Netflix “How to Get Rich” Insights

May 9, 2023  | By David Lowe

What can Netflix teach us about our money? You may be surprised how relevant the lessons can be.

In his new documentary series “How to Get Rich,” financial podcast host Ramit Sethi highlights the importance of developing a plan for money instead of spending reactively. “How to Get Rich” also shows why automation and accountability are essential. Good systems – and ongoing coaching to stay on track – help us stick with a long-term plan that requires patience.

That’s where financial planning comes in. A trusted financial planning team not only helps families think strategically about their money, but also helps them avoid costly mistakes. Plus, financial planning helps to keep the focus on what will contribute the most to what Ramit calls “your rich life.”

Here are several ways that financial planning helps families take control of their money and use it to fund their “rich life” – meaning the things that give them a sense of deep fulfillment.

Spending plans and cash management

When several of the “How to Get Rich” households start talking to Ramit, their spending feels like a mystery to them. They admit they have no clear sense of how many dollars flow to which types of purchases on a monthly or annual basis. Stress and head-scratching ensue.

“Where did all my money go?”

“I make a good income, so why don’t I have enough money to invest – or to spend on fun experiences?”

Those are the kind of sentiments that couples like Amani and Matt voice throughout the show. They also are very common responses that financial planners help their clients wrestle with daily.

The first step, as Ramit demonstrates throughout the show, is to review expense patterns carefully and be honest about spending patterns. Budget analysis is a key part of the financial planning process – but it’s a lot of work. As a result, not a lot of firms take on the challenge. We do, though, as we believe it’s essential for raising awareness and then helping clients optimize the use of their hard-earned money.

Many people, especially busy parents and professionals with demanding work schedules, feel that they don’t have the time to study their long-term spending trends. They may not know they are spending more than they are earning. Or, they may not realize how much surplus money is accumulating in low-interest checking accounts (which aren’t likely to outpace inflation and build long-term wealth). Financial planning can help spot those trends and develop a collaborative process for getting back on track.

Ramit uses the phrase “conscious spending plan” several times throughout the show. Financial planners emphasize the same thing. “Conscious spending” means every dollar has a purpose – whether it’s paying bills, supporting family or funding memorable experiences with friends. The same goes for excess funds. They are allocated in advance to appropriate saving and investing vehicles so they can build long-term wealth – instead of “leaking out,” as often happens when spending does not follow a plan.

Thoughtful financial planning helps develop the structure of conscious spending and cash management. That can mean things like:

  • Deciding how much to keep in a checking account, savings account and emergency fund
  • Setting aside a pre-determined amount from each month’s paychecks (or from occasional bonuses) to cover expenses that happen sporadically throughout the year. Those are the kinds of expenses that can be a bit messy to track – especially with budgeting apps that focus mainly on recurring monthly bills. Think of things like vacations, kids’ summer camps, annual life insurance payments or property taxes (if the mortgage does not have escrow).
  • Reserving the right amount for income taxes – especially if you have a complex financial life because of business ownership, RSUs, ISOs, etc.
  • Automated savings and investing. Setting up recurring contributions allows you to “pay yourself first” and remove excuses that can keep you from investing as much as you need to live “your rich life.”

Paying off debt

“How to Get Rich” also highlights another essential service that a financial planning team provides: helping people pay off debt in a strategic way. That can seem a daunting task when credit card bills have stacked up (as in several of the households on “How to Get Rich”). Collaborative financial planning, however, creates an opportunity to triage a debt situation and address the biggest concerns first.

Take Monique and Donnell. Ramit introduces them – and their debt problem – to viewers, then outlines how long it will take them to pay off their bills if they only make the minimum payment. On the other hand, a more aggressive repayment schedule can cut several years (and loads of interest charges) off the family’s debt burden.

Financial planning helps not just with credit card debt, but also with another liability that stresses many young professionals: student debt. This subject gets really tricky, particularly with issues such as income-based repayment plans, government programs, tax deductions and marriage (i.e. if the spouses have vastly different incomes or student loan debt burden). There are many factors to consider, and a decision on one aspect of student debt may have unintended consequences for other aspects of financial life. That’s one reason it is so important to have a financial planning team that can advocate for you and help you pay down debt in a thoughtful way.

