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The groundbreakingNEW YORK TIMESandWALL STREET JOURNALBESTSELLER that taught a generation how to earn more, save more, and live a rich life—now in a revised 2nd edition.
 
Buy as many lattes as you want. Choose the right accounts and investments so your money grows for you—automatically. Best of all, spend guilt-free on the things you love.
 
Personal finance expert Ramit Sethi has been called a “wealth wizard” byForbesand the “new guru on the block” byFortune. Now he’s updated and expanded his modern money classic for a new age, delivering a simple, powerful, no-BS 6-week program that just works.
 
I Will Teach You to Be Richwill show you:
• How to crush your debt and student loans faster than you thought possible
• How to set up no-fee, high-interest bank accounts that won’t gouge you for every penny
• How Ramit automates his finances so his money goes exactly where he wants it to—and how you can do it too
• How to talk your way out of late fees (with word-for-word scripts)
• How to save hundreds or even thousands per month (and still buy what you love)
• A set-it-and-forget-it investment strategy that’s dead simple and beats financial advisors at their own game
• How to handle buying a car or a house, paying for a wedding, having kids, and other big expenses—stress free
• The exact words to use to negotiate a big raise at work
 
Plus, this 10th anniversary edition features over 80 new pages, including:
• New tools
• New insights on money and psychology
• Amazing stories of how previous readers used the book to create their rich lives
 
Master your money—and then get on with your life.

 
Year:
2019
Edition:
Paperback
Publisher:
Workman Publishing Company
Language:
english
Pages:
352 / 394
ISBN 10:
1523505745
ISBN 13:
9781523505746
File:
PDF, 8.66 MB
Download (pdf, 8.66 MB)

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Additional Praise for Ramit Sethi and I
Will Teach You to Be Rich
“Ramit Sethi is a rising star in the world of personal finance
writing . . . one singularly attuned to the sensibilities of his
generation. . . . His style is part frat boy and part Silicon Valley
geek, with a little bit of San Francisco hipster thrown in.”
—SAN FRANCISCO CHRONICLE

“. . . one of our favorite personal finance sites.”
—LIFEHACKER

“The easiest way to get rich is to inherit. This is the second best
way—knowledge and some discipline. If you’re bold enough to do
the right thing, Ramit will show you how. Highly recommended.”
—SETH GODIN, AUTHOR OF THIS IS MARKETING

“The common perception about personal finance books is that the
advice is loaded with technical terms and jargon. On this front, I
Will Teach You to Be Rich comes as a complete surprise. It is
written in an extremely breezy style, but it doesn’t mean that it
contains frivolous advice. On the contrary, it packs useful
information for beginners on how they can manage their money.”
—ECONOMIC TIMES

“. . . particularly appealing to the younger generation with its easyto-read, no-holds-barred language.”
—BUSINESS INSIDER

Real Reader Results

Ramit’s teaching that frugality isn’t about “spending nothing” but rather about
spending extravagantly on the things we love changed our outlook on life. My
wife and I retired from full-time work at ages 33 and 35, respectively, and
adventure around the country in an Airstream RV. We wake up every morning
excited and energetic because we control every minute of our day.”
—STEVE ADCOCK

“When I was 30, I had no 401k and a student loan of $16,000. Now I’m 35, I
have no student-loan debt, a healthy 401k, an IRA, an additional investment
account, and one secured credit card which I use to pay my monthly bills. I
used IWT to do all of this and now spend most of my money on what I love,
which is my kids, food, and ebooks.”
—ARIEL STEWART

“Since implementing a fully automated system in 2011, my net worth went
from zero to close to $450k. I;  never have to worry about money—I have
enough for bills, any indulgence, and maxing out retirement accounts (Roth
and 401k).”
—ROSS FLETCHER

“I read your book in 2010 when I was a 25-year-old executive assistant at a
tiny book publisher making $28,000. I’m now leading a full team of writers in
San Francisco and making $155,000.”
—CLAIRE PEACOCK

“After reading your book, I negotiated a $175 monthly reduction in apartment
rent by offering a long-term extended lease and putting the apartment as a
preferred vendor. Landlord agreed immediately, and that saved me over
$3,500!”
—SAMEER DESAI

“I’ve got over $100,000 growing for retirement, $8,000 in the personal
investment account, and have next year’s Roth contribution already set aside
in an interest-bearing account.”
—DAVID CHAMBERS

“I used the advice from IWT to set up my Schwab IRA, a personal investment
account, and a checking account prior to starting my first job when I was 24.

I’m now 30 and have over $300k saved between my personal investment
account, 401k, and IRA.”
—HILARY BUUCK

“At first your chapter on debt freaked me out—you can’t just get out of debt
so fast! Then I realized making more money was not scary or daunting, but
very doable. I went from making around $4,000 a month to $8,000 a month
from my company. I had 4,500 in debt that is now down to $900 (soon it’ll be
at $0).”
—REENA BHANSALI

“I’ve used the IWT principles to pay down $40,000 in debt inside two years
by negotiating a raise and taking on my first side-gig projects with the “1K on
the Side” project. And with the automation principles, and paying ourselves
first, my wife and I built close to $200,000 in savings in the last two years.”
—SEAN WILKINS

“I took this book on a Caribbean cruise and couldn’t put it down. It led me to
getting a $20,000 salary increase in my day job and starting a side business as
a career coach, earning thousands each month. It helped me negotiate down
bills and fees, increase my credit limit, grow a healthy retirement fund and
savings, and fundamentally change my mindset about earning money.”
—MARY GRACE GARDNER

“I went from having nothing in my investment accounts to having over
$55,000 to date.”
—ALEX CRAIG

“I didn’t have any credit card debt so I was able to implement the whole book
in about three weeks. After that, I kind of forgot about it. Eight years later I
was worth close to $200,000 with no debt as a retail employee.”
—DANIEL LEE REIFENBERGER

“I changed my student loans from 20-year loans to 10-year loans. I had no
idea the difference, and it ended up saving me over $10k. . . . Just by paying
an extra $50 a month.”
—LYLA NUTT

“When I was 25, I had $8,500 of credit card debt, and $3,000 of other debt.
IWT gave me the manageable steps to get out of my hole, better use my credit
cards, not live check to check, pay off what I owed, and start saving. At 28, I
have $50,000 in savings, am debt-free, have automated my finances, and I am
going to buy a house this year.”

—ALLISON REYNOLDS

“In four years after I read IWT, I’ve saved $40,000 using dollar cost
averaging to contribute to my $20,000 index tracking fund. I received one
promotion and four raises, increasing my earning potential by 70 percent :)”
—BEVAN HIRST

“Without the book, I wouldn’t have started my retirement account. It showed
me what to open and how to use systems to automatically save my money for
future purchases. So far I have $40,000+ in retirement by maxing out my
Roth every year.”
—JAMES MONROE ŜTEVKO

“I was 25 when I read the book. I had a crappy job, very little savings, and
even less of a clue what to do with my money. I implemented IWT systems
and I got a new job (with a 20 percent raise) at a company where I’ve
flourished for the past five years. I have $100,000 in my retirement accounts
and six months’ salary in an emergency account, along with other savings for
various goals.”
—SHEILA MASTERSON

“Before, I felt guilty because at 37 I should have had my stuff together. Now
everything is completely automated. I feel more confident and can spend
guilt-free with the money left over. Since reading your book, I maxed out my
Roth IRA, made a $7,000 emergency savings account, have a growing
investment account, and have multiple accounts for special purchases.”
—QUINN ZEDA

I WILL
TEACH
YOU TO
BE RICH
No Guilt. No Excuses. No BS.
Just a 6-Week Program That Works

RAMIT SETHI
SECOND EDITION
WORKMAN PUBLISHING
NEW YORK

To my wife, Cassandra.
You’re the best part of every day.

