Tuesday, November 17, 2015

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


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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.
 
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