Happy Wednesday, Wise Owl Nation.
It's April 15th, I am officially 30, and you are halfway through another week!
It is now time for your weekly dose of Wise Owl Wednesdays.
As always, this is a weekly email I send out to help us all become wiser, healthier and wealthier. You can find all past issues (including this one) here.
This weeks issue will cover the following:
- The quote of the week
- Part II of our review of "I Will Teach You To Be Rich"
- My weekly tips in wisdom, health, and wealth
- Your homework for the week
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Quote of the week:
Another quote on wealth to tie in with our review of a book on wealth.
If you aren't reading the book I hope this quote sparks a little wisdom in you. Always pay yourself first. When you make money, save a percentage of it always. Only then should you spend.
People are driven by their emotions, and few things in life flare up the emotions like money.
So do yourself a favor and follow Warren's advice to only spend what is left after saving.
Your bank account will thank you.
Book Of The Month
Every month I choose a book that can help you improve your life in one of three categories:
- Mind
- Body
- Bank account
Then I break it down over the month, giving my own thoughts in this format:
Week 1 - Introduce new book, talk about why it's great
Week 2 - Review the first third of the book and give takeaways
Week 3 - Review the second third of the book and give takeaways
Week 4 - Review the last third of the book and give takeaways.
This month's book focuses on your bank account.
How to get more $ into your bank account, how to get it to stay in your bank account, and where to put those $ so that you always have plenty of them.
Let's get started.
Book Of The Month for April - I Will Teach You To Be Rich by Ramit Sethi (2nd Edition)
Following our outlined schedule below I will be covering the first three chapters today.
Did you do last week's homework and buy the book!? If you haven't it is not too late.
Links to get this book:
** The links above are affiliate links. If you purchase the books with the links above, I receive a super tiny commission, which helps support this newsletter. Thank you! **
Last Week: April 8 - You can read it here
Chapter 1 - Optimize Credit CardsChapter 2 - Beat the BanksChapter 3 - Get Ready to Invest
This Week - April 15
- Chapter 4 - Conscious Spending
- Chapter 5 - Save While Sleeping
- Chapter 6 - The Myth of Financial Expertise
Final Week - April 22
- Chapter 7 - Investing Isn't Only For Rich People
- Chapter 8 - How to Maintain and Grow Your System
- Chapter 9 - A Rich Life
Chapter 4 - Conscious Spending
Overview: This is the longest chapter in the entire book for a good reason. This chapter will make or break your entire personal finance strategy. This chapter takes the cookie cutter advice of "make a budget" and throws it out the window.
It is an alternative spending philosophy that allows life to not suck while still allowing you to save and invest like a badass.
The core philosophy can be summarized by this one quote:
"Spend extravagantly on the things you love, and cut costs mercilessly on the things you don’t." - Ramit Sethi
This chapter is about choosing where to spend your money, but it is also about knowing how much is okay to spend each month. You are aiming to create what I call a "gap of opportunity" which will allow you to allocate money towards investments and guilt free spending.
You want to spend less than you earn, obviously, and this chapter really helps drill in the best ways to do that.
Key takeaways:
- Figure out your conscious spending plan by determining how much your fixed expenses are (rent, loans, food, etc)
- Decide to buy only the things you enjoy. Is it shoes, clothes, lattes, or maybe video games? That's fine. Whatever actually brings you some joy, don't feel guilty spending money on.
- Cut expenses mercilessly everywhere else to create a gap of opportunity.
- Create a 3-6 month emergency fund by allocating at least 10% of your income towards savings
- Then allocate that same 10% towards investments
- Allow 15-20% of income to go towards guilt free spending. Money is a tool to be used. So use it.
- Make small changes each month until you reach your target percentages
My thoughts - I hate budgeting, so this style of spending really resonates with me. I love buying things like books or eating out (doordash during the quarantine). So I cut expenses mercilessly everywhere else. For example.
- I don't have cable
- I never buy clothes. The only new clothes I get are on my birthday and on Christmas because they are gifts. Seriously.
- I travel maybe once a year out of state
Some additional thoughts and tricks
- I save/invest around 25% of my income. 10% is the starting place only. The more you save and invest, the earlier you "reach a level of f*ck you"
- My family and friends all split the major streaming services. My sister pays for Netflix and Hulu. I pay for Spotify, ESPN + and Disney + and my parents still have cable so we get access to HBO from them.
- Open multiple savings accounts with your online bank like Marcus by Goldman Sachs. Have different buckets of money for different things like Emergency Fund, Wedding Fund, New Car Fund, etc.
Chapter 5 - Save While Sleeping
Overview: Well last chapter was a monster, and this chapter helps you automate everything so you can maintain and improve the conscious spending habits you chose in chapter 4.
