Six Money Traps That Keep Smart People From Getting Rich
I Will Teach You To Be Rich
Ramit Sethi, host of Netflix's "How To Get Rich" and author of I Will Teach You To Be Rich, argues that intelligence doesn't guarantee wealth, and that past a certain point it can get in the way. He says he has spent more than 20 years working with engineers, doctors, and tech founders, and that many of them struggle with money because of how they apply their intelligence. In his view, they fall into six predictable traps that feel smart but cost them large sums over time. His central message is that investing rewards time, simplicity, and consistency rather than cleverness, and that the most valuable use of intelligence is choosing the right problems to solve.
Trap 1: Waiting Until You're Ready
Sethi's first trap starts from the observation that smart people have been rewarded for preparation their whole lives. When they decide to learn about investing, he says, they open a dozen browser tabs, start a ChatGPT conversation, and study asset allocation and tax optimization. Their goal is to know more before they begin. Meanwhile, someone less inclined to over-research might read one good article, open a retirement account, set up an automatic monthly contribution, and move on.
He argues the second person is far more likely to grow their money. In his words, investing "does not reward you having 45 tabs open" and doesn't traditionally reward understanding either. Reading 40 books won't produce better returns than reading one. What investing rewards is time. For smart people, he says, learning more is often a form of procrastination.
To show the cost, he compares two people who each invest $500 a month. Person A starts at 25. Person B spends years reading textbooks on portfolio construction and starts at 35. By his figures, Person B invests for 30 years and retires with $585,000, while Person A invests for 10 more years and ends up with $1.2 million. Sethi describes the gap, roughly $650,000 by his count, as the price of waiting until you're ready.
He adds a story from his time at Stanford. When he started talking about money with his Stanford friends, he found most of them knew nothing about it but felt they were supposed to know already. Friends who hadn't gone to elite universities, he says, knew they didn't understand money and eagerly accepted his offers to explain it. He presents this as the same pattern: the people who didn't overthink things started earlier, and in his example the person who didn't overthink built more net worth. He attributes that to avoiding analysis paralysis, not to being smarter or luckier.
His recommended steps are:
- Open an investment account today. He says it takes less than an hour.
- Invest in a simple, low-cost target date fund or index fund, with an automatic transfer. He says you can start at $50 a month or whatever your conscious spending plan allows.
- Leave it alone and let time work for you.
Trap 2: Perfectly Executing a Flawed Plan
Sethi says the same perfectionism leads to a worse trap: getting very good at solving the wrong problems. He recalls working at a tech company where discussions about pricing and marketing turned into intense back-and-forth debates among smart people. After a year or two, he says, the team began to wonder whether they were even asking the right question. His conclusion is that the best use of intelligence is choosing which problems to focus on.
He calls small optimizations "$3 questions." Examples include tracking coffee spending to bring the average down from $3.75 to $3.25 a cup, juggling credit card points across seven cards, choosing which card to use for gas versus tires versus a bagel, and switching savings accounts to earn 4% instead of 3.85%. He grants there is a time and place for cutting costs, but says people get so deep in these weeds that they never ask the bigger questions.
His alternative is "$30,000 questions":
- How can I increase my income?
- Can I negotiate my salary?
- Should I start a side business?
- Am I paying too much in investment fees?
On fees, he claims a 1% advisory fee could cost someone $385,000 over a lifetime.
The math of a raise
To show the scale, he takes someone earning $80,000 who negotiates a $25,000 raise. He expects viewers to call that unrealistic and says many people do negotiate raises that size, some with his help. He also says the point is to apply the example to your own situation, even if the number is $2,500. Assuming a 3% annual cost-of-living increase, he says that after 30 years the person with the raise has earned $4.99 million in total, versus $3.8 million without it, or about $1.18 million more from one conversation. With a smaller $5,000 raise, he says, investing the extra $5,000 every year for 40 years at a 7% return would produce just over $1 million at retirement. His broader claim is that focusing on big wins can "solve a hundred smaller problems in one move."
Big wins he recommends
Negotiate every job offer. He says employers won't pay more out of goodwill, and the best negotiating position is being a top performer with proof. He suggests asking your manager six months before your review what it takes to be a top performer, agreeing on specific goals, and then exceeding them. That changes the conversation from asking for more money to showing how you'll make the company more money.
