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Book Review: Will This Guy Really Teach You to be Rich?

Part of my duty to you as Mr. Money Mustache is to research the entire field of personal finance and investing, and report back to you with any significant findings. We need to know if there are any competing ideas, bloggers, or book authors that have something valuable to offer us. We also need to know when there are silly and Anti-Mustachian ideas in circulation that need to be mocked.

So today I must make a little confession to you. Ever since I wrote the Frugality as a Muscle article back in June, I have had a secret obsession with Ramit Sethi. I think I really like the guy, based on his writing style and the fact that he makes everything exciting with his habit of thinking big. He’s also quite hilarious, in that “witty and tenacious Indian guy who pokes fun at the tenacious nature of Indian people” way. For example, one of his primary pieces of advice for tricky situations is “Negotiate like an Indian”. Another recommendation is that during a conversation with a friend in a coffee shop, you should turn and throw your muffin across the room so it smashes into pieces against the wall, then turn back to them with wide eyes and yell, “DO YOU DOLLAR COST AVERAGE!?!?!”.

I feel right at home with this vibe, because many of my university friends and engineering coworkers had moved here from India and they had the same energy. And Mrs. Money Mustache herself is 50% derived from an Indian background, and thus even my son has scored a 25% share. Meaning we all get a refresher course in the whole Devoted Immigrant Entrepreneur culture whenever we visit her folks back in Canada.

Despite the many positive things I have to say about the guy, if Ramit Sethi and Mr. Money Mustache ever meet in person I fear a deep crack will form in the dry earth beneath our feet and a great chasm will open up, leaving Ramit tottering dangerously on one side while I stand solidly on the other. This is because of our deep philosophical divisions on the role of frugality and efficient living in a rich person’s life.

To resolve all of my waffling between admiration and scorn (and perhaps yours as well), I decided to actually take the time to read his entire book, called “I Will Teach You to Be Rich”. I wanted to see if he could convince me to change my opinion, if I spent ten hours poring over his masterpiece. So let’s see what he had to say.

What it boils down to seems to be,

  • Get out of Debt
  • Set up automatic payroll deductions and bank account transfers so that you end up saving some of your earnings (including investing in index funds)
  • Get in the habit of actually phoning your service companies (phone, insurance, credit card, cable) to ask them for better service and interest rates
  • Get better negotiating and job-hunting skills so you can score better jobs and positions in your jobs

Doing useful things like these is called “Focus on the Big Wins”, and his enticement is that if you do these things, you can afford to spend the rest of your money on the “things you love”, guilt-free.

It all sounds sensible, and I believe Mr. Sethi deliberately made it a minimalist plan because his target audience is partly fresh-out-of-college kids with credit card debt and a Spring Break/Daddy’s Credit Card/Bikinis/Jeep-Wrangler-With-an-Automatic-Transmission-Cruising-the-Strip-on-South-Padre-Island  level of financial sophistication. He points out that since most people do absolutely nothing with their finances, and end up flushed down a toilet of debt, then by just learning these basics, you’ll be better off than 90% of the population.

In many situations, I’d be happy to be in the top 10%. But when it comes to financial skills and early retirement, we need to move that decimal point over a few places to the left. Self-made financial independence at a young age is not difficult in this country… but yet I’ve noticed it is incredibly rare. That’s why you’re reading Mr. Money Mustache, right?

If I had kept my job and started a blog about how I was busily spending all of my nice office worker salary, nobody would want to read about it. But since I’m the one freaky guy who DIDN’T buy quite as many cars and televisions as everyone else, then it’s a more interesting story. “Hey.. wait a minute.. you’re saying WHAT happens if I don’t spend all my money? I get to quit working and do whatever I want? Well shit, why didn’t anyone tell me that before!?!”

But in this book, you won’t find that option presented. Check out, for example the rough guide of how much of your money should automatically go to various places:

  • Fixed Costs (rent, food, “car payments”, internet, phone, etc): 50-60%
  • Investments (savings): 10%
  • Savings for additional special spending (vacations, wedding, downpayment on house): 5-10%
  • Guilt-free spending on the things you love: 20-35%

Again I can see what he’s getting at – saving 10% is better than what most people do – but by planting the idea that you spend 90% of what you earn, and only save 10%, he’s automatically setting someone up for about a 50-year working career. Even if he moved another 10% from the other categories over to “Investing” to yield a 20% savings rate, you would have cut the career from 50 years down to 36.

Young minds are impressionable. You can plant the idea of Lifelong Firehose Spending, or a Big Money Mustache, and either one will take hold. I’ve heard from 18 and 19-year-olds that have just become excited about saving and investing instead of borrowing for that first 1.9% interest pickup truck they were previously interested in, and it warms my heart.

Just a few more quotes and facts from the book that illustrate our differences:

  • “In investing, all we need to know is a few smart things to invest in, then we need to go away and let our money grow for thirty years”
  • Even after becoming a personal finance blogger, he bought himself a new Honda Accord on credit with a 4.9% dealer loan
  • A story is told about a friend with $3000 in credit card debt, who spends $650 per month going out to restaurants. The advice was to call the credit card company to drop the interest rate on the balance from 18% to 15% so that the balance could be paid off in 18 instead of 22 years
  • He points out that weddings cost an average of $28,000. Then he provides a table of how to save for a wedding of this cost ($333 per month for 7 years starting at age 21).

I understand that the psychology behind some of the weaker ideas is, “People are just weak-minded flabby zombies and you can’t expect them to exercise self control. The best you can do is to get them to make tiny, automatic changes to their lives. Baby Steps”.

But I also understand there is some value to providing a good role model. Instead of telling people a few small tips, why not provide a complete role model that completely shocks people out of complacency, like the idea that you can become FREE 30-50 years earlier if you set yourself free right now from the idea that spending is a source of happiness?

