Rich Girl Roundup: Responding to Our Most Controversial Topic

Katie: Welcome back, Rich Family, to the Rich Girl Roundup weekly discussion of The Money with Katie Show. I'm your host, Katie Gatti Tassin, and every week Henah and I are gonna break down some sort of interesting discussion, but we are trying something a little bit different this week. Before we do, here is a quick message from our sponsors. 

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Katie: Now before we get into this week's roundup, I just wanted to let you know how excited I am for this Wednesday's full main episode, because I'm interviewing Ramit Sethi, the author of I Will Teach You To Be Rich and the host of the Netflix show How to Get Rich. We talk about money, business, life, philosophy, politics. It's a super wide-ranging conversation and it was really cool to get to ask him questions that I've never heard him answer before. So make sure that you tune in on Wednesday to hear that interview. Okay. Onto the Roundup. 

So this week, instead of answering a listener question, I thought it would be fun to try something new and kind of dig into, I'll call it “critical feedback” of some of our more controversial recent topics, where we put out a bunch of stuff on social media, if you're not following there. And when you're blasting something out to hundreds of thousands of people, there are gonna be people that disagree, but some topics lend themselves to more interesting dialogues and discussions than others.

So in the spirit of that, I pulled a few emails that I thought were really interesting. Henah, are you down to discuss with me? 

Henah: I'm a little scared, but I'm down to see what people had to say. 

Katie: I know you are. So last month we did a week of material all about self-made millionaires—maybe you remember it. And we were questioning the fundamental legitimacy of the claim of being a self-made millionaire, as well as the trope that I think is best described as the “rich people act poor and poor people act rich” and that is why they are rich and poor, respectively. Kind of like The Millionaire Next Door vibe. And it generated a lot of interesting discussion. 

Henah: It did. 

Katie: The first email is from someone in their eighties who I ended up having a really lovely conversation with, but they basically said, “I started from scratch. I got a PhD from an Ivy League school. I worked at my company for 35 years. I always saved a third of my salary, and I'm worth $10 million, and I disagree with your thesis.” So of course I read this email and Henah, you forwarded it to me. So what did you think when you read it? 

Henah: Well, I think I was a little bit unsurprised that we got feedback, because I think people, and I'm not saying this is the case for this person, but I think sometimes when you hear something that applies to you, you kind of get a little defensive. That might be your first reaction is to be like, “No, no, no, I did this all by myself.” So I kind of was expecting a little bit of pushback, and this particular person, you know, if you're saving a third of your salary and you're worth $10 million, I was sort of like, “Hmm, the math is…how did we get there?” I guess, what was your initial gut reaction? And then I know that you had the conversation, as you said. 

Katie: Yes. 

Henah: So how did that go down? 

Katie: I mean, I was like, “Oh my god, you're worth $10 million. That's amazing. How did you do that?” I basically asked, keeping in mind, right, this person is in their late eighties, so like “How did you pay for college?” But that question is not as pertinent for someone who's in their eighties than someone who's going to college today. “How much did you earn in your career?” 

Henah: The million dollar question. 

Katie: Yeah. “How much did you have when you retired? How much of that 10 million has just been the result of compounding over the last 30 years versus what they retired with, and did you have a pension?” Again, because this is someone that's in the generation where those were more common. 

Henah: You know, I would be so scared to push back with you because you would come in with a list of questions like, “Once I see the answers to all of these, I will determine if your pushback is valid.” 

Katie: “This is legitimate pushback.” No, well, but that's the thing. How can you disagree with someone's subjective life experience? But it was just because $10 million is so much money, I was like, “I just want to know how you accomplished this.”

So they were super, super sweet and it was really interesting to hear the details of their life and their story, and a few things really jumped out at me. So they told me that when they were in their teens and kind of college-aged, they got a thousand dollars from their dad and a thousand dollars from their grandfather. I calculated that if you were 18 and—it was in the fifties—that is the equivalent of about $22,000 today. 

Henah: That's a nice chunk of change. 

Katie: It's a nice chunk of change. That's right. In 1960, Harvard's tuition was $1,500 per year, which is the equivalent of about $16,000 today. The actual tuition of Harvard today is about $60,000. Though it does appear that most students who attend Harvard get some sort of aid or scholarship. And this person did receive a pension, and it pays out the equivalent of about $144,000 per year. 

Henah: So, like $12k a month? 

Katie: Correct. Before taxes. 

Henah: Wow, okay. 

Katie: They got a great situation, right? And so I don't wanna take away anything from this person. They're clearly very bright, very driven, worked super hard, and are still pretty bright because they were conversing with me very quickly over email. There's no denying that. But it did highlight for me, what makes this conversation that we wanted to get into so fascinating, which is that in the original email they said “I started from scratch.”