Develop rare skills. He tells viewers to get so good that their boss dreads the idea of them quitting, by identifying the skills the company values most and becoming exceptional at them. He stresses that this isn't a trick for extracting $10,000: "You actually have to be good in order to negotiate it."
Focus on income growth first. "There is a limit to how much you can cut, but there's no limit to how much you can earn," he says. He argues that higher income gives more financial freedom and solves many smaller problems, and he mentions starting a side business as one option.
Trap 3: Resetting Your Starting Line
The third trap appears after income rises. Sethi says that in America especially, the world offers endless ways to spend money: a bigger house, a fancier car, a trip to the Maldives, or a Range Rover spotted on Instagram. Seeing these things isn't the problem. The problem is that smart people are very good at justifying purchases, for example by telling themselves they can stretch now because they'll earn more in two or three years. He says that isn't how careers or wealth work.
His core principle is that wealth grows "in the gap between what you earn and what you spend." This, he says, is why many high earners lack a substantial net worth: as they earn more, they spend more, often on things they don't particularly care about, and their new income quietly becomes their new spending baseline. He clarifies that spending more when you earn more is fine. The issue is failing to reconsider where the spending goes. He cites a statistic that one in three households earning between $100,000 and $150,000 still worry about paying their bills.
His fix is a rule that removes the decision. When you get a raise, send 80% of the increase to investments and spend the other 20% guilt-free on a restaurant, a trip, clothing, or a bag. Because most of the raise is already going somewhere important, he says, you've given yourself permission to enjoy the rest.
Trap 4: Thinking You're Smarter Than the Market
Sethi introduces the next traps as more dangerous, saying any of them could erase hundreds of thousands of dollars even if the rest of a financial system is sound. The first is believing you can outsmart the market. He describes a doctor who reasons that because they are good at learning, they can apply the same skill to investing and beat everyone else. He says reacting to green arrows in the headlines with a "proprietary strategy" is no different from panic-selling when the market turns red. He calls market timing one of the costliest mistakes and says everyone makes it, whether smart or not, young or old.
He blames an industry of influencers for making this worse by acting as if they can predict the market. He says some of them taunt him on Twitter when the market moves their way, then go quiet when it turns, and he claims they are notorious for deleting trades so they only show wins.
He cites a study that he says found $10,000 invested and left alone for 15 years would grow to around $30,000, while someone who tried to time the market based on the news and missed just the 30 best trading days would end up with only $6,873, losing money. He argues the best days often come unexpectedly, sometimes right after another best day, and that moments that feel most dangerous are when people get out and then stay out during the recovery. He also says more than 80% of professional investors, whose job is to beat the market, fail to do so over the long term, which makes the idea of an amateur outsmarting the market "preposterous."
He describes his own strategy as boring. He automates his investments every month regardless of what the market is doing and doesn't keep 20 financial apps on his phone or follow daily market news. He says his system invests "whether it's up, whether it's down, whether I'm traveling, whether I'm dead," and that the market keeps rewarding its simplicity.
He also notes that even people who understand these ideas often stall on small practical questions, such as which account to open, which fund to pick, or whether to automate on the 1st or the 5th of the month. They add the task to a to-do list and a year later nothing has changed.
Trap 5: Overpaying for a False Sense of Security
Sethi says he is happy to pay for expertise, citing personal trainers and a horseback guide, but that wealth is different. Once people accumulate assets, many assume hiring a financial advisor is the mature next step. He says most people he talks to don't understand what their advisor actually costs.
His example is someone with $50,000 invested who adds $1,000 a month for 35 years. Through an advisor, he says, they would retire with about $1.7 million. Doing it themselves with a low-cost index fund, they would have over $2 million. By his math, roughly $400,000 goes to the advisor for the same returns. He stresses that a 1% fee isn't fixed: it grows with the portfolio, so the better your investments do and the longer you invest, the more you pay.
