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

by Ramit Sethi

Follow my CEO Method: Cut costs, Earn more, and Optimize your existing spending.

In relationships and work, we want to be better than average. In investing, average is great.

buy-and-hold investing wins over the long term, every time.

Before you go further, I encourage you to think about your Rich Life. Why do you want to be rich? What do you want to do with your wealth? Get really specific. If your Rich Life is “I want to take a taxi instead of a bus,” write it down! I realized I live in New York but I hadn’t been taking advantage of all the cultural events here, so I decided that once every quarter, I’d go to a museum or Broadway show.

1. A Rich Life means you can spend extravagantly on the things you love as long as you cut costs mercilessly on the things you don’t. 2. Focus on the Big Wins—the five to ten things that get you disproportionate results, including automating your savings and investing, finding a job you love, and negotiating your salary. Get the Big Wins right and you can order as many lattes as you want. 3. Investing should be very boring—and very profitable—over the long term. I get more excited eating tacos than checking my investment returns. 4. There’s a limit to how much you can cut, but no limit to how much you can earn. I have readers who earn $50,000/year and ones who earn $750,000/year. They both buy the same loaves of bread. Controlling spending is important, but your earnings become super-linear. 5. Your friends and family will have lots of “tips” once you begin your financial journey. Listen politely, then stick to the program. 6. Build a collection of “spending frameworks” to use when deciding on buying something. Most people default to restrictive rules (“I need to cut back on eating out . . .”), but you can flip it and decide what you’ll always spend on, like my book-buying rule: If you’re thinking about buying a book, just buy it. Don’t waste even five seconds debating it. Applying even one new idea from a book is worth it. (Like this one.) 7. Beware of the endless search for “advanced” tips. So many people seek out high-level answers to avoid the real, hard work of improv...

First, decide what you want to get rewarded with—cash back or travel. I recommend cash back

use a site like bankrate.com to sort through your options.

Most of the best rewards cards have fees. Are they worth it? You should run the numbers to decide, which takes less than 5 minutes. Here’s a quick rule of thumb: If you spend thousands per month on your credit card, the rewards are usually worth it. But if you spend more modestly or you’re not sure whether you want to pay a fee, spend a few minutes doing a quick analysis by searching for “credit card rewards calculator.” Plug in your numbers and you’ll quickly see

If you’re booking travel or eating out, use a travel card to maximize rewards. For everything else, use a cash back card. The card I use for travel and eating out is the Chase Sapphire Reserve. For everything else, I use an Alliant cash back card. And for business, I use a Capital One cash back business card. For extra benefits, I have an Amex Platinum card.

Try to get fees on your cards waived. This can be a great way to optimize your credit cards, because your credit card companies will do all the work for you. Call them using the phone number on the back of the card and ask if you’re paying any fees, including annual fees or service charges. It should go a little something like this: You: Hi, I’d like to confirm that I’m not paying any fees on my credit card. Credit card rep: Well, it looks like you have an annual fee of $100. That’s actually one of our better rates. You: I’d rather pay no fees. Can you waive this year’s annual fee? Earlier I mentioned that it can be worth paying annual fees for rewards cards. This is true—but why not ask?

So, call your credit card company and ask them to lower your APR. If they ask why, tell them you’ve been paying your bill in full on time for the last few months, and you know there are a number of credit cards offering better rates than you’re currently getting.

Think balance: For most people, having two or three credit cards is perfect.

Get more credit. (Warning! Do this only if you have no debt.)

You: Hi, I’d like to request a credit increase. I currently have five thousand dollars available, and I’d like ten thousand. Credit card rep: Why are you requesting a credit increase? You: I’ve been paying my bill in full for the last eighteen months and I have some upcoming purchases. I’d like a credit limit of ten thousand dollars. Can you approve my request? Rep: Sure. I’ve put in a request for this increase. It should be activated in about seven days. I request a credit-limit increase every six to twelve months.

