50 pages • 1 hour read
Ramit SethiI Will Teach You To Be Rich: No Guilt. No Excuses. No BS. Just a 6-Week Program That Works
Nonfiction | Book | Adult | Published in 2009A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Chapters 8-9Chapter Summaries & Analyses
Chapter 8 Summary: “How to Maintain and Grow Your System”
By the time readers get to Chapter 8, they’ve done the work to set up their financial infrastructure, set up investments, and automate the system. The rest is extra credit. Chapter 8 shows readers how to maintain their financial system and offers some tips for readers who want to optimize their system.
Sethi first advises readers to think about why they want to optimize their system. He returns again to the idea of living outside of the spreadsheet; it’s tempting to want more just for the sake of having more. Instead, Sethi encourages readers to identify specific goals like going on a big vacation or buying a house in their dream neighborhood. He calls this readers’ “street-level motivation.”
The earlier chapters in the book recommended Sethi’s 85% Solution: It doesn’t have to be perfect, but you do have to get started. Now, Sethi shows readers how to fill in the remaining 15%. The more that readers feed into their system, the more they’ll get out of it: “one of your key drivers will be feeding as much as possible into your system” (263). Following this statement is a chart showing how much readers would make after 5, 10, and 25 years if they invested $100, $500, or $1000 per month. The differences are significant. He encourages readers to go to bankrate.com and enter their monthly investment assuming an 8% return. It’s worth it to cut back on spending wherever possible so that every last cent can be poured into investments because compounding is just that effective.
If readers have chosen to manage their accounts through an index fund, they’ll need to rebalance their asset allocations once a year. What this means is that as some assets have grown, the balance across the portfolio has shifted—assets are no longer as diversified and allocated as they originally were. The investor has to go back to the accounts and re-allocate. If investors bought into a target date fund, the fund does this work automatically. Sethi provides several pie charts representing examples of how a reader might re-allocate their assets; then he provides a two-page table showing the growth of a portfolio and thus the change in asset allocation over the course of eight months.
Sethi’s next advice for readers is about taxes. He suggests that readers stop worrying about taxes, and he debunks six important myths about taxes. What readers do need to know about taxes, he writes, is that the more you invest in tax-deferred investment accounts like your 401(k) or Roth IRA, the more tax advantages you’ll enjoy.
Following this brief discussion of taxes, Sethi provides an annual financial checklist, some advice about when and how to sell stocks if you absolutely have to, and lists financial goals for super-overachievers.
Chapter 9 Summary: “A Rich Life: The Finances of Relationships, Weddings, Buying a Car, Your First House, and More”
Sethi turns from the topic of how to manage finances to the topic of how to manage emotions around finances. By now, readers should have identified their definition of a rich life and their financial priorities. Having a rich life is “about designing the lifestyle you want” (283). Sethi begins the chapter with the question of whether it’s better to invest or pay off student debt. He offers three options—pay the minimum on your debt and invest the rest; pay as much as possible on your debt and invest a minimum; split it 50/50—and says that the choice comes down to an individual’s comfort level and the interest rates. There is no right or wrong answer here, as there is no right or wrong answer with most of the topics that Sethi addresses in this final chapter.
In the next section, he addresses relationships: how you talk to your parents about money and how you help them if they’re in debt. The answer is that you should tread lightly and ask questions instead of making heavy-handed suggestions. He also answers whether you should tell your friends and family how much money you have. Sethi’s advice is to make sure that your friends and family know that you’re thriving, but there’s no reason to give them specific numbers.
Next, Sethi addresses money in romantic relationships, offering advice about how to talk to your significant other about money and how to navigate situations in which you make more than your partner or your partner spends irresponsibly. Sethi suggests focusing on the details of how much things cost and the kind of lifestyle that you want to live together.
Although everyone swears that they will have a simple wedding, Sethi shows readers in a table how easily wedding costs can accumulate. His advice to readers is that they start saving now, even if they are not engaged or in a relationship. A wedding should be one of the long-term savings goals integrated into every young professional’s Conscious Spending Plan.
In the next section, Sethi discusses work and money. Specifically, he offers readers eight suggestions for how to negotiate a raise, and he provides scripts for readers to have a conversation with their boss. He enumerates negotiating tricks and tactics to help along the way.
Finally, the book closes with a brief section on how to save for big-ticket items like a car and a house. Sethi explains how to negotiate with car salespeople and how not to settle. When he gets to buying a house, Sethi’s offers some unconventional advice. Although most people see home buying as an investment, Sethi says that, in the long-term, most people take whatever money they earn on a house sale and put it into their next house, so they’re not really making money over time. Instead, readers should see home buying as a purchase, and they should be very aware of the fees and costs of closing and maintaining a house rather than focusing exclusively on the mortgage payment. All of these expenses should be incorporated into readers’ Conscious Spending Plan.
On the final page of the book, Sethi reminds his readers, again, that living a rich life is about more than just money; it’s about deciding what you want and making your money work for you to help you get there.
Chapters 8-9 Analysis
Sethi’s final two chapters present readers with the payoff for all of their hard work. Assuming that readers have followed Sethi’s action plan from the beginning, they have at this point paid down their debt, made a Conscious Spending Plan, set up their investments, and decided on financial goals and priorities. Along the way, Sethi aims to empower readers to confront exploitative institutions and gain a deeper understanding of their own psychology and behavior. This focus on behavior means that Sethi makes the lessons of the book applicable to areas beyond finances: Making Choices and Taking Action and Turning Attention From the Micro to the Macro are lessons that readers can apply to any area of their lives.
At the same time, as he has throughout the book, Sethi continues to push back against conventional narratives about wealth accumulation and financial success. Whereas conventional wisdom holds that buying a house is a good investment and a sign of financial achievement, Sethi argues that buying a house should be seen as a purchase, not an investment, and he endorses renting for as long as necessary. Similarly, while most people buy a car based on the brand and mileage, Sethi argues that the most important factor to consider when buying a car is how long it will be used. If the car will be sold within a few years, even the best deal will not return the investment. He saves these major moments of pushback against convention to end the book on a climactic note and leave readers with a sense of knowledge acquisition.
Sethi also continues to encourage readers to think deeply about why they want to build wealth and how they will use wealth to enrich their lives. In the final two chapters, Sethi rewards readers with a picture of what their “Rich Life” will look like: enough financial security to be able to choose whether to go on vacation or invest more in a given year; being able to help support aging parents; or being equipped to have emotionally intelligent conversations with a partner about finances. At the close of his book, Sethi draws readers’ attention to The Relationship Between Money and Fulfilment. He closes on the same note on which he opened: Living a rich life is not about being rich; it’s about using money to set yourself up to have the experiences and relationships that you will find fulfilling.