“Spend on the things you love” sounds like a nice soul-satisfying message, unless you pause for a while and think, “Wait a minute – what if I don’t love THINGS? What if I’d rather Spend time on the things I love, rather than spending large sums of money on them? What if my spending level and happiness are actually completely unrelated?

So the personal finance part of the book is clearly Anti-Mustachian, just as I expected. At best, it should be called “I Will Teach You to Stay Out Of Trouble”.  But let’s move on to the last third of the book – what I consider the good part.

Ramit is a super-hard-working entrepreneur. He comes up with neat ideas, plans and develops the shit out of them, then finds ways to package them up nice and clean and simple and get people excited about them. He demonstrated this skill first by applying for and winning $200,000 of obscure college scholarships to allow himself to go to Stanford University for free, then by starting his now-famous blog about six years ago, then writing a book that he pushed into massive popularity, not to mention making all sorts of entertaining YouTube videos and television appearances on big nationwide shows. Every time I look at his site, there is something else new that he’s up to.

In the book, he shares some tips on how to apply the same attitude towards getting a job and negotiating a salary. There’s a nice example about how one of his friends did really extensive background research on a company before going in for her first interview for a marketing position. She also had prepared three fancy campaign ideas and even practiced the presentation and the speeches with him before going to the interview. Because she did so much more than the other candidates, she blew them away and got the job and a huge raise. But the actual work involved was only about 30 hours – for a $30,000 raise. His quote on this type of activity is very wise: “It’s the behind-the-scenes work that really makes you rich”. It might be grueling and not very fun, but taking the time to truly impress important people with more influence than yourself, and then get up in their face so they can give you a helping hand upwards, really is the highest-paid work a corporate worker can do on an hourly basis.

It’s just a matter of what you do AFTER that, that makes all the difference. By working hard and working smart, you can earn an ever-higher income. But a high level of income doesn’t make you rich. A high level of investments, which work for you even when you are sleeping, and compound like a snowball on a steep hill, is what makes you rich.  Investments are equal to earning minus spending. If your spending goes up with your income, you don’t get to retire any sooner.

So I’m sticking to my guns: work hard, save harder, become financially independent, THEN start doing the work you love for the rest of your life, without such a strong burden of materialism distracting you. You’ll have the freedom to pursue your passion, and income will just be an interesting side-effect rather than a constant requirement.

Is the book still worth reading? Yes – especially if you are a financial beginner, and especially since books are free to those following the Mustachian way of using the library. I’d just suggest reading it with a side dish of triple M.

And even after all of this, I still secretly want to go eat chicken wings and drink beer with Ramit in San Francisco someday.

 

  • Rich Schmidt November 6, 2011, 4:38 am

    Good book review!

    I imagine you and Ramit will appeal to different audiences… at least initially. For some people, Ramit will grab their attention & help them make some significant progress financially… and then after they’ve grown accustomed to their new financial lifestyle, may be ready for your Mustachian wisdom. And who knows… there might be others out there who feel so intimidated by your luxurious ‘stache that they feel they can never pull it off… but find Ramit’s advice and standards to be within their reach.

    Do you have plans to expand your Mustachian empire to include email newsletters, books, coaching, webcasts, courses, etc, like Ramit has?

    Reply
    • MMM November 6, 2011, 12:06 pm

      Expanding the Mustachian empire to sell stuff? Definitely not!

      It’s not that I think there’s anything wrong with those activities. It just seems that trying to find ways to get people to give me money, would be a distraction from the fun of working on becoming a better Mr. Money Mustache.

      It all goes along with this philosophy I’m preaching of not always wanting more money and higher spending levels. I have plenty of money to live on, so all future decisions must not be made based on whether or not I can earn money from them.

      I will admit that I do like joking around with people in real life, rather than just typing stuff into the computer like this.. So someday I might do something like an MMM channel on YouTube where we visit un-mustachian households and give them some schooling.. Things that spread the word without becoming too commercial would be fun. I’d need to be allowed to keep swearing, of course.

      Reply
      • JAB November 14, 2011, 1:12 pm

        Never say, “Definitely not! “

        Reply
  • Mark Y. November 6, 2011, 5:56 am

    I like Ramit’s focus on the increasing income side of things. As someone who makes 20K/year, while only spending 10-12K, I could reach my retirement goals a lot quicker by increasing income rather than cutting spending more (which I am going to do anyway). I set up the automatic investing scheme he had, but I increased the percents much higher, with 40% going straight to investments / savings.

    Reply
    • MMM November 6, 2011, 12:11 pm

      Excellent Mark! Yeah, I think that having people focus on increasing their income up to a certain point is very valid – I’d personally set the upper limit of usefulness as somewhere around $100k per person.

      Once you’re there, you are already in a territory that lets you retire in well under 10 years, so focusing on even more income is only going to slice a very short time off of the financial independence race. And once you have financial independence, income is irrelevant – you can still focus on achieving more and having more fun, but the money part is just numbers.

      … Unless you are so hooked on spending that you always need more – which is the case for most people and which is the reason Mr. Money Mustache is typing this blog.

      Reply
  • rjack November 6, 2011, 6:14 am

    About the only thing I hadn’t heard before was…

    “Get in the habit of actually phoning your service companies (phone, insurance, credit card, cable) to ask them for better service and interest rates”

    I assume that you mean “rates” instead of “interest rates”?

    Reply
    • MMM November 6, 2011, 12:13 pm

      Well, I meant “rates” for the phone, insurance, cable, but “interest rates” for the credit cards.

