I Will Teach You To Be Rich is the perfect introductory personal finance book for 20–35 yo. Ramit covers the A-Z of personal finance in a simple, yet effective language. It’s fascinating to me that anyone can make this usually dull topic as engaging as he does. While I am not new to this topic, I’m confident this book has changed many people’s lives. Here are 5 valuable lessons from the book.

1. Online Banks vs. Big Banks

We’re all too familiar with the brick-and-mortar bank where we had our first account. It was likely the bank that our parents used. These are the big banks with branches in every city and physical customer service. They make majority of their money through fees. In 2018, banks in Australia made $13 billion in fees. This is where online banks come in. They allow you to open an account for free, provide you with the best savings rates and free ATM withdrawals locally and internationally. They can do this due to a lack of physical branches resulting in reduced overhead.

At the a big bank you’d be lucky if you could manage to get 0.5% savings rate, but you can manage up to 2%, if not higher at an online bank. As you see in figure 1, you could make up to $600 just in interest in a year on a $30000 principal as opposed to $150 at a big bank. Given that inflation in Australia in 2019 was 1.61%, you would actually be losing money at a big bank.

2. Get rid of your bank fees

Ramit motivates the reader to actively dispute your bank fees which could include overdraft fees, annual credit card charges and account maintenance fees. The caveat is that you need to be a loyal customer that pays their credit bills on time. It’s a lot easier for the bank to give you a fee waive instead of a losing you. Until I read it in the book, this never occurred to me. The concept that anything money related is negotiable is a constant theme throughout the book.

3. Financial Expertise is a myth!

Whenever you think about investing, picking stocks or seeking a financial adviser come to mind. The cold hard truth as mentioned by Sethi is that managed funds beat the market less than 25% of the time. That’s a number from 2006. More recently I found that managed funds actually beat the market less than 5% of the time. It’s wiser to invest your money in the market through index funds. They provide you with a diversified entry to the stock market with an annual return of 8% per year. It’s a safer option as index funds represent the global economy.

4. Conscious Spending: A La Carte Method

Ramit proposes the A La Carte Method as a way of taming your subscription expenses such as gym, magazine and cable tv memberships. Firstly he suggests to cancel them all and restart them individually as needed. Let’s take the gym membership as an example. Suppose the monthly cost is $100, Sethi highlights that the average person goes to the gym an average of 4.3 times, therefore each visit is $23. If instead you buy a single visit pass ranging between $10-$15, the monthly cost would be $40-$60, saving you as much as $60. If you do end up using the gym more often, just restart your membership. This seemed like a refreshing way of looking at expense-cutting. It highlights our blinding optimism in estimating our productivity.

5. 85% Rule

The 85% rule is all about getting started. It’s better to start investing than not doing it at all. You are at risk of losing out on the magic of compounding. It’s better to get 85% rather than nowhere. I thought such a simple rule was effective in showing the reader that taking action is the key. You have got to walk the talk.

If you are a more visual person, you might like