Summary of I WILL TEACH YOU TO BE RICH
It does not take a special person or group of people to become wealthy. What you need to do is to define what being wealthy means to you. Does investment feel overwhelming currently? I know I do. Feeling overwhelmed already? Don’t worry! You will learn all of what I just mentioned in this blog, and best of all, after the first setup, you will spend no more than 90 minutes on your personal finances each month.
Here is a summary of the 5 most important takeaways from “I will teach you to be rich” by Ramit Sethi.
Takeaway number 1: What does “rich” mean to you?
It is 100% okay to spend unapologetically on the things you love, as long as you cut back on other stuff. Heck, even Mike Tyson, who earned hundreds of millions, has been in financial trouble because he didn’t spend consciously. Oh, I see that the Joneses just bought a new Volvo.
Maybe it’s time we upgraded our own? It was pretty sweet that James wore that Armani suit to work today. I need one! Sweetie? Santa Claus is visiting the Andersons in Costa Rica. Wouldn’t it be nice to visit him?
Keeping up with your friends can become a full-time job in itself if you get lost and try to keep up with them mindlessly, but you must remember that there is always a trade-off. In that case, you might be forced to say no to that Tesla, for example.
Take Mary, as an example. She spends $6,000 a year on designer shoes, with a $50,000 take-home salary. Do you believe she has control over her personal finances? Of course, she does! She lives with a friend and makes use of public transport, so she can spend lavish amounts on her love, designer shoes, and still accomplish her financial goals.
Takeaway number 2: Don’t let minutia get in the way of the big picture.
Benjamin Franklin famously said, “Don’t put off until tomorrow what you can do today.” Do you want to know how to become wealthy? Begin right now. Sure, for most of us, the greatest moment to begin was probably ten years ago, but guess what?
Today is the second-best time. Here’s an example of something you might be able to perform today: Create an online savings account with no fees, no withdrawal limits, and a high-interest rate. Simply type “high-interest rate savings account in…” into Google.
But this is where many skeptics and procrastinators come to a halt. How can I be certain that this is the highest-interest account? This is merely an excuse for not getting started. Indecisiveness costs more than subpar decisions. Ramit Sethi teaches what he refers to as the “85% solution.”
He claims that doing things correctly 85 percent of the time is preferable to doing nothing at all. Another reason for opening that account today is that I only have $100. Why bother with a small-scale account that will only yield a few dollars each year?
When it comes to developing good money habits, it’s crucial to remember that no amount is too small. Now is the ideal time to begin because the stakes are low. A newly formed band should not turn down an opportunity to perform at a smaller event simply because they aspire to perform at Madison Square Garden one day.
They should see it as an opportunity to improve their skills and practice. Similarly, you can’t expect to handle millions of people well if you’re having trouble with hundreds of thousands. The minutiae should be avoided at all costs. You don’t have to get it perfect the first time, but you do have to start somewhere. And now is a fantastic day to do so!
Takeaway 3: Shift your focus from micro to macro.
Have you ever heard of something like this before? Save your money on $3 lattes! For a limited time only, switching to Ally Bank will get you a 1% better interest rate! Organize all your coupons! If there’s one thing I appreciated about Ramit Sethi’s I’ll Teach You to Be Rich, it’s his preference for macro-level decisions over micro-level ones.
These three cases are examples of little judgments. While participating in such activities may make you feel like you’re automatically a member of the lean FIRE movement, this is not where the struggle is fought.
This is similar to the pro-environmentalist who keeps bugging you about cooking with a lid on when two flies fly across the Atlantic at least four times per year. We should concentrate our efforts on five to 10 topics that are truly important and will produce results.
Exceptional outcomes and a solid return on investment in energy Here are a few examples of huge wins: -Automating your financial system (more on this in the following takeaway) -Maintaining a high credit score Using credit cards to earn free cashback and rewards,
By the way, if you know of a card with outstanding benefits in your area, please leave a comment below. -Contributing to a 401(k) plan to receive at least the full employer match Clearing your credit card debt -Cancel your memberships and instead purchase them every month.
A hint from my brother: if you want to watch a specific series on Netflix, for example, you may pay for the subscription for 30 days and then cancel it immediately. You’ll have time to view the series for which you set up the account. However, you will not be charged for a product that you are not using three months later.
