“Is that your unicorn palace?”
I blinked. Parsing the connotations brought to mind by the unfamiliar expression.
Fanciful.
Imaginative.
Luxurious.
Magnificent.
Opulent.
Before settling on unlikely.
Hopes and dreams territory. A heavenly nirvana. The ultimate happy path. Winning at life.
The framing of the expression suggests disbelief at the implausible or impractical nature of the ask.
Did unicorns exist? Possibly. The Scottish certainly believe so, adopting it as their national emblem, said to represent “innocence, purity, and power“. Ignoring the irony that the pure are powerless, while those in possession of any real power lost their innocence long ago.
Did all unicorns reside in palaces? Or were unicorn palaces the exclusive domain of overachievers and the beneficiaries of generational wealth?
As is so often the case, reality differs markedly from legend. Science tells us that some 38,000 years before Genghis Khan led his horde across the Steppe, the first humans to arrive in the region encountered an unusual animal: giant furry rhinos. These rhinos were said to be nomadic and solitary by nature, rarely encountered at the best of times, before climate change rendered them extinct.
But their legend lived on.
Handed down from one generation to the next.
Stories embellished and exaggerated with each retelling. Until an animal with poor eyesight and the grace of a lumbering tractor had evolved into a sleek mythical beast possessing magical properties.
Symbolism. The truth no longer mattered. Certainly not enough to get in the way of a good story!
Recently I watched a couple of episodes of Ramit Sethi’s tv show on Netflix. The premise behind the show is simple, think Grand Designs or Queer Eye but for money. Celebrity host performs money makeovers for reality television actors playing members of the general public.
The casting ran the gamut of clichés, striving to tick all the “people like me” inclusion boxes. Entitled affluent white people. Black working poor. Vain gay men. Naïve young women. All making bad choices. All lying to themselves about the reasons why.
While the program is a thinly veiled advertorial for Sethi’s “I will teach you to be rich” brand of financial coaching, his approach intrigued me.
Choosing to focus on the positive.
Enabling the attainment of dreams via automation, conscious spending, and self-awareness.
Teaching the skills required for sustainable financial self-sufficiency.
Recognising that winning the money game is achieved via behavioural psychology, not spreadsheets.
It is a variant of the approach adopted by many of the good personal finance writers today. Pete Matthew. The team behind Monevator. Michelle Freeman. George Agan. Mrs Flamingo. Nick Carr. Sonny Bailey. Nick Maggiulli. Lawrence Yeo. And in particular, Morgan Housel.
In their own way, each encourages the audience to ask themselves “why”? Why do I do this? Why do I want that? Why do my behaviours not align to my professed beliefs.
Their good stuff focuses on the timeless rather than the fashionable.
Choosing substance over clickbait or fleeting news cycle headlines.
Stories that will continue to resonate with readers long after their blogs “go dark”.
Choosing (for the most part) not to serve up empty promises of easy answers or paint-by-numbers checklists. No one-size-fits-all plans. None of the frugalista, penny wise pound foolish, nonsense that dominates the personal finance niche. To quote Sethi, focussing on the “$30,000 questions, not the $3 ones”.
I once shared a youth hostel with this old guy who claimed to be a globetrotting emergency medical physician. Whenever a natural disaster struck, he would jump on the first available flight to provide aid to those in need. In between disasters, he spent his days hanging out at youth hostels telling tall tales and charming the pants off female backpackers.
Over a few beers, the guy spoke of “aequanimitas”, which meant always remaining calm and composed. Few things in life were as hectic and stressful as emergency medicine, so having a checklist containing sequenced rules of thumb helped him avoid making mistakes in the moment.
I don’t remember the entire list, but it went something along the lines of:
- First fix breathing, bleeding, and circulation.
- Assume the worst until proven otherwise.
- Watch for common warning signs.
- Everyone lies. People are idiots. Trust no one. Believe nothing. Always do your own thinking.
- You will make mistakes. Learn from them.
- Treat others as you would like your closest loved ones to be treated.
- When in doubt, do what is best for the patient.
I remember admiring the guy’s approach and storytelling. Though some of that admiration was grudging, after the pants he charmed off were those of the pretty backpacker I had been chatting up!
Sethi applied a similar approach to his television money makeovers.
Starting with an evidence-based review of finances and cash flow. Reading through bank, brokerage, and credit card statements. Identifying anomalies. Gaps. Inconsistencies. Warning signs.
Did the punter regularly spend more than they earned?
Were they haemorrhaging money to consumer debt, credit card interest, or student loans?
