“The best thing you can do is not make a bad decision.”
—Ramit Sethi
The eight-episode series “How to Get Rich” on Netflix promises to solve people’s financial problems in just six weeks. It follows four couples and four individuals on their journey to understanding money, learning how to spend consciously and taking ownership of their financial situation to “live their rich life.” Huge thanks to AAII’s investment editor Cynthia McLaughlin for recommending it to me!
The show’s creator Ramit Sethi is a personal finance expert who digs into the emotional and behavioral aspects of money to show these people how they can improve their finances. But to what end? The show’s title is, of course, marketing. The end goal isn’t to become a billionaire but to know that what you want to do with your money is attainable with the way you’re managing it.
Each couple and individual has a goal in mind: buying a house, retiring their mother, budgeting for a wedding, starting a business, getting out of debt, etc. One of the biggest hurdles for most of them is learning how to talk about money with their partner, something that requires having the same vocabulary with which to talk about it.
Monique and Donnell, who want to buy a house, have kept their money separate for 17 years of marriage. When Ramit asked about their financial accounts, each had about 10 accounts across credit cards, checking and savings! The first thing he recommended was closing the majority of those accounts to consolidate and better visualize how much money they have. Eventually, the couple gets a joint account for their money, though there’s a learning curve for Donnell. Since he grew up poor, when he has money, he wants to spend it even if he doesn’t need something. However, this doesn’t take into account the couple’s debt they want to pay down in order to save for a house. Now that they have a joint account, Donnell’s spending is on full display, so he and Monique can be more transparent about money than when they kept their finances separate.
Frank recently came into a lot of money by winning a reality show and is spending $200 on brunch every weekend! Even though Anthony Bourdain hated the idea of brunch, calling it a “horrible, cynical way of unloading leftovers and charging three times as much as you ordinarily charge for breakfast,” I love a good brunch, but $200?! Absolutely not. Frank was orphaned at a young age, so the rest of his family showered him with gifts and money but didn’t provide a foundation of financial understanding. He has over $200,000 in student loans and says he will take them to his grave. He already has collectors calling every day, and if he doesn’t pay his student loans, Ramit says, “They’ll start taking money from your paycheck and you’ll never be able to buy a house.” After much convincing from Ramit, Frank agrees to put some of his winnings toward his student loans.
When it comes to investing, Ramit has a lot of opinions. He doesn’t think individual investors should have a financial adviser who is taking 1% of their profits as payment. Even at this seemingly low rate, Ramit believes it is too much to pay an adviser and that individuals can make millions more on their own. Unless you have a large portfolio or a complex financial situation, he thinks you should be paying your adviser an hourly fee instead. One couple, Millie and Christian, are in good financial standing but are making a few “boneheaded” moves with their money. Christian uses Robinhood, to which Ramit says, “Robinhood’s fine, but you shouldn’t be using it.” Robinhood uses a day-trader approach to investing, enticing individuals to make nonstop portfolio moves when they’re better off sticking with the investments they have. The look on Ramit’s face was priceless when Christian said his buddy mentioned “puts and calls,” the language of options trading. Options are extremely risky investments that are best left to the professionals. This is another way individuals can get pulled into shiny things they don’t understand that will ultimately lead them to financial ruin. Ramit declared, “Investing should be boring!”—I couldn’t agree more!
Meanwhile, Millie’s job is unmistakably a multi-level marketing scheme. Once Ramit scratches the surface of how she feels about the job, we discover that Millie was awarded a car at a certain level of sales, but if she doesn’t reach that level every month, she is saddled with the entire car payment. The car payment is $660 per month, but the company writes her a check for $500 per month. At the time, she had failed to reach the level of sales required for the $500 check eight times and had to pay $660, which was not accounted for in the couple’s budget. Even though this seemed like a fulfilling job to Millie, it quickly became a financial trap. Ramit convinces her to eventually find not just a better job, but a career that can support her end of the relationship.
Other wild stories from the show include someone living paycheck to paycheck who has a checking account for their dog but not a 401(k) retirement account and a frivolous spender who gets $25,000 per month in alimony and blows it all on Rodeo Drive. There are many great examples of what NOT to do with your money, but if you end up falling into a financial hole, the show provides ways to reverse that fortune. Money can be a scary and overwhelming thing, but the more you’re able to discuss it proactively instead of waiting until something is a huge problem, the better off you’ll be. Taking action over the small things, like paying one bill, will give you the courage to tackle the big things, like your goals.
