The Truth About Why Rich People Are So Cheap
Financial anxieties, therapy, and spending habits - March 27, 2022 (about 3 years ago) • 10:47
Transcript:
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Sam Parr | It's rooted in trauma... like just fear. It bothers me so much.
For example, Cometeer Coffee sent me some for free. It's so good, but it's $1.50 per cup. When I compare that to my regular bean coffee, which is often less expensive, I think, "$1.50? Sometimes I don't even drink the whole thing."
So, I've been really struggling with the question: Is that worth it? Is this worth it?
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Shaan Puri | Can I tell you something interesting? I saw the "O One Percent Rule."
So, Nathan Barry came on the podcast, and he was cool. He's the founder of ConvertKit. He came on and was telling us about some blog posts that either he's written or that others have written that he liked.
I went back and I read one of them, and I saw this thing called the "O One Percent Rule." Have you seen this?
No? Okay, so I'll...
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Sam Parr | he's pretty amazing | |
Shaan Puri | I'm going to pull up this... where's the blog? The O1% rule of wealth. Let me see if I can pull it up here. Okay, I'm not going to be able to find it real quick, but I'll put the link in. Ben, if you could find it or search "Nathan Barry wealth ladder O1%."
So basically, the way the guy thinks... he's like, you know, he talks about price sensitivity. He's sort of like, as you get richer, the way you think about money should change.
This is like when I came to your house and you had CVS receipts in the glove compartment because you're saving them for like the $3 thing. You're like, "Hell yeah!" And I was like, "Dude, you just sold your company for like many, many millions of dollars. What are you doing with these CVS receipts?" You're like, "I just like to do it. It's a habit."
So this guy talks about how the richer you get, you should sort of... he's like, this works for when you sell something to somebody or yourself. As you get to that level, basically below...
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Shaan Puri | O 1% of your net worth. So, you take your net worth and you multiply it by 0.01, whatever you know, 1%. So, let's say you're worth... | |
Sam Parr | let's do a 100,000,000 so a 100,000,000 what is it times what | |
Shaan Puri | Use $5,000,000, right? Let's use a more approachable number here. So, that would be $500. If you have $5,000,000 in net worth, $500 is the threshold below which you don't really feel it. You don't really care or feel it; you're going to become a little bit price insensitive below that.
So, that might be like opting for the nicer hotel or just really not caring. You can just ball out at a restaurant; you really don't care.
He draws this little curve and he's like, at the first level of wealth, he calls it like level 0 or level 1 of wealth, where it's like, you know, your level 1 is like $100 or less than $100 to that. Well, a $1,000,000...
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Sam Parr | yeah a $1,000,000 would be a $100 | |
Shaan Puri | yeah so he's like you know at that. Like you know if you're at the grocery store and something costs an extra dollar like you care you don't wanna buy the eggs that cost a dollar 99 more you care he's like then the next the next jump up is you're like well I don't care at like you know it's he the the way he draws the charts like what are restaurant prices then the next one is like what are vacation prices it's like you don't even really care about how much your vacations cost the next one is like you you know you could fly 1st class and then the the final one is like you know or the next one is like you can buy a crazy house so you you know you don't really get you're not really feeling house prices as much and then the final one is like you know what are prices anyways like you know this is when you're worth over $100,000,000 like at that. Most things don't cost anything to you and you're pretty insensitive to the cost of it so I'm just sort of summarizing the idea the the exact you know you can quibble about what you should or shouldn't care about but I thought it was kind of an interesting number and the reason I bring it up is very few people that I know are like properly price sensitive so there's a lot of people I know like my dad who no matter how wealthy they've got like these sort of like the trauma of not having money is so deeply ingrained in his body that like you know starbucks he's just like he's like pissed off when they charge even if he buys the coffee it like he's angry at the price he's like oh my god 4.99 like I could make this for so much less and they're like sir you're welcome to do that he's like like what's going on and you know he's anchored to prices from like the eighties when like you know that's why like he thought movie tickets should cost x and also you know it just like hurts him to spend more than some amount regardless of what's in his bank account and so he's kind of on one side of the spectrum too cheap and then there's the other side of the spectrum which is more where I am where it's like dude you should really kinda pay attention to this you're you're kinda spending like pretty crazy and you know completely price insensitive is on the other side and then there's like whatever the sweet spot is and then school they don't really teach you how to how to like gauge that or what what those kind of like what even should be a good number for this what should I spend on things | |
Sam Parr | So, you don't get nervous? I freak out a little because, as an entrepreneur, some years I just knock it out of the park and make so much money. Other years, I make nothing. I mean, hopefully, I don't think nothing will ever happen again, but there are times you don't get nervous about running out.
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Shaan Puri | No, actually, like two months ago, I was like, "Oh my God, I have like no cash left. No cash on hand." I was just investing in everything I saw. I was putting money into startups, into crypto, into stuff. Then I was spending a bunch; my payroll expanded. I was like, "Oh my God, I have like so little cash." In that cash, I thought that way too. It was under $60 in cash, and I was like...
