5 money lessons I learned 10 years ago from 'I Will Teach You To Be Rich' that I still use today
- In his bestselling book, "I Will Teach You To Be Rich," Ramit Sethi shares practical advice that you can use to refocus your money for better long-term financial results.
- Automated saving and investing at financial institutions with low-fee, high-interest accounts can put you on track to reach any financial goal.
- Sethi says you shouldn't feel bad spending money on the things you want, as long as you fulfill your financial obligations first.
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On Ramit Sethi's 2009 book tour for his bestselling book "I Will Teach You To Be Rich," I was lucky to chat with Ramit personally about his book and personal finance advice during his visit to the Tattered Cover Book Store in downtown Denver. As a personal finance blogger myself, it was fun to meet one of the best-known names in the online personal finance space and hear from the horse's mouth what he had to say about managing our money.
But you don't need to sit down with Ramit to get his most important lessons. You can just order his recently updated book and get every detail from the comfort of your favorite chair, couch, or park blanket. Here are some of the best lessons from "I Will Teach You To Be Rich" that you won't want to miss.
1. Pick the best bank account
I'm someone who loves travel and hates bank fees. That leaves me with a short list of bank accounts that work well for my situation. Chapter two of "I Will Teach You To Be Rich" is titled "Beat the Banks." It says you should open only high-interest, low-fee accounts and may want to consider multiple savings accounts.
These criteria led me to the bank accounts I have today at Charles Schwab (my checking), Ally Bank (two savings accounts), and Capital One (one money market savings account). All of these accounts have no minimum balance, no recurring fees, and offer interest rates well above average.
2. Use your credit cards the right way
Credit card interest can be very expensive. If you can't pay off your credit cards in full by the due date each month, you are better off not using them. The same goes for people who fall into bad spending patterns and can't follow a budget when they have credit cards. However, if you can commit to paying off your cards in full every month by the due date, they can turn into a gateway to huge rewards.
Cash back and travel rewards credit cards can put a little cash back in your pocket for each purchase or give you miles or points you can redeem for free travel. When you use those travel rewards well, they can be worth even more than the cash. But that approach is only worthwhile if you can avoid interest charges.
3. Spend based on values
Chapter four of the book is titled "Conscious Spending." It isn't about cutting every possible nickel and dime out of your budget and living as frugally as possible. Instead, Ramit suggests you focus your spending on what you value most.
For example, he shares one story of a friend who spends five figures a year going to bars, nightclubs, and other nightlife. But he is in good financial shape despite these costs because he funds savings, retirement, and other goals first. Once you meet your financial obligations, you can spend, within the budget you set, guilt-free.
4. Automate your investing
Good intentions for saving and investing are great, but unless you take action you may run into serious financial struggles in retirement. Luckily we live in a time where we can automate the vast majority of those savings so we never have to think about it.
If you have a 401(k) plan at work, participate. If you don't have an IRA or Roth IRA, open one. Set up automatic rules that match your payday and bills schedules and you won't ever have to remember a manual transfer. Chapter three of the book helps you answer those investment account questions you may be wondering while chapter five goes into details on automation.
5. A little action today leads to huge results in the future
One unifying theme that stretches across the book is that you can take small actions today that add up to tremendous results later on. While saving $5, $10, or $20 per month may not seem like much, over time it becomes hundreds, thousands, and even more.
Sethi also shows that you can follow your own financial journey. Don't worry about where your neighbors, family, or friends spend their money. Try to avoid wasting money on things you don't care about and work to get a good deal on major purchases so you do have the money to spend on what you care about most. If you can master a few basic skills, you could have a much brighter financial future ahead.
- Read more about Ramit Sethi and "I Will Teach You to Be Rich":
- The worst thing you can do with your 401(k) when you leave a job, according to a financial expert and bestselling author
- A financial expert and bestselling author says the best money advice he can give isn't a mystery or magic - it's just math
- A financial expert and bestselling author asks anyone with debt the same first question
- A financial expert and bestselling author says for building wealth in the long term, 'average' is more than enough
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