Why So Many Young Adults Feel Financially Stuck | Ramit Sethi on ‘The Interview’

If you have billions, and you argue. against paying a slight marginal tax. increase, you might be an. >> [music]. >> What should we do with our money? Ramit. Sethi claims to have the answers, but. he's not your typical finance guy. >> No matter how much you earn, I know you. can live your rich life. >> To the rich life. >> [screaming]. >> His book, the bluntly and irresistibly. titled I Will Teach You to Be Rich, has. more than a million copies in print.

[music]. Like any good media entrepreneur, he has. since launched a Netflix show and a. video podcast. >> What are the financial challenges. between the two of you? >> The more money she's made, the less. valuable I am. >> So, why are people listening to him? >> I want us [music] to get deeper than. thinking that spending money is. frivolous or somehow unimportant. It's. not. >> Here's my conversation with Ramit Sethi. >> [music].

>> Ramit, thank you for taking the time to. speak with me today. >> Thank you for having me. >> We're going to talk about money. >> My favorite topic. >> My problem is I have too much of it. How. do I [laughter]. How do I get rid of some money? That's. my That's really my issue. >> You do not hear that too often. >> [laughter]. >> Um so, I just to start, when you talk. about. helping people. become rich, you don't just mean rich. in a dollar figure way. You 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, you know, 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 and to. my mind one of your key insights is that. you 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 going to do that. you need to cut ruthlessly on the things. that that don't enhance your life in a.

meaningful way. It 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 [gasps] 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, or I mean, this. is what you do for a living, so 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, you. know, people they're not just going to. say one thing. They might say, well, I I. love to travel, I like to I love to eat.

out, I love to buy new clothes. How is someone supposed to know like. at 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. Oh, 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 two is. travel, number three 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 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." Like that. 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 four 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. and then, you know, 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 for just to be clear, what are.

the the four 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 or. for your family, 20 to 35%. If you hit. those numbers, call it a day and move on cuz 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 a. investment account at age 14. And. instantly I'm putting in, you know, 20. bucks, 50 bucks, 100 bucks, and I'm. already compounding it until 65. I go, "Whoa, this is amazing.". So, [snorts]. 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, cuz 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, the financially It's financial.

independence retire early. Um. Would And And there are people who sort. of relentlessly are working their. financial numbers so they know at some. point. as young as 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 what's the 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 three 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'm. tripping over LEGOs. Let me spend 20. bucks 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. at.

at 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. 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. The. blog evolved into.

the best-selling book I will teach You. to Be Rich, which was published in 2009, which is sort of become one of these. books. that are perennial best-sellers. But, when did this 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.

401k match. You know, did you think, oh, I need to find another. lane for 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. Uh I broke my own rules on that one. I should have done it earlier. That was. that was a violation of my own rules. >> What your own rule about what? >> Talk about money early. >> Oh. >> Earlier. And anyway, so we we finally. talked about it. Um and we went through. a pre-nup process, which was. um.

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 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. pre-nup? >> No. Most couples don't need it. If one or. both partners come into a relationship. with. pre-existing 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's. 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. >> Uh uh conversation which. >> 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. Maybe the person who's doing. the spending. uh feels like uh spending is a 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. Haha, 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's 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. >> You know, I have to say that sometimes. when I. uh. think in sort of a. 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, you know, they're they look like they. should be doing well and they're 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. um provide uh. the same life for their kids that that. they were able to have. And that's sort. of on on one side of it. And then on the. other side, you have people who have a. lot of money, but they seem completely. like coiled and unable to to enjoy it. And I think this is actually painting a. in whole, kind of a grim portrait of. American society. [laughter].

Like there's. like. What do What do you think. your podcast. is saying about American society writ. large? Like if an alien were to come. down and watch Ramit Sethi's show, what. 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 a home. So, it may be stressful but when I ask. them, what are the consequences that you. have faced? Uh 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. all 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 [snorts] 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 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 deserve you know, 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 agulate them. We look at their. pictures in Bora Bora. >> 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 four key numbers, your debt payoff.

date. You got to know these things. And. we need to understand that. just cuz 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. >> I I. want to know about your. political evolution a little bit. >> I'm no expert on the space, but you. know, I think one of the the big.

sort of like the heavyweights is a guy. like Dave Ramsey, right? Who who is sort. of like it has a good old boy vibe and I. think he's he's sort of. publicly pretty pro-Trump. >> Was there some point in your career. in which you consciously thought, "Oh, I. like there is a lane for somebody to. talk about money who seems. politically. different than Dave's Dave Ramsey. Like. there's there's like a.

uh 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. >> You know what that couple is? That.

couple's screwed. Because life doesn't turn out exactly. like your little plan. Ever. >> 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, [snorts] 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. uh. 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 uh personal political change. you you just described. When I was. reading I Will Teach You to Be Rich, you.

know, you it I I understand this this. book was now written, you know, 17 years. ago. Uh. uh But you know, you write about the. problem of uh victim culture. And you. 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, whoa, hold on, hold on. That's not. what I said. This is an 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 a 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 going to read a. single book about money or watch a free. YouTube video. Somebody solve it for me. That's not going to happen. We got to. 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 the the game is rigged against me. I could I could follow every step that. Ramit Sethi tells me to take, and I'm. I'm still going to struggle to get my. head above water, or. or would we look at somebody who says. something like that and say like, you. know, you're you're just not making the. right moves. >> Mhm. >> 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. >> [snorts]. >> and you are the one bearing the brunt of. it. >> And what would be the the sort of. inverse of of a question like that.

where, you know, the sort of the the. millennial or the Gen Z person who says. like, "Look, the the. the system is such that I'm going to. struggle more than my parents or my. grandparents. You know, what would you point to and say like, "No, 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. >> If if we can say that. sort of getting ahead financially is.

harder for. uh millennials and and Gen Z'ers 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. >> Uh 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, ten thousand, 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 cuz 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 got to 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 help them 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 your 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. >> Um Ramit, thank you for taking all the. time to speak with me. >> It was a total pleasure. Thank you. >> [music]. >> I'm Lulu Garcia-Navarro. >> And I'm David Marchese. >> And we're the hosts of The Interview, an. audio and video podcast from The New. York Times. >> Every week we interview fascinating and. influential people from all walks of. life.

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