He says he isn't against financial advisors as such, but he would never pay a percentage of assets under management. He would pay a personal trainer $150 an hour or a media trainer $500 an hour, just not 1% of his portfolio. His recommendation is to either do it yourself with a simple low-cost index fund from a firm like Vanguard, Fidelity, or Schwab, or hire an advisor who charges a flat, project-based, or hourly fee. He says he doesn't mind paying premium fees, as long as they aren't a percentage.
Trap 6: Chasing an Intellectual High
The last trap is what Sethi calls the "tragedy" of good investing: once you realize it's simpler than you thought and your portfolio has grown, it becomes boring. Others talk about market corrections and AI, and none of it matters to someone with a simple, automated portfolio. That can feel like missing out, because the balance just rises slowly, with ups and downs along the way. He describes logging in occasionally, seeing the number, and feeling like he isn't doing anything smart.
His message is that boring investments are good investments. Investing isn't meant to be entertainment or a source of identity, and he warns against the Wall Street Bets approach. If you want fun, he says, get a dog or watch a TV show. "Wealth rewards consistency, not novelty." Learning matters early on, including asset allocation and diversification, but once the system is running, one of the most important things is to stop fiddling with it. This connects to one of his core money rules: fight for simplicity in your finances.
His concrete guidance:
- Automate so investments are funded first when a paycheck arrives, and let compounding work over years.
- Keep it simple with a target date fund or a set of index funds. He points to chapter seven of his book for details.
- Review accounts maybe twice a year. He compares frequent checking to messing with a Thanksgiving turkey that's already cooking.
- If you can't resist experimenting with crypto, individual stocks, or anything else, cap it at up to 5% of your portfolio, accept that you may lose it, and leave the rest untouched.
He closes with the idea that runs through all six traps: set up your system, automate it, and move on, because that is how real wealth gets built.
Are you smart? If I ask you that question and your answer is anything but yes, you might not be smart. Just click X and stop watching this video. This is only for smart people.
Some of you are too smart for your own good. Take the intelligence down a little bit. Give me 10 points of your intelligence and I will show you how to actually make more money. But when it comes to making money, there is a point where you can actually be too smart. Where you can think, "Oh, I'll just apply my intelligence and figure out something that no one else has figured out. That's how I'll get rich."
I've spent over 20 years working with engineers, doctors, tech founders. These are very smart people and yet a lot of them struggle with money. Not because of their intelligence, but because they fall into six predictable traps that feel smart, but quietly cost them millions over time. The worst trap of all has built this entire industry to appeal to smart people's egos. I'm going to show you how to avoid that.
But first, trap number one, waiting until you're ready. When you are smart, you've gotten rewarded for being prepared your whole life. Think about it. If it's time to figure out investing, smart people will open up a dozen browser tabs. They've got a ChatGPT conversation going. They're learning about asset allocation and tax optimization, particularly for lump sum investing. And the idea that smart people use is, "I want to know more than when I first started."
Meanwhile, someone else, perhaps maybe not as smart as you, might read one good article, open a retirement account, set up an automatic monthly contribution because they're lazy, and then get on with their life. One of these options is actually far more likely to grow your money. Which one do you think it is?
You know what? I already know that you're afraid to answer because you were so penalized as a child for getting the wrong answer that you don't even want to try to guess. Just freaking try it. Go out on a limb. This is just a YouTube video. It is one that's going to make you millions of dollars if you follow the process and you're young enough and you aggressively invest, but you're afraid, "Oh, Ramit's going to ask me the wrong question." The correct answer is the person who gets started and automates their money.
Remember, investing does not reward you having 45 tabs open. It actually doesn't even traditionally reward understanding. In other words, you can read 40 books and you're not going to get better returns than someone who's read one book about money. You know what investing rewards? Time. When it comes to building serious wealth, learning more is often a form of procrastination employed by really smart people. I'll show you the math.
Two people invest the same amount, $500 a month. The average person, A, starts at age 25. The smart person, B, decides to read 44 textbooks on portfolio construction. Then they start investing at age 35 instead because they're so busy with these books. Person B invested for 30 years. At the end of that time, they have $585,000 at retirement. Person A, who hasn't picked up a textbook since they were 20 years old, they invested for an extra 10 years. Guess how much they end up with? $1.2 million. In other words, the time you were waiting until you're ready would have turned into $650,000 in returns later.