“Hi there. I checked my credit and noticed that I have a 750 credit score, which is pretty good. I’ve been a customer of yours for the last four years, so I’m wondering what special promotions and offers you have for me . . . I’m thinking of fee waivers and special offers that you use for customer retention.”

Create a spreadsheet that looks like this: The Pocket Tracker for Tracking Credit Card Calls Call Date Time Name of Rep Rep’s ID# Comments Whenever you make a call regarding a dispute on your bill, you wouldn’t believe how powerful it is to refer back to the last time you called—citing the rep’s name, the date of the conversation, and your call notes. Most credit card reps you talk to will simply give in because they know you came to play in the big leagues.

Many people don’t know that credit cards offer excellent consumer protection. This is one reason I encourage everyone to make major purchases on their credit card (and not use cash or a debit card). I called my credit card company and told them I wanted to dispute a charge. They said, “Sure, what’s your address and what’s the amount?” When I told them about my experience with the cell phone company, they instantly gave me a temporary credit for the amount and told me to mail in a form with my complaint, which I did. Two weeks later, the complaint was resolved in my favor.

simple spreadsheet like this one. How Much Do You Owe? Name of credit card Total amount of debt APR Minimum monthly payment Congratulations! The first step is the hardest. Now you have a definitive list of exactly how much you owe.

week ONE 1 Get your credit score and credit report (one hour). Check them to make sure there are no errors and to get familiar with your credit. You can access your report and score at myfico.com. (As I mentioned, lots of people use Credit Karma to get a free credit score, but I prefer the official credit score from MyFico, which is more accurate even though it has a small fee.) In addition to your credit score, get your free credit report from annualcreditreport.com. 2 Set up your credit card (two hours). If you already have one, call and make sure it’s a no-fee card. If you want to get a new credit card, check out bankrate.com to find the best one for you. 3 Make sure you’re handling your credit cards effectively (three hours). Set up automatic payments so your credit card bill is paid off in full every month. (If you’re in debt, set up an automatic payment for the largest amount you can afford.) Get your fees waived. Apply for more credit, if you’re debt-free. Make sure you’re getting the most out of your cards. 4 If you have debt, start paying it off (one week to plan, then start paying more). Not tomorrow, not next week, today: Give yourself one week to figure out how much you owe, call the lender to negotiate down the APR or restructure your payments (in the case of student loans), and set up your automatic payment with more money than you’re paying now. Getting out of debt quickly will be the best financial decision you ever make.

The 30-Second Test I have a theory that the first thirty seconds in a restaurant tell you everything you need to know.

The real lesson is: When companies—and people—show you who they truly are, believe them.

Think of savings accounts as places for short-term (one month) to mid-term savings (five years). You want to use your savings account to save up for things like vacations and holiday gifts, or even longer-term items, like a wedding or the down payment on a house.

You: Hi. I noticed that my current checking account has fees. I’d like my account to have no annual fees, free checking, and no minimum balance, please. Bank rep: I’m really sorry, but we don’t offer that kind of account anymore. You: Really? That’s interesting, because [competitor] is offering me that exact deal right now. Could you check again and tell me which comparable accounts you offer? (Eighty percent of the time, you’ll get a great account at this point. If not, ask for a supervisor.) Supervisor: Hi, how can I help you? You: (Repeat argument from the beginning. If the supervisor doesn’t give you an option, add this:) Look, I’ve been a customer for X years, and I want to find a way to make this work. Plus, I know that your customer-acquisition cost runs hundreds of dollars. What can you do to help me stay a customer? Supervisor: What an astounding coincidence. My computer is suddenly allowing me to offer the exact account you asked for! You: Why, thank you, kind sir. (Sip Darjeeling tea.)

