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[Music]
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tool welcome to the best interest
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podcast hosted by Jesse Kramer where we
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discuss today's best ideas in personal
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finance and investing the best interest
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is a personal podcast meant for
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entertainment purposes only it should
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not be taken as Financial advice and is
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not prescriptive of your financial
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situation here's your host Jesse
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Kramer hey guys what's up welcome to
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episode 32 of the best interest podcast
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my name is Jesse Kramer and right now as
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you are listening to this or at least if
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you're listening to this when it's first
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released I am somewhere in the adarand
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de mountains far from cell service far
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from technology probably camping on a
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remote island in an unknown Uncharted
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Lake as such no interview this week I'm
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recording this ahead of time and I'm
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going to read a little article from the
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best interest Blog the title of the
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article is rules Dave Ramsey and the
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[Music]
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Sith rules they're meant to be broken
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right well personal finance is full of
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rules rules rules like pay yourself
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first rules like don't carry credit card
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debt do this not that now some people
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they Advocate what I would call absolute
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rules an absolute rule is a it's an
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unbending rule it cannot be broken
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unless we're going to face some sort of
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negative consequences and we think about
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these absolute rule makers the people
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making these rules they're they're hard
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asses we think about them as dictators
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some sort of rigid boore because a good
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rule should have some sort of exception
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after all only a Sith deals in absolutes
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thank you Obi-Wan Kenobi for that quote
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but listeners stick with me here what if
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the Sith are actually right now how
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could the Sith be right well absolute
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rules might do some good speaking of
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Sith let's transition over and talk
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about Dave ramsy now if you aren't
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familiar with Dave Ramsey he is one of
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the preeminent voices in the personal
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finance education space he had a
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longtime radio show call-in radio show
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and he turned it into a podcast and he's
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also written many books very successful
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at all of those things but Dave Ramsey
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he's also a little controversial some of
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that controversy it involves his ethics
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and his morality for example you know
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he's been accused of of being a giant
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prick but the pertinent controversy for
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this article it involves Dave Ramsey's
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thoughts on personal finances best rules
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you see Dave is a man of absolute rules
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for example Dave believes that nobody
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should use credit cards absolutely
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nobody and Dave also says that a housing
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mortgage is the only acceptable debt
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that you are allowed to carry and even
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then there are still guardrails about
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how big your mortgage can be that sounds
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a little strict to me I disagree with
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both of those rules and many other
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people disagree with those rules too
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they find Dave's absolutism to be
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antithetical to this idea that personal
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finance is personal there's no one-size
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fits all answer well except for Dave's
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iron fisted rules but the more I have
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thought about Dave's rigid rules The
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more I've realized that perhaps just
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perhaps they rely some sort of hidden
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wisdom does Dave know something that the
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rest of us are overlooking or is he just
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a Sith Master using his mind tricks
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against unsuspecting Padawan Learners
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well let's focus for a second on Dave's
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opinions about credit cards now here are
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some quotes directly from Dave Ramsey's
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website first quote there's just no good
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reason to have a credit card end quote
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second one quote there's no positive
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side effect to credit card use there's
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no Bea in the system because it's all
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been set up to benefit the credit card
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companies not you end quote and the
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third one quote when credit cards stay
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out of your wallet cash stays in end
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quote to paraphrase nobody should have a
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credit card for any reason now that is a
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controversial opinion and it's certainly
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an absolute opinion there is no room for
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exception in Dave's mind and it's easy
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to poke holes in Dave's logic you see
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just think about credit card programs
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with Miles and points and cash back they
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yield benefits to credit card users as
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long as someone is responsible enough to
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avoid credit card debt and to spend
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wisely their credit card is a tool that
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they can benefit from the knife that
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cuts your food well it could be used to
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stab yourself in the face the efficacy
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of the knife it depends on responsible
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use the same logic applies to credit
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cards or lightsabers I think Dave is
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wrong but how could Dave Ramsey or a
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Sith Lord possibly be right in their
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absolute rules it all boils down to to
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this one fact when you allow for
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exceptions too many people will falsely
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believe that the exception applies to
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them I'm going to repeat that one more
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time when you allow for exceptions too
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many people will falsely believe that
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the exception applies to them yes we are
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all Unique Individuals that's why it's
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so hard to Fathom that any subjective
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rule could be so comprehensive as to
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apply to all of us rule rules need
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exceptions because we're all unique just
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like Margaret me said though always
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remember that you are absolutely unique
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just like everyone else you see humans
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can be too quick to assume that their
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uniqueness qualifies them as an outlier
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it doesn't your uniqueness it's just
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kind of like everybody else's uniqueness
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it does not excuse you from rules that
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you don't like it does not excuse you
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from rules that you disagree with nor
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does it excuse you from Rules rules that
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you find difficult to follow most rules
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will still apply to you even though you
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are a unique person if you falsely
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believe that an exception applies to you
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then you might end up breaking a rule
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against your best interest thus as rule
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creators or as rule suggesters we're
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faced with a catch
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22 if we create an absolute rule it will
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likely be out of touch with reality so
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we should make an exception to that rule
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right
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well but then the exception it could end
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up hurting more than it helps now what
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do I mean that it could hurt more than
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it helps well here are a couple quick
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examples don't try heroin wow look at
