on March 23, 2009
First, here's what this book is not: It's not your parents' money management and investing book, although as a parent I wish I had done in my twenties what Ramit Sethi tells the twenty-somethings they should be doing right now.
Ramit starts with the premise that most people are so overwhelmed by the sheer amount of financial information available that they just shut down and do nothing. So Ramit tells you exactly what to do with your money and why. Want to know whether it's smarter to pay extra on your student loans or put that money into your 401(k) instead? Ramit will tell you. Want to know some specific financial companies that offer the low-cost index funds you should invest in through your Roth IRA? Ramit will tell you. Do you not even know what the heck an index fund is? Ramit will tell you!
Ramit also tells the truth about brown bagging your lunch and curbing your latte habit; and the truth is that these actions on their own are virtually pointless. Instead, you should go after the big wins, like getting the lowest interest rate and the best price on your next car because you have impeccable credit and negotiated "like an Indian" (negotiation scripts included).
Ramit maps out exactly how to get from where you are now to where you want to be financially, including how to create a personal money management system that practically manages itself. Ramit's system starts with a no-fee checking account and an online high-interest savings account. (He even tells you which online bank he uses.) He then walks you through setting up automatic bill payments and regularly scheduled transfers to your investment accounts. Throughout, he includes easy-to-understand charts, as well as short pieces by other personal finance bloggers.
I wish I could quote some of the passages that I found especially useful or entertaining--Ramit writes with an appealing, if oddball, humor--but I have already mailed my copy of the book to my 24-year-old son, who called me last night to tell me it never would've occurred to him to ask his bank to waive an overdraft fee. (That gem is in chapter 2, I think.)
Thank you, Ramit! I hope this enthusiastic review by an "old person" will not stop the young people from buying your book!
on June 29, 2009
I Will Teach You To Save Money, though a far less titillating title would be the more appropriate name for this book. 20 and 30 somethings are the intended audience for this book. And for them the book is delightfully irreverent and saucy in its language. You will not get rich by using the concepts in this book however you will gain basic financial literacy, which is the first step on the path to creating wealth. There are no new financial revelations in this book. If you already have a personal finance library you can pass on this book. If you don't already have one and are looking for a place to start, this book is a great way to go. I Will Teach You To Be Rich is not for people who have created a measure of wealth and are looking to increase it. For that you will have to look elsewhere.
on February 9, 2016
This is my new #1 recommendation for anyone seeking personal finance advice.
This is definitely the best personal finance book I've read so far. It's a logical, step-by-step, practical handbook for financial success, specially written for people in their 20's. Sethi gives advice on “automatically enabling yourself to save, invest, and spend - enjoying it, not feeling guilty...because you’re spending only what you have.” His main point: automate your finances so you effortlessly save and invest, leaving you money to spend on things you love without feeling guilty. Automatic saving and investing helps overcome psychological barriers and laziness.
In addition to his emphasis on automation, I agreed with Sethi’s recommendation for long-term, passive, buy-and-hold investing instead of speculative, market-timing investing. I also liked Sethi’s 85 Percent Solution, which states that it's better to act and get it 85% right than to do 0%; sometimes good enough is good enough, and it’s always better than doing nothing.
Another good message is "spend extravagantly on the things you love, and cut costs mercilessly on the things you don't." That's valuable because everyone defines being "rich" differently, and it's not all about money. Money is just the tool we use to acquire the material possessions and experiences we want. That's the difference between being cheap and being frugal; being cheap is trying to cut spending on everything, and being frugal is cutting costs on the things you don't care about so that you can splurge on the things you do.
I liked the concept of making a Conscious Spending Plan instead of a budget. Almost no one actually makes a budget, and even fewer follow it. Instead, consciously decide how you'll spend your money. I especially like this idea of guilt-free spending, because too often the recommendation is to limit all spending. But people in their 20s want to live it up, not sit at home and pinch every penny! The Conscious Spending Plan lets you spend a certain percentage of your money on whatever you want, without feeling guilty, since you’re paying yourself and your bills first.
The book is written in the form of a 6-week action plan. Each chapter describes the tasks and reasoning behind them, and ends with a checklist of steps to take. Here are the weeks:
Week 1: Credit Cards. Check your credit, pick a good credit card, set up automatic payments, pay off debt.
Week 2: Bank Accounts. Open or assess your checking account, open and fund a high-interest savings account.
Week 3: Investing Accounts. Open a 401(k), make a plan to pay off debt, open a Roth IRA and set up automatic payment.
Week 4: Conscious Spending. Create a Conscious Spending Plan, track spending, and cut in the right places.
Week 5: Automatic Money Flows. List and link accounts, then set up an Automatic Money Flow to automatically fund the 4 categories of your Conscious Spending Plan.
Week 6: Investing Choices. Figure out your investing style, research investments, and buy funds.
The book gives a fairly in-depth explanation of the concepts and fundamentals of personal finance, but also contains plenty of examples of actual bank accounts and funds. There are many references to the 2008 recession and other events, so those parts of the book didn't age well.