Contents
An Open Letter to New Readers
INTRODUCTION

Would You Rather Be Sexy or Rich?
Why do people gain weight after college? The similarities between money
and food ■ Counterintuitive but true: We need less personal-finance
information ■ Common excuses for not managing money ■You’re not a
victim—you’re in control ■ Stop debating minutiae and focus on the Big
Wins ■ The key messages of I Will Teach You to Be Rich ■ “Rich” isn’t just
about money: What does it mean to you?
CHAPTER 1

Optimize Your Credit Cards
How to beat the credit card companies at their own game
Why Indian people love negotiating ■ Stop being intimidated by your credit
cards ■ Picking the best card for airline miles, cash back, and rewards ■ The
six commandments of credit cards ■ How to negotiate with your credit card
company to get fees waived and receive lower rates ■ Secret perks your card
offers ■ Why you should always buy electronics, travel, and furniture on your
credit card ■ What not to do with your cards ■ The burden of student loans ■
When credit cards go bad ■ Five steps to getting rid of debt ■ Week One:
Action Steps

CHAPTER 2

Beat the Banks
Open high-interest, low-hassle accounts and negotiate fees like an Indian
How banks rake it in ■ The bank accounts I use ■ Why you really need a
separate savings account ■ Opening high-interest, no-fee accounts ■ Why
people stick with terrible bank accounts ■ Five marketing tactics banks use to
trick you ■ Negotiate out of fees with your current bank (use my script) ■
Week Two: Action Steps
CHAPTER 3

Get Ready to Invest
Open your 401(k) and Roth IRA—even with just $50
Start investing, step by step ■ Why your friends are scared of investing ■
Investing is the single most effective way to get rich ■ Where should your
money go? Introducing the ladder of personal finance ■ Mastering your
401(k) ■ Crush your debt ■ The beauty of Roth IRAs ■ What about roboadvisors? ■ The exact account I use ■Feed your investment account ■HSAs
■Beyond retirement accounts ■Week Three: Action Steps

CHAPTER 4

Conscious Spending
How to save hundreds per month (and still buy what you love)
How to spend extravagantly on the things you love and cut costs mercilessly
on the things you don’t—without making an annoying budget ■ The
difference between cheap people and conscious spenders ■ How my friend
spends $21,000 per year going out—guilt-free ■ Using psychology against
yourself to save ■ The four buckets: fixed costs, savings, investments, and
guilt-free spending money ■ The envelope system for not overspending ■
What if you don’t make enough money to save? ■ How to make more money
■ Handling unexpected expenses ■ Week Four: Action Steps
CHAPTER 5

Save While Sleeping

Making your accounts work together—automatically
The power of defaults ■ How to spend only 90 minutes a month managing
your money ■ Ways to use psychology to help you save money ■ Create your
automatic money flow ■ Using your automated finances to fuel your rich life
■ Week Five: Action Steps
CHAPTER 6

The Myth of Financial Expertise
Why professional wine tasters and stock pickers are clueless—and how you
can beat them
Who should you trust? ■ Experts can’t guess where the market is going ■
How experts hide poor performance ■ You don’t need a financial adviser ■
Behind the scenes: When two wealth managers tried to recruit me ■ Active
vs. passive management
CHAPTER 7

Investing Isn’t Only for Rich People
Spend the afternoon picking a simple portfolio that will make you rich
The beauty of automatic investing ■ Asset allocation: more important than the
“best stock of the year!” ■ Retiring in your 30s or 40s: The FIRE movement
■ Convenience or control? You choose ■ The many flavors of stocks and
bonds ■ Creating your own portfolio: How to handpick your investments ■
Investing the easy way: target-date funds ■ Feeding your 401(k) and IRA ■
The Swensen model of asset allocation ■ Insane crypto “investments” ■
Week Six: Action Steps

CHAPTER 8

HOW TO MAINTAIN AND GROW YOUR SYSTEM
You’ve done the hard work. What’s next? Here’s how to maintain (and grow)
your financial infrastructure to achieve your Rich Life.
Feed your system—the more you put in, the more you’ll get out ■ Ignore the
noise ■ The tricky part of managing your own portfolio: rebalancing your
investments ■ Nutty beliefs about taxes ■ When to sell ■ For high achievers:
a ten-year plan ■ Giving back—an important part of being rich

CHAPTER 9

A Rich Life
The finances of relationships, weddings, buying a car, your first house, and
more
Student loans—Pay them down or invest? ■ How to help parents who are in
debt ■ The big conversation: talking about money with your significant other
■ Should you sign a prenup? ■ Why we’re all hypocrites about our weddings
(and how to pay for yours) ■ Negotiating your salary, I Will Teach You to Be
Rich style ■ The smart person’s guide to buying a car ■ The biggest big-ticket
item of all: a house ■ The benefits of renting ■ Is real estate really a good
investment? ■ Planning for future purchases ■ Your Rich Life: Going beyond
the day to day

Acknowledgments
Index

AN OPEN LETTER TO NEW
READERS
If you listened to all the internet influencers telling you the things you “need”
to do every morning, here’s what your day would look like:
4:00 a.m. wake up
4:01 a.m. meditate
5:00 a.m. drink 37 gallons of water
5:33 a.m. gratitude journal
10:45 a.m. eat (keto only)
11:00 a.m. track every penny of spending from the last 16 years
11:01 a.m. die
I dunno, guys. I prefer advice that actually works. And when I took a hard
look at the advice I gave in this book a decade ago, I realized one thing: I was
right.
If you bought this book ten years ago and followed the exact advice in it,
here’s what you would have accomplished by now.
■ If you had invested just $100/month, that $12,000 would have turned into
over $20,000 (The S&P 500 averaged around 13 percent annually over the
last decade.)
■ If you had aggressively invested $1,000/month, that $120,000 you
contributed would have grown to more than $200,000.
■ You would be spending less than 90 minutes per month on your money.
■ You would have been able to take multiple vacations and fly business class
—completely free—using credit card points.
■ Money would have gone from a source of anxiety and confusion to one of
calm and possibility.
As you’ll see in this book, I do things differently than typical money
“experts.” I won’t lecture you about cutting back on lattes (buy as many as
you want). I won’t try to convince you to keep a budget (I have a better
method). And one more thing: I’m a real guy. I post on Instagram and Twitter
(@ramit) and I write for millions of people on my blog and newsletter almost

every day (iwillteachyoutoberich.com). So let’s start off doing something
different: I want to hear from you. Really! Send me an email
(ramit.sethi@iwillteachyoutoberich.com, subject: new book reader) and tell
me two things:
1. What made you decide to take control of your money today?
2. What does your Rich Life look like? (Please be specific!)
I read every email and I try to respond to as many as possible.

What has I Will Teach You to Be Rich allowed you to
do?
One of my greatest joys is hearing from you about how you’ve applied my
material to change your life. I asked some of my readers to share their results.
I paid off $10,000 in
credit card debt that I
accumulated
while
unemployed, bought a
condo
in
San
Francisco, and am
now debt-free and
building my retirement
funds.
—JULIANA BRODSKY, 38

I have $200,000 in retirement savings and countless vacations paid
for by creating specific savings accounts for them; it’s hard to put a
specific number on that.
—KYLE SLATTERY, 30

I travel internationally for a month 1 or 2 times a year. Last year it
was South Africa; this year, Korea.
—ESLI LIGAYA, 34

The Rich Life is about freedom. In my case it allowed me to take 9
months off work and travel throughout Argentina, Colombia, and the
US. And now it’s allowing my wife to take a 6-month break from work
to figure out what’s next.
—SEAN WILKINS, 39

We were able to put three children into private school on one full-time
income.
—BRYAN DILBERT, 32

All that said, I’ll admit that I wasn’t perfect. Ten years ago, I made three
mistakes when writing the first edition of this book.
My first mistake was that I didn’t cover the emotions around money. I
spent time covering the nuts and bolts of personal finance—I gave you the
perfect word-for-word scripts to get late fees waived, the exact asset
allocation I use for investing, and even how to manage money with your
partner—but if you don’t tackle your invisible money scripts, none of it
matters.
Invisible scripts are the messages you’ve absorbed from your parents and
society that guide your decisions for decades—and often without even being
aware of it. Do any of these sound familiar?
■ “You’re throwing your money away on rent.”
■ “We don’t talk about money in this house.”
■ “Credit cards are a scam.”
■ “Stop spending money on lattes.”
■ “Money changes people.”
■ “You don’t get that level of wealth without making a few shady deals here
and there.”
■ “The stock market is gambling.”
■ “Student loans are a scam.”
In this edition, I’ll show you what the most insidious, powerful invisible
money scripts are—and how to beat them.
The second mistake I made was being too overbearing. The truth is, you
can choose what your Rich Life is and how you get there. In the original
book, I did write about the different definitions of a Rich Life, but I didn’t
acknowledge that we might take different routes to get there.
For example, your Rich Life might be to live in Manhattan. It might be to
ski forty days a year in Utah, or to save and buy a house with a huge yard for
your kids, or to fund an elementary school in Croatia. That’s your choice.
But how you get there is also your choice. Some people choose the
traditional route of saving 10 percent, investing 10 percent, and slowly
working their way to a comfortable Rich Life. Others save 50 percent of their

income and quickly reach the “crossover point” where their investments pay
for their life—forever. (This is called “FIRE,” or Financial Independence,
Retire Early.)
You choose your Rich Life. And in this edition, I want to show you
different ways to get there. To do that, I’ve included lots of examples of
people who took unconventional routes to create their Rich Lives.
Finally, the third mistake. Let me just say that I’ve messed up quite a few
things in my life: I’ve hired and fired the wrong people. I ruined my chance at
a TED talk by walking into the meeting unprepared. I was six feet and 127
pounds into my mid-twenties, looking like a hairy Indian Gumby. But nothing
compares to my worst mistake of all:
Writing the actual interest rates of banks in the original edition of this
book.
Here’s what I wrote back then:
“Online banks pay a higher interest rate for savings accounts—about 2.5 to
5 percent, which would produce $25 to $50 interest per year on that $1,000,
compared with $5 per year on the Big Bank savings account.”
The information was right . . . at the time. The problem is, interest rates
change, which I forgot to mention. And in the years after the first edition was
published, they dropped—from 5 percent to 0.5 percent. I assumed people
would run the numbers and realize that the interest rate doesn’t really matter
much. For example, on a $5,000 balance, that means your monthly interest
dropped from $21 to $2. In the grand scheme, not that big of a deal.
But when facing lower interest rates on savings accounts, readers got mad
—really mad. And they took their anger out on me. Here are a few emails I
got:
■ “This book is a scam. Where are the 5% interest rates you talk about??”
■ “What bank has 3% interest rates??”
■ “Subj: WHERE ARE THE BANKS U WROTE ABOUT”
For the last ten years, I’ve gotten over twenty of these emails every single
day. Never again. See my favorite banks. But not their interest rates. WHICH
WILL CHANGE, GUYS. In this edition, I’ve corrected these mistakes. And
I’ve added new material.
1. New tools, new investment options, and new approaches to money. If you
want to get more aggressive about investing, I’ll show you how. What do I
think about robo-advisors? I’ll tell you. And what about pre-nups? I share my
thoughts.