Could they weather a financial storm, or predictably unpredictable “life happens” event?
Did they have the balance right between living for today and saving for tomorrow?
Were those savings being invested?
Were those investments wise? Cost-effective? Efficient?
Then he met with the punter in person. Attempting to get a sense of their personal circumstances. Their goals and challenges. Whether their behaviours aligned with achieving their desired outcome.
Being television, there had to be manufactured drama. A couple on the verge of divorce. A Ferrari driving socialite who prowled along Rodeo Drive. A reality television star who was trying and failing to finance an influencer lifestyle on a beer budget. A parasitic vampire who financed their lavish lifestyle via eye-watering levels of child support.
One by one, the characters received Sethi’s advice. Paid it lip service by tinkering around the margins. Thanked him for his efforts with vague promises about big future changes they would make. Then they disappeared from the narrative.
Which is a fair reflection of the realities of any advice-based profession, from coaching to counselling to therapy. The adviser can provide clients with best advice in the world, but can’t make them listen.
Sometimes they get to vicariously join the client for part of their journey. Watching like a proud parent as their client stumbles, grows, and (hopefully) eventually succeeds.
More often, they attempt to equip the client with the tools needed for success, and then wish them safe travels. Never learning how the journey ended, or what adventures occurred along the way.
The tag line for the tv show was “what is your rich life?”. This involved the client articulating their happy place. Sethi then helped guide the client to construct a substantive long-term plan for making that happy place attainable.
The work of years or decades, not the easy answers promised by a 20-second TikTok or 280 character Tweet.
None of the “rich life” visions involved a magic number. No net worth, savings rate, or total market return calculations. All were expressed as variants of having “enough“.
Enough to not worry about money.
Enough to pursue the things they enjoyed free from guilt or pressure.
Before watching the show, I was vaguely aware of the existence of Sethi’s book, but hadn’t encountered his work. I did a bit of bit of background research, and turned up a list of money “rules” Sethi had published on Twitter earlier this year. His financial equivalent of the aequanimitas list.
Combining that Twitter thread with the lessons from the tv show, I’ve paraphrased the list below (and screened out one item about flying business class for flights exceeding 4 hours):
- Always have 1 year of emergency fund cash
- Of your gross income: Save 10%. Invest 20%. Spend no more than 30% on housing (including rent/mortgage + property taxes + renovations + repairs + service charges + utilities)
- Be able to pay in full for large expenses before spending (e.g. weddings, holidays)
- Spend whatever you want on education and health
- Buy the best and keep it for as long as possible
- Earn enough to only work with people you respect and like
- Prioritise time outside of your finances spreadsheet
- Marry the right person
The list is an interesting combination of lifestyle enablement today and saving for tomorrow.
Accepting that longevity is uncertain. There are no guarantees we will live to see retirement, nor be fit and active enough to enjoy it should we be fortunate enough to do so.
Recognising that any plan focused on self-discipline, self-denial, or delayed gratification is unlikely to be sustainable over the long term. Which means it will ultimately fail.
Understanding that behavioural psychology is the key to winning the money game.
Is Sethi’s “rich life” a unicorn palace? Possibly. New branding applied to an old concept: visualisation.
But without a goal to aim at, each little step we take will be directionless. Neither taking us towards nor diverting us away from a target destination. Instead, we wander aimlessly. Spinning our wheels. Treading water. Marking time.
For those of us fortunate enough to eventually succeed in attaining those “rich life” goals, chances are high that lived reality will contain only a passing resemblance to long imagined fantasy. Giant hairy rhinos where we envisaged beautiful magical horses.
But whatever form reality takes, if we followed the common path described by any of those personal finance writers, we will have enjoyed a “rich life” throughout the journey.
References
- Agan, G. (2023), “Principles Personal Finance“
- Bailey, S. (2023), “NZ Wealth and Risk“
- Carr, N. (2023), “Your Money Blueprint“
- Davis, J. (2018), “The Siberian unicorn lived at the same time as modern humans“, Natural History Museum
- Freeman, M. (2023), “Fire and Wide“
- Housel, M. (2023), “Collaborative Fund“
- Maggiulli, N. (2023), “Of Dollars and Data“
- Matthew, P. (2023), “Meaningful Money“
- Money Flamingo (2023)
- Osler, W. (1904), “Aequanimitas“, McGraw-Hill
- Sethi, R. (2023) , “10 Money Rules“, Twitter
- Sethi, R. (2009), “I will teach you to be rich“
- Studio Lambert (2023), “How to Get Rich“, Netflix
- Yeo, L. (2023), “More to That“
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Donna 21 May 2023
Why did you remove the business flight? I actually think it is sound advice, as it makes such a difference to one’s wellbeing and ability to recover after a long flight! Part of FI is being able to afford a few luxuries in life.