      He suggests negotiating lower interest rates on the credit card, whereas I suggest never running a balance on a credit card.. to the point where if you have one, you go into hobo mode and move into someone’s basement until you get rid of that ridiculous debt.

      Reply
  • AGil November 6, 2011, 7:23 am

    Rich, I think people are weak and just cannot do it. Perhaps the main issue with Americans and most other rich nations is that they very impressionable by the media and cannot find happiness if it does not involve buying what they tell you to buy and doing what they tell you to do. Personally, I have spent my share of money in my late teens and early twenties and found that it is just a hamsters wheel of never ending quick bursts of joy. Thanks MMM for reading this book for me, no need to pick it up.

    Reply
  • Joe O. November 6, 2011, 8:20 am

    Huzzah! This book review was great.

    I’ve long agreed that Ramit’s “focus on the big wins” isn’t enough, that one can focus on living simpler instead of doing the big wins and then spending a load of money on stuff that doesn’t really make one happy.

    When I saw you post about IWTYTBR, I was worried you would cave (somewhat), because he has a big following, in order to not piss off his followers.

    But your review was spot on.

    Thanks for sticking to your guns.

    Ramit has a few good ideas, but his overall philosophy is flawed (too simplistic for the sake of soundbites/sales).

    MMM’s way is superior, and glad you’re willing to not cave for a more “popular” way.

    Reply
    • MMM November 6, 2011, 12:20 pm

      Yeah, the biggest difference is in our definition of what is a “Big win”. A person earning 60k and spending 60k can take two paths.

      Ramit: Work extra to start earning 80k, and make a few easy tweaks to start saving 8k per year

      Mustache: Start by fixing your lifestyle so it costs 30k, and start saving 30k per year.

      MEANWHILE, become great at your job and move up to also start earning 80k. Sure, let’s say it takes some effort to build your frugality muscle and you don’t start earning the 80k until a few years later than the Ramit way.

      The Ramit follower still needs to generate passive income of 72k/year before he can retire. The Mustachian wins the race by many decades, because he is independent as soon as his investments are paying 30k/year.

      There’s just no arguing which way is better, unless you are a Consumer Sukka that thinks spending $72,000 per person per year will make you happier than spending $30,000. (And once again, I’m spending $8k per person per year and live like a king).

      Reply
  • ams November 6, 2011, 9:28 am

    Hi MMM,

    I’m a new reader of your blog, and I have really loved reading what I consider an “ethical” approach to personal finance- getting ahead financially without the concomitant entitlement to massive consumption that that usually goes with (ie. the american dream, “I want lots of money so I can buy lots of shit”). The focus on the environment also hits all the right notes.

    This book review brings up a question for me: What advice do you have for those of us who are still students? My husband and I are on opposite sides of 30, and finishing up big degrees. I’ll be an MD in 1.5 years, and can look forward to a long satisfying career, over which I will have a lot of control, and for which I will be well paid. He is finishing up a PhD in the environmental sciences, can look forward to a long satisfying career, but will probably not earn too much. We share common goals of putting life ahead of work, taking time off for kids, working part time sooner rather than later, etc.

    He is already basically a non-consumer (this ties in with the environment), and I am reforming…slowly. Our debt is very low for someone at our stage of education. He has no debt whatsoever. I carry student loans which will be forgiven if I practice in a rural community- which we plan to do. We got married and turned a profit, have a craigslist car, live in the cheapest student housing, etc.

    Our biggest weakness is our ignorance of the financial system in general. Neither of us come from the middle class, and we don’t know anyone who invests. In fact, we’ve both always considered investing somewhat evil, and are reluctant to get involved. Do you have any tips on how to 1) put us in the best position at graduation to start becoming financially healthy, 2) educate ourselves about savings, investments, etc.?

    Any advice would be greatly appreciated! To show my gratitude, here is one of my favourite cost-cutting tips: get yourself a pressure cooker. We eat beans as a staple, and if you buy them dried and cut out soaking and endless hours of boiling you’re much more likely to actually eat them on the regular. We get our beans and spices from an indian store here, and can make 2.5 days of absolutely delicious, healthy food for under two dollars. Although, if Mrs MM is of indian descent, I guess she’s already down with this?

    Reply
    • MMM November 6, 2011, 12:30 pm

      That is so interesting! Before starting this blog, I didn’t even know that there was a group of people that thought investing was evil. Now I have heard this several times in emails and your comment.

      I think people are getting the basic financial system (capitalism, which is not evil) mixed up with the actions of a powerful minority of large business owners and politicians (who have an unending level of greed for money, regardless of consequences to the environment or other people – which is evil).

      Note that most business owners and politicians are not in this category – they are great people who just happen to work hard and end up earning lots of money for it. The most extreme example being Warren Buffett. But the actions of the crooks like the Enron guys and various characters in the news today ruin the reputation of businesspeople in the public’s eye.

      Back to your investing question – what you need is BOOKS. You could start by checking out “A Random Walk Down Wall Street” from the library, and also read “Economics Explained”, which I reviewed earlier in this blog. For a really fun simple starter on stock investing, read “The Little Book that Beats the Market” – but be sure to also read the random walk one above as a counterbalance.

      Reply
    • BobTX June 4, 2013, 9:13 am

      Nearly two years later, but I’m reading through the blog from the beginning, and I can’t help commenting that it appears my wife and I have alter egos who found this blog a lot earlier than us (or we’re your alternates – whatever)!

      We’re an MD (my wife) and an ecologist/evolutionary biologist (and we’re roughly the same ages, and exact same career timing as you) who apparently were practicing Mustachians without knowing that there was a label and fun online community for it until this last month or so.