I went to Stanford and when I started talking about money with my friends at Stanford, I learned most of them knew nothing about money, but the irony was that many of them thought they should know. I'm like, how were you supposed to know this? We're young, we're 19, 20 years old. Nobody's really taught us this.
Ironically, my friends who did not go to an elite university, they knew that they didn't know how money worked. And so when I would say, "Hey, let me show you how it works," they were like, "Yes, please show me." Whereas people who were a little too smart for their own good would say, "Well, I'm already supposed to know this. Why do I want to come and learn this?" Which one do you think actually built more net worth? Which one do you think started investing early?
For that example of person A and person B, the person who didn't overthink it actually built more net worth. Not because they were smarter, not because they got lucky, simply because they avoided analysis paralysis and they got started. And smart people fall into this trap a lot. We love to analyze. Give me all the angles. I need to find out how it's not going to work because the better I am at analysis, then the smarter I am.
Here's what to do instead. Open an investment account today. Do not wait. It takes less than an hour. You can use any of the brokerages that you see on the screen now. Next, I recommend investing in a simple low-cost target date fund or index fund. Set up an automatic transfer. You can start at $50 a month or more, whatever you can afford using your conscious spending plan. And third, leave it alone. You are now an investor and you are letting time work in your favor.
Now this perfectionism that so many of us pursue shows up when we invest, but it also shows up in an even worse way in the next trap. Trap number two, perfectly executing a flawed plan.
I realized early on that when I worked at a tech company, we would be having discussions about pricing and marketing and whoever came up with a question to ask, the smart people in that room would attack it like rabid dogs. And we'd be going back and forth. What about this? And have you thought about that? And after doing this for a year and two years, we kind of realized, are we even asking the right question?
You see, sometimes smart people get really good at solving the wrong problems, but really smart people realize the best use of their intelligence is to choose the right problems to focus on. This is why you see all these people, they're spending time analyzing their coffee consumption. "Oh, if I optimize it, it'll actually be an average of $3.25 per coffee, not $3.75." I say, so when wrong question, you should be focusing on $30,000 questions. Big ones.
Too many high earners are using these elaborate spreadsheets and optimizing different inputs, playbooks across credit card points, seven different cards. Wrong question. Those are examples of what I call $3 questions. For example, should I switch savings accounts to get 4% instead of 3.85%? Should I use this credit card when I buy gas and that credit card to buy tires and this credit card to buy a bagel?
There is a time and a place to focus on cutting costs, but I find that people are often so deep in the $3 weeds that they're not even asking the right question. I suggest you ask $30,000 questions like, how can I increase my income? Can I negotiate my salary? Should I start a side business? Am I paying too much in investment fees? That 1% fee that I'm paying my financial advisor, did I realize it will cost me $385,000 over my lifetime? These are the kind of big questions that I want you to apply your intelligence to.
For example, let's say you currently make $80,000. Let's say you negotiate a $25,000 raise. Stop right there. About to go, "Ramit Sethi, in what economy can I negotiate a $25,000 raise?" First of all, there are a lot of people who can negotiate $25,000 raises. I've helped them do it. More importantly, apply the example. Maybe it's not $25,000, maybe it's $2,500. Stick with me because I want to show you the math.
Let's say that you also get a cost of living increase of 3% every year. After 30 years with that raise, you have earned a total of $4.99 million, but without that $25,000 raise, you earned $3.8 million. Do you see what happened? From that one conversation, you made $1.18 million more.
Maybe it's unrealistic to negotiate a $25,000 raise. So let me show you the math with a $5,000 raise. If you get that raise and you invest the extra $5,000 every year for 40 years at a 7% return, you would retire with just over $1 million. Adjust the numbers for your own situation. What I'm showing you here are big $30,000, $300,000 questions. And when you focus on these big wins instead of micro-optimizations, you can solve a hundred smaller problems in one move.
