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3 Tips on how I Will Teach You To Be Rich

Posted: March 20th, 2009 | Author: | Filed under: Uncategorized | 1 Comment »

Ramit gave a preview copy of his new book, I Will Teach You To Be Rich, to Kristine and I last week.  I didn’t think I’d read it, but on my way out for a trip to Pittsburgh, I grabbed it for some in-the-air reading.   I ended up digesting it in 3 days – it was a quick and engaging read.  I’ve heard many of the tips before, but never took much action, because this booked was to-the-point, it got me motivated.

After reading it, I’ve already taken the following steps:
1. Opened a rollover IRA for my old IBM 401k and opened a Roth IRA for new investments (thanks Ramit)
2. Opened a ‘fee-less’ checking account
3. I’m in the process of moving all my bills to my credit card.

I’ve done all of this on www.charlesschwab.com

1. Open a Roth IRA (and 401k if you can)
When I was at IBM, they had an employer match program for my 401k, so I maxed that out.  When I left, I didn’t think about it too much and didn’t keep investing.  But investing a little each month (even if it’s just $50) can have a huge benefit over 30-40 years.  I guess in the back of my mind it’s been, "Ohh, I’ll be super rich later and won’t need to worry about this."  But in reality, no matter what your income or investments look like in the future, it always helps to have a tax deferred or tax-less cashout on the order of a few hundred thousand to a million plus.

2. Stop paying fees on your checking account
Over a year ago, I got so fed up with Bank of America double charging me ATM fees that I switched to Citibank.  I literally walked across the street on Market St. in San Francisco from BoA to Citibank and said "Bank of America is chairing me fees for everything, what can you do for me."  They opened me a no fee checking account, or so I thought.  It seemed after a year, some of those fees started popping back up (I later learned it was only for a limited time.)  I’ve been okay with it, because the fees are minimal, but still annoying – such as a $10 hit if I use my overdraft.

Open a Charles Schwab Checking Account -> They REFUND ALL your ATM fees.
Kristine has told me about this for sometime now.  It can really improve your buying behavior by never worrying about where you’re getting cash – and it helps you from taking out a lot of cash that you’ll spend when ‘you get the opportunity’

3. Move all your bill payments to credit cards.
There are two main reasons to pay bills via credit card.
i) It will protect you in any dispute.  For instance, I still have a negative mark on my credit report by a Verizon charge-off because they raped me with fees and overcharges and I refused to pay.  Yes, I am that spiteful & stupid that I will allow a negative mark on my credit report just to stick it to the man.

ii) Points, which amount to little, but still on the order of 2-3% of what ever you’re spending.  If you travel a lot, Ramit recommends the Citi PremierPass Elite.  For $75/yr, it gives you points on ever dollar spent, every mile flown (even if it’s not you), and free companion fare in the U.S. on flights over $299.

I considered this, but the $299 compainon fare is a bit restrictive, you have to call a certain number to make reservations between 8-5pm CST, and I hear you have to do it months before.  So after opening a Charles Schwab Checking account, I added their 2% cashback card – instant into your checking account.
 
 

Bonus Tip: Another thing I’ve been doing and Ramit really talks about in the book, is to set up a REAL monthly budget and automatic payment system.  I’ve been doing this through a Google Spreadsheet for both joint expenses (Kristine & I) and personal expenses.  Make sure to include things like ‘savings’ and ‘shit that goes wrong’ each month, and you’ll have no problem covering that parking ticket or flight you want to take.  (ING sub-savings account are helpful here, Ramit has an example of this in action.)

Bonus Tip #2: Get yourself a copy of I Will Teach You To Be Rich.  I think it can make a great gift.

 


One Comment on “3 Tips on how I Will Teach You To Be Rich”

  1. 1 kadavy said at 9:57 am on March 20th, 2009:

    It might be a good time to distribute your IRA into your Roth IRA. Because 1) you won’t be taxed on the gains when you’re 59 1/2 (which will be a huge savings), and 2) because the value of your IRA will be TAXED as INCOME when you make this distribution, now is a good time for this, because the value of your IRA is probably artificially low (given the state of the economy).

     I did this last year. I’d rather be taxed on 8k of income this year than $100k (what that 8k will likely be worth) later on.


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