Dave:
Ramit Seiti did everything the modern financial experts said not to do. He rented instead of buying. He upgraded to new expensive cars. He spent plenty on luxury vacations and he still made millions in the process. You’ve probably heard of Ramit. He wrote the bestseller, I Will Teach You to Be Rich. He has a Netflix show called How to Get Rich, and he hosts the Money for Couples podcast. And Ramit’s message really couldn’t come at a better time because in today’s economy where everything feels a little bit hopeless, doing the opposite of what the gurus tell you might actually be the right way to build wealth. To Ramit, money is not that hard. You just need to stop making it hard for yourself. He invests automatically, he spends meaningfully, and makes choices that are best for both his bank account and his lifestyle. Today on the show, we’re going deep on one of those choices.
Why renting beats owning for many Americans right now? And Ramit makes one thing clear. If you and your partner get in sync on four basic personal finance numbers, you will build your rich life, whatever that means to you. What’s up everyone? I’m Dave Meyer, chief investment officer at BiggerPockets. We got a great show for you today with Ramit Seiti. You know him from his YouTube channel or his book, both named I Will Teach You to be Rich or his podcast Money for Couples. Let’s bring on Ramit. Ramit, thank you for being here. We’re so excited to have you.

Ramit:
Thanks for having me.

Dave:
I want to start big picture here and talk about the moment that we’re in, in the American economy. How would you describe the climate right now?

Ramit:
Confusing. We have record high housing prices, relatively high interest rates compared to the last few years, but prices have not gone down even though we have more sellers increasingly. Real estate prices are sticky. We have a K-shaped economy where many people in the press are talking about how horrible things are. But when I walk around in LA, in Manhattan, there’s a place that’s selling $60 loaves of rye bread and there’s sometimes a line out the door. So it’s very confusing, but I also think lots of opportunity and also a lot of opportunities for tried and true financial advice where we don’t have to innovate on certain things. We can just do what has worked for a long time and it actually still works.

Dave:
Well, I’m glad you said that because it feels to me that there is a growing economic hopelessness maybe among younger people. I’m a millennial, even in my generation, even in my friends who are relatively well off and have good jobs, just this feeling that you can’t really get ahead right now and that things are so unaffordable. But I’m curious, you said that perhaps nothing has really changed and the same principles of personal finance are still true even in this confusing environment?

Ramit:
Some are, some are not. Some have really changed and mostly for the worst, especially for young people. There’s a lot of rage for young people and actually understandably so. When I graduated from college in 04 and 05, even back then there were people playing chicken little, “Oh my God, there’s no chance of us getting ahead.” And I did not really take them seriously. And I remember there was a comment, I vividly remember it, basically saying this was around 06, 07, “There’s no way to get ahead. Investing, that’s what old people do. It doesn’t work for us anymore.” And I remember responding to that comment and saying, “That’s what people have been saying for 50 years and that person probably did not invest. They probably missed 15 plus years of a bull market where they could have made millions just investing a small amount of money every month, all because they had this narrative that things are incredibly difficult and there’s no way for me to get ahead.” However, some of that might actually be true now.
The chance for the average person to buy a house in many cities, not just Manhattan, but in many cities is now effectively zero. There are no paths for a person in many, many high cost of living, even medium cost of living cities earning a median wage to buy a house. It is impossible. And we shouldn’t shrug our shoulders and we certainly should not do what a lot of older people have done. Oh, stop buying avocado toast. That’s actually insulting and wrong. I think the new series that somebody needs to launch is taking boomers out and actually asking them, how much do you think it costs to buy this gallon of gas, this thing of groceries, and of course a house. The numbers are staggering and these are not accidental choices. These are policy decisions that we have made in this country that have made housing completely and totally unaffordable.
So I think there’s a lot of rage and understandably so. With that said, there are still opportunities we can use to get ahead and that’s why it’s so confusing right now.

Dave:
Totally. Yeah. And I think the housing thing is very real, some of the lowest affordability in housing we’ve ever seen in this country. And I don’t see it getting better anytime soon without big government policy, some sort of black swan event in the economy. It seems unfortunately like we’re here to stay. You can’t go on social media or read the news and not hear about some new prediction that your job is going away. And so I think of these things combining where it’s very hard to afford a home. The labor market is uncertain. If you’re trying to raise a family, there’s all sorts of expensive costs there. People want to know what to do. So that’s why you’re here. What do you do?