“How to Get Rich” highlights another essential part of budgeting and debt management. That’s the cost of housing. Effective financial planning helps buyers ensure they don’t buy more house than they can afford. (Note: that number may be much lower than the loan a lender is willing to give!) Financial planning for home buyers involves several of the factors Ramit mentions – such as debt-to-income ratios and how long the homeowner plans to stay in the house. It also looks at ongoing costs – such as HOA fees, utilities and repairs. Incorporating all of those into a well-thought-out budget allows a household to accomplish a home ownership dream without squeezing out other things that mean a lot to the family. In other words, financial planning helps families avoid being “house rich but cash poor.” It helps them not just have a nice place to live, but to be able to live richly.

Focus on what matters most

Finances are complicated, and with so many decisions to make, it’s easy to get overwhelmed. “How to Get Rich” highlights this when Ramit points out people getting fixated on minor purchases (or, in one bit of recurring humor, an old toaster that the owner can’t bear to get rid of). Ramit encourages his followers to focus not on decisions that are only worth a few dollars, but on what he calls “$200,000 decisions.” Those are the big things – like selling a too-expensive condo or starting a business that could generate millions of dollars of income over a lifetime.

Financial planners do the same thing. The planning process helps busy families zero in on what matters most. Sure, financial planning involves careful analysis of the little details, but the end result is helping people see how the big decisions they are weighing affect their financial future.

“What if I leave my corporate job for a tech startup that offers me an ownership stake?”

“Can I afford to raise kids?”

“I’d love to take a six-month sabbatical. Is that realistic?”

“I just inherited $2 million. I’m still paying down medical school debt, we’re behind on retirement and college savings, our family found a $1 million house we love, and my wife just received an offer to buy in as a partner at her law firm. What should we do?”

Those are the kinds of big questions that real families wrestle with every day. It takes a lot of work to delve deeply into the numbers and project the effects of decisions. Once a financial planning team does that, though – and presents the forecasts in an understandable way – it’s amazing the clarity that families receive. An outside perspective from a trusted advocate can be incredibly valuable in helping families reach conclusions and feel confident about their key decisions.

Coaching and accountability

“How to Get Rich” not only shows the number-crunching involved in financial planning, but also the power of effective coaching and accountability. As multiple episodes reveal, good questions help people think deeply and identify what is important in their financial lives. A good coach also provides reassurance – and helps structure the disciplines needed to stick with a long-term plan. Change in life is hard. We see it in nutrition, exercise, relationships, jobs and mindset. Why would money be any different? An ongoing financial planning relationship with a trusted team helps families stay on track when life gets difficult, markets react in unexpected ways or unforeseen opportunities (with attendant complications and potential pitfalls) arise. When pursuing “your rich life,” it’s incredibly powerful to have a thinking partner and a coach to keep you on track.

Real-life examples

If you still are wondering what financial planning looks like in real life, consider a few examples from the real people featured in “How to Get Rich.” This is just a small sampling of a few of the households featured and the kind of money issues that a financial planning team can help them address.

  • Matt & Amani – young couple looking to go from single-income to dual earnings. Need help with:
    • Working as a team on financial decisions
    • Paying off debt
    • Progressing in careers
      • Budgeting for childcare needed when both parents enter the workforce
      • Considering starting a business: entity structure, tax planning, creating a small business retirement plan
  • Monique & Donnell – burdened by debt. Need help with:
    • Paying off liabilities
    • Saving for first home purchase
    • Developing a spending plan that puts them in control (instead of leaving them feeling reactive and stressed)
  • Sophina – young condo owner with growing income from gymnastics videos and online lessons. Needs help with:
    • Evaluating home ownership costs
      • Conducting rent-vs.-buy analysis
      • Planning for and minimizing capital gains taxes on sale of residence
      • Budgeting for maintenance and other costs beyond the mortgage
    • Self-employment issues for a fitness professional
      • Liability protection
      • Tax planning (home office deduction, depreciating equipment, etc.)
      • Need for emergency savings while getting customer base established
  • Frank – had a financial windfall (but spends way too much). Enjoys lucrative self-employment. Needs help with:
    • Strategic payoff of student loans
    • Refinancing
    • Business entity structure and tax planning
David Lowe, CFP®
512-467-2000, ext. 111   |  [email protected]

David joined Austin Wealth Management in late 2021 as a financial planning associate. He has been interested in personal finance for years and holds the CERTIFIED FINANCIAL PLANNER™ designation. David’s interest in investing began in his teenage years through conversations with…Read More

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