10 key ideas from ‘ I will teach you to be rich’

I Will Teach You To Be Rich by Ramit Sethi is personal finance book that covers the essentials of managing money and thereby essentials of becoming rich. The following are 10 key ideas I gleaned from the book.

1. Personal finance is not complicated. Just like losing weight involves eating less and exercising more, managing your money well involves spending less, saving more, investing what you earn in a sensible way, not getting into debt, earning more and automating this whole procedure as much as you can. Knowing this, not debating about minutiae and taking action is what counts.

2. Credit cards: Credit cards if used in a proper way can boost your credit score. You should buy a credit card that has no annual fees or get the fees waived. Get one which gives you the rewards that you want. Get one with lower rates or negotiate for a lower rate. Pay back the credit card each month in full. If you buy things with your credit card, you often have more protection(especially electronics, travel and furniture).

3. Banking: Get accounts with no minimums and no fees. Use the highest interest savings account but do not be a rate chaser.

4. Tax sheltered accounts: Use tax sheltered accounts for investing to avoid tax legally and increase your wealth.

5. Spending consciously: Spend on things that you love and cut costs mercilessly on what does not matter to you. Have a budget for guilt free spending.

6. Automate: Saving, investing and spending if automated will make you more effective and wealthy.

7. Investing: Invest in low-cost index funds or ETFs in broad well established asset classes according to well established asset allocation principles. You will become wealthy in the safest way.

8. Big items: Student loans, having a conversation with your spouse, weddings, negotiating your salary, cars and house(renting versus buying) are all big things in life. Think about them carefully before you commit.

9. Giving back to society is also an important part of being rich.

10. Ask yourself: Why do you want to be rich? What does being rich mean to you? The answers you give to these questions will decide how you approach the subject of money.

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