Money Challenge Results: Learning From 'I Will Teach You to Be Rich'
Last week for our Money Challenge, we chose to read Ramit Sethi's "I Will Teach You To Be Rich" to learn more about personal finance. Today we discuss our key takeaways from the book below.
Katherine: I always steer clear of reading self-improvement books or "how-to"s because I usually think they're a bunch of hooey. But "I Will Teach You To Be Rich" wasn’t that. The second you start reading, it's like this easy conversation with a person who is ridiculously funny and sharp.
These are some highlights:
- His language. Starting off a finance book with the sentence, "I've always wondered why so many people get fat after college." Instantaneously, I like this guy. You keep reading and you see the parallels fall into place, between weight and financial debt. With both topics, Sethi says the world loves to debate minutiae, the tiny details of it, every last tip and "to do" and "not to do," but when it comes down to it, it doesn't actually make a difference.
- The sense that he gets it. He knows what the problems are. With subheadings like, "Why is managing money so hard?" he discusses things like the lack of financial training in our education system, our accusations that credit card companies and banks are out to profit off of us (which he agrees with), and where we could possibly get an extra $100 per month (he says it can be an amount that fits your income), and pinpoints the media as a huge source of misguidance. He makes sure to address the fact that saving and investing money has nothing to do with your income level.
- His approach: this book is about small steps -- reducing the minutiae, reducing the overwhelming choices and options. He wants us to know enough to start doing something with the money we have and grow it. He acknowledges what is holding us back and with that acknowledgment and points out that it's easy to overcome. And his book does that for us.
Amy: This is the actually first personal finance book I’ve ever read, and working at MyBankTracker is also my first general introduction to personal finance, so I’m still in a wide-eyed state towards how to manage my money.
A lot of the advice from Sethi was invaluable and I think it’s important that he comes from a psychology background to tackle issues of money from a psychological standpoint. I do think that a lot of America's money problems are mentally rooted -- how we process the way money affects our lives. Using the goal of living a “full life” is an incredibly important motivator in being able to manage money well.
Claire: "I Will Teach You to Be Rich" was extremely helpful for me because it offers basic information about investing for your retirement, as well as how to save money and cut frivolous spending. I really like Ramit Sethi's advice about using an automated system each month to allocate your money into different savings buckets, and whatever you have left over, you can use towards things you really like.
Too often, I feel guilty about making certain purchases because I just can't help myself sometimes. Ramit shows you a way to funnel your money to savings and investments first, and then through what he calls "conscious spending," you can spend on the things you love. Saving money is similar to dieting -- you don't want to completely deprive yourself, otherwise you might give up or feel overwhelmed.
A great example he used was about his friend who had a major shoe addiction -- she would regularly spend over $300 for one pair. He says that although it's a ridiculous amount to be spending on shoes, she shouldn't feel guilty because she had a good amount invested and saved. She also happened to live in a very modest apartment, saving money on rent.
I believe this is a good rule to follow. Rather than sit around feeling guilty about it, prioritize where the bulk of your money is going first -- mostly into savings, and then whatever you have left over can be used for shopping, eating out, or whatever your guilty pleasure is. Keeping track of your expenses is also important (to see where your money is going). I started tracking my expenses this month before I even cracked open the book!
This week, I'm going to actively make an effort to change the way I handle how my money is saved, and follow the valuable advice Sethi offers in his book.
Simon: This is actually the second time that I've read the book (I first read it in 2010). After reading it the first time around, I did follow much of the advice that Ramit shared, including financial automation, conscious spending as opposed to budgeting, and spending lavishly on things you love while cutting costs on things you don't. Ramit places emphasis on savings on the big things in life, like home purchases, cars, and weddings, which makes sense but I haven't needed to apply his advice on these purchases yet.
One thing I disagreed with, was Ramit's reason for not getting a cash back credit card. Today, there are many credit cards that offer a generous amount of cash back if it's tailored to your spending. (To be fair, many of these attractive cash back credit cards did not exist when the book was published.)
All in all, it's a great personal finance book for anyone who is just starting to learn to manage their money.