I Will Teach You To Be Rich - By Ramit Sethi

Date read: 
September 1, 2019
See My Collection of 50+ Book Notes

My Thoughts

Completely changed the way I look at personal finance. Bit American-centric, but it offers great to-the-point rules for structuring your spending. The number one takeaway is to spend extravagantly on the things we really love and to avoid spending in areas we don't.

Summary Notes

Invisible scripts are the messages you’ve absorbed from your parents and society that guide your decisions for decades—and often without even being aware of it.

  • “You’re throwing your money away on rent.”
  • “We don’t talk about money in this house.”
  • “Credit cards are a scam.”
  • “Stop spending money on lattes.”
  • “Money changes people.”
  • “You don’t get that level of wealth without making a few shady deals here and there.”
  • “The stock market is gambling.”
  • “Student loans are a scam.”

We love to debate minutiae. When it comes to weight loss, 99.99 percent of us need to know only two things: Eat less and exercise more. Only elite athletes need to do more. But instead of accepting these simple truths and acting on them, we discuss trans fats, obscure supplements, and Whole30 versus paleo.

People love to argue minor points, partially because they feel it absolves them from actually having to do anything.

The best time to start investing was ten years ago. The second best time is today.

The truth is, you likely can’t beat average returns. In fact, average 8 percent returns are actually very good. Ironically, people who fear “being average” do exactly the things that make them perform worse than average

The 85 Percent Solution: Getting started is more important than becoming an expert. I’d rather act and get it 85 percent right than do nothing. Think about it: 85 percent of the way is far better than zero percent.

Spend extravagantly on the things you love and cut costs mercilessly on the things you don’t.

Investment isn’t about being sexy—it’s about making money, and when you look at investment literature, buy-and-hold investing wins over the long term, every time.

10 Rules for a Rich Life

  1. A Rich Life means you can spend extravagantly on the things you love as long as you cut costs mercilessly on the things you don’t.
  2. Focus on the Big Wins—the five to ten things that get you disproportionate results, including automating your savings and investing, finding a job you love, and negotiating your salary. Get the Big Wins right and you can order as many lattes as you want.
  3. Investing should be very boring—and very profitable—over the long term.
  4. There’s a limit to how much you can cut, but no limit to how much you can earn.
  5. Your friends and family will have lots of “tips” once you begin your financial journey. Listen politely, then stick to the program.
  6. Build a collection of “spending frameworks” to use when deciding on buying something. Most people default to restrictive rules (“I need to cut back on eating out . . .”), but you can flip it and decide what you’ll always spend on, like my book-buying rule: If you’re thinking about buying a book, just buy it. Don’t waste even five seconds debating it. Applying even one new idea from a book is worth it.
  7. Beware of the endless search for “advanced” tips. So many people seek out high-level answers to avoid the real, hard work of improving step by step. It’s easier to dream about winning the Boston Marathon than to go out for a ten-minute jog every morning. Sometimes the most advanced thing you can do is the basics, consistently.
  8. You’re in control.
  9. Part of creating your Rich Life is the willingness to be unapologetically different.
  10. Live life outside the spreadsheet.

What your credit score is based on

  • 35% payment history (How reliable you are. Late payments hurt you.)
  • 30% amounts owed (How much you owe and how much credit you have available, aka your credit utilization rate)
  • 15% length of history (How long you’ve had credit)
  • 10% new credit (Older accounts are better, because they show you’re reliable.)
  • 10% types of credit (For example, credit cards, student loans. Varied is better.)

How credit scores affect what you pay on a $200k 30-year mortgage:

Fico Score — APR — Total
760–850     4.279%    $355,420
700–759     4.501%    $364,856
680–699     4.678%    $372,468
660–679     4.892%    $381,773
640–659     5.322%   $400,804
620–639     5.868%   $425,585

Invisible money scripts = typically unconscious, trans-generational beliefs about money that are developed in childhood and drive your behavior today.

Only 50 percent of households reported any credit card debt, while credit card companies reported that 76 percent of households owed them money.

Seventy-five percent of Americans claim they don’t make major purchases on their credit card unless they can pay it off immediately. Yet from looking at actual spending behaviors, over 70 percent of Americans carry a balance, and fewer than half are willing to reveal their credit card debt to a friend.

Action Steps Week 1:

  1. Get your credit score and credit report (one hour)
  2. Set up your credit card (two hours). If you already have one, call and make sure it’s a no-fee card.
  3. Make sure you’re handling your credit cards effectively (three hours). Set up automatic payments so your credit card bill is paid off in full every month.
  4. If you have debt, start paying it off (one week to plan, then start paying more).

Think of savings accounts as places for short-term (one month) to mid-term savings (five years). You want to use your savings account to save up for things like vacations and holiday gifts, or even longer-term items, like a wedding or the down payment on a house.

I recommend two different accounts at two separate banks. Having your money in two separate accounts—and banks—uses psychology to keep your savings growing.

Action Steps Week 2:

  1. Open a checking account or assess the one you already have (one hour). Find an account that works for you, call the bank (or go in), and open the account. If you’ve already got one, make absolutely sure it is a no-fee, no-minimum account.
  2. Open an online high-interest savings account (three hours).
  3. Fund your online savings account (one hour). Leave one and a half months of living expenses in your checking account, or as close to it as you can manage.

The median retirement balance in the United States for people ages 56–61 is $25,000. This could have been accomplished by investing $6 a month since 1980 into a 60/40 portfolio.

Over the twentieth century, the average annual stock market return was 11 percent, minus 3 percent for inflation, giving us 8 percent

We worry about dying from a shark bite (when we should really worry about heart disease). When there’s a sale on eggs or chicken, we’re happy—but when the stock market gets cheaper, we think it’s bad. (Long-term investors should love when the market drops: You can buy more shares for the same price.)