      (Rarely used cheap efficient Craiglist car for needs beyond our walk/bike commuting, free healthy outdoor hobbies, rapidly paying down the portion of student debt we couldn’t pay as we went on the medical training, living rich & happy non-consumer people-focused lives in our cheap as dirt 300sqft apt while all my wife’s peers built even larger mountains of debt by adopting the “doctor-scale lifestyles” before they even started earning those doctor salaries. We’re free to start really earning as of now, but really are perfectly content with our current lifestyle, and feel great about how low our energy and resource use is – we’re not going to change anything for years to come.).

      Like you, it was not just for the should-be-obvious-to-everyone financial benefits of living ridiculously cheap while socking it away, but also for the clear environmental imperative that ideally everyone should all recognize to consume less crap. (We also have done a lot of international development work in third world countries, which really throws light on just how ridiculously even particularly spending averse members of the tribe of “poor grad students” live in our country compared to much of humanity).

      Anyway, I don’t have anything that intelligent to say here, other than that I thought the parallel between our situations was too cool to not comment on. I hope figuring out investing basics has gone well. Everything I’m seeing on this blog jives very well with what I’ve learned up to this point from a dad who is an investing wizard. I’ve even learned a few new tricks here, and have gotten a bit more interested in the whole rental property thing – thanks MMM!

      Reply
  • Dancedancekj November 6, 2011, 10:27 am

    Haha, you should do “Rich Dad, Poor Dad” next. The author is coming on tour to my city, makes me cringe whenever I’m at work and I hear “Learn why saving money won’t make you rich or retire early.”
    (I’m not actually serious, since I think one of the reasons I like MMM is its unwavering and nonpartisan focus on the Way of the Mustache, not reasons why the Mustache is superior to others. Still makes me wish a tiny bit I could just stand up whenever it plays and shout “Yes it will! The Mustache shall prevail!!!” )

    Reply
  • Value Indexer November 6, 2011, 11:35 am

    Ramit’s blog was one of the first I started reading (long ago), and he’s contributed to my success. I’m guessing that 0.01% of the population couldn’t benefit from some of his advice. It’s good to see that more people are hearing about him now.

    One thing I figured out a while ago (maybe influenced in part by Ramit) is that I don’t want to work hard, save hard, and retire early. Depending on how you interpret it that can mean “do what you don’t want to do now so you can do what you want later”. I converted instead to “do what you want, just a bit more slowly while continually improving your finances”.

    That might mean spending money on what you love, or just spending time on it and accepting that you won’t be completely independent at 30 because you didn’t work 12 hours a day. Funnily enough once I “retired” from getting rich quick it turned out that I started doing things with better potential for future income :) Some people need strong pressure to get them to act but it doesn’t work as well for me.

    Reply
  • Quentin Hartman November 6, 2011, 3:54 pm

    I haven’t read Ramit’s work at all, but based on your synopsis, he’s advocating more-or-less what my parents taught me about managing my money, and more-or-less how I’ve lived since I got out of college. After about 11 years of working for about $55k a year on average, my wife and I have a net worth of about $40k put together. We’ve probably been saving a bit less than the 10% he advocates and we took a BIG hit when the housing market imploded.

    That strategy doesn’t work. The MMM way of doing things gave me a big “Aha!” moment in the form of a plan that fits my value system pretty well and is simple enough to not be intimidating, and would have yielded much better results. Looking back at what some very non-Mustachian decisions cost us is embarrassing. If I had known this way of doing things (and frankly, paid more attention to my wife) things would be very different now. I did some back of the napkin figuring the other day and if my fairly conservative numbers were right we’d be sitting on more like $300k right now if we had started living this way when we got married.

    Now that we have a daughter, I think the biggest gift I can give her is teaching her how to live like this so she can get started earlier than we did and get spend more of her life living and less of it working.

    Reply
    • Nerode November 7, 2011, 3:46 pm

      Quentin, kudos for admitting your wife’s advice was good – I hope you’ve told her as well as us!

      Secondly, recognising your comments to do with ‘if only I knew this earlier’ as being true for me too, I can only say “it’s never to late to do it right”. And we have the advantage over the youngest here in KNOWING that the ‘normal’ approach fails.

      Reply
      • qhartman November 7, 2011, 5:21 pm

        Indeed I have. In fact we had an extended discussion the other night about how my “buying stuff equals happiness” mentality was really undermining our goals, and I had managed over time to nearly turn her over to “the dark side”. She is fully appreciating my reformed perspective.

        Reply
      • Grant November 8, 2011, 5:52 am

        How does the saying go? The best time to start is yesterday. The second best time to start is today…

        Reply
  • Gerard November 6, 2011, 4:12 pm

    I had never heard of this guy until this review… maybe I live under a rock. I just had a look at his site and he can’t get through a couple of paragraphs without shilling his thousand dollar seminar. Turned me right off. Reminded me of those televangelists who say “God is all-powerful and all-knowing and needs you to send me a hundred dollars.”

    Reply
  • burntout November 6, 2011, 9:33 pm

    From another indian guy .. I dont think Ramit is aggressive enough. His advice maybe good for the average joe, but not for the early retirement enthusiasts. I think Jacob is a much better role model for folks like us (and of course Mr MMM)

    Reply
    • Christine Wilson November 7, 2011, 10:48 am

      Hi Burnout!

      Who’s Jacob please? :)

      Reply
      • Brave New Life November 7, 2011, 11:09 am

        earlyretirementextreme.com

        Reply
        • Christine Wilson November 7, 2011, 11:30 am

          Thanks!

          BTW – What’s with Ramit’s “give me.. 7k to 12k (i forget the exact amount) and i will show you how to get your dream job”? That seemed rather scammy to me…

          Reply
          • Jack H. November 7, 2011, 12:22 pm

            Why is that scammy?

