He is Generation Y's favorite personal finance adviser. His message: Motivation isn't enough. Develop a system, and get over yourself.
By Mina Kimes, writer
FORTUNE -- On a recent afternoon I met with Ramit Sethi, a popular personal finance guru, at a Southeast Asian restaurant in downtown Manhattan. The interview wasn't going well. Sethi, who is 29 years old and Indian American, is inscrutable. He doesn't smile often. His eyebrows, thick and slanted down toward the bridge of his nose, give him a stern look. Over vegetable curry I asked him about his childhood, and he told me that he didn't remember much. He shrugged off my questions about his hobbies and his aspirations. It wasn't until the end of our lunch, when I reached for my debit card, that his eyes lit up.
"Show me!" he barked, pointing at my wallet. When he spotted the Bank of America (BAC) logo peeking out of the billfold, he threw up his hands, appalled. "Oh, my God," he said.
I cringed. The debit card offers meager rewards. It is linked to a checking account that requires a minimum balance, locking up my money for a paltry interest rate. The bank was threatening at the time to slap me with a $5 monthly fee. As I yanked my wallet back, Sethi laughed with delight.
I should have seen it coming. Ramit Sethi (pronounced Ruh-MEET Say-tee) is the enfant terrible of the personal finance world. Since starting his website, iwillteachyoutoberich.com, in 2004 as a Stanford undergrad, he has built a cult following. Nearly 200,000 people subscribe to his newsfeed. His book, also called I Will Teach You to Be Rich, rocketed to No. 1 on Amazon the day it came out. He sells online courses that cost upward of $1,000 and pulls in more than $1 million a year.
Sethi's advice isn't terribly unusual: He wants young people to slash their debt, invest for retirement, and increase their earning power. It's his approach that makes him different. Unlike most people in the self-help business, Sethi eschews fuzzy affirmations in favor of specific directives. His tips are based on careful testing and paired with musings on the mysteries of human behavior. His technocratic style is similar to that of Tim Ferriss, author of the smash hit productivity guide The 4-Hour Workweek. Like Ferriss, Sethi specializes in coming up with simple tweaks -- or hacks, as productivity junkies call them -- that his readers can apply to their lives.
Sethi and Ferriss are good friends. "There are a handful of people who are very analytical and good at testing and have, almost as a side effect, built these personal brands," says Ferriss. "Ramit is one."
And yet, after I paid for my lunch with my scorned debit card, I found myself puzzled by Sethi's popularity. For a guru, he isn't very charismatic: He is distant, not warm, and comes across as more taskmaster than mentor.
But that may be why his readers, chiefly Millennials in their twenties and early thirties, adore him. They say they are tired of being pandered to by experts twice their age. Max Cantor, a 26-year-old programmer from Cleveland, says he admires the blogger's willingness to alienate people. Cantor once e-mailed Sethi a question, only to see his query appear in an I Will Teach You to Be Rich newsletter as the subject of mockery. "He's kind of a dick, right?" Cantor says with a laugh.
A quiet kid who liked to crack codes
As Sethi pads around his Manhattan apartment (it's a classic bachelor pad -- black modernist furnishings, empty beer bottles by the sink), I ask him about his immigrant parents. He says they taught him the art of negotiating, a skill he thinks is scarce among Americans. In his book he recounts how his father, a chemical engineer, once spent five straight days negotiating over a car, only to back out at the last second because the salesman refused to throw in floor mats. Sethi says his name was originally supposed to be Amit, not Ramit. But when his parents realized that Amit Singh Sethi's initials spelled out a profanity, they went back to the registrar and convinced him that he had erroneously dropped an "R." "Like true immigrants, they didn't request a name change, because that would be, like, $50," he says.
As a kid growing up in Sacramento, Sethi showed no signs of becoming the brash, opinionated person he is today. His mother, Neelam, says, "When he was really little, he just wanted to be left alone."
Sethi says he was smart, but never the smartest student in class. What he did have, though, was systems. "I like to figure out how to crack codes," he says. When his parents told him they didn't have the money to pay his college tuition, he devised an organizational system to apply for 60 scholarships. After his first applications were turned down, he videotaped himself practicing interviews and realized he wasn't smiling enough. From then on, he went into interviews grinning -- and won more than $200,000 in scholarships, which he used to go to Stanford.