{in·deed·a·bly} 21 May 2023 — Post author
Thanks Donna, that made me laugh out loud. Of all the possible points from my story, this was not the one I had expected being the first to be commented upon!
Basic value for money and opportunity cost.
The value for money piece:
It is the same plane. Takes the same amount of time to arrive. Experiences the same delays and the same lost luggage. Screens the same movies. Serves up much the same microwave meals, albeit with fancier cutlery and a slightly nicer wine list. Allows similar “plane sleep” with all the background noise, awareness of movement, strangers snoring and farting and coughing and talking in close proximity… though I grant you the experience is less bad the closer you are to the front of the plane.
Is that really worth paying three times the price for? Some would say yes. I’m not one of them. For what it is worth, if the flight was 1/3 the time, then I’d be all for it. An epic 20+ hour odyssey flight is horrible however much you pay for it!
The opportunity cost piece:
Over the years I’ve done the London to Australia round trip more than 20 times. If I use the prices for flights next week as a guide, the difference between flying economy and business class is roughly £4,000.
At today’s purchasing power, 20 trips x £4,000 each = £80,000
That is £80,000 that I retain, rather than gifting to the airlines. The experiences enjoyed, holidays taken, and memories made at the destination are exactly the same irrespective of which seat I travelled in.
What else could I put that £80,000 towards? Well tuition for one kid to go through 4 years of university is roughly £40,000. I have two kids. So it is the difference between each of them starting at 0 versus starting adult life underwater by the amount of a small mortgage, just by my making that one simple lifestyle choice.
I may not get to enjoy the five minute head start on boarding or collecting my bags, nor then envious glances as the peasants and peons all file past to shoehorn themselves into cattle class. But I’m comfortable with that.
My general philosophy on life is if something makes a person happy, and doesn’t harm anyone else, then go for it. So if you derive £4000 worth of pleasure from sitting in business, accept that you’ll still enviously glance at those seated ahead of you in first class, and acknowledge that price of the ticket doesn’t make the flight any shorter, then you do you 😊.
A.M. 21 May 2023
Long (many years) time lurker… Thanks for all the great writing!
One key thing your summary missed is that the money rules supposed to be personal. Those you’ve laid out are Ramit’s personal rules. His ‘system’ would encourage one to develop their own – which also incorporates circumstance. The intent is to simplify decision making by defining what one values up front; “money dials” in his vernacular. He values business class flights, appetizers, and books.
Appreciate all your effort with this blog and sovereign quest!
{in·deed·a·bly} 22 May 2023 — Post author
Thanks A.M, for the comment and having the perserverance to become a long time lurker.
The personal in personal finance.
Agreed everyone has different priorities and goals. Derives pleasure or pain in varying degrees from different stimuli. Has a multitude of goals and challenges, ranging from health to family to culture to peer pressure.
Any rules of thumb are just that, a tool to be used (or ignored) as appropriate to the individual. They prompt thought, and conscious decision making, a guide as opposed to an itinerary. My list would be a bit different from Ramit Sethi’s or those suggested by Scott Pape, or yours for example.
Which is what makes people fascinating, we are all a little bit different from each other. Which in turn is why understanding the behavioural psychology aspect is so key.
Fire And Wide 22 May 2023
Hey Indeedably – that was a bit of a (nice) shock reading my name this morning whilst enjoying my morning cuppa in bed! Thanks for that, appreciated. Some great blogs listed there.
You are so right, it would be much easier to tell the story the large audience wants to hear – a simple, easy, one-size-fits-all solution to a life of financial freedom. Tips and tricks while missing the big picture. But I just don’t think that’s helpful and it certainly wasn’t how it worked for us.
To me, it seems a big part of why so many people give up, with reality getting in the way per usual! Getting the right mind-set and priorities goes way further than any spreadsheet tinkering. Though I do still love a good spreadsheet obviously 😉
I haven’t seen Sethi’s show but sounds like an interesting one on the right tracks. Though I did have to laugh at the manufactured “people like me & drama” casting – having been on a TV show like that many moons ago myself, could all too easily relate!
At least it wasn’t your future wife that guy charmed the pants off! A good list though. Basics first, the 80/20 approach to getting things ‘right’ goes a long way.
