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by
Ramit Sethi
The single most important thing you can do to be rich is to start early.
In relationships and work, we want to be better than average. In investing, average is great.
personal finance is a confusing mess of overblown hype, myths, outright deception—and us, feeling guilty about not doing enough or not doing it right.
Sometimes the most advanced thing you can do is the basics, consistently.
The key to using credit cards effectively is to pay off your credit card in full every month.
If you learn only one thing from this book, it should be to turn your attention from the micro to the macro.
“Compounding,” Albert Einstein said, “is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.”
The great irony is that this person believes “control” will help their investment returns, when in reality, they’d actually get better returns by doing less.
One thing I’ve learned in the self-development business: We all have lots of reasons why we aren’t doing something we “should,” like investing, flossing, or starting a business. No time, no money, not sure where to start, etc. Sometimes the truth is simpler: We just don’t want to.
Investing Is the Single Most Effective Way to Get Rich By opening an investment account, you give yourself access to the biggest money-making vehicle in the history of the world: the stock market.
The Millionaire Next Door discovered, 50 percent of the more than 1,000 millionaires surveyed have never paid more than $400 for a suit, $140 for a pair of shoes, or $235 for a wristwatch.
“People who spent money to buy themselves time, such as by outsourcing disliked tasks, reported greater overall life satisfaction.”
“Show me someone’s calendar and their spending, and I’ll show you their priorities.”
The only long-term solution is to invest regularly, putting as much money as possible into low-cost, diversified funds, even in an economic downturn. This is why long-term investors have a phrase they use: Focus on time in the market, not timing the market.
The vast majority of you do not need a wealth manager or even a financial adviser.
mutual funds use something called “active management.” This means a portfolio manager actively tries to pick the best stocks and give you the best return. Sounds good, right? But even with all the fancy analysts and technology they employ, portfolio managers still make fundamentally human mistakes, like selling too quickly, trading too much, and making rash guesses.
Mutual funds typically charge 1 to 2 percent of assets managed each year.
“passive management.” This is how index funds (a cousin of mutual funds) are run. These funds work by replacing portfolio managers with computers. The computers don’t attempt to find the hottest stock. They simply and methodically pick the same stocks that an index holds—for example, the five hundred stocks in the S&P 500—in an attempt to match the market.
The big difference is in fees: Index funds have lower fees than mutual funds, because there’s no expensive staff to pay. Vanguard’s S&P 500 index fund, for example, has an expense ratio of 0.14 percent.
Bottom line: There’s no reason to pay exorbitant fees for active management when you could do better, for cheaper, on your own.
As Warren Buffett has said, investors should “be fearful when others are greedy and greedy when others are fearful.”
FIRE: Financial Independence + Retiring Early. Think of someone who retires in their thirties and will technically never have to work again because their investments cover their annual living expenses, every year, forever.
As a financial adviser once told me, “Once you’ve won the game, there’s no reason to take unnecessary risk.”
There’s a funny effect called illusory superiority, which refers to how we all think we’re better than other people (especially Americans).
“I believe that 98 or 99 percent—maybe more than 99 percent—of people who invest should extensively diversify and not trade. That leads them to an index fund with very low costs.” —Warren Buffett,
We talked about how we would travel: What if I want to stay at a nicer hotel and she wants to save money? We talked about our businesses: Mine has been around for many years, while hers is just starting up. What if she didn’t hit her numbers one month? Or for three months in a row? What if my income decreased? We talked about risk and security. How does money make you feel? Do you need a certain amount in your bank account to feel safe? Are you risk-averse? I’m willing to bet your partner thinks about risk and security differently than you do. Find out.
Negotiating tactic: Always frame your negotiation requests in a way that shows how the company will benefit. Don’t focus on the amount you’ll cost the company. Instead, illustrate how much value you can provide the company.
I reached out to seventeen car dealers and told them exactly which car I wanted. I said I was prepared to buy the car within two weeks and, because I knew exactly how much profit they would make off the car, I would go with the lowest price offered to me. The same day, as I sat back with a cup of Earl Grey tea and three tacos with habanero salsa, responses started rolling in from the dealers. After I had all the offers, I called the dealers, told them the lowest price I’d received, and gave each of them a chance to beat it. This resulted in a bidding war that led to a downward spiral of
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I’m conservative when it comes to real estate. That means I urge you to stick by tried-and-true rules, like 20 percent down, a 30-year fixed-rate mortgage, and a total monthly payment that represents no more than 30 percent of your gross income. If you can’t do that, wait until you’ve saved more.
