my two cents

What If Spending Money Felt … Good?

Photo-Illustration: by The Cut; Photo: Getty Images

Strangers stop Ramit Sethi on the street all the time to ask for financial advice. “I love it, actually,” he says. Which is good, because he’s about to get a lot more famous. In his new Netflix series, How to Get Rich, he coaches 12 people through financial struggles ranging from debilitating debt to poorly timed crypto investments. The show lands somewhere between Queer Eye and Marie Kondo’s Tidying Up but with higher stakes — people’s livelihoods are on the line.

It’s easy to be skeptical of Sethi’s “rich life” ethos, which encourages people to “spend extravagantly on the things you love and cut costs mercilessly on the things you don’t.” But there’s a reason why his book, I Will Teach You to Be Rich, has been a top seller for over a decade, spawning a popular podcast and financial course that has helped thousands of people save, invest, and gain control of their money. What makes Sethi’s advice so much better than everyone else’s? It’s partly his delivery — he’s warm, funny, and empathetic about money quandaries that would give most people a heart attack. But he also keeps things simple. And most important, he doesn’t shame people for spending money or tell them they can’t. Instead, he encourages them to — he believes it’s an important part of being financially healthy.

I talked to Sethi about why more people should spend their money without guilt and how they can afford to do so while also saving for the future.

Unlike a lot of financial experts, you are very pro-spending. Why is that?

I always like to start off by asking people, point blank, what they love spending money on. Deep down, everyone knows their answer. And people’s faces light up when they talk about it. The most common one is eating out. No. 2 is travel. Three is health and wellness. And the list goes on. Then I ask them what they like about it — it’s important to get really specific. These answers are really interesting. Most of us have never actually been asked: What if you could spend more on the things you love?

We live in this paradoxical society. On one hand, we’re so puritanical about money. We’re told not to buy lattes or jeans or handbags or travel until we’re 90 and we’ve saved our whole life. On the other hand, we see our friends in Bora Bora on Wednesday on Instagram, and it’s like, how come they get to do that and we can’t?

I want everyone to have a vision for spending on the things you love, because once you do, then you can cut costs mercilessly on the things you don’t. That’s the whole process. Most of us have never articulated what we love spending on, and we’ve never allowed ourselves to imagine the possibility that we might be able to spend even more on it. Instead, we are taught that saving money is the ultimate virtue. But that’s not the point of money. Of course you should save and invest and pay off your debt. But you should also use your money to live a rich life today, without any guilt.

What if you just can’t afford to, though? 
People ask me that question a lot. “Why is it so tough to save money in an economy like this? What are you supposed to do if you’re already cut to the bone?” And I simply reject the premise that money is something to feel bad about, even when you fall behind on your bills or have debt that seems overwhelming. Housing is expensive and inflation is real. But that doesn’t mean that money has to be something we feel bad about. Why can’t we talk about how to plan a way forward that feels good? I wish someone would ask me, “I love handbags, but I feel guilty when I buy them. How can I feel good about that?” That’s a conversation that doesn’t exist in our culture, and I want to show people that you actually can feel good about creating a plan that allows for spending money, even if you don’t have a lot.

So how can you stop feeling guilty about spending money when it’s tight? Most people don’t save enough, and really would be better off if they did more of it. Right?
It’s not enough to simply twirl around three times and say, “Rich life,” and suddenly you can afford to buy a private jet or whatever you want. You’ve got to know your numbers. We all intuitively get that.

There’s four key numbers that I track carefully. I don’t keep a budget, nor do I recommend anyone keep a budget; you do not need to be tracking the price of broccoli or your morning coffee. I encourage people to stop focusing on the $3 questions and start focusing on the $30,000 questions.

So here are the four numbers. First, know your fixed costs. They include your rent or mortgage, your utilities, any debt you have, car payment, groceries, things that stay roughly the same every month. Your fixed costs should be 50 to 60 percent of your take home-pay. The next category is your savings. This includes an emergency fund or perhaps savings for a down payment on a home. That would be roughly 5 to 10 percent of your take-home pay. The next is your investments. This is where the real money is made, and where wealth is created. You want to allocate at least 5 to 10 percent of your take-home pay to investing. Finally, my favorite category of all: guilt-free spending. That should be 20 to 35 percent of your take-home pay. That’s a lot! And you should enjoy it. Spend it on cocktails or a beautiful coat or a vacation or massages or activities with your family. And don’t feel guilty, because you know that your fixed costs, your savings, and your investments are already taken care of.

To make all those numbers work, you usually need to cut back on spending somewhere. What are some cost-cutting measures that people often overlook?
The No. 1 lie we are told about money in America is that buying a house is the best investment of all. So you see a lot of people directing all their energy toward that, and when I ask them why, the answers I get are often very trite: “I don’t want to throw money away on rent anymore” or “I don’t want to pay my landlord’s mortgage” or “I want to build equity.” But a lot of people don’t even know what equity is. There are lots of ways to build equity that are much cheaper and easier than owning property.