Ramit:
We cannot control what’s happening in the macro economy. We can’t control if AI has taken or will take our job. We can control to a pretty good extent how much we are saving and how much we are investing. And a lot of this sounds like fuddy-duddy old advice. Oh, you’re telling me I need to save 10%? Well, are you? Are you actually contributing the right amount to your retirement accounts? Are you actually putting money on auto save? It’s so funny how many people are looking for alternative investments when they’re not even doing the basic foundational work. This is the equivalent of people in the fitness world looking for some new peptide. It’s like, buddy, you haven’t gone to the gym since 1987. You don’t know what a foam roller is. What are we talking about peptides? Let’s get the basics done. Then we can work on some of the alternative stuff.
This drives me insane. And I can tell you, I have a podcast, I bring couples on my show, Money for Couples, and these couples apply. They go through a lot of screening. It takes months and months for them to appear on the show. You know what percentage of them have read my book, I Will Teach You, which by the way, is available in every public library in the country. Do you know what percentage of them have read my book?

Dave:
Maybe like 25%, a quarter.

Ramit:
I wish. Less than 10%.

Dave:
Really?

Ramit:
Yes.

Dave:
What is that about?

Ramit:
The average American has never read a single book about money.

Dave:
That’s wild.

Ramit:
And yet by the time they are 40, it is the number one source of worry and concern for them. So I have a lot of empathy for the fact that housing as a policy decision because of NIMBYs has made it incredibly unaffordable, especially for young people. I have a lot of sympathy for the fact that childcare is incredibly expensive, but I have zero sympathy for people who find money difficult and have not gone to a public library and read a single good book, whether it’s mine or somebody else’s, on personal finance.

Dave:
It’s so true. Just take the easiest possible way to solving this problem for yourself is probably step one there. But I think our audience actually is relatively educated about finance and is committed to it. If they’re listening to this podcast, they want to improve their financial future. And so savings, obviously one of them, but how do you view saving versus investing and what you should prioritize? And out of your own personal recommendations, what do you recommend investing in?

Ramit:
Well, I’m an index investor, so the vast majority of my net worth is in index funds. I love it because my index fund does not call me at night. My index fund does not have phantom costs. My index fund doesn’t require me to ever go into the worst place on planet earth, Home Depot.

Dave:
What?

Ramit:
No, I hate Hoe Depot.

Dave:
Oh, I love Home Depot.

Ramit:
You know what? I have a rich life. My rich life is that I die before ever walking in Home Depot again. I never want to go there. I don’t own a toolbox. And when I posted this on social media, by the way, a lot of people said, “What kind of man doesn’t own a toolbox?” These guys are trapped in their own cage of masculinity thinking that I have to own a toolbox. I own Japanese pens. Do they? The toolbox guys? No. We all have our rich life and mine is not going to Home Depot.

Dave:
That’s right. It’s up to you, but I love Home Depot. I’ll wander around those aisles for… I’m not even a handy person. I stink at that kind of stuff, but I just like seeing all the stuff in there for some reason.

Ramit:
There’s something for everybody. Wait, what are we talking about? Sorry, I went off on my digression.

Dave:
No, it’s totally fine. We were talking about investing.You were saying index funds.

Ramit:
Yes. I’m an index investor. And because I focus on money and psychology, when you talk to many people, when they talk about saving, they’ll say stuff like, “I try to save, but I take one step forward, two step back.” I don’t try to save, I automate it. So it’s automated investing, automated saving. These are kind of classic concepts, but I think taken to operational excellence. For example, when I’m saving, I am saving not just for an emergency fund, but I’m also saving for named accounts. 2028 trip to Tokyo, I know how much I’m going to spend. I’ve broken it down by, let’s say 72 months until I’m going to go there. I add a little buffer and the money is automatically deposited. So by the time I go on the trip, it’s already planned and paid for. As an example, to take it to a more extreme level, when I was in my 20s, I knew that one day I would get married.
I knew that I would have a huge wedding. I love a big wedding. In fact, my philosophy is for the important things in life. I don’t want price to be the number one, number two, or number five concern. When there’s something important, I want to be able to spend effectively what I want to spend, anything. And a wedding for me, especially in my culture, but even just for me is important. So I started saving money in my 20s. Again, I had not even met my now wife, but what this really shows is when we’re talking about saving, number one, if you can start to think beyond the month and start to think next year, five years, 10 years, or ultimately 30 plus years, that is really powerful. And two, you actually have to save less every single month. I am so thankful to my 20-something self that by the time we went to plan our wedding, which was this multi-day affair, money was not a primary concern.
We could do what we wanted. So for everybody listening, I know that we all know about saving. This is a somewhat pretty sophisticated audience. Saving is great, but I would actually urge you to get more specific with saving. I don’t want a junk drawer of money. I want it broken out by named accounts or whether it’s a down payment for a house, a car, whatever. And then as for investing, we have a lot of different routes people choose. I know people on this show tend to love real estate. I’m personally not into real estate. I rent by choice. I have for more than 20 years and I’ve made far more renting and investing than I ever would’ve by buying, but there are lots of different approaches to investing. All I ask is that we run the numbers. And if we do that and we choose what we like to invest in, we know what we want to end up at, wonderful.