2. New money scenarios you’ll confront. How do you handle relationships
and money? I’ve added new material. Once your financial system is set up, I
want you to know what to focus on next. And finally, if you know people who
complain about politics and baby boomers to explain why they can’t pay off
their debt and get ahead, they should read my thoughts on victim culture.
3. Incredible stories from other IWT readers. I’ve included tons of new
examples, including inspirational success stories from all different kinds of
people: men and women in their twenties, thirties, forties, and fifties; people
who started from nothing and people who built on success to grow even more.
Plus, gut-wrenching stories about people who procrastinated on implementing
the material in this book—and what it cost them.
I added new material where appropriate, but I preserved techniques that
continue to work. Many people want “new” advice—but the value in this
book doesn’t come from novelty; it comes from usefulness.
In ten years, I’ve also changed. I’ve gotten married, I’ve grown my
business, and I’ve learned more about money and psychology. Now I get the
chance to share what I’ve learned with you. Amidst the noise, the hype, the
apps of the day, the IWT personal finance system works. Long-term, low-cost
investing works. Automation works. Use this book to create your own Rich
Life, just like thousands of others have.
—Ramit Sethi

INTRODUCTION

WOULD YOU RATHER BE SEXY
OR RICH?

I’ve always wondered why so many people gain weight after college. I’m not
talking about people with medical disorders, but regular people who were
slim in college and vowed that they would “never, ever” let that happen to
them. Yet, little by little, most Americans gain an unhealthy amount of
weight.
In the ten years since I wrote my book, weight and health have become
such controversial topics that I was advised to delete my references to them.
But after my own journeys with nutrition, fitness, and money, I now believe
even more in the connections between them—and that you can take control.
Weight gain doesn’t happen overnight. If it did, it would be easy for us to
see it coming—and to take steps to avoid it. Ounce by ounce, it creeps up on
us as we’re driving to work and then sitting behind a computer for eight to ten
hours a day. It happens when we move into the real world from a college
campus populated by bicyclists, runners, and varsity athletes who once
inspired us to keep fit. But try talking about post-college weight loss with
your friends and see if they say one of these things:
“Avoid carbs!”
“Don’t eat before you go to bed, because fat doesn’t burn efficiently when
you’re sleeping.”
“Keto is the only real way to lose weight.”

“Drinking apple cider vinegar speeds up your metabolism.”
I always laugh when I hear these things. Maybe they’re correct or maybe
they’re not, but that’s not really the point.
The point is that we love to debate minutiae.
When it comes to weight loss, 99.99 percent of us need to know only two
things: Eat less and exercise more. Only elite athletes need to do more. But
instead of accepting these simple truths and acting on them, we discuss trans
fats, obscure supplements, and Whole30 versus paleo.

WHY ARE MONEY AND FOOD
SO SIMILAR?
WHEN IT
COMES TO
FOOD, WE . . .

WHEN IT COMES TO
PERSONAL FINANCE,
WE . . .

don’t track calorie
intake

don’t track spending

eat more than we
know

spend more than we realize—or admit

debate minutiae about
calories, diets, and
workouts

debate minutiae about interest rates and hot
stocks

value anecdotal advice
over research

listen to friends, our parents, and TV talking
heads instead of reading a few good
personal-finance books

Most of us fall into one of two camps regarding our money: We either
ignore it and feel guilty, or we obsess over financial details by arguing interest
rates and geopolitical risks without taking action. Both options yield the same
results—none. The truth is that the vast majority of people don’t need a
financial adviser to help them get rich. We need to set up accounts at solid
banks, automate our day-to-day money management (including bills, savings,
and, if applicable, debt payoff). We need to know about a few things to invest
in, and then we need to let our money grow for thirty years. But that’s not as

cool or exciting, is it? Instead, we read internet articles from “experts” who
make endless predictions about the economy and “this year’s hottest stock”
without ever being held accountable for their picks (which are wrong more
than 50 percent of the time). “It’s going up!” “No, down.” As long as there is
something being said, we’re drawn to it.
Why? Because we love to debate minutiae.
When we do, we somehow feel satisfied. We might just be spinning our
wheels and failing to change anyone’s mind, but we feel as if we are really
expressing ourselves, and it’s a good feeling. We feel like we’re getting
somewhere. The problem is that this feeling is totally illusory.Think back to
the last time you and your friend talked about finances or fitness. Did you go
for a run afterward? Did you send money to your savings account? Of course
not.
People love to argue minor points, partially because they feel it absolves
them from actually having to do anything. You know what? Let the fools
debate the details. I decided to learn about money by taking small steps to
manage my own spending. Just as you don’t have to be a certified nutritionist
to lose weight or an automotive engineer to drive a car, you don’t have to
know everything about personal finance to be rich. I’ll repeat myself: You
don’t have to be an expert to get rich. You do have to know how to cut
through all the information and get started—which, incidentally, also helps
reduce the guilt.
I knew I should save
for retirement, but I
didn’t really know how,
besides “put some
money in your 401(k).”
I also thought saving
was only about NOT
spending money. As a
result, I felt horribly
guilty about spending
money on *anything*,
even if I had saved up
for it. I had also never
really thought about
asking for a raise and
didn’t know how to
approach it. I had just
treated the initial wage

I’d been offered as set
in stone.
—ELIZABETH SULLIVAN-BURTON, 30

Why Is Managing Money So Hard?

People have lots and lots of reasons for not managing their money, some of
them valid, but most of them poorly veiled excuses for laziness or not having
spent ten minutes on research. Let’s look at a few:

Info Glut
The idea that there is too much information is a real and valid concern. “But
Ramit,” you might say, “that flies in the face of all American culture! We
need more information so we can make better decisions! All the experts on
TV say this all the time, so it must be true!” Sorry, nope. Look at the actual
data and you’ll see that an abundance of information can lead to decision
paralysis, which is a fancy way of saying that with too much information, we
do nothing. Barry Schwartz writes about this in The Paradox of Choice: Why
More Is Less:
As the number of mutual funds in a 401(k) plan offered to employees
goes up, the likelihood that they will choose a fund—any fund—goes
down. For every 10 funds added to the array of options, the rate of
participation drops 2 percent. And for those who do invest, added
fund options increase the chances that employees will invest in
ultraconservative money market funds.
You scroll online and see ads about stocks, 401(k)s, Roth IRAs, insurance,
529s, and international investing. Where do you start? Are you already too
late? What do you do? Too often, the answer is nothing—and doing nothing is
the worst choice you can make. As the table shows, investing early is the best
thing you can do.
Look carefully at the chart below. Smart Sally actually invests less, but
ends up with about $80,000 more. She invests $200/month from age thirtyfive to age forty-five and then never touches that money again. Dumb Dan is
too preoccupied to worry about money until he’s forty-five, at which point he
starts investing $100/month until he’s sixty-five. In other words, Smart Sally
invests for ten years and Dumb Dan for twenty years—but Smart Sally has
much more money. And that’s with just $200/month! The single most
important thing you can do to be rich is to start early.

HOW TO MAKE $60,000 MORE
THAN YOUR FRIENDS (WITH
LESS WORK)
SMART
DUMB DAN
SALLY
When beginning to
invest, the person is . . .

35 years
old

45 years old

Each person invests
$200/month for . . .

10 years

20 years

$181,469.
With an 8 percent rate of
return, at age 65, their
accounts are worth . . .

Voilà—
the value
of starting
early

$118,589. Even though he
invested for twice as long,
he’s behind by $60,000

If you’re younger, your money will grow even more. If you’re older, don’t
get discouraged. I recently got a message from a woman in her forties who
was unhappy about these numbers. “What’s the point of writing that?” she
asked. “It makes me feel bad that I’m already too far behind.”
I understand how she feels. But we can’t hide from the math—so instead
of sugarcoating the facts, I believe in showing you the truth, including ways
to increase your savings. Yes, the best time to start investing was ten years
ago. The second best time is today.