Personal Finance Ladder
Rung 1: invest enough in 401(k) to get company match
Rung 2: pay off debt
Rung 3: invest as much as possible in Roth IRA
Rung 4: put more into 401(k), as much as possible
Rung 5: invest in non-retirement (taxable) account
Conscious Spending Plan recommended percentages (save and invest more if possible)
50-60% on fixed costs
10% on long-term investments
5-10% on savings goals
20-35% on guilt-free spending
Use target-date funds or index funds.
Invest aggressively in retirement accounts, since retirement is so distant.
Recommended financial institutions: Vanguard, T. Rowe, Schwab
Rebalance every 12-18 months by investing more in underperforming assets (not selling outperforming assets).
Hold tax-inefficient (income-generating) assets like bonds in tax-advantaged accounts.
Hold tax-efficient assets like index funds in taxable accounts.
Choose funds based on:
1. Expense ratio
2. Asset allocation
3. 10-15 year return
Model your portfolio after David Swenson’s Yale Endowment portfolio:
30% US stocks
15% developed international stocks
5% emerging market stocks
15% government bonds
Buying a house
Houses are a poor investment compared to stocks; they’ve historically returned 0% after inflation. Before buying a house, determine the total monthly payment including mortgage, taxes, insurance, and maintenance. It should be less than 30% of your gross monthly income.
The total house price should be less than 3 times your annual gross income.
Buy a house only if you can live in it for 10 years. Make a 20% down payment and get a 30 year fixed rate mortgage.
To be fair, I probably should have listened to this one, but I did many of the other things Sethi points out.
Use savings for goals less than 5 years away.
Set your accounts for automatic deferrals, transfers, and payments to automatically direct money into retirement accounts, savings, bills, and a spending allowance.
Negotiate a higher total compensation (salary plus benefits) by researching compensation for comparable jobs and proving the value you bring to the company.
One thing I did was that I continuously talked to my friends about the book and we sat down together and completed a lot of the actions in sequence. By having those around me also aligned it made easier for me not to be tempted to go out. For example, we decided only to go out to eat for lunch once a week to stick to our plan.
Sethi also gives many tools and recommendations throughout the book to help you accomplish your goals.
on January 28, 2013
Nowhere on the front cover does it mention that this book is about teaching 20 year olds the basics of financing. I'm closer to 40 and already know all this stuff, a waste of my time. I thought he was going to teach me to be rich (like the title states). Here is the books itinerary:
IN WEEK 1, you'll set up your credit cards and learn how to improve your credit history (and why that's so important).
IN WEEK 2, you'll set up the right bank accounts, including negotiating to get no-fee, high-interest accounts.
IN WEEK 3, you'll open a 401(k) and an investment account (even if you have just $50 to start).
IN WEEK 4, you'll figure out how much you're spending. And then you'll figure out how to make your money go where you want it to go.
IN WEEK 5, you'll automate your new infrastructure to make your accounts play together nicely.
IN WEEK 6, you'll learn why investing isn't the same as picking stocks--and how you can get the most out of the market with very little work.
on July 28, 2011
In two and a half years all of the "high yield interest bearing" accounts online have diminished. Author recommends you put your savings online at ING, which at writing had 3%+ interest bearing now has a measly 1%. He recommends you have a checking account with Scwab online, who at the time of writing was 3-5% interest, is now, get ready, 0.05%!! This was helpful 2.5 years ago, now is meaningless. You may as well put your savings in a credit union with a similar rate of return (around 0.5%) and you will have access to it immediately instead of waiting 3-5 days for a transfer in case of an emergency.
on May 8, 2009
The book is good, especially if you aren't following the authors blog. Unfortunately, if you are following the blog you will find little new information here. Ramit Sethi does have a nice writing style and uses great examples. Highly recommend this book to people who don't have a computer.
The only thing interesting about this book is that it is incredibly well marketed despite having mediocre content that you can get for free on literally millions and millions of web sites. Most of the ideas in this book are pretty basic - get a credit card to build up your credit, keep a budget, save money, etc. I think most people know all that already. You aren't really going to be rich following any of these ideas, but if you follow them for 40 years you will most likely have a more comfortable retirement than people with poor credit or no savings. If you really want to be rich I suggest reading the Millionaire Next Door. Most of the millionaires surveyed in that book are business owners, doctors, lawyers, executives, etc. Most didn't get rich just by being frugal. They were frugal, had jobs with high incomes and were often masters at finding ways to shelter their income from taxes. That is how people really get rich.
on May 5, 2015
I bought this book because it had great reviews. It took me one night to read through it because the information is soooo basic. This book is really intended for a very narrow audience: 20 somethings who don't know ANYTHING about personal finance...AT ALL. I was going to give this book one star, but then I thought that it could be helpful for someone who doesn't know a thing about money. I have read many books on personal finance and therefore probably know too much for this book to be of any use to me. His main message throughout the book is "just start" investing, yes, that's how he's teaching you to be rich. The author is exploiting the time value of money principle in that anyone who invests a little bit consistently over 30-40 years will be rich. This is not mind blowing new information to me.