Ramit walks through how to link your accounts together to create a system that automatically moves your money where it is needed.
This is an image from the book:
This image showcases the basic breakdown of how this money system works.
Key takeaways:
- Humans are emotional creatures. Spending can be emotional. Automate your money to ensure you pay yourself first.
- You deserve to spend time doing things you love, not managing your money.
- Use a tool like Clarity Money or YNAB to list all of your accounts
- Link your accounts together so you can create the automatic money flow
- Automate sending $$ to your savings and investment accounts, paying off CCs and other bills
- Relax while your system takes care of itself, automatically building your rich life.
My thoughts: This shit works. I've used it for years and it's how I was able to stop stressing about money, pay off my student loan debt, and start aggressively investing.
I will walk through what I do each month to "save while I sleep." It's very similar to what the book prescribes.
- Every paycheck I get from my day job automatically takes out 6% then matches 6% and puts it in a 401k with Vanguard.
- I then (automatically) send money to my Emergency Fund, gift funds, and any other savings goals I have
- If I get any income from other sources I split it up: 20% goes towards savings/investments, 60% goes towards bills, then the final 20% is what I can spend on whatever
- Every week $50 is invested in Cryptocurrency automatically.
- Any interest my investments or crypto earns is automatically reinvested
- My credit cards automatically pay themselves off a few times a month
- I have alerts set up to yell at me if I start overspending in any area
The accounts I use:
- Clarity Money to view all of my finances (except crypto)
- A brick and mortar bank for my direct deposit
- Marcus by Goldman Sachs for my high interest savings accounts (emergency fund, etc)
- Coinbase to automatically purchase Bitcoin and Ethereum each week
- I use several Chase credit cards to maximize points. I make sure I never overspend.
- Also use an Amazon credit card for amazon purchases that provide 5% cash back and use that cash back to buy gifts for friends and family
- My 401k, IRA, and Roth IRA are all at Vanguard right now
- I am opening a self-directed IRA so I can add Crypto to my long term investments. This is an advanced thing and do not recommend for someone just setting up their finances.
Chapter 6 - The Myth of Financial Expertise
Overview: Humans are not perfect and all "experts" are human. This is especially true with financial experts. Ramit breaks down just how bad financial experts are at picking the right stocks, and how the fees they charge investors will destroy huge chunks of investor's returns over time.
So do your homework by reading this book, educate yourself, and stay away from the finance experts that just want to take your money.
As Naval Ravikant says - "There are no get rich quick schemes. That’s just someone else getting rich off you."
Key takeaways:
- Experts are overrated in many industries, especially finance
- Most mutual funds fail to beat the market consistently
- The fees of actively managed funds are ridiculously high
- Index Funds are cheap and consistently outperform other funds over the long term
- You can invest in index funds yourself, easily.
My thoughts:
This is the chapter that tells you to be wary of financial experts that are not a fiduciary. The next chapter will tell you how to actually invest your money.
Because of this book I have never hired a financial advisor. I've invested in index funds for the last 7-8 years and have paid attention to how the mutual funds have done. Index funds did better.
For those of you that are brand new to investing, or have a low risk tolerance, index funds are the right choice.
Of course, a few newsletters ago I mentioned that the next 50 years of finance cannot be predicted by the last 50 years, which is when Index Funds reigned.
The 2010's just ended. Were index funds the best performing asset of the last 10 years? Nope.
Bitcoin was. Some food for thought.
Book Homework:
- Buy the damn book if you haven't yet
- Create a conscious spending plan
- Automate your cash flow system
- Remind yourself that you can be your own financial advisor
- Fill out this 2-min Cryptocurrency survey if you are curious about crypto (The beginner course is in the works!)
Tips or Tools of the week: Wisdom, Health or Wealth
Each week I share either three tips or three tools that will help you become wiser, healthier, and wealthier.
Wisdom tip of the week: Make your world small.
- Only focus on stuff you can control
- Eat food that's in your house
- Sit quiet for five minutes
- Delete an annoying app from your phone
Health tip of the week: Drink water when you're hungry because you might actually thirsty.
I did this yesterday and it freaked me out. It allowed me to fast until 2pm when I normally eat around 11am. Pretty wild.
Wealth tip of the week: Again 98% of this week's newsletter was wealth tips, so I will keep this brief.
I would say fill out this 2-min Cryptocurrency survey if you are curious about crypto.
I am tired of the fear, uncertainty, and doubt that surrounds Bitcoin and other cryptocurrency. There is nothing to be afraid of a lot of amazing things to look forward to. So fill out the survey so I can make the best course for beginners possible.
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- Books I should review
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