            Reply
  • Matt November 7, 2011, 10:15 am

    I’m not sure if it’s insecurity or the tribe mentality but being too far off from the group makes everyone nervous. Ramit has created a brand for the masses and hasn’t ruffled too many feathers. Too much uniqueness scares people and they will strive to pull you back to the group. Social markers like ownership in the same shit makes everyone feel like they’re all on the same boat and safe, even if the ship is sinking.

    Great review by the way. You nailed it.

    Reply
  • Christine Wilson November 7, 2011, 10:46 am

    Hi MM,

    I think that baby steps are fine. When I read about behavioral psychology it suggests that baby steps can be the easiest way to change behavior. That and hanging out with people who are already doing the things you want to do. We are influenced by our friends and society. However, blogs like Ramit’s stay at baby step #1. I understand what you are saying though because the people who read about saving 10% may not understand that they can and should do more after they’ve conquered the first steps!

    Reply
    • Tanner November 7, 2011, 3:18 pm

      I’m not a fan of the baby step method. If something needs to change, I think you should go all in. I have seen to many people and companies try the babystep method of change only to never achieve the change they intended in the first place. The first baby step causes a little pain and they freeze. I’ve seen this cost companies I have worked for millions of dollars in lost productivity and moral. I have also seen the opposite, people and comapnies go extreme, draw a line in the sand and say we are changind “X” by this date no matter what. In my company some people got upset and uncomfortable, while others that yearned for things better, lived up to the challenge to make the company better.

      I say if something needs to change, change as much as you can at once or as quickly as posible. The pain is a lot more at first but then you get over it quickly and ‘adapt’ a term that MMM would use. In my experience the payoffs outweigh babysteps; and even if it doesn’t work out you learn to better ‘adapt’ to changes in the future which is invaluable.

      An extreme example; think about the American Debt? Unless someone steps up and says enough and starts doing something, its going to keep getting worse. Baby Step aren’t working. Just my 2cents

      Reply
      • Christine Wilson November 7, 2011, 3:46 pm

        Well I do agree that Ramit’s blog falls short – it gives a few steps and says “Okay you’re done and perfect as you are!”.

        I also believe in a step system for anyone learning to do something new for the first time. I think it allows focus on mastering a few skills well before moving on to the next level. I think psychologically when someone only sees the entire picture it can make them freeze. However if you break it up into manageable chunks, this helps the person feel that each task is possible and keeps the person focused and motivated so they can learn. Then they finish and you up the level. Another thing that steps allow you to do is allow the person to master a skill to the point where they can streamline a process.

        I would agree that the American debt could be handled in a more aggressive manner. I don’t know if that’s wise from an Economic perspective because I’m not an economist (but I digress)

        The difference between individuals in congress and kids fresh out of college is they’re not learning to manage their finances for the first time. I think there is a difference between how an experienced company or government handles implementing change and how a individual learns a new skill.

        Reply
        • Tanner November 13, 2011, 10:14 pm

          I was reading ERE for the first time and had to nod in agreement to this: “Don’t worry. There will be no cutting back in this program. Instead things will be cut away completely . Trust me on this one: It is much easier to deal psychologically with not having access at all compared to having restricted access. Restricted access only serves as a constant reminder of what you are missing. No access on the other hand changes your priorities and values and soon those are seen as the ideal state and your previous state is seen as something undesirable.

          There won’t be any small baby steps either. Although it is of course strictly up to people to adopt what they want, I favor an all or nothing, that is, an extreme approach. A Blitz Krieg of shock and awe if you will. Attacking full force on several points leads to synergy. ”

          I know you may disagree with this type of thinking, but in my experience I tend to agree with his opinion.

          Reply
  • Yabusame November 7, 2011, 2:53 pm

    I’ve looked at Ramit’s blog a few times but the hard sell always puts me off. Seeing MMM’s suggestions to AMS post above is more like it.

    I’m 40 and I feel like I’ve come to this party late, but better late than never. About 10 years ago I started investing in the FTSE All Share index. My plan was to start investing in a High Yield Portfolio when I had more available. Anyway, two years ago. Bought a house with my partner so I cashed in my Index Tracker and used the funds as a deposit. Over the next year I built up some credit card debt furnishing the house. I got gazelle-intense (ala Dave Ramsey) on that debt and it is now paid off. I’m back to thinking about long term investing, only this time I have an end goal. This time I want Financial Independence and to retire early.

    Rather than just socking my money away because I think it’s a good idea, now I want to put it in investments that work that money and make it grow.

    My only worry is, what to invest in? Books are probably where I should start so I’ll take a look at those you recommended to AMS. Whilst I’m reading, I can look to clearing my mortgage whilst I educate myself in true capitalism.

    I may not retire extremely early, but I may have a more interesting retirement.

    Are you planning and Investing 101 posts?

    Reply
    • MMM November 7, 2011, 9:41 pm

      There are a few fairly US-oriented investing posts on this blog if you go to the bottom and click the “investing” category. And some more advanced ones coming up soon! Since you mention FTSE, it sounds like you are in the UK.. you might enjoy reading what the Monevator has to say about British investing as well – http://www.monevator.com

      Reply
      • Yabusame November 8, 2011, 2:47 am

        Thanks MMM for the pointer to Moneyvator. I’ve been looking for a UK-based finance blog for ages. Er, yes I am in the UK.

        Reply
  • Luis Valenzuela November 7, 2011, 4:52 pm

    I am so close to convince the Miss that spending does not equal happiness. My technique is photos. Anytime we do something fun that brings us joy and that it was free or nearly.. I take pictures. Later on I bring those pictures up and we talk about how much fun we had, while I casually mention how we didn’t even spend money on that occasion.