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Sam Parr | I feel low | |
Shaan Puri | Yeah, I think it was like $38,000 in my Wells Fargo checking account. I was like, "Where did all the money go?" This was like... and I was like, "Well, yeah, I guess."
I looked at the outgoing transactions, and it wasn't that my spending had gone up; I was really just investing a lot of money. But I was like, "Wow, I need to manage cash." For most of the time, for me, it's like, "Oh, I need to send my invoices for things." You know, like, "Alright, I'm going to teach a course, and I'm going to invoice for the podcast." I'm going to do the things that bring in cash today versus most of the things I invest my money into, which are long-term, illiquid things or my own businesses.
Right? Like, maybe I should take a withdrawal out of my business and put money in my bank account. So, you know, it was just a reminder of that. But no, I don't really get too worried about that. And maybe, you know, again, I think I'm too far on the dial of being willing to spend on whatever.
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Sam Parr | Ramit Sethi, that's pretty much what his entire image and content is about. He has this podcast where couples argue. For example, one couple might say, "We are worth $3,000,000," and then they get into a fight because one of them spent $80 on something silly. Ramit's all about that.
He often says, "I'm more like your father than I am like you." I think it's rooted in trauma and fear. I have the same thing where it bothers me so much. For example, Cometeer Coffee sent me some for free, and it's so good, but it's $1.50 per cup. When I compare that to my regular bean coffee, I'm like, "$1.50? Sometimes I don't even drink the whole thing."
I've been really struggling with whether that is worth it. Then there's the backsplash on my sink in the kitchen that needs to be replaced, and it's $800. I've been fretting over it for over a year now. I'm like, "$800 to replace that? I can't!" Even though it will add value to the home and also make me happier, I understand why your dad thinks that way.
It's really challenging when you've felt one way for years, and now suddenly things are different.
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Shaan Puri |
Yeah, maybe we actually need money therapy. Money therapy specifically, I think that's actually a good idea here. So therapy is this broad thing that has a bunch of associations with it, and mostly it's like stigmas and... blah blah blah. I think somebody needs to spin off and Ramit sounds like he's kinda doing this, which is...
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Sam Parr | sweet help therapy is a great idea | |
Shaan Puri | Financial therapy... and it's like, "Yeah, I have a money coach." Or, you know, you probably need to switch from therapy to coaching. This is the hack to focus on performance and not, you know, fixing a broken part of me. But, in reality, it's that.
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Sam Parr | I tried finding people like this, and when I met them, I was like, "Look, we just got a..."
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Shaan Puri | new you're not a financial advisor different things | |
Sam Parr | No, I know I would go to therapy for a lot. Whenever I was trying out a new therapist, I'd be like, "So, I'm not trying to sound like a douche or big-headed, but I'm a high achiever. I want to conquer the world and do cool stuff."
So, I don't want to talk like this. This is the place that I'm coming from: I'm high octane, baby. Can we make those happen? Do you have the tools necessary, or do you specialize just in traditional methods?
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Shaan Puri | Wait, what? What were you really trying to tell her? Were you trying to tell her that my problems are not that I'm broken, but that I'm trying to achieve a higher level of success? Or were you trying to tell her that I'm an A player, a UA player therapist? Or is that what you were trying to ask her? What were you trying to ask her?
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Sam Parr | no the blunt way to explain it is I've got rich I'm I'm complaining | |
Shaan Puri | about some | |
Sam Parr | rich people problems | |
Shaan Puri | okay got | |
Sam Parr | I'm just mostly insecure about certain things, and I want to use that to conquer the world. Right? I'm not going to... | |
Shaan Puri | complain about twitter yeah | |
Sam Parr | And like, I'm going to complain about stuff that sounds super weak because, on the outside, everything's going great. But I need you to empathize that I'm trying to go places.
I don't need you to tell me that, "Well, you made a million dollars last year. Isn't that good enough?" Like, no, dawg, that's not it. I need you to understand what's at stake here, you know what I mean?
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Shaan Puri | and sam what is at stake here | |
Sam Parr | that's a you're a better I'm gonna be I'm gonna | |
Shaan Puri | be your money therapist | |
Sam Parr | But you know what I mean, like totally. So, I would meet people and I'm like, "Oh, you've only worked with a certain type of person." I don't think you understand. I don't think you'll be able to help me.
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Shaan Puri |
Yeah, yeah, exactly. I know what you mean. It's the reason Tony Robbins gets paid $1,000,000+ per client because his clients are Serena Williams and Ray Dalio, and you know, whoever.
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Sam Parr | and he's like trades you rich | |
Shaan Puri | Yeah, and he himself is successful. His other clients are, you know, objectively very successful. But everybody, everybody can improve the little voice in their head.
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