14 Money Rules That Actually Work transcript

Money is 95% psychology, 5% strategy. Most financial advice ignores this. That's why so much of it looks good on paper but fails in real life. In this video, I will share with you 14 money rules that actually work. They come from Rammit Seti's best-selling book, I will teach you to be rich. Let's get into it. Rule number one, the 85% beats perfect. You know what's funny about weight loss? We all know what to do. Eat less and exercise more.

That's it. But instead of just doing it, we spend months arguing about keto versus paleo, whether carbs are evil or what time of day we should eat. And while we're having these debates, we're sitting on the couch eating pizza. Money is exactly the same. We already know what we need to do. set up a savings account, automate your bills, pay off your debt, invest a little bit every month, and let it grow over time. But instead of doing it, we argue about which bank has the slightly better interest rate.

We spend hours tracking every single expense in a spreadsheet. We read articles trying to predict what the economy will do next year, as if anyone actually knows. And while we're doing all of that, our money is just sitting there doing absolutely nothing. Here's what Ram figured out, and he calls it the 85% solution. You don't need to get it perfect. You just need to get it 85% right. Because getting 85% right beats getting 0% right every single time.

The person who opens an investment account today and puts in $50 will always be richer than the person who spends two years researching the best options. So, here's what you need to do. Pick a simple financial system and move on with your life. Don't obsess over tiny changes in spending. Rule number two, the conscious spending plan. What if I told you that you could still spend extravagantly on the things you love? You don't need to be cheap.

You don't need to cut out your morning coffee. And you don't need to track every single expense. That's what Re calls a conscious spending plan. The idea is simple. You decide in advance exactly where your money is going, like how much for rent, for saving, for investing, and for going out. And once you've made those decisions, you're free. No more guilt about spending money because you already planned for it. But here's the key.

To spend extravagantly on the things you love, you have to cut mercilessly on the things you don't care about. Let me give you an example. Rammit has this friend John who spends a crazy amount of money eating out four times a week. Nice restaurants, expensive food. If you see that, you might think he's wasting money. But here's what you don't see. He doesn't own a car. He takes public transport everywhere. He works long hours.

He's barely home, so he lives in a cheap apartment and he doesn't care about decorating. He cut those things because they don't matter to him. And here's the important part. Before he spends anything on eating out, his system has already automatically transferred money to his pension, his investments, his savings, and his monthly expenses. Whatever is left after that is his guilt-free spending money. He can blow it all on restaurants and feel zero guilt about it.

So, here's how you can plan like John. In a conscious spending plan, there are four buckets. Bucket one, fixed costs. Rent, bills, groceries, debt payments. Try to keep this between 50 and 60% of your income. Bucket two, long-term investments. Your pension and investment accounts. Aim for at least 10%. Bucket three, savings goals. Things like vacations, a wedding, a house down payment, around 5 to 10%. Bucket four, guiltfree spending.

Your fun money, restaurants, movies, clothes, whatever you want. No guilt, no justification needed. Here's what you can do. Look at your bank statements from last month. See where you're actually spending your money. Then ask yourself, are these things I actually care about? Cut the stuff you don't love. Redirect that money towards savings, investments, or guilt-free spending, the stuff you actually enjoy. Rule number three, start early.

The math is violent. Okay, this might be the most important lesson in the entire book, so pay attention. Let me tell you about two people, Sally and Dan. Sally starts investing $200 a month when she's 25. She keeps doing this for 10 years until she's 35. Then she stops completely. Never invests another dollar for the rest of her life. Dan is different. He waits until he's 35 to start investing. Then he puts in $200 a month for 30 years until he's 65.

So here's the question. Who has more money when they're both 65? You might think it's Dan, but you're wrong. It's Sally. She has $80,000 more than Dan. Now, think about it. Sally invested for 10 years. Dan invested for 30 years. But Sally ends up with more. Why? Because she started earlier. In compound interest had more time to do its thing. Look, every year you wait to start investing, you're losing money you will never be able to get back.

Time is the most powerful force in investing and you cannot buy more of it. Rule number four, big wins versus small wins. People love to obsess over small stuff when it comes to money. Should I skip my morning coffee to save $5? Should I cancel my Netflix subscription? Meanwhile, they've never once negotiated their salary. They've never called their landlord to ask for a lower rent. Let me show you the math. If you skip a $5 coffee every single day, you'll save about $1,825 in a year.

