"I Will Teach You To Be Rich" is my favorite personal finance book. Why? It doesn't treat you like you're a clueless adult like some books do and it isn't so technical that only a handful of its readers really grasp the lessons. It bridges a nice gap in the middle that anyone that is looking to get a handle on their personal finance should buy into.
I've actually read both editions of this book. The first I checked out of the Penn State on campus library, but I bought the newest edition for my own library. I will comfortably say that after reading the text the first time I made a couple of decisions that made me anywhere from $800-$1,000 in my first year. Pretty good return-on-investment, right?
I've always been pretty responsible when it comes to my finances. However, there is always room to get better. In this book, you don't have to give up your expensive activities (for me it is my gym), but you also need to find ways to achieve your financial goals before you go crazy spending or even worse borrowing through loans or credit card payments. This means investing up to your company match in your 401(K) or in my case a SEP-IRA. If you've already done that find a way to fully fund your Roth-IRA (up to $6,000 per year for those under age 50). Both are pretty sweet deals to grow your money and not make 65 year old you want to hop in a time machine and beat up 30 year old you with a cane.
The book goes into big purchases such as cars, home, marriages and more. Setting up a savings plan to pay for those goals should be part of your strategy if you see fit. Unlike many personal finance gurus the author doesn't shove home ownership down your throat. This is ideal for me, because I work in tourism and sports where there are only a handful of such organizations per region. For me, I would rather invest those funds rather than having the urgency of home ownership.
There are so many lessons to take from this book that I am only scratching the surface.
What Did I Learn?
1. The first thing I did after reading this book the first time is quit using my debit card for all of my purchases. I found a credit card with a strong cash back program and have used that for anything that I could. Most importantly, just because I have a credit card doesn't mean my spending habits change. All that changed was the route that I pay for. I also pay off my credit card in full each month meaning I get all the perks of cash back without the inconvenience of paying interest.
2. I opened up a high-interest online savings account. Most people work with a typical brick-and-mortar bank you can walk into. It's great to say "hi" to those folks and you absolutely should have a checking account through an organization like this in my opinion simply for the support of your community. However, I wouldn't stash my money in their savings accounts, CD's, money market accounts or anything else. When you do you're paying their overhead and getting a lousy interest rate in exchange for doing so. I found an online savings account that gives me anywhere from 20x-30x the traditional bank interest rate. It was eye-opening in my first month when my interest total was greater than a full year in my traditional bank.
3. I had just a SEP-IRA through work, which functions similar to a 401(K) meaning that my money doesn't get taxed until I take it out after I turn 59 1/2 if I so choose. However, I have enough extra money laying around that I opened a Roth IRA through Vanguard recently. The difference in this account vs. the other two I mentioned is that the money was already taxed when it was paid to me and will NOT be taxed when I pull it out in my ripe old age. I can contribute as much as $6,000/year into this account.
4. This is still one I am kicking around, but I love to travel. It might make sense for me to open a travel focused credit card to pay for my travel I already do and also my going out to eat. Obviously, you pay the dollar amount in full each month and keep the rewards that come with owning the card. At the end of a year or two, what kind of rewards will I be looking at. Will it be enough to cover most of a weekend getaway? That sure would be nice.
About the Author
Andy Rupert is a Penn State (B.A. John Curley Center for Sports Journalism 08') and a Southern Miss (M.S. Sport Management 09'). He has spent his whole career working in sports and tourism digital marketing and metrics.