Sunday, November 14, 2010

Book Review: I Will Teach You To Be Rich

Book Review: I Will Teach You To Be by Ramit Sethi

I purchased this book for a specific purpose. I am always looking for resources for premarital counselling. I usually reccomend "The Wealthy Barber" for young couples looking to master their finances as I find it easy to read and very helpful. But for some people, the Wealthy Barber is still too much information (as easy to read as it is). And so after poking around on Ramit Sethi's excellent blog, I took a chance and ordered this book to see if it could be an even easier resource for couples to read and implement. For the most part, this book was exactly what I hoped it would be.

The book's angle is that it is written for 20 somethings by a 20 something (an ego filled, very confident 20 something). It is not written for couples per se, but many of the values espoused by Sethi work for singles or couples. The book is structured into a six week action program to take control of your financial life and put you on the automatic track to retiring rich:

Week 1: Optimize Your Credit Card. Sethi teaches you what kind of credit cards to get, how many, how to negotiate with credit companies, how to get rid of charges from them, and especially how to get out of credit card debt
Week 2: Beat The Banks. The focus is on how to get the best deal on your banking, how to choose a good bank, how to set up chequing/savings accounts, and how to set up an online investing account. Sethi doesn't like many banks but loves credit unions.
Week 3: Get Ready To Invest. Since this is an American book he talks about setting up your 401(k) and Roth investment accounts (Canadians will substitute similar accounts such as RRSP's and TFSA's), and coming up with a plan to pay off debt. I like how he counters young people's objections for not investing.
Week 4: Conscious Spending. Track your spending, optimize your spending, create a conscious spending plan (instead of a budget), track your saving/spending/investing. For anyone struggling with budgeting, this chapter alone is worth the price of the book I'd say.
Week 5: Save While Sleeping. Integrate you automatic saving, automate your bill payments, etc.
Week 6: Investing Isn't Only For Rich People. Figure out your investing style, research your investments, start buying your investments (and set up automatic monthly payments of more).

There is a lot of great stuff in this book. Except for the American stuff that doesn't fit our Canadian context, it is all super practical. All of it. The book is all action. Sethi is an interesting author - his humor is corny and he crudely cuts down any idea he things is worthless (and yes, he does this often) but his reasons for doing it are presented so straightforwardly that it's difficult to disagree with (or fault him too much for it). If you are looking for a no-nonsense, all practical, specific advise system for managing your finances then this book deserves a look. What did I get out of it? First, his view of financial "experts" as being useless as fewer then 25% can even beat the market consistently and how you can use index funds is a complete revelation (and is backed by hard statistics). I also really liked his positive and simplified approach to budgeting (essentially his idea of budgeting is not really budgeting at all). Lastly, overall his book is super empowering - he makes it seem extremely simple for you to manage your own finances and doesn't pull punches about what he sees as "stupid" money management by many in his generation. I rate this book 4.4 ninja stars out of 5. If you are in your 20's and would like to borrow this book of me, I'd be happy to borrow it to you for a month so I can get other people's impressions before I use it extensively with others.

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