Books, English

Can a Book Make You Rich? (I)

Managing works and projects is the daily task of every engineer. Although we also deal with costs in this management, we often do not apply such knowledge in our personal financial management. In that sense, there are several books on the subject, and one of them is “I will teach you to be rich” of the author Ramit Sethi (you can visit his website clicking here).

Ramit Sethi began by investing his first salary from his scholarship into stocks… resulting in his first loss (he lost half of his investment). That way, he realized that he could not simply invest, he would have to understand how the system works.

Graduated from Stanford, while studying psychology and human behavior, he noticed that the tips provided by experts did not work or even the experts themselves did not follow them. In this way, he began to gather and post his findings and launched the book “I will teach you to be rich”, which we will review in this text (and the next ones).

"I will teach you to be rich" book cover.
“I will teach you to be rich” book cover.

Credit Cards and Investments

 

In the first chapter, Ramit Sethi makes an extensive analysis of the use of credit cards. In the US, they have a score that indicates how “good payer” you are. Banks and lending agencies use this score to assess how much interest will be charged on a given loan.

In this way, if you have a high score, you will get lower an interest rate because the risk the bank will be undergoing is low – since you pay your bills on time. Now, if you do not pay your bills on time, or pay the minimum portion of your credit card, you are likely to pay high interest rates because of the high risk of someone lending money to you and you do not pay.

He continues talking about credit cards, the author shows that we should take advantage of them, especially if it’s about miles and points. Remember that you should use them wisely – and know how the system works, so we do not lose this “tug of war” against the banks.

Almost all bank fees are negotiable.

 After choosing the best credit card, Ramit poses that we should choose the best savings account – and start investing. If you really want to be rich, do not just put money in saving accounts, you need to invest it.

In this sense, the website “Clube dos Poupadores” makes an extensive comparison between saving accounts and funds and the text is worth reading. [Link – In portuguese]

Next, we present 5 steps that we must take to invest, in the form of a ladder, one step at a time. They are:

  • Investing in 401 (k)
  • Pay all your debts
  • Open a Roth IRA
  • Is there any money left? Invest again in the 401 (k)
  • Open another account to save your money, or consider investing in yourself, whether starting a business or investing in your education.

[…] consider investing in yourself: Whether it’s starting a company or getting an addictional degree, there’s no better investiment than your own career.

As the book was written with the North American reality in mind, we have some unfamiliar terms like 401 (k) and the Roth IRA for Brazilian people (they are two types of private retirement plans).

But even though it is aimed to the North Americans, there is so much that we can adapt to our reality, such as:

  • Investing in the long term;
  • Open a company (why not a startup?);
  • Negotiate your bank fees (negotiating is one of the great skills mencioned in this book).

And that’s only 1/3 of the book – follow us and know when the other parts will be ready.

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