Six systematic steps you should take to invest.

  1. 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.
  2. Pay off your credit card and any other debt.
  3. Open up a Roth IRA (see The Beauty of Roth IRAs) and contribute as much money as possible to it.
  4. If you have money left over, go back to your 401(k) and contribute as much as possible to it (this time above and beyond your employer match).
  5. HSA: If you have access to a Health Savings Account (HSA), it can also double as an investment account with incredible tax features that few people know about.
  6. If you still have money left to invest, open a regular non-retirement (“taxable”) investment account and put as much as possible there.

Action Steps Week 3:

  1. Open your 401(k) (three hours).
  2. Come up with a plan to pay off your debt (three hours).
  3. Open a Roth IRA and set up automatic payments (one hour).
  4. Find out if you’re eligible for an HSA and, if you are, open your account (three hours).

For the last fifty-plus years, budgeting has been the battleground for snobby personal finance writers who’ve tried to shove a daily tracking system down everyone’s throats because it sounds logical. There’s only one catch: NOBODY EVER DOES IT.

Conscious spending is, quite simply, about choosing the things you love enough to spend extravagantly on—and then cutting costs mercilessly on the things you don’t love.

People who spent money to buy themselves time, such as by outsourcing disliked tasks, reported greater overall life satisfaction.

The 60 Percent Solution: split your money into simple buckets, with the largest, basic expenses (food, bills, taxes), making up 60 percent of your gross income. The remaining 40 percent would be split four ways:

  1. Retirement savings (10 percent)
  2. Long-term savings (10 percent)
  3. Short-term savings for irregular expenses (10 percent)
  4. Fun money (10 percent)

I once had a woman who emailed me saying, “I always tell myself I want to run three times a week, but I never go.” I wrote back and said, “What about going for a run once a week?” She replied, “Once a week? What’s the point?” She would rather dream about running three times a week than actually run once a week.

If you know you’ll have to spend about $500 on Christmas gifts, start saving $42/month (that’s $500 divided by twelve months) in January.

Action Steps Week 4:

  1. Get your paycheck, determine what you’ve been spending, and figure out what your Conscious Spending Plan should look like (thirty minutes).
  2. Optimize your spending (two hours). Dig deeper into your savings goals and monthly fixed costs.
  3. Pick your Big Wins (five hours). Assuming you want to cut your spending by $200/month, what one or two Big Wins will you target?
  4. Maintain your Conscious Spending Plan (one hour per week). Enter any cash receipts into your system each week.

Automating your money will be the single most profitable system you ever build.

Once you’ve gotten your money under control and you’re hitting your targets, you absolutely should spend your leftover money. Look to your savings goals. If you don’t have something in there for “vacation” or “new snowboard,” maybe you should. Otherwise, what is all this money for?

Action Steps Week 5:

  1. List all your accounts in one place (one hour).
  2. Link your accounts together (three to five days)
  3. Set up your Automatic Money Flow (five hours).

Putnam Investments studied the performance of the S&P 500 over fifteen years, during which time the annualized return was 7.7 percent. They noted something amazing: During that fifteen-year period, if you missed the ten best days of investing (the days where the stock market gained the most points), your return would have dropped from 7.7 percent to 2.96 percent. And if you missed the best thirty best days, your returns would have dropped to -2.47 percent—negative returns!

In actual dollar values, if you’d invested $10,000 and kept your money in the market over those fifteen years, you’d end up with $30,711. If you missed the ten best investing days, you’d end up with $15,481. And if you missed the thirty best investing days, you’d end up with $6,873—less than you began with.

Focus on time in the market, not timing the market.

Action Steps Week 6:

  1. Figure out your investing style (thirty minutes). Decide whether you want the simple investment options of a target date fund or the increased control (and complexity) of index funds.
  2. Research your investments (three hours to one week).
  3. Buy your fund(s) (one hour to one week).

Ask yourself what the point of all of this work is. Is it to earn an extra $10,000? Or to actually live a Rich Life?

If you had to get extremely specific about why you want to earn your next $10,000 and you had to bring your answer from the clouds to the street, what would you say?



  • Fixed costs (50–60%)
  • Investments (10%)
  • Savings (5–10%)
  • Guilt-Free Spending (20–35%)
  • Reassess current subscriptions (cut if necessary).
  • Renegotiate cable and internet bills.
  • Revisit spending goals: Are they accurate? Are you actively saving for them?If your fixed costs are too high, it may be time to look at a cheaper rent (or AirBnB’ing a room out, or earning more).
  • If you aren’t investing at least 10 percent, it’s worth finding the money from somewhere else—usually guilt-free spending—and reallocating it to investments.


  • Cell phone bill
  • Car insurance
  • Cable and internet
  • Bank fees


  • Confirm you’re contributing the max to your 401(k), that your money is being invested (not just sent over and sitting there—for a cautionary tale), and that it’s being invested in the right fund(s).
  • Confirm you’re contributing the max to your Roth IRA, that your money is being invested (not just sent over and sitting there), and that it’s being invested in the right fund(s).
  • Be sure you’re taking advantage of all the tax-advantaged accounts you can


  • Revisit your debt payoff plan: Are you on track? Can you pay any of your debt off sooner?
  • Check your credit report and credit score.
  • Renegotiate your credit cards’ APRs.


  • Make a plan to use your credit card points!
  • Call to ask what other perks your credit card offers that you haven’t taken advantage of.
  • Confirm you’re not paying any unnecessary fees. If you are, try to negotiate them down.


  • Negotiate a raise.
  • Make money on the side


  • Review your insurance needs, including renters insurance and life insurance.
  • If you have dependents, create a will.

Related Notes

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