One of Sethi's first scholarships was a $2,000 cash award, which he invested in a single stock. He promptly lost half his money. "I was like, whoa, I'd better learn how this money thing actually works," he says. "I spent the next couple of years reading every book on personal finance." As Sethi learned more about saving and investing, it occurred to him that people his age were prone to making stupid mistakes about money. So he put together a handout titled "I Will Teach You to Be Rich" and gave it to his friends. Julie Nguyen, one of his classmates at Stanford, recalls that Sethi used to try to give free classes on campus. When I asked her if she ever attended one, she laughed. "People didn't really go."
Undeterred, Sethi launched a blog. He started off writing about the usual topics, like credit card debt and Roth IRAs, but he quickly had an epiphany: Financial education was a waste of time. Most of his friends knew what they should be doing, but they weren't doing it. At the time, Sethi was studying behavioral psychology. He began to think about applying persuasive techniques to advice about money. He started writing about the psychological hurdles that kept people from fixing their finances and offered suggestions on how to overcome them.
For example, one of the bedrocks of Sethi's advice is automation. Instead of just telling readers to cut back, he teaches them to create an "automatic money flow" system. It works like this: Your paycheck is deposited to your checking account, which is programmed to automatically deposit money in your Roth IRA and savings accounts. A couple of days later your credit card pays off all of your bills. Shortly after that, your checking account pays off your credit card in full. The system refreshes after each pay cycle.
Sethi's faith in automation is driven by his belief that many people are incapable of making smart financial decisions on their own. His willingness to say as much is unusual. Most personal finance gurus peddle the belief that confidence begets success and that the strength to do better comes from within. Sethi disagrees. "We know that most people, including most experts, believe that willpower solves all," he says. "It's a very American idea -- just try harder. But I think that people see that they try and try, and genuinely want to do something, but willpower alone fails them. What I try to do is introduce systems."
As Sethi delved deeper into the psychology of finance, his posts grew longer. He started attracting hundreds of thousands of readers, some of whom left sprawling stories about how his advice affected their lives. He began appearing on television. Eventually, publishers came knocking. When his book debuted above the second Twilight novel on Amazon (AMZN), Sethi took a screen shot of the bestseller list and posted it online. He circled Twilight in red; next to it, he wrote "Dominated!"
Advisers for the next generation
In recent years a number of personal finance experts have tried to corner the Gen Y market. They include Farnoosh Torabi, a former journalist turned television personality, and Alexa von Tobel, whose website, LearnVest, is geared toward young women. But Sethi's voice is the one that connects best. Like many popular twenty-something writers on the Internet, he employs a tone that is both snarky and over-the-top silly. Overdraft fees, he once wrote, "make me want to cover myself in birdseed and stand in front of a toucan cage while duct-taped to the ground." Paying the minimum amount on a credit card "is the grown up equivalent of a little boy letting the school bully take his lunch money on the first day of school, then coming back with his pockets jingling every single day afterward."
Sethi has no qualms about mocking his readers. For example, he has been recommending ING Direct's savings account for years. When Capital One (COF) -- a company he says has poor customer service and bad credit card options -- bought ING Direct this summer, he was flooded with concerned e-mails. "So now that a terrible company bought ING Direct, what should you do?" he wrote. "THE ANSWER IS CALM THE FUCK DOWN YOU WEIRDOS." He concluded: "Seriously, I hate you all."
Sethi's favorite target is the financial services industry. He frequently expresses his distaste for big banks, credit card issuers, and actively managed mutual funds (like many personal finance types, he advises his readers to invest in low-cost index funds). "When you're making fat commissions off providing essentially no value and protecting it through obscurity and miseducation and misrepresentation, then I get really pissed off," he says.
Most professional bloggers make money in one of two ways: They either hook up with corporations, who pay them to send customers their way, or they sell advertisements. Sethi rarely does either. He makes the bulk of his revenue from courses he delivers online. For $47 a month, he'll send you Scrooge Strategy, tips on saving money; for $997, you can buy Earn1k, a two-month long video series on earning more on the side. His latest offering, Dream Job Elite, was an eight-week coaching program. The course, limited to 15 people, cost $12,000. It sold out in less than a week.
