🌼Ramit Sethi’s 3 ‘I Will Teach You to be Rich’ Rules
Put these into practice and you’re on your way to wealth.
Ramit’s 2009 book is still popular over a decade later.
And for good reason.
He provided a basic education in personal finance paired with easy to remember rules.
Learn MoreThese are the big 3 you’ll want to remember.
Understand compounding
Most of us are familiar with the positive, investment version of compounding.
But in more cases than not, compounding is working against you.
As in, everything costs more than you think.
Because not only are you spending it, you’re also not able to invest it.
And if you’re paying interest, you’re really spending more a good bit more than you think.
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Here’s some quick math:
You’re buying your first home for 400k. You only put 25k (6%) down because most people don’t have 80k in cash (20%).
If the interest rate on your mortgage is 6.5 percent, you’ll pay a total of $478,293.60 in interest over those 30 years.
By the time the loan is paid off that 400k home will have cost you 853k.
On the other hand if you’d taken 25k and added 2,300 (roughly your mortgage payment) to your stock account at 7% per year…you’d have 2.8 million after 30 years.
Quite the swing.
Buy less house. Invest in more assets. Get compounding working for you.
Automate savings and investing
Cut the thought process out.
Because your monkey brain will convince you it’s more fun to spend than save.
It’ll make you think you have extra money to spend.
Your monkey brain needs to become a money brain.
One of the first things I did when I started my 9–5 was automate my 401k deposit. The I set my direct deposit up to put a certain amount into my checking (what I knew I needed for bills) and deposit the rest into a savings account.
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Spend/Cut method
Spend lavishly on what you love.
Cut ruthlessly on things that don’t serve you.
For us, we’ll spend on food and vacations. We enjoy both experiences.
Pretty much everywhere else I’m cutting. I don’t clothes shop often. I shop around for car insurance, internet packages and subscription services at least twice per year, every year.
You can have the things you want. You just can’t have all the things you want.
Contributed by Travis Essinger
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