3 Simple Steps Leading to Personal Wealth (from Ramit Sethi)

by Jamie Simmerman · 9 comments

I recently had the privilege of being a fly on the wall during a one-on-one interview with Ramit Sethi, author of the New York Times Best Seller I Will Teach You to Be Rich. And while I can’t divulge the details of the interview (as much as I’d like to share them with you), I was inspired by Ramit’s ideas and picked up his book from Amazon. What struck me the most about Ramit? He’s young, he’s confident, and his ideas on personal finance aren’t orthodox.

Ramit Sethi’s Advice for Those Interested in Personal Finance

If planning for a secure financial future is a priority for you, some of Ramit’s words may surprise you, especially if you’ve read more traditional literature on personal finance. Here’s what he suggests early in his book:

  1. Stop trying to be an expert on personal finance. Take action now.
  2. Keep your choices simple. For most people, financial planning is simple: do some basic research, invest and leave it alone. Save as much as you can, even if it’s just $20 a month to start with.
  3. Stop spending money on items that aren’t top priority in your life.

Makes simple sense, yes?

Fat and Sassy – and Poor?

Ramit believes the majority of people fall into one of two categories: those who ignore money and feel guilty about it, and those who obsess over the minute details and never take action (think analysis paralysis). Can you relate to one of these categories?

One of the interesting ideas he spells out in his book has to do with a common American pandemic. He claims that the American habit of pursuing information overload leads to consumption-mindedness, resulting in a fat, poor nation of individuals. He backs up his claims with numbers. “Nearly 2/3 of Americans are overweight or obese, and the average America is nearly $7,000 in debt (Sethi, 2009). “ Does our consumerist attitude really lead to a lifestyle filled with unhealthy indulgences and financial ruin? And if so, what does that say for our Nation? Ramit advises we stop pursuing ultimate knowledge about finances and get busy making and saving money.

Buy and Hold – Keep it Simple

When it comes to investing, Ramit’s advice is easy to follow. Invest early, do some research, make a decision, and use a buy and hold approach. He claims it’s not sexy when you can’t brad about your latest Day Trading activities, but it pads your bank account, which is the entire purpose of investing, right? Reevaluate your funds once every six months to provide a financial check-up on your investments.

Spend Money Only Where it Counts

We’ve talked about spending money according to your priorities before here at MoneyNing, and Ramit’s advice follows suit by telling readers to find out what matters most in their life, then cut costs without mercy in all areas except that top priority. Everyone values something differently in their lives, and while one consumer may value keeping a nice suburban home, another may value traveling the world and couldn’t care less if he has a permanent address. Find what matters most in your life then stop wasting money on things that don’t matter that much to you. Stop giving up the best for what’s good or mediocre.

Ramit’s writings are chock full of interesting, useful, and sometimes provocative tips on personal finance and building wealth. There are many ways to read about his ideas, like getting his book on Amazon, from your local library, or from his website at IWillTeachYouToBeRich.com. It’s not your typical personal finance blog.

Have you read Ramit’s book or blog? What struck you most about his views?

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{ 9 comments… read them below or add one }

Rosie March 15, 2012 at 7:41 am

Oh wow! I love this guy! His website it completely fascinating… I can wait to use some of his advice. It is my biggest downfall in several aspects of my life that I get too much info and never actually “DO”.

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AJ March 15, 2012 at 12:17 pm

Rosie,

So glad you mentioned his website. I didn’t think to look for it.

As for the article, “Spend Money Only Where it Counts” says it all. I have a co-worker that was recently a little jealous of me because I paid off a brand new truck (yes, I buy new vehicles because I use them till they fall apart and my father was a lousy used car salesman… Sorry, I digress. ) That was last week. Two weeks ago the co-worker bought a dirt bike (he is not a child), and this week he bought a street legal motorcycle. I teased him about being jealous of me and he smiled as if to say “yes, you caught me.” He has tried to ask for advice in the past, so he may come around eventually. I try not to mention anything till he asks, but sometimes I just can’t resist. ;-)

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PFM March 15, 2012 at 6:55 pm

I read Ramit’s book a few months ago and was surprised how much I liked it. It’s really good for younger people just getting there feet wet in the financial pool. The advice about investing in mutual funds was solid. He has a fun way to relate to the reader and I caught myself chuckling at some of his anecdotes. If you’re in your 20′s this is a must read, but it’s also a fun read no matter what your age.

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I'mJustSayin' March 16, 2012 at 9:24 am

My husband and I work for a large employer [contractor to the Gov't]. They are offering voluntary termination packages / severance pay to employees who opt to leave or retire, and the incentive package is based on years with the company. A friend of my husband’s with 30+ years with the company said he won’t take the package because he just bought a truck with a 7 year loan payment. STUPID!

He is giving up 6 months of free paychecks, at retirement age, so he can pay on a new vehicle.

Unbelievable.

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MoneySmartGuides March 16, 2012 at 10:43 am

Excellent points. They are simple, yet the hard part is following them. I preach buy and hold myself and people tell me that it is boring. The point isn’t for it to be fun, it’s to make money. Use all of the time you would have used doing research to pick up a new hobby or play with your kids!

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Marbella March 17, 2012 at 5:24 am

These three advice do you need not go to a lecture in order to learn. They are fundamental in any economy.

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Steven Ng March 17, 2012 at 7:43 am

Ramit has one of the best approaches to personal finances. I have read his book and I haven’t found advice like that in too many other places.

Thanks for sharing!

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Alice Job Applications March 17, 2012 at 9:23 am

That sounds great and interesting. It struck me on his really cool simple ideas to stop pursuing ultimate knowledge about finances and get busy making and saving money , spending money according to the priorities and stop wasting money on things that don’t matter that much to you. Stop giving up the best for what’s good or mediocre. I do love his ideas. It inspired me to start 3 steps leading me to personal wealth. Just take actions now. Thanks a lot for sharing such a great article.

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Ollie December 7, 2012 at 12:44 pm

I think I’ve read this same idea before. My dad bought a compendium of books from Success Unlimited and part of that collection was “The Negative Power of Positive Thinking” by Edward L. Kramer, Ph.D. The author was saying to stop planning and start acting out your plans. I think I have that think analysis paralysis thing and I’d so much like to get it out of my system.

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