Here are a few big wins that will move the needle in your life. Negotiate every job offer. People are not just going to pay you more out of the goodness of their heart. You've got to negotiate and show why you are worth it. The best way to negotiate is to be a top performer with proof to back it up. Six months before your current job's review, ask your manager what it takes to be a top performer, get specific goals that you both agree on, and then exceed them. That shifts the conversation from, "Hey, can I make more money? I hate the economy," to, "Here's how I will make you and the company more money."
Next up, develop rare skills. Get so good at your job that your boss dreads the idea of you quitting. How do you do this? It means identifying the skills that your company values the most and actually becoming exceptional at them. Notice that I'm not giving you some abracadabra trick to subtly negotiate $10,000. You actually have to be good in order to negotiate it, but when you approach your career with this vision, it can happen.
Next, focus on income growth first. There is a limit to how much you can cut, but there's no limit to how much you can earn, and earning more gives you a lot more financial freedom. It allows you to solve dozens of smaller problems, and that could be, for example, starting a side business. There's so many different ways to increase your income. Start thinking in that approach, not just, "Can I cut costs on everything?"
But here's the thing, even if, even when you start earning more, there's a common trap that guarantees your income increase is not going to help you as much as it could. This is where smart people make another expensive mistake. You work hard to increase your income. Maybe you've negotiated raises. You start a side business, but you treat your taxes like an afterthought. If you are a high earner, and especially if you're a business owner, taxes are likely one of your biggest expenses.
And a lot of people just hand their documents to a CPA once a year and hope for the best, but that's reactive. I would rather treat my money proactively, and that's why I partnered with Gelt. Gelt is a modern CPA firm that specializes in high-income earners and business owners year-round, not just during tax season. Here's what makes them different. A proactive tax plan that's tied to your goals, your cash flow, and your P&L. They have guidance on credits, deductions, and entity setup to optimize your structure, and they've got a clean, modern platform that keeps everything organized and on track.
If you're making multiple six figures or you're running a business and you don't have a proactive tax strategy, you might be overpaying, and that can be costing you a lot. So if you want to see what a real tax strategy looks like, visit joingelt.com/Ramit to schedule your consultation today. You can scan the QR code on screen or click the link in the description below.
Now let's talk about another trap that happens after you increase your income. Trap number three, resetting your starting line. When you have money, especially in America, the world is going to give you lots of ways to spend it. A bigger house, a fancier car, a trip to the Maldives. Maybe you see new people on your Instagram feed driving a beautiful Range Rover. You go, "I need a Range Rover for the space."
Here's what makes this a trap. It's not a problem just to see a picture of a beautiful SUV. The problem is that for smart people, we are very good at justifying that we need it. "My income is going up. It's going to keep going up. I could probably afford this car right now to stretch, but two, three years, I'll be making more money. No big deal." Well, that's not how careers work. That's not even how wealth works. Wealth doesn't grow purely based on your income. Wealth grows in the gap between what you earn and what you spend.
This is why you hear of so many people who make a lot of money, but they don't actually have a substantial high net worth. The more they make, the more they spend, and they're spending it on stuff they don't even particularly care about. If this is you, without you noticing, your new income level becomes your new spending baseline. I hear it all the time with people whose incomes go up and they start loosening the reins. "Hey, we'll take an extra vacation. Hey, I don't mind getting this new car because I make a lot more money."
That's okay. If you make more, you should spend more, but they do not reset where their spending is going. This is why one in three households earning between $100K and $150K still worry about paying their bills, even though they make a lot of money. The move that works here is to create a rule that removes this decision entirely.
The next time you get a raise, my suggestion, take 80% of that, send it to your investments, and then take the other 20% and have a blast. Go out to a restaurant, take a beautiful trip, buy a beautiful piece of clothing or a bag. Do it guilt-free because you know that you've taken most of your increase and you've sent it to an area that is important to you. Meanwhile, you've also given yourself permission to spend on the things you love.
So far, we've talked about the traps that are slowing your progress, but these next few traps are worse because if you aren't careful, any of these can erase hundreds of thousands of dollars, even if the rest of your financial system is perfect. So let's take a look, starting with trap number four, thinking you are smarter than the market.
I like smart people, but sometimes some of you are extremely dumb because you think you can outsmart the market. When the market goes up or the market goes down, smart people love to believe they have an edge. "Hey, I'm a doctor. I understand the value of education and I know how to learn all these things. So I'm going to do the same thing with investing and outsmart everybody else." That's not how it works, you freak.
