I Will Teach You To Be Rich! OK, actually I won’t. But author Ramit Sethi will as he teaches you about money, living within your means and saving in this book.
Financial Independence is often described as a journey since it takes time and commitment. This book was the catalyst that revealed the first steps along that path to me, a path I never realized existed before. Here’s my long overdue review.
I will teach you To be rich – an introduction
- What it is
A 6-week plan to start managing money, savings and investments, living within your means, and then automating it all to grow wealth.
- What it isn’t
A scheme to magically triple your net-worth in 6 weeks.
- Who’s it aimed at?
Just about anyone who doesn’t have a budget but primarily the younger reader (20-30 years) starting college or careers with little personal finance knowledge.
Ramit Sethi is the founder of iwillteachyoutoberich.com. His site goes beyond personal finance into entrepreneurship, how to earn more money, achieve / negotiate what you want and generally become independent. Note you’ll receive a fair amount of email if you sign up for free book downloads – I’ve not paid for any of the seminars / products offered, nor do I plan to. So with that said, let’s get on with the review.
What does being rich mean to you?
Ramit doesn’t define what rich means – it’s different for everyone. In fact one of the first questions poised in the book is “what does being rich mean to you?” Generally speaking, his definition of ‘rich’ is having enough money to be independent and live the life that you want to live.
The topic of being cheap vs. being frugal runs throughout IWTYTBR. Being cheap (a bad thing) is defined as worrying about the cost of things; being frugal (a good thing) is when you worry about the value of things. Ramit makes a case about ‘conscious spending’ (guilt-free spending money) – he’s okay with someone spending $300 a month on shoes if that’s their passion and if their budget fully covers their savings, living expenses and retirement goals.
The six-week plan
The six week plan forms the bulk of the book. It’s a series of steps and actions to take each week. The author is very big on taking action and positivity loathes procrastination.
1. Credit Cards
The actions in the first week are about improving your credit history, choosing a credit card and making a plan to pay off credit card debt if you have any.
2. Checking and Savings
The second week follows on with reviewing your bank accounts, finding high-interest accounts and opening a savings account.
Investing is discussed in the third week, primarily from a 401(k) or Roth IRA viewpoint. Standard advice here – contribute enough to your 401(k) to meet any employer match, then max out your Roth IRA contribution and finally max out your 401(k) contribution if you can.
4. Start Spending!
Making a “Spending Plan” is the call to action for the fourth week. It’s another way of making a budget by focusing on what you want to spend your money on, rather than where you want to save money.
5. Save while sleeping
Automating your finances is the topic for the fifth week – setting up a system that ensures money is being saved or invested each month automagically.
6. Invest some more
Week 6 focuses on non-retirement investing and opening a brokerage or taxable account. Ramit favors low cost index funds with automatic investments although he does briefly discuss individual stock purchases. This isn’t an investing book by any means – the emphasis is more on establishing a simple “good enough” investment strategy so that people start investing.
7. Rinse, repeat and improve
The remainder of the book is general advice on optimizing your financial life, long term planning for large expenses such as weddings and asking if you really want to buy a house. he offers general advice on negotiating a raise or a cheaper car price and his website offers much more detail on those topics.
Things I gained while reading this book
I was about 40 years old when I read this book a couple years ago – at the time I was earning more than I was spending but I had no direction or clue what to do with the extra money so it just sat in a bank account. Yes I know, that’s a nice problem to have!
While I knew the basics of budgeting and managing credit cards; I was entirely clueless about investing, I didn’t know about IRA accounts (though I did have a 401(k) with a random fund selection) and I had never considered investing any money in a taxable investment account.
So I wasn’t really the intended target demographic for this book, but it helped me figure out how to think about money, long-term planning and investments and take the first steps. Those steps then lead to other milestones along the way such as Your Money or Your Life and then to DividendMantra , the Financial Independence community and eventually to this blog post.
What I personally gained from reading this book (given my starting ignorance) were:
- A no-fee ATM card with unlimited ATM fee rebates for withdrawing cash anywhere in the world (but most often in the Detroit area) without extra charges. Thank you Schwab!
- A Roth IRA account (@ Vanguard)
- A separate interest checking account for living expenses (@ Ally) and the beginnings of my budgeting approach.
- Investing isn’t the big, scary, expensive monster that I thought it was.
I Will Teach You To Be Rich is an incredibly engaging book to read – it puts the “fun” in Finance, not just from the casual writing style but also because of the range of subjects and side discussions that it contains. To someone who’s well established with Financial Independence however it’s not going to offer anything new. But it’s a great introduction to financial education and could be a gift that keeps on giving for someone who has no knowledge about personal finance.
Quote of the day
Who wins at the end of the day? The self-satisfied people who heatedly debate some obscure details? Or the people who sidestep the entire debate and get started?