"I Will Teach You To Be Rich" - Book Review

Are financial advisors wrong about Ramit Sethi?

I read his book "I Will Teach You To Be Rich" today.

Here is a comprehensive summary and review of what I learned from a financial planner's perspective.

Ramit says we often fall into one of two camps regarding money (or when trying to improve any form of wellness):

1. Ignore it completely (yet feel guilty)

2. Obsess over minute details (paralysis by analysis)

Both camps typically fail by not taking action.

Most people I know (especially here) fall into the second camp, spending too much time picking up pennies (including myself).

Ramit encourages us to get out of the weeds of complex optimization (micro 15%) and focus on the BIG wins (macro 85%), but making them bite-sized.

Ramit says we don't need more information, to hire financial advisors, or become financial experts to get rich.

It starts by taking action rather than complaining, blaming others, and playing into victim culture. What if we spent the time learning/doing rather than complaining?

He reminds us that financial firms have weaponized the fear of being average - convincing consumers they can do better, but only by hiring a financial advisor to do it for them.

"Complexity for the sake of job security" is a phrase we often agree on within the FI community.

When it comes to investing, I agree with most of Ramit's recommendations:

1. Focus on asset allocation as the most significant part of your portfolio within your control.

2. Buy low-cost, passive index funds.

3. Automate contributions and rebalance annually.

I think target-date funds are OKAY, but the limited time/talent required to buy 1-3 index funds can be worth it.

I agree that robo-advisors aren't worth the cost, for another reason: they often include unnecessary cash positions. Schwab's "Intelligent" Portfolios, for example.

He mentions that "age and risk tolerance matter."

Although retirement assumptions may be age-based, the investments should be aligned with when the money will be needed to supplement other income sources - based on time horizon and risk capacity.

I love that the book focuses on spending instead of traditional "budgeting!"

"Spend extravagantly on the things you love and cut costs mercilessly on the things that don't." We are rarely kind to ourselves when we review our spending, but it should be a positive experience!

These are my favorite rules for a rich life mentioned in the book:

??Spend more on things you love, and vice versa

??Focus on the big things (85%)

??Make investing boring

??Be unapologetically different

??Live outside of the spreadsheet

Chapter 1 includes fantastic education about CREDIT!

Regardless of how you "feel" about it, establishing good credit will affect the future costs of your largest purchases (houses and cars). I'm a big fan of being the benefits-building credit card user the banks hate - paid on time!

When Ramit mentions "financial advisors," he seems to focus on investment managers who just put client funds into expensive portfolios for 1% AUM.

Yes, this is still the majority of the industry. But personalized financial advice (beyond investments) doesn't get much focus.

He mentions finding an hourly or project-based advisor through NAPFA.

He also says to hire fee-only advisors because they charge flat fees, but "fee-only fiduciaries" and NAPFA also include % AUM advisors. "Flat-fee financial planner" seems to be more accurate today.

There are now advisors who provide personalized financial (including investment) advice without managing ANY client investments or selling ANY insurance products.

They are called "advice-only" financial planners, offering flat-fee hourly, project-based, or ongoing services.

This has been an endless debate, but I agree that the cost of financial advice should not be tied to asset levels. To me, it's not just about cost. It's about transparently aligning fees to the services provided. There is a big wave of financial advisors doing it differently.

I give this book a 9/10 and agree with almost everything in it as solid fundamental advice.

It seems to be written for younger audiences, but that's a good thing. Thinking long-term and investing early is enough to move in the right direction.

I could go more into the weeds with my 12 pages of detailed notes, but I'll stick with the 85%.

Let me know if you have any questions!

Learn more about Ramit and his educational content by following him at Ramit Sethi . We are not affiliated in any way.