People see these headlines. They see the green arrows. They go, "I got it. Got it. Let me apply my proprietary strategy." But this is just equivalent to somebody who is panic selling. "Oh, I'm scared. I see red. Sell it all." And believing that you can buy and sell at the right time will actually cost you hundreds of thousands of dollars. Listen carefully because this is actually one of the most costly mistakes that everybody, smart, not so smart, older, younger, everybody makes this.
Timing the market, trying to outsmart the market is a classic mistake and there are people incentivized to make this even worse. There's an entire industry of influencers who build an audience acting like they can predict what's going to happen. Some of them follow me on Twitter and they'll write me little taunts when the market goes up or international stocks drop. "Ha ha, Ramit said you can't predict it." But then when things turn, you never hear from them again. They're actually notorious for deleting their trades because they only want to show you that they are winners.
A study measured that if you had invested $10,000 and just left it alone for 15 years, you'd end up with around $30,000. But if you tried to time the market, meaning you tried to decide based on the news when to invest and when not, if you did that and you missed just the 30 best trading days, you would end up with only $6,873. You would have lost money.
Do you understand what this means? It means that when you time the market, it's not just about randomly being right or wrong. Did I put three ounces of chicken in my meal or 3.5 ounces? We're talking about thousands, tens of thousands, even millions of dollars. The best days in the market don't come when you think they will. Sometimes they come after yesterday was the other best day. The moments that feel most dangerous when the analysis says to get out means that you will probably stay out when the market recovers.
Please know this: over 80% of professional investors, these are people who are highly educated, whose jobs it is to beat the market, fail to do it over and over again for the long term. The idea that you can outsmart them when even they can't outsmart the market is preposterous. Some of you need to really take a big fat humble pill. Hey, maybe I'm not the smartest
In the world at this. Maybe I don't actually need to be the smartest in the world to succeed.
I'm smart and even I know that I can't beat the market. So you know what I do? You know what my actual strategy is? It's boring. Automate my investments and get on with my life. I don't need 20 financial apps on my phone. I don't need to read the market news. What's the trades happening today? There's no reason. I set up my system to automatically invest every single month, whether it's up, whether it's down, whether I'm traveling, whether I'm dead, it's always going to be investing. And the market continues to reward me for the simplicity of my system.
I want this for you. I actually want you to stop overwhelming yourself with a bunch of investing to-dos and just calm, cool, and collected. Once you have set up this simple, calm approach, I'm going to show you another big thing to look out for that most people are not aware of at all.
But before I share how to protect yourself against this, I want you to stop and ask yourself a question. Even if you understand the concepts in this video so far, if I asked you right now, do you know exactly what to do tomorrow to begin and grow your investing journey? Would you know what to do?
I've seen thousands of smart people, people who have money, they want to invest, getting stopped by little things. Hey, which account should I choose? Which fund should I choose? Do I set up the automation to happen on the first of the month or the fifth of the month? And it's really common. There's a lot of complexities when it comes to this stuff. So you hit a roadblock, you freeze, and then you add it to your to-do list. But a year later, often nothing has changed.
And I want you to take action. I don't want you to simply watch these videos and go, "That's interesting." No, I want you to build real wealth to live your rich life. And that is exactly why I created Money Coaching. Inside this program, we work quickly. I'm going to show you exactly how to set up your entire financial system step by step in just 48 hours.
I'm not only talking about investing, I'm talking about making sure your bills are automatically paid. I'm talking about every December, how to set up a 1% increase in your contributions rate, which will be worth hundreds of thousands of dollars and more. Best of all, I will show you how to spend money guilt-free on the things that matter to you because this life is not simply about restriction.
In Money Coaching, you're going to get live calls with me to answer your specific questions, plus step-by-step playbooks and an incredible community of other people who want to live their rich life too. You don't need to simply understand more material. It's time to actually take action. So if you want to stop overthinking and start building real wealth, scan the QR code here or click the link below to join Money Coaching today.
