When it comes to being rich, learning how to manage money first is vital to your financial success. Ramit Sethi, personal finance advisor, states that by implementing his 6 week program, you’ll be well on your way to creating a financial framework that will automate itself and soon, money will be working for you rather than the other way around. The key component to becoming rich is getting started! Points from the book:
1. To be rich, you don’t necessarily have to be the smartest person. You just need to get started on a money management system that works and to stick with it. “Too many of us are paralyzed by the thought that we have to get every single part of our personal finances in order before truly getting started managing our money. Should I use my 401(k) from work or open an IRA? Should I go fro mutual funds or individual stocks? Do I need a variable annuity? Here’s my answer: Do you need to be the Iron Chef to cook a grilled-cheese sandwich? No, and once you make your first meal, it’ll be easier to cook the next most complicated thing. The single most important factor to getting rich is getting started, not being the smartest person in the room.“
2. Your credit rating matters more than you think it does. Your credit rating is based on your ability to repay back money on time. The more you default on your payments, the riskier you become to banks. The riskier you are, the higher your interest rates are on future loans. When buying big ticket items (house or car and etc.) your monthly payments can increase substantially because of these interest rate differences. “Ironically, credit is one one of the most vital factors in getting rich, but because it’s hard to wrap our minds around it, we often overlook it entirely. It’s time to wake up and pay attention to it (and not just because of the credit crisis), because establishing good credit is the first step in building an infrastructure for getting rich. Think about it: Our largest purchases are almost always made on credit, and people with good credit save tens of thousands of dollars on these purchases. Credit has a far greater impact on your finances than saving a few dollars a day on a cup of coffee.“
3. Take full advantage of any sort of employer contribution to any fund that they’re paying. Some companies match your contribution by 100% up to a certain amount. Try to max that out as it’s essentially free money and you’ll never get 100% guaranteed returns elsewhere. “If your employer offers a 401(k) match, invest to take full advantage of it and contribute just enough to get 100 percent of the match. A ‘401(k) match’ means that for every dollar you contribute to your 401(k), your company will ‘match’ your contribution up to a certain amount.“
4. Spend more on what you like/enjoy and cut back on things that don’t matter to you. This requires you to think about what really matters to you most and how you can enjoy it even more while spending less on things that don’t matter. “Frugality isn’t about cutting your spending on everything. That approach wouldn’t last two days. Frugality, quite simply, is about choosing the things you love enough to spend extravagantly on – and then cutting costs mercilessly on the things you don’t love. The mind-set of frugal people is key to being rich. Indeed, as the researches behind the landmark book The Millionaire Next Door discovered, 50 percent of the more than one thousand millionaires surveyed have never paid more than $400 for a suit, $140 for a pair of shoes, and $235 for a wristwatch. Again, frugality is not about simply cutting your spending on various things. It’s about making your own decisions about what’s important enough to spend a lot on, and what’s not, rather than blindly spending on everything.“
Check out the book here: I Will Teach You To Be Rich
Thank you for reading! Please comment below on a book that you recommend as I’d like to add more on to my reading list! Please join my Facebook group here follow my Twitter here like the post, or share it.
By Ryan Lee