Dave:
Amen. Agree. And I want to talk to you about your views on housing in just a minute. But while we’re on the topic of savings, I’m just curious, has delayed gratification always been something that comes easy to you? Because I think that’s the hard part of saving. It’s not setting up the automation, it’s choosing to use your resources for something in the future rather than using it for right now.

Ramit:
Yes. Ever since I was a kid, my parents taught us about delayed gratification, about working really hard. Education was massive in our house. I think that really translates into when I learned about investing in my early teenage years. And once I really understood compound interest, especially at age 14 when I started investing, I was like, wait, that’s all? Literally I’m 14. If I put $100 here and just let it sit, it turns into that much. Once I really internalize that, I think everybody listening probably has that moment when you truly understood compound interest, what I realized is I just need to put the money and let it sit. Don’t mess with it. And honestly, by the time I was 25 and I saw how much it had turned into, it just confirmed what I had known at 14.

Dave:
It’s that moment where you say, okay, $100 now, especially if you’re 20 years old, by the time you’re 40, it might double two or three times, right?

Ramit:
Yes.

Dave:
And so if you just extrapolate that more and more, you kind of have this crazy game in your head where you’re like, I could spend five grand or I could have 50 grand in 30 years, whatever the math works out to be.

Ramit:
Although I suspect a lot of nerds on this show have taken it too far because in my new book, Money for Couples, I identify four different money types, okay? Avoider, warrior, optimizer, and dreamer. I bet you 80% of the people listening to this show are optimizers. That means optimize… I’ll tell you about optimizers. They have a spreadsheet with 37 different sheets. They do a Monte Carlo calculation. Oh God,

Dave:
Yes.

Ramit:
They do all kinds of calculations. What if I assume a 10% nominal? How about 9.5% nominal? No, it’s got to go down because of inflation. And they spend their entire life optimizing 30 years from now. Now, listen, I love optimizers. I am a former optimizer. I’m a reformed optimizer. I love planning for the future. I find that people who think about the long term tend to be optimizers. The problem is that optimizers can take it too far and can become unbearable and very cheap.

Dave:
Oh yeah, for sure.

Ramit:
Because they start to say, “Why would I spend money on this vacation or go to Taco Bell? That Taco Bell order for $12 could turn into $73 if we compound it.” That’s not the kind of person you want to be around. So I do think that one of the under discussed topics in personal finance and money is knowing how to spend money meaningfully. You see, because everybody talks about saving, but nobody teaches you how to spend money meaningfully. I said meaningfully. I did not say spend it on random stuff you don’t care about, but I’m talking about spending extravagantly on the things you love. And this is a topic that I’ve been spending years covering with my audience because what is the point of accumulating all this real estate, all this cash, all these stocks, all this money if you don’t actually know how to use it and when to use it?

Dave:
This is such an important topic, and I think it’s a common problem that folks in our community have and the fire movement. I think just fire movement in general.

Ramit:
Really, you don’t say.

Dave:
Well, I mean, I have fallen victim to it myself. I think I’m also maybe a reformed optimizer myself, but how do you spend money? What’s the right way to do it?

Ramit:
My philosophy for money is spend extravagantly on the things you love as long as you cut costs mercilessly on the things you don’t. Now, most people like that. They tend to intuitively agree, “Yeah, I like that. I spend extravagantly on the things I love.” I go, “Cool. Like what?” And they might say bottled water. “I always feel good buying two Kirkland cases of bottled water.” I say, “That’s wonderful. I’m glad you like that water. That’s great. Hey, you have $9.6 million in your portfolio. Why the hell are you talking about bottled water? Why?”

Dave:
It’s so stupid.

Ramit:
This is a classic thing. Do you know how many people I’ve had on my show who have millions of dollars and they cannot bring themselves to stop comparing the price of grapes? They cannot bring themselves to stop finding the cheapest flight. It’s a malady. It’s a problem. And in my world, it’s actually quite limiting. I want you listening to this and watching this. I want you to feel a sense of ease that if you go to a restaurant, you feel comfortable enough that you can order what you want because you’re not going to walk into a restaurant where you can’t comfortably order what you want. I’m very loose and comfortable ordering something in a restaurant because I know it’s not going to materially affect me. Where I am very judicious and careful is adding fixed costs like a house, a car payment, anything that I know I’m not going to go down from.
I want people to feel joy. I want them to be able to tell me what their rich life is. The most common answer when I ask that question is I want to do what I want when I want. Okay, that’s not a good answer. That’s just generic. That’s just words. I say, “What do you want?” What I really want to hear is something like, “I want to be able to take my dog for a walk three times a week during the weekdays. I want to be able to take a two-month trip to Italy. I want to be able to splurge and treat my parents to an incredible trip two times a year, or anytime my friends do a fundraiser, I want to donate the maximum amount.”