Now let's get to the next trap, trap number five, overpaying for a false sense of security. I like paying for coaches. I've paid for personal trainers. I've paid for a horseback guide. I've paid for a lot of different guides. I'm happy to do it, but there is something very different when it comes to your own wealth.
Once you've started doing well, once you've accumulated some assets, a lot of smart people think that the next step is to hire a financial advisor. It sounds reasonable. It actually feels like a mature, even sophisticated move, but the vast majority of people that I talk to do not understand how much their financial advisor actually costs. And I want to show you the math because it is truly shocking.
Let's say you have $50,000 in investments and you add a thousand dollars a month for 35 years. If you do that through a financial advisor, you'd have about $1.7 million when you retire. That's pretty good. But what if you did it on your own? What if you chose a low-cost index fund, which is incredibly easy to do? You would actually end up with over $2 million.
The fees that you paid that you weren't even aware of end up being about $400,000 going into your advisor's pockets for the same return. Remember, the 1% fee is not a fixed cost. It compounds based on the size of your portfolio. In other words, the better your investments do, the longer you invest, the more you pay.
Now, I'm not against financial advisors per se, but I would never pay a percentage of assets under management. I would pay a personal trainer $150 an hour. I would pay a media trainer $500 an hour, but I would not pay them 1% of my portfolio. Why would I do that? Pay an hourly fee? Great. Do it yourself? Also great, but never, ever pay a percentage of your portfolio.
Instead, I recommend if you're going to DIY, purchase a simple low-cost index fund from a place like Vanguard, Fidelity, or Schwab. No advisor required if that's the simplicity of your portfolio. If you choose to find an advisor, make sure they charge a flat fee or they charge on a project basis or hourly basis. You can pay them a lot. I don't mind paying premium fees, but not a percentage.
Now, the decision that determines whether any of this sticks. Before I get into it, I noticed that about half of you watching this channel are not subscribed. Hit that subscribe button, turn on notifications. I'm going to keep sharing videos that show you real math and money psychology to help you build real wealth. So click subscribe right now.
Trap number six, chasing an intellectual high. Now there is a tragedy of good investing because once you've cracked the code, meaning it's actually simpler than you think, and you have earned tens of thousands, hundreds of thousands, sometimes even millions of dollars in your portfolio, the tragedy is it's boring.
Everyone else you'll notice starts to talk about market corrections and AI. But if you are following a boring portfolio, none of that matters to you. And sometimes it can feel like you are missing out because your balance is going to slowly increase month over month. Sometimes it goes up, sometimes it goes down, but generally over a long term, it goes up and it's going to happen automatically. Truth is it's not very entertaining.
My investments are boring. Maybe I log in every so often. I look at the number, I go, "Oh," close. It doesn't feel like I'm doing anything smart. Here's my message for you. If your investments feel boring, good. Your investments should be boring. It's not meant to be entertainment. You do not want to find yourself on WallStreetBets or using your investments as a source of identity. You want to have fun? Get a dog. Watch a TV show. This is meant to build wealth. And the truth is wealth rewards consistency, not novelty.
Early on, learning matters. You want to learn how asset allocation works and you want to learn what diversification is. But once your system is running, one of the most important things you can do is stop fiddling with it. And that's why one of my core money rules is to fight for simplicity in your finances. Y'all are fighting about stuff that doesn't matter anymore. "Oh, should we get the extra ravioli?" Who gives a—
Here's what you do. Automate your finances. Paycheck comes in, investments get funded first. Allow the years of compounding to build serious wealth. Simplify, use a target-date fund or a set of index funds. And if you want to learn how this works, you can get chapter seven of my book, I Will Teach You to Be Rich.
Then review your accounts maybe twice a year. Make sure everything is still on track. But remember that the more you review, the more you are fiddling with stuff. It's like messing with Thanksgiving dinner. Stop messing with the turkey. It's cooking. Leave it alone.
And if you can't help but experiment, crypto, individual stocks, whatever, create a rule. Hey, I'm going to invest up to 5% of my portfolio in random fun stuff. And I don't care if I lose the money, but do not touch the rest of your portfolio. Set it up, automate it, move on. That is how you build real wealth. And if you want the exact steps to automate every piece of your money system, check out this video next.
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