3 Simple Money Saving and Investing Hacks from Personal Finance Author Ramit Sethi
I previously came across a Personal Finance book on Amazon.com titled “I Will Teach You to be Rich” by author Ramit Sethi. The cover of the book has a picture of an Indian guy on it, and I thought to myself…this looks interesting.
I know a handful of people from India and they all seem to be excellent at managing money. Can he teach me the Indian secrets of becoming rich?
I purchased the book for 10 bucks and read the whole thing in two days.
I’m a lifelong learner. My learning habits didn’t stop in college. I read books on a regular basis to stimulate the synapses in my brain. If I come across some good information in a book, I’ll apply that knowledge into my life.
I enjoyed the information in Ramit’s book. Prior to reading the book, I was pretty good at managing my money. I was keeping track of my expenses and balancing my bank accounts with sniper accuracy.
However, it was really time consuming for me to look over all my accounts, transfer money from my checking account to my savings account, balancing all my accounts etc…I basically created a bookkeeping job for myself.
Ramit’s book was the answer to the missing pieces in my money management system.
I took many of the concepts presented in the book and applied them into action.
As a result, I was able to drastically reduce the time it took to manage my money. I now only spend a few minutes a day to look over my accounts.
I recommend you read the book if you’re serious about learning how to manage your money, because he offers a complete step by step blueprint for you to create a system to manage and invest your money.
I’ll share with you the 3 hacks I personally took and applied from the book.
Hack #1: Stay Away From the Big Corporate Banks and Start Banking Online
One of the most important lessons in the book was to avoid doing business with large corporate banks such as Bank of America and Wells Fargo.
These big giant corporations are notorious for making money off the little guys like you and I. They charge all types of unnecessary fees for their services and it’s basically to rip us off.
Instead, Ramit recommends opening up accounts with online banks or credit unions because they won’t nickel-and-dime you to death.
Online banks run their entire business with a lower overhead cost. Therefore, they’re not trying to squeeze every cent out of you in order to turn a profit.
Credit Unions are not-for-profit, and essentially exist just to serve their members. If you join a credit union, you become part owner/member.
I decided to closed my Wells Fargo checking and savings account. My Wells Fargo savings account would be charged $15 dollars a month if I didn’t maintain a minimum balance of $3,000.
You’re going to charge me a fee for handling my money…if I don’t give you enough money to hold? What kind of deal is that?!
I opted to go with an online bank for my checking account. I use an online military bank because I’m a military veteran, and they have really good customer service.
For an extra savings account and experimental purposes, I joined an online bank that Ramit recommends in his book.
I also joined a credit union for military personnel. My credit union is excellent whenever I need a loan. They offer outstanding interest rates, and I’ve never been denied a loan.
I conduct 99% of my banking online, without ever having to step foot inside a brick and mortar bank (This is VERY convenient).
If you have an account with one of the big for-profit corporate banks, Get away from them immediately!
Open an account with an online bank or a credit union in your local area. Stop wasting your precious time at the bank waiting to speak to a teller. Stop getting ripped off by service charges.
The book has a lot of great suggestions about choosing the right bank for your needs. Read it and decide what is best for you.
Hack #2: Fatten Your Savings Account on Autopilot
I’ve effortlessly saved over $3,600 dollars into a savings account in the first 6 months of taking action.
The secret to effortless saving is to set up automatic transactions between your checking and savings accounts.
I use automatic transfers to move money from my checking to one of my savings account. I don’t have to worry about anything.
I only have to log into my account periodically and check my balance to make sure everything is running smoothly.
EmigrantDirect offers an online savings account that I really like. It’s a high-interest savings account.
I earn 0.5% interest rate on my money (a higher rate than most savings accounts offered at other banks. Ramit actually recommends EmigrantDirect in his book).
Automatic savings is really great because it eliminates the process of overthinking things. I don’t have to spend my time thinking about transferring money from my checking account to my savings account every time I receive my pay check.
When I used to manually conduct transfers from my checking account to my savings, there was always an opportunity to second guess my decision to save.
Now, with my automatic savings plan, I don’t even get a chance to think about bailing on my savings goals. The money automatically gets withdrawn from my checking account and put into my savings before I even get to touch it.
It’s almost like having a personal banker managing it for me. I set it and forget it, and voila, there’s useful money in the future!
You should set up automatic transfers from your checking account to your savings account every payday.
The idea is to move the money into savings before you get a chance to spend it. The money you don’t see is money you won’t miss.
The amount you choose to save varies entirely on your life circumstances. but I recommend you to try to start saving 5% of your pay.
If you can’t do 5%, do 1%…the key is to just get it started!
If you need help with setting up automatic transfers, contact a customer service representative at your bank and tell them you need help setting up automatic transfers.
However, your bank probably gives you the option to do this online. Log into your account and look around.
Hack #3: Invest Regularly in the Stock Market to Get Rich
There’s a section in the book dedicated completely to investing in the stock market. I wasn’t an expert on investing, so I paid a lot of attention to this portion and gained a lot of valuable lessons from it.
I’m pretty fortunate to work for an employer that offers a 5% match to my retirement investment account (Free Money!!). I took the 5% match and contribute an additional 12% of my salary.
My contributions to this account are automatically deducted from my paycheck. The great thing about investing is the thought of compounding my money (Stacking My Dollars!!).
I currently invest 90% of my money into an Index fund that matches the S&P 500. The other 10% is invested in Government Bonds.
I’ll review my investments in a year and decide if I want to switch to something more aggressive.
I choose to invest my money in order to keep up with inflation. Money sitting in a regular savings account will eventually lose its value in the future due to inflation.
I expect my money to grow in an investment account, so I am looking forward to having over a million dollars in this account when I retire (I’m 31 years old at the time of this writing and plan to retire at 67…for now).
My recommendation to you: If your employer offers you a retirement account, then invest in it as much as possible. If you’re capable of maxing it out, you should do it.
If your employer doesn’t offer a retirement account, then you need to open up an IRA. I’ve used an IRA in the past with Fidelity, and I didn’t have any issues.
There’s a whole section in the book that explains what you need to know about investment accounts.
Your Turn to Take Action
This book added a lot value to my life. The automation portion alone freed up valuable time for me.
I used to spend a lot of time manually conducting transactions from checking to savings. Automation out performs the manual process every time.
I’ve established short-term and long-term savings goals. I’m continuously investing for retirement.
I smartened up and used ideas from the book to optimize my system. If you feel like your personal finances aren’t in order, then you need to read the book.
You will learn a thing or two…or three. It will definitely change your life.