I Will Teach You to be Rich, by Ramit Sethi

I have read a lot of books about personal finance over the past few years.  It’s a topic I felt I needed to learn more about, but I did this before the recent economic downturn. Last year I reviewed Ali Velshi’s book, Gimme My Money Back, which was written to address the causes of our financial collapse and as a basic primer for personal financial management.  I Will Teach You to be Rich also covers the basics, but it is written for twenty- to thirty-somethings. It focuses on streamlining your finances using online tools, and maximizing your returns by choosing the best online banks, credit cards and low-cost investment vehicles.  At the end of each chapter, the author lays out action steps that should take six weeks to follow. I think these are especially beneficial for young adults.  Having a manageable plan makes it more likely that you can accomplish your goals.  The last chapter focuses on major milestones like weddings, purchasing a home or car, and repaying student loans.  I was surprised by some of the things that Sethi reveals, such as that the average wedding costs $28,000 or that buying a home rather than renting may not be the best choice.

I particularly like Sethi’s writing style.  It’s no-nonsense and easy to understand.  He uses examples of his own money strategies, as well as his friends’ choices, to illustrate money-management principles.  I also like his fresh perspective.  There are many books that talk about budgeting, which Sethi says doesn’t work.  He suggests keeping necessary expenses at about 50%, investing 10% of your income, saving about 10% of your income, and the rest is fun money.  Most budgets suggest only allocating 10% to “fun,” but Sethi is recommending up to 30%.  He practices the “set it and forget it” approach; automatically invest and save your money, have bills paid automatically, and enjoy the rest.  It’s a more hands-off approach to money management, but also more practical for a younger generation.

Overall, I think this is one of the best personal finance books for the novice that I’ve read.  The only quibble I have is with the name, which is slightly misleading. This is not a “get rich quick” plan or scheme.  This book provides solid advice for properly managing your money.

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