Get my 5-day email funnel that generated $400,000 from a single launch

Want an email sales funnel that's already proven to work? Get the entire word-for-word email funnel that generated $400,000 from a single launch and apply it to your own business.

Yes! Send me the funnel now
Start Here: “The Ultimate Guide to Personal Finance”

4 dumb money mistakes

26 Comments- Get free updates of new posts here

25 19

I love making fun of horrible money advice and atrocious career advice as much as anyone else, but sometimes we have to turn the focus onto ourselves.

How many of us choose to focus on the most pointless areas of personal finance? Should I open this credit card? I feel guilty paying for name-brand cheese. Do you think I should buy one of those coupon books?

People waste time on minor decisions and debate minutiae for several reasons:

  • It’s all they know, since they’ve repeatedly had the “latte” example shoved down their throats for 20 years (even though it hasn’t worked)
  • They don’t have an overarching money system, so they grasp at whatever decisions are in front of them
  • Small decisions make us feel productive, while Big Wins take systematic work

Think about it for a second. You can work for 2 years to really optimize one area of your finances (e.g., honing your discipline to stop buying chocolate). But what if you’ve picked the WRONG THING to work on? What if chocolate purchases are only 0.00001% of your total spending? No matter how hard you work at disciplining yourself, it’s ultimately useless. It’s like being CEO of the wrong company.

I’d like to talk about some of the most common areas we focus on and highlight some effective/ineffective ways to think about them. Why? Because being rich isn’t about which credit card you use or which bank you choose. If you want to live a rich life, learn to focus on the bigger picture: mindset, execution, and timing are more important than sitting around and debating minutiae. Let’s go through some examples to help apply this to your life.

The point is to work on the right things, not to simply try harder.

Mistakes: Paying off Debt

  • Goal: Get out of debt
  • What people obsess about: negotiating APR, credit score, transferring balances between cards
  • What they should REALLY care about: cutting costs and automating payments

People in credit card debt spend time debating which credit card they should get, how they can quickly up their credit score, or whether or not they should negotiate a lower APR. Those things will only take you so far. The number one thing they need to do is AUTOMATE THEIR PAYMENTS AND CUT COSTS TO PAY OFF THE DEBT.

The problem is that thinking about how to use my script to get a lower APR and calculating how much 5% lower APR will save them is more fun, sexier, and seems more tactical. I don’t care how many blog posts or books you’ve read about the intricacies of credit. If you haven’t actually done the #1 thing you need to do, it’s worthless. And again, that thing is: Cutting costs and automating payments.

Mistakes: Earning More

  • Goal: Increase your income
  • What people obsess about: business cards, how much to charge, what their “idea” is
  • What they should REALLY care about: how to EARN money

When trying to earn more money, the #1 barrier is “finding an idea.” Instead of systematically testing different ideas, most people simply wait for the idea to fall down from heaven — and they do this for their entire lives.

Worse, some people delusionally waste time on business cards, setting up an LLC, and obsessing over pricing. I’ve seen this in literally thousands of examples of students I’ve worked with.

And yet most of these activities are pointless. The best example of this is Nicole, a freelancer working toward the goal of earning $1,000 more per month. I showed her how 90% of her activities were a complete waste of time — and I showed her how to earn more money rapidly.

If you’re curious, I have tons of resources on earning more money, plus a free mini-course with step-by-step scripts to use today.

Mistakes: Saving Money

  • Goal: Save money
  • What people obsess about: bank interest rates, budgeting, making spreadsheets
  • What they should REALLY care about: cutting costs, earning more, setting up automatic savings contributions

Most people never even think of this, but for the few that do, they often approach it in a curious way.

How many friends do you know who take out a piece of paper and sketch out grandiose notions of how much they can earn/save to live a great lifestyle? Sound familiar?

Yet those pieces of paper are soon discarded, and we get our next set of bills at the end of the month, shrugging. “I guess I spent that much,” we say.

When we try to save, we end up trying to save on everything — 50 cents on this, $4 on that. As a result, we give up in a couple weeks. A better approach would be to use the Two-Headed Savings Approach, which lets us focus on limited attention and willpower on the biggest wins.

After that, focus on the CEO Model — Cut Costs (above), Earn More, and Optimize Spending. Optimize existing spending by making a few phone calls to negotiate lower rates for cable, your gym membership, even credit cards. And automate the entire process.

Mistakes: Bank Accounts

  • Goal: Open an account
  • What people obsess about: account interest rates, rewards
  • What they should REALLY care about: opening an account and automating payments

I get dozens of emails every week with people freaking out about opening a bank account. “Ramit,” they say, “your book says ING gives 3%. But it’s only 0.75%! What am I gonna dooooo?”

First, I want to ignore them. Then I want to kill them. Finally, I decide to shame them.

Attention morons: The difference between 1% and 2% on even a $10,000 balance is about $8/month. You do not get rich from rate chasing. Instead, pick a bank you trust, fold it into your automation system, and get on with your life.

Don’t know where to start? Here are my favorite checking and savings accounts. Pick one and get on with your life.

The Key Takeaway: Work on the RIGHT things, not everything

Americans love to try to do it all. They use phrases like “it couldn’t hurt, right?” when in reality, it very much could hurt to focus on the wrong things.

That’s because we’re cognitive misers with limited attention and willpower. If you’re wasting these limited resources worrying about a $3 latte, you will almost certainly be ignoring the Big Wins — like negotiating a higher salary, finding your Dream Job, earning more, and cutting costs on the biggest areas of spending.

