I moved to an expensive neighborhood in NYC this year which motivated me to learn new personal finance tips. So I read I Will Teach You To Be Rich by Ramit Sethi. These are my takeaways from the book.

The jist of it all

  • How to be rich
    • Increase income
    • Reduce expenses
    • Save and invest intelligently
  • Aim to carry no credit card debt above all else
  • Maintain a good credit score, this has a massive effect on the lifetime cost of major purchases
  • Set up an automated money management system and be as hands off as possible once that is set up
  • Use the automated money management system/a budget to enable guilt-free spending.
  • Ruthlessly cut costs on anything that is not important to you.
  • Include expected costs in your budget (e.g., wedding, yearly Ikon pass renewal)
  • For every major purchase, predict the cost wholistically. Sticker price + buying and selling fees + maintenance, etc.
  • Dollar-averaging over time is the surest path to financial health.
  • When it comes to investing, fees are the enemy. Choose investments that reduce fees.
    • A 1% fee on an investment account balloons into a 33% loss of returns in the long term.
  • Retirement accounts are an excellent investment vehicle because they reduce taxes.

Recommended budget and schedule

Suggested budget breakdown | Expense | % Income | | ———– | ———– | | Fixed costs (rent, utilities, etc.) | 50-60 | | Retirement savings | 10 | | Short- and medium-term savings | 10 | | Guilt-free spending | 20 |

A great automated money management system | Date | Action | | ———– | ———– | | 1st of month | Salary direct deposits to checking account and 401(k). Receive a billing notification email from credit cards to review in time before the payment goes through | | 5th of month| Transfers from checking to savings and investment accounts | | 7th of month | Pay bills, ideally with a credit card. Pay off credit cards with checking account |

Optimize investment returns with these facts

  • Your choice of investment plan, e.g., distribution across stocks bonds and cash, has more effect on your returns than the specific securities you choose to invest in.
  • HSAs have a special tax structure that make them an excellent investment vehicle. HSA money can be spent on any qualified medical expense, any time (tax free). Once you’re 65, you can spend HSA money on anything.
    • Contribute money tax-free
    • Take a tax deduction
    • Grow the money tax-free
  • Your employer match to a 401(k) isn’t counted toward your contribution limit.

Ramit’s thoughts on financial institutions

  • Never work with Wells Fargo or Bank of America. They have a terrible track record.
  • Don’t work with a financial advisor and don’t trust in fund managers to beat the market consistently.
  • Vanguard has excellent low-expense index and target date funds.
  • Schwab is a reputable business to do checking and investing with.
  • Get an online high-interest savings account.
    • Capital One 360 Savings is the savings account Ramit uses. It has a feature to create sub-savings accounts (to save up for a wedding or a car for instance)
  • When setting up a new account, the new bank will gladly help you arrange the transfer. Keep a little extra money in the old account for 60 days in case there are any automatic transfers still trying to draw from it.

Tips for the job applicant

  • Consider keeping a “networking budget” to use to travel and meet people for career advancement.
  • Ramit lists a phenomenal way to impress as a job candidate on p. 312
    • Break down the job posting line by line and connect your own skills and projects directly to each line.
    • Research their website extensively with the goal of being able to speak knowledgeably about the company and why you are a good fit.
    • Annotate your resume and be ready to expand on how any line has prepared you or demonstrated that you are capable of doing something specific to this role.
    • Talk to anybody you know who works at the company or in the same industry and ask what you can do to stand out.
    • Come up with 3 proposals of how you might perform your work to increase some metric meaningful to the company (e.g. standardizing test methodology)
  • When negotiating your job offer, don’t tell them your current salary. Make them work for it.
  • Smile during negotiations.
  • Practice negotiating with your friends. Videotape it even.

Credit card advice

  • Have 2 credit cards! One to maximize points for travel and eating out (Chase Sapphire Reserve) and another to maximize cash back on everything else.
  • A late payment on a credit card will:
    • Drop your credit score
    • Increase your APR on this card AND the other cards you have
    • Incur a fee
  • Credit card companies are competing for your business, so call and ask before the annual fee kicks in if you can waive it. If they say no, ask if they will reduce it.
  • Most credit cards double the warranty of your purchases. If your iPhone breaks after Apple’s warranty period has finished, the credit card will still cover it for some time.
  • Extra collision car rental insurance is WORTHLESS. It is covered through your existing car insurance and your credit card will usually back you up to $50k.
  • Most credit cards include trip-cancellation insurance which covers any change fees for a trip you rebook, which can be between $3-10k per trip.
  • Credit cards offer excellent consumer protection, they will fight merchants for you with their massive teams of lawyers.
  • Keep this spreadsheet when disputing anything. You become a monster to deal with when you have this information at your fingertips.
Date Time Rep name Rep ID Comments
         

Major purchasing and life events advice

  • Ramit has an EXCELLENT method for buying a car at a good price on p. 319.
  • Leasing a car is not the best financial decision. Buying a car and driving it into the ground is.
  • Fightingchance.com is an information service for car buyers.
  • If you’re going to get married, get a prenup. It’s hard but it’s not that weird.

Specific behavior tips

  • Remember that our priorities are demonstrated by how we spend our time and money.
  • CALL and ask financial institutions and merchants for better deals.
    • E.g., get your ATM fees waived when traveling abroad.
  • When disputing something or asking for something from a company, don’t ask questions that allow them to give you an easy “no”. If they say no, ask what else they can do to help you.
  • The A La Carte method of reducing expenses: Cancel all discretionary subscriptions you can, and instead pay for everything you need a la carte.
    • This forces you to be conscious of what you pay for.
    • Psychologically, we value things we pay for out-of-packet more.
  • Opt out of credit cards offers at optoutprescreen.com.
  • Stop getting unwanted catalogs in the mail by using catalogchoice.org.

Interesting facts

  • Over long periods of time the stock market typically returns 8% after accounting for inflation.
  • On average, someone with a bachelor’s degree earns $1 million more than someone who only has a high school diploma over their lifetime.
  • You must pay student loans even if you declare bankruptcy.
  • People who spend money to buy time, such as by outsourcing disliked tasks, report greater overall life satisfaction.
  • There is strong data to indicate that the more you earn, the more satisfied you are with your life.
  • Consumer spending accounts for ~70% of the American economy.
  • 2/3 of American millionaires did not come from wealthy parents.
  • 50% of 1,000 millionaires surveyed never paid more than $400 for a suit, $140 for a pair of shoes or $235 for a wristwatch.