Book Summary: I Will Teach You To Be Rich by Samit Sethi
Transform your financial habits and unlock the path to wealth
It is not uncommon to see people gain weight after college. Many experts recommend eating less and exercising more to manage weight gain. Food and money are similar because they compound. Just as people don’t put on weight overnight, they don’t become rich in a day either. It accumulates little by little until the results become visible.
So, why do most people struggle for financial stability or even freedom? Many have one of these bad money habits: they ignore their finances, complain, or don’t attempt to leave their economic abyss. These are surefire ways to remain poor or, at best, average.
Investments do not have to be a do-or-die situation. You can research the financial market to discover and invest in solid stocks. Allow your interest to compound and focus on other things. Furthermore, beware of financial gurus who go on and on about the hottest stocks in the market. If you listen to them, you may lose majorly.
“Now more than ever, it is harder to make financial decisions because of the information overload around us”—Ramit Sethi.
Just like you don’t have to have a degree in nutrition to eat healthily, you also do not need certification in personal finance to cut down your expenses and make plans for your future. Nevertheless, you should deepen your knowledge in an area if you are to succeed in it. Everything starts and ends with you. Thus, before contributing your money to anything, invest in your knowledge first. Stay up-to-date with all the investing options and restrictions in your area, and never limit yourself to one source of information alone.
In this summary, you’ll learn practical ways to build sustainable wealth by avoiding risks and losses. Are you interested? Let’s get started!
You have the power to outsmart credit card companies on their terms
Modern banking systems can save you money if you negotiate and get yourself the best deal with multiple perks and bonuses like discounts, free car insurance, or flight miles. Credit cards can be tricky, but you should never let them intimidate you. The media is responsible for people’s fear of credit cards since it highlights the most dramatic and negative stories. The stats, headlines, and emotions surrounding debts and credit cards paralyze many people, not letting them enjoy the advantages of our time.
For those who delay their fees or cannot control their expenses, credit cards become an evil that sucks up all their money. But you should look at a credit card as a fire. Once, people were afraid of fire. However, they found the vital advantages that made their life more comfortable over time. Unfortunately, banking remains a gray area for many users. Hence, instead of avoiding credit cards, we must learn more about them to discover the magnificent benefits they bring.
“The secret to managing credit cards is balancing paying your bills on time and spending over your limit”— Ramit Sethi.
Wise credit card users are confident in the possible charges or fees because they find the golden middle ground in their banking experience. Here are some of the commandments they follow:
• Avoid late payments at any cost.
• Try to get discounts.
• Lower your annual percentage rate (APR).
• Stick to your primary credit cards for an extended period.
• Don’t open cards at retail stores.
• Get as many cards as you need for comfort and convenience, but use them.
• Get more credit to improve your credit utilization rate.
• Use your credit card’s secret perks like trip-cancellation insurance and concierge services.
Credit cards can help you track your spending. Put all your purchases on key credit cards, and you’ll find it easier to categorize your expenses. Online banking helps prevent the waste of your resources and save up instead.
The main reason for credit card complaints is the debt many accumulate. To clear it, calculate how much you owe, pay off crucial ones first, seek a lower APR, and figure out additional sources of income.
Hence, ensure you get your credit score and report, set up your credit card, and handle it effectively.
Unlock greater profits by opening hassle-free, high-interest accounts and negotiating lower fees
Having organized your credit cards, it is time you set up your bank accounts. Banks are the backbone of your financial infrastructure. Therefore, you need to carefully pick the right ones, optimize them, and cut off unnecessary fees. A rule of thumb in selecting the right banks is to check what extra costs apply and what services they offer.
Beyond interest from loans, banks make a lot of money from overdraft fees. They won’t warn or protect you — they’d rip you off. Unfortunately, many people stick with the banks that drain their money, offering tons of products and increasing the charges. The reason is that many are unaware that there are better options or find it too troubling to switch banks. Learning the basic information about accounts helps to protect your money.
Unnecessary fees are usually attached to checking accounts, which serve as the critical fund for your income. From it, the money is transferred to savings or investment accounts. Savings accounts are where you put your short to mid-term savings for goals like a vacation, rent, or an emergency fund. The secret is to have a checking account and a savings account in two different banks. This way, you will doubt your decision to withdraw money from your checking account for a needless purchase.
Even if you aren’t rich yet, setting up your accounts this way enables you to develop effective financial habits. If you don’t start when the stakes are low, you will not manage things well when the stakes become high.
