Transcript of A Personal Finance Star on What Millennials Need From Their Boomer Parents New

From The New York Times, this is The Interview. I'm David Marchese. What's the best thing to do with our money? It's an age-old question and one often prompted by the feeling, at least for me, that there are experts out there who know the mysterious answers hidden from the rest of us financial rubes. Ramit Sethi has found success positioning himself as one such expert in the world of personal finance. His book, the irresistibly titled "I Will Teach You to Be Rich," has more than a million copies in print. In the years since it was published in 2009, Sethi has transitioned into streaming with a Netflix series called "How to Get Rich" and a popular podcast, "Money for Couples," in which he ends up playing both financial advisor and de facto relationship therapist for couples struggling with money problems. So why are people listening to him? For one, he comes across as younger, hipper, and more emotionally attuned tuned and liberal than your stereotypical browbeating financial experts. For another, he says the key to personal wealth, even in an economic moment that seems particularly tough for his younger audience, can be as much about spending money as it is about scrimping and saving.

I wish I'd known that sooner. Here's my conversation with Ramit Sethi. Ramit, thank you for taking the time to speak with me today.

Thank you for having me.

We're gonna talk about money.

My favorite topic.

My problem is I have too much of it. How do I get rid of some money? That's my, that's really my issue.

You do not hear that too often.

No. So just to start, when you talk about helping people become rich, you don't just mean rich in a dollar figure way, you mean it in a more holistic way. So can you explain to people what rich means to you in the way that you use it?

The word rich is extremely loaded in our culture. When we think of rich, we have a very specific vision of what that looks like. For example, in the '80s and '90s, it was a country club, maybe a fur coat, a private jet. That's rich. But it's quite different now. Rich could be picking up your kids from school every afternoon. Rich can be traveling for a few months a year or buying a beautiful piece of clothing. But your rich life is yours. And we see that especially in the last few years as people went through work from home and they realized, hey, I would actually rather do this for the rest of my life. It might even mean taking a small pay cut, but I want the freedom and the flexibility. So until now, I hadn't seen people talk about rich in a positive way that fits you like a glove. I saw it in this kind of Richie Rich on TV vision, and that just didn't connect with me.

So one of your big insights, and to my mind, one of your key insights, is that you actually encourage people to spend money on the things that they love and which they feel will enhance their lives in a meaningful way. But if you're gonna do that, you need to cut ruthlessly on the things that, that don't enhance your life in a meaningful way. Where did that insight come from that you don't have to be afraid of spending on certain things?

I started my entire business from my dorm room, and I remember at the time reading a ton of books on money and the material that I read on personal finance. Did not connect with me at all. It was people who didn't look like me lecturing me about all the things I'm not allowed to do with my money. There was no vision of what I get. Like, I would literally— you put your hand out. I think this is a powerful exercise for a lot of people with money. Put your hand out, palm up, and ask yourself, what do I get? What do I get for all the work I'm doing, for the risks I'm taking, for sometimes working week— what do I get? And it better be something cool. And I started to talk to people. What do you love to spend your money on? Every person has an answer and their eyes light up and they'll, they'll go, oh, um, you know, I love travel or I love, um, clothes. Okay. And then the next thing they'll say, depending on what their answer is, is, uh, but I know I probably shouldn't. And they shrink.

And I never let them. I go, hey, what do you love? What kind of— what's your favorite piece? Why do you love it? And then I ask the next question: if you could spend more on that thing, what would it look like? What would it feel like? This is a very powerful moment because the vast majority of people have never been asked this, and they've never been treated, especially by a money person, non-judgmentally.

But how do people prioritize spending on the things they love? Because I think if you were to ask someone— I mean, this is what you do for a living. So you, you know, and you correct me if I'm wrong, but if you were to ask someone, you know, what are the things you love? They're not just gonna say one thing. They might say, well, I, I love to travel. I like to eat out. Mm-hmm. I love to buy new clothes. How is someone supposed to know, like, at what point does spending on the thing they love, it's actually sort of counterproductive to their larger financial goals?

First of all, people do not prioritize spending on the things they love. That's not the way people act. And this is one of the central mistakes that the entire financial industry makes, which is to treat people like they are rational robots. Ah, people, they believe that their children are the most important thing to them, so therefore they are apportioning resources accordingly. No, they're not. They're not doing that at all. And so when I ask them, what's the most important thing to you? The answers are always the same. The number one thing that people love to spend money on is food. Eating out, fine. Number 2 is travel. Number 3 is health and wellness. Then we take a look at where their money is actually going. It is never aligned. Never. And so what they claim is important to them is not reflected on their calendar and in their spending plan. And that's where we get the opportunity to change things.

