‘Rich’ can mean different things to different people. Having said that, if you have a desire to be rich, Ramit Sethi’s acclaimed book ‘I will teach you to be rich’ describes 5 simple steps to becoming rich. Today we’ll look at his book for the best answer.
Money is essential to our survival in this capitalist society. You will find a wide range of standards depending on the amount of money you spend with thousands of business organizations. With a conscious attitude towards your investments and expenditures, you can achieve tremendous financial success. No matter where you live or what your profession is, there is always someone to help. This article will teach you how to become rich in 5 steps in an organized manner.
Table of Contents
5 Essential steps to become rich:
The author suggested these five essential steps to follow to become rich. They are-
- What does ‘Rich’ mean to you?
- Beware the Minutia.
- Swap your attention from micro to macro.
- Set up your automatic money system.
- The pyramid of Investing options.
Also Read: Your Money or Your Life: Book Summary
What does ‘Rich’ mean to you?
Ramit Sethi has put the psychological aspect in response to what does ‘Rich’ mean? Everybody desires to be rich but nobody will talk to you about what actually ‘rich’ means. When you read the book I’ll teach you to be rich you will learn to spend consciously. For example, you love to spend more on your sports activity, so you can spend more money there because it will give you mental peace. But If you drive by an influencer and brought a big car that you can not maintain, that will cause psychological pain. The subtleness will disappear from your mind and you will be stuck in a mental cage. And I bet, you are earning the money for your need not to buy another headache to maintain.
“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t.”― Ramit Sethi, I Will Teach You To Be Rich.
Beware the Minutia:
The proverb goes ‘money begets money’. It is a simple idea that we learn from our school but alas! We won’t use the strategy in our practical life. When we realize it is not wise enough to save money but a simple investment will turn into something. And the integration of all investments will turn into the biggest capita one day. And that is why Ramit Sethi urges you to invest your money from today, and it is never too late.
We know from Benjamin franklin Don’t put off until tomorrow what you can do today So the late investment will only cost you but taking a baby step by searching which bank offer the most profit on google and invest your money. Suppose You are planting trees in your unused land but after a while, you can earn a lot when you sell those trees. So it clearly defines the utilization of the capital you have. The best utilization of your capital is to invest. Here I want to put a quote from the book I am reviewing-
“The single most important factor to getting rich is getting started, not being the smartest person in the room.”― Ramit Sethi, I Will Teach You To Be Rich.
Also Read: The Psychology of Money: Book Summary
Swap your attention from micro to macro:
In these 5 steps to become rich, the second step is to emphasize more on macro rather than micro when it comes to investment or expenditure. Here are the twelve big wins described by the author.
- Automating your money system (we’ll learn about it from the next point).
- Keeping a great credit score.
- Using the credit cards (the transaction records will be beneficial for having rewards).
- To get a full employer match.
- Paying up your credit card debt.
- Cancel your subscription when you are not using it!
- Focus on the area where you spend extra.
- Negotiating a race.
- Doing freelance work.
- Affordable House.
- Affordable car.
- Allocating your capital right.
So for the young people out there if they build a habit based on this, they will be the flag bearer of success. The author says, “young is about developing the right habits.” ― Ramit Sethi, I Will Teach You To Be Rich.
Set up your automatic money System:
We are humans, we know exactly what is the best possible solution for us but sometimes we go with our emotional momentum. We follow our instinct and do the things which should not be done. Thus, we should create a system which will save us from doing these types of activities. To create the system you will need the following things-
- Checking account.
- Savings account.
- A credit card.
- A retirement savings account.
- An Investment Account.
You need to customize your account based on the activity you intend to do with the particular account. For example, you have to open a high-interest rate account when you go for the saving account. The duration is also an important aspect of creating an account.
Next, The Author urges us to make a conscious spending plan. So the plan has to have-
- Fixed costs
- Investment
- Savings
- Guilt-free spending
And make a pie diagram to framework the overall spending. This system will help to build conscious financial attributes.
Also Read: 7 Steps to Build a Financial Future
The Pyramid of Investing:
The savings and investment section will be the backbone of the financial automated system. Therefore, to improve the investment section author urges to follow the pyramid model. The main components of the pyramid model are:
- Pick your own stocks and bonds.
- Select your own index funds and mutual funds.
- Invest in target date funds.
If we want to build a pyramid on the above data, the author told us to pick our own bonds and stocks on the bottom and investing in target-date funds on the top. Besides, number 2 and number 3 are the simplest forms of investment and the author thinks that 99 percent of people belong here. As you need time to inaugurate your bond and compete with others the author thinks that it is safe to invest in target-date funds.
If I want to recap my whole blog, Ramit Sethi said in his book I’ll teach you to be rich
To become rich, 5 steps to follow are, a person should figure out what rich means to him, and try to become a conscious spender. He should balance between the spending and investment through the automated financial system and invest in target-date funds.
I hope this book review cum summary was helpful. If you want to read the book click here. If you want to read summaries like this then click here.
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