The cost of living crisis and inflation are today’s biting financial challenges, leading many of us to turn to friends, family or financial advisers for guidance.
But millions are also turning to the streaming services, which are churning out a lot of financial self-help content, not least Netflix, most recently a programme called How to get Rich, which unexpectedly made it into the Netflix Global Top 10.
So what’s being said here that’s new? The show is hosted by Californian personal finance coach Ramit Sethi, who has a bestselling book and podcast. He delivers a personal finance version of tidying up guru Marie Kondo’s approach to happiness: his basic idea being to “spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t”.
Sethi, 40, started his financial journey as “a dude in a dorm room” at Stanford University, after he lost half a college scholarship on the stock market. He recommends budgeting and, for investors, low-cost Vanguard funds. He warns against day trading, telling one young high-earning man on his show that his £100,000 in the red via trading on Robinhood is gambling, not investing. Plus, he’s great on how to have the money conversations that we all need to have, particularly if you’re part of a couple that disagrees on the fundamentals.
It’s common sense stuff, eloquently explained. For example: “We will spend our entire life agonising over $3 questions and completely ignore the $30,000 questions. A cup of coffee every day will make no difference in your life. But, are you paying a 1 per cent fee to a financial adviser, which will actually take 28 per cent of your returns directly out of your pocket in fees?” But it’s hardly rocket science.
The show’s success comes partly from our inner voyeur — viewers want to see how much the colourful case studies earn and spend. From a drag queen in debt to a divorcee with a trust fund, plus a charming couple saving for a dream wedding, we get excruciating details about their bank balances and money troubles.
But the series title is misleading. This is not about doubling your money overnight or even about growing it faster. And, at a time when energy bills are going through the roof, Sethi’s over-repeated and wearingly enthusiastic catchphrase of “saying YES to a Rich Life”, is somewhat hard to take. Maybe I’m too British.
I think Sethi has won his viewers because he delivers what seems like the opposite of traditional money advice. Instead of focusing on saying “no” in order to save, he encourages people to say “yes” to spending whatever their finances allow.
This focus on enjoying the money you have — “thinking big” in order to “feel rich” — is interesting. His top three takeaways focus on the psychology around meaningful spending, changing patterns ingrained in childhood and making the switch from saving to spending.
I caught up with him to delve deeper. He explains: “Rich could mean travelling two months a year, a beautiful cashmere coat, picking up your kids from school every afternoon. The key here is that your ‘rich life’ is yours, nobody else’s.
“The biggest surprise is that people don’t think about it at all. Most of us wake up, eat breakfast, go to work, answer some emails, come home and watch TV and that’s a pretty good day. But when I ask people ‘What it is for?’ I get back answers like ‘retirement’. In fact, when I ask ‘What would you like to spend more on?’ there’s often no answer.”
Sethi recalls a man in Washington who said if he were to quadruple his spending, it would be on eating out. He initially joked: “I’ll probably have to watch my weight because I’ll be eating out four times a week.” But after some thought, he said: “I would take my family with me to these Michelin star restaurants because they could never afford to go on their own.”
For Sethi, this realisation is “the beautiful part of money”. “At the beginning level of personal finance, it’s always about the ‘what’. What can I get? Can I get that jacket? I have no problem with that. But at the highest level of money, it is always about ‘who’. Who do I get to bring with me? Who can I surprise with generosity?”
He recommends we all create a one-month, a one-year or even a 10-year bucket list — and working out what it costs. “The important thing is that you find a way to use your money to get excited versus simply paying bills.”
Sethi recognises that our childhood dramatically affects our views of money, but argues that those views can be changed.
“When I speak to people who have accumulated a significant amount of money and yet feel anxious about spending it, we’ll often spend time tracing it back to a conversation they remember from when they were six years old with their parents around the dining table, and they will realise that they are haunted by the ghosts of what their parents or even their grandparents said.”
He believes the characteristic of people who are good at saving, but who struggle with spending, is that they simply never took the time to develop the skill.
And it’s important not to miss the opportunity to spend, particularly in the prime spending years between the ages of 40 to 60. “Before 40 most people don’t have that much money. After 60 there are potential health challenges, whether it be you, a partner or a family member who you want to take care of. So, if you imagine this prime spending between 40 and 60, you start to ask yourself: ‘Wow, I have a window during which there are certain things in life that I can likely only do now.’ ”
Ouch. That hits home. I’m in my 40s so I will start a conversation with my husband around our 10-year spending plan.
Do I feel richer after talking to Sethi? No. Would I let him dissect my financial life and see my bank balance? Probably not.
But I’d watch his next series, if only to learn from the folly of others. And maybe also to feel a little smug that my finances, though not perfect, are in better shape than they could be.
Moira O’Neill is a freelance money and investment writer. Twitter: @MoiraONeill, Instagram @MoiraOnMoney, email: moira.o’email@example.com