The Media Is Partially to Blame (I Love Casting
Blame)
Open the typical financial site and I bet you’ll see an article called “10 NoHassle Frugality Tips for Getting Ahead with Your Finances” or “How
Today’s Senate Vote Affects Estate Taxes.” Reading those headlines, you
intuitively know why online columnists wrote them: to get pageviews and sell
ads.
We know that because reading yet another frugality article is not going to
change anyone’s behavior. And the estate tax affects less than 0.2 percent of
people. But both of those headlines make people feel good—or angry.
Enough! I don’t care about pageviews or stoking rage. If you’re like me,
you care about knowing where your money’s going and redirecting it to go
where you want it to go. We want our money to grow automatically, in
accounts that don’t nickel-and-dime us with fees. We don’t want to have to
become financial experts to get rich.

The Rise of Victim Culture
There’s a group of people—mostly young, disaffected people—who have
decided it’s easier to be cynical than to improve themselves.
“LOL! Invest? I can’t even save enough for pizza.”
“LOL! Find a job? What world do you live in . . .”
“Maybe if baby boomers hadn’t ruined it for all of us . . .”
People actually compete to see who’s the bigger victim. Oh, you can’t
afford a four-bedroom house at the age of 26? I can’t afford to live in a
cardboard box! Oh, you like going to parties to meet new people? That must
be nice, I have social anxiety so I can’t do that. (What? No, I didn’t see a
doctor. I diagnosed myself.)
You know who’s the real victim here?
Me. I’m offended at you being offended. And at the stupidity of this entire
victim culture.
I refuse to play into the theatrics of how you can’t afford to save even $20
a month. When this book was originally published, I got hundreds of angry
emails accusing me of being elitist for encouraging people to save and invest
even a modest amount. Those cynics were wrong. They surrounded
themselves with other naysayers, bought flimsy arguments, and incurred a
staggering cost for their beliefs: They missed out on hundreds of thousands of

dollars of gains. Meanwhile, my readers put in the work to create their Rich
Lives.
You choose. Be a cynic or carefully evaluate your options, knowing you’ll
probably make a mistake here or there . . . but you’ll grow at each step of the
way. I choose to move forward.
I understand this is a complex issue. Yes, socioeconomic policy, access to
technology, and pure luck matter. For example, if you start off with two
parents and you graduate from college, you’re already luckier than most
people on this planet.
But we play with the cards we’re dealt. I believe in focusing on what I can
control.
For example, by the time I entered kindergarten, it was clear I would never
be in the NBA—fine. On the other hand, it was clear I would dominate the
shit out of my classmates in spelling bees. Also fine.
Then there were the gray areas, like starting a business, becoming more fit,
and learning to be better in dating. I had to learn those skills and work really,
really hard.
This is where the victim mindset comes in. So many people complain
about politicians and sociological problems without looking around at their
own behavior. They give up at the first sign of failure. If you want to be a
passenger in life, fine—go with the flow. I’ve found it’s a lot more fun to be
the captain of my own ship, even if I go off course sometimes.
As you can see, I don’t have a lot of sympathy for people who complain
about their situation in life but do nothing about it. That’s why I wrote this
book! I want you to be empowered to take control of your situation, no matter
where in life you started from. I want you to have a level playing field against
these huge Wall Street firms, mindless articles, and even your own
psychology.
Here are a few examples of victim culture when it comes to money:
“I can’t save any money.” Years ago, when the economy crashed, I launched
something called the “Save $1,000 in 30 Days Challenge,” where I showed
people tactical ways to save money using fresh psychological techniques.
Thousands of people joined and worked to save thousands and thousands of
dollars.
Except a few people.
While most people were supportive, I was surprised by how many people
were actually offended by the very concept of a “Save $1,000 in 30 Days

Challenge” because they didn’t even earn that much each month, or they
found my recommendations to be “too obvious”—even though I defined
“saving” as cutting costs, earning more, and optimizing spending.
Here are some examples of their complaints:
■ “Doing this is impossible for me . . . I don’t make enough to try this
exercise.”
■ “Nice idea, but the current median family income here in Ohio is
$58,000/year. After taxes this means a monthly paycheck of about $3,400.
Note that this is the median, so fully half of Ohio families live on less than
this! I doubt many of them could save $1,000/month without selling off
their children.”
■ “This’d be nice . . . If I even made $1,000 in a month, I might try it. But
I’m in university . . .”
First of all, notice that crazy people have a particular way of writing—
they’re always trailing off at the end of a sentence. If someone writes you and
says, “It must be nice . . .” or “That sounds hard . . .” odds are good that
they’re a serial killer who will be knocking on your door very soon, then
wearing your skin as a raincoat.
Also, people love to use their particular situation—living in Ohio, or
Malaysia, or not having gone to an Ivy League school—to explain why they
can’t get the same results others can. I used to engage and show them
examples of people in their own area who got amazing results. Their
response? “Well, did they have [increasingly obscure criteria: moved around
three times as a kid, eleven fingers, whatever]?” As soon as I said no, they
said, “See? I knew this wouldn’t work for me.” Cynics don’t want results;
they want an excuse to not take action. Ironically, even if they win their own
manufactured argument, they lose overall, because they’re stuck in a prison of
their mind.
“The world is against me.” Yes, there are lots of societal problems right now.
But when it comes to personal finance, I focus on what I can control. This
idea escapes whiners, whose natural reaction when asked to actually do
something about their situation is to create reasons why they can’t. It used to
be personal excuses (“no time”). Now, with the rise of victim culture, it’s
more politically correct to point to some external force, like median earnings
or economic policy. Yes, getting your financial life in order does require some
work. But the rewards far surpass the effort.
The truth is that these whiners miss the point. While saving $1,000 in a
month was eminently reasonable, it was also an aspirational goal. If you

couldn’t save $1,000, what about $500? Or $200? Finally, the people who
complained about money a year ago are probably still complaining, while
many of the people who took the challenge saved hundreds and even
thousands of dollars.

Other People We Can Blame for Our Money
Problems
There are other common excuses for why we don’t manage our money. Most
of them don’t stand up to scrutiny:
■ “Our education system doesn’t teach this.” It’s easy for people in their
twenties to wish that their colleges had offered some personal finance
training. Guess what? Most colleges do offer those classes. You just didn’t
take them!
■ “Credit card companies and banks are out to profit off us.” Yes, they
are. So stop complaining and learn how to beat the companies instead of
letting them beat you.
■ “I’m afraid of losing money.” That’s fair, especially after global crises
where front-page articles used words like “tanked” and “lost generation.”
But you need to take a long-term view: The economy grows and contracts
in cycles. If you withdrew your money from the stock market in 2009, you
missed out on one of the longest sustained periods of growth in history.
Fear is no excuse to do nothing with your money. Remember, you can
choose among many different investment options—some aggressive, some
conservative. It all depends on how much risk you’re willing to take. In
fact, by automating your money, you can put yourself in a position to excel
when others are scared—by continuing to consistently save and invest.
When others are scared, there are bargains to be found.
■ “What if I don’t know where to get an extra $100 per month?” You
don’t need to earn another penny. I’ll show you how to streamline your
existing spending to generate that money to invest. Follow my CEO
Method: Cut costs, Earn more, and Optimize your existing spending.
■ “I don’t want average returns.” Our culture stigmatizes being average.
Who wants to have an average relationship? Or an average income?
Financial firms have weaponized that fear of average: They suggest it’s
bad to be average, that it’s boring, and that you can do better. There’s
actually an entire ad campaign based on this idea by a popular roboadvisor whose tagline reads “Be better than average.” The truth is, you
likely can’t beat average returns. In fact, average 8 percent returns are

actually very good. Ironically, people who fear “being average” do exactly
the things that make them perform worse than average: trade frequently,
make outlandish bets, incur high taxes, and pay unnecessary fees.
Remember: In relationships and work, we want to be better than average.
In investing, average is great.
You’re not a victim, you’re in control. Once you truly internalize that, you
can start to go on offense. No more being paralyzed by the thought that you
have to get every single part of your personal finances perfectly organized
before you can begin to manage your money.
Do you need to be the Iron Chef to cook a grilled-cheese sandwich? No,
and once you make your first meal, it’s easier to cook something more
complicated the next time around. The single most important factor to getting
rich is getting started, not being the smartest person in the room.

Put the Excuses Aside
Listen up, crybabies: This isn’t your grandma’s house and I’m not going to
bake you cookies and coddle you. A lot of your financial problems are caused
by one person: you. Instead of blaming circumstances and corporate America
for your financial situation, you need to focus on what you can change
yourself. Just as the diet industry has overwhelmed us with too many choices,
personal finance is a confusing mess of overblown hype, myths, outright
deception—and us, feeling guilty about not doing enough or not doing it
right. If you’re not satisfied with your finances and you’re willing to take a
hard look in the mirror, you’ll discover one inescapable truth: The problem,
and the solution, is you.
Let’s put the excuses aside. What if you could consciously decide how to
spend your money, rather than say, “I guess that’s how much I spent last
month”? What if you could build an automatic infrastructure that made all
your accounts work together and automated your savings? What if you could
invest simply and regularly without fear? Guess what? You can! I’ll show you
how to take the money you’re making and redirect it to the places you want it
to go—including substantially growing your money over the long term, no
matter what the economy is like.