So if someone were listening to you today and, and thought, okay, I'm willing to cut back on some things that mean less to me, and I'm willing to give myself permission to spend more on things that mean more to me, that's not sufficient, what are the other things they need to be doing to put themselves on more stable— or not just more stable financial ground, but to actually grow their wealth?

Okay. Most of us do not know our basic numbers. Money is so mystifying and confusing, often by design, but also by a lack of, uh, effort that we put into it, that when I ask people, what's your household income? You know, 50% of people do not even know their own household income. What people typically discover when they calculate their 4 key numbers is that they have way too much money going towards fixed costs. That would be things like their housing, which is a huge problem, especially now, towards their cars. Americans love to buy gargantuan $85,000 trucks, and then, you know, they, they go, oh, that's just normal. They also discover that they don't have a lot in savings. And when we look at how much they're automatically saving every month, it's usually zero. What a blessing to be able to go, oh, it's very clear why we don't have any savings, because we are not saving. Now that we understand the basics, we can make some changes.

And just to be clear, what are the, the 4 key numbers?

The first is your fixed costs, anything that is fixed to keep the lights on. So your rent or mortgage, your auto payments, debt, groceries, the things that you use every day and they're going to stay there. The next one is your savings. How much are you saving? These are as a percentage of your take-home pay. The third is your investments. That's where the real wealth is created. And finally is guilt-free spending. This is eating out, traveling, anything that you like to do for you, for your family. 20 to 35%. If you hit those numbers, call it a day and move on because you are nailing it.

Well, have you always had a healthy relationship with money? What's your personal relationship with money?

It has evolved over time. I think that I, you know, it's funny, I struggled with math when I was younger. Well, to the same extent today, I struggle with rotating things in my head and puzzles. But for some reason, compound interest just made sense to me. And it was early, you know, my dad helped me open up an investment account at age 14, and instantly I'm putting in, you know, $20, $50, $100, and I'm already compounding it until 65. I go, whoa, this is amazing. So that part, I think for whatever reason, that was a talent that I had. But I was also a utilitarian. I was the kind of guy where in his early 20s, if you looked in my apartment, there's nothing on the wall, maybe one poster, no frame, 'cause why would I? That's just a waste of time and money, right? And, and I was living in San Francisco, so I think it's kind of a common sentiment, just like focus on efficiency. And now I would say I'm the furthest from that idea.

And how old are you?

43.

But you're, you're not one of these FIRE guys.

No.

The financial independence retire early. Um, and they're people who sort of, uh, relentlessly are working their financial numbers so they know at some point, as young as they can possibly do it, they can stop working and just live off their investments. What do you think they're missing? Like, you are sort of critical of the FIRE mindset. What's the criticism there?

What I appreciate is that the FIRE community pushes people to think in a different way. And in America, anything that gets people to engage with their money, I'm Initially for it, I think that they took the average savings rate, which Americans have roughly 3, less than 5%, and they said, how about 30%? How about 50%? That's pretty bold, which I appreciate. But I do think that if you build a life where you focus solely on a number in a spreadsheet, that is a mistake. There are far too many people who go through life ultra frugal, and over time their ability to spend money meaningfully atrophies. For a lot of people, it can be as simple as, hey, every time I come home, there's a bunch of shoes on the floor. I tripping over Legos. Let me spend $20 on a little organizer to put those shoes in there. Wow. Or let me spend a little bit of money to make my life slightly more convenient so I can have quality time. Or let me just tip 30% everywhere I go. I want to be super generous to the people that are taking care of me at the coffee shop, etc., and the restaurant.

I want us to get deeper than thinking that rich or spending money is frivolous or somehow unimportant. It's not.

I want to, uh, go back to the beginning of your career for a little bit. So you've been doing this, or talking about money for 20 years, and you started blogging, I think in roughly 2004 when you were still at Stanford. And the blog evolved into the bestselling book, I Will Teach You to Be Rich, which was published in 2009, which has sort of become one of these books that are perennial bestsellers. But when did the switch happen where you decided to talk specifically to couples about money? I was wondering, you know, it's like there's only so many ways that you can say, you know, pay off your debt, you know, spend on the things that matter, buy low-cost index funds, do the employer 401(k) match. Did you think, oh, I need to find another lane for the material?