Yes, that's quite big. But you have to give something up every single day for an entire year to get there. Now, compare that to one successful salary negotiation. One conversation with your boss or a new employer could get you an extra $5,000 to $15,000 per year. And that increase doesn't just happen once. It compounds year after year for the rest of your career. So which makes more sense? One negotiation or giving up coffee for 365 days?

Ram calls these big wins. Your salary, your rent, your debt interest rates. These are the big ones. Get these right and you can buy all the lattes you want without feeling guilty. Here's what I want you to do. Write down your five biggest expenses. right now. Pick one of them and ask yourself, can I negotiate this? Can I reduce this? One big win will save you more money than skipping coffee. Rule number five, automate everything.

Let me be completely honest with you. You are lazy. I am lazy. Everyone is lazy. This is not an insult. It's just human nature. You think you're going to manually transfer money to your savings account every month? You think you're going to remember to invest on the 15th? You won't. And if you think you're going to track your spending in a spreadsheet, Ramit says, "Sure, you might care now, but in 2 weeks it'll be back to Twitter and Netflix.

Nobody really cares about managing their money. Hell, I don't even care." So, what's the solution? It's automation. You set everything up once. Your paycheck comes in and money automatically goes to your savings, your investments, your bills without you having to think about it. Look, most people spend whatever they spend during the month. And when they check their bank account, they wonder where did all my money go?

But for you, you decide first where every dollar goes. And then you set up systems so it happens automatically before the month even starts. You already know this much goes to rent, this much goes to investments, this much goes to savings, and this much is for fun. If you rely on willpower, you will fail. If you rely on systems, you will win. Here's what to do. Set up automatic transfers from your spending account to your savings account, investment account, and bill payments.

It takes maybe 1 hour to do this. Then you forget about it and let the systems do the work. Rule number six, boring investing wins. A lot of people with high salaries have no investments. Their excuses, I don't have time to follow the stock market or stocks can go down. I don't want to lose my money. So what does Warren Buffett recommend for people like that? Lowcost index funds. Let me explain. An index fund is a fund that matches a market index.

For example, the S&P 500 is a list of 500 of the largest companies in the United States. When you buy an S&P 500 index fund, you're buying a tiny piece of all 500 of those companies at once. No picking winners. No guessing which stock will go up. Now you might have heard of mutual funds. Those are actively managed. Fund managers pick stocks they think will beat the market. Problem is they charge high fees and most of them fail to beat the market anyway.

An index fund is different. No manager trying to outsmart the market. Just a computer making sure the fund matches the index. fees are super low, like 0.03% to 0.2% per year. Now, let me ask you something. When someone asks about your investments, what sounds cooler? Option A, I bought some Tesla last week, sold it for a quick profit, now I'm looking at some crypto plays. Option B, I buy the same index fund every month.

I haven't changed anything in 5 years. Option A sounds exciting, right? Option B sounds boring. But here's the thing. Option A takes time and a lot of research. Remember the people who said, "I don't have time." For them, option B is how they get rich. Here's what you can do. Buy a lowcost index fund, keep buying it every month, and leave it alone. That's it. Rule number seven, separate your accounts. Okay, this one is simple but powerful.

You need two accounts, a spending account and a savings account. And ideally, they should be at two different banks. Why? Psychology. Let me explain. Let's say your friends invite you out on a Friday night. If you check your spending account and you only have $30 left, you might say no or suggest somewhere cheaper, you'll adjust your behavior based on what's available. But if all of your money is sitting in one account, you look at it and think, "Oh, I've got plenty." So you go out, you spend freely, and suddenly the money you saved for a vacation or for a house is now paying for last night's drinks.

When your savings are separate and hard to access, you don't touch them. It's that simple. Now, some of you might be thinking, "But I only have like $300. Why should I bother separating it?" Here's why. This isn't about the amount. It's about building the habit. When you eventually have $10,000 or $50,000 or more, that habit is going to matter a lot. So, start building it now. Now, here's what you can do. Open a savings account this week.

Make it high yield if you can with low fees. Put something in it, even just $20. And do not connect a debit card to it. It should be hard to access. That's the whole point. Rule number eight, spending frameworks. Every time you want to buy something, do you have a debate in your head? Should I buy this? Is it worth it? Maybe I should wait and think about it. That mental battle is exhausting. And the worst part is you end up feeling guilty whether you buy it or not.

If you buy it, you feel guilty for spending. If you don't, you feel like you're depriving yourself. Here's the solution. Create rules that decide for you. Rammit calls these spending frameworks. Let me give you an example. Whenever Ram is thinking about buying a book, he just buys it. No, let me think about it. He just gets it. Why? Because even if the book turns out to be mediocre, one good idea from it could change his life.

