I Will Teach You to Be Rich | Ramit Sethi

I am a fan of personal finance books and I do like to read this kind of books that I found in the best seller list of Amazon. This time, the list brought me the book: "I Will Teach You to Be Rich, Second Edition: No Guilt. No Excuses. No B.S." This New York Times and Wall Street Journal Bestseller is written by Ramit Sethi.

There were some generic recommendations which do not fit to the realities of today, at least for my country Turkiye. Anyway, it is a good piece of work who want to have a mindset about where to start for personal finance. Let's continue with my highlights from the book:

People love to argue minor points, partially because they feel it absolves them from actually having to do anything. You know what? Let the fools debate the details. I decided to learn about money by taking small steps to manage my own spending. Just as you don’t have to be a certified nutritionist to lose weight or an automotive engineer to drive a car, you don’t have to know everything about personal finance to be rich. I’ll repeat myself: You don’t have to be an expert to get rich. You do have to know how to cut through all the information and get started—which, incidentally, also helps reduce the guilt.

Investing early is the best thing you can do.

The best time to start investing was ten years ago. The second best time is today.

I don’t have a lot of sympathy for people who complain about their situation in life but do nothing about it. That’s why I wrote this book! I want you to be empowered to take control of your situation, no matter where in life you started from. I want you to have a level playing field against these huge Wall Street firms, mindless articles, and even your own psychology.

In relationships and work, we want to be better than average. In investing, average is great.

The single most important factor to getting rich is getting started, not being the smartest person in the room.

It’s more important to get started than to spend an exhaustive amount of time researching the best fund in the universe.

Spend extravagantly on the things you love and cut costs mercilessly on the things you don’t. This book isn’t about telling you to stop buying lattes. Instead, it’s about being able to actually spend more on the things you love by not spending money on all the knucklehead things you don’t care about. Look, it’s easy to want the best of everything: We want to go out all the time, live in a great apartment, buy new clothes, drive a new car, and travel anytime we want. The truth is, you have to prioritize.

Investment isn’t about being sexy—it’s about making money, and when you look at investment literature, buy-and-hold investing wins over the long term, every time.

Simple, long-term investing works. This idea gets nothing but yawns and eye rolls. But you decide: Do you want to sit around impressing others with your sexy vocabulary, or do you want to join me on my gold-lined throne as we’re fed grapes and fanned with palm fronds?

Our largest purchases are almost always made on credit, and people with good credit save tens of thousands of dollars on these purchases. Credit has a far greater impact on your finances than saving a few dollars a day on a cup of coffee.

There are two main components to your credit (also known as your credit history): your credit report and your credit score.

Your credit report gives potential lenders basic information about you, your accounts, and your payment history. It tracks all credit-related activities (e.g., credit cards and loans), although recent activities are given higher weight.

Whether you’re paying the full amount of your credit card bill or risking my wrath by paying just part of it, pay it on time. Lenders like prompt payers, so don’t give your credit card company the opportunity to raise your rates and lower your credit score by being a few days late with your payment.

Switch to a no-fee card. I suggest you do this at the same credit card company to simplify your life—and so you don’t have to close one account and open another, which will temporarily affect your credit score.

Now the one tricky part: If you decide to get a new card, should you close your old card? I’ve changed my view here over the years. The typical advice is to keep cards open for as long as possible, which is generally smart. But if you have lots of cards that you never use, reconsider this. Some of my readers have opened over twenty-plus cards to “churn” rewards, and now they can’t keep track of all their cards. This is where you have to make a decision on risk versus reward and simplicity versus complexity.

To improve your credit utilization rate, you have two choices: Stop carrying so much debt on your credit cards (even if you pay it off each month) or increase your total available credit. Because we’ve already established that if you’re doing this, you’re debt-free, all that remains for you to do is to increase your available credit.

Remember, 30 percent of your credit score is represented by your credit utilization rate. To improve it, the first thing you should do is pay off your debt. Only after you’ve already paid off your debt should you try to increase your available credit. Sorry to repeat myself, but this is important!

Reducing spending and prioritizing debt. The most sustainable way to pay off credit card debt is also the least sexy. Unlike balance transfers or HELOC borrowing, it’s not very exciting to tell people you decided to spend less on other things so you could pay off your debt. But it works.

Conscious spending is not about simply cutting your spending on various things. It’s about making your own decisions about what’s important enough to spend a lot on and what’s not, rather than blindly spending on everything.

If you want to know how to use money to live a happier life? Whillans et al. told the New York Times that “People who spent money to buy themselves time, such as by outsourcing disliked tasks, reported greater overall life satisfaction.”

A Conscious Spending Plan involves four major buckets where your money will go: fixed costs, investments, savings, and guilt-free spending money.

Remember, the more aggressively you save now, the more you’ll have later.

Rather than dreaming about running three times a week actually run once a week.

Habits don’t change overnight, and if they do, chances are they won’t be sustainable.

Build the habit first. Systematize it later.

