Video Transcript: "Money Myth #1 Willpower" an Original SpendLessTV.com video from Ramit Sethi.

Hey guys Ramit Sethi here from I Will Teach You To Be Rich. I'm recording this video for my friends at SpendLessTV, and today I'm going to be covering the first of three money myths.

And the first myth is that: personal finance is all about trying harder, it's all about willpower.

We know this, we've heard this in America: if I just try harder, I can achieve my dreams. If I just try harder I can lose those ten pounds. If I just try harder I can save that $100 a month. And the truth, the fact of the matter is it's not simply all about will power alone. If you don't believe me, just look around or even ask yourself: How's that worked out for me over the past 6 months or 12 months, 18 months? Have you been saving money consistently? Have you been earning more money? For most of us when we are realistic with ourselves we realize that trying and trying and trying again is simply not sufficient.

So today I'm going to give you three suggestions for ways that you can cover this, ways that you can make up for our lack of willpower.

The first and the most important is to automate toward your goals. So let's say you want to save $100 bucks a month, or let's say you want to do some type of goal... automation is simply one of the most powerful strategies you can use that will actually make you hundred of thousands of dollars, believe it or not... And let me give you an example of how: I use this technique called "The Next Hundred Dollars." Of your next hundred dollars that you make from your paycheck or wherever - where is it going? For most of us we have no idea. At the end of the month we look back and we say, "I guess I spent that much." But for people who are focused on automation, they know, "$5 is going to my savings account, $10 to my retirement account, $5 to this other retirement account, etc." So what you can do is automate your money so that as soon as your paycheck comes in, you only set this up once, your money is automatically dispersed and then you get the remainder to spend guilt-free. It seems simple, but it's profoundly difficult to started, once you do though, you set it and forget it - our money grows forever and you never have to think about, "Am I saving enough for my retirement?" etc. You only thing you have to worry about is how can I tune that amount higher and higher? So, that's the first thing, automation.

The second thing is to focus on using barriers, active and passive for yourself. Let me give you an example: Sometimes we don't just want to automate our way to some goal, we actually want to prevent ourselves from doing something. Here's the most common thing I hear: How can I prevent myself from spending so much money on clothes? Now, I happen to have personal first-hand experience with this. I accidently um.. archived these e-mails that were coming to me every day. You know, those "deal of the day" sites? And I accidently filtered them to go to rash. My spending dropped precipitously. And so one thing you can do is remove yourself from all the lists you're on and watch your spending go down, it's crazy but it actually works.

The second (third) thing you can do is use the ala carte strategy. Now this also sounds surprising but in one study, people overestimated how often they went to the gym by over 70 percent. It would have been actually cheaper for them to cancel their membership and buy a day pass every time they went. Crazy! Same thing is true of cable. A lot of us could cancel our cable and simply buy the shows we want on iTunes or Amazon, we'd actually save a lot of money.
So, these are things you can do strategically to automate your way to success and then to use barriers to prevent yourself from spending on things you don't want to spend. So you can take these action plans, you can go to my site click on psychology of money and you'll learn more about the psychology of it, you can also pick up a copy of my book "I Will Teach You To Be Rich" and you'll see a very specific action plan for how to implement these. Thanks a lot. Thanks to SpendLessTV.