To get their finances in order, most Americans only need to make minor, practical changes to their spending and saving habits. But sometimes it takes an inspirational pep talk to effect change. Other times, it takes a “hot take” to light the fire.
Ramit Sethi, entrepreneur, media personality and author of the 2009 New York Times bestseller “I Will Teach You To Be Rich,” recently posted some hot financial takes to his 175,000 followers on TikTok. Here’s what a few of his fellow money experts had to say about them.
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‘Driving a high-end luxury car doesn’t mean they’re wealthy, but they’re probably wealthier than you.’
Let’s call this a “not-that-hot” take. Of course, someone driving a $100,000 car owns a ride that the average driver can’t afford. As Aaron Razon, personal finance expert at Coupon Snake, mentions, a luxury car owner doesn’t just have to afford the large upfront price, but pay for expensive maintenance and repair costs too.
“High-end cars are not just expensive to purchase, but are also expensive to maintain, so if someone can afford it, and you can not, then it’s probably a sign that they are more stable in their finances than you are in yours; but it could also be proof and a pointer to their extravagance and priorities as well,” said Razon.
However, millionaires prefer to spend their money on practicality rather than price. Many wealthy people know not to spend on depreciating assets, and the financially irresponsible tend to be motivated by a boost in self-esteem that a status-symbol vehicle can provide.
“I have seen people who are behind on their credit cards and paying 25% interest driving a Bentley. Financial stupidity is real,” said Anupam Satyasheel, CEO and founder of global financial advisory and corporate services firm Occams Advisory.
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‘You don’t need to be debt-free before you start investing.’
Sethi’s assertion about investing before paying off debt isn’t necessarily a hot take. But it’s certainly a credible opinion, even if there are still some people that believe the opposite to be true.
The truly rich often use debt to grow their wealth. However, according to Melanie Musson, insurance and finance expert at Clearsurance.com, the decision to pay off debt or invest your money depends on an individual’s unique financial position.
“Is it best to invest before you’re debt-free? That depends,” said Musson. “If your debt is high-interest, it’s better to pay it off before investing. However, if your debt is low-interest, you should start investing while continuing to make payments on your debt.”
‘Too many of you are wasting way too much time chasing credit card miles.’
If you’re a traveler and have the discipline to pay off your credit card balance every month, credit card miles are as valuable as cash and can save you a bundle on flights, hotels and car rentals. However, if the lure of redeeming rewards is causing you to overspend, then what’s the point?
Aside from accruing interest from new purchases and neglecting current debts to chase miles, too many people chase benefits they’ll never use, said Satyasheel. “They chase them, spend money on cards to get the points and then [aren’t even] smart in using those points.”
‘The difference in switching savings accounts to get 0.15% more interest is a complete waste of time, and you’re playing small.’
For those carrying big bank balances, an increase in interest earned can make a huge difference when changing savings accounts. But for the average person, is chasing higher rates worth the effort? Experts differ in their opinion.
As Satyasheel notes, “With real inflation running at over 5% and rapid currency debasement, 0.15% or even 1% won’t do a lot.”
However, as Razon said, optimizing your savings, no matter how seemingly insignificant, is better than not, especially if you believe savings to be a forever goal.
“Yes, while the hassle of changing accounts for a 0.15% interest might appear insignificant, the fact is that this effort pays off eventually over time, because 0.15% interest would eventually add up to a significant amount in the long run,” he said.
Razon continued, “I also disagree with this take because it completely ignores the fact that some high-yield savings accounts offer promotional rates and other benefits that make the hassle of making this switch worth all the trouble.”
‘You checking your apps every single day is just a way of you avoiding real, substantive, transformative change.’
Most people have an unhealthy relationship with their phone and an overemotional relationship with their investments. A recent survey by CNBC Select and Dynata found that 49% of investors check their portfolio performance at least once a day.
“Looking at your portfolio frequently can make you feel like it’s performing worse than it actually is, and the less likely you’ll invest correctly for long-term success,” Dan Egan, managing director of behavioral finance and investing at Betterment, told Select.
For Sethi, automating your finances will help you “set it and forget it” without having to think about your investments daily.
Satyasheel agrees. “People waste too much time in random apps. Real change happens outside apps in hours of deep focused work,” he said.
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This article originally appeared on GOBankingRates.com: These Are Ramit Sethi’s Financial Hot Takes: Do Experts Agree?