Cheers again!
PS Fwiw, I have been known to indulge in a business class flight or two – but only on the cheap through travel hacking obviously!
{in·deed·a·bly} 22 May 2023 — Post author
Thanks Michelle.
I subsequently watched a couple more episodes, and realised a couple more things about the setup. The participants appear to have signed up for a six week coaching programme, at which time they road off into the sunset clutching a branded journal and having prepared a “conscious spending” plan (i.e. evidence based budget).
Which appears to explain the lack of substantive outcomes, the time periods were too short to achieve material change beyond the one-off quick wins (e.g. pay off a credit card, apply for a better paying job, etc). Doesn’t make it bad of course, just unsatisfactory in a junk food kind of way.
If business class makes you happy, have at it. No judgement here.
Martin 24 May 2023
Hi Indeedably,
Another great post!
Question on the application of point 2:
“Of your gross income: Save 10%. Invest 20%. Spend no more than 30% on housing (including rent/mortgage + property taxes + renovations + repairs + service charges + utilities)”
Why would this be gross income? It seems a little odd to base the numbers on gross when (ignoring salary sacrifice) you only have net to play with?
Just interested in an opinion on that, validating whether I’m too focused on tomorrow rather than today!
Thanks
Martin
{in·deed·a·bly} 24 May 2023 — Post author
Thanks Martin.
I can’t speak for Ramit Sethi, these are his rules of thumb. On his tv show, several times he cited 30% gross income as being the upper bound for living a “rich life“. He is not alone in selecting that portion size however, Scott Pape of Barefoot Investor fame also uses a 30% share of income for housing, but in his rule of thumb it is 30% of disposable income.
For mine, focussing on disposable income makes it easy for a person to slip into the trap of passively accepting their taxation burden, as opposed to proactively managing tax like they would any other class of expenditure. That has important implications for their financial progress, as for anyone honestly earning a decent wage, taxation will be one of their two largest outgoings alongside housing costs.
A pie chart showing where our money goes looks very different if income tax (PAYE + NI) accounts for 35-40% of the pie, followed by another 30% consumed by housing. All our non-housing lifestyle costs are now being met from the remaining 30-35%. Food. Clothing. Childcare. Holidays. Gifts. Savings. Investments.
You highlight salary sacrifice as an example, and it is a good one, but others also exist. Freelancing through a limited company. Running an actual business. Investing through a personal investment company or dynastic trust. Consciously choosing tax residency. The list of potential options is as broad as our imaginations and risk appetites, making paying tax an optional lifestyle choice. Of course some of those options require a certain level of wealth before the benefits outweigh the fees involved in establishing and operating them.
Which is another way of expressing Sethi’s regularly made point about focussing on the big stuff and not sweating the small stuff. Choosing to clip coupons or avoid avocado toast isn’t going to move the needle. Choosing how much rent/mortgage interest you pay, or whether to incur National Insurance on your earnings, most certainly will.
weenie 28 May 2023
The thing is, many ‘small stuff’ can lead to big stuff.
Pennies make pounds and whilst I agree that priority and more effort should be given to the big stuff, I’m not sure that ignoring the small stuff is the right way to go. It might not move the needle much but even small improvements can make a difference (eg 1% improvement theory).
I haven’t seen Sethi’s show (yet), am sure I’ll probably catch up with it at some point.
Anyway, I’m with you on the flying business class – on my last trip back from Hong Kong, I was bumped up to Premium Economy from Economy, which was nice but I wouldn’t have paid for it!
{in·deed·a·bly} 28 May 2023 — Post author
Thanks weenie.
True. But it is also true that nobody ever saved their way to being rich.
Sethi’s point is most people would be better off investing their time in improving the marketable value of their skills to obtain payrises or finding a more sustainably affordable neighbourhood to live in. Consider the vastly different cashflow profile available to somebody relocating from London to a commuter town in Kent or Hertfordshire for example.
Traditional personal finance focuses on the easy wins, clipping coupons or brown bagging lunch for example. The equivalent of financial junk food. Quick, convenient, but ultimately unsatisfying.
It is the difference between the life changing skills someone starting out might learn from reading Monevator for example, versus the immediate gratification of UK Money Blogger network. In 5 years time, the Monevator reader no longer needs help, while those consuming content from the other end of the personal finance spectrum will still find themselves sweating their basic cost of living cashflows.
Of course there is no reason why a person couldn’t do both, but the outcome of the former is going to shift the needle far more than the latter.