Dave:
Love that.

Ramit:
Yeah. I don’t care what it is. I don’t even care if you want a F-450, even though you’re driving across paved concrete to your job at an insurance company. I don’t like it. I think it’s dumb personally, but if that’s your rich life and you can afford it, wonderful. But I want you to have a vision of what your rich life is, and it cannot simply be accumulating more money for some day when you’re going to magically start using it.

Dave:
Right, but I think is it just an excuse, the accumulating more money because it’s quantifiable and spending the time to actually think about what you want? Although it sounds easy is actually kind of hard.

Ramit:
Yes, that’s precisely what it is. It is very easy to do something that you have proven you’re good at. If you’re good at having a 38% savings rate or 45% savings rate, you’re really good at saving. Okay, great. You won that game. Check the box, turn the page, and go to the next chapter of your life. So every year my wife and I do… In December, we do a rich life review. So we sit down, this happens over multiple days. We’re in no rush. Sometimes we’re in a different location, but this time we happen to be in our house. And the first thing we do is we pull out our phones and we select the 20 most memorable photos of the year.

Dave:
Ooh, I like that.

Ramit:
Most memorable.

Dave:
That’s a good one.

Ramit:
Now note the word that I said, memorable. Sometimes there are sad photos because sometimes sad things happen. Sometimes they’re photos with family. There’s so many different ways. We selected the 20 photos and then we sent them to each other and we talked about each of them. Here’s why this is meaningful. I really loved when we, this is a real one, where I sent a text message that I had screenshotted. I texted my wife and I said, “Hey, do you want to meet for coffee right now?” It’s like 12:10 in the afternoon on a Wednesday. And she was like, “Hey, I’m just finishing up at the gym. Can I meet you there in 10 minutes?” And we both met and I was like, “This is financial freedom. The ability to meet in the middle of the day for coffee. It costs us nothing, but that was great.” So we talk about that.
Then we talk about what do we want our theme to be for next year, our theme. And our theme one year can be relationships. The theme that year was a year of beauty. We wanted to surround ourself with beauty, so maybe flowers in our home or just beautiful things. We love beauty. So then we then talk about what do we want to do more of and less of next year. So maybe you want to travel more, maybe you want to travel less, maybe you want to spend more time with family, maybe less. Who knows? It’s up to you. And finally, finally, this is days later, we look at the numbers. Notice that we never start with the numbers. This is a classic mistake that optimizers make. They pull out their freaking 10,000 line spreadsheet and they show it to their wife or their husband, “Hey, look at the asset allocation.
We were overbalanced.” Nobody cares. You don’t even care.

Dave:
It’s so true. You don’t. It’s just numbers.

Ramit:
So we always start with the vision, we start with the softer stuff, we start with the memories, all that. And so then we get to the numbers. The numbers part, we’re like, “Okay, let’s look back at the year. What did we project? Where were we over? Where were we under? And then what do we want to change going forward?” If you have the means, you do not get points for playing small. There is no reward. There is no virtue in living a smaller life than you have to. I’m not here to live a small life. I’m not here to live a frugal life. I’m here to live a rich life. Now, what that rich life is, I get to define and my financial circumstances also define it, but there are no points for playing small.

Dave:
Do you know Nick Majuli? Yeah. He’s an author. Yeah. He has that thing where I think it’s, maybe I’m getting the math wrong. If it’s like 0.1% of your net worth or less, just don’t even think about it. Just don’t even spend any mental energy on it because it’s not going to matter in the big picture and you’re kind of missing the point.

Ramit:
I like Nick’s work a lot and I like Nick’s concept. For me, I’ll give you something that everybody can do right now, whether you’re solo or with a partner. It’s a similar concept. I call it the worry-free number. You’re not worrying about this number. When we were younger, when we used to go to the grocery store, there was a pack of gum. It was like 59 cents or 99 cents. You wouldn’t worry. You just pick it up if you want a pack of gum. You don’t really care about it. But as you get older, as your income increases, you don’t adjust that number. So there are people who make a thousand times more than they used to make as a teenager, but they are still worrying about something that costs $10. Okay? You wouldn’t believe how many millionaires I talked to who agonize over the price of blueberries.
I said, “You’re wasting my time. I don’t want to hear about your blueberry problems. Please.” We need to pick a worry-free number. It is a number where anything below this number we simply do not worry about because no pack of gum, no pickles, and no raspberry can materially affect my finances. So I simply don’t worry about it. Now, for most people, if you don’t know what number to pick, 20 bucks is a good number. If you’re listening to this podcast, you’re a freaking nerd, you love money, you have 38,000 spreadsheets. The number’s higher than that. I can tell you rightnow. It’s probably $150. Okay?

Dave:
Yeah.