I think that money is so multi-dimensional that I can talk about this for the rest of my life. but the advice to me was relatively one-dimensional. It was, here's a spreadsheet, put some numbers in it, and God bless. And I actually think that, uh, money is alive. It is like relational. And that's when my relationship focus started was several years ago. Um, my wife and I met, talked about money. A little late. I broke my own rules on that one. I should have done it earlier. That was, that was a violation of my own rules.

Wait, your own rule about what?

Talk about money early. Oh, earlier. And anyway, so we, we finally talked about it and we went through a prenup process, which was challenging. And then we got married. And you don't stop talking about money when you get married. It's actually only the beginning. And so I discovered how challenging it was, and I'm the I Will Teach You to Be Rich guy, and I'm like, if this is hard for us, let me ask other couples. So I started asking all these couples, how do you talk about money? Who handles it? Um, what do you disagree on? And it was like the earth started shaking because there's all these taboo stories that nobody talks about publicly. And whenever there's a taboo around money, I pull out my flashlight and I want to shine a light on it.

Do you think every couple should have a prenup?

No, most couples don't need it. If one or both partners come into a relationship with preexisting assets or any sort of complexity, then it may make sense. It's worth looking into. But the vast majority of people do not need it.

So when you speak to couples about their money problems and they're talking about specific ones, like what are, what are the most common problems that you come across where, like, actually the problem is not the money, it's what the money represents between the, the couple.

It usually represents something much deeper. So a classic example that happens all the time is couples do not talk about money, but what they do talk about is we have this expense that just came up. We've got to send her on a field trip, or we're taking a trip to Grandma's next month. Where's the money going to come from? And it produces and reinforces this feeling that we only talk about money when there's a problem. So what we have to do is rebuild this relationship. Where are you today? They're like, I don't know. I go, all right, do you know how much you're going to have at 65? They have no clue. So I do a little compound interest calculation for them and I tell them how much they're going to have. And sometimes They are shocked because the number, if you compound over 10, 20, 30, 40 years, that number becomes quite large. And they, they realize through more discussion that this argument they have about who spent too much at Target is completely absurd when you're talking about having that kind of retirement.

But I'm also interested in what's underneath the, uh, you spent too much money at Target. Oh yeah, conversation, classic, right? Which could be, you know, maybe the person who's being critical, maybe they are actually controlling and they want to be— they want to oversee all the spending. Yeah, maybe the person who's doing the spending feels like, uh, spending is, is a way of sort of exercising power in their own way. So, so what are, what are those sorts of dynamics that you see recurring in the couples that you talk to?

There are psychological dynamics, there are gender dynamics, cultural dynamics at play. It is the most fascinating part of what I do. So Target is actually a very real example. It's very common that usually in a heterosexual relationship, um, the wife will go to Target, and it's almost a running joke that she will go in with the intention to spend $50 and come out having spent $250. This is actually a meme online. Hahaha, I spent $250. And that produces a lot of conflict. Several reasons. One, the husband, who's often not involved in the daily tracking of anything or knowledge of what's being spent, he just looks at a number and goes, why did you do that? The person who spends the money, in this case wife, becomes quite defensive. What do you mean? I'm out here going shopping every day, taking care of things. And so now we have an entrenched conflict where there is no understanding of the dollars or the vision, just why'd you do that? And it reverses in gender as well. We will often hear guys spending money at a gas station. This is quite common. They go every morning, they're buying snacks, drinks, at a gas station.

Why'd you do that? We can make it at home. So they over time come to realize that what they are spending, either they can easily afford it, so why are we arguing about this? Or this is not the vision for our rich life. And candidly, sometimes I'll just tell them, like, is Target your rich life? And I have to say, I don't think buying a bunch of commodities can be a core part of your rich life. In fact, I've never heard somebody say Target is my rich life. It's just not. Spending time with your kids, being able to volunteer with them, buying something beautiful that you appreciate, even going out and splurging for a meal and getting an extra appetizer— yes, that can be part of a rich life. A lot of people have told me that. But buying some stuff at a random store? Probably not.

After the break, Ramit explains his problems with a lot of personal finance content.

Personal finance personalities will bring people on their show who are making obviously poor financial decisions. They will subject them to mockery, and they will essentially present the message that it's all your fault.

You know, I have to say that sometimes when I've been thinking in a broader way about your work, particularly your work with couples. And I see these couples come on, and to all outward appearances, they look like they should be doing well, and they're having— they're really struggling. Like, people talking about maybe losing their house, or sort of the specter of divorce can come up because of tensions around money, or people really anxious about not being able to provide the same life for their kids that they were able to have. And that's sort of on one side of it. And then On the other side, you have people who have a lot of money, but they seem completely coiled and unable to enjoy it. And I think this is actually painting a, in whole, kind of a grim portrait of American society. What do you think your podcast is saying about American society writ large? If an alien were to come down and watch Ramit Sethi's show, what would the takeaway be?

