and passionate about in life. Regardless of your income, if you don’t invest enough in things that bring you joy, you’ll likely never feel empowered by money or satisfied with the efforts you’ve put into building your wealth.
“I’ll never tell you to stop feeling a certain way, but your feelings can lead you astray. With this couple, it led them astray significantly,” Sethi wrote. He pointed to the fact that if the couple continued at the rate they are currently investing, they would have about $35 million at age 65 and wondered what they could do with that money at that age.
“In my opinion, this is a pointless pursuit of wealth without acquiring the ability to spend money meaningfully,” he wrote.
“I want to see improvement.”
Sethi’s podcast episodes rarely end with him telling a couple to go find ways to spend more money, but with this couple, that’s more or less what his advice boiled down to .
“Rather than approach their money out of fear and play defense, go on the offensive,” he wrote. He suggested the couple say to themselves, “We did a really good job. We have accomplished more than we ever imagined. We set ourselves up to be financially successful for the rest of our lives. We can easily take $5,000 a month. and spend it on things that are much more meaningful to us.'”
Your feelings can lead you astray.
Ramit Sethi
self-made millionaire
He suggested various ways for them to use their money to make their lives easier and more “magical.” Is there a more convenient childcare option they could afford to splurge on? Maybe they want to fly business class and take their family on their next vacation. Maybe they could improve their shopping or hire someone else to do the shopping for them.
In terms of their income, the possibilities are almost endless.
“By the way, you can afford way more than $5,000 a month, but I’m starting you somewhere achievable,” Sethi wrote. “Nice job on the financial part. I really want to see an improvement on the psychology part of spending.”
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