U.S. Markets closed

NYT Bestselling Author Ramit Sethi Explains The Secrets To Growing Your Wealth

Eric Barker

My friend Ramit Sethi is the NYT bestselling author of I Will Teach You To Be Rich . He’s also well known for his blog of the same name . What’s always interested me about his work is that it’s based on psychology and a strong, practical knowledge of how people really behave.

——————-

The Secret to Managing Your Money: Systems And Big Wins

Ramit:

One of the things that I talk about in all my material is the importance of building systems. The importance of acknowledging that we are, at heart, lazy. We don’t want to do a lot of things that we should do, and so if we can actually build systems that automate a lot of our decision making — like our investing, like our savings, like all those things — then we can actually focus our limited attention and our limited willpower on the things that really matter.

So I take a couple of very intentional approaches. One is big wins, not small wins. So that means [not] worrying about lattes, which is the most common and ridiculous example in money literature. Here’s the truth: even if we cut back on lattes, it’s not even worth that much. $3 or $4 a day really doesn’t add up to that much.

Second of all you’re actually probably very unlikely to do that. When we wake up in the morning, you’re going to cut your caffeine out and you’re going to hate your life? All to do what? Save a couple of bucks.

Then third, every minor decision we make actually makes it more difficult for us to make all these other decisions at all. That’s the basis of being a cognitive miser. And so, instead I focus on the big wins. Things like negotiating your salary, getting your dream job, earning more on the side, starting to invest properly. For example, if you just improve your credit score when you go to buy a house that could be worth over $100,000. How many lattes is that worth?


How Top Performers Negotiate Salary

Ramit:

So let’s pretend I’m the employer. You’re trying to negotiate. I say, “Okay, how much were you paid at your last company?” A typical performer would either blurt out the number or they would say, “Uh, well, I mean, I made 50 but I’m hoping to maybe make 54,000 or 56,000 at this company.” Right there, you just lost the game. A top performer they’d say, “I’m sure that we can get to the salary discussion later but right now I just want to see if this is a good fit for both of us.”

Now those words sound very simple but there’s a huge psychological and strategic difference. Because top performers know that the money is not the problem. The money will come. They’re good enough if they get an offer; they’re going to get a great offer. But they’re also confident enough to push back and say, “I’m sure we can talk about that later but right now I want to see if it is a good fit for both of us.” In other words, they’re evaluating the company as much as the company is evaluating them.

 

The Power of Testing Your Ideas

Ramit:           

I learned how to practice and test different approaches. In this one story I’ve told many times when I need scholarships for college I kept on getting interviews but I kept on losing them once I got to the interview. I finally got so frustrated I videotaped myself and I discovered that in my head I was this friendly, jolly guy but externally I wasn’t smiling at all. I just looked angry. I forced myself to learn to smile and after that I ended up getting more than enough scholarships to pay for my undergrad and graduate school at Stanford.

Number one is the importance of testing. You can do it in every aspect of your life. Don’t just think ideas in your head. You actually have to go external and validate these results. It’s about really getting out of your room, getting out of your head and going external.

The second thing I realized about testing was it doesn’t have to be complicated. This is a classic extreme reach barrier where people say “Hey, wait a minute Ramit. I don’t want to have to build some elaborate testing system.” Well, you don’t. When it came to me testing a way to get myself to go to the gym I took a notepad and I wrote down different permutations of tests that I ran until I found the one that worked. Soon it starts to become part of your just repertoire.

 

Networking Without Being Sleazy

Ramit:    

The fundamental reason that people are afraid and scared of networking is the first archetype that comes to mind is this sleazy, slimy, shammy guy who just rifles out business cards at an event. But in reality the very best networkers, you can actually think of them yourself. We all have friends who are just like cool to be around. They’re always sending you awesome stuff. In emails, they’re like, “Hey, check out this book”, “Oh, you’ve got to see this video I just watched, here, here’s a copy.”

That is actually networking, because they’re serving you first. Now one day if they came to you and said, “Hey man, I know you have a friend who works at X company. I’m actually trying to get connected there. Do you think you can introduce me?” Of course you would say yes… Networking is about a personal relationship. I would rather spend three hours researching one person, and send an incredibly amazing email, than go to an event with a bunch of other people handing out business cards.

 

Books That Can Help

Ramit:

I love this book called “Age of Propaganda” by Aronson and Pratkanis. Most of people have heard of Cialdini and “Influence“, which is a terrific book. This is another book in the same vein and it really explains human nature in a really nice, narrative fashion. It’s all based on experimental research. It’s a terrific book.