    By the way, mid-article reads “actually competely unrelated”. An L is required

    Reply
  • Dividend Mantra November 7, 2011, 7:01 pm

    Thanks MMM for the book synopsis.

    Sounds like very run-of-the-mill financial advice and nothing special. Save 10% and negotiate better rates from your service/credit providers is very elementary, in my opinion. No offense meant.

    Reply
  • Early Retirement Extreme November 7, 2011, 7:25 pm

    1) Most large blogs are large because they’re aiming at the middle of the Bell curve. They have the largest potential audience.

    2) If they say something that’s too different from what people are ready to hear, people will stop reading.

    3) The middle of the Bell curve knows practically nothing about finance.

    This is why the major blogs rarely present a philosophy that can be differentiated from the prevailing consumer-careerism. It is why the teachings comprise a few tips. It’s why things must be presented as quick and easy solutions.

    I Will Teach You to Be Rich doesn’t really teach anyone how to be rich unless a million dollars in 40 years is considered “rich”. Maybe the title is historically/accidental. (I sympathize with THAT problem.)

    A more accurate title would be “I will teach otherwise clueless college graduates how to avoid dumb mistakes with their money.” Now don’t get me wrong. I think that’s a very useful thing to do. It is certainly needed and RS does it very well.

    The fact that they will be working for the next 40 years is taken as a given [as is the case for most people]. If that notion was challenged, the blog wouldn’t be nearly as large as it is AND there’d be a very real likelihood that people would just discard the other notions and not even do simple things like opening a retirement account, saving at least some accessible money, and figuring out how not to pay overdraft charges every month (some ppl do that).

    The way I see it, this is like the first step. Maybe some will then move on to other blogs and learn more “advanced” stuff. Talking about extreme early retirement is pretty much near the Terminus of the personal finance. Few will ever go that far and to go there they have to get through all the first stuff first.

    Reply
    • MMM November 7, 2011, 8:42 pm

      Oh, we will see, Jacob, we will see ;-). Mr. Money Mustache is going to change the whole bell curve!

      Reply
      • Early Retirement Extreme November 7, 2011, 10:29 pm

        Bill Mollisson (permaculturist) said something like “I can’t change the world alone. It’ll take at least three of me.”

        Always looking for the two others :)

        Reply
    • buzz November 8, 2011, 12:36 pm

      What Jacob is saying is spot on with my experience as a reader. I’m in college and one day looked around me and realized the majority of my peers were in significant debt already. I wasn’t thinking about early retirement, or anything but the typical 40-50 year career. I went to the internet only for a solution to the debt problem. I didn’t want to end up losing my home like so many people around me were (this was around 2008)

      A quick google search led me to Getting Rich Slowly by J.D. Roth. His is a fantastic blog for the absolute finance amateur – I learned about stock investing (nobody around me invests and my assumption was that only rich business men invest), I learned what a CD is, I learned it’s actually fairly easy to live a debt free life, and many other basic financial tenants. After reading that and The Simple Dollar for a year, I became bored realizing I had learned everything they had to offer (these guys repeat themselves A LOT) The comments section led me to I Will Teach You To Be Rich, which I dismissed as soon as RS kept e-mailing me about his Earn1K program (it may be great for some, but I’m a student uninterested in this) Then I found Jacob through a comment of his, and was immediately hooked, as this was fresh material that challenged a lot of what I assumed to be the given. And I’m very grateful I did. I’m now 21, graduating in about a year, with a credit card but zero debt, no loans, and about $15K in the bank. I plan to go to grad school, maintaining my simple lifestyle that allows me to be debt-free, and then work for 5-7 years before calling it quits and enjoying the rest of my youth while I still have the body and health to do whatever I choose. This lifestyle I find to be less stressful than the alternative of chasing insatiable desires and becoming more and more chained to your job.

      Reply
      • BobTX June 4, 2013, 9:33 am

        This is so incredibly excellent:

        “I plan to go to grad school, maintaining my simple lifestyle that allows me to be debt-free, and then work for 5-7 years before calling it quits and enjoying the rest of my youth while I still have the body and health to do whatever I choose. ”

        I have always thought the saddest part of our typical American consumer culture life-arc is the turning of so many people’s best youth years into stressful, pinned in one place, no free time, slave-away years – without most even getting ahead during them due to spending!. Granted some people “avoid” that by not getting into any sort of career path at all, but the bargain of free time and enjoyment of youth here often comes with even higher stress (what am I doing, where am I going?) and often mounting debts.

        I love the consume less -> earn some -> save/invest lots -> swiftly enjoy freedom before you are too old path that’s available if an MMM-like lifestyle is adopted early. (I also love this blog’s emphasis that it is never too late though to claw back some of your future life from being spent on a treadmill chasing an ever-receding promise).

        Reply
  • Kim November 8, 2011, 4:33 am

    How refreshing to read your review of Ramit. I breathed a sigh of relief when I read “This is because of our deep philosophical divisions on the role of frugality and efficient living in a rich person’s life.”

    That is where he lost me as well. As part of a married couple who has done the Ramsey FPU “We’re debt free!” and are now facilitating FPU for others, I take issue with his philosophy.

    That being said, I don’t like to throw the baby out with the bathwater, so when I read him, I take ideas that will work, and use them and/or share them.

    Found you via Lifehacker.

    Reply
  • Rebecca November 8, 2011, 8:56 am

    So funny, I just picked this book up at the library right before your review! And after reading through most of it, I completely agree with your review. I think it’s hilarious that he obsesses on daily lattes; obviously this is to be a counterpoint to the Automatic Millionaire who famously argued that the expense of a latte&muffin a day can become a million dollars if invested. I guess that idea bothered enough people that Ramit decided to reference it as a selling point. Every time I read that I want to say “but the coffee I make at home TASTES BETTER!” But anyway…

    I still really like the book, because I’m one of those financially clueless people who could definitely use Ramit’s advice to help me build credit and organize my finances from the ground up, and his step-by-step advice is very user-friendly. But as far as the philosophy goes, I’d much rather stick with the MMM way of life, it just makes more sense to me. I’m tired of a life dominated by STUFF, it’s just silly.