Ramit:
Try it for a month. Now, the first thing that optimizes you to go, Ramit Seiti, are you telling me that I’m going to spend $150 every single month? That’s how I’ll end up in the poor house. Ha, ha, ha. No, stop thinking like that, as if you’re going to lose control. People who are overly frugal, they actually feel this deep sense of fear that they’re going to lose control. That’s why they say things like, “I don’t need to eat in a fancy restaurant. I’m a simple person.” The idea is that if I eat in a nice restaurant or I stay at a Four Seasons one time, that I’m suddenly going to lose all control and have to stay in a Four Seasons every single night for the rest of my life. That’s not how it works. I eat at nice places once in a while.
Most of the time I’m happy to get a slice of pizza or a taco. Okay?

Dave:
Yeah.

Ramit:
So pick a number, discuss it with your partner if you have one, and from now on, anything below that number, you simply are not going to worry about. You can adjust the number every year during your December rich life review.

Dave:
I like it. We are talking about how to spend money, and you and I fortunately are in a position where we’ve been successful and probably have discretionary income, but is this true for folks who are just getting started with their financial journey as well?

Ramit:
Well, I think if you live in America, the vast majority of people do have discretionary income. And one of the biggest problems is that most people do not have a framework for how to decide. So literally to most people, they look at random purchases. It could be eating out, it could be a car payment, it could be gas, it could be a medical expense, and it all kind of looks the same. It’s just a bill. That is not how we think about it. There are four key numbers that I always tell people, you have to know these key numbers. I don’t keep a budget. I don’t believe in budgets. I think it’s pointless to track how much you spent on Fritos. It’s such a waste of time.

Dave:
I love this. I hate budgeting so much.

Ramit:
Yeah. I mean, let me tell you, do you know how many people on my podcast, they spend hours and hours every single week? The number for a lot of these hardcore budgets seems about four hours a week.

Dave:
Four hours? What are you doing?

Ramit:
Well, I ask them. So I look at their budget. It’s insane. They have red and green and different tabs and all this stuff, and I’m looking at it and even I am overwhelmed, but it tracks every single thing dutifully. And I say, “Okay, what does this tell you?” And they look at me like startled. They go, “Well, I’m budgeting.” I go, “Okay, but what does it tell you? What’s the point here?” And they have no idea. I go, “Do you know how much you make?” No. 50% of people do not even know their own household income. I go, “Do you know how much you’re going to have at retirement?” No. “Do you know how much you have in your savings account and how many months of an emergency fund is that? “No. The budgeting is simply a way to feel a sense of control. And instead of tracking how much you spent on some vegetable, a better way is to know four key numbers.
Number one, your fixed costs. My recommendation is 50 to 60% of your take home pay. This is your rent or mortgage. Anything that is fixed, any debt payments, gas, car payments, things that are fixed, groceries, 50 to 60% most people are over because of their housing costs. The second is your savings rate. I recommend five to 10%, maybe higher depending on how much you need. Third is your investments, investment contribution, five to 10%, although of course higher is better. And then the fourth one, guilt-free spending. This is the discretionary thing we’re talking about.

Dave:
Oh,

Ramit:
I like that. Yeah. 20 to 35%, that’s a lot of money. That’s a lot. But you can spend money guilt-free knowing that you’ve hit your other numbers. The thing is most of us don’t have this framework, so we go through life just randomly buying things and then feeling bad and then doing it again and wondering, how come I never feel good about money? Well, how can you feel good if you don’t actually have a simple roadmap on how your money should be allocated?

Dave:
Well, to your point, you’re out of control. Not necessarily you’re spending out of control, but you don’t have a process for measuring where your dollars go, and that can feel like you’re out of control. Even if you’re maybe making good financial decisions, it would feel a little chaotic because you don’t have any sort of system for yourself.

Ramit:
Nailed it. It’s the equivalent of walking into a gym and there’s 150 machines in there and you’re just like, “What should I do today?” And then you do it for six months and you’re like, “How come I’m not seeing any progress and I don’t even know if this is working?” There’s no program. For anything in life where we want to make really good progress, we need some kind of program. And the program can be free. The thing I just described is my conscious spending plan. It’s free. You can find it online. It can be a free YouTube tutorial, but we need some kind of program instead of just randomly trying to do stuff on our own. That’s what I’ve found in my life.

Dave:
Let’s get back to just

Ramit:
The

Dave:
Conversation about index funds

Ramit:
And

Dave:
Investing. So you made your point that I think is a fair criticism or contrast between index funds and real estate. One is entirely passive, one is not. Some people bill real estate investing as passive income. It is not. It is a combination of investing in entrepreneurship and entrepreneurship takes a lot of work. So I think there are a lot of benefits to it, and I personally do both. But tell me a little bit about your views on real estate because you are pretty adamant about home ownership and your opinion on that it’s not necessarily right for everyone, or maybe it’s not even

Ramit:
Right

Dave:
For anyone.