Ramit: Hi. I just saw this bank charge for overdrafting, and I’d like to have it waived. Bank rep: I see that fee . . . hmm . . . Let me just see here. Unfortunately, sir, we’re not able to waive that fee. It was [some BS excuse about how it’s not waivable]. Bad things to say here: “Are you sure?” Don’t make it easy for the rep to say no to your request. “Is there anything else I can do?” Again, imagine if you were a customer service rep and someone said this. It would make your life easier to just say no. As a customer, don’t make it easy for companies to say no. “Well, this Indian author told me I could. Have you read his book? It’s called I Will Teach You to Be Rich, and I love it because . . .” Nobody cares. But it would be cool if a thousand customers called their banks and said this. “Okay.” Don’t give up here. It’s easy to walk away, but there’s a better way. Try this instead: Ramit: Well, I see the fee here, and I’d really like to get it waived. What else can you do to help me? (Repeat your complaint and ask them how to constructively fix it.) At this point, about 85 percent of people will get their fees refunded. I have hundreds of comments from people on my blog who have taken this advice and saved thousands of dollars in fees. But in case the rep is obstinate, here’s what you can do. Bank rep: I’m sorry, sir, we can’t refund that fee. Ramit: I understand it’s difficult, but take a look at my history. I’ve been a customer for more than three years, and I’d like t...

week two 1 Open a checking account or assess the one you already have (one hour). Find an account that works for you, call the bank (or go in), and open the account. If you’ve already got one, make absolutely sure it is a no-fee, no-minimum account. How? Open up your last bank statement or, if you don’t have that, call your bank and say, “I’d like to confirm that my bank account has no fees and no minimums whatsoever. Can you confirm that?” If you discover you’ve been paying fees, use the negotiating tactic to get your account switched to a no-fee, no-minimum account. Be aggressive in threatening to leave if they don’t switch you. 2 Open an online high-interest savings account (three hours). You’ll earn higher interest, and it’s psychologically powerful to have your savings account separate from your checking: You’ll be much less likely to dip into your savings if it's not immediately reachable through your normal banking. Spend a couple of hours looking over the banks I recommended. To see a more comprehensive list, compare banks at bankrate.com or check my website to see what my blog readers think of different bank accounts. 2a Optional: Open an online checking account (two hours). This isn’t absolutely necessary, but if you’re ready to be more advanced about your checking and earn a higher interest rate, go ahead and open up an online checking account. Remember, the main benefits of an online checking account are a high interest rate and fewer tricky fees. If you don’t ...

“Compounding,” Albert Einstein said, “is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.”

The Ladder of Personal Finance These are the six systematic steps you should take to invest. Each step builds on the previous one, so when you finish the first, go on to the second. If you can’t get to number 6, don’t worry—do your best for now. In Chapter 5, I’ll show you how to make this automatic so your system can run itself with just a few hours of work per year—but remember, opening these accounts and getting started is the most important step. Rung 1: If your employer offers a 401(k) match, invest to take full advantage of it and contribute just enough to get 100 percent of the match. A “401(k) match” means that for every dollar you contribute to your 401(k), your company will “match” your contribution up to a certain amount. For example, for easy math, let’s assume you make $100,000 and that your employer will 100 percent match your contribution up to 5 percent of your salary. This means that you’ll contribute $5,000 and your company will match it with $5,000. This is free money, and there is, quite simply, no better deal. Rung 2: Pay off your credit card and any other debt. The average credit card APR is 14 percent, and many APRs are higher. Whatever your card company charges, paying off your debt will give you a significant instant return. For the best ways to do this, see Five Steps to Getting Rid of Credit Card Debt in Chapter 1. Rung 3: Open up a Roth IRA (see The Beauty of Roth IRAs) and contribute as much money as possible to it. (As long as your income is $...

if you move to another company, don’t worry. You can take it with you. Here’s how: 1. Move it to an IRA. This option is preferred. It lets you “roll over” your 401(k) money into an IRA,

Call your discount brokerage, such as Vanguard, Fidelity, or Schwab (you’ll be signed up with one of these by the end of the chapter), and ask for their help with a 401(k) rollover, including converting to a Roth IRA. It should take about ten minutes,

If your employer offers a 401(k) but doesn’t offer a match, open up the 401(k) anyway (assuming there are no monthly fees), but don’t contribute any money for now.

