"I Will Teach You To Be Rich" by Ramit Sethi

Book Summary:

I Will Teach You To Be Rich” is by Ramit Sethi, a personal finance expert. His updated book delivers a simple and powerful, no-BS 6-week program that just works.

It will show you:

  • How to crush your debt and student loans faster than you thought possible

  • How to set up no-fee, high-interest bank accounts that won’t gouge you for every penny

  • How Ramit automates his finances so his money goes exactly where he wants it to

  • A set-it-and-forget-it investment strategy that’s dead simple and beats financial advisors at their own game

  • How to handle buying a car or a house, paying for a wedding, having kids, and other big expenses—stress free.

And amazing stories of how previous readers used the book to create their rich lives. Master your money—and then get on with your life.

Book Lessons:

10 Rules for a Rich Life:

  1. A Rich Life means you can spend extravagantly on the things you love as long as you cut costs mercilessly on the things you don’t.

  2. Focus on the Big Wins–the 5-10 things that get you disproportionate results, including automating your savings and investing, finding a job you love, and negotiating your salary. Get the Big Wins right and you can order as many lattes as you want.

  3. Investing should be very boring–and very profitable–over the long term.

  4. There’s a limit to how much you can cut, but no limit to how much you can earn. 

  5. Your friends and family will have lots of “tips” once you begin your financial journey. Listen politely, then stick to the program.

  6. Build a connection of “spending frameworks” to use when deciding on buying something. For example, Ramit’s book-buying rule: If you see an interesting book buy it, one book might just change your life (like this one).

  7. Beware of the endless search for “advanced” tips. Sometimes the most advanced thing you can do is the basics, consistently.

  8. You’re in control, no one is coming to rescue you. Take control of your finances and build your Rich Life. 

  9. Part of creating your Rich Life is the willingness to be unapologetically different. Once money isn’t a primary constraint, you’ll have the freedom to design your own Rich Life. Embrace it, this is the fun part!

  10. Live life outside the spreadsheet. Once you automate your money using the system in the book, you’ll see that the most important part of a Rich Life involves relationships, new experiences, and giving back. 

Ramit’s 6 Week Program To Becoming Rich:

Week 1:

  • Get your credit score and credit report

    • You can access your report and score at myfico.com

    • You can also get your free credit report from annualcreditreport.com

  • Set up your credit card

    • Get a no-fee card, check out bankrate.com to find the best card for you

  • Make sure you’re handling your credit cards effectively

    • Set up automatic payments so your credit card bill is paid off in full every month

  • If you have debt, start paying it off

    • Figure out how much you owe, call the lender to negotiate down the APR or restructure your payments, and set up your automatic payment with more money than you’re paying now

Week 2:

  • Open a checking account or assess the one you already have

    • Find an account with no-fees and no-minimum

  • Open an online high-interest savings account

    • Higher interest = Higher savings

  • Fund your online savings account

    • Leave 1-2 months of living expenses in your checking account

Week 3:

  •  Open a 401(k)

    • Contribute enough to get a full match

  • Come up with a plan to pay off your debt

    • Run a calculation by paying an extra $100 or $200 per month

  • Open a Roth IRA and set up automatic payments

    • Send as much as you can, even $50 per month is fine

  • Find out if you’re eligible for an HSA and, if you are, open your account 

Week 4:

  • Get your paycheck, determine what you’ve been spending, and figure out what your Conscious Spending Plan should look like

    • Break down your take-home income into chunks of fixed costs (50-60%), long-term investments (10%), savings goals (5-10%), and guilt-free spending money (20-35%).

  • Optimize your spending

    • Examine your savings goals and monthly fixed costs

    • Break down expenses into monthly chunks and then recalculate your plan

  • Pick your Big Wins

    • Open an account at You Need A Budget or Personal Capital

    • Assume you wan to cut your spending by $200 per month, what one or two Big Wins will you target?

    • Start using the envelope system where you allocate a fixed amount of cash each month for a certain activity or expense

  • Maintain your Conscious Spending Plan

    • Enter any cash receipts into your system each week

    • Adjust the percentages to each part of your spending plan

    • Make sure your system is realistic enough that you’ll stick with it for the long term

Week 5:

  • List all your accounts in one place

    • By linking your accounts, you’ll make your life easier and get all the information you need all in one place

  • Set up your Automatic Money Flow

    • Have a system that automatically sends money to your investment accounts, savings account, fixed costs, and leave you money for guilt-free spending. 

Week 6:

  • Figure out your investing style

    • Decide whether you want the simple investment options of a target date fund or the increased control of index funds

  • Research your investments

    • Research funds from Vanguard, T. Rowe Price, and Schwab

  • Buy your funds

    • Buying a target date fund is easy:

    • Transfer money to your investment account, log in to your account, enter the ticker symbol and click buy

That’s it! You’re now on your way to becoming rich.

P.S: Don’t try to time the market:

Over the past 15 years, the performance of the S&P 500 earned an annualized return of 7.7%

  • However, during that 15-year period, if you missed 10 of the best trading days, your returns would drop to 2.96%

  • And if you missed the 30 best trading days, your returns would be -2.47% (negative returns!)

  • In other words, if you invested $10,000 you would have:

    • $30,711 if you kept your money in the market the whole time

    • $15,481 if you missed the 10 best trading days

    • $6,873 if you missed the 30 best trading days

Book Review:

I Will Teach You To Be Rich” by Ramit Sethi is a simple and clear guide to gaining control of your finances. The title may sound gimmicky, but this isn’t a get-rich-quick scheme, rather it is the opposite. Get out of debt, start saving, put your money to work by investing, and you’ll eventually get rich, or at least live a Rich Life (have financial freedom).

If you’re interested in learning about personal finance or get out of debt and start investing, this is a great book for you.

Rating: 4/5 Stars

If you’re interested in this book, you can get it here.

If you want the audiobook version, click here for 2 free audiobooks here.

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