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3 money tips I took from “I’ll Teach You How to Be Rich”

  • I want to read every book on my shelf this year, and I started with “I’ll teach you how to be rich.”
  • Some of the advice seemed generic, but I picked out three great strategies that I plan to do myself in 2022.
  • I will automate my finances, invest in index funds and break up with my bank.
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One of my personal goals for 2022 is to read every book in my library. Over 50% of the books in my collection are paperbacks from used bookstores or books from friends that I have never read. I figured I’d give each book some attention, then decide which ones to keep and which ones to donate to my local library.

I decided to put this goal into motion on the first day of the year. I closed my eyes and grabbed a book from the shelf. I have chosen “I will teach you how to be rich,” by Ramit Sethi. My husband gave it to me, but I never really read it.

While the title made me think the advice inside this book was going to be risque and unconventional, I found it to be quite the opposite. Many of the tips inside seem perfect for a beginner learning the basics of key financial fundamentals, like understanding your credit score or the differences between a checking account and a savings account.

I found myself taking notes and takeaways that streamlined some financial next steps I need to take ASAP. There were three big takeaways I got after reading “I’ll Teach You How to Be Rich”.

1. Create an automatic cash flow

I’ve invested a lot of time in organizing my finances and creating a workable budget, but I haven’t automated a monthly financial game plan. Currently, I do everything manually, including transferring money between different accounts, depositing cash into my retirement fund, and paying my credit card bills. This means that I spend at least an hour a week managing my finances, when I don’t really need it.

Sethi establishes an automated money flow that can be set up to have your paycheck automatically split and directly deposited into multiple accounts.

Its structure works like this: you can set up your paycheck with your employer so that a certain percentage is automatically deposited into your 401(k) each month, and the rest can go into your checking account. From your checking account, money can be automated to go to your savings account, any additional retirement accounts like a Roth IRA, and then to pay credit cards and any additional bills.

Although my structure is a little different depending on my goals, creating an automated flow makes managing my finances standardized and easier.

2. Go for index funds, not individual stocks

A few years ago when I started investing in the stock market, I didn’t really have a plan other than buying stocks of companies I supported or believed in. This left me with a lot of individual stocks and no strategy for what to do with them or how to know when to sell them.

I’ve known for a while that this plan is flawed. When I read the book, I was able to better understand the power of index funds on individual stocks.

Sethi explains that index funds are collections of stocks that computers manage to match the market index. Choosing index funds over individual stocks allows me to be more self-sufficient, instead of monitoring over 30 companies in which I own stocks and investing in collections of hundreds and thousands of stocks and bonds .

3. Break up with your bank

There’s a line in the book about people sometimes not switching banks because they’ve been customers there for a while, or in my case, forever. This loyalty does not engender rewards and, in fact, can hold you back financially.

I still have checking accounts and savings accounts at the very first bank I opened accounts with. Although I transferred 85% of the money from these accounts to another bank with lower fees and a higher interest rate, I cannot bring myself to move the rest of this money and close the accounts. for all time.

This means I am wasting time making more money because my money is sitting in a bank account with 0.01% interest versus 0.5% interest in my new bank.

I also incur frequent monthly charges on my business account with this bank because my balance is below the minimum required for this type of account. If I moved my business account elsewhere, I could find a bank that wouldn’t impose the same penalties.

At the top of my to-do list for 2022, I need to break away from the original bank I’ve used for most of my life and connect with a bank that handles my money more.