Remember that getting a raise is not about you. It’s about you demonstrating your value to your employer. You can’t tell them you need more money because your expenses are higher. Nobody cares. You can, however, show how your work has been contributing to the company’s success and ask to be compensated fairly.

“Show me someone’s calendar and their spending, and I’ll show you their priorities.” Now you have an answer to the question: What does your spending say about you?

In truth, being rich is within your control, not some expert’s. How rich you are depends on the amount you’re able to save and on your investment plan. Acknowledging this fact takes guts, because it means admitting that there’s no one else to blame if you’re not rich.

Putnam Investments studied the performance of the S&P 500 over fifteen years, during which time the annualized return was 7.7 percent. They noted something amazing: During that fifteen-year period, if you missed the ten best days of investing (the days where the stock market gained the most points), your return would have dropped from 7.7 percent to 2.96 percent.  And if you missed the best thirty best days, your returns would have dropped to -2.47 percent—negative returns!

In actual dollar values, if you’d invested $10,000 and kept your money in the market over those fifteen years, you’d end up with $30,711. If you missed the ten best investing days, you’d end up with $15,481. And if you missed the thirty best investing days, you’d end up with $6,873—less than you began with.

Market is going to go. But candidly, when it comes to investing and compound interest, your feelings will lead you astray.

Long-term investors have a phrase they use: Focus on time in the market, not timing the market.

Investing Isn’t Only for Rich People

Automatic investing is not some revolutionary technique that I just invented. It’s a simple way of investing in low-cost funds that is recommended by Nobel Laureates, billionaire investors such as Warren Buffett, and most academics. It involves spending most of your time choosing how your money will be distributed in your portfolio, then picking the investments (this actually takes the least amount of time), and finally automating your regular investments so you can sit and watch TV while growing your money. Hey, we’re lazy. We might as well embrace it and use it to our advantage.

As Warren Buffett has said, investors should “be fearful when others are greedy and greedy when others are fearful.”

Think about that remarkable fact: Your investment plan is more important than your actual investments.

Let’s say you didn’t grow up with parents who knew a lot about money. Or, until recently, you thought the only way to invest was to “pick stocks.” I hear you—we all start from different places in life.

Hey, my dad didn’t teach me about the importance of engaging my core when deadlifting. We all start with the cards we’re dealt. But you’ve read this book. You can move and start investing aggressively now.

Let’s go through an exercise I call “Taking It From the Clouds to the Street.”

When I ask you, “Why do you want more?” the common answers are “freedom” or “security.” Those are fine, but I want to challenge you to go deeper. The problem is that high-level, vague visions never motivate us as much as we’d hope. True motivation is often real, concrete—on the street. It’s something that affects our day-to-day.

What’s your street-level motivation? You could create some lofty life purpose—or you could take a ten-minute walk and figure out what gets you excited at this exact moment. The answers are often a lot simpler than you think.

The automatic system is great, but it’s fueled by only one thing: the money you feed it. That means that your system is only as strong as the amount you put in it.

Because the rewards of investing as early as possible are so tremendous, one of your key drivers will be feeding as much as possible into your system.

Every dollar you invest today will be worth many more tomorrow.

The more you feed into your system now, the sooner you’ll reach your goals.

Rebalancing your portfolio will make sure your assets remain properly allocated and protect you from being vulnerable to a specific sector’s ups and downs.

When you first begin taking control of your money, people will notice. (Candidly, you’re probably talking about it more than before. You know the saying “How do you know if someone is vegan? Don’t worry, they’ll tell you.” Same with taking control of your finances. My suggestion: Be mindful of how you discuss money and who you discuss it with.) By mastering your money, you’re disrupting the normal relationship pattern you’ve had with others, which makes them uncomfortable and causes them to react in odd ways. Don’t take it personally. Smile and say, “Thank you.” As the people around you get more comfortable with the new you, the comments will gradually fade away.

“LOL, I can’t believe you still believe in index investing. That’s cute. It’s so obvious that Apple is going to the moon.” (Or is it Tesla? Or Bitcoin? Or ICOs?)

Ignore the noise. Remember, investing shouldn’t be dramatic or even fun—it should be methodical, calm, and as fun as watching grass grow. (What you can do with your investments—and your Rich Life—that’s fun!)

If you’ve set up your asset allocation and are consistently funding it, stick to your guns. You’re investing for the long term, and when you look back, day-to-day changes will seem like minor blips—which they are.

Everyone has an angle but there are no tricks or hacks to long-term personal finance. After you read the hundredth breathless post about how index investing is only for beginners (it’s not), you’ll realize you know more than most of the advice out there. That’s the magic moment: Instead of “living in the spreadsheet,” tweaking random numbers, and searching out endless reddit threads about personal finance, you can spend less than ninety minutes a month on your finances—and instead live your Rich Life outside the spreadsheet doing things that matter.

As you become more financially successful, your relationships with others might change. Be aware of it.

Getting rich isn’t about one silver bullet or secret strategy. It happens through regular, boring, disciplined action. Most people see only the results of all this action—a winnable moment or an article in the press. But it’s the behind-the-scenes work that really makes you rich.