Financial Guru Review: Ramit Sethi

If you’re looking to get out of debt, organize your finances, and build wealth; you may be tempted to see what the financial gurus are saying on what to do. I do a financial guru review on some topics that are of concern to many of my readers.

Reviewing Ramit is bit different from the others, as I have been reading his blog for years. I received feedback from you to do a financial guru review for him. He’s the author of I Will Teach You to Be Rich (a book I reviewed here and made a video).

Ramit Sethi on Getting Out of Debt and Credit Cards

Ramit follows many other financial gurus who suggest paying off high interest debt before getting into investing.

• Calculate your debt: You have to look at how much debt you’re in with each company, the interest rate you’re paying on each card, and the minimum payments you’re required to make.
• Decide which method works best for you: Ramit weighs the pros and cons of Dave Ramsey’s debt snowball method and the standard highest interest first order. Ramsey’s way has a psychology boost, as you’re eliminating the accounts you quicker, but the interest based payment plan is better from a purely financial standpoint.
• Lower your credit cards’ interest rates: Going beyond just accelerating debt repayment, Ramit gives scripts on how you can speak with the customer service representative. I had called my credit card company a while back and had my interest rate lowered.
• Allocate your income to paying off the debt and get started: Ramit points out that you have to choose an expense cut that is sustainable until you can get the debt paid off. He also wants readers to not debate the meaningless details and just get started.

Ramit Sethi and Building Wealth

If you have to distill Sethi’s method on getting rich, it’s automating a sustainable system.  He is not looking for you to purge everything in your finances and have you live on beans and rice.  He wants you to spend money on what you (not what others say you should) love and “cut costs mercilessly” on things you don’t care about.

Ramit's system automates your transfers.

He outlines in his book and site the process you can take to streamline your finances.

• Find a bank/credit union that will not fee you constantly. Consider online banks to see if they it your needs. Make sure the bank/credit union has free online billpay. Don’t waste time chasing rates or being enticed by teaser specials some banks put out.
• Create a conscious spend planning. He breaks the plan into several categories: fixed costs (50-60%), investments(10%), savings (5-10%), and spending money (20-35%).
• Set goals that be achieved sustainably. For example, Ramit shows how he decreased his eating out budget in half over the course of six months. If you just cut immediately, there is a high chance that you won’t keep that goal.
• Look for ways to increase your income. I agree with Ramit that just cutting costs can only get you so far. He gives you a script in his book on how to prepare for compensation review. Having side income is important and Ramit has tips on where you can start.
• He then has your link your accounts. Ramit has specific plans on how to set up your automatic transfers. His guest post on Four Hour Work Week details his automation plan a bit more.

What Ramit Sethi Says About Buying a Home

First off, Sethi wants you to examine why you want to buy a house. Do you want a place to own or are you looking for an investment? He expects you to run the numbers thoroughly because this is probably the biggest purchase you’ll make. He argues that too many people rush into buying a home with being financially prepared.

For those that argue that owning is better than renting, Ramit gives reason why that is not always the case. He debunks some myths on real estate’s investment potential and offers a rent vs buy calculator. If you do have a mortgage, Ramit offers optimization tips on decreasing the amount of interest you’d pay.

My Thoughts On Ramit Sethi

I find many of Ramit’s thoughts on personal finance to be sound. So many times on personal finance blogs, mine included, little tidbits are debated or discussed. The real decisions, though, are eliminating high interest debt, saving early for retirement, plan ahead for big expenses, and handling your finances in way that works for you.

Free coffee at McDonalds is nice, but you’re not going to make a big improvement to your finances based on small tips. You’ll improve on your finances by making small sustainable changes and looking for big wins. Take care of that and you can have fun comparing interest rates at online banks.

What are your Thoughts?

Do you listen to financial gurus’ money advice? If so, which one? If not, why? Is there a financial guru you’d like me to review?

• Financial Guru Review: J.D. Roth This week’s Financial Guru Review is about J.D. Roth. He's the personal finance blogger over at Get Rich Slowly. He's very popular in the persnal finance blog niche and has been around for many years. His mantra for his personal finance is " do what works for you". He doesn't......
• Guide to Fixing Your Credit Report and Raising Your Score Sometimes I get questions sent to me through the email. Some questions are very specific and some a bit more universal. /caption] Reader Asks a Question About Credit Reports One question I received through email this week was about credit reports and scores. Here's the gist of the question: Should......

• Money, Mathematics, and Personal Behavior – Dave Ramsey is Right! Dave Ramsey has had a great amount of success with his radio show that teaches good old fashioned common sense financial advice. He is certainly not without his detractors though. There are a lot of people who describe his advice as out of the main stream and mathematically incorrect. Both......
• Reader Tip: Pay Your Bills as They Arrive Andy sent me a tip by e-mail the other day. This isn’t long enough to be a reader story, but I think it’ll be useful advice for some GRS readers. Andy says he’s learned that if he pays his bills as they arrive, he feels a lot less stressed than......