Ramit:
Okay. So I rent by choice, and like I mentioned, I’ve rented for over 20 years. I’ve lived in San Francisco, New York, Los Angeles, and my view is as follows. For the biggest purchase of your life, which is your house, you should first run the numbers and you should be extremely knowledgeable about all of the costs of buying a house. Second, you should account for all the non-financial considerations. Those are things like a particular school district, the ability to renovate, or you just plain want to buy a house, and then you should make your decision. Now, let me pause. Does any of that sound controversial?

Dave:
Not at all. No.

Ramit:
Not at all. Why is it that in America, when I even propose the mere idea of running the numbers, when I even merely suggest that sometimes renting can be a better financial decision than owning thousands and thousands and tens of thousands of people. Tell me I’m wrong. I’m stupid. I’m a moron. I’ve obviously lost money. I’m poor. Why is that?

Dave:
Because NAR is the biggest lobbyist in the country.

Ramit:
Exactly. Thank you very much. The number one religion in America is home ownership. And when you even suggest that maybe owning a house may not be the right decision for everybody, people go insane.

Dave:
Yeah, they do.

Ramit:
It used to be just in very high cost of living cities that The far superior financial decision to rent, not to own. I’m talking about cities like Menlo Park, Palo Alto, all of Manhattan, but in particular in the expensive neighborhoods. But now in 100% of the top 50 US metro cities, it’s cheaper to rent than to own.

Dave:
Exactly.

Ramit:
So I think your audience probably gets this, but even still, it is so deeply embedded in America that we even have these pithy little phrases. “You’re throwing money away on rent. “Oh, really? Am I throwing money away on vacation when I go on vacation? No, I’m not. You’re paying your landlord’s mortgage. Oh, really? Am I paying my local sushi owner’s mortgage when I go out to sushi there? How come you don’t say that with a sneer on your face?

Dave:
Totally.

Ramit:
Again, I don’t mind that if you decide to buy, I don’t mind. I will probably buy a house at some point myself. That’s fine. When my wife and I buy a house, it will be the worst financial decision we’ve ever made. I can tell you that right now, because in the cities we live in, it tends to be very expensive. It will cost us many millions over renting and investing. That’s okay because life is not always lived in a spreadsheet. But you’ll have to run the numbers and you have to be comfortable saying, “Hey, for the biggest purchase of my life, we are going to become extremely knowledgeable. We’re going to know the difference between the buy versus rent calculations. We’re going to know how much maintenance we’re going to set aside, 1%, 2%, 3% per year. We’re going to understand opportunity costs, this $250,000 down payment that were putting down.
What if we invested it for the next 30 years? We are going to know all of these numbers and then we are going to make the right decision for us.”

Dave:
Yes.

Ramit:
Again, I am sharing all this not to dissuade anyone from buying a house. I simply want you to understand the mechanics of this very opaque, complex transaction. A lot of people say like, Ramit, you only talk about the negatives of buying. First of all, that’s not true. There are a lot of people who make a decision. It’s informed. Even if the math doesn’t pencil out, they decide affirmatively, I’m going to buy a house because of these reasons. Wonderful. I support your rich life. But y’all need to listen. Virtually every single thing you read in America about buying a house always will lead you to, yes, you should buy a house because everyone has an incentive for you to buy a house. The brokers, the lenders, the realtors, everybody. Everybody wants you to buy. I’m not making a single cent off of you stopping for 10 minutes and running some freaking calculations.
Look, I’m not making a cent. I want you to stop and be still and run the numbers and then factor in the non-financial considerations for your house before you go and think you need to compete with the Joneses and buy a house. Maybe you do, maybe you don’t, but it’s up to you and you can rent and make a lot of money. I’ve made millions by renting and investing the difference. I lived in superior neighborhoods, in superior housing. If a problem happens, I text my landlord. It’s fixed quickly and I didn’t have to go to Home Depot. Best of all.

Dave:
Your number one criteria. Yes.

