Book summary of I Will Teach You to Be Rich

Your financial situation is ultimately in your own hands. Don't blame society, media, or others for your financial issues, anyone has the ability to save money wisely.
Young people should not let fear of losing money stop them from making the right financial decision. They are more risk tolerant because they have time to fix mistakes and they also have less to lose.
The 85% solution suggests that most young people fail to handle their finances because they think they must be experts. However, what matters is just taking immediate action, even if it's only 85% correct.
1. “Getting started is more important than becoming an expert.”
Your credit score can help you save money and build wealth. When you need to make a large purchase (e.g., house) you'll most likely need a loan (e.g., mortgage). Your credit score influences the loans and interest rates you can access. With good credit, you can qualify for lower interest rates, saving hundreds of thousands over time.
1. Someone with excellent credit may pay $359,867 for a $200,000 mortgage over 30 years compared to $430,427 for someone with poor credit -- a $70,560 difference.
Credit cards are key to building credit. To boost your score, pay down debts, make payments on time (use automatic payments to never miss a payment), and lower interest rates by negotiating with lenders. Seek cards with the best rewards. If you incur fees, you can often call to get them waived.
Getting out of debt boosts your credit and saves money. Do it in 5 steps:
1. Total your debt.
2. Focus on paying off one card first, either the highest APR (annual percentage rate of charge) or lowest balance.
3. Negotiate a lower APR to reduce interest.
4. Cut spending to free up more for payments.
5. Just start -- an imperfect plan now is better than no plan.
Have at least one checking account and one savings account. Checking account is for frequent withdrawals, a savings account is for future goals and plans.
Consider using online banks. Online banks can offer no fees and higher interest rates because they have minimal overhead costs compared to brick-and-mortar banks. Smart banking choices compound returns.
1. $50,000 in an online account at 4% yields $2,000 annually versus just $250 at a traditional bank's 0.5% rate.
Try to always have around $1,000 in your checking account for emergencies and to avoid overdraft fees.
Investing gives higher returns than savings due to compound interest (the interest you earn is added to your principal, so the next year you earn interest on that new higher amount). Longer time invested means more compound growth. So start early -- letting compounding work over decades yields far greater wealth than saving alone.
1. The stock market's average annual return is 8% after inflation.
2. Assuming 8% annual return, $1,000 becomes $46,901.61 in 50 years, thanks to compound interest.
A 401(k) retirement account through your employer is a good place to start investing. It offers tax breaks (money isn't taxed until withdrawal/pretax), potential employer matches, and easy automatic contributions from your paycheck.
1. Since a 401(k) is meant for retirement, withdrawing before age 59.5 triggers a 10% early penalty plus income tax.
2. Make sure to invest enough to get all of your employer's match. It's essentially free money.
Next open a Roth IRA on your own with an investment brokerage using your after-tax dollars. Unlike 401(k) withdrawals, Roth IRA earnings and withdrawals in retirement are tax-free. You can withdraw contributions without penalty, but not earnings. Start small if needed. Vanguard, Schwab, and Fidelity are good options.
Adopt a conscious spending plan to reduce guilt and align spending with your values. Automatically allot percentages for fixed costs, investments, savings, and guilt-free spending.
1. Example: 50-60% fixed costs (rent, food, utilities, debt), 5-10% savings, 10% long-term investments, 20-35% guilt-free spending.
2. “Spend extravagantly on the things you love, and cut costs mercilessly on the things you don't.”
3. “My friend Jim once called to tell me that he'd gotten a raise at work. On the same day, he moved into a smaller apartment. Why? Because he doesn't care very much about where he lives, but he loves spending money on camping and biking. That's called conscious spending.”
Automate your finances to effortlessly manage your money and maintain your goals.
1. Set up automatic payments for fixed costs and credit cards, and automatic transfers from checking to saving/investment accounts.
2. Use mid-month calendar reminders to track spending and ensure you stay within goals.
Funding an investment account is not the same as investing the money within it. If you automate 401(k) or IRA contributions but don't actually invest, the money just sits there earning nothing. This is a common costly mistake.
Start by learning about asset classes, the building blocks of investing.
1. Stocks are shares in a company whose value fluctuates based on performance and investor sentiment. Stocks are riskier but offer higher potential returns.
2. Bonds are more stable investments where you loan money to a government or company for a set repayment schedule. Bonds buffer against stock market volatility.
Don't get overwhelmed trying to pick individual stocks. Even experts can't predict performance consistently.
Invest in automatic lifecycle funds based on your age, also called target-date funds. They handle investing and risk balancing for you at a minimal cost. They automatically adjust your asset allocation appropriately from more stocks when younger to more bonds as you near retirement.
People over underestimate wedding costs. An average American wedding costs $35K. Start saving as soon as possible, before even getting engaged. Estimate your target wedding date, then divide expected costs by months until then to determine a monthly savings goal.
You have the most leverage to negotiate salary when first hired. Tips:
1. Emphasize the value you'll add, not your needs or how much it'll cost them.
2. Use other offers for leverage.
3. Negotiate total compensation -- vacation, stock, etc.
4. Stay friendly. You both want an agreement.
5. Make them give an offer first and keep your target salary quiet. Research compensation for comparable jobs.
6. Practice negotiating with others. It will feel awkward at first but makes you more confident.
When buying a car, determine your true monthly car budget including insurance, gas, parking, maintenance -- not just the car payment.
1. The best way to save on a car is to drive it as long as possible, so buy reliable cars and invest in maintenance.
2. Get quotes from dealerships at month's end when salespeople want to meet quotas. Use quotes to spark a bidding war for the best deal.
A house is generally the biggest purchase of your life. Be prepared and diligent.
1. Home ownership costs include mortgage, insurance, property taxes, and maintenance -- things you don't need to worry about when renting.
2. Home ownership costs should not exceed 30% of your monthly income.
3. Typically a 20% downpayment and 2-5% closing costs are required to purchase a house.

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