I followed-up with Anil, the winner of the I Will Teach You To Be Rich book giveaway, on what his key takeaways from the book were (that’s also one way to ensure that the winners actually read the book!). Anil was kind enough to write a pretty detailed response that I’m posting as a guest post in Q & A format.
What are your Top-5 key takeaways from the IWTYTBR-book?
- Start early. In most cases, the investments which we make at the beginning of our career give the highest returns.
- Do not try to keep up with friends in terms of expenses. We, or rather I, tend to buy things which our friends bought. We do not know why they bought those things but we always want to keep up with friends. I have this habit and I’m still trying to get rid of it. A very good example is clothes. Most of my friends buy branded clothes. Though I like to dress simple, I buy branded clothes.
- Conscious spending. We really need to know what we are interested in buying and what we actually end up buying. In my case, I should track my expenses and find out where my money is going. I’m yet to figure out what’s needed and what’s unnecessary. It’s OK to spend guilt-free on something but it’s also important to cut down that money somewhere else.
- Save for a goal. When we save for a goal, we save more than when we save without a goal. It doesn’t make much sense if we’re saving without any goal. We can as well spend that money as we have not yet set goals. Goals could be anything like marriage, retirement, buying a home or car, taking a vacation or just about anything which requires more than your monthly take-home salary.
- Focus on the big wins. This is similar to me earlier comment on conscious spending. If we cut down our expenses on minor things we might not save much. We should rather focus rather on the big wins.
- Savings and checking accounts in the US are equivalent to savings and emergency account in my terms. Emergency account could be split between debt funds and a normal savings account. I have two savings accounts — ICICI and SBI. ICICI is like my checking account and SBI is my savings (emergency account).
- Get rid of emotions and do the calculations. A good example is about credit cards. The author has mentioned that he pays annual fees on credit cards because he accumulates more points which translate to more benefits. I never thought so. I always had the notion that I should not pay for something which is available for free. I should now compare holistically.
What is your overall assessment of the IWTYTBR-book?
The book was very simple to read and understand. Some of the chapters such as credit cards, IRA, 401(k) were not completely relevant but we could relate to those as we have similar equivalents. I liked the comparison between frugal people and cheap people. On reading the book, I could come to the conclusion that the US financial system thrives on defaulting customers. I also have felt that Indian Banks are a lot more mature — no overdraft charges, higher interest on savings account, etc. But the APR on credit cards in India is too high compared to that in the US.
The chapter on getting everything automated is tough. I have one question related to that. It’s easy to setup ECS for different things such as credit card, power bill, phone bill, etc. But the problem comes when the phone or other utilities are disconnected and the money is debited for that despite asking the bank to stop the ECS. I have read several such cases and for this reason I have never issued an ECS. I guess I’m deviating from the main point. Overall, the book had several lessons.
I now request you to pass the book on to someone you know who can benefit from it.