(If you’re wondering why student loan debt is okay to have while you move on to investing, here’s why: Student loan debt tends to have lower interest rates than credit card debt. It also tends to be large. That means you can set up a payment schedule, but also invest at the same time.) If you do have non–student loan debt, it’s time to pay it off.

it’s time to climb to Rung 3 and start funding a Roth IRA.

Roth IRA uses after-tax dollars to give you an even better deal. With a Roth, you invest already-taxed income and you don’t pay any tax when you withdraw it.

To start a Roth IRA, you’re first going to open an investment brokerage account with a trusted investment company (see the table on the next page).

ask them this simple question: “Do I have a high-deductible health plan?” If they say no, I give you permission to curse me out for forcing you to make such a call. (Before you hang up, though, ask them if you’re eligible for a high-deductible plan. You may want to consider it, especially if you’re young and generally healthy.) On the other hand, if they say yes, you do have a high-deductible plan, ask them if you can pair an HSA with your account.

account. I use an account called Navia Benefits,

action steps week three 1 Open your 401(k) (three hours). Get the paperwork from your HR manager and fill it out. Check to see if your employer offers a match. If it does, contribute enough to get the full match. If not, leave your 401(k) account open but contribute nothing. 2 Come up with a plan to pay off your debt (three hours). Get serious about getting out of debt. Revisit Five Steps to Getting Rid of Credit Card Debt in Chapter 1 and see Student Loans—Pay Them Down or Invest? in Chapter 9 for ideas on how to pay off your credit card debt and student loans. Run a calculation from bankrate.com to see how much you could save by paying an extra $100 or $200 per month. 3 Open a Roth IRA and set up automatic payments (one hour). Send as much as you can, but even $50/month is fine. We’ll dive into the details a little later. 4 Find out if you’re eligible for an HSA and, if you are, open your account (three hours).

the 2010 study by Deaton and Kahneman found that “emotional well-being” peaks at $75,000.

But if you take another measure, “life satisfaction,” you find no plateau—not at $75,000, or $500,000, or even $1 million.

But is “life satisfaction” tied to money?

Imagine a pie chart that represents the money you earn every year. If you could wave a magic wand and divide that pie into the things you need and want to spend your money on, what would it look like?

Here’s the idea: A Conscious Spending Plan involves four major buckets where your money will go: fixed costs, investments, savings, and guilt-free spending money.

Categories of Spending Fixed costs Rent, utilities, debt, etc. 50–60% of take-home pay Investments 401(k), Roth IRA, etc. 10% Savings goals Vacations, gifts, house down payment, emergency fund, etc. 5–10% Guilt-free spending money Dining out, drinking, movies, clothes, shoes, etc. 20–35%

Fixed costs are the amounts you must pay, like your rent/mortgage, utilities, cell phone, and student loans. A good rule of thumb is that fixed costs should be 50 to 60 percent of your take-home pay.

Monthly Expense Monthly Cost Rent/mortgage Utilities Medical insurance and bills Car payment Public transportation Debt payments Groceries Clothes Internet/cable

Let’s just say the average house in your neighborhood costs $300,000 and you want to do a traditional 20 percent down payment. That’s $60,000, so if you want to buy a house in five years, you should be saving $1,000/month.

Regardless of exactly what you’re saving for, a good rule of thumb is to save 5 to 10 percent of your take-home pay to meet your goals.

To run an 80/20 analysis yourself, do a Google search for “conducting a Pareto analysis.”

Monthly fixed costs (60 percent): $2,400 ■ Long-term investments (10 percent): $400/month ■ Savings goals (10 percent): $400/month ■ Guilt-free spending money (20 percent): $800/month

I’d pick the two Big Wins—two items that I spend a lot on but know I could cut down with some effort—and focus my efforts on them.

The Envelope System 1. Decide how much you want to spend in major categories each month. (Not sure? Start with one: Eating out.) 2. Put money in each envelope (category). 3. You can transfer from one envelope to another . . . . . . but when the envelopes are empty, that’s it for the month.