In many cases, the monthly costs of renting are much lower than owning. It might cost $3,000 a month to rent versus $6,000 to own, including all the phantom costs of owning, like taxes, maintenance, and insurance. If you rented and took that extra $3,000 and invested it, you’ll make a lot more money in the long run. That’s the key — you’ve got to invest the difference. I’ve rented in San Francisco, New York, and L.A., and I have made more money renting than I would have owning.

I’m not against owning property. I myself plan to buy a home someday. But for now, renting is a better financial decision. When people hear this for the first time — the idea that renting can be a good financial decision — it’s almost like they’re hearing that the sky is green. They’ve heard the opposite for so long. But that’s one of the reasons I did this Netflix show. I’m tired of people feeling guilty for not owning homes, especially if they’re young and not making huge amounts of money. I’m tired of older people telling younger people to cut back on avocado toast when we have structural changes like housing prices and health-care costs that have made it impossible for us to have parity with our parents’ generation. I want people to start feeling good about money today, instead of feeling like they’re not allowed to.

How do people know what they should feel good about spending their money on?
People should get really specific about this. The more you develop a crisp vision of what you want to spend your money on, the more bewildering it is going to be to other people, and that is how it should be. For example, I have a money rule for myself that says I get unlimited spending on appetizers. That’s because when I was a kid, I grew up in a big family with two immigrant parents, and we couldn’t afford to order appetizers. So for me, now, it feels incredibly rich to go to a restaurant, see two appetizers I like, and say, “I’m going to get them both.” For you, it would be different. Maybe your rich life involves going to yoga at 2 p.m. on Tuesdays and Thursdays, or hiring a personal trainer. To someone else, that might sound like a huge waste of money or time. What is frivolous to one person is very important to another.

Another example: My wife and I love to travel. I’ve spent more on one year of travel than I have spent on 20 years of car expenses. To most people, that’s crazy. But for me, it’s exactly right. The point is, you get to decide.

What if you decide to splurge on something and then it costs way more than you anticipated? For instance, you’ve mentioned that your wedding cost a lot more than you and your wife planned, which is pretty common. What should you do when your spending gets out of hand? 
I’m obsessed with phantom costs. These are the invisible costs that most of us never consider, and they can profoundly affect us. Basically, you have to expect them. I have a simple guideline that I use for travel. Whatever the hotel nightly price is, I add 50 percent on top of that. Why? Because it accounts for taxes. Maybe you get a drink at the bar. In other words, I would rather be surprised by overestimating than underestimating. You do not want to be surprised by your expenses, and the bigger the expense, the more the phantom costs.

The ideal scenario is to start early and start planning for phantom costs before you need to pay them. Most people say, “Oh, that would’ve been nice; it’s too late now.” But let’s get real: You can start doing it right now for expenses that are coming in the future. What about a vacation you want to take next year? What about a car repair? It hasn’t broken yet, but it’s going to break at some point in the next five years. All of these are predictable, and they’re an important part of going from defense to offense with your money.

Most of us approach money from a defensive position. We’re reactive: “Oh my God, this expense came up and I have no idea how I’m going to pay it!” I get it. Sometimes things come out of the blue. But if we zoom out and ask ourselves: What are the things that might happen this year? We have an anniversary dinner in August. We have a holiday trip in December. What if we start putting money aside right now, even a little bit? Then you’ll have more time to plan and be proactive.

Even if you do plan, though, sometimes things just cost more. What happens if you do spend more than you hoped?
A good approach is to build in some flexibility. For example, you might shorten a trip or cancel some plans. You don’t want to have your back against the wall when it comes to money. But, finally, sometimes you just overspend on something. You can’t predict everything. That’s life. If you overspend on something, my suggestion is to sit back, take a deep breath, and realize that your future is bigger than your past. You can get back on track, and you’ll learn from this.

How do you say no to plans or expectations to spend on things that you can’t afford? A lot of people are very judgmental about how other people spend their money, and they take it personally when you don’t want to spend your money the same way that they do.
The key phrase to add is for me — it’s hard to argue with that. To go on offense with your money, you can’t subject yourself to the whims of whatever pops up in front of you. You’ve got to have a strong vision of “Is that important to me?” If it is, great, let’s rearrange your money so you can go out to brunch with your friends. But if it’s not, then you’ve got to develop the psychological skills of saying, “That’s not going to work for me, and I’d love to see you another time.”

The Cut’s financial-advice columnist, Charlotte Cowles, answers readers’ personal questions about personal finance. Email your money conundrums to

What If Spending Money Felt … Good?