Book Review: I Will Teach You To Be Rich by Ramit Sethi

A lot of physician forums and podcasts discuss classic personal finance books such as The Richest Man in Babylon, The Psychology of Money, Rich Dad Poor Dad, The Millionaire Next Door, Think and Grow Rich and others. However, right now there is a show trending on Netflix “How To Get Rich” that stars the author of a New York Times bestseller. “I Will Teach You To Be Rich,” is a personal finance book by Ramit Sethi that was first released in 2009. The author states his goal is to help people get out of debt, save money, and invest for the future.

Though the book is not aimed specifically at physicians, it is high yield and is full of many useful lessons. Many of us feel overwhelmed and have no idea where to start on our financial journey and many physicians end up spending money on random things and watching it trickle away. The book is written in a clear and concise style, and Sethi uses humor and personal anecdotes to make the material more engaging. He also provides practical tips and advice that readers can use to improve their financial situation. In fact, the audiobook is narrated by the author himself and is thoroughly entertaining. If you play it at 2x speed it is only a five-hour investment of your time and will provide you will actionable next steps.

The big question in this book is what does your rich life look like? Most people haven't taken the time to write it out. Everyone will of course have a different answer. Some of us value travel, others may want luxury goods, and some may want the financial freedom to help their relatives or friends without worry.

Some of the key takeaways from the book include:

You must set financial goals.

What do you want to achieve with your money? Once you know what you want, you can create a plan to make it happen. Too many physicians fall into the trap of simply striving for more without knowing or understanding how much is enough. This leads them to make poor decisions, keep getting drawn into investments like crypto they don't understand and keep trading their time for money and working on someone else’s terms.

Conscious spending.

The author isn’t trying to shove a budgeting system down your throat or have you track every single penny. He states you should plan where your money should go ahead of time (for fixed costs like rent, food, debt, and assign a certain percentage for savings and investments). He advises that once you have a plan, you then spend the rest of your money guilt free on the things you love. In order to do this, you will need to cut expenses on things that don’t increase your happiness. Sethi suggests you don’t focus on cutting out lattes but focus on the big expenses you have. He discusses techniques such as negotiating your credit card interest rate, getting a discount on your cell phone bill, find deals and optimize your spending.

Automate your finances.

The book goes over the importance of setting up automatic transfers from your checking account to pay your bills, to your savings account, into your retirement accounts, and to an investment account. This will help you avoid late feeds, avoid overspending, and build up your savings and investment portfolio.

Invest your money.

There are many different ways to invest your money, but the most important thing is to start early. The sooner you start investing, the more time your money has to grow. Sethi emphasizes the importance of investing in diversified passive funds, and warns of the dangers of simply handing over your money to a financial advisor charging a fixed percentage of assets under management (AUM) fee. Such fees sound low e.g. 1% AUM but over the course of a 30 year period, with compounding, they can eat into a large chunk of your portfolio (up to 20%!)

Live below your means.

This means spending less money than you earn. It's not always easy, but it's important if you want to reach your financial goals. We can all outspend any level of income, and many physicians do. There’s a reason why so many physician financial forums talk about “living like a resident” for a few years after you start earning Attending physician money. This pay raise can provide an extra cushion in paying down your student debt and building up your investments. If on the other hand you go out and buy a physician-Mansion or the six figure Porsche 911 – you may never have money to invest.

Don't be afraid to ask for help.

If you're struggling with your finances, there are many resources available to help you. You can talk to a fee-only fiduciary financial advisor, read books and articles, or join a forum. Andwise can help.