Ramit Sethi says 'people with a lot of money' rarely keep enough of it in their checking account — here's why

Date:

Share post:


Ramit Sethi says 'people with a lot of money' rarely keep enough of it in their checking account — here's why

Ramit Sethi says ‘people with a lot of money’ rarely keep enough of it in their checking account — here’s why

Checking accounts help us manage our day-to-day financial transactions with ease, but personal finance expert Ramit Sethi argues not everyone uses these simple tools in the optimal way.

“One of the most common mistakes made by people with a lot of money: keeping less than $5,000 in their checking account,” Sethi wrote in a recent post on X.

He says this practice is often a sign of financial anxiety among the affluent: “When I talk to wealthy people who worry about money, one big tipoff is that — almost always — they keep a small amount in their checking account.”

Don’t miss

Why they do it

Sethi, who hosts the “I Will Teach You To Be Rich” podcast, says there are two underlying reasons why wealthy individuals keep small sums in their checking accounts.

“It’s usually driven by: 1. They used to not have enough, so all extra money was being used; 2. They think they should invest all excess cash and money sitting in checking is being ‘wasted’,” he explained.

This mindset appears sensible. It’s logical to assume that if your checking account has sufficient funds for upcoming transactions, you can allocate any surplus to a savings account for interest accrual or invest it elsewhere for potentially higher returns.

Sethi, however, argues that this mentality can prevent individuals from achieving their desired outcomes: “Unfortunately, their beliefs are not getting them the results they want!”

The solution

Sethi’s solution is straightforward: “Just keep more in your checking account.”

He contends that keeping an additional $5,000 or $10,000 in a checking account won’t significantly impact a wealthy individual’s financial situation. Meanwhile, this strategy can provide a buffer that allows them to operate with more flexibility than a strict monthly budget might permit.

Sethi observes a noticeable shift in sentiment when individuals follow this strategy: “When they make this change, they instantly feel better about their money.”

Read more: Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here’s how you can save yourself as much as $820 annually in minutes (it’s 100% free)

He points out that there is a psychological advantage to seeing a higher balance in one’s checking account, regardless of one’s financial status.

“Remember that most people — wealthy and non-wealthy alike — derive a sense of comfort from what they see in their checking account,” he wrote.

While Sethi’s post has received more than 642,000 views on X, not everyone agrees with this approach. One X user asked whether that $10,000 would be better kept in a higher-yield account earning 2.7% or more.

Sethi defended his strategy, replying, “Doesn’t matter. The interest on $10K, especially for a multi-millionaire, is irrelevant. Money is not always meant to be optimized.”

While the wealthy might not concern themselves with the interest earned on a mere $10,000, for the average person, earning interest can be quite beneficial — particularly in light of the aggressive interest rate hikes by the U.S. Federal Reserve.

These days, some banks and financial institutions are offering high yield savings accounts that pay upwards of 5%.

In the U.S., most savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor, per insured bank. This insurance provides protection to depositors in the event that the bank fails, ensuring that their funds are safe and accessible.

What to read next

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.



Source link

Alexandra Williams
Alexandra Williams
Alexandra Williams is a writer and editor. Angeles. She writes about politics, art, and culture for LinkDaddy News.

Recent posts

Related articles

US envoy says Mexico not safe, blames ex-president for failed security

MEXICO CITY (Reuters) - The U.S. ambassador to Mexico, Ken Salazar, said on Wednesday that the country...

A $1 billion proposal is the latest plan to refurbish and save the iconic Houston Astrodome

HOUSTON (AP) — The Houston Astrodome has been in limbo, waiting for its chance at a second...

Elon Musk’s plan to slash waste will prove the Left humiliatingly wrong

It is impossible to cut spending on that scale, it would strip away vital social protections, and...

Iran sets up mental health clinic to ‘treat’ women who refuse to wear hijab

Iranian women who resist wearing the hijab are to be given treatment at a specialist mental health...

Heavy rain triggers flash flood warning in Lafayette

Parts of Lafayette are under a flash flood warning, and heavy rain has made parts of the...

US government worker charged with leaking classified documents on Israel's plans to strike Iran

WASHINGTON (AP) — A man who worked for the U.S. government has been charged with leaking classified...

When horror hits China, the first instinct is shut it down

The gates outside the Zhuhai sports complex in China were closed. Inside, the stadium was in darkness,...

Plane Passenger Confronts Seatmate Watching Show at 'Full Volume' — and Their Response Left Them Baffled

After some "complaining" and dirty looks from fellow travelers, the passenger decided to intervene, they explained on...