I Will Teach You to Be Rich
Ramit Sethi
I Will Teach You to Be Rich is Ramit Sethi's six-week programme for setting up a personal finance system that runs on its own. You optimise your cards and accounts, write a conscious spending plan instead of a budget, and automate transfers on payday so savings and investments move before you can spend them. Then you pay off debt on a written plan and invest in low-cost funds every month. Its rule is to spend extravagantly on what you love and cut mercilessly on what you do not, with saving and investing paid first.
Every personal finance book tells you to make a budget. You have made several and abandoned all of them, because a budget is a list of things you may not do. Sethi's book is the one that replaces the budget with a machine: decide once where the money goes, let the bank move it on payday, and spend the rest without guilt or a spreadsheet.
The book in essence
Sethi's system has four moving parts and a philosophy. The philosophy is that a rich life is defined by you, funded on purpose, and should take about an hour a month to run. The first part is the conscious spending plan: four rough buckets (fixed costs, investments, savings and guilt-free spending) in place of a thirty-line budget. The second is automation: standing orders dated on payday move the investment and savings amounts before you see them, and every bill is paid by direct debit. The third is a debt plan that lists every balance with its rate, negotiates the rate, chooses avalanche or snowball and automates the extra payment. The fourth is investing in broad, low-cost funds every month without watching them. Around this he adds scripts for negotiating fees and salaries, and a distinction between cheap, which cares about the price of everything, and frugal, which cares about the value of a few things.
The book began as a blog Sethi started at Stanford in 2004, became a bestseller in 2009, and was revised in 2019 with updated numbers and a new emphasis on the reader's own definition of a rich life. Its examples and products are American, but the system (plan, automate, pay down, invest) is the part that travels.
Who it's for
- People in their twenties and thirties who want a working system rather than a lecture
- Anyone whose budgets have failed and who suspects the problem is the budget, not them
- Readers with card debt who want a concrete plan rather than shame
Who it's not for
- — Readers outside the United States who need the specific accounts and products; take the system and ignore the product names
- — Anyone wanting a philosophy of money rather than a procedure; pair it with Housel for that
Key lessons
01
The conscious spending plan replaces the budget
Four rough buckets instead of thirty categories: fixed costs around half to sixty percent of take-home pay, investments around ten, savings five to ten, and guilt-free spending with whatever remains. Once the first three are set, the fourth is yours to spend without tracking. The plan starts with what you may do, which is why it survives when budgets do not.
A primary-school teacher and a bus driver in Kocaeli write their plan on the back of an electricity bill: fixed costs 60 percent, investments 8, savings 6, the rest guilt-free. For the first time they know how much they can spend on a Saturday without checking anything, and the Sunday-evening argument about money loses its subject.
02
Automate everything on payday
Willpower is an unreliable money manager, so the plan has to run without it. On the day the salary lands, standing orders move the investment amount and the savings amount to separate accounts; every bill is on direct debit; the credit card pays its full statement automatically. The transfers are dated on the salary day, not the first of the month, because a bounced transfer is a quietly disabled one.
A police officer in Erzurum is paid on the fifteenth. He spends one evening setting standing orders for the fifteenth: 10 percent to a fund at another bank, 5 percent to a savings account with no card. His bills move to direct debit and the credit card to full autopay. Six months later he realises he has not made a single money decision since that evening, and both accounts have grown anyway.
03
Pay off debt on a written plan
List every debt with its balance, rate and minimum. Call and ask for a lower rate or move the balance to a cheaper product. Choose avalanche, highest rate first, or snowball, smallest balance first, whichever you will follow. Automate the minimums and one fixed extra payment on the target, and when it clears roll the whole payment to the next. The day the last balance is zero, the payment becomes an investment order.
A café owner in Çanakkale lists her debts for the first time: two cards, an overdraft and a supplier loan, 120,000 lira in total. She asks both card issuers for a lower rate, and one agrees. She picks the avalanche, puts a fixed extra 5,000 a month on the card with the highest rate, and sets every payment to direct debit. Fourteen months later only the supplier loan is left.
04
Spend extravagantly on what you love, cut mercilessly on what you do not
Most people spend a little on everything and feel guilty about all of it. Sethi's rule is to name the one or two things that make you happy and fund them properly, with money left once saving and investing are paid and taken from categories that return nothing. The extravagance is targeted, not general. Cheap cares about the price of everything; frugal cares about the value of a few things and will happily overpay for them.
An architect in Trabzon decides her two things are live music and good running shoes. She buys concert tickets without checking the price twice, and cancels a gym she never used, a second streaming service and a meal-kit subscription. Her total spending falls, and she enjoys more of what is left.
Try this today
Write your conscious spending plan in four numbers, fixed costs, investments, savings and guilt-free, then set one standing order dated on your next payday for the investment amount.
Quick check
How does a conscious spending plan differ from a budget?
Why should transfers be dated on the salary day rather than the first of the month?
Selected quotes
“Spend extravagantly on the things you love, and cut costs mercilessly on the things you don't.”
“The single most important factor to getting rich is getting started, not being the smartest person in the room.”