The Key Messages of I Will Teach You
to Be Rich

I believe in small steps. I want to reduce the number of choices that paralyze
us. It’s more important to get started than to spend an exhaustive amount of
time researching the best fund in the universe. I Will Teach You to Be Rich is
about taking the first step—understanding the barriers that keep us from
managing our money and then tearing them down and putting our money in
the right places so we can achieve our goals. Frankly, your goal probably isn’t
to become a financial expert. It’s to live your life and let money serve you. So
instead of saying, “How much money do I need to make?” you’ll say, “What
do I want to do with my life—and how can I use money to do it?” And
instead of being driven by fear, you’ll be guided by what history has shown us
about investing and growth.
I’ll keep it simple: Too many books try to cover everything about money,
leaving you holding a book that you “should” read but don’t because it’s
overwhelming. I want you to know enough to get started setting up automated
accounts and investing, even with just $100. So here are the essential
messages of I Will Teach You to Be Rich:
The 85 Percent Solution: Getting started is more important than becoming
an expert. Too many of us get overwhelmed thinking we need to manage our
money perfectly, which leads us to do nothing at all. That’s why the easiest
way to manage your money is to take it one step at a time—and not worry
about being perfect. I’d rather act and get it 85 percent right than do nothing.
Think about it: 85 percent of the way is far better than zero percent. Once
your money system is good enough—or 85 percent of the way there—you can
get on with your life and go do the things you really want to do.
It’s okay to make mistakes. It’s better to make them now, with a little bit of
money, so that when you have more, you’ll know what to avoid.
Spend extravagantly on the things you love and cut costs mercilessly on the
things you don’t.This book isn’t about telling you to stop buying lattes.
Instead, it’s about being able to actually spend more on the things you love by
not spending money on all the knucklehead things you don’t care about.
Look, it’s easy to want the best of everything: We want to go out all the time,
live in a great apartment, buy new clothes, drive a new car, and travel anytime
we want. The truth is, you have to prioritize. My friend Jim once called to tell
me that he’d gotten a raise at work. On the same day, he moved into a smaller
apartment. Why? Because he doesn’t care very much about where he lives,
but he loves spending money on camping and biking. That’s called conscious
spending. (Learn how one of my friends consciously spends $21,000 per year
going out.)

There’s a difference between being sexy and being rich. When I hear people
talk about the stocks they bought, sold, or shorted last week, I realize that my
investment style sounds pretty boring: “Well, I bought a few good funds five
years ago and haven’t done anything since, except buy more on an automatic
schedule.” But investment isn’t about being sexy—it’s about making money,
and when you look at investment literature, buy-and-hold investing wins over
the long term, every time.
Don’t live in the spreadsheet. I encourage you to pick your financial system
and move on with your life, which means not “living in the spreadsheet,” or
obsessing over every tiny change in your spending and in the market. The
idea that you could do this might seem far-fetched right now, but by the time
you’re done with this book you’ll be extremely comfortable with your money
and investing. I’ve known too many people who end up tracking every single
fluctuation in their net worth, running different scenarios in Excel and
modeling out how soon they can retire. Don’t do this. You’ll turn into a social
weirdo and, more important, it’s unnecessary. If I do my job right, you’ll
automate your money and live your Rich Life, which takes place outside the
spreadsheet.
Play offense, not defense. Too many of us play defense with our finances. We
wait until the end of the month, then look at our spending and shrug: “I guess
I spent that much.” We accept onerous fees. We don’t question complicated
advice because it’s given to us in a language we don’t understand. In this
book, I’ll teach you to go on offense with your credit cards, your banks, your
investments, and even your own money psychology. My goal is for you to
craft your own Rich Life by the end of Chapter 9. Get aggressive! No one’s
going to do it for you.
I Will Teach You to Be Rich is about using money to design your Rich Life.
I’ll teach you how to set up your accounts to create an automatic financial
infrastructure that will run smoothly with minimal intervention. You’ll also
learn what to avoid, some surprising findings from financial literature (is real
estate really a good investment?), and how to avoid common financial
mistakes. And you’ll start taking action instead of debating minutiae. All this
will take you just six weeks—then you’ll be on the road to being rich. Doesn’t
that sound good?

THE BEST MISTAKE I EVER
MADE

When I was in high school, my parents told me that if I wanted to go to
college, I’d need to pay for it with scholarships. So like a good Indian
son, I started applying . . . and applying and applying. In the end, I’d
applied for about sixty scholarships and had won hundreds of thousands
of dollars.
But my best scholarship was the first one—an award for $2,000. The
organization wrote a check directly to me. I took it and invested in the
stock market—and immediately lost half my money.
Oops. That’s when I decided that I really needed to learn about
money. I read the personal-finance books, watched the TV shows, and
bought the magazines. After a while, I also started sharing what I’d
learned. I taught informal classes to friends at Stanford (even though in
the early days, nobody would ever attend). Then, in 2004, I began
writing a blog called “I Will Teach You to Be Rich,” covering the basics
of saving, banking, budgeting, and investing. The rest, as they say, is
history.

Why Do You Want to Be Rich?
I’ve talked to more than a million people about personal finance over the last
fifteen years through my website and speaking engagements. When I do, I
always ask two questions:
■ Why do you want to be rich?
■ What does being rich mean to you?
Most people never spend even ten minutes thinking through what “rich”
means to them. Here’s a hint: It’s different for everyone, and money is just a
small part of being rich. For example, my friends all value different things.
Paul loves eating out at Michelin-starred restaurants where a meal might cost
$500. Nicole loves traveling. And Nick loves buying clothes. If you don’t
consciously choose what “rich” means, it’s easy to end up mindlessly trying
to keep up with your friends. I consider myself rich now that I can do these
things:
■ Make career decisions because I want to, not because of money
■ Help my parents with their retirement, so they don’t have to work if they
don’t want to

■ Spend extravagantly on the things I love and be relentlessly frugal about
the things I don’t (e.g., live in a nice apartment in New York but not own a
car)
Every December, I sit down with my wife and we get intentional about the
next year. Where do we want to travel? Who do we want to invite with us?
What can we imagine doing in the next year that we’ll remember for the next
fifty years? This planning process—where we get to intentionally design our
Rich Lives—is one of the most fun things we do together as a couple.
Before you go further, I encourage you to think about your Rich Life. Why
do you want to be rich? What do you want to do with your wealth?
Get really specific. If your Rich Life is “I want to take a taxi instead of a
bus,” write it down! I realized I live in New York but I hadn’t been taking
advantage of all the cultural events here, so I decided that once every quarter,
I’d go to a museum or Broadway show. Once I set the intention, it became a
part of my Rich Life. Don’t be embarrassed about how small—or big—your
vision is. For example, when I first wrote down my list of a Rich Life, one of
the key goals was being able to order appetizers from a restaurant menu,
which I never did as a kid. As time went on, my goals got bigger.
When you picture your ideal life, what are you doing in it?

10 RULES FOR A RICH LIFE
1. A Rich Life means you can spend extravagantly on the things you
love as long as you cut costs mercilessly on the things you don’t.
2. Focus on the Big Wins—the five to ten things that get you
disproportionate results, including automating your savings and
investing, finding a job you love, and negotiating your salary. Get the
Big Wins right and you can order as many lattes as you want.
3. Investing should be very boring—and very profitable—over the long
term. I get more excited eating tacos than checking my investment
returns.
4. There’s a limit to how much you can cut, but no limit to how much
you can earn. I have readers who earn $50,000/year and ones who earn
$750,000/year. They both buy the same loaves of bread. Controlling
spending is important, but your earnings become super-linear.

5. Your friends and family will have lots of “tips” once you begin your
financial journey. Listen politely, then stick to the program.
6. Build a collection of “spending frameworks” to use when deciding on
buying something. Most people default to restrictive rules (“I need to
cut back on eating out . . .”), but you can flip it and decide what you’ll
always spend on, like my book-buying rule: If you’re thinking about
buying a book, just buy it. Don’t waste even five seconds debating it.
Applying even one new idea from a book is worth it. (Like this one.)
7. Beware of the endless search for “advanced” tips. So many people
seek out high-level answers to avoid the real, hard work of improving
step by step. It’s easier to dream about winning the Boston Marathon
than to go out for a ten-minute jog every morning. Sometimes the most
advanced thing you can do is the basics, consistently.
8. You’re in control. This isn’t a Disney movie and nobody’s coming to
rescue you. Fortunately, you can take control of your finances and build
your Rich Life.
9. Part of creating your Rich Life is the willingness to be
unapologetically different. Once money isn’t a primary constraint,
you’ll have the freedom to design your own Rich Life, which will
almost certainly be different from the average person’s. Embrace it. This
is the fun part!
10. Live life outside the spreadsheet. Once you automate your money
using the system in this book, you’ll see that the most important part of
a Rich Life is outside the spreadsheet—it involves relationships, new
experiences, and giving back. You earned it.

