Saturday, February 4, 2012
The book this week was I Will Teach You To Be Rich by Ramit Sethi. I was thrilled with this book... It was well written, but in a very unorthodox way. Sethi uses a very conversational type of writing style that make the book incredibly entertaining. Sethi started by writing a blog www.iwillteachyoutoberich.com, on his blog he writes about personal finance and related topics and then published this book February of this year. This little tidbit of knowledge really caught my attention because, well, sounds exactly like what I want to do.
On to the book... Solid ideas and very clear "how-tos" throughout the book. The book is organized around the main idea of 6 Weeks to Financial Literacy. Each chapter walks the reader through steps to learn a new financial idea. These ideas cover everything from negotiating with credit card companies to get the best deals to opening a high interest yielding back account to saving tens of thousands of dollars by concentrating on "big wins" instead of cutting out unnecessary nickel and dime things out of your budget.
My favorite idea covered in this book, which I found to be quite genius was automating your finances. Automating your finances saves you lots of time by saving for retirement, investing, and setting aside money for your big purchases, all the while, paying your rent and fixed expenses, all done with as little as a few hours of you interaction a month. I actually saw Ramit Sethi talk about this a while back in a YouTube video and didn't even realize it was him I watched until about half way through this book.
Here is that video I watched, pay attention! Really great ideas here!
One of the most important things I think you should take away from this book is the importance of investing as early as possible. People hear this but disregard it... they assume they will do it later. You won't! Humans are creatures of habit, in fact, the human mind starts getting comfortable with routine around the age of 25, so everything you do at the age of 25, you will do for the rest of your life. You will generally wake up at the same time, like the same foods, work the same job, and INVEST the same way. You need a bigger reason to change after this age for your mind to really do it. So I urge you to invest now. It doesn't matter how much money you have... that is ridiculous! I started investing money when I was 13 years old. I definitely wasn't racking in the dough back then... Sure my investment was shares in a credit union, but investing none the less, and after this investing was a habit. Been doing it ever since. If you are past the age of 25... understand the importance of investing and give yourself the reason you need! I have read countless stories of people as old as 65 years old that shocked themselves into a craze investing so they would be able to retire comfortably. Run the numbers and find out what it will take for you to come up with the money you want to retire with. This should show you how powerful compound interest really is... I like Bloomberg.com's calculators, as well as, Dave Ramsey. Check out Bloomberg's Roth Calculator and throw in some numbers http://www.bloomberg.com/invest/calculators/roth_ira.html I also recommend giving the retirement planning calculator a whirl as well.. Both my idea of fun! (I'm kind of a nerd) The great thing about Sethi's concept of automating your finances is it gives you the needed push to start your investing. If a certain sum of money is automatically invested for you each month right after your paycheck you don't even need to think about whether you have the money or what else you might spend it on.. After you do this for a year, you start seeing how powerful compounding interest is and you'll wish you had started sooner.
There are so many ideas I like in this book.. investing in index funds instead of mutual funds, the cost of a wedding (average cost is $28,000, have you started saving?), negotiating a high salary... the list goes on. Ramit Sethi is on my list of favorite authors now. If the concepts laid out in this weeks blog interest you... pick up this book and read it cover to cover, and then read his blog. If you have any questions on the book don't hesitate to ask. I would be more than happy to help anyone that wants it.