There’s a book from the marketing and advertising world which many people have not read. It’s by Eugene Schwartz. It’s called Breakthrough Advertising“. A terrific book which is extremely dense. It took me like a week just to get through the first few pages. I reread it about once a year. Every year I learn new insights.

Then I’ll give you one more also on the idea of testing. This is also from the advertising world. It’s called “My Life in Advertising” and “Scientific Advertising” by Claude Hopkins. All of these are based around experiments. Experimental psychology or experimental advertising.

What you discover is that you can actually discern human nature. Some of it is very obvious. But some of it is extremely layered and subtle. You would only be able to tease it apart if you had experiments and then further experiments and even more subsequent experiments. That’s why I really love these books. They shine a light into why we do the things we do.

——————-

Join 25K+ readers. Get a free weekly update via email here.

Related posts:

What are the three best methods for networking?

What 10 things should you do every day to improve your life?

What five things can make sure you never stop growing and learning?

Read more posts on Barking Up The Wrong Tree »



More From Business Insider

  • Why Advanced Micro Devices, Inc. Stock Closed 11% Lower on Friday
    Business
    Motley Fool

    Why Advanced Micro Devices, Inc. Stock Closed 11% Lower on Friday

    Analyst Pierre Ferragu from financial firm New Street Research set his price target for AMD at $18 per share, arguing that the stock has been priced for a level of success that simply isn't realistic. "AMD's stock price reflects a scenario we don't believe possible," Ferragu wrote. In particular, Ferragu sees larger rival Intel (NASDAQ: INTC) getting its manufacturing act together as we speak.

  • Hate Taxes? 37 States Make Social Security Tax Free
    Business
    Motley Fool

    Hate Taxes? 37 States Make Social Security Tax Free

    Over the course of your career, you'll probably have tens of thousands of dollars in Social Security payroll taxes withheld from your paychecks. Workers are confident that by paying those taxes up front, they'll be able to collect Social Security benefits

  • Now is a ‘once-in-a-lifetime’ chance to invest in US pot companies, investor says
    Finance
    Yahoo Finance

    Now is a ‘once-in-a-lifetime’ chance to invest in US pot companies, investor says

    With some Canadian pot stocks posting triple-digit return rates this year, many retail investors have looked north to pour cash into cannabis. U.S. cannabis companies are worth a lot more than their current valuations suggest since federal illegality has put undue pressure on the industry, said David Wenger, a New York attorney and senior editor of the Cannabis Law Digest.

  • This Refining Giant Is the Latest Energy Company to Give Up on Its MLP
    Business
    Motley Fool

    This Refining Giant Is the Latest Energy Company to Give Up on Its MLP

    The energy sector continues to experience a gigantic consolidation wave, which is causing master limited partnerships (MLPs) to drop like flies. Valero Energy (NYSE: VLO) is behind the latest disappearing act in the space after it agreed to buy out its MLP Valero Energy Partners (NYSE: VLP). Valero Energy launched Valero Energy Partners in late 2013, joining its refining rivals in creating an income-producing vehicle that would steadily buy its parent's midstream assets.

  • What happens if you win Mega Millions' $970M jackpot?
    News
    Associated Press

    What happens if you win Mega Millions' $970M jackpot?

    Despite the terrible odds — one in 302.5 million for those keeping score at home — someone will eventually match all six numbers and win the Mega Millions jackpot, which now stands at $970 million. Here are some answers for someone holding that prized lottery ticket for what would be the second-largest lottery jackpot in U.S. history. Lottery officials recommend winners take a deep breath, put their winning ticket in a safe spot and consult with a reputable financial planner before popping over to the lottery headquarters.

  • Freeport’s Q3 2018 Earnings: What’s the Word on Wall Street?
    Finance
    Market Realist

    Freeport’s Q3 2018 Earnings: What’s the Word on Wall Street?

    Freeport-McMoRan (FCX) is scheduled to release its third-quarter earnings results on October 24. Analysts polled by Thomson Reuters expect Freeport to post revenue of $4.5 billion in the third quarter. Freeport posted an adjusted EBITDA of $1.6 billion in the third quarter of 2017.

  • America’s Biggest Employer Isn’t Hiring Seasonal Employees This Year. Here’s the Reason Why
    Business
    Money

    America’s Biggest Employer Isn’t Hiring Seasonal Employees This Year. Here’s the Reason Why

    For the third year, Walmart won’t be hiring tens of thousands of seasonal employees to provide extra support during the holidays. Instead, Walmart is forgoing the long-standing practice in favor of giving it’s full- and part-time employees more hours and opportunities to earn extra cash. The idea, Walmart says, is to fulfill the wishes of many of its employees.