What You’ll Get Out of This Book
Most people think that investing means “buying stocks,” as if they should
buy and sell random stocks and somehow magically make a profit. Because
they’ve started with a mistaken assumption—that investing means picking
stocks—the ones who decide to learn more go down the rabbit hole of fancy
terms like “hedge funds,” “derivatives,” and “call options.”
In reality, their fundamental assumption was incorrect. Investing isn’t
about picking stocks. In fact, your investment plan is actually more important
than any individual investment you make. Sadly, most people actually think
you need this level of complexity to get rich because they see people talking

about this stuff online each day. Guess what? For individual investors like you
and me, these options are irrelevant.
It sounds sexy, but when individual investors talk about complicated
concepts like this, it’s like two elementary school tennis players arguing about
the string tension of their racquets. Sure, it might matter a little, but they’d be
much better tennis players if they just went outside and hit some balls for a
few hours each day.
Simple, long-term investing works. This idea gets nothing but yawns and
eye rolls. But you decide: Do you want to sit around impressing others with
your sexy vocabulary, or do you want to join me on my gold-lined throne as
we’re fed grapes and fanned with palm fronds?
I Will Teach You to Be Rich will help you figure out where your money is
going and redirect it to where you want it to go. Saving for a vacation to
China? A wedding? Just want to make your money grow? Here’s the six-week
program that will let you tackle it.

SIX WEEKS OF

ACTION STEPS
IN WEEK 1, you’ll set up your credit cards, pay off debt (if applicable), and
learn how to master your credit history and free credit rewards.
IN WEEK 2, you’ll set up the right bank accounts.
IN WEEK 3, you’ll open a 401(k) and an investment account (even if you
have just $100 to start).
IN WEEK 4, you’ll figure out how much you’re spending. And then you’ll
figure out how to make your money go where you want it to go.
IN WEEK 5, you’ll automate your new infrastructure to make your accounts
play together nicely.
IN WEEK 6, you’ll learn why investing isn’t the same as picking stocks—
and how you can get the most out of the market with very little work.
You’ll also learn to choose a low-cost automatic portfolio that beats typical
Wall Street portfolios, and find out how to maintain your investments by
setting up a system that lets you remain as hands-off as possible while your
money accumulates automatically. Plus, I provide answers to many specific

money questions, including how to buy a car, pay for a wedding, and
negotiate your salary.
After reading this book, you’ll be better prepared to manage your finances
than 99 percent of other people. You’ll know what accounts to open up, ways
not to pay your bank extra fees, how to invest, how to think about money, and
how to see through a lot of the hype that you encounter online every day.
There aren’t any secrets to getting rich—it just takes small steps and some
discipline, and you can do it with a little bit of work. Now let’s get started.

CHAPTER 1

OPTIMIZE YOUR CREDIT
CARDS
How to beat the credit card companies at their own game

You’ll never see an Indian driving a two-door coupe. Really, think about it. If
you have a neighborhood Indian—let’s call him Raj—this guy is driving a
practical four-door car, usually a Honda Accord or Toyota Camry. However,
Indian people aren’t just fanatical about driving sensible cars. We’re
absolutely nuts about hammering down the price to the last penny. Take my
dad, for example. He’ll bargain for five straight days just to buy one car. I’ve
been along for the ride on these weeklong negotiating sessions with him
before. Once, as he was literally about to sign the papers, he stopped, asked
them to throw in free floor mats (a $50 value), and walked away when they
refused. This, after he’d spent five days bargaining them down. As he dragged
me from the dealership, I stared straight ahead, shell-shocked.
As you can imagine, by the time I went to buy my own car, I had been
steeped in a rich tradition of negotiating. I knew how to make unreasonable
demands with a straight face and never take no for an answer. I took a more
modern approach, however: Instead of spending a week going from
dealership to dealership, I simply invited seventeen dealers in Northern
California to bid against each other for my business while I sat at home and
browsed around the internet, calmly reviewing the emails and faxes (yes,
really) as they came in. (For more about buying a car.) In the end, I found a
great deal in Palo Alto and walked in ready to sign the papers. Everything was
going smoothly until the dealer went to check my credit. He came back
smiling. “You know, you have the best credit of anyone I’ve ever seen at your
age,” he said.

“Thanks,” I replied, actually wanting to say, “AWWW, YEAH, I KNEW
IT.” That’s because I was a weird twentysomething Indian who chooses a
four-door Accord for his dream car and prides himself on his credit score.
Then the dealer said, “Hmm.”
“Hmm?” I asked.
“Well,” he said, “it looks like you have great credit, but not enough credit
sources.” The bottom line, he told me, was that they couldn’t offer me the
low-interest option we had talked about. Instead of 1.9 percent interest, it
would be 4.9 percent. That didn’t sound like much, but I pulled out a notepad
and did a quick calculation. The difference would be more than $2,200 over
the life of my car loan. Because I was getting such a great deal on the car, I
convinced myself that the higher interest rate was okay, and I signed the
papers for the loan. But I was still pissed. Why should I have to pay an extra
two grand when I had great credit?
Most people weren’t raised like me, so I understand that you probably hate
negotiating. Most Americans do. We’re not sure what to say, we get nervous
about looking cheap, and then we look at ourselves and say, “Is this really
worth it?” In a pool of sweaty discomfort, most of us conclude “No”—and we
pay full price.
I have a fresh perspective: It’s not worth negotiating everything, but there
are a few areas of life where negotiation is a Big Win. In this chapter, I’m
going to show you how to go on offense and squeeze as many rewards and
benefits out of your credit cards as possible. You’re going to start winning
against them. And for the first time, negotiating is going to be fun.

The Usual Credit Card Scare Tactics
Virtually every section on credit cards in every book starts with these three
scare tactics.
Scary stats. According to the Prosperity Now Scorecard, the median US
household credit card debt is $2,241, and the median student loan debt is
$17,711. The Fed Reserve notes that “Four in 10 adults in 2017 would have to
either borrow money, sell something, or simply not be able to pay if faced
with a $400 emergency expense.”
Scary headlines. “The looming debt crisis will hurt these Americans the
most,” reports CNBC. Or this one from the Washington Post: “A debt crisis is
on the horizon.” Business Insider reports that “America’s student debt crisis is
worse than we thought.”

Scary emotions. Confusion, anxiety, and lies—the media knows that if they
employ these, they’ll sell pageviews and ads.
Reading these scare tactics, how do you feel? Most of us respond by
shutting down and ignoring the problem.
Debt was about fear. I
didn’t talk about it, I
didn’t look at the whole
picture, I avoided any
conversation
or
thought about it.
—WARREN KOPP, 36

Debt was always at the back of my mind. I couldn’t enjoy spending the
money I had because it haunted me.
—CHRIS BEHRENS, 45

I remember feeling embarrassed when I would apply for a credit card
and get turned down . . . When debt collectors would call, I would feel
embarrassed and stressed about ignoring the call, because I owed
money, but couldn’t afford to pay it off.
—ALLISON REYNOLDS, 28

The media thrives on creating fear and anxiety around debt, as if it’s
inescapable and crippling. And they rarely suggest solutions—when they do,
they’re along the lines of “eat out less.” Thanks, guys.
The result is a tornado of negative emotions. We feel helpless. We feel
outraged. Who should get the blame? I don’t know, but somebody should.
Most of all, we do nothing. This is how “outrage culture” works—it makes
you feel angry and exhausted . . . and then you go back to doing nothing.
I have a different approach.

The Way I See It
Credit cards give you thousands of dollars worth of perks. If you pay your
bill on time, they’re a free short-term loan. They can help you keep track of
your spending much more easily than cash, and they let you download your
transaction history for free. Most offer free warranty extensions on your
purchases and free rental car insurance. Many offer rewards and points worth
hundreds or even thousands of dollars.

Credit cards are also convenient enemies. Almost everyone has a bad story
about late fees, unauthorized charges, or overspending. Not surprisingly,
many pundits have a knee-jerk reaction to credit cards: “Using credit cards is
the worst financial decision you can make,” they shout. “Cut them all up!”
What an easy battle cry for people who want simple solutions and don’t
realize the benefits of multiple sources of credit.
The truth about credit cards lies somewhere between these two extremes.
As long as you manage them well, they’re worth having. But if you don’t
completely pay off your bill at the end of the month, you’ll owe an enormous
amount of interest on the remainder, usually about 14 percent. This is what’s
known as the annual percentage rate, or APR. Credit card companies also tack
on a whopping fee every time you miss a payment—usually around $35. It’s
also easy to overuse credit cards and find yourself in debt, as many American
credit card users have done.
This isn’t meant to scare you away from using credit cards. In fact, instead
of playing defense by avoiding credit cards altogether, I want you to play
offense by using credit cards responsibly and getting as many benefits out of
them as possible. To do so, you need to optimize your credit card(s) and use
them as a spearhead to improve your overall credit. By the end of this chapter,
you’ll know how to squeeze the credit card companies for everything they’re
worth—without paying unnecessary fees—and you’ll know how to use your
cards to boost your all-important credit score. I’ll show you how to negotiate
with credit card companies and reveal secret perks that nobody talks about.
And I’ll show you exactly how I maximize my credit cards for perks and cash
back, including examples of how I use points for free flights and high-end
hotel stays.
When I was traveling
with my fiancée to see
her family in Dubai, I
surprised her with a
three-night stay at a
resort in the desert that
could
only
be
described as 7-star. We
had a private villa in
traditional
bedouin
style overlooking the
Dubai desert with a
private pool, and all
meals at the resort

were provided. The
whole
experience
easily would have cost
$2,000-plus a night,
but I did the whole
thing for free with
points.
—NATHAN LACHENMYER, 29

