- "I Will Teach You to Be Rich" helped me get out of debt, fix my credit, and save money.
- I learned to stop making excuses, to automate my finances, and to prioritize debt first.
- I also learned the impact of fees over time, and that being a boring investor is a good thing.
Just over a year ago, I was in a tremendous amount of debt, and my credit score was in the low 400s. I couldn't get approved for any type of loan, and when retail stores would ask me if I wanted to apply for their store credit card, my running joke was, "If you ran my credit, it'd break your machine."
Finally, after an entire life of being financially irresponsible, I decided I wanted to turn it around. I read dozens of books, but "I Will Teach You to be Rich" by Ramit Sethi, is the one that changed my life.
Prior to reading this book, I figured all hope was lost for my financial future. I figured I'd just be one of those people who never had good credit, a savings account, a retirement account, or any type of investments. Not only did I not have any money in savings, but I had five or six bills in collections and owed about $8,000 in taxes.
Thankfully, Ramit's book gave me the kick in the butt and motivation I needed to get out of this situation. The book provided me with an incredible amount of value, but these are the five lessons that stuck with me the most and got me on the right track.
1. Take responsibility
For my entire life, I was filled with excuses for why my financial situation was a hot mess. I blamed my parents for not being good with money and used that as a crutch to never educate myself. I also justified not paying bills because these companies didn't need my money.
Ramit's book hit me with some much-needed tough love and made me realize I was only hurting myself. I wasn't doing any sort of world-changing activism by "sticking it to the man." Basically, I needed to grow up and be a responsible adult.
2. Prioritize debt before all else
I wanted to skip a lot of steps and just dive straight into saving and investing, but the book explained to me how debt was actually costing me money. My debt was the reason for my low credit score, which meant I was paying higher deposits, higher down payments and higher interest rates. Not only that, but even trying to rent an apartment with my girlfriend or turn on utilities was a pain.
I had no clue you could settle debts for less than the total amount before reading this book. It taught me negotiation tactics with creditors by explaining how financial institutions and collections agencies make their money. Some of my collections were years old, so they were happy to take whatever I offered.
Additionally, the book taught me the importance of getting pay-for-delete letters to ensure the collections were removed from my credit report, which I ended up needing for one of the debts I paid off.
3. Automate your system
I'm a psychology nerd, so this made sense to me. Humans aren't that great at willpower and self-discipline by design, which is why automation is so helpful. Ramit taught me how to set up my accounts and automate my system to never miss payments, save responsibly, and invest.
For example, my checking account is through my stock brokerage site, and I'm paid via direct deposit twice a month. I also have a separate high-yield savings account through a different bank (something else I learned from the book), and my credit card is through that bank as well. About two or three days after paydays, a portion of my money pays off my credit card balance, some goes to my savings account, and some buys stocks.
Above all else, this is probably the most important lesson, and I always help friends set up a similar system.
4. Fees and interest rates matter
Like so many people, I think about monthly payments rather than the overall cost. This book explained to me why that's the wrong thing to do. Interest adds up, and it's how banks and other creditors make their money.
To put it in perspective, a 72-month $20,000 car loan at 10% interest will cost you an additional $6,677.21 in interest. Improving your credit score or haggling the interest rate down to 6%, and interest is only $3,864. That's almost $3,000 saved!
Now, I'm obsessed with interest calculators, and it's the main thing I look at when taking out loans or getting a new credit card.
5. Be a boring investor
Finally, when it comes to investing, Ramit taught me that the best thing you can do is be a boring investor. He really drilled this into my head, and I'm grateful. I started investing during the bull market of 2021 when everyone was trying to find the next big stock or crypto.
Ramit convinced me to invest in low-risk index funds, and if I really wanted to gamble, only do it with a small percentage of my portfolio. With the ongoing inflation issues and a potential recession, he probably saved me thousands of dollars.
Until about a month ago, I didn't realize how much this book helped me until I gave the book another read. Today, I have no outstanding collections, I don't owe the IRS anything and actually got a refund, and I have money in savings. As a result, in just over a year, my credit score is now over 660. I have great interest rates on my credit cards, and I even haggled an amazing deal when refinancing my car.
The lessons from "I Will Teach You to be Rich" by Ramit Sethi changed my life, and I can't recommend it enough. Not only do I teach the strategies to my friends, but I'm also able to help my son avoid the financial mistakes that I made in the past.