I guess common sense isn’t so common. In “I Will Teach You To Be Rich,” Ramit Sethi shares anecdote upon anecdote about people falling into horrible credit card debt keeping up with the unfortunately common consumerist lifestyle. Luckily, the book provides solid advice about how to break this cycle. Three main takeaways from the book are:
1. Optimize your credit
The clowns on r/Frugal would have you believe that credit cards are evil. This is incorrect. Credit helps you track your spending, can get you rewards, provides consumer protection, and helps you build a history that can save you thousands of dollars in interest on home and business loans. The key to these benefits is eliminating credit debt, usually the first step in financial triage.
Nearly everything can be automated: credit card payments, student loan payments, investment into your 401k, bill autopay, deposits to a savings account, etc. We are lazy and prone to passivity, so it is important to take as much day-to-day maintenance out of our hands as possible.
3. Don’t try to beat the market
For every Warren Buffet there are thousands of weekend warrior traders chasing meaningless short term gains. Sethi does a good job hammering home the point that even highly paid professionals rarely succeed in beating the market over the long term. Worse yet, actively traded funds eat significantly into your margins with management fees. It is better to play the long game and choose low-fee index funds (or similar investments) if you’re investing for the long haul.
The fatal flaw of the book is that it errs too much on the side of frugality. In a book about becoming rich, there is very little about increasing your income, starting a side business, or value creation. While Sethi gives myriad tips on reducing spending, the only writing devoted towards making more money is when how to weasel a better raise out of your employers or get a job with a slightly better salary. Frugality isn’t necessarily the best mindset for happiness over the long term, and at least Sethi agrees that one should identify sources of fulfillment and allocate spending to them.
I came to many of the conclusions in Sethi’s book on my own, but that was through five years of reading forums, taking tidbits from friends and the media, and trial and error. The book can be quotidian and Blue Pill at times, but the good certainly outweighs the bad. It is a must-read for anyone in serious debt, or any twentysometihng to attain financial independence.
Read More: “I Will Teach You To Be Rich” on Amazon