This is me.....Then: Ramit Sethi

Showing posts with label Ramit Sethi. Show all posts

Tuesday, February 9, 2016

My February 2016 Reads

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I have one of the same goals in 2016 as I had in 2015.

Read one book per month.

It worked well for me last year, though I did miss a few months, and I would like to continue this same goal this year.

In December 2015, I started a book called I Will Teach You To Be Rich. This book is written by Ramit Sethi and is described as a 6-week personal finance program that works. I continued this book in January 2016, but still have a few more chapters to finish. Because it is a book that requires action and I have been reviewing each chapter on my blog, it is taking longer than usual to complete. Therefore, one of my reads for February 2016 is I Will Teach You To Be Rich by Ramit Sethi.

As part of our Christmas tradition, there are two items that the people in my household receives every Christmas eve.
1) Pajamas
2) A book

This year, I decided to get my husband an adult coloring book with colored pencils. I brought my daughter a Melissa & Doug coloring book and jumbo triangular crayon set. My husband gave me two books.

One of which is based on T.D. Jakes #1 New York Times Best Seller entitled, Instinct: The Power to Unleash your Inborn Drive. This is not the actual book, but rather the Daily Readings version of this book that provides 100 insights that will uncover, sharpen and activate your instincts. I started this in January 2016 and will continue reading an excerpt each day until I finish. According to my calculations, the 100^th day of 2016 is April 9^th, so be prepared to hear about INSTINCT Daily Readings: 100 Insights That Will Uncover, Sharpen and Activate Your Instincts for the next few months. Since each reading is only 2-3 pages, I will still be able to add a new book each month, without causing too much of an inconvenience.

The second book that my husband gave me is entitled, Make It Happen: Surrender Your Fear. Take the Leap. Live on Purpose., by Lara Casey. I’ve never heard of this book or author, but apparently it got 4 ½ out of 5 stars on Amazon. Also, a very popular lifestyle blogger (Mattie James of Mattieologie.com) mentioned this on her Periscope about her list of "to read" books for 2016. Judging by these indications, I think this’ll be a good one to read. Plus, my husband clearly has an idea of the things I struggle with and is attempting to provide me with assistance in overcoming my fears and taking the leap. J I will definitely give a full review once I am done.

What books are you reading in February 2016?

Wednesday, January 27, 2016

I Will Teach You To Be Rich..... Starting With Conscious Spending

FACT: You cannot become ~~rich~~ wealthy without controlling your spending....consciously.

I cross out rich because, in my eyes, rich is temporary and is seldom beneficial long term. Many athletes, celebrities and lottery winners are rich, but if they do not practice conscious spending, then they are not rich for long.

According to a 2010 study by researchers at Vanderbilt University, the University of Kentucky and the University of Pittsburgh, the more money you win in the lottery, the more likely you are to end up bankrupt. As a matter of fact, according to this study published in The Review of Economics and Statistics, many of them become bankrupt within 5 years of scoring a big win.

The average professional athlete in the United States will make more in one season than most of us earn in our entire lives. However, according to Wyatt Investment Research, 78% of NFL players, 60% of NBA players and a large percentage of MLB players file bankruptcy within five years of retirement.

Most people's stinking thinking causes them to assume that they are broke because they don't make enough money. However, according to my research, more money does not fix financial problems.

What does, then? CONSCIOUS SPENDING
Of course I'm oversimplifying things a bit. However, if you read any of the articles or books about the habits of wealthy people with a net worth over a million (especially those who had modest income levels during their working years), you will find that one of the main ways they were able to save and invest their way into millions was to consciously spend on the money they earned, so that a large portion of it could be used to build their wealth.

In chapter 4 of I Will Teach You To Be Rich, Ramit Sethi focuses on conscious spending. Although Ramit calls it conscious spending and says that he doesn't use budgets, the bottom line is that he does.....and you need to, as well, if you want to be rich and win with money. He says that conscious spending is deciding where you want to spend your money up front, instead of spending it on random things here and there. Deciding what you don't love and are not that important to you, so that you can cut back mercilessly on those things, in order to have money to spend luxuriously on those things that are important to you.

So here are the steps that Ramit suggests to create a Conscious Spending Plan:

Step 1: Create 4 major buckets where your money will go.

Step 2: List every expense that you can think of that falls under the 'Fixed cost' category and fill in the dollar amounts for each. A good rule of thumb is that your fixed costs should be 50-60% of your take-home pay.

Once you've gotten all your expenses filled in, add 15% for unexpected expenditures or items you may have overlooked. According to Ramit, a flat 15% will cover you for things you haven't figured in and you can get more accurate as time goes on.