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Brave Jesse first he's defending Dave
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Ramsey then he's defending the Sith and
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now he's condemning heroin but seriously
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don't try heroin guys I know this might
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be an outlandish example but I really do
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think it'll drive the point home if I
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were to create an absolute Rule and an
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accept to the rule about heroin use they
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might read something like this the
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absolute rule nobody should ever use
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heroin but then there's an exception for
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a very very small minority of
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individuals heroin use can be a
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reasonable part of their normal lives
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and I'll link in the show notes some
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medical research backing up that claim
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so you see which rule is technically
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more true believe it or not it's the
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exception but which rule does the most
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good for the most people the absolute
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rule the absolute rule I know it's more
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untrue but it's also more helpful if I'm
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addressing an audience like you guys and
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I want to help that audience I'm going
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to say don't be stupid guys say no to
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heroin use there's no exception to that
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rule that is the rule to live by
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allowing for one person to successfully
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pursue the exception is not worth it if
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a dozen people attempt the exception and
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fail and become addicted and die or
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whatever that's the utilitarian thing to
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do here it doesn't take a a Mandalorian
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to know that this is the way next
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example you should budget so we're going
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back to personal finance here we're
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going to look at budgeting one of our
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favorite personal finance topics and to
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start off this argument here's a cool
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little factoid only 30 to 40% of
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American households maintain a budget if
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I wanted to fix this problem I'd start
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with an absolute rule about about
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budgeting that absolute rule would be
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100% of people should maintain a budget
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but the real truth is that many people
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are naturally Frugal and Thrifty maybe
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maybe 20% of the population falls into
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this Frugal Thrifty bucket and these
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people would be wasting their energy by
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maintaining a budget they don't need to
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budget they're already Frugal enough
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they don't need to budget so I should
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add an exception to my rule and that
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would read something like 80% of people
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should be maintaining a budget in their
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lives but here's the problem how many
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people out there are self-reflective
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enough to admit that they need the
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structure of a budget in other words how
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many people will correctly place
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themselves in that 80% bucket where they
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need a budget would we see perfect 80%
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compliance to the rule well I think we
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all know the answer here there are tons
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of people out there who are going to
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falsely believe that they possess the
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requisite Thrift to forego budgeting
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they're going to overestimate their own
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discipline they're going to see
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themselves as unique outliers to the
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rule when we know they're not really
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that unique exceptions are like
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self-imposed Jedi Mind Tricks our brains
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are deceiving our own brains so when we
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create such a rule we have this
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trade-off to make we have to pick the
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lesser of two evils evil one is that we
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tell 20% of the population that they
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need a budget when when in reality we
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know that they don't need a budget but
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evil too is that we allow some unknown
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percentage of the population to convince
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themselves that they are unique enough
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that they don't need a budget when in
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reality those people do need a budget so
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since only 40% of the population uses a
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budget I'd wager that the other 60% of
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the population they believe that the
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non- budgeting exception applies to them
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you know when you give someone an inch
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they take a mile if we give people the
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option that they might be the exception
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to the rule they are probably going to
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do the easiest thing they can which in
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this case is believe that budgeting
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doesn't apply to them now so far I've
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glossed over one pretty important aspect
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about absolute rules namely absolute
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rules they do not permit free will or
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freedom of choice and that fact alone
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makes many people cringe so let's go
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back to the budgeting example at the the
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end of the day it's your choice whether
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you actually budget or not it's really
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none of my business whether the choice
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you make serves your best interest of
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course I want to help you guys I want to
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do what's best for you guys but I won't
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ever Force someone to follow me thus we
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see arguments between personal finance
00:12:46
pundits who have the same goals right
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everybody's goal is to help people but
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we see different experts arguing over
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these small differences you know whether
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all people should budget or whether 90
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5% of people should budget or whether
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80% of people should budget those are
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relatively small differences that end up
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causing these arguments it's a textbook
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example of Sigman Freud's narcissism of
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small differences when focusing on
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Personal Finance I think we need to make
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room for exceptions but also implore to
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people that they need to know themselves
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so Dave Ramsey he is correct that credit
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cards can do terrible damage to your
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Financial Health but does that mean that
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all people should avoid them or should
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we ask people to look hard in the mirror
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and ask themselves am I the kind of
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person who might fall prey to credit
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cards fake promise of free money the
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better you know yourself the more likely
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you will be to correctly choose which
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rules to follow and which rules you
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might qualify for as an
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exception let's look at me I'm a Frugal
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guy but I still budget I budget every
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single dollar that comes in and out of
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my bank accounts I also know that I'm
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disciplined enough to use my credit card
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cards wisely I've never missed a credit
00:14:00
card payment completely ignoring Dave
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Ramsey's absolute rule learn about your
00:14:06
own brain feel the force flow through
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you and only make exceptions in
00:14:11
exceptional
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[Music]
00:14:17
cases that was an article from the best
00:14:20
interest blog called rules Dave Ramsey
00:14:22
and the Sith if you want to reach out to
00:14:25
me my email is Jesse bestin interest.
00:14:28
blog you find me on Twitter where my
00:14:30
username is
00:14:32
bestore JC and on Instagram
00:14:36
theore
00:14:38
bestore interest thank you guys for
00:14:41
subscribing thanks for all the five star
00:14:42
ratings thank you for leaving the very
00:14:45
kind reviews of the best interest
00:14:46
podcast I appreciate it you know we can
00:14:49
continue to invest in one another
00:14:51
because as Ben Franklin said an
00:14:53
investment in knowledge pays the best
00:14:54
interest sharing with other people
00:14:56
that's investing in their knowledge
00:14:59
thank you guys thanks for listening to
00:15:00
episode 32 of the best interest
00:15:03
[Music]
00:15:15
podcast