by Jared Goralnick
Three years ago I went through a bunch of books and paid $500 for advice to get my finances in order. I’m so glad I built a system for myself, and I’ve been happy to help many friends since.
Much of my interest in personal finance started when I began reading a blog that’s just now morphed into a book. This book would’ve made my life easier and wallet thicker three years ago. The following are some highlights from the bestselling I Will Teach You To Be Rich.
Ramit from I Will Teach You To Be Rich
Ramit Sethi and I have always gotten along. While he’s funnier and always a few steps ahead, our blogs attempt to cut right to the meat of whatever subject we’re addressing. That to-the-point style is why his site is the only personal finance blog in my reader.
I’m writing about his book here because the process of taking care of one’s finances is crucial to productivity, happiness, and building businesses.
In late March, Ramit published I Will Teach You To Be Rich (and it immediately hit #1 on Amazon). The book explains quick ways to make sure you’re spending, saving, and investing your money wisely. It’s not an “advanced” book, but rather it’s designed to ensure that your financial plan for the future is sound, getting you 90% to where you need to be. So every month you’ll know you’re on the right path…and every year you’ll know your future is considered.
That’s a tall order, I know, but sadly so much of our present and future lifestyle relates to how we manage our money.
Some Highlights I Enjoyed
Here are some specific action items or points I noted, some for me and some that I thought you’d enjoy. Any emphasis added was by me.
- Page 15: You should create a yearly reminder in your calendar to check your credit report and make sure everything looks right. The site where you can get this report for free, once per year, is AnnualCreditReport.com
- 31: “Automatic warranty doubling: Most cards extend the warranty on your purchases. So if you buy an iPod and it breaks after Apple’s warranty expires, your credit card will still cover it up to an additional year. This is true for nearly every credit card for nearly every purchase, automatically”
- 55: It’s important to think long and hard if there are any big purchases that could be made with a credit card that you’re not making that way. Rewards can add up big time so it’s worthwhile to think hard about this for a minute (are there phone, gas, rent, tuition, or other bills you could be paying with a rewards card?)
- 81: A scary statistic is that “78 percent of twentysomethings cash out their 401(k)s when they leave their jobs, taking a huge a hit on taxes and fees.” Takeaway: if you’re switching jobs, either keep or figure out how to transfer your 401(k), which isn’t that difficult. Don’t lose 10+% of your retirement savings because it seemed like the easiest way to get your money.
- 96: Ramit created a great table that explained how to be frugal without being cheap. Get the gist of his cheap vs frugal discussion here
- 100-101: Ramit goes into lots of depth into “the a la carte method,” which is an approach to rethinking the recurring payments and subscriptions in our lives to save a bunch of money
- 122: if you ever find yourself with unexpected income, one approach is to immediately put 50% away and then spend the other 50% of it on something fun. Whether or not you divide your gift this way, “compare this with not having a plan and letting your money ‘just sort of’ get spent”
Should You Read This Book?
I haven’t done a great job capturing the book in a few bullet points—because it’s a series of concepts, and then applications for them. Like I mentioned in the last bullet, it’s about being conscious of (and having a plan for) how money flows through your life.
The book’s not for everyone, but if any of the following apply I’d highly recommend it:
- You don’t have an automatic system for distributing your money every month—cash, short term, and long term savings (you’ll learn everything about this)
- You’ve struggled with budgets (he offers an alternative, tactical approach)
- You don’t max out your Roth IRA or 401(k) every year (or don’t know exactly how these work)
- You’re under 35 and don’t know where to invest (one thing he highly recommends is lifecylce funds. I personally use Vanguard’s 2050 Retirement Fund for much of my investing)
- Your parents still play a part in your financial planning
I can’t recommend I Will Teach You To Be Rich enough for cutting right to the chase and addressing the questions that were most on my mind when I constructed my financial system a few years back.
If you’re curious, some of the other books I’ve enjoyed on the topic and recommend are The Bogleheads’ Guide to Investing (helpful for building a foundation of knowledge about investing) and The Intelligent Asset Allocator (it’s a classic on the topic of sound distributed investing). I’d lent these both out to friends who were learning…but now I’m just lending out Ramit’s book.
Best of luck in figuring out your finances. If you have any quick tips along the lines of doing it wisely and productively (or thoughts on the book), feel free to share below.
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That is so useful. thank you.
Everyone can benefit from this info. Thanks for posting this. Will subscribe to your site. Brett
Great Stuff. Glad someone is addressing young people to help them understand such terminology as IRAs and 401Ks.Do remind them though, that none of those tools is exempt from bad markets. Invest wisely.
A really, really big tip is “If you don’t have the money, don’t buy it!”. Revisit the old concept of saving up to buy things. Your life will be much better for it.
A corollary to that is to get the smallest mortgage possible, not the largest that they will give you.
I have read Ramit’s blog and also bought the book. Other great info he gives you is/are actual tips of how to call your credit card companies and negotiate lower rates, ask them to remove fees, etc. Many people, especially young people, do not realize you can do this and they usually say “yes”! Doing nothing leaves you simply paying more and more. He offers many “how tos” on other topics, too – it helps you get off your duff and pick up the phone – and less afraid to try it.