Personal finance expert Ramit Sethi is furious when faced with the notion that homeownership is the ultimate wealth-building investment.
“This is driving me crazy!” he exclaimed in July when he was a guest on entrepreneur Stephen Bartlett's podcast, “The Diary of a CEO.”
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Sethi added that owning a home “can be a very bad financial decision. And there are much better and much easier investments.”
It turns out that these investments have as much to do with personal values as they do with financial moves. Some involve smart spending.
Here's a summary of Sethi's personal money rules, excerpted from his best-selling book, “I'll Teach You to Get Rich.” Keep in mind that these apply to him, but can be adjusted as needed.
1. Always have an emergency fund for the year
Sethi acknowledged that a year's worth of emergency fund savings is “more conservative” than most financial experts recommend. But it will help him sleep better at night (and you can help too).
“It's in a savings account and it's fully liquid and that's what it's for,” he said.
2. Save 10% of your total annual income and invest 20%.
Mr. Sethi is a fan of investing in the S&P 500, which tracks the stock performance of 500 largest companies. The S&P 500 index has had its ups and downs, but since January 2019, investors have seen an increase of about 80%. He has more than tripled in the past 20 years.
3. Pay for large expenses in cash
Sethi said this includes major holidays, weddings and engagement rings.
“This is debatable,” he notes, but it also creates delayed gratification and avoids unsecured debt. Sethi sets goals for these expenses and saves every month.
4. I don't question spending money on books, appetizers, health, or donating to a friend's charity fundraiser.
Sethi has a rule when it comes to buying books: If you think you can learn at least one transformative thing from a book, then buy it.
but AppetizerMr. Sethi said that luxuries “feel incredibly rich” to him because when he was young, his family could not afford them.?
5. Book business class for flights with 4 or more passengers.
Yes, the seats are more expensive than economy. But the idea behind this counterintuitive strategy is “from contempt to curiosity,” he said.
Ask yourself if your company will cover the cost and/or if you can get there with less physical stress by flying.
read more: The Pennsylvania trio bought an abandoned school for $100,000 and turned it into a 31-unit apartment building.How to invest in real estate without all the hard work
6. Always buy the best and keep it for as long as possible
That doesn't mean spending a lot of money. Sethi is proud of his extremely reliable 17-year-old four-door Honda Accord. The savings you make from maintaining your car can also be put toward other places.
7. Don't limit spending on health care and education
Expanding your knowledge base will lead to greater success.
“I want to learn from great people” [finance] You can take accounting classes and become a teacher,” Sethi said.
Taking care of your health will lead to a better quality of life. For example, Sethi says getting help from a personal trainer can help with training and nutrition.
8. Earn enough to work only with people you respect and like.
“Who you surround yourself with is very important,” he noted. “Ideas permeate consciousness; values permeate.”
If you're having a bad experience at work, consider moving to a different department or a different boss.
9. Prioritize non-spreadsheet time
“Yes, you should know your numbers,” Sethi said on money matters.
But at some point, he emphasizes, it's time to turn the page and live a rich life with friends and family.
“I spend less than an hour a month managing my finances.”
10. Marry the right person
You never thought of this as a financial decision, right?
“Probably the most important thing of all,” Sethi said.
The partner you choose “will influence where you live, the home you buy, and how much you spend,” he argues.
Discuss money with your partner early and often to create harmony on one of life's most important issues.
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This article is for information only and should not be construed as advice. PROVIDED WITHOUT WARRANTY OF ANY KIND.