I recently booked 2 round-trip tickets from San Francisco to Italy for
a 2-week vacation this fall. The flights were completely free with
credit card points!
—JANE PHILIPPS, 30

In the past year I’ve flown business class to Spain and stayed at
luxury hotels for a week, flown round-trip business class with my
girlfriend to Thailand, and flown my mother to Germany business
class to visit for her father’s 80th birthday. I’m also about to redeem
miles to go to Budapest next spring!
—JORDAN PETIT, 27

Student loans can be a great decision. Journalists love to write about the
student debt “crisis.” Yet a student loan can be one of the best investments
you ever make, with the average bachelor’s degree holder earning over $1
million more than people with only a high school diploma. Yes, debt sucks,
and yes, many predatory colleges and graduate schools actively lie to young
Americans about the actual value of their degree—a problem that’s
completely inexcusable and supported by an educational-industrial complex.
Many earnest but naive students were misled by their counselors, colleges,
and even their parents about incurring student loan debt on degrees that will
never pay off.
But you can pay off your debt faster than you thought possible (to see how,
flip to Student Loans—Pay Them Down or Invest?). And your college degree
was almost certainly worth it—even if you’re only considering the financial
return on investment and not including the benefits of making lifelong
friends, building priceless habits of discipline, and exposing yourself to new
ideas as an educated citizen. Ignore the scare tactics of the student loan
“crisis.” If you have student loan debt, use the material in this book to create a
repayment plan.
Most people are playing the game wrong. I’ve spoken to literally thousands
of people who are in debt. Some of them have had tough situations—

unexpected illnesses, elderly parents who need support, surprise expenses.
But, candidly, some of them are simply playing the game wrong. They’ve
never spent a weekend reading a book on personal finance. They don’t even
know how much they owe! Instead of doing the work to aggressively win at
the game of debt, they complain. It’s like watching a four-year-old trying to
play Monopoly, then realizing they can’t understand the rules (which they’ve
never read), getting angry, and flipping the board over. I’ll show you how to
win.
When it comes to student loans and credit cards, my goal is for you to stop
playing defense. I’m going to show you how to play offense instead. For
student loans, make an aggressive plan and minimize the amount of interest
you pay. For credit cards, I squeeze every single benefit out of them.
Basically I want the credit card companies to hate you, as they hate me.
The best part is how fast you can change your financial life once you
switch from playing defense to playing offense with your money.
In the 3½ years since I
read the book, I paid
off $14,000 in credit
card debt and $8,000
in student loan debt.
—RYAN HEALEY, 27

In the past year since I started this book, I opened a 401(k) and a
Roth IRA, understand how they work, and have funded $7,200 toward
my retirement. I also opened 2 credit cards to build my utilization and
boost my credit score and am 100 percent a deadbeat customer who
pays on time every month in full.
—JEFF COLLINS, 35

I learned how to automate my credit card payments, set up flexible
spending, and start investing in index funds. Today I have amassed
over $40,000 in my “net worth,” having been out of school for less
than 2 years. Thanks for the advice!
—EMILY BAUMAN, 24

BANK OF AMERICA HATES ME

Bank of America, one of the world’s shittiest banks, hates me because
I’ve named them as one of the worst banks out there. Good news! Ten
years later, they’re still on my list for screwing over my readers
repeatedly. (Wells Fargo is also on my list.) I don’t cut deals with banks
—I don’t need their money—and I call out the best, and worst, financial
companies for my readers.
As you can imagine, the worst companies don’t like being named in a
New York Times bestselling book. I discovered Bank of America hates
me because one of my friends works in their corporate office. One day,
she reached out to me and said, “Did you know you’re on a Bank of
America influencer list?” I was surprised. Me? Little old me?
Then she added: “It’s a negative influencer list.”
I have never been so proud.

Playing Offense: Use Credit to
Accelerate Your Rich Life
People love to pick sexy investments and use fancy terms like “distressed
securities” and “EBITDA” when they focus on getting rich. But they often
ignore something that is so simple, so basic, that it just doesn’t seem
important: their credit. Ironically, credit is one of the most vital factors in
getting rich, but because it’s hard to wrap our minds around it, we often
overlook it entirely. It’s time to wake up and pay attention to it, because
establishing good credit is the first step in building an infrastructure for
getting rich. Think about it: Our largest purchases are almost always made on
credit, and people with good credit save tens of thousands of dollars on these
purchases. Credit has a far greater impact on your finances than saving a few
dollars a day on a cup of coffee.
There are two main components to your credit (also known as your credit
history): your credit report and your credit score. These boring terms can
actually save you tens of thousands of dollars over your lifetime, so listen up.
This is an example of a Big Win—worth paying attention to.
Your credit report gives potential lenders basic information about you,
your accounts, and your payment history. It tracks all credit-related activities
(e.g., credit cards and loans), although recent activities are given higher
weight.

Your credit score (often called your FICO score because it was created by
the Fair Isaac Corporation) is a single, easy-to-read number between 300 and
850 that represents your credit risk to lenders. It’s like an SAT score for the
credit industry (higher is better). The lenders take this number and, with a few
other pieces of information, such as your salary and age, decide if they’ll lend
you money for credit like a credit card, mortgage, or car loan. They’ll charge
you more or less for the loan depending on your score, which signifies how
risky you are.
It’s ridiculously easy to check your credit score and credit report—and you
should do it right now. Once a year, by law, you’re allowed to obtain your
credit report for free at annualcreditreport.com. It includes basic information
about all your accounts and payment history.
Lots of people use Credit Karma (creditkarma.com) to get a free credit
score, but I prefer the official credit score from MyFico (myfico.com), which
is more accurate even though it has a small fee.
Why are your credit report and credit score important? Because a good
credit score can save you hundreds of thousands of dollars in interest charges.
How? Well, if you have good credit, it makes you less risky to lenders,
meaning they can offer you a better interest rate on loans. Maybe you don’t
need a loan today, but in three or four years, you might need to start thinking
about a car or a house. So please don’t scoff at or dismiss what you just read.
One of the key differences

CREDIT SCORE VS. CREDIT
REPORT
WHAT YOUR CREDIT
SCORE IS BASED ON:

WHAT YOUR
CREDIT REPORT
INCLUDES:

35% payment history
(How reliable you are. Late
payments hurt you.)

■ Basic identification
information

30% amounts owed
(How much you owe and how
much credit you have available,
aka your credit utilization rate)

■ A list of all your credit
accounts

15% length of history

■ Your credit history, or whom
you’ve paid, how consistently,
and any late payments

(How long you’ve had credit)

10% new credit
(Older accounts are better, because
they show you’re reliable.)

10% types of credit

■ Amount of loans

■ Credit inquiries, or who else
has requested your credit info

(For example, credit cards, student
loans. Varied is better.)

Get your credit score at
myfico.com for a small fee.

(other lenders)

■ Get your free credit report
once a year at
annualcreditreport.com

between rich people and everyone else is that rich people plan before they
need to plan.
If you doubt that a loan’s interest rate really makes that much of a
difference, check out the table on the next page. Look at the differences in
what you’d pay for a 30-year mortgage based on your credit score.
As you can see, a high credit score can save you tens of thousands of
dollars over your lifetime (or more if you live in a high-cost-of-living area).
While other people spend many hours cutting coupons, agonizing over
generic brands at the grocery store, or beating themselves up over a morning
latte, they’re failing to see the bigger picture. It’s fine to keep a close eye on
your expenses, but you should focus on spending time on the things that
matter, the Big Wins. So let’s dig into tactics for improving your credit, which
is quantifiably worth much more than any advice about frugality.

HOW CREDIT SCORES AFFECT
WHAT YOU PAY
ON A $200,000 30YEAR
MORTGAGE, IF
YOUR FICO
SCORE IS . . .

. . . YOUR
APR*
(INTEREST
RATE)
WILL
BE . . .

. . . WITH
INTEREST,
YOU’LL PAY
A TOTAL
OF . . .

760–850

4.279%

$355,420

700–759

4.501%

$364,856

680–699

4.678%

$372,468

660–679

4.892%

$381,773

640–659

5.322%

$400,804

620–639

5.868%

$425,585

*APR calculated in August 2018.