“When choosing your bank(s), look for values like trust, convenience, and reputation”—Ramit Sethi.
Negotiate everything. Avoid monthly fees by calling your bank to ask for a no-fee account. Notify them that you know how much it costs to land a new customer and that another bank is offering you something better. Indicate the years you have been a customer and your willingness to remain one. Most of the time, they will make you a better deal.
Thus, set up your online checking and savings accounts and save little by little.
Did you know? Forbes revealed that in 2017, banks made more than $34 billion from overdraft fees alone.
To build wealth, embrace investments instead of fearing them
After getting your financial infrastructure up and running, the next step is to open an investment account. Saving small amounts once in a while is not enough. Investing is the fastest and safest way to increase income and reach financial freedom. As most financial gurus say, the only way to multiply your wealth is to make money work for you, not the other way around.
While life turmoils prevent some people from increasing their income, most people will never be wealthy simply because they have the wrong money attitudes and behaviors. In reality, most people in their twenties are Bs: they’re not exceptional but not terrible. They still have time to plan and research their investment options. Still, if they remain on the theoretical level, they may become Cs. The Cs are those who cannot make ends meet. Don’t let that happen to you. Be an A: manage your money correctly and look for ways to scale up in whatever you do.
Research shows that most older people wish they saved money and invested. They can still do it, but it becomes more challenging with age. Investment is not easy or obvious. It takes time and knowledge to develop this financial habit and become active. Yet, many young people put it off and hope for an inheritance or a lottery win to transform their financial state.
“Investments allow you to escape inflation and give you incredible results”— Ramit Sethi.
Nonetheless, a safe investment option in many countries is a retirement savings account — 401(k) in the US. This account has immense advantages for those who spend a certain amount of money. However, you can only withdraw your money after a certain age; otherwise, you’ll face severe penalties and money losses. Its purpose is to prevent you from pulling out your money before retirement.
“The truth is, you can choose what your Rich Life is and how you get there”— Ramit Sethi.
Hence, investing is the only way to grow your wealth. You can start with a little sum, but you’ll notice your habits change on a weekly or monthly basis. You will spend more reasonably and enjoy saving and investing.
Start setting aside a little each month; you’ll be surprised at how quickly you can indulge in the things you love!
So far, you have learned about your investment options. It is now time to take control of your expenses. Developing a strategic spending plan is the most complex part of financial management since no one likes to limit their needs and pleasures. However, with some work, you’ll notice that you don’t lose or miss out on anything and manage to save more than expected.
The critical thing you should know to alter your financial situation is to decide who you are: a conscious spender or, as the author states, a “cheap person.” A conscious spender says no to the things that do not add value to them and buys what they love. On the other hand, others try to live up to societal expectations and allow their friends to influence them. They waste the money they don’t have on things they don’t need to impress people they don’t like. “Cheap spenders,” think short-term, while conscious people keep long-term values in their minds.
Conscious spending does not mean buying only food or clothes in second-hand stores. Instead, it presupposes you know what you will buy and don’t feel guilty.
“If you see your financial plan as self-deprivation, it may be challenging to follow”—Ramit Sethi.
Classifying all your spending, especially rent, food, and other bills, takes time and effort. Nevertheless, it is vital to be aware of all your purchases, and people rarely remember the payments that occur automatically. The A La Carte Method calls on you to cancel subscriptions and pay for the services only when needed. For example, you pay for the movie you want to watch instead of the monthly payments on Netflix.
This way you:
• Are aware of your expenses every time you pay for things.
• Notice and value your purchase.
• Save more than you think.
The A La Carte technique de-automates your life, so you must manually make or decline the payments. Thus, you are always aware of your money flow.
To implement this method, you need to:
• Figure out what you spent on subscriptions in the last month.
• Cancel them and buy things A La Carte.
• After a month, calculate how much you spent on those items.
• Compare the two numbers and notice that you spend considerably less now.
Hence, mindful spending effortlessly saves you time and money. Determine what unnecessary things and subscriptions drain your wallet and change your financial behavior.
Maximize your savings effortlessly by automating your finances
Automating your money is the single most profitable system you will ever build. While some people play defense by saving more, you can play offense by creating a technology-based system to ensure you’re still growing your money. Such an approach acknowledges human behavior when tired or unmotivated and prevents fines, late fees, and excessive spending.
