Personal finance guru Ramit Sethi regularly shares insights that can help people build wealth and avoid common money mistakes. While there are basic principles everyone should follow, such as creating a budget and investing a small portion of every paycheck, your mindset also plays a role.
Sethi recently identified the five money mindset hurdles that can damage your finances. Addressing these obstacles can strengthen your finances.
Hate Spending Money
Sethi says that it’s hate to hate spending money. While some people are great at investing money, those same people may be reluctant to spend any of their money.
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Sethi believes that people should focus on living a rich life. That doesn’t mean getting deep into debt, but it’s okay to make some irrational purchases as long as you can afford them. For instance, a handbag isn’t a necessity, but Sethi will argue that it may be worth buying a handbag or a similar item if it makes you happy over the long run.
Describe Yourself As “Cheap”
The way you talk about yourself and your money impacts the type of person you become. Sethi is against talking down on yourself and saying that you are “cheap” with your money.
It’s okay to be frugal. Frugality means carefully watching your finances but being comfortable with spending money when needed. Cheapness involves going for the product or service with the lowest price, regardless of the quality.
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Hate Paying Taxes
Sethi also believes that you shouldn’t hate paying taxes. People who embrace Sethi’s approach will argue that taxes go toward vital programs and institutions that keep the country running. Someone has to maintain the roads, and that requires tax money.
However, this point had some controversy in the comments. Not everyone likes where all of the tax funds are going.
“I have a fundamental disagreement with how our government spends money and extorts taxpayers, so I will continue to hate paying taxes and still have a healthy relationship with money,” one X user replied.
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Judge Other People For How They Spend Their Money
Some people find it bizarre that someone would spend more than $100,000 on a luxury car. However, Sethi says you shouldn’t judge these people for making those types of purchases. It’s better to acknowledge that people have different ways of living their rich life.
However, Sethi will take a different stance if those high-end purchases result in substantial debt. He is an advocate for spending money instead of penny-pinching with a seven-figure portfolio. However, he is against getting deep into debt and struggling to stay financially afloat just to buy a big truck.
Cannot Spend Money Without Quantifying ROI
Sethi wrapped up his list by saying that it’s bad if you cannot spend money without quantifying the ROI. While it’s good to stay on top of your finances, people with reasonable room in their budgets may want to consider spending some of their money on discretionary purchases. That’s Sethi’s mentality, especially if those purchases enrich your lifestyle.
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