It's no surprise to me that money is fraught and that you're pointing out even the people I have on the podcast who are multi-millionaires aren't happy. Yeah, they're not happy. And, and you look at it from the outside and you go, that is shocking. Sometimes you look like it's so obvious why you have these financial problems. Like, I have couples, they are 2 months away from literally running out of money. 2 months. And they have kids. Okay. They will lose their house. They will lose their multiple vehicles. They are months away from it. And they're remarkably lackadaisical about it. They have never really faced any consequences. Think about it. Many of us still have our cell phones. Still have our internet at home, still have a home. So it may be stressful, but when I ask them, what are the consequences that you have faced? Oh, I have $25,000 of credit card debt. I go, how does that affect you day to day? Nothing. It's just a number. What I am trying to do with my work is to bring the reality of money From the clouds to the street. Meaning money is not just a word.

It's not just, oh, let's improve our portfolio, or like, debt is bad. I want to know what would it feel like to go to the grocery store and be free to pick up an extra treat for your family? What would it feel like if you and your partner, when you talked about money, you actually started with a compliment? And you ended with a hug. What would that feel like? Not a fight, not sullen silence, but wow, that was really cool.

It doesn't— just in listening to you give that answer, it also doesn't help that we clearly live in a society that thinks people who have money are better than people who don't have it. And also people think they deserve to have more money than the people who don't have it.

It's a bizarre relationship. If you were to explain it to aliens, We love the wealthy in America. We adulate them. We look at their pictures in Bora Bora.

Yeah, we aspire to be them.

We aspire to be them. But we hate them.

Yeah, exactly.

We hate them. We hate them for evading tax increases. We hate them for being evil capitalists. And these simple labels actually do us a disservice. You want to be good at money? You better learn how it works. You better learn how it works on the individual level. We're talking about your 4 key numbers, your debt payoff date. You gotta know these things. And we need to understand that just 'cause you have money does not mean you are evil or bad. But if you have billions and you argue against paying a slight marginal tax increase, you might be an asshole.

I want to know about your sort of political evolution a little bit. I'm no expert on the space, but, you know, I think one of the heavyweights is a guy like Dave Ramsey, right, who is sort of like a— has a good old boy vibe. And I think he's sort of publicly pretty pro-Trump. Was there some point in your career in which you consciously thought, like, there is a lane for somebody to talk about money who seems politically different than Dave Ramsey. Like, there's, there's like a, a left-coded version of that guy, and I want to be him.

No, my political outspokenness was more at my revulsion at what Donald Trump was saying. You know, he was calling Mexicans rapists and saying other horrific things And I realized in that moment, if I cannot speak up, somebody who runs their own business, who has a large platform, somebody who looks like me, then who can? For the most part, the personal finance world, particularly in the media, has often been right-wing coded. Personal finance personalities will bring people on their show who are making obviously poor financial decisions. They will subject them to mockery over and why did you do that? How could you spend that much? And they will essentially present the message that it's all your fault. Now, I believe that we should take personal responsibility for our money. Yes, 100%. That's why I talk about savings rate and I call people out when they're spending more than they have. But we can simultaneously acknowledge that and the need for systemic reform. You will not hear the need for systemic reform on many personal finance media platforms. You will not hear them talking about why housing is so expensive. It's not just cuz, it's because of nimbyism, because of a political decision that we've made.

You will not hear them talking about raising money taxes on billionaires, even though taxes are historically low. No, you will hear them simply saying you spend too much on oats every morning and you're a bad person. I find that to be nonsensical. When you understand that society is not simply a, a culmination of people making individual decisions, but there are structural reasons that we are the way we are, structural, then suddenly you start to realize, oh, money is much more nuanced and interesting, and you actually become a lot more compassionate about it.

Well, this is something that maybe relates to the kind of personal political change you just described. When I was reading I Will Teach You to Be Rich, you know, you— I understand this, this book was now written, you know, 17 years ago, but, you know, you write about the problem of victim culture, and you sort of suggest that people who complain about systemic and societal or structural problems related to personal finance are like whiners, you know.

Whoa, hold on, hold on. That's not what I said.

What'd you say?