Ramit:
Or make your decision for yourself.You

Dave:
Might be surprised to hear me agreeing with this. I’m the host of a real estate show and a real estate investor, but I think this is increasingly true. I think there are a lot of factors here to consider. First and foremost, going out and buying a quote unquote dream home is usually a bad financial decision. It just is. If you’re trying to stay in it for 20 or 30 years, you might come out even, but taking the opportunity cost and investing your money elsewhere is often a really good decision. Just think about if you’re going to go out and buy a $400,000 home and put 20% down, that’s 80,000 and you’re going to keep that in your home and then you’re not going to be building that much equity at first because of the mortgage. And you could be putting that in an index fund or I would argue or some of the things I suggest is take that and buy a rental property that’s actually an income producing asset instead of something that you’re paying for.
Now, I own my own home. We’re actually considering selling it and going to rent again actually because I liked being a renter. I think it makes a lot of sense in certain markets. I live in Seattle. It’s very expensive here and rent is just a lot cheaper. The other thing I will add to this conversation though, Remit, this is kind of in our world, is that if you want to make your primary residence a good investment, you can do that. That is a choice, but it’s not just going out and buying your dream home on Zillow. You’re going to have to do what we call a live and flip where you buy something that’s run down and renovate it and you can make a lot of money and turn it into a positive investment. You could do something called house hacking where you buy multiple units, you live in one unit and make it other.
Those are ways because if you run the numbers, those actually make a lot of sense. Now, as Ramit said, you just have to run the numbers. It’s not this mystical thing that you have to imagine out there. You can actually go do it. We have a tool on BiggerPockets. It’s free. I have something called the Buy Rent House Hack Calculator. You can run these numbers for yourself and figure it out. And if you choose because of your own lifestyle, your personal preferences, because you want a sense of security and stability from staying in one place the rest of your life to buy a home, good for you. I’ve done that in my past. I will probably do it again in the future, but you should know the decision that you’re making and the trade-offs that you’re making.

Ramit:
I love that. I love that. Oh my gosh.

Dave:
I don’t know if you expected that on this podcast.

Ramit:
No, I did not. And I’m really pleased. I think that it’s a great message coming from you especially because you’re so knowledgeable about real estate. There are lots of ways towards your rich life. I think this is a mistake I made when I wrote the first version of I Will Teach You to Be Rich. It came out in 09 and I was a little too dogmatic about there’s index funds and rich life and let it compound and all that stuff. The fact of the matter is some people love index funds. Some people really want to have a second residence, et cetera. There’s lots of different ways. They want to start a business. And so I accounted for that in the 10-year update of my book. And there are so many different ways towards your rich life, but in order to get there, you do need to run some numbers and you might end up buying.
Again, I probably will buy at some point too, but you’ve got to think ahead, not just do what everybody else is doing.

Dave:
One more question before we get out of here. You talk a lot to couples, as you said, and you talked about designing your rich life together, which I think is excellent advice. One of the things I get a lot from our audience and we hear a lot in our community is that if you’re in a relationship, one partner, one member of the relationship hears the podcast, gets excited about real estate, wants to go all in on this, and they need help bringing their partner on board or at least discussing that and trying to get them excited too because real estate, as we’ve discussed, it’s entrepreneurship. It can be time-consuming at times. I believe the benefits are worth it, but not all partners see it that way. So maybe you have some advice on how to have these kinds of conversations with your partner.

Ramit:
Every week I have couples on my show Money for Couples, and sometimes they’re in $400,000 of debt. Sometimes they have $12 million net worth and there is some disagreement. I love talking to them because they share all of their numbers. They share their income, their debt. We see exactly where they spend their money. In a recent episode, a couple thought they were eating out maybe twice a month. They were eating out 15 times a month. How

Dave:
Do you miss that?

Ramit:
It’s classic. Well, you know what’s shocking? 50% of people don’t even know their own household income.

Dave:
That is insane.

Ramit:
It’s shocking. But this has given me a lot of empathy for people because when you really talk to them, you realize how disconnected people are from money. And if you’re listening to this, it’s possible your spouse or your partner is actually like this too. You have to remember, most people do not get off listening to financial podcasts. The vast majority of people who come on my show have never even read my own book. And so we have to actually meet people where they are. To most people, money is intimidating. It’s scary. It’s something that we both hate and love. We love the part about I can take a nice trip to Spain, I can buy something at Whole Foods, but we hate all these confusing terms. We hate feeling like we’re doing something wrong. We hate needing to budget every single expense. There’s a deep love-hate relationship with money.
The biggest mistake couples make is that they do not have a shared vision of a rich life. Let me say it again, because I guarantee this is true in your own relationship. They do not have a shared vision of a rich life. Oh, they might have some Google Doc that both of you have access to, but your partner hasn’t logged into that ever. You know that. In fact, the role that you have set up, if you’re listening to this podcast, you are probably the money person.

Dave:
100%.

