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Stop being cheap and go buy something valuable today

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Let’s start the week off right: with me getting really angry and threatening to throw heavy things at people.

Guys, I am so tired of hearing about young people sabotaging themselves by being cheap. Not frugal, cheap. (There’s a difference.) Let me tell you why using an example from the recent IWillTeachYouToBeRich chat I recently held.

During the chat, someone asked me what I was going to do with the site in the future, and I mentioned how I was interested in using different types of media like podcasts, videos, etc. There was a lot of enthusiasm: “Yeah, Ramit!” they said, “you should do it!”

Then I decided to test the lovey-dovey emotions that we were all feeling. See, I’ve been getting lots of requests to do a regular podcast, but it’s a lot of work to do a really good one. That’s why I’ve been playing with the idea of charging for them.

Oh, man. When I mentioned this in the chat room, people went apeshit. They were dead set against it, and I watched the mood go from Kumbaya-happiness to dark indignation. Curious, I thought. Actually, I thought it was completely stupid, and here’s why:

Before I went nuts, I asked people, why not charge? And the reasons I got back were so breathtakingly absurd that I actually stripped out people’s names.

person1: don’t charge though
person2: yeah, please don’t charge
person3: I have universtiy debts to pay for… =… O(
person4: It feels punitive
person5: your good karma will come back to you muliplied if you do not charge
person6: because people dont want to pay lol my guess is you will lose many readers if they have to pay
person7: No charge….comeon! you cant ask us to pay to learn saving 🙂
person8: one thing that would concern me if you charged is that the quality of material would need to match the fee
person9: i think you should charge. you weed out the ppl who aren’t willing to make basic investments in their investments
person10: dont charge
person11: frankly your latest work hasn’t been great ;(
person12: we cheap 😛 don’t charge. we hear to save money here XD
person13: suze orman does not charge for her show
person14: Dude, there are people who CAN’T pay. (Me, for example, here in Bangladesh, I don’t have a way to pay for stuff in the web.)
person15: you’ve been giving out quality information for free, i think i’ve gotten used to it…
person16: Charging is not a succesful business model for editorial content on the web, currently
person17: people dont know what the advice is worth before getting it but you have to pay first
person18: you will NOT attract new audience members by charging….existing ones, maybe
person19: Payment is a barrier between the reader and the important information; I would think you of all people would understand how dangerous it is to erect even minor barriers for people.

Seeing this really pissed me off. In fact, these reasons are so ridiculous that I almost took out a sledgehammer and smashed my monitor, Hollywood-style.

Listen, if I decide to charge for podcasts–which I haven’t decided yet–then you can decide if they’re valuable enough to pay for. But please don’t use dumb excuses like “How can you expect me to pay when I’m trying to save?” and “I’m used to free stuff.”

The truth is that most young people don’t understand the value of money. Ooh, yeah, I said it. We don’t differentiate between cost and value. We’ll happily spend money eating out, drinking, or going to movies, but when it comes to paying for content or other valuable items–things you consider an investment–we balk. We’ve gotten used to everything being free, and when things start costing money, the result is a panicked “no way!” reaction. How do I know? Because I’m a young guy, and a few years ago I was saying stupid stuff like the above quotes, too.

* * *

When I was younger, I tried to save money on everything, whether it was a Coke or a major purchase like an iPod. I understand being on that end of the gradient. Now that I’m earning money, though, I see the value in spending money on things beyond eating out. Person9’s comment spoke to me:

“person9: i think you should charge. you weed out the ppl who aren’t willing to make basic investments in their investments”

Frankly, if you’d told me to spend more money on certain things back then, I would have ignored you. But hopefully you’re smarter than my past self. Also, you might have read enough on this site to know that spending on the things you love is perfectly ok.

Ben Casnocha put it well when he wrote this:

“What are the best corners to cut? In the Google cafeteria, the food is awesome, and the chairs and tables are pieces of shit. That’s a great example of cutting the right corners.”

Right on. Today, I see young people sabotaging themselves all the time by being cheap about the wrong things. “I’m not going to buy that book! It costs $27.95!” they say, not realizing that the book could inspire them to do something that would make them $10,000. That’s a 357x return. Or, “I’m not going to spend $15.00 on the more expensive cellphone plan–that’s ridiculous!” No, what’s ridiculous is you then not monitoring your usage and ending up spending $58.00 in overage fees in one month.

“But Ramit,” you might say, hiding behind a wall because of the mallet I am holding on this angry Tuesday, “how do I know that $30 book will pay off? What if I don’t get anything from it?” Jesus Christ, you don’t know! That’s called taking a risk! Unfortunately, I see a lot of people nickel-and-diming the really important things that could pay off explosively.

Instead of being guided by the invisible hand of stupidity, take some conscious control of your spending. Are you just spending on eating out? When was the last time you spent money strategically to try to gain something useful? Yes, it’s actually good to spend money on things you value. Yes, it’s important to spend money on things that will benefit you financially, intellectually, whatever. Yes, I’m encouraging you to spend money on certain things! In fact, here are some of the subscriptions and things I’ve spent money on:

  • A subscription to Before & After Magazine, to improve my design skills
  • A subscription to the Rhapsody music service, because I like finding new music without having to wait
  • A Rowenta iron, because I love ironing

This point of this isn’t to brag about how much I spend on stuff. Heh, frankly, it’s not that much in the grand scheme. And it’s a little different than my posts on Irrational But Good Things To Buy and Cost vs. Value. The point is to differentiate between spending on fun, and spending on things you consider investments.

