Ramit Sethi is best known for his role in Netflix’s How to Get Rich but the self-made millionaire says he won’t be spending money on a luxury car anytime soon.
Sethi still drives a Honda Accord from 2005 when he graduated from college.
He says it is part of his money dial approach. Which means spending money on things you like spending on and not on things you don’t necessarily care about.
A self-made millionaire
He tells CNBC, “It’s a very sensible car. I keep it in meticulous condition. Could I buy a new car tomorrow? Sure. Is it important to me? No.”
“I spend extravagantly on the things I love but I cut way back mercilessly on the things I don’t,” he says.
Sethi says turning your money dial down on certain areas allows you to turn it up on others.
This approach allows you to focus on the things you really enjoy and spend money on them.
“This is where money becomes much deeper than just buying stuff. Money creates meaning, and that is really a core part of a rich life. It’s ok to just want something, be able to afford it and then buy it.”
Conscious spending plan
Sethi advocates a conscious spending plan which means dividing your money into four categories:
- Fixed costs; things you have to pay for car loan payments, rent, mortgage payments and so on
- Savings which include your emergency fund
- Investments (this could include retirement funds, mutual funds and the like)
- Guilt-free spending ie travelling and dining out.
Sethi says that once the above is taken care of you can spend the remaining amount in a guilt-free manner.
“We are taught that money should only be restriction. Let’s actually flip it. Let’s talk about spending more on the things we love,” he said.
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