Concentrate on reducing costs in a few key areas rather than a little bit here and there. You know the areas where you frequently tell folks, “Yeah, I probably spent too much on……” -Negotiating a raise-Doing freelance work-Buying a property you can afford-Buying a car you can afford and focusing on the total cost of ownership rather than price tag-Allocating your capital correctly (more on this in the last takeaway).
You are welcome to use this as a checklist. If you can obtain 5 to 10 of these rights, you will be able to purchase as many $3 lattes as you desire.
Takeaway number 4: Set up your automatic money system.
We, humans, are vulnerable at times. We become distracted, bored, unmotivated, and so on, which jeopardizes our prior investing efforts and saving habits. You believe you care, but that is likely to change in two weeks.
It’ll be back to cat videos and Netflix for a while. As a result, we must establish an automated money system that can save us from our worst selves. This strategy will ensure that we stick to our long-term financial plan by allocating our revenue each month.
Creating an automatic money system is a way to undertake some work now to reap many advantages in the future. By the way, if you want to reap the advantages for years to come, hit the like button.
You’ll need the following items for your system: -A checking account This is where the money is spent first. Consider it similar to a distribution canter. Its primary function is to input suitable amounts into your other accounts via automatic transfers and to pay off all of your bills.
An escrow account This is a place to keep your short-to-medium-term savings goals. Vacations, gifts, your wedding, a down payment on a property, and other expenses Choose one with no fees, no withdrawal restrictions, and a high-interest rate.
a credit card This is a free, short-term loan with benefits and perks when used wisely. Get at least one that offers cashback. An investment account; A retirement savings account, such as a 401k or a Roth IRA, is required, but this varies by nation. Purchase one from an online broker.
Your automated money system must be built on a deliberate spending plan that includes four buckets: Fixed expenses Financial investments
-Savings and spending without feeling guilty. Here’s a terrific idea for what percentage of your take-home salary these should be. 50-60% of the costs are fixed. 10% is the amount invested. Savings range from 5 to 10%. Spending without feeling guilty, from 20% to 35% Here’s an example of how you might split your money in order to stick to such a spending plan. Don’t fall below 5% for savings and 10% for investments, because these two buckets will be the foundation of your new prosperous existence.
However, if you adopt a handful of the huge wins from takeaway number three, you will be able to quickly increase these percentages. Automation is fantastic because it teaches us to live without money; if we don’t see it, we don’t feel the need to spend it.
Takeaway No. 5: The Investing Options Pyramid to be Rich
As I indicated previously, your savings and investment accounts will form the foundation of your new prosperous existence. So, let’s have a look at how you might invest your money there. Remit Sethi discusses three distinct strategies to invest your money to be Rich.
You can:
1. You must select your stocks and bonds.
2. Create your index and mutual fund portfolio.
3. Invest in a target-date fund. This is the investment choice pyramid.
The farther up the pyramid you go, the easier it is to invest. Ramit Sethi believes that the second or third level of the pyramid is the best option for 99 percent of the population. I believe this figure is significantly lower among you.
Simply watching these videos will likely place you in the top 10%, but here’s why Ramit believes so: -An individual investor can’t outperform the market. Time spent trying to outperform the market could be better spent elsewhere.
Take a look at takeout number 3’s great wins for such activities. According to Ramit, even index funds and mutual funds are too much of a nuisance for the majority of consumers. Diversification and asset allocation are handled for you by so-called target-date funds.
The only thing you need to do is set up your automated money system. For example, if you plan to retire in 2055, you can set up your investment or retirement account to purchase Vanguard’s target retirement 2055 every month.
That’s the end of it. There will be no more fuss, and your money will benefit from the marvels of compound interest. Consider the term “passive income.” It can also be utilized to achieve specific financial objectives.
If you anticipate marrying in five years, for example, you can begin purchasing target retirement accounts. 2025 is the target date for that specific aim. Let’s take a short look back.
There will always be trade-offs. You must define what a wealthy life entails for you and become a judicious spender. Consider the 85 percent solution. It is preferable to succeed 85 percent of the time than to fail.
Concentrate your efforts and resources on the major wins. Getting affluent isn’t about avoiding three-dollar lattes. Set up an automated money system to keep yourself safe from your worst self.
Investing in target-date funds is a terrific way to earn high returns with little to no effort. I’ll teach you how to get wealthy.
It goes into a lot more detail and is quite practical on how to put these ideas that I’ve just outlined into action, especially if you’re from the USA.
Finally, if you want to start building better money habits right away, check out my blog posts for more personal finance book summaries.
Summary:
Just don’t forget to start your savings account
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