Pimp Your Finances

Ramit Sethi – of I Will Teach You to be Rich – recently caused a bit of an outrage when he introduced a new paid subscription service for a savings newsletter titled:  Scrooge Strategy: Premium Savings Tips.  It costs $8 a month, and is delivered weekly via email.

He promises that the newsletter will be full of high quality tips, not standard fare like “don’t order cokes when you eat out”.  He wants to focus on the big hitters – not tips that require a large amount of work or sacrifice just to save $10.  According to Ramit himself,

If I’m going to change my lifestyle – and eliminate the things I’ve been enjoying for years – I want to save thousands, not a few dollars.

In addition to higher quality, he promises to include step-by-step instructions for each tip.  From the examples he gave, it seems like it could be something like  a script for negotiating with companies, screen shots that walk you through setting a budget, etc….

After Ramit introduced the Scrooge Strategy, there was a surprising reaction.  Some people were infuriated that Ramit would charge for his previously free advice, while others questioned the logic of paying money to save money, especially when the advice may be available for free elsewhere.

To sooth the nay-sayers, he includes a 60 day guarantee with every subscription.  If you’re not satisfied, you can get a 100% refund as long as you cancel within 60 days.

Although I was leery, I decided to give it a shot.  I wasn’t impressed with his 30 day savings challenge, but figured that if I tried this for two months and it didn’t pay for itself, I could just cancel.

So far, I’m happy with it.  I’ve gotten two tips so far, and the first one alone has more than paid for the first month’s subscription.

The first tip is that to really save money, you should focus on your two biggest areas of spending.   Don’t worry about the nickel and dime stuff.  I know it’s not earth-shattering advice, but if you follow what he says, you will save money.

In addition to the tip, he also gives instructions on how to identify your biggest expenses, suggestions for setting goals, and ways to track your progress.  He doesn’t just give advice – he gives you the tools to do it.

The second tip I received is to “run the damn numbers” when making decisions like deciding to rent/buy, or choosing to use extra money for investing or pre-paying a mortgage.  I don’t like it as much as the first tip because it’s not as concrete, but it’s still solid advice.

Because there was such a negative response after the Scrooge Strategy was introduced on I Will Teach You to be Rich and even Get Rich Slowly, I’m going to respond to some of the pre-emptive criticism.  Here are some of the questions and complaints I saw, as well as my response after having read the first newsletters.

Why should I pay for advice that is available for free elsewhere?

There is information about anything online.  The difficulty is in finding something that’s specific to your situation, detailed enough to help, and significant enough to make an impact.  The Scrooge Strategy definitely does all of these things.  If paying a small fee can can save you time and more than pay for itself, that’s a good investment.

It’s greedy to charge for advice that used to be free

This advice is much more detailed than what appears on his regular site.  It contains more thorough examples, and tips that are more likely to have a big impact.  Also, I don’t see a problem with charging for advice.  He gets paid for his free advice via advertising, so why is it a big stretch to charge users instead, especially if the quality of the product is higher?

What info can the newsletter contain?  We all already know what to do

That is a valid concern.  I’ll grant that most people know what we should be doing.  The problem is that we choose not to.  If following the Scrooge tips makes it more likely that we ‘ll do the things we should, then it’s a big help.

One way it enables our success is by providing a method for following the advice.  Another way it helps is that after paying for something, we’re more likely to use it.  It’s a psychological effect known as “sunk cost fallacy”.  After paying for something, our instinct says we have to use it so we get our money’s worth.  The problem with this line of thought is that the money we have spent is gone – it costs us just as much regardless of whether we use it or not. 

Sunk cost fallacy can hurt us – like if we continue to pay money to have a car fixed simply because we’ve already paid so much for repairs in the past – but it can help us too.  After paying $8 for the first month, I felt incredible motivated to actually follow the advice he gave.

So my official verdict after the first two newsletters is I like it, and have already saved about $30 after only 8 days.  I would definitely recommend this to others.  If nothing else, try it for sixty days.  If you follow all the tips and don’t save at least $100 – the cost of a year’s subscription – cancel it.  That’s the mindset I had when I joined, and it looks like I’ll be keeping it for a while.