You can spend as little as 90 minutes a month managing your money using the “Next $100.” It is about deciding where the next $100 goes — savings or investments. If you are a conscious spender, you know how much money goes to each area of your life. However, if you keep tracking and managing it every week, you’ll get frustrated and forget to pay your bills. Hence, linking your accounts will transfer a certain amount of your money to each. For example, your salary goes to your checking account and gets split; 20% may go automatically to your savings account, 10% to investments, etc.
This method helps you enjoy life without overthinking and manage your financial situation daily. It also helps you avoid simple human mistakes and takes the tiresome process of payments off your shoulders.
Furthermore, by making technology work for you for free, you don’t have to pay someone to do the same job. Many hire an accountant to manage their money, analyze the expenses, and pay the bills. Others pay financial experts to consult on investment options. In reality, people would benefit more by contributing to passive funds than by trying to pick expensive fund managers who claim to be able to beat the markets.
“If you do the necessary research, you can manage your funds independently without external fund managers”—Ramit Sethi.
Unfortunately, people give in to manipulation and risk their savings for the mere game of a broker who may not know more than you do. Moreover, you’ll pay a lot for their services, which will not guarantee any win or financial safety.
“Fear is no excuse to do nothing with your money. When others are scared, there are bargains to be found”—Ramit Sethi.
Thus, learn to rely on your knowledge and experience. If you lack any of those, invest in them instead of paying a financial expert.
Investing in stocks and other funds isn’t just for the wealthy
Most people like to spend their money instead of managing it. Automatic investing is the perfect option for people who don’t want to waste time but want to receive profits. It involves carefully deciding how to distribute your money across your portfolio. You also need to pick specific investments and automate your regular contributions so you can relax while your money keeps growing.
“Automatic investment charges less and promises superior performance”— Ramit Sethi.
When people think about investing, they usually imagine brokers who work with hedge funds and stocks shouting into old phone receivers. Although many people keep trading on the market, such investment is risky and rarely pays off. Moreover, it takes a lot of time and drains your money for no reason. Automatic assets demand less time and effort. Eventually, such tactics will bring you to the point when your investments cover your expenses automatically. Then, you don’t have to work anymore. The acronym FIRE captions it best. It means being Financially Independent and retiring Early.
However, there are other ways of investing, like stocks, shares, bonds, and index funds. To choose one of these, you must first study their pros and cons. Furthermore, you must invest in more than one source. You must keep it manageable so it doesn’t take too long. After all, your goal is to create a fruitful asset allocation and not to rule the financial market.
“Your investment plan matters more than the actual assets.”—Ramit Sethi.
When you start saving and investing, you must carefully consider all the options and plan the next steps. First, determine what you value more — convenience or control. Automatic assets are the best options for people who value their time more. Those who love to gamble and manage their money will prefer following the market and trade. Choose what works for you. Only afterward can you select where to invest.
To sum up, the fastest and most effective way to start building wealth is to choose your investing style and create your first asset. It is easier than it seems. Draw up a step-by-step investment plan and follow it no matter what.
Conclusion
No matter your income level, you can create a system that will make you wealthy. You don’t have to be a broker or have a financial degree to change your life. The techniques are unconventional, but they are proven to work. Describe what a rich life means to you and introduce new financial habits, starting with practicing negotiations to get better deals, analyzing your expenses, and reconsidering your credit cards.
Life is not just about investing more and saving more. There must be an apparent reason for the extra credit you want to get. Once the cause is clear, you can accumulate more and grow faster in your financial goals.
Finally, ignore the noise of money advice. Just ensure you follow these steps:
• Sort out your credit cards.
• Start high-interest savings and checking accounts.
• Open a 401(k) and investment account.
• Track your spending.
• Automate your transactions.
• Learn more about investments.
These six steps will make you rich and financially satisfied. Finally, by enhancing a rich person’s mindset, you can make money work for you and finally become FIRE — economically independent, retiring early.
Why not give this a shot? You might be pleasantly surprised!
To transform your financial situation, consider implementing these thoughtful steps:
– Begin by outlining your aspirations for various stages of your life. Set specific, actionable goals you wish to achieve in three, five, and ten years. This timeline will serve as a roadmap to guide your financial decisions and priorities.
– Take time to vividly imagine the person you want to become and the possessions you hope to acquire. For example, in three years, you might envision yourself living in a charming apartment with beautiful decor and vibrant surroundings. Looking further ahead, picture owning a stunning house that reflects your style and values in ten years. While keeping your ambitions realistic and grounded is essential, don’t hesitate to dream big and maintain a sense of hope for the future.