  • Miami swimwear company sues Sears, Lampert for fraud
    Finance
    American City Business Journals

    Miami swimwear company sues Sears, Lampert for fraud

    A Miami swimwear company this week sued Sears Holdings Corp., Sears CEO Eddie Lampert, and Lampert's ESL Investments hedge fund for fraud in Cook County, Illinois. InGear Fashions is suing for $840,000, claiming in its Circuit Court of Cook County lawsuit that Sears, Lampert and ESL engaged in fraud by not paying the company for its swimwear, which it's been supplying to Sears for the past six years.

  • Cramer's 5 favorite tech stocks right now, including Appl...
    MSFT
    CNBC Videos

    Cramer's 5 favorite tech stocks right now, including Appl...

    Jim Cramer reveals his top "power" players in the information technology space, including consumer tech plays, software giants and a fintech kicker.

  • Business
    Benzinga

    Jim Cramer Shares His Thoughts On Amarin, AT&T, McDonald's And More

    On CNBC's "Mad Money Lightning Round", Jim Cramer said Arrowhead Pharmaceuticals Inc (NASDAQ: ARWR) is a great speculative stock. Cramer is willing to endorse AT&T Inc. (NYSE: T), but he thinks Verizon Communications Inc. (NYSE: VZ) offers more safety

  • Apple will jump 40% in the next 12 months, analyst says
    Finance
    Yahoo Finance

    Apple will jump 40% in the next 12 months, analyst says

    Apple (AAPL) will surge 40% in the next 12 months, according to Dan Ives of Wedbush. The firm initiated coverage of Apple with an Outperform rating and added the tech giant to its Best Ideas List. Ives also slapped a $310 price target on the stock, making him the biggest Apple bull on Wall Street.

  • Hillary Clinton under fire over Lewinsky comment
    Politics
    Fox Business Videos

    Hillary Clinton under fire over Lewinsky comment

    Madison Gesiotto, National Diversity Coalition for Trump, and Democratic strategist Al Mottur on how former presidential candidate Hillary Clinton said that her husband’s affair with Monica Lewinsky was not an abuse of power.

  • Boeing works widebody deals in Asia as Airbus woos a longtime Boeing customer in China
    Finance
    American City Business Journals

    Boeing works widebody deals in Asia as Airbus woos a longtime Boeing customer in China

    Boeing is negotiating potential widebody jet deals with Korean Air, Thai Airways and IndiGo, while one of its longtime, exclusive customers in China is now talking with Airbus. Thai Airways International is weighing buying Boeing's new 777X or Airbus A350s as part of a plan to renew its widebody fleet, a senior executive told Reuters at an airline industry conference in South Korea. Thai Airways submitted a plan to its government to buy 23 jets worth $3 billion including widebodies, but it was returned to the airline's leadership for a fresh three-month review.

  • Why Valero Energy, eBay, and New Age Beverages Slumped Today
    Business
    Motley Fool

    Why Valero Energy, eBay, and New Age Beverages Slumped Today

    Some major market benchmarks managed to hang onto their gains, but the Nasdaq Composite, and Russell 2000 indexes posted losses of 0.5% to 1.25%, and the S&P 500 was virtually flat. Valero Energy (NYSE: VLO), eBay (NASDAQ: EBAY), and New Age Beverages (NASDAQ: NBEV) were among the worst performers on the day. Valero Energy dropped 10% after the refinery company announced that it would buy back all outstanding units of its related MLP, Valero Energy Partners (NYSE: VLP).

  • Business
    Investopedia

    10 Sources of Nontaxable Income

    The Internal Revenue Service defines income as any money, property or services that taxpayers receive. This article will describe a few of the more common categories of nontaxable income. Income That Isn't Taxed 1. Usually, disability benefits are taxable if they come from a policy with premiums that were paid by your employer.

  • Suddenly Toxic, Saudi Prince Is Shunned by Investors He Courted
    World
    Bloomberg

    Suddenly Toxic, Saudi Prince Is Shunned by Investors He Courted

    Now Crown Prince Mohammed bin Salman could become the biggest risk to his own project. Everything changed when Jamal Khashoggi walked into the Saudi consulate in Istanbul on Oct. 2 and didn’t come out. Prince Mohammed, who’s denied any knowledge of Khashoggi’s fate, still has his defenders -– notably Donald Trump.