    Reply
  • Kevin M November 8, 2011, 10:48 am

    Ramit’s approach is somewhat unique in that he advocates (strongly) for increasing your income, which I like. I wonder though, how many of his audience actually saves that increased income, or simply spends more based on his % breakdown you referenced.

    My problems with his philosophy are a) he ignores half of the equation for “getting rich”…which of course is spending less and b) that spending (or being rich) are related to happiness at all. Like Jacob said, his message is clearly needed in a time when most of his target audience is pissing away every last cent (and sometimes more) than they earn.

    Reply
  • Dragline November 8, 2011, 12:22 pm

    Ramit is really part of the Tim Ferriss/Robert Kiyosaki world of extroverts who are focused on “hacking” or finding shortcuts to various issues in life. They are also serial entrepreneurs. Nothing wrong with any of that — they have lots of interesting and useful ideas. But their solutions are usually on the “find ways to make more money” and “negotiate a better deal” side of things than the “find ways to spend less”. In philosophical terms, they are Epicureans, not Stoics.

    If you don’t actually like the social aspects of negotiating everything all the time and maximizing your exposure, their approaches suddenly don’t seem all that desirable. You also need to bear in mind that they are all in the advice business, and are really just looking for ways to put old ideas in new packages so that they can be marketed to a new audience.

    One of the things I notice about these types is that they seldom have any children. It makes me wonder what value they place on personal relationships outside leveraging them for business purposes. There is a certain psychopathy in all this (don’t get me started on Kiyosaki in particular.)

    Reply
  • Kevin December 27, 2011, 12:17 pm

    I’m so glad you pointed out the major differences between you and Ramit. I wholeheartedly side with you on those things. I have always disliked Ramit’s up-sells and it got really ridiculous when he offered some job thing that was thousands of dollars where he would help you get the “job of your dreams” by boosting your salary “guaranteed”. He’s not making us rich, he’s making himself rich.

    Also, I wanted to point out that there is a difference between you and Ramit when it comes to being rich. I think Ramit pushes for people to be richer (i.e. give them more money but no sense of passive income), whereas you push for people to be wealthier. There is a difference between rich and wealthy. Wealthy means you can live off your money and assets for an indefinite period of time whereas rich just means you make over $100k/yr and you’re in the top 10% of the US but you’re not necessarily wealthy as you don’t have an emergency fund, investments, passive income, or any of that good stuff. I, unfortunately, at 30 years old am in the latter category. I gross over $160k in my small business but I am $7k in debt. However, since reading your blog a couple months ago, it sparked a huge change in my spending habits and overall thinking about money, and I have since paid off my car, paid down $20k in debt so far, and am well on my way to becoming debt-free in a couple short months. After that, I will invest my surplus cash like crazy to hopefully be able to retire by 40. Keep up the fantastic work, MMM, and thank you for being such a huge inspiration to us all.

    Reply
  • Mike Key January 4, 2012, 12:40 pm

    I couldn’t agree more. I do like his style of writing and I’ve been reading his blog for awhile, but ever since I read him talk about all the reasons why LEASING A CAR was a great idea, I’ve approached him with a sense of caution. But with most things in life, we have to learn to look for the good stuff the lines up with our philosophy and drop the bad.

    Reply
  • James January 25, 2013, 2:20 pm

    I am an avid reader of both Ramit’s material and yours. I like to think that both of you are (mostly) big win thinkers.

    You teach people to live closer to where they work, so that their commute doesn’t destroy their bottom line.
    Ramit teaches people to negotiate their salary, so that their labor more effectively improves their top line.

    The end result is that by applying lessons from both of you, you maximize your margins for minimal effort.

    There are, of course, failings in both of your works.

    I think that you put too much emphasis on saving. I like my fucking twice a day coffee mix and my goddamned $1500/month downtown apartment, and my long road trips on the weekends with my wife. Giving up all of those luxuries would move my retirement from 9 years away to 7.5 years away. I think I can tolerate work just a bit longer.

    I think that for all of Ramit’s emphasis on Big Wins, he doesn’t put enough emphasis on the ultimate Big Win — not having to work at all, and instead being able to spend your time doing whatever you want, from playing video games all day to pretending you’re a caveman rediscovering fire to plugging away on your latest indie game development project to hooking up with chicks.

    Reply
  • Zalo August 10, 2013, 2:03 am

    Early retirement 19 year old reporting for duty.

    Reply
  • Diogo Andrade October 15, 2013, 7:07 am

    Late reader here, but an early Rammit Reader. Where it is clear that MMM and Rammit have different lifestyles, I think you misjudge him for it. In this very book you criticise, in Chapeter 8, which he labels it an “advanced chapter” he lists the very foundations of early retirement:

    “No matter how you go about it, be sure that you are shoveling the maximum amount possible into your system every month…. and the more you feed into your system now, the sooner you will be rich”.

    So, the 10% investing framework is described as the very first baby step, or the “85% solution” as he puts. And I think you get it wrong when you say he tells us to stop there.

    Also, while MMM is really serious about sharing with us the wonders of his lifestyle, I think you end up following Rammit’s advice on spending extravagantly on the things you love. And since MMM loves his freedom, that’s where he spent all his work money.

