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: optimise your cards and accounts, write a conscious spending plan instead of a budget, automate transfers on payday so savings and investments move before you can spend them, 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.
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 parts are the conscious spending plan, four rough buckets for fixed costs, investments, savings and guilt-free spending, in place of a thirty-line budget; automation, standing orders dated on payday that move the investment and savings amounts before you see them and pay every bill by direct debit; a debt plan that lists every balance with its rate, negotiates the rate, chooses avalanche or snowball and automates the extra payment; and 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 couple in Bursa write fixed costs 58 percent, investments 8, savings 7 and the rest guilt-free, with a rule that their weekend breakfasts are never on the cut list. Three unused subscriptions go instead. The monthly argument about money mostly goes with them.
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 pharmacist in Antalya sets it up on a Sunday afternoon: 10 percent to a fund at another bank, 6 percent to a card-free savings account, bills on direct debit, card on full autopay. She is ill for two weeks in April and does not think about money once; in May everything has moved exactly as in March.
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 sales rep in Gaziantep lists three cards, a phone instalment and an overdraft: 84,000 lira. He moves the worst balance to a cheaper loan, chooses the snowball, clears the phone in month one and puts 3,500 extra on the smallest card. Eleven months later two cards are gone.
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 actually make you happy, fund them properly, and take the money from categories that return nothing. Cheap cares about the price of everything; frugal cares about the value of a few things and will happily overpay for them.
A designer in Kadıköy decides his two things are one long trip a year and good coffee. He funds both first and cancels a gym, two streaming services and a delivery subscription, and finds the trip is paid for by things he never noticed were gone.
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.”