  • Frustrated GM investors ask what more CEO Barra can do
    Business
    Reuters

    Frustrated GM investors ask what more CEO Barra can do

    General Motors Co (GM.N) Chief Executive Mary Barra has transformed the No. 1 U.S. automaker in her almost five years in charge, but that is still not enough to satisfy investors. Ahead of third-quarter results due on Oct. 31, GM shares are trading about 6 percent below the $33 per share price at which they launched in 2010 in a post-bankruptcy initial public offering. The Detroit carmaker's stock is down 22 percent since Barra took over in January 2014.

  • Business
    Motley Fool

    Why IBM’s Brief Growth Streak Just Stalled

    Unfortunately for its shareholders, there was a speed bump on the road to rebound last quarter: The company reported this week that revenue shrank, and growth in its vital "strategic imperatives" businesses slowed. Seriously, when IBM's legacy mainframe business is the strongest performer in a given quarter, one has to see that as a problem.

  • This Marijuana Investment Firm's 11 Top Cannabis Picks for Explosive Growth
    Business
    Motley Fool

    This Marijuana Investment Firm's 11 Top Cannabis Picks for Explosive Growth

    The marijuana industry has become a hotbed of investment activity, and players of all sizes are looking to get into the action. On top of all the interest from ordinary investors, cannabis companies have seen demand rise from sophisticated institutional investors that have experience with deploying larger amounts of investment capital in search of high-growth opportunities. One of the most interesting marijuana investment specialists that investors can follow is Canopy Rivers (NASDAQOTH: CNPOF).

  • 'You are messing with the wrong guy': The CEO of an American mining company eviscerates Goldman Sachs analyst and short sellers on earnings call (CLF)
    Business
    Business Insider

    'You are messing with the wrong guy': The CEO of an American mining company eviscerates Goldman Sachs analyst and short sellers on earnings call (CLF)

    Cleveland-Cliffs CEO Lourenco Goncalves took time out of his company's third-quarter earnings call to attack a Goldman Sachs analyst and short sellers. It's not the first time Goncalves had a contentious moment with an analyst on an earnings call.

  • Valero to fold logistics arm back into parent company in $950 million deal
    Finance
    American City Business Journals

    Valero to fold logistics arm back into parent company in $950 million deal

    Less than five years after it was created as a master limited partnership, San Antonio-based pipeline and storage terminal company Valero Energy Partners LP is merging back with its parent company.  Valero Energy Partners (NYSE: VLP) announced after close of market on Thursday that it is merging with Valero Energy Corp. (NYSE: VLO), its general partner Valero Energy Partners GP LLC and Forest Merger Sub LLC, a subsidiary that was incorporated in Delaware as a merge vehicle by Valero on Tuesday. Under a merger agreement filed with the U.S. Securities and Exchange Commission, Valero will buy all outstanding shares of VLP stock at $42.25 per share in a transaction that is expected to be worth $950 million.

  • Marijuana investors may lose 90% of their money in Canada, so consider the really big prize elsewhere
    News
    MarketWatch

    Marijuana investors may lose 90% of their money in Canada, so consider the really big prize elsewhere

    Marijuana presents a tremendous opportunity for investors over the next few years. Naïve investors are excited. The reality is that professionals will pick their pockets, and many naïve investors who are excited now will end up losing 90% of their investment.

  • 5 U.S. Marijuana Stocks to Buy Before the Market Lights Up
    Finance
    InvestorPlace

    5 U.S. Marijuana Stocks to Buy Before the Market Lights Up

    As such, the full range of recreational products offered by Tilray (NASDAQ:TLRY), Canopy Growth (NYSE:CGC) and their peers can now be sold throughout Canada. One question for American investors is how that affects U.S. marijuana stocks? What happened in Canada changes little in the U.S. The federal ban on marijuana remains in place.

  • Marathon Petroleum: Analyzing the Short Interest
    Finance
    Market Realist

    Marathon Petroleum: Analyzing the Short Interest

    Will Marathon Petroleum’s Q3 Earnings Beat the Estimates? (Continued from Prior Part) Short interest in Marathon Petroleum The short interest, represented as a percentage of outstanding shares, in Marathon Petroleum (MPC) has risen from 5.4% on July

  • Cleveland-Cliffs Has Strong Q3 2018, Reinitiates Dividend
    Finance
    Market Realist

    Cleveland-Cliffs Has Strong Q3 2018, Reinitiates Dividend

    Cleveland-Cliffs (CLF) released its third-quarter earnings today before the markets opened. Its revenue came in at $741.8 million, which was 24.3% higher YoY (year-over-year), beating analysts’ estimate of $732 million according to the consensus compiled by Thomson Reuters. In its second-quarter results, it beat the consensus estimate.