And the cost of a book is nothing compared to the cost of missing that one idea. Here's another example. You could have a rule like, I always fly economy for short flights, but I always fly business for anything over 6 hours. Now, you never have to debate it. The rule decides for you. The point is to remove the mental battle. Once you have the rule, you just follow it. No guilt, no back and forth. Here's what I want you to do.

Pick two or three categories where you want to spend freely without guilt. Something like, I always buy books without thinking. I always pay for convenience if it saves me more than an hour. I always buy quality when it comes to shoes and jackets. Now you never have to debate those purchases again. Rule number nine, get rid of debt. If you've got credit card debt, student loans, whatever it is, you need to deal with it first because you can't invest aggressively when you're paying 20% interest on a credit card.

The math just doesn't work. So, here's how to get rid of it. Five steps. Step one, figure out exactly how much you owe. Write down every single debt. The total amount, the interest rate, and the minimum payment. Step two, decide which debt to attack first. You've got two options. The first option is called the snowball method. You pay the minimum on everything, but you throw all your extra money at the smallest debt first.

Why? Because when you pay that one off, it feels good. It gives you momentum to keep going. The second option is the high interest method. Same idea, but you attack the one with the highest interest rate first. Mathematically, this saves you the most money. Honestly, just pick one and start doing it. Don't overthink it. I personally like the snowball method because money is all about psychology, not math. Step three, call your credit card company and ask them to lower your interest rate.

I'm serious. Just call them and ask. Tell them that other cards are offering you better rates and you want to stay with them. Sometimes they say no, but sometimes they say yes. And if they say yes, that's money saved for doing nothing but asking. Step four, figure out where the extra money is going to come from. Can you cut something? Can you use some savings? Can you sell something you don't need? Step five, start. Don't wait until you have the perfect plan.

Start this week. You can always adjust later. To recap, figure out your debt, choose a method, negotiate your rates, decide where the money comes from, start paying it down. Rule number 10, fix your budget. All right, you've set up your conscious spending plan, but the numbers just don't work. You've done the math and there's not enough left over for guilt-free spending. What do you do then? You've got four options. Option one, decrease your investments or savings.

But honestly, I'd avoid this unless you really have no other choice because it's going to cost you in the long run. Option two, decrease your fixed costs. Look at your subscriptions. Are there any you're paying for but barely using? Cancel them. Look at your debt. Can you call and negotiate a lower interest rate? Or if your rent is eating up most of your income, maybe it's time to consider moving somewhere cheaper. I know that's not easy, but sometimes it's necessary.

Option three, use something called the envelope system. You allocate a specific amount of money to each category. Groceries, eating out, entertainment, whatever. And once that money is gone, it's gone. You can't spend more. It forces you to be intentional about where your money goes. Option four, increase your income. There's a limit to where you can cut, but there's no limit to how much you can earn. You could do these three.

One, negotiate a raise at your current job. Ask your boss what it would take to become a top performer. Two, or if that doesn't work, look for a higherp paying job somewhere else. three or start doing freelance work or business on the side. Here's what to do. If the numbers aren't working, start with option two first. See what you can cut from your fixed costs. If there's nothing more you can cut, find ways to earn more.

There's a limit to how much you can cut, but there's no limit to how much you can earn. Rule number 11, define your rich life. In the conscious spending plan, you learned the percentage, how much should go to fixed costs, investments, savings, and guilt-free spending. And your first goal was just to hit those numbers. Now, let's talk about going beyond saving and investing more. But first, do you even want more? If you do, why?

When you ask people why they want more money, the most common answers are freedom and security. Those are fine answers, but it's not clear. You need to define your rich life. What does it look like? For some people, a rich life means traveling the world. For others, it means having time with their family. For others, it means the freedom to quit a job they hate. There's no right answer, but you need to know what your answer is.

Because if you don't define it specifically, you'll end up chasing someone else's version of rich. And that's a race you'll never win. Here's what I want you to do. Write down what your rich life looks like. Be specific. What are you doing? Where are you living? How are you spending your time? Then figure out how much money you need per month to live that life. Use an investment calculator. assume around 8% returns and see how much you need to invest each month to get there.

And once you have that number, find ways to increase your income so you can allocate more towards savings and investments. Now you have a real target to aim for. Rule number 12, buying a car the smart way. Before you buy a car, there are four things you need to think about. budgeting, picking, negotiating, and maintaining. Let's start with budgeting. The car price is not the only cost. You also need to factor in insurance, gas, maintenance, and if you live in a city, probably monthly parking, too.