In the quotes from the chat above, one guy said something like, ‘How can I spend money on a podcast when you expect me to save?’ Let’s get real here: Assuming the podcast (or whatever) is worth paying for, then you need to think more about whether it’s an investment or a simple cost. Does it have the potential to make you happy? Beyond that, could it give you the potential to make more than the cost of the podcast? Is there a trial or a refund policy? Is there some magical way of of judging if you think the content will be good (like maybe 2 YEARS OF POSTS?!?)?

This post isn’t just about my hypothetical podcasts, and it’s not about going to buy that iPod/coat/car you’ve really been wanting. It’s about not being cheap. It’s about using your money strategically by realizing what’s an investment and what’s not. So here’s what I want you to do. This week, go find something valuable you want to spend money on–and then go buy it. Yes, I’m telling you to go spend money on something you love and something that will benefit you in some way. Do me a favor and add a comment here telling us what you bought. Bonus points if you spend money on something that will turn your money into 10x what you spent (e.g., a good business book or buying lunch for your mentor to get his advice). Remember: You control your spending.

If you’re new to IWillTeachYouToBeRich, check out my table of contents, RSS feed, and email newsletter. You can also add this blog to your My Yahoo page.

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  1. He huffed, and he puffed and he blew the house down. Just kidding Ramit. On the one hand I can see why this would upset you, but on the other hand, what did you expect?

    To be honest, your posts are in the top 99.9% of all blog posts on the web. The fact that I can get more out of one of your personal finance articles than an entire semester of personal finance at an Ivy League School should tell you something.

    But since you have yet to charge for content, or even have ads on your site (which personally I think you are crazy for) our perception is that you would always give us unlimited-Ramit-inspirations free of charge.

    It might be cool if you went at it like MarketingSherpa, where you release the podcast for a week to your newsletter list and then after that week people would have to pay. As a result, I think your newsletter list would grow a lot faster, of which you could supplement some income with a few text link ads in each newsletter.

    Or you could just charge, either way, you’ve got my attention.

  2. Ah, my friend, I have to say that my favorite part of this post was, “like maybe 2 YEARS OF POSTS?!” That was *golden*.

    I for one will support either decision you make (on charging), knowing full well that the effort you would put into making a podcast, if even close to the effort you put into this blog, will be WELL WORTH IT!

  3. Get your sledgehammer out, because I’m about to talk about charging.

    One effect I’ve noticed over time is this: desperate people will spend money on something, only to be disappointed that it won’t fix their problem quickly, and then they abandon it.

    Be careful that you very clearly explain that the podcasts don’t have all the answers, and that solid investments still take a long time to build.

    It’s not just financial desperation that can lead to this. Case in point, I once spent $40 (about 20% of my liquid assets at the time) on a new exercise outfit, thinking the cost would spur me into going to the gym again (kind of reverse-sunk-costs mentality). It didn’t work.

  4. Great Post! You’re dead on the money when it comes to not being cheap. Being cheap all the time will drain your life of things you love (other than all the nickels and dimes you’ve collected)

  5. Young people tends to ignore the value of advices because they have plenty of time to make mistakes and learn it the hard way.

    It takes time to become wise.

  6. True enough. That is what I think when I go buy books, as long as they give me one good idea they are worth the dollars I spent on them.

  7. Wow, looks like this really struck a chord with you. As well it should, this ‘all content should be free’ is stupid. People have many times commented on your own site about charging money for a product = evil (usually refering to Dave Ramsey – whose radio show is free online, BTW). Some of your readers somehow perceive you and your site as being more legitimate since you aren’t selling something. Thus, you now start talking about charging for some content and you’ve now joined the ‘evil ones’. What did they expect from someone who talks constantly about entrepreneurship?? Does your readership not think that you will ever have a book to sell? Or ebook? Or podcast? Or whathaveyou?

    Also – and I know I risk you filtering this comment out by saying this – I must say that it does not look like your “2006 Money Makeover” is working so well if your loyal following are not willing/able to shell out a few buck for a podcast. I mean, seriously – It’s not like you’re going to charge $50 per podcast…

  8. I’d prefer that your podcasts cost something. However, you need to understand that I now have higher expectations from your podcasts compared to your blog. I’d no longer be a user, but a real customer, and as a customer I have an expectation of value.

    As you say, you don’t want to produce something bad because podcasts can vary in quality. If I’m paying, I expect better quality both in recording and in content. If I put down a dollar or two for your first podcast, and I don’t get what I’m expecting than little is lost (who honestly can’t part with a dollar or two for one trial? Now we’re talking cheap). If I don’t like it or see the value, I stop. If I like it and see value, I continue.

    I don’t like this “phenomenon” of free everything. I WANT to pay because then I know you have an obligation to me for providing quality, and I know that you think what you’re offering has that value. It’s up to me to decide if that’s really true based on my values.

    Also, there is no risk of losing readers because you add podcasts, but require payment for those. If there is good quality posting, then people will read. If the podcasts are better (or more entertaining, more fun, more emotional, more real, more interactive, more convenient, etc. or any combination of those), than some percent of your readers will pay.

  9. First: I’d definitely pay for podcasts.

    Second: Along similar lines, here’s my purchases for the week (along with a bit of background).

    I’m turning 20 next month, in college, and engaged to my live-in fiance. We both came from less-than-ideal family backgrounds, so this allows us to support each other fairly well.

    I work full-time and spend about an hour a day stuck in the Orlando commute, so my first purchase is a short list of Audiobooks.

    I’ve ALWAYS been one of those teenaged “No way I’m paying for music downloads” sorts of people, so this represents a huge shift for me. But now, I’ll be able to put that hour to some better use, as opposed to the usual iPod playlists.

    …My second purchase this week was a brand new Vespa. Since my fiance only drives a mile or two to work every day, we can eliminate one car, four tanks of gas per month, repairs, and half of our insurance. With a 49cc engine, no special licensing/education is required, and it’s much more fun to ride.

    Keep up the great work, Ramit!