written by
Srinivas Rao

Ramit Sethi: The Psychology of Money: How to Design a Rich Life

3 min read

These are cliff notes from an episode of The Unmistakable Creative Podcast

Ramit Sethi is the author and entrepreneur who specializes in money, emotionally loaded subject that touches our lives every day. In this amazing interview, the conversation revolves around money (obviously), debt, boundaries, habits, behaviors, psychology, and a lot more. It is full of excellent takeaways and my favorite ideas are summarized below.

1. As an undergrad, Ramit worked with BJ Fog at Stanford. He got to be there by being persistent, personable, and thinking outside of the box. In addition to academic achievement, he saw a tremendous potential of networking, being proactive, and showing up.

2. Many successes in our lives can be traced back to our behaviors and the things we do on a regular basis. However, aside from our will, environments also play a big role in behavior, for better or for worse. Our actions are never outside of the context and the truth is that sometimes we are just not ready for a change.

3. Stories we tell ourselves about the money originate from our childhood and conversations that our parents had. We can work on tactics all we want, but before we change our internalized stories about money, we are not able to make lasting positive change.

4. In times of crisis, it is important to acknowledge the situation, make a plan, and keep moving. Ramit said that if we are used to playing one instrument in an orchestra, in times like this we may have to learn to play different music or perhaps even change the instrument. That is the metaphor for resilience and resourcefulness that is much needed when everything is uncertain.

5. When we are thinking about our future, financial or otherwise, it is important not to only focus on things we don’t want (I don’t want to end up like a greeter in Walmart’). Focusing on what we do want is more motivating and powerful.

6. Most of us were raised to ask ourselves $3 questions, in other words, how to save tiny bits of money at the time. More important is to ask ourselves bigger questions and ensure a few key big wins: what job do we do, are we paid well, who do we date or marry. If we get these few questions right, we can free ourselves from worry about tiny savings on things that ultimately do not matter.

7. Ramit talked about the extreme front barrier, the term that signifies the extreme stories we tell ourselves regarding reaching our goals. For instance, we tell ourselves that if we want to pay off debt, that means that we’ll have to eat ramen for the rest of our lives, or if we want to lose weight, we’ll never ever be able to eat ice cream. These extreme scenarios make us reluctant to strive for our goals and ultimately make us quit before we start. We need to be more realistic and ask ourselves how we can do it in a more balanced and sustainable way.

8. When we pay for something (gym, counseling, an online course) and intentionally create time and space, we are not likely to make progress. We value things that we pay for, no question about it. There is a ton of free information out there but unless we are willing to do something extra, we are unlikely to benefit from it.

9. Rich life has many elements and money is just one of them. Other elements include intentionality and active pursuit of our values. Although money is important, it’s not the only component we should be deliberate about.

10. To be unmistakable, according to Ramit, you must have your own unique point of view.

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