Look back at your conscious spending plan. Figure out how much you can spend on your car. Second is picking the right car. Four things matter here. One, pick something you'll actually enjoy driving that fits your budget. Two, make sure it's reliable. Constant repairs will cost you way more. Three, check the resale value because some cars hold their value and some don't. Four, consider fuel efficiency so you're not spending a fortune on gas.

Third is negotiating. And this is where Ramit's approach is genius. He bought his car at the end of December. That's when salespeople are desperate to hit their quotas before the year ends. Here's what he did. He contacted 17 different dealers and told each of them the exact car he wanted. He mentioned to them he was ready to buy within 2 weeks. Once he had offers from all of them, he'd call each dealer back and told them the lowest price he'd received.

He gave each one a chance to beat it. Then what happened? They started competing against each other and the price kept dropping. In the end, he only had to visit one dealership, the one that gave him the best price. Fourth is maintaining the car. Keep a record of every service, oil changes, tire changes, everything. Why? Because when you eventually want to sell, buyers are going to ask about its history. If there are no records, they're going to negotiate you down.

To recap, budget for the total cost, not just the car price. Pick something reliable with good resale value. Negotiate by making dealers compete against each other. Keep records so you get a better price when you sell. Rule 13, buying a house versus renting. A lot of young people think buying a house is the first thing they should do after college. No investment plan, no pension yet, just a house because everyone says it's the best investment you can make.

Look, before you buy a house, there are three things you need to consider. First, can you afford it? Here's the general rule. Your house should cost no more than 2.5 times your annual income. You should have at least 20% saved for a down payment. And your total monthly housing cost, mortgage, taxes, insurance, and maintenance should be around 30% of your gross income. So, if you make $50,000 a year, your max house price is about $125,000.

Your down payment should be $25,000, and your monthly cost no more than $1,250. If you can't hit those numbers, you're not ready. Save first. Here's where people get tricked. They think, "I'm paying $1,000 in rent now, so I can afford a $1,000 mortgage." Nope. That's wrong. When you buy a house, I bet you'll want a nicer place. So, higher payment, add property tax, insurance, maintenance on top. Suddenly, your $1,000 is $1,500 or more.

And if the toilet breaks, that's your problem now, not the landlord's. Second, are you going to stay there for at least 10 years? If you sell before that, the transaction fees are brutal. Agent commissions, stamp duty, moving costs, it adds up fast. If you're not planning to stay at least 10 years, renting is the better financial decision. Third, and this might surprise you, the stock market often beats real estate as an investment.

Reit himself rents. He does want to buy in the future, and he even has a subsavings account for a down payment, but he rents right now because he ran the numbers. A $350,000 house doesn't actually cost $350,000. Once you factor in interest, insurance, maintenance, and all the other fees over 30 years, it's more like $800,000. When you rent, you avoid most of those extra costs. That means you have more money to invest.

And the more you invest, the more you make. Here's what to do. Don't assume buying is always better. Factor in all the costs, not just the mortgage. Ask yourself if you're staying for at least 10 years. Then decide based on your situation, not based on what everyone else tells you. Rule number 14, 10 principles for a rich life. All right, let's wrap this up with Ramit's 10 principles for a rich life. Think of these principles to guide your money decisions going forward.

One, spend extravagantly on the things you love and cut mercilessly on the things you don't. It's not about spending less, it's about spending intentionally. Two, focus on the big wins. These are the five to 10 decisions that actually move the needle, like your salary, your rent, your investments, etc. Get those right and everything else is just a noise. Three, investing should be boring. If your investments are exciting, you're probably doing it wrong.

Set it up, automate it, and leave it alone. Four, there's a limit to how much you can cut, but there's no limit to how much you can earn. At some point, you can't cut anymore, but you can always find ways to earn more. Five. Friends and family are going to give you tips about money. Listen politely, then stick to your own plan. Six, create spending frameworks. These are rules that decide for you so you don't have to debate every purchase.

Seven, stop searching for advanced tips. The most advanced thing you can do is master the basics and do them consistently. Eight, nobody is coming to rescue you. Not the government, not your parents, not the lottery. You are in control of your financial life. Nine, your rich life is going to look different from other people's rich lives, and that's completely fine. 10, once your system is set up, stop obsessing over the numbers.

The point of getting your money right is so you can stop thinking about money. Go live your life outside the spreadsheet. Here's my final ask. Pick three of these principles that hit you the hardest. Write them down somewhere you'll see them every day. Let them guide your decisions. Thanks for watching. And if you want more book summaries like this one, then check out the playlist you see on your screen.