Once you've got a fairly accurate number here, subtract it from your take-home pay. Now you'll know how much you'll have left over to spend in the other categories. Plus, you'll have an idea of a few targeted expense areas that you can cut down on to give yourself more money to save, invest and do the other things you love (See how this kind of sounds like a budget to me?).

Step 3: A good rule of thumb is to invest 10% of your take-home pay for the long-term. For the record, long-term investing typically means 401(k), Roth IRA and other retirement-type savings vehicles.

Calculate the amount and automate it.

Step 4: Short-term savings could be things like Christmas gifts, a vacation, a wedding or a down payment on a house. This should be no more than 5-10% of your take home pay.

Calculate the amounts for the various accounts and automate a separate savings account for each.

Step 5: Feel free to spend whatever is left on whatever tickles your fancy! If you want to use that money to invest more, do it. If you prioritize travel over early retirement, hit up every country in the world. Sky is the limit! You can spend guilt free because all of your obligations are already taken care of. (Word to the wise: Just don't overdraft)

I should mention that if you don't make enough to fit in these to categories, you need to do one of two things:

Find a way to cut back some of your expenses.
Find a way to make more money.

Ramit offers some great ideas in his book on cutting expenses, negotiating higher salaries and freelancing.

Read my previous blogs for more information about Ramit Sethi's, I Will Teach You To Be Rich. Below is an outline of the topics covered in previous chapters and a link to my blog post about each chapter/topic.

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Wednesday, December 30, 2015

I Will Teach You To Be Rich And Get Ready To Invest

I Will Teach You To Be Rich And Get Ready To Invest

Week 3: Get Ready To Invest

Open your 401(k) and Roth IRA -- even with just $50

I am reading I Will Teach You To Be Rich by Ramit Sethi. This book provides a 6-week step-by-step guide to getting your finances in order to become rich.

Week 1 focused on optimizing your credit.
Week 2 focused on opening and optimizing your bank account.
Week 3 focuses on teaching you to get ready to invest.

This chapter will discuss why you should invest and the best way to start investing your money and how to set up the process in a week.

THE WHY
A millionaire is not a person who makes $1 million or more per year.  A millionaire is someone who's net worth is $1 million or more.

On average, millionaires invest 20 percent of their household income each year. Their wealth isn't measured by the amount they make each year, but by how much they've saved and invested over time.

Investing is the single most effective way to get rich!

THE HOW
Step 1: If your employer offers a 401(k) match, invest to take full advantage of it and contribute just enough to get 100% of the match. This is free money and there is, quite simply, no better deal.

Step 2: Pay off your credit card and any other debt (excluding any primary home loans you may have outstanding). If you can't pay this off immediately, set up a plan to pay off your debt within a specific amount of time.

Step 3: Open up a Roth IRA and contribute as much money as possible to it, up to the maximum allowed by the Internal Revenue Service.

Step 4: If you have money left over, go back to your 401(k) and contribute as much as possible to it, up to the maximum allowed by the Internal Revenue Service.

Step 5: If you still have money left to invest, open a regular nonretirement account and put as much as possible there. Also, pay extra on any mortgage debt you have, and consider investing in yourself: Whether it's starting a company or getting an additional degree, there's often no better investment than your own career.

*Please note that my philosophy varies slightly from what Ramit suggests in his book. My how, which takes into account Dave Ramsey's Baby Steps, would be the following.

Step 1: If your employer offers a 401(k) match, invest to take full advantage of it and contribute just enough to get 100% of the match. This is free money and there is, quite simply, no better deal.

Step 2: Pay off your credit card and any other debt (excluding any primary home loans you may have outstanding). If you can't pay this off immediately, set up a plan to pay off your debt within a specific amount of time.

Step 3: Open up a Roth IRA and contribute as much money as possible to it, up to the maximum allowed by the Internal Revenue Service, but no more than 15% (minus the % you have already contributed to 401(k)) of your income.

Step 4: If you have money left over, go back to your 401(k) and contribute as much as possible to it, up to the maximum allowed by the Internal Revenue Service, but no more than 15% (minus the % you have already contributed to 401(k) and Roth IRA) of your income.

Step 5: If you still have money left to invest, open a regular nonretirement account and put as much as possible there. Also, pay extra on any mortgage debt you have, and consider investing in yourself: Whether it's starting a company or getting an additional degree, there's often no better investment than your own career.
              5a: If you have children, open an ESA or 529 plan to save for their college education. If not, skip to 5b.
             5b: Use all extra money to pay off your home early. If you don't have a mortgage, skip to 5c.
             5c: Open a regular nonretirement account and put as much as possible there. Also, consider investing in yourself: Whether it's starting a company or getting an additional degree, there's often no better investment than your own career.