Ramit:
And I’m going to tell you right now, huge mistake. When I met my wife, we started talking about money and I realized right away, I’m like, “I am not going to be the money person in this relationship, even though it would be a natural fit. This is what I do for a living. I have my systems.” But I’ll tell you why. Number one, one day I’m going to get hit by a bus. You think I want my wife to get that phone call from some sh*t head at Goldman Sachs saying, “Hey, I’d like to charge you 2.25% AUM to my grieving wife?” No, I’ll be looking up from hell saying I did it wrong because I didn’t show her how investment fees work. That’s number one. Number two, I need a second set of eyes because this stuff is complex and you actually need somebody who can double check you.
And number three, this is the most important, is actually more fun to have your partner involved. Even if your partner doesn’t know as much about money, you get to dream together. Remember, money is not a series of numbers in a spreadsheet. It’s actually about dreaming. That’s why we spend so much time in December with our Rich Life Review. So if your spouse is kind of not interested or you can’t seem to get them on board, my guess is a lot of your spouses are kind of like, “You just handle it. You’re better at it.” Then listen closely. You need to put away your spreadsheet and put away your freaking papyrus scroll with all your formulas since 1964. Put that away and sit down. You can use the actual word for word scripts in my Money for Couples book. You can start off by saying, “Listen, I want to talk about money in a different way than we’ve ever talked about it.
I’ve realized that whenever we talk about money, I think I probably go too deep in the weeds. I get excited about this stuff. I’m into it, but I’ve realized that I actually want us to do this together. It’s important to me because one day I might not be here and I want you to be prepared.” And also it’s just a lot more fun. So he or she is going to go like, “Okay.” They’re kind of like, “What the hell? This is weird.” But you go, “I just have one question. I was listening to this podcast and he asked this question. I’ve been thinking about it. What’s your rich life?” And just let your partner talk. And if they don’t know, you can say, “For example, I know that you love spending time with our daughter. What would that look like if you could do it more or if you could be even more free, what would it look like?” And she’s like, “Oh, I’d love to be able to take her to this TOTS class and not have to worry about the price.” You go, “That’s amazing.” Now you’re listening.
You’re not debating your spouse. You freaking contrarians. You’re saying, “That’s amazing. What if you could do more? What else would you do? What would we do as a family?” And then you tell him or her a little bit more too. You say like, “Gosh, what I would really love to be able to do is I really want to be able to take our dog to a blah, blah, blah.” And then guess what you do right after that? You go, “Hey, that was awesome. I love you. Let’s keep talking about this. I love you.” And you give them a big kiss and that’s it. Why did I end there? Because when it comes to money, many people make the common mistake of feeling like they need to do everything in one conversation. Money is overwhelming. It is complex. It evokes feelings. Best thing you can do is keep it short and end on a high note.
Then after that, the next thing you do, find one episode from my podcast that really connects with you. You can just look at the titles, find one that sounds like the two of you and then listen to it together next time you’re in a car or in bed or whatever. Listen to it and start to use that as your entree into how to talk about money. That is how you get your partner involved. It’s slow. It’ll probably take you months, but it’ll be one of the best things you ever do.

Dave:
Wow. That’s fantastic advice. I resonate with a lot of things you’re saying because I’m definitely the money person in my relationship and I am good at it. And so I’m like, oh yeah, I feel good about this. But I think you’re right that it’s more fun. And there’s one other part of that I want to bring my wife along with me too, is I don’t want 100% accountability for our financial situation too, right? What if I make a mistake? I want you to know the decisions that I’m making and that we’re both okay with the amount of risk that we’re taking, what we’re trying to save, what is guaranteed for us, what’s up in the air, that kind of stuff. It makes a lot of sense. And I think just listening to this description for the real estate investors out there, it would make sense that once you have this shared vision of the rich life, then you talk about, okay, how does real estate help us get to that rich life or to have a more rich life?
I would imagine the way I would’ve approached this is like, oh, we’ll have a thousand dollars more next year. And maybe that conversation wouldn’t have resonated, but if I had approached it with, hey, that rich life that we are both so excited about, here’s how we can accelerate that or have a higher probability of achieving it if we choose to take on this project of real estate investing.

Ramit:
That is exactly right. The real estate comes towards the end. It is simply a way to achieve your rich life. There’s a couple I had on my podcast and I think they have four children, and she was always struggling because they didn’t have enough money for her to go to the grocery store. She wouldn’t have enough money on their card, and yet they own five houses. And she’s like, “How can we be wealthy enough to own five houses, but I don’t have enough money for groceries?” That is a misalignment with their rich life. He was obsessed with asset value, portfolio net worth. She’s like, “I just want to buy groceries.” So there’s a misalignment. In that case, you might say, look, let’s sell one of these houses. We now have $15,000 in our checking account at all given times. My partner feels amazing. I’m still building assets.
We are doing it together. Wow. That’s how you really use money to connect.

Dave:
That’s beautiful. I love that. Such a good advice. Well, Ramit, thank you so much for being here. This was a lot of fun. I had a great time with our conversation. You gave some tips, but just reiterate for everyone where they can learn more from you.

Ramit:
You can find me on my Money for Couples podcast. You can find me on my Netflix show How to Get Rich, and of course, my books, I Will Teach Be Rich and Money for Couples. Search my name. You can find me on social media anywhere. And I look forward to hearing your stories about you living your rich life.

Dave:
Thanks again, and thank you all so much for watching this episode of the BiggerPockets Podcast. We’ll see you all next time.