    So in the end, MMM and Rammit core principles happen to be very aligned :)

    I may sound like a Rammit’s fan, but reading his material and following through his advice laid all the foundations I needed to be ready for deep mustachism. If it weren’t for YNAB (budget software) which I got as Rammit’s earn1k course bonus, I wouldn’t have even know about MMM blog, since Jesse (YNAB) linked me in here.

    And if you read through Rammit’s blog, you will find a shitload of tactics and advice on how to save on “small things” such as heating, electricity, restaurants, etc.

    I strongly suggest you review all of his work before telling your readers to dump his material, beacuse there are a lot of golden things in there.

    Reply
  • Andy November 13, 2013, 1:31 pm

    I’ve read a lot of stuff such as Tim Ferris’s 4 Hour Work Week, and some of Ramit’s materials. They have a totally different approach than The Mustache. Most of their ideas are well suited for single guys in their 20′s who haven’t already dug themselves into a mortgage, a full-time job, car payments, and kids.

    Tim Ferris does hit on many Mustachian ideas, such as minimizing travel cost, and DIY projects. On the other hand, he also is an avid consumer.

    I really like MMM’s approach because all I had to do was just analyze what I’m already doing. I didn’t have to start a business, negotiate my salary, do freelance work, or anything like that. I just had to take a step back, and make my current life more efficient.

    Reply
  • MC June 22, 2014, 12:44 pm

    When I first saw this book and read the title, I thought “You got to be kidding me!”

    I know dozens of authors whose intention was the same (just didn’t put it so arrogantly into heading) and actually din’t teach a thing, or taught very little. And unfortunatelly, this book jumps into the same category.

    I really appreciate that author tried to be as specific as possible when giving advice, but I guess this book isn’t for everyone, especially not for me. These are the books I really liked if anyone feels the same:

    http://www.amazon.com/dp/0984358102/
    http://www.amazon.com/dp/1591845610
    http://www.amazon.com/dp/B00KPH0KSU

    Reply
    • David S August 6, 2014, 12:27 pm

      I have to reply to this because it is so off the mark that it’s ridiculous. What MC and MMM for that matter completely miss and overlook is that the word “Rich” in the title of Ramit’s book does NOT refer to money, it refers to a lifestyle, lead a “rich” life.

      His advice is geared at 18-25 year olds who have received little to no personal finance education and quite honestly have absolutely no desire whatsoever to “retire early.” They want to go out with their friends, have a good time, and enjoy their youth. If you try to talk to these kids about “living frugally” and “retire early” they’d tell you to take a hike. What Ramit teaches them is that they can do all of the things they want and *still* be responsible financially. By slowing easing them into responsible habits, he re-enforces the ideas that lead to proper financial habits.

      I believe that he does a great job and should be commended for it. I feel as though some of you have little to no idea how tough it is trying to talk to a 22 year old about “retirement.” It is the absolute furthest thing from their mind.

      I found this book review somewhat disingenuous as it only attacks points that are easy to attack in MMM terms and overlooks or totally misunderstands the other relevant portions of what it is teaching.

      Reply
      • Mr. Money Mustache August 6, 2014, 2:10 pm

        Sounds like a fair criticism, David. Ramit and I have slightly different target audiences.. but I will stand up for the under-25s and say there are many of them who DO get the concept of financial independence. Quite a few of them end up here.

        The IWT personal finance ideas are definitely a good start. But I think if you let yourself hit a 15% savings rate and then just chase after increased income for the rest of your life, you’ll miss the whole point of being alive.

        Now the NEWER Ramit stuff seems really good – general good psychological and business habits training. He’s a clever guy and I bet the courses are a lot of fun to take.

        Reply
        • DavidS August 6, 2014, 3:17 pm

          Thanks for replying. I agree with you that taking it further is the best course of action (that’s why we’re all here after all!) and I feel that Ramit gives them the push they need to get there and perhaps investigate further. I also agree with you that there are some young folks who get it right off and buy in to the MMM lifestyle, and that’s awesome, but it’s not the majority and we know that.

          I also think different folks have different ideas of what “being alive” means, especially at different ages. I guess I took less issue with your specific points than those of some of the commenters who seem to want to paint Ramit as some kind of charlatan peddling a “get rich quick” scheme when that couldn’t be further from the truth. Blindly following *any* direction or methodology is rarely a good idea regardless of how many people around you seem to agree wouldn’t you think? Thanks.

          Reply
  • Steve August 19, 2014, 11:56 pm

    I don’t post too regularly here MMM, just the odd time and I think I sent you an email once about how your writing and ideas really influenced my thinking on personal finance – and you were nice enough to email back, which was pretty cool!

    Anyways, I’ve been reading a lot of Ramit’s stuff recently (the free stuff, in true Mustachian fashion) and I’ve been tempted. But the Mustachian influence is stronger. I knew I had to check to see if you had your take on IWT and you do!

    To use myself as a personal example, right out of college, I would have been the PRIME target audience for IWT: living a lifestyle beyond my means, in student loan debt, and no idea about personal finance. But once I got thrown out into the real world with $52k in student loan debt, I knew I had to get serious about paying it off and growing wealth. I don’t know quite how I found MMM, but I did over 2 years ago and it seriously influenced my thinning on money, investments, and life. MMM was an influence on me to pay off my student loans as fast as I could – it took me 2 years and 3 months to pay off $52k. That was after I was unemployed and searching for work for 8 months. Now that the debt is gone, my wife and I are building wealth and financial independence looks like it’s about 10 years away. I guess MMM has been a strong influence. And to be honest, maybe not everyone is suited for the MMM philosophy; I think you have to share a similar philosophical outlook on life.

    Thanks for the book review MMM – I knew you wouldn’t let me down! Team MMM 1 and Team IWT 0 (so far).

    Reply

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