I’ve been in touch with Ramit Sethi since not long after he began writing on his blog, I Will Teach You to Be Rich, almost five years ago. It is no surprise to me that Ramit, after enhancing his writing with years of practice on his rapidly-growing website, has published I Will Teach You to Be Rich, which is right now the number one book on Amazon.com under personal finance and number three on Amazon.com overall. This is not simply a republication of the blog like some books presented by other bloggers-turned-authors. I would consider the book, released yesterday, to be one of the best books about money management for twenty-somethings. I’ll explain why in this review.
I’m not praising this book because I’ve known Ramit (through the internet) for several years. In fact, when I first discovered his blog, I was skeptical of the kid right out of college promising to teach people how to be rich. He wasn’t rich as far as I could tell; how can someone with no real experience make such a claim? I found out quickly that Ramit is a great teacher who can connect with his audience, and in all honesty, personal finance isn’t difficult conceptually. The biggest problem is cutting through the noise and misinformation, and Ramit’s background with psychology provides some insight on the barriers between conceptual knowledge and behavior.
Ramit’s book and his blog are not for everyone. The author’s style can be harsh; yet, on a scale of one to Suze Orman in abrasiveness he would only score a seven. He manages to mix insults with jokes, judging ever so slightly the stupid mistakes not of his readers, but of his readers’ friends. The book is built upon a framework of a six-week program — what self-help book would be complete without a reducible metaphor — designed to take a personal finance newcomer from freshman status to savvy long-term investor. Ramit claims readers will succeed even if pursuing only 85% of what is written in the book.
I Will Teach You to Be Rich contains actionable suggestions in the book, and 85% of the tips within would keep a money management novice busy. Many of these tips are refreshing. It is clear that Ramit is not a fan of obsessive frugality, a view that I share. Ramit also claims to be unsatisfied with the concept of budgeting, but offers a “Conscious Spending Plan:” essentially a budget with more syllables and a trademarkable name, recommends the envelope system of managing expenses, and offers two models for dividing income into buckets for planning expenses.
The elements of the six-week program illustrate the most important concepts in Ramit’s plan to helping readers work to attain the status of “rich:”
- Optimizing credit cards: using credit cards as a tool for expense maintenance, protection, and building credit
- Optimizing savings: finding high-interest savings accounts with no fees while not wasting time chasing rates
- Opening investment accounts: taking advantage of tax-advantaged retirement accounts with brokers friendly to new investors
- Managing expenses: using the aforementioned Conscious Spending Plan to decide where your money should be going
- Automating the system: removing human intervention from the financial machine to allow more of your money to work for you
- Investing to earn more: foregoing products designed to make money for the financial industry rather than for you
Many books we are accustomed to seeing in this genre are written by financial advisers, professional money managers, or those formerly or currently closely tied to that industry. Thankfully, Ramit breaks away from their traditional advice by advocating low-cost index funds and target retirement funds, stressing the lack of necessity of a professional financial planner for most individuals. Thankfully, Ramit shares the data to support his claims. Yes, it’s true that Ramit missed a calculation, but you’ll find that the concept of the benefit of compound interest is still sound.
Actionable tips are scattered throughout the book. In one section, Ramit includes a script for convincing a credit card customer service representative to drop a late fee. In another, he presents a detailed account of how he made twenty car dealerships compete for his business. In yet another, Ramit offered concrete advice for negotiating a pay raise with management. Many of the chapters include short essays provided by other bloggers, such as Nickel from Five Cent Nickel, JLP from All Financial Matters, J.D. from Get Rich Slowly, Jim from Bargaineering, Gina formerly from Lifehacker, Trent from The Simple Dollar, and myself.
While most readers of Consumerism Commentary may find the advice within the book to be simplistic and basic, I Will Teach You to Be Rich should be at the top of the list for most recent or soon-to-be college graduates. Ramit Sethi’s style of writing isn’t for everyone, but it doesn’t take long to get past the attitude. This book is a worthy competitor among other recent money management books for the age group like Suze Orman’s The Money Book for the Young, Fabulous and Broke, and Ramit’s immediate connection with the target audience makes his book more likely than others to be read, enjoyed, and followed.
I spoke with Ramit several days ago to record a conversation in which we answered several questions from Consumerism Commentary readers, sharing our thoughts and picking fights over our disagreements. I haven’t decided whether to publish the recording on Consumerism Commentary, but Ramit insists that I offer the MP3 of us answering your questions to anyone who buys the book from Amazon.com and forwards the receipt to me at [email protected] within the next 48 hours. You’ll receive an hour-long recording (if Ramit edits it down from about 90 minutes, but it’s all good stuff) of the two of us answering questions about the best accounts, saving, investing, and automating your money. It was a fun conversation, although as I’ve admitted to other people, Ramit outclassed me at every turn.
Updated December 22, 2011 and originally published March 24, 2009.