Whenever Sethi promotes his products on iwillteachyoutoberich.com -- which is often -- commenters howl in protest. "Sounds like Ramit figured out how to earn some extra dollars on the side," one wrote. Another added, "Good luck teaching yourself how to be rich, Ramit. I, however, am unsubscribing."
Sethi shrugs off the criticism. He points out that his blog and newsletter are both free and that dissatisfied customers can get full refunds on all his courses. On top of that, he discourages people with credit card debt from purchasing his course on earning more. "It's not really about money," he says. "I've never been interested in money per se. I'm interested in behavioral change."
From saving to earning
In Chicago this fall, Sethi threw a meet-up for his readers at a hotel bar. About 60 people showed up. Sethi, dressed casually in a shawl-collared cardigan and jeans, floated between groups of his readers, mostly college-educated men and women in their twenties and early thirties. Many were between jobs. David Patnode, a 31-year-old wearing a huge camera and a necklace with a silver phoenix charm, told me that Sethi inspired him to leave his position at a health care software company to pursue his dream of becoming a photographer and martial arts instructor. "He gave me the confidence to realize I will be successful no matter what I do," said Patnode, who had driven more than two hours from Madison. Andrea Arnold, a 28-year-old mother of two, nodded in agreement. Reading Sethi, she said, motivated her to find freelance graphic design work so that she could work from home.
About two years ago the focus of I Will Teach You to Be Rich shifted from saving to earning. For Sethi, it was a smart business move; there was only so much advice he could give on cutting back, whereas making more money is a subject with unlimited potential. He spent a year interviewing experts and testing his hypotheses on freelancing and negotiating. He then packaged his findings, including specific tips on everything from pricing (aim high) to social networking (don't bother) into an eight-week course. It is now his primary source of revenue.
At a time when so many young people are struggling to pay their bills and find work, it seems foolhardy -- cynical, even -- to advise them to shell out hundreds of dollars for courses on earning more. But Sethi counters that the corporate career path has failed his generation. "Three years ago no one thought they'd get laid off," he says. "Young people want control. We've seen that taken away from us."
After we left Chicago, Sethi put me in touch with Chris Clark, a 31-year-old financial systems analyst living in San Francisco. Clark discovered I Will Teach You to Be Rich in 2009. He had just gotten married and was buckling under $50,000 in student loans. He had a job, but he was making barely enough to get by. He recalls how he would eat the free snack bars at his office for lunch most days. "It was a pretty depressing time for me," he says.
Sethi's blog inspired Clark to think about earning money on the side. He found a client who needed data analysis work and offered to do the job for just $15 an hour, throwing in one condition: The client had to pass his name on to other prospective customers (one of Sethi's favorite tactics). By the end of 2010, he says, he had made an extra $15,000. That gave him the courage to ask his employer for a raise. After studying the blog's negotiating tips, he made his move and scored a 70% bump in his salary.
As Clark recounts his story, I can't help but wonder: What's the magic bullet? He mentions Sethi's tips, but none of them strike me as particularly unusual. So I ask him what he has learned from Sethi, and he says something surprising: "Nobody cares about you. People care about other people, and generally people are good ... but nobody cares about you in any given interaction."
That idea flies in the face of everything that people Clark's age -- Generation Y, also known as Generation Me -- have been taught. Millennials grew up believing in the power of the individual. They were told that they were special, and that if they had faith in themselves, success would follow. But those lessons have collided with the recession. Faced with high unemployment and crushing student debt, young people are learning that self-esteem only goes so far.
Enter Sethi. His message has nothing to do with individual empowerment. He takes the opposite tack. He believes that people are inherently weak, and that they should acknowledge as much so that they can develop systems for improvement. He writes that hiring managers don't actually want to hear about you in interviews -- they want to hear what you can do for them. The same goes for potential clients. Get out of your own head and get into theirs, he says. Then get the money.
As Sethi greeted fans at his meet-up in Chicago, it was clear that he practices that approach himself. His readers huddled around him in a circle and peppered him with questions, but he refrained from talking about himself. Instead, he talked about his blog -- and how it attracts only discriminating people. Someone asked him how much time he spends on his posts. "I try to write longer stuff so the dumb people go away!" he said. As he sniggered, everyone in the circle beamed at one another.
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This article is from the December 26, 2011 issue of Fortune.
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