I will teach you to be Rich by Ramit Sheti is a powerful book to help you in your finances. The author has given simple plan that can be implemented to control one’s finances and solve all our issues if we follow them diligently.
Ramit Sheti has advised us to take small steps and use some discipline to make us rich. He has advised us about sensible banking, budgeting, saving and investing. He also urges us to review this plan after every 6 months.
The author ask us such thought provoking questions like:
Q- Why do you want to be Rich?
Q-What do you want to do with your wealth?
Every person’s answer would be different and it would help the person in his financial planning.
Ramit Sheti has given us a plan of 6 weeks to gradually improve our finances:
Week 1: Set up Credit Cards
Week 2: Set up the Right Bank accounts with no fees and high interest accounts.
Week 3: Open a Retirement Account (401(K)) and investment account
Week 4: Figure out how much I am spending? How to make your money go where you want it to go?
Week 5: Automate your new infrastructure to make your accounts play together nicely.
Week 6: Get the most of the market with little work.
According to the author there are 3 Categories of people-
A- Already Managing their money and want to optimize what they are doing.
B- Largest Group of people are not doing anything but could be persuaded to change that if you figure out what motivates them.
C-Unwashed mass of people who are a lost cause.
The author has a very novel approach. He says everybody advises us how to save and invest money but nobody advises us how to spend the money .
Ramit Sheti emphasizes “Do not deprive yourself”.
He has designed a unique concept of “Conscious Spending Plan”. So what is this plan, let us try to understand.
First Save and Invest enough money each month and then use rest of the money guiltfree spend on what you love most like shoes, jewelry etc.
The plan consists of
- Fixed Costs ( Rent, Utilities, debt etc.)- 50-60% of take home pay
- Investments (401(k), Roth IRA)- 10%
- Saving Goals (Vacations, Gifts, house down payment, cash for unexpected expenses)-5-10%
- Guilt free Spending Money (Dining out, drinking, movies, clothes, shoes)-20-35%
The author has also advised us to Automate our finances to focus on Long Term Goals and the salary should be properly distributed among checking account, Retirement Account, Savings, Credit Card Payment and Miscellaneous Bills.
The author has discussed about the topic such as Asset Allocation and its importance. But the key takeaway from the book is the Conscious Spending Plan. So if you are in dire need of controlling your finances, read and follow this book. This is one of the best finance book I have read.