This is in the introduction. Yeah, I did talk about victim culture, which when I initially wrote it in 2007 was a fine thing to say. Now it has become right-coded. But I never said that you're a victim because you're complaining about social structures. No, there is an amount of personal responsibility that we have to take with our money. So we cannot simply say life is too hard. I'm not gonna read a single book about money or watch a free YouTube video. Somebody solve it for me. That's not gonna happen. We gotta take personal responsibility.

Well, so what, what are the valid structural reasons for why some people struggle to get ahead? Can we give credence to someone who says like, look, the game is rigged against me. I could follow every step that Ramit Sethi me to take and I'm still going to struggle to get my head above water? Or would we look at somebody who says something like that and say, like, you know, you're just not making the right moves?

You know, that's— this is such a great question. No, I would not look at them and say you're not making the right moves. I think, first of all, we need to acknowledge, for example, the jobs, even for college-educated graduates, are scarce and the pay is not what they need to do to survive. And housing, of course, is the biggest one of all. We have systematically made it more expensive by letting people who bought a house and then pulled up the drawbridges around them, not allowing more housing to be built. We have a policy decision to let wealthy, typically older people protect their house value while younger people cannot afford a basic house. And if you take a look at some young person and they're like, hey, I can barely afford my housing and I already live with a roommate, it's not fair to tell them, oh, you're not doing enough. No, this is something that happened around you. You were not even aware of it or a participant in it, and you are the one bearing the brunt of it.

And what would be the inverse of a question like that where the millennial or the Gen Z person who says like, look, the system is such that I'm going to struggle more than my parents or my grandparents. What would you point to and say, like, no, here, here's the myth about that thinking?

I would ask them, what have you read to improve your personal finances? Right there, boom. There is at least one thing that anybody can do in America that will have a profound effect on your finances. Usually the simplest answer is to Automate your savings. Just pulling aside a certain amount of money before you ever see it. People go, there's no way I can do that. I'm already cut to the bone. You will be shocked at how much you can actually survive on and even thrive on. And the money's just automatically growing for you. You don't even know it. That's powerful. That takes understanding psychology and automation, but anyone can do it in less than 2 days.

You know, if we can say that getting ahead financially is harder for millennials and Gen Zers than it was for older generations. What advice would you give to parents for how best to help their kids? I mean, maybe just give them as much money as you're able to give them.

Yeah. Write them a big fat check if you can. Yeah, it's actually not too far from it. You know, the— in the old days, in the old days, the idea was I'll pass whatever I have along when I die. And more sophisticated, uh, financial planners now know if you have something to give, giving a few thousand dollars, $10,000, however much, is much more impactful when your children are younger, particularly when they're 35, 40, 45. Those are really tough financial times for people. But look, the best thing that older parents can do is to actually ask their children and legitimately learn What is going on financially for young people? Because it is not the same. And I am tired of hearing these comments. Oh, we bought a house when it was 17% interest. Yeah, the houses were a fraction of what they cost today. And if you look at what they were as a percentage of income, they were way lower. It was achievable. We know this because there are a lot of people who bought a very nice house on one income. That is effectively impossible today. Thanks to NIMBYism. So actually just asking your children, hey, I know it's really tough right now.

Can you just like, what's it like? How much are you spending on food and housing? And how does that break down? And oh my gosh, here's what we spent. Wow. If I had to do that today, I don't know how I would do it. There is power in just acknowledging and validating. And there are so many young people who would love to hear their parents just say, Wow, that's gotta be really tough. I had no idea.

Ramit, if you could snap your fingers and go into the minds of every American and get them to change one behavior around money that will put them on the path to a richer life, what would that be?

Once a month, one hour, set it aside. If you're solo or with a partner, look at your key numbers. Ask yourself, what's my rich life? Has anything changed since last month? Am I on track? And what progress have I made? Then celebrate. That's it.

All right. I'll do that with my wife once a month for an hour, and I'll report back to you.

I would love it.

All right, Ramit, thank you for taking all the time to speak with me.

It was a total pleasure. Thank you.

That's Ramit Sethi. To watch this interview and many others, you can subscribe to our YouTube channel at youtube.com/@theinterviewpodcast. This conversation was produced by Wyatt Orme. It was edited by John Wu. Mixing by Sophia Landman. Original music by Dan Powell, Rowan DeMisto, and Marian Lozano. Photography by Devin Yalkin. The rest of the team is Priya Matthew, Seth Kelley, Paula Neudorf, Joe Bill Munoz, Amy Marino, Kathleen O'Brien, and Brooke Minters. Our executive producer is Allison Benedict. Special thanks to Ron Lieber. I'm David Marchese, and this is The Interview from The New York Times.