I hope everyone is excited for Memorial Day weekend. I can’t believe it’s here already. The kids will be out of school soon. We’re not too far from having a middle schooler.
I had been hoping to write a little more often, but the dog business has been busy. Also, my wife is traveling all the time now. Juggling the kids and their activities is a lot.
I don’t follow too many personal finance gurus these days. I’ve covered the basics. The gurus can be great if you are starting out. After a while, though, there are diminishing returns. That’s why I try to write about a new product or service that I’m enjoying.
One of the new things in personal finance is not really new – Ramit Sethi has been around forever, but he has a new Netflix show. I wasn’t expecting much, but it’s very, very good. No, it’s great! I love how he helps solve people’s money problems. He kind of guides them to the best solution for them. I think it’s great how he meets them where they are.
Ramit is a little complicated. While it seems pretty clear, he’s a personal finance guru now. There was a time when he came up with this thing called the Seagull Theory and wrote an article about how his website wasn’t about personal finnace. I think he kind of pivoted to psychology for a bit, but it seems clear back to personal finance.
I wanted to cover two bits of advice that he goes into
Ramit on Rent vs. Buy
Ramit is firmly in the rent camp. It’s okay to buy, but he thinks most people benefit from having the freedom to rent. As he says in the Netflix show, renting is the ceiling of what you’ll pay. You won’t pay more. When you own a home, a mortgage is the floor. You have to pay to fix stuff up.
It’s a good point, but it really only works for that lease. A lot of people saw rents go up a lot in the last year. Of course, many of them complained. As Beyonce might say, they should have put a ring on it (buy instead of rent). There are a lot of people in our area of Newport, Rhode Island, that can’t afford to live anywhere in the city. They are completely priced out of the market and have to move away from their friends and family. That’s a sad situation.
If we wanted to rent our house now, it would be $3500 a month. Our mortgage is a 15-year one, but it’s still only around $3000. If we had a 30-year mortgage, maybe we’d only be paying $2400 or so. We’re about four years away from just paying the property taxes, which is a lot less. We still have all that pesky maintenance to take care of.
The other thing is that we’ve built up a lot of equity. We bought it for $400,000, and we now have over $700,000 in equity. We could sell and use the money to pay rent for years.
Ramit’s argument may be that when you rent, you can save and invest the extra money that you aren’t paying on the mortgage. This is great, but I know a lot of people won’t save and invest. Maybe they’ll start to, but then life happens and derails them. Homeownership forces you to save. That’s why most Americans have most of their net worth in their homes.
This may sound like I’m against renting. We actually rented a home when we lived in Silicon Valley for six years. You needed a lot of money to get a downpayment on a home competing with the tech millionaires.
In the end, you have to do what’s right for your situation. It helps to run the numbers. It also helps to understand all the angles.
Ramit on Teaching Children About Money
Ramit recently went on a rant that we shouldn’t teach kids personal finance. Here’s his rant:
Should personal finance be taught in HS???
Thanks to @ramit for joining @awealthofcs and @michaelbatnick on this special episode of TYB! Link down below for the full episode out now on YT????
— The Compound (@TheCompoundNews) May 22, 2023
Obviously, I don’t agree as I have a Kid Wealth to show for that.
He complains that high school teachers aren’t going to teach it. Or that they would take away something. You can teach compound interest as part of math class. It doesn’t require taking anything away. However, I suppose if you wanted to take something away, you could remove trigonometry.
He also asks who is going to create the curriculum. Fortunately, there are tons of curricula already out there. He makes a poor assumption that bad banks would create the curriculum. Nope, I don’t think either Wells Fargo or Bank of America has one.
Then he pivots to an unrelated rant about politics. It’s very weird whataboutism. I guess you could say that we shouldn’t teach kids to read either because books are political now. That doesn’t make any sense.
Finally, he says that he’s failed to teach kids about money. He then says that if he can’t do it, then the average teacher stands no chance. I’m really good at adding two numbers together, but when it comes to teaching kids to do it, I’m probably not that good. Do you know why? I have taken no classes in education. Personal finance is relevant to kids because they want to be able to buy stuff.
It’s just wrong on every level.
However, with all that said, go watch his Netflix show. I think he makes a lot more great points.
Rent vs buy is such a “it depends” thing. Our mortgage is only $780 a month, then another $650 for property taxes. To rent my house in the inflated Dallas area market would easily be at least $3,000. But, the upkeep is crazy. I pay $100 a month just for pool chemical maintenance, but home repairs cost so much. I was meeting with a financial planner, and she asked to see our budget, and then kind of wigged out on our repairs budget being so high. I told her ours is high because we actually know what we spend. Most people dont.
Buy is better for the long term if the real estate market keeps rising. Rent is okay for the short term. Our tenant at our duplex pays 105% of our mortgage every month. You can’t beat that. Repair and maintenance are expensive, but you can mitigate some of that with DIY.
Not a huge fan of Ramit. I’m not sure why.
Look I’ve rented my entire journey to FI, which was 16 years. Had I bought a property when I first started working, my net wealth would easily be doubled haha thanks to the huge run property has had here in Australia. I don’t regret it though, as the freedom I got to travel australia and the world was pretty valuable to me. But the cash on cash returns of leveraged property investing shouldn’t be discounted. I actually just finished a small property development and the COC return would have been better if we just bought and held city property… ugh!. Anyway, I liked Ramits Netflix doc too, but as you said, courses for horses- called ‘personal’ finance for a reason
Is Ramit the guy who wrote a book about how to be rich at age 26 and not being rich? If so, Brilliant marketing.
The guy seems to just focus on fame and money. I’d rather have my family. Ramit’s low self-esteem and narcissism isn’t attractive.
Lazy Man says
I don’t know if he was rich or not at age 26. I know that I used his PBwiki software that he was highly involved with in or soon after college (I think he went to Stanford). So perhaps he could have been rich. I think he tends to use “rich” as “having your best life” though.