My credit mistake was
I opened my account

too late, I very quickly
started using my card
to stay out of my bank
overdraft, and it got
out of hand. Then I
forgot I had to make a
payment and missed a
payment. I wish I’d
understood how a
credit card would help
my credit score a
decade ago, because
then
I
would’ve
already made, learned
from, and recovered
from my daft mistakes
with it.
—JC, 29

Building Credit with Credit Cards
Credit comes in many forms (car loans, mortgages, and so on), but we’re
going to start with credit cards because almost all of us have one, and most
important, they’re the fastest and most concrete way to optimize your credit.
Most people are making at least one or two major mistakes with their credit
cards. The good news is that it’s incredibly easy to fix this by learning a little
bit about how credit cards work.

GUESS HOW MUCH AN IPHONE
COSTS IF YOU FINANCE IT
WITH A CREDIT CARD?
One of the biggest problems with credit cards is the hidden cost of using
them. It may be incredibly convenient to swipe your card at every retailer,
but if you don’t pay your bill every month, you’ll end up owing way more
than you realize.

LET’S
SAY
YOU
BUY
THIS . . .

PAYING MINIMUM
PAYMENTS, IT WILL
TAKE THIS LONG TO
PAY IT OFF . . .

YOU’LL
PAY THIS
MUCH IN
INTEREST

$1,000
iPhone

9 years, 2 months

$732.76

$1,500
computer

13 years, 3 months

$1,432.19

$10,000
furniture

32 years, 2 months

$13,332.06

Assumes 14% APR and 2% minimum payment

If you paid only the minimum monthly balance on your $10,000
purchase, it would take you more than 32 years and cost you more than
$13,000 in interest alone, more than the purchase price itself. Remember,
this doesn’t even factor in your “opportunity cost”: Instead of paying off a
$10,000 sofa for over 30 years, if you’d invested the same amount and
earned 8 percent, it would’ve turned into about $27,000! Try calculating
how much your own purchases really cost at
bankrate.com/brm/calc/minpayment.asp.

Getting a New Card
How do you choose the right credit card? I have a few simple rules that I use
when choosing my own cards:
■ Don’t accept credit card offers that come in the mail or from retail stores
like Gap or Nordstrom.
■ Squeeze every reward you can out of your credit cards.
■ Pick a good one, then move on with your life.
Now here’s how to do it.
Get rewarded for your spending. There are different levels of rewards cards.
Some are very basic, while others offer hundreds of dollars in annual benefits
—or even thousands, depending on how much you spend.
First, decide what you want to get rewarded with—cash back or travel. I
recommend cash back because it’s straightforward, there are excellent cash
back cards, and it’s simpler than travel rewards, which require more
sophistication to truly maximize. (For more on maximizing travel rewards,
look up forums on “credit card churning.”)
Once you decide on the primary reward you want, use a site like
bankrate.com to sort through your options.
Most of the best rewards cards have fees. Are they worth it? You should
run the numbers to decide, which takes less than 5 minutes. Here’s a quick
rule of thumb: If you spend thousands per month on your credit card, the
rewards are usually worth it. But if you spend more modestly or you’re not
sure whether you want to pay a fee, spend a few minutes doing a quick
analysis by searching for “credit card rewards calculator.” Plug in your
numbers and you’ll quickly see which rewards cards are worth it for you.

Bottom line: It’s almost always worth getting a rewards card. Be sure to do
your homework and pick one where you value the rewards.
Don’t sign up for retail store credit cards. These cards might as well have
“You Screwed Yourself” written on them in thirty-six-point type. I can’t count
how many times I’ve been in line and seen someone buying $40 of socks or a
cheap T-shirt or two. I just wait for the conversation I know is about to
happen. “Would you like to open a credit card?” the salesperson asks, praying
he meets his commission goal for the month. “You’ll save ten percent.”
Yup! There it is! Between clenched teeth, it’s me muttering, “Shut your
mouth, Ramit. Don’t say anything. They don’t want your unsolicit—”
Person at the register: “Hmm . . . sure, I’ll open that card. Why not? It
couldn’t hurt.”
Two points for our friend who decided to open a retail credit card:
1. As a general rule, whenever you say, “It couldn’t hurt,” IT VERY MUCH
COULD HURT. Every single time I’ve said that in my life, I’ve proceeded
to make a huge mistake.
2. This person just opened one of the most predatory cards out there to save
$4. Jesus. You might as well reach into a dirty gutter to find a few pennies.
That would be cheaper than the financial beating you’re going to
eventually take.
Get some standards, people. You wouldn’t marry the first person who
touched your elbow. Why would you sign up for a retail store card that has
high fees, near-extortionate interest rates, and terrible rewards?
As for the credit card offers that come in the mail, generally you can find
better options by researching online. (Sidenote: If you find yourself getting a
ton of credit card offers and other junk mail, go to optoutprescreen.com to get
off their marketing lists.)
I forgot to pay a stupid
$25 Gap bill. It was a
big PITA over 25
bucks. They dinged my
credit and almost sent
it to collections. I
followed the process to
challenge it 6 months
later. Told them it was
a one-time mistake. I
believe the phone

agent gave me an
address to send a
letter. I did and a
couple months later
the remark was gone
from my account.
—PAUL FRAZIER, 30

SEARCHING FOR CREDIT CARDS
ONLINE
A secret of the credit card industry: When you compare credit cards
online, you’re entering a murky world of SEO and affiliate fees where
nearly all credit card listings are compensated. This means that virtually
every site is being paid for showing you their “recommended” cards,
and it’s not easy to see why certain cards are being recommended. You
can usually find very good cards on these sites. But if you’re a high
spender, be sure to take a few extra minutes searching around. For
example, when I was beginning to plan my wedding, I looked for the
best cash back card. Buried at the bottom of some forum post, I found a
cash back credit card from Alliant Credit Union that paid 3 percent for
the first year of spending, then 2 percent afterward. That was the best
cash back reward on the market, but the card never showed up in my
original searches.
Don’t go card crazy. Now that you’re in the market, you might be tempted by
any number of card offers. But don’t overdo it. There’s no magic number of
cards you should have, but each additional card you get means added
complexity for your personal finance system: more to keep track of and more
places for things to go wrong. Two or three is a good rule of thumb. (The
average American has four credit cards.)
My online business
profile didn’t have my
latest address so I
never
received
statements. For 34
months,
my
bank

account got charged
$60. I ignored it and
didn’t investigate it,
hoping it would go
away. I was cocky I
could force them to
waive these charges
because
of
the
relationship. Then I
finally willed myself to
look into it, visited
branches, called 5
different departments.
No bid. Once all was
said and done, I ended
up paying ~$2,000 for
a
$3,000
initial
balance. It completely
smoked my confidence.
I closed down all 11 of
my cards except my
CSP. Technically I’m
still “ahead” but the
thought of having paid
$2,000 when I *didn’t
have to* and it was
*100% avoidable and
in my control* was too
much.
—HASSAN AHMED, 36

Remember, there are other sources of credit besides credit cards. These
include installment loans (such as auto loans), personal lines of credit, home
equity lines of credit, and service credit (such as utilities). Your credit score is
based on your overall sources of credit. “Take it slow,” Craig Watts of Fair
Isaac Corporation says, cautioning against prescribing a specific number of
credit sources. “It depends on how long you’ve been managing credit. The
less information in your credit report, the higher the prominence of each new
report. For example, if . . . you only have one credit card in your name, when
you open another account, the weight of that action is more than it would be
ten years down the line.” In short, pick two or three great cards, maximize

rewards sensibly, and remember that these cards are just one part of your
overall financial infrastructure.

THE EXACT CREDIT CARDS I
USE
Years ago, I decided to optimize my credit card rewards. I knew I was
about 95 percent of the way there—I had cash back and travel cards for
my business and personal spending—but I wanted to get truly dialed in
for that last 5 percent. As my business had grown to dozens of
employees, my spending had increased considerably. These rewards
started to become meaningful and I wanted to be sure I was getting
every benefit available.
For example, at a certain point, we were spending over $40,000 on
ads every month. I know most people don’t need to maximize points at
this level. But I think it’s fascinating, and I want to share what I learned.
I wanted to know:
■ Am I squeezing out every possible reward from my spending?
■ How should I handle large spending events, like a wedding or a team
retreat?
■ When should I use a cash back card versus a travel card?
Most important, what am I missing? What are all the cool things I
should be asking for that I don’t even know about?
Finding answers was harder than I thought. First, I posted on
Facebook, asking if anyone knew an expert who could audit my
spending and give me feedback on the cards I was using. Most of the
people I initially talked to were focused on maximizing points for frugal
traveling. That’s cool, but it’s not really my thing.
Then I had an unusual call with a guy named Chris.
“I had my credit cards in pretty good shape,” Chris told me. “But
then I wanted to get really good. And I know guys like you and me
don’t have a lot of time to play the credit card games of opening and
closing cards all the time.”
I was listening.

Chris told me how he set up his cards to maximize rewards to the
tune of millions of points. I was interested, but I wanted to see if he
really knew what he was talking about. Then he said this.
CHRIS: You want to know what I do to really squeeze the points out of
my credit cards?
RAMIT: YES!
CHRIS: Some hotels will give you five hundred points for every night
you waive housekeeping. So if I’m traveling alone, I get a room with
two beds. I switch beds, switch towels, and I get my five hundