Making, Managing, Spending: The Three Money Skills
Treat earning, investing and spending as three separate skills and audit yourself honestly on each.
- Difficulty
- Easy
- Time to result
- ~ongoing to results
- Steps
- 5
- Confidence
- 87%
Ramit's model splits money competence into three distinct skills. Making is the one everyone focuses on, for understandable reasons. Managing feels dry, which is exactly why people are driven to make it sexy, fiddle with it, and mess it up. Spending is the one almost nobody thinks about consciously — as Ramit puts it, everybody teaches us how to save and nobody teaches us how to spend meaningfully. The instruction is to think about all three models and what it would take to be really good at each. Sam is the case in point: 99th percentile at making income, he assumed it transferred, got into real estate and deals, and discovered managing is closer to due diligence and Excel than to invention. On the managing side Ramit's discipline metaphor is a Thanksgiving turkey — once it is in the oven, let it cook and do not fiddle. On the spending side he argues for consciously practicing paying for value, which he learned by hiring a personal trainer in his late 20s.
Origin
Ramit articulated the split on his own podcast after years of coaching people who were excellent at one of the three and assumed that made them good with money.
Core principles
- 01Making, managing and spending are three separate competences, not one
- 02Skill in one does not transfer to the others
- 03Managing is boring by design; excitement there is a warning sign
- 04Nobody is taught how to spend meaningfully, so it must be practiced deliberately
- 05Once invested, leave it alone — the turkey is in the oven
How to run it
- 1
Separate the three skills
Write down making, managing and spending as three distinct competences. Resist the assumption that being good with money is one undifferentiated trait.
Pro tip Most people can only claim one honestly, and that is fine — knowing which one is the point.
- 2
Audit yourself on each
Ask what it would take to be really good at each of the three. Sam's audit surfaced that he is creative and can invent from scratch, which suits making, but that managing needs due diligence and Excel skills he did not have.
Watch out Skipping this audit after a liquidity event is how people lose money they were excellent at earning.
- 3
Make managing deliberately boring
Choose a simple default — a target date fund or index fund — and let it ride. Ramit's turkey rule: once it is in the oven, do not fiddle around with it, you are just messing it up.
Watch out Entrepreneurs who love control feel the strongest pull to tweak, and it is counterproductive with investing.
- 4
Practice spending as a skill
Deliberately pay for value in areas you care about and watch what better results feel like. Ramit's entry point was finally walking into the gym across the street and hiring a personal trainer, which he trained with for about five years.
Pro tip Pair it with the inverse — name what you refuse to pay for at all.
- 5
Apply the right money lens for your situation
Ramit refuses to let a wealthy friend evaluate purchases through the cost lens. Advice that fits a school teacher does not fit someone who sold a company; pick the lens that matches your circumstances.
Pro tip Ramit's one rule for Sam on Europe trips and clothes shopping was simply 'no budget'.
In the wild
After selling his company to HubSpot, Sam felt confident because he was in the 99th percentile of income. He assumed real estate deals and other investments would be easy, then found that a real estate company is often closer to being really good at Excel than to inventing something from scratch.
→ He learned the distinction the expensive way, through a few costly mistakes, and now holds his HubSpot and Airbnb stock plus a standard Vanguard index allocation without ever having sold a share.
In his late 20s in New York, Ramit lived opposite a gym and it took him four months to get the courage to walk in and ask for a personal trainer. It had nothing to do with money — he had money — but saying it out loud meant having to follow through.
→ He trained with that trainer for about five years, learned that paying for value gets better and faster results, and built the spending skill he now teaches.
Common mistakes
Assuming making money means you are good with money
High income creates false confidence in investing and deal evaluation. The skills are unrelated, and the correction usually arrives as an expensive mistake.
Making managing exciting
Because managing feels dry, people are incentivized to sex it up — tweaking allocations, chasing thrills. Ramit's view is that people who get the thrill from tweaking would be shocked at what it truly costs them.
Never thinking about spending at all
Everybody is taught to save; nobody is taught to spend meaningfully. Left unexamined, spending drifts into accumulating things you do not care about instead of funding the life you want.
Is it for you?
Best for
High earners who assume competence in one money skill transfers to the others
Not ideal for
People looking for a single tactic rather than a diagnostic model
From the transcript
“And I think there's three. There's making, managing, and spending. All three very distinct skills, and everybody primarily focuses on the first, making money.”
“Everybody teaches us how to save, nobody teaches us how to spend meaningfully.”
“kind of like making turkey dinner for Thanksgiving, once you put it in the oven, you let that thing cook. Do not fiddle around with…”
From the episode
Ramit Sethi: His New Netflix Show, How To Stand Out & Spend Your Money
Ramit Sethi