BUY BOOKS HERE:

I Will Teach You To Be Rich by Ramit Sethi

The Total Money Makeover: A proven plan for financial fitness by Dave Ramsey

Tuesday, November 17, 2015

I WILL TEACH YOU TO BE RICH…..Starting Today!

I WILL TEACH YOU TO BE RICH…..Starting Today!

Okay, okay! WE will teach you to be rich….starting today!

My co-partner in crime is Ramit Sethi, the author of the New York Times bestseller, I Will Teach You To Be Rich. While he has authored the book, I will be doing the reading. I will be breaking down theories and steps in the book, as well as providing real life examples and cute little antidotes.

SPOILER ALERT:

The key to being rich (according to Ramit) is to set up accounts at a reliable no-fee bank and then automate savings and bill payment, then know a few things to invest in and let your money grow for 30 years.

MY TAKE:

It takes a bit (lot) more than that and I will make sure to bring up any areas that Ramit tries to tip toe over.

I WillTeach You To Be Rich is broken up into 6 weeks of topics, followed by a set of action steps. At the end of the 6 weeks, if you follow all of the action steps, Ramit promises that you will be well on your way to being rich…..if you are consistent and faint not. :-)

By the way, this is my November/December read and I will be going through and completing all 6 weeks of action steps by the end of the year. Feel free to join me each week while I discuss the topic and action steps towards richness, indeed.

WEEK 1: OPTIMIZE YOUR CREDIT……CARDS

While there are experts out there (Ahem…..Dave Ramsey) that believe that debt is against the bad and that you avoid it and a credit score at all costs. My beliefs are more in-line with what is taught by Ramit.

If you do not know how to responsibly use debt, avoid it like a plague (or get some discipline). However, if you are have the discipline to use your card prudently and to pay off your credit card every month, it can actually be a benefit.

Even if you have the money in your account, who wants to have that ridiculous hold that hotels put on your account when you use your debit card to reserve your room? When you rent a car, who wants to pay that ridiculous insurance, when there are really good credit cards out there with exceptional coverage? When you buy an expensive product and something goes wrong, who wants to wait for the bank to put the money back into your bank account? Who wants to pay for an extended warranty, when there are credit cards out there who will give you an extra year or two, just for making the purchase on their card? If I can save major money by utilizing the benefits that only credit (not debit) cards provide and I know that I am going to pay the full balance off that month, I choose credit.

To optimize your credit you must do the following…..THIS WEEK!

1. Know what is on your credit report and know your FICO score.

a. Go to http://www.annualcreditreport.com and receive a copy of 1 (or all three) of your credit reports for free. Make sure that they are accurate. Work to remove all negative credit history over time.

b. Get your credit score. You can purchase it from MyFICO and other websites for a nominal fee, but I would suggest getting it for free. I monitor my credit score through Credit Sesame, Credit Karma and one of my credit cards.

2. Set up your credit cards

a. Do you have an active credit card? If not, do your research and get one (unless, of course, you fall into that undisciplined category). If no one will have you, find a good provider of secured credit cards that will report your payment history to the credit agencies to help you build credit. Otherwise, find a card with the most benefits that will fit your lifestyle.

3. Make sure you are handling cards effectively

a. Set up auto pay to pay off the full balance each month. Split the payments to match your paycheck schedule, if necessary.

b. Get fees waived and negotiate a lower APR, where relevant.

c. Become familiar with the benefits offered by your card and make good use for them, when needed.

4. Make a plan and start paying down debt (if applicable)

a. I am a fan of the Snowball Method (as suggested by Dave Ramsey). List all of your debts from smallest to largest. Pay the minimum on all the debts, except the smallest debt. Based on your budget, pay an additional amount on this debt each month. Once that debt is paid off, move to the next smallest debt. In addition to the minimum due that you had already been paying, roll the amount that you were previously paying on the smallest debt over to the next smallest debt, and so on and so on, until all of your debts are paid off.

b. In addition to the snowball method, I am also a proponent of the Snowflake Method. If you get a side hustle, if you find a penny on the ground, if you get a bonus check or tax refund, etc., etc……apply that extra money to the lowest debt.

* Personally, we have paid off all of our credit card debt and are currently working on obliterating some rather stubborn student loans (long story…..don’t want to talk about it). Once that is complete, I fully plan to work Dave Ramsey’s Baby Steps as outlined in his Total Money Makeover book. We never stopped our 401k contributions, as he suggests, but that is because I did not think it was the best plan of action. However, that’s another story for another day.

I encourage you to go through the 4 steps listed above with me. Let’s try to get rich together and if it doesn’t work for us, we can all blame Ramit Sethi.

BUY BOOKS HERE: