Bests & Worsts Reviews from Amazon

This is my new #1 recommendation for anyone seeking personal finance advice. This is definitely the best personal finance book I've read so far. It's a logical, step-by-step, practical handbook for financial success, specially written for people in their 20's. Sethi gives advice on “automatically enabling yourself to save, invest, and spend - enjoying it, not feeling guilty...because you’re spending only what you have.” His main point: automate your finances so you effortlessly save and invest, leaving you money to spend on things you love without feeling guilty. Automatic saving and investing helps overcome psychological barriers and laziness. In addition to his emphasis on automation, I agreed with Sethi’s recommendation for long-term, passive, buy-and-hold investing instead of speculative, market-timing investing. I also liked Sethi’s 85 Percent Solution, which states that it's better to act and get it 85% right than to do 0%; sometimes good enough is good enough, and it’s always better than doing nothing. Another good message is "spend extravagantly on the things you love, and cut costs mercilessly on the things you don't." That's valuable because everyone defines being "rich" differently, and it's not all about money. Money is just the tool we use to acquire the material possessions and experiences we want. That's the difference between being cheap and being frugal; being cheap is trying to cut spending on everything, and being frugal is cutting costs on the things you don't care about so that you can splurge on the things you do. I liked the concept of making a Conscious Spending Plan instead of a budget. Almost no one actually makes a budget, and even fewer follow it. Instead, consciously decide how you'll spend your money. I especially like this idea of guilt-free spending, because too often the recommendation is to limit all spending. But people in their 20s want to live it up, not sit at home and pinch every penny! The Conscious Spending Plan lets you spend a certain percentage of your money on whatever you want, without feeling guilty, since you’re paying yourself and your bills first. The book is written in the form of a 6-week action plan. Each chapter describes the tasks and reasoning behind them, and ends with a checklist of steps to take. Here are the weeks: Week 1: Credit Cards. Check your credit, pick a good credit card, set up automatic payments, pay off debt. Week 2: Bank Accounts. Open or assess your checking account, open and fund a high-interest savings account. Week 3: Investing Accounts. Open a 401(k), make a plan to pay off debt, open a Roth IRA and set up automatic payment. Week 4: Conscious Spending. Create a Conscious Spending Plan, track spending, and cut in the right places. Week 5: Automatic Money Flows. List and link accounts, then set up an Automatic Money Flow to automatically fund the 4 categories of your Conscious Spending Plan. Week 6: Investing Choices. Figure out your investing style, research investments, and buy funds. The book gives a fairly in-depth explanation of the concepts and fundamentals of personal finance, but also contains plenty of examples of actual bank accounts and funds. There are many references to the 2008 recession and other events, so those parts of the book didn't age well. Notes Personal Finance Ladder Rung 1: invest enough in 401(k) to get company match Rung 2: pay off debt Rung 3: invest as much as possible in Roth IRA Rung 4: put more into 401(k), as much as possible Rung 5: invest in non-retirement (taxable) account Conscious Spending Plan recommended percentages (save and invest more if possible) 50-60% on fixed costs 10% on long-term investments 5-10% on savings goals 20-35% on guilt-free spending Investing Use target-date funds or index funds. Invest aggressively in retirement accounts, since retirement is so distant. Recommended financial institutions: Vanguard, T. Rowe, Schwab Rebalance every 12-18 months by investing more in underperforming assets (not selling outperforming assets). Hold tax-inefficient (income-generating) assets like bonds in tax-advantaged accounts. Hold tax-efficient assets like index funds in taxable accounts. Choose funds based on: 1. Expense ratio 2. Asset allocation 3. 10-15 year return Model your portfolio after David Swenson’s Yale Endowment portfolio: 30% US stocks 15% developed international stocks 5% emerging market stocks 20% REITs 15% government bonds 15% TIPS Buying a house Houses are a poor investment compared to stocks; they’ve historically returned 0% after inflation. Before buying a house, determine the total monthly payment including mortgage, taxes, insurance, and maintenance. It should be less than 30% of your gross monthly income. The total house price should be less than 3 times your annual gross income. Buy a house only if you can live in it for 10 years. Make a 20% down payment and get a 30 year fixed rate mortgage. To be fair, I probably should have listened to this one, but I did many of the other things Sethi points out. Additional notes Use savings for goals less than 5 years away. Set your accounts for automatic deferrals, transfers, and payments to automatically direct money into retirement accounts, savings, bills, and a spending allowance. Negotiate a higher total compensation (salary plus benefits) by researching compensation for comparable jobs and proving the value you bring to the company. One thing I did was that I continuously talked to my friends about the book and we sat down together and completed a lot of the actions in sequence. By having those around me also aligned it made easier for me not to be tempted to go out. For example, we decided only to go out to eat for lunch once a week to stick to our plan. Sethi also gives many tools and recommendations throughout the book to help you accomplish your goals.