Making these big changes is hard, so we try to distract ourselves with peripheral decisions like APR, interest rates, credit-card companies, and other irrelevant data.

Choose your battles wisely. We can only focus on so many things (something that flies in the face of our “do it all” culture), so it’s important to (1) pick the right areas to focus on, and (2) ruthlessly hone and optimize our approach within each area.

For example, we all know people who have been talking about some “great idea” they have…for 20 years. Compare them with someone else who decides to simply get started — who takes a testing approach — and after 4 weeks, has made more progress than the “dreamer” made in 40 years?

I’ve covered every single one of these topics on this site over the last 8 years.

To get started, check out the links above. But before you open up 20 tabs, commit to do just ONE thing today. Maybe it’s “Cutting $100/month from my spending” or “Earning $250/month by May.”

Just remember — most people will focus on the tactics because they’re shiny and immediately rewarding. But losers love tactics. Winners ignore shiny things and focus on what matters most.


* * *
Get my insider newsletter, sent every few days to ~200,000 people:

  • Insider techniques on psychology, negotiation, automation, and investing
  • Ready-to-use scripts that are never publicly released
  • Case studies and private Q&As

25 19

Related Articles


How to crush your performance improvement plan

There are two types of people who stumble onto this page. Either you love your job and hope to crush ...

Read More

How to turn negative performance review phrases into a 30%+ raise

Here’s a dirty secret about performance reviews your HR department doesn’t want you to know. Any performance review, ...

Read More


25 19
  1. True! It’s not about the perfect system. It’s about having the guts to go do something. The thought that keeps me going is “dumber/less talented people have succeeded, why can’t I?”

  2. Your answer for saving money is listed as the previous mistake! Lol. I agree with everything you say though. I would add Pay Yourself First.

  3. […] 4 Dumb Money Mistakes. “I love making fun of horrible money advice and atrocious career advice as much as anyone else, but sometimes we have to turn the focus onto ourselves. How many of us choose to focus on the most pointless areas of personal finance? Should I open this credit card? I feel guilty paying for name-brand cheese. Do you think I should buy one of those coupon books?” I Will Teach You to be Rich […]

  4. Ramit-

    Automating payments has had a profound impact on my life. As a self employed dude, I was always scrambling. Boom, bust. Make money, chase bills away, buy something cool, be broke, scramble, make money.

    That was a rut.

    I read your book and it was the FINAL thing that convinced me to W2 myself – my ego had to face facts and realize that I could only draw a smallish-salary. But, the taxes are raked. I live in reality. I can give myself a raise anytime.

    And it was enough. More than enough. It got me out of the twitchy, addicted boom-bust freelancer business model.

    I make a salary and it turns out that it’s more than enough. It put me on a rhythm. I don’t have to stall vendors, I have the cash to run the business. You don’t explicitly say freelancers should W2 themselves…but if you’re freelancing for a living, you gotta.

    That was life changing, and not having to think about money all the time is meaningful. I get paid. And I can build a business. The two interrelate.

    • Chris,
      I am a business owner too. One thing that use to kill me was bills all hitting at the same time and trying to pay them all as they came in. I worked out a system where I have a separate bank account that I pay all my fixed expense. I took all my fixed expenses and calculated a total monthly expense. I divided it by four and have that amount withdrawn automatically from my business account every Friday. Then, I have a portion automatically go into a personal account for spending and the same amount go into saving and emergency fund. Since I evened out my cash flow, I never worry about paying my bills.

  5. For me, the process of actually working to get out of debt involved the psychology behind why I was putting myself into debt in the first place. I HAD to do that, it’s the way my mind works. THEN I was able to cut costs and automate my payments! I’m still working on it.

    And for the record, I only opened up 3 tabs! 🙂

  6. Hey Ramit,

    That was a wonderful recap post of your IWT philosophy. It was like IWT for beginners!

    As an endnote…when there is no goal (and plan to get there), then anywhere you end up is fine.

    “Fine” but random.

    And good things, don’t happen “randomly”.

  7. I have one objection to automated savings/investments… It’s that I LOVE hitting that confirm button to send money to the Roth, to send money to the savings accounts, or to send in that final payment to the student loan company (which is happening as soon as I get my tax refund).

    And every month when I make these transfers I stop and think can I increase these payments? And sometimes I actually DO increase them be it a one time bump or a permanent increase!

    • Chase,

      I have the same obsession that you have, so the compromise that I made was to call all my creditors and ask them to change my due date on my payments. Now, I sit down on the 15th of every month, at 6 am (can you say a n a l rententive) and I pay all my bills on that one day. The only things that I have automated are my retirement contributions, my investment contributions, my savings, my tithing and my mortgage payment. All other bills, I love hitting the submit button.

  8. Well I caught the “pop up window” rather quickly but have to admit I have made a few of the mistakes myself or I know someone that has. … Have everything automated but “automate-out” what I put in! Thanks for the pep talk…needed it.

  9. Very interesting article. It is true that focussing on small things that aren’t going to have a massive impact on your bank balance can be a waste of time financially and that often it can be easy to miss the big picture. I do think though that it is important to thoroughly question all purchasing decisions as they can have an impact upon far more than just your finances.

  10. Yep, it was me, obsessing about APRs instead of automating payments. Somehow I realized that automation might be more helpful (even though a good APR wouldn’t hurt), and I tried that. Honestly, I don’t like it much because some months I can add more to my payment, some months I cannot. I do like to have control over my payments. I guess automation is not for everyone. 🙂