I Will Teach You to Be Rich: No Guilt. No Excuses. No B.S. Just a 6-Week Program That Works.

by Ramit Sethi

Why are your credit report and credit score important? Because a good credit score can save you hundreds of thousands of dollars in interest charges. How? Well, if you have good credit, it makes you less risky to lenders, meaning they can offer you a better interest rate on loans. Maybe you don’t need a loan today, but in three or four years, you might need to start thinking about a car or a house. So please don’t scoff at or dismiss what you just read.

Again, conscious spending is not about simply cutting your spending on various things. It’s about making your own decisions about what’s important enough to spend a lot on and what’s not, rather than blindly spending on everything.

Money should be about all the good things it can do, not the bad. To do that, you can’t agonize over thousands of micro-decisions per month—you have to focus on the bigger picture.

Age and risk tolerance matter. If you’re twenty-five years old and have dozens of years to grow your money, a portfolio made up of mostly stock-based funds probably makes sense. But if you’re older, retirement is coming up within a few decades and you’ll want to tamp down your risk. Even if the market tanks, you have control over your asset allocation. If you’re older—especially if you’re in your sixties or older, for god’s sake—a sizable portion of your portfolio should be in stable bonds.

These allocations are just general rules of thumb. Some people prefer to have 100 percent in stocks until they’re in their thirties or forties. Others are more conservative and want some money in bonds. But the big takeaway here is that if we’re in our twenties and thirties, we can afford to be aggressive about investing in stocks and stock funds—even if they drop temporarily—because time is on our side.