These 3 Tips From Ramit Sethi Changed How I Think About Money

Not all financial advice resonates with me, but these tips did, in a big way.

Of the many personal finance advisors out there, my favorite by far is Ramit Sethi. He's the author of I Will Teach You To Be Rich, and what I noticed from the beginning is that he talks about money differently than most. He doesn't shame his audience for spending money, and in fact, he encourages people to use money to build their own rich lives.

A few pieces of Sethi's advice really stuck with me. These three tips have helped shape my own approach to personal finance, and they're responsible for a lot of the things I've done right.

1. Find your money dials

Money dials is Sethi's term for the different areas where we spend money. He says there are 10 that tend to be the most popular:

• Convenience
• Travel
• Health/fitness
• Experiences
• Freedom
• Relationships
• Generosity
• Luxury
• Social status
• Self-improvement

Each person's priorities are different. By finding your money dials, you can adjust your spending habits to match them. The idea is to cut spending in the areas that don't matter as much and free up more money for the areas that do.

For example, I've turned up my travel money dial quite a bit. It's something I love to do, and I've found that I enjoy it much more when I'm not on a tight budget. And even though I use travel credit cards to help bring down the cost, a large portion of my disposable income goes toward travel.

I'm able to invest more in traveling because I don't spend as much on other money dials, like health and fitness. That's still important to me, it's just not something I feel the need to spend much money on right now. I'm fine without a nutritionist, personal trainer, or a membership to a high-end gym.

2. Forget frugality, focus on earning more

Sethi is all about maximizing your earning potential, not trimming your expenses to the bone. He often points out that there are limits to how much you can cut, but not to how much you can earn. Many of his products teach students how to boost income by finding a better job or launching a business.

In my experience, I got much better results money-wise when I focused on increasing my income. I've been broke before, and honestly, the typical advice about saving more did me no good. I had already cut unnecessary expenses. I couldn't free up $300 per month by eating out less, because I wasn't eating out to begin with.

Cutting costs is fine if you think there are some places where you're spending too much, but it can only get you so far. For most people, it's going to be difficult to cut $5,000 or $10,000 in yearly expenses. Even if you do, it's not like you can keep cutting more, year after year.

Raising your annual income by $5,000 or $10,000 is likely more realistic. It also doesn't require you to lower your quality of life, which is often the problem when you focus entirely on cutting spending. And if you make raising your income a priority, it's something you could continue to do going forward.

3. Get the big things right and stop asking $3 questions

People often spend way too much time and energy on small, insignificant financial choices. Sethi recommends that you forget about those and focus on the money moves that really matter, such as investing money every month and avoiding excessive living expenses.

This issue has come up several times in Sethi's podcast. Couples will stretch their budget for an expensive home or car, and then wonder later if they should get rid of a $15 streaming service to save money.

It makes far more sense to prioritize decisions that make a sizable impact. When you get these right, you don't need to sweat the small stuff. Here are some examples of big things to focus on:

• Automatically investing your money
• Negotiating a higher salary
• Keeping your housing costs down
• Boosting your savings rate

All these actions can be worth thousands of dollars per year. You're not going to manage that by cutting out the occasional trip to Starbucks or canceling Hulu.

The great thing about these tips is that in addition to helping you financially, they also improve your quality of life. I've definitely seen positive results by using them in my own life, and I'd recommend them to anyone interested in getting better with money.