Henah: Right. Which is kind of like the yellow flag here. 

Katie: It for me really highlighted just the inherent bias that we all have in the way that we think about our own success and how easily we kind of gloss over the advantages we were given. We're very quick to attribute the good things that have happened to us to our own intelligence or effort, and very quick to write off the bad things as bad luck. And the one big piece of pushback that I saw consistently that week was like, “No, no, no. Read Millionaire Next Door.” I've read that book; I know that book. But I do think that it's fascinating when you consider the subject matter of that book, which is that they studied baby boomers, and the post-World War II economy was the biggest boom time in history, right? I think we all can look back at that and recognize that that was kind of anomalous economic growth. So there are tailwinds that every generation has, and they're going to be different. I think I can even recognize this in my own life. Had I been born in 1975, I wouldn't have a full-time job being a blogger and a podcaster. Being alive in the time that I am has been a leg up in being able to do what I do. 

Henah: Right. To your point, too, buying a home is not as easy, or buying land is not as easy as it used to be. But then there are trade-offs, like it is easier than ever to invest and to do it for free.

Katie: Exactly. 

Henah: So there are different tailwinds that we have to attribute our successes to, or at least give some responsibility or accountability for, which I think is kind of the point of your whole thesis, right? 

Katie: Yeah, yeah. And the Millionaire Next Door thing was interesting because one piece of feedback was in response to the blog post, which was this criticism of the way in which we look at rich people who act as though they don't have any money and say, “Ah, that's why they're rich.” But “Poor people act rich and that's why they're poor.” It was a criticism of that mentality, and somebody had said, “Hey, you know, love your work, but I think this is off the mark. The reality is that a lot of middle-income Americans amass significant wealth by making smart decisions around consumption when it comes to cars and houses and investing in low-cost index funds regularly.”

And I agree, which is why this interpretation of the original piece was what I was a little afraid of when we went out with it, 'cause I was like, no, I agree that if you're a median earner, that the type of car you drive and the type of home you buy, those things make a huge difference in your outcomes. So I think if you can make decisions that change your save rate from $500 per month to a thousand dollars per month, you're literally gonna end up with twice as much money later, for sure. But it kind of, I don't know, highlights this larger question of, how much of that is in your control with respect to things like housing? And if the cost of things like housing and education and medical care have continued to rise while the cost of everything that you would consider conspicuous consumption has continued to plummet over the last few decades, maybe avoiding conspicuous consumption historically was enough to make you a millionaire, but is that still gonna be enough today? 

Henah: No, I think that makes a ton of sense. I was actually just thinking, I think having access to the financial literacy of knowing what to do to become rich is also another piece of this. If you're working a minimum wage job or two minimum wage jobs, you're probably not sitting around saying, “How can I amass my wealth and totally become the millionaire next door.” You're thinking, “How do I get food on the table next week?” So yeah, I think that there's a gamut of what is the actual reality that a lot of people are living in, and the amount of money that they could feasibly save, and by comparing yourself to the Jeff Bezos or the Warren Buffett or whatever, it's really just setting you up for failure, and you can't compare yourself to the people next door because you're not the people next door. You are just in your own situation. I understand where people are coming from and I totally value the fact that there are many people who work their modest job, they save a bunch and whatever, but I don't think it's fair to glorify people who already have the high incomes for their budget-friendly choices. 

Katie: Yeah. Like the lifestyle choice of frugality after the fact, where it's like, oh yeah…I love this topic. I think it's gonna continue to come up. It's come up before on this show. We've talked about the American Dream, how things have changed, what the American Dream even means today. And there are also generational differences just based on what you've experienced in your life and your own subjective feelings about how you got where you got. And that's pretty hard to argue with. I think in the future, we'll see after more controversial weeks if we get interesting feedback that we can talk about, because it just kind of serves to add more color to these conversations and makes them a little bit less one-sided, I guess. Although I guess it would make it really not one-sided if we invited someone on to talk about it with us instead of just discussing it in their accent. 

Henah: “Hello, would you like to join us?” 

Katie: Honestly, he's a legend. I'm like, you know what? No matter what, icon, total icon. 

Henah: I think that obviously if you have feedback, we definitely wanna hear it, and we are two people so it's not representative of everybody.

Katie: Totally. Yes. Our experiences are subjective, too. So that's not to say that this is definitive fact, but it is fun to see how other people with different life experiences interpret the work that we do. So thank you for listening to this week's Rich Girl Roundup, and we will see you on Wednesday.