Also, you may disagree, but I wasn't into his style of writing. There were too many odd remarks, bad jokes, some sexist language that really turned me off.
In the last two weeks I've read three finance books to keep me from having a nervous breakdown every time I turned on MSNBC: 1) The WSJ Guide to the End of Wall Street by Dave Kansas; 2) Suze Orman's 2009 Action Plan, and; 3) I Will Teach You To Be Rich by Ramit (pronounced "Ra-meet") Sethi.
Ramit's is by far the best of the three for my purposes (I'm 26, have a job, don't really know what I'm doing w/money, but I love compound interest and try not to be stupid).
This book is worth its weight in gold and here's why:
First, it's targeted to a younger demographic (guessing 18-34, aka the FOX demo), and his advice is much more detailed and specific than the other books: giving readers detailed options for setting up high interest online savings accounts; breaking down renting vs owning; showing you how to save hundreds a month without budgeting ("Budgeting is the worst word in the history of the world") but by spending consciously; figuring out how much a $250 ipod really costs when charged on a CC w/14% APR ($297), and much, much more.
Second, Ramit is very funny and tells good stories. He doesn't talk down to the reader, or say that it's not our fault that we maxed out our credit cards on DVDs and 14 subscriptions to Vibe. Instead, he tells it like it is (for example, "If you miss a credit card payment, you might as well just get a shovel and repeatedly beat yourself in the face.") He's like Dr. Phil, if Dr. Phil weren't a doctor and instead was a skinny Indian kid.
I especially appreciated Ramit's attitude about the Starbucks rule being BS, and that instead of obsessing over lattes, we should focus on the big wins like improving our credit scores. Another valuable distinction he makes is between stupid and conscious spending. Scrimp on unnecessary expenses so that you can spend lavishly, consciously and w/o guilt on the things that really matter to you (nice pens, vacations, expensive stuff for babies, etc.)
Third, this book is well-organized into a 6-week action plan. Of course, it will take more than that to get out of debt, build retirement savings, raise credit scores, etc., but the 6-week schedule will put you well on your way to achieving your financial goals, big and small.
Overall, I walked away from this book with a much clearer understanding of my spending, and a much more functional relationship with my money. My only regret is that it wasn't published sooner, so I could be compound awesome. This is a MUST for every college student, post-grad, young professional, you get the picture. Truly, one of the best, most useful books of its kind, for any generation.
[I originally wrote this review for the Kindle version -- Amazon doesn't have the link set up correctly yet, so if you want to buy on Kindle, just search for it under the "Kindle Books" category]
on March 28, 2012
Ramit says he bought a car by faxing car dealers the best offer he could find and then asked them for counter offers (a "bidding war"). He writes that one car dealer sent him an offer for a new Honda with $2000 of list price "an unheard price discount for a new Honda". When he walked in the car dealer the conditions of the deal changed (as it always does when you walk into a car dealer) and although the price stayed the same, the interest rate was much higher for financing the car as it should have been (the car dealer said he did not have enough credit history, although his credit was "excellent" as Ramit states). Ramit foolishly agreed to pay a higher interest rate than he should have because "the price was so good".
That is a common mistake made by "beginners" who do not understand that car dealers often make more money through financing than through the car sale itself.
Ramit did a few things right to be fair. What he failed to do was either to get a loan from a nearby credit union right away and finance the car through them or to make a significant down payment at the car dealer. The latter is important to later refinance your car at a local credit union since otherwise the value of the car would be lower than the loan itself. Local credit unions almost always have 2-4% lower interest rates than the car dealer (if you have good or "excellent" credit as Ramit)...
I cannot believe Ramit failed to mention this and tells people to make the same mistake he did... (unless he is getting paid by the car industry to write this). A Honda with $2000 off, but with a 2-4% higher interest of a 5 year loan can easily mean he only "saved" $500 of MSRP. Not too good, actually pretty bad.
I purchased a Hyundai $6000 under list price just when the new model came out and the car dealer told me the same thing Ramit was told "that I would only qualify for a higher percentage loan because of lack of credit history"... I made a $2000 down payment at the car dealer and 3 months later I refinanced the car for just 2.99% at a local credit union which saved me another $1500.
Two years later the Kelly Blue Book value of my used car with 20,000 miles on the car is still higher than what I paid for it new at the car dealer...
My tips for buying a new car for a great price:
- Buy the old model when the new model already stands on the car dealer lot (happens every 4-5 years)
- Buy a "show car / demo car" that people test drive before buying the car at the dealer. The show car I bought had ZERO (!) miles on it (was never driven) but could be sold even cheaper because the car dealer also gets it for less from the car manufacturer. Also, show cars have full warranty because the car is considered new even if it has a few hundred miles on it.
- Do not fall for the financing trick at the car dealer! Did you know that General Motors in the last years made more money from car financing than from selling cars?
I had to share this because I feel like Ramit does not really understand how car dealers make you believe you got a good deal and you still paid too much for it...
In general, his book has some good advice. but if you have already read one or two financing books before you will find no new information in his book (maybe his writing style makes it a little bit more fun to read).