I Will Teach You to Be Rich, written by a Stanford University graduate, advocates a practical approach to financial well-being conveyed in an instructive and engaging style. Ramit Sethi emphasizes in his book that financial well-being is essentially based on the four pillars of personal finance: banking, saving, budgeting, and investing. He presents a number of novel approaches for accumulating wealth through personal enterprise. He also advises readers on automating finance and implementing a plan that allows them to make money while sleeping. Indeed, the book is about how to earn more, save more, and live a more prosperous life.
About the Author
Ramit Singh Sethi is a self-proclaimed personal finance expert and entrepreneur from the United States. Sethi is the author of the 2009 New York Times Best Seller, “I Will Teach You to Be Rich,” as well as the founder of GrowthLab.com, IWillTeachYouToBeRich.com, and PBworks, a commercial wiki website.
We’ve seen a brief overview of the book and its author. If you want to see my other book summaries, like 12 rules for life, A Beautiful Book About Life Lessons, or How to talk to anyone, A Book about Communication: you can visit my whole dedicated page on my blog for book summaries. now lets directly get to our Book “I will teach You to be Rich”
You can be as rich as anyone and even more
It is not uncommon to see people gain weight after college. Many experts recommend eating less and exercising more to manage weight gain. Well, food and money are quite similar in the ways they compound. Just as one doesn’t put on weight overnight, one doesn’t become rich overnight either. It compounds little by little until the results become visible.
|When it comes to Food We…||When it comes to Personal Finance|
|don’t track calorie intake||don’t track spending|
|eat more than we know||spend more than we realize or admit|
|debate small things about calories, diets and workouts||debate small things about interest rates and hot stocks|
|Value accidental advice over research||listen to friends, parents and TV talking persons instead of reading a good personal finance books|
Many people have one of these two bad money habits: they ignore their finances or argue over the smallest details without doing anything about it. These are sure ways to remain poor or, at best, average. You may not need the help of any financial advisor to get rich. You can do it by having an account and automating your finances; you can build wealth.
Investments do not have to be a do-or-die situation. You can do your research to discover solid stocks and invest in them. Allow your interests to combine and focus on other things. Many financial gurus these days will tell you about the hottest stocks in the market. If you listen to them, you will lose majorly. Always make your own investment decisions.
Now more tha ever, it is harder to make financial decisions because of the information overloaded around usRamet Sethi
Just like you don’t need a degree in nutrition to eat healthy, you don’t need certification in personal finance to control your expenses and become wealthy. Keep reading to find out what works and how you can build sustainable wealth
Optimize your credit cards
Once you become a good negotiator, you can save a lot of money. Credit cards can be a bit tricky, but you should use them wisely. The media is usually responsible for people’s fear of credit cards. Many people are terrified by the debt and the headlines that surround us. There is a way out: a different approach to credit card issues.
Credit cards give you thousands of dollars’ worth of perks, but most people play the game wrong. Improve your overall credit score by optimizing and investing with your credit cards. You can negotiate with credit card companies and learn the perks that nobody talks about.
The secret to managing th credi cards is finding the balance between paying your bills on time and spending over your limitRamet Sethi
There are some rules that must be followed. some of these are
- Pay off yor credit card when it is due
- Try to get discounts
- Do not settle for a high annual percentage Rate (APR)
- Mentain your cards for a long time and keep them active – but also keep them simple
- Get more credit to improve your creit utilization rate
- Use your credit card’s secret perks including automatic warranty doubling, car rental insurance, trip cancellation insurance and other services
Credit cards can help you track your spending. Put all your expenses on credit cards, and you will find it easier to categorize your expenses. Your credit utilization rate accounts for 30% of your overall credit score. You should pay off your debt to boost your score. Only after you have already paid off your debt should you try to increase your available credit.
To clear the credit card debt, calculate how much you owe to bank, then pay off crucial ones first and then seek lower APR, and figure out where the money to pay off the debt.
Beat the Banks
Having organized your credit cards, it is time to set up your bank accounts. Banks are the foundation of your personal finances, so you must exercise extreme caution when choosing a bank. Choose the banks that have the lowest fees. A good tip is to select the bank that offers better services with no extra fee. while bad banks offer ever-increasing fees and unnecessary products and devise even more ways to take the money out of your pockets.
In addition to earning interest on loans, banks make a lot of money from overdraft fees. They won’t warn you or protect you; instead, they will rip you off. Unfortunately, many people stick with banks that hurt their money. Learning the basics about money will help you save money at the bank.
Unnecessary fees are usually attached to checking accounts, and they are the backbone of your financial system. You need to protect yourself from the fees levied on this account. Savings accounts are the accounts where you save your short- to mid-term savings. The money saved in a savings account is used for goals like a vacation, rent, or an emergency fund.
The secret is to have both your checking and savings accounts in two different banks. This strategy will ensure that your money is growing. Consider your savings account, where you deposit funds, and your checking account, where you withdraw funds.
Even if you dont have that much money, setting up your account in 2 different banks will make your habit for the time when you ave money. if you don’t start when the stakes are low , you will not be able to manage money when the stakes will be high.
In picking accounts, consider your personality. There are three options to choose from: Most basic option is good for lazy people. basic option with small optimization is recommended for most people. Advance setup plus full optimization is perfect for people who can handle complex proceses easily.
When choosing your bank(s), lookout for values like trust convenience and featuresRemit Sehthi
Negotiate everything. Avoid monthly fees by calling your bank to offer you a no-fee account. at first they will deny but tell them ou have better offer from other banks that are giving you better offer and as you are their old customer, you would like to remain the loyal customer. Most of the time they will give you a better deal.
Did you know forbe’s statistics shows that in 2017, banks made more than 34 billion dollars from overdraft fees. you should learn and try to use it in your facour
Get Ready to investing
The next step after the credit card and banks is to open your investment account. it is not enough to save money. you must have to invest. You must put your money to work for you. In banks it will rott and inflation will eat your money. Put your money to work so that it earns you more than even the highest – yeilding saving accounts, and investing is the best way to do it.
Compounding is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealthAlbert Einstein
The 401(k) is a type of investment account that offers huge benefits. interestingly, Research shows that only a few people have 401(k) account. among people earning under $50,000 a year, 96% fail to contribute the maximum amount into their 401(k).
Investments allows you to escape inflation and give you incredible resultsRamit Sethi
While some people are considered wealthy because of their circumstances, the majority of people will not be wealthy because of their negative attitude toward money and poor financial behavior. Most people in their twenties, if they don’t set aggressive goals and don’t take action, become the Cs. The Cs are a lost cause. Don’t let that happen to you. Manage your money properly and look for ways to scale up whatever you are doing.
There are invisible investment scripts that must be corrected. some of these are
“There are so many stocks out there, so many ways to buy and sell the stocks, so many people giving different advice. it feels overwhelming”
“it feels like i am always buying at highs and i don’t wanna be a person who buys into the market when it peaks”
There are 6 systematic steps you should take to invest. that is called the ladder of personal finance. each step builds on previous one
- If your employe offer a 4O1(k) match, invest to take full advantage of it and contribute just enough to get 100% of the match
- Payoff your credit card and any other debt
- Open up a Roth IRA and contribute as much money as possible
- if you have money left over, go back to 4O1(k) and contribute as mush as possible
- HSA: if you have access to a Health Saving accounts, it can also be doubled as an investment account with incredible tax features that few people know about
- if you still have money left to invest, open a regular non-retirement (taxable) investment account and put as mush as possible there
So far, you have set up your investment accounts. it is now time to take control of your spending so that your money can go where you want to go it Developing a spending plan is most dificult part of financial management. However, putting in the required work to master it eliminates the phrases like “Can i afford this?” from your life forever.
There is difference between concious spender and cheap people. A concious spender says no to the things that do not add value to them and a big YES to the things that they love. Cheap people, on the other hand, try to live up to social expectations and easily influenced by their friends. Cheap people spend the money they don’t have, on things they don’t need, to impress the people they don’t like. Cheap people think short term while consious people thinks for long term.
The A La Carte takes the advantage of psycology to cut your spending. the idea is to cut all discretionary subscription you can. Then, Buy what you need a La Carte. The A La Carte method works for three reasons:
- You’re probably paying to much already
- Somehow, you are forced to be mopre concious of your spending
- You Value what you pay for
The Problem with La Carte method is that it de-automates your life. You have to do things manually and pay as you uise.
To implement La Carte method you need to:
- Figure out what you spend on subscriptions last month
- Cance the subcriptions and begin t buy them La Carte
- After a month, calculate how much you paid in these items
- Cut down a little below how much you spent on things in the last month. you want to save money without losing touch with reality
If you see your financial plan as self deprication, it may be difficult to follow. See it as concious spending for your future instead.
This book spending plan involves four major sections: fixed costs, investments, savings and huilt free spending money. Fixed costs are the amounts you must pay regularly. A good trick is that fixed costs should be 50-60% of yor take home pay.
The 60% solutions suggests that you split your money in simple buckets. with the largest, Basic expeses (food, bill, taes), making upto 60% of your gross income. Balance 40% devide into 4 ways
- Retirement Savings (10%)
- Long-term savings (10%)
- Short term savings for irregular expenses (10%)
- Fun Money (10%)
Every now and then, you get a sudden income or windfall. It’s tempting to take a windfall and spend it on something you’ve had your eye on for a while. but work within your conscious spending plan. The best part about making a spending plan is that it guides your decisions, letting you say no much more easily and freeing you up to enjoy what you do spend on. This is guilt free spending at it’s best.
Save While Sleeping
Automating your money is the single most profitable system you will ever build. Some people play defensive by saving more but you can play offensive by building a system that that acknowledge our normal human behaviour – we get bored, distracted and unmotivated – and use technology to ensure you are still growing your money. Put in the work now and enjoy the dividends for the rest of your life.
You can spend as litle as 90 minutes a month managing your money by using a concept called the “Next 100$”. Basically it is about deciding where the Next 100$ goes, Savings or investments.
To see how it works, consider Ramit Sethi’s friend Michelle as an example. Her employer automatically deducts her 5% of her Pay – an amount she setup by talking to her HR department – and puts it in her 401(k) account. Michelle then keeps her remaining part of pay check in a checking account by direct deposit. About a day later, her Roth IRA Retirement accounts pulls 5% of her salary for itself. 1% goes to weding sub-saving account, 2% for house downpayment, 2% for emergency fund. by the end of month, she spent less than 2 hours monitoring her finances, yet she’s invested and saved effectively.
The procedure for automation is really simple. First link all your accounts together. then setup automatic transfers to happen at various days. Tweak the system to suit your earning pattern. When you setup automation this way, you are saving and investing each month and paying all your bills on time.
The great thing about automation is that it works without your involvement and it’s flexible enough to add or remove accounts anytime. You are accumulating money by defaultRamet Sethi
The Myth of Financial Expertise
An invisible financial script you play in your mind is “I don’t know. i just want to someone else to take it from my hands”. What taht means is you are overwhelmed and confused by jargon and confusing advice. But this is your money. learning the fundamentals will be the most profitable decision you will ever make.
Dont wish it was easier, wish you were better. Don’t wish for less problems, wish for more skills.Ramet Sthi
In “The smartest investment book you will ever Read” Daniel Solin cites a study conducted by Professor edward S. O’Neal fro the Babcock Wake forest school of Managemet. He figures that investors (both private and institutional) and particularly 401(k) plans, would benefit more by investing in passive funds than in trying to pick expensive fund managers who claim to be able to beat the market.
If you do necessary reserch you can manage your funds on your own without external fund managersRamet Sethi
Yet we all know that money is not purely rational – even seeing the clear math here. it’s emotional. So, once and for all, let’s tackle the invisible money script that keeps people beliving that active investment is worth it – then we can start investing.
Investing is not only for Rich People
Automatic investing is a simple way of investing in low-cost funds that is recommended by many successfull people. it is about how to distribute your money across your portofolio. You need to pick secific investments and automate your regular investments so you can relax while your money keeos growing
Pick a simple portofolio that will make you rich, charges less and promisses superior performance. Automatic investment is a best waty to invest.Ramit Sethi
Automatic investment may not seem as promising as investment in high-risk and high-profit hedge funds and stocks, but it works a lot better. You can reach a crossover point where your investments earn enough to fund your expenses, automatically. then you don’t have to work anymore. The acronym FIRE caption its best. it means Financially Independent Retire early.
There are two type of FIRE! Lean Fire and Fat Fire. Lean FIRE are people who learn to live on Lean amount of money – 30k to 50K USD – annualy. Fat Fire is the people who want to live an extravaganza life at highest level of spending. For example 2018, Oprah Winfrey bought a house for $8 Million. That seems outragously expensive, right? Here’s the twist: because her net worth at that time was over 4 billion, if that money was even conservatively invested and returned 4% her investment alone – not even counting her salary – would generate $160 Million that year, effectively making the house “free” to her.
No matter what is the level of your income, or what do you want to make a living for yourself. you can create a system that can help you make wealth for yourself. The techniques are quite unconventional but they are proven to work. Take into consideration the human factor when it comes to money matters and learn to live outside spreadsheet. Describe what a rich life means to you and state steps you need to take to make it happen.
Get honest why you want more. ife is just not about investing more and saving more. there must be a good reason what you extra money wants for.Once the reason is clear, then you can begin to accumulate more and grow faster by feeding your system. The more volume you put into the system the more output you will get out of it.
Ignore noise of money advice. Everyone’s got advice based on the way they handle money. just ensure you sort out your credit cards, open high interest saving and checking accounts, open a 401(k) and investment account, track your spending, automate your transactions and learn more about investments. These 6 steps are guaranteed to make you rich and keep you financially satisfied.