That’s probably not the title anyone ever would have thought would come from me. Over the past couple of weeks, I’ve been obsessed with reading and listening to Ramit Sethi, the author of I Will Teach You to be Rich. Ramit just released an updated version of his book and has been on a bunch of podcasts while on his book tour that I’ve been listening to. He has a ton of great personal finance knowledge and ideas that really resonate with me. One of them is to spend extravagantly on the things that you love.
Ramit says that you should save 20-30% of your income, spend extravagantly on the things that you love to spend money on, and cut mercilessly on the things that you don’t love to spend money on. He says that doing this will allow you to live YOUR Rich Life without worrying about what others think or what their definition of their Rich Life is.
Money Dials
I feel Ramit’s concept is what I’ve practiced but haven’t had the words to accurately explain it until I started listening to the podcasts that he’s been speaking on. Everyone has a different definition of what their Rich Life would be and what they enjoy spending money on. Once you figure out what your Money Dial is (the things that you LOVE to spend money on) Ramit asks what it would be like if you spent 10X as much on it.
My Rich Life consists of maintaining a high savings rate which will hopefully lead to a great deal of flexibility in the future and spending my money on travel. To do this, I have cut (somewhat) mercilessly in other areas of my life. I live in a really cheap apartment, I may eat at a restaurant only once or twice a month, a lot of the clothes that I wear are from high school and college, and I drive an 18-year-old truck and have never had a car payment or the expensive insurance premiums that come along with a newer vehicle.
There Is Sacrifice
Status symbols and impressing others doesn’t do anything for me, but what does is traveling and exploring the world. Maybe you love having a nice house and constantly upgrading it or buying a brand new car every couple of years or buying designer clothes. That’s fine. Ramit says to spend extravagantly on those things to make sure that you’re living your Rich Life. You shouldn’t judge me for how I view living a Rich Life and I shouldn’t judge you for how you view living a Rich Life.
Spending extravagantly on the thing that you love does take some sacrifice to make sure your financial life is still in order. Maintaining a high savings rate and cutting mercilessly are two HUGE keys to this concept. A higher-than-normal savings rate is obviously what’s going to make sure that you’re living within your means and that you’re being proactive about setting yourself up for a successful future. Obviously, if you want to spend 10X on the things that you love, then you’ll have to cut mercilessly on the things that you don’t love.
Live YOUR Rich Life
If you have a high savings rate, then what you spend the rest of your money on doesn’t really matter too much. Why not make sure that you’re spending as much of it as possible on the things that you LOVE and wasting as little of it as possible on the things that you don’t care as much about?
There’s so much more great personal finance knowledge that Ramit has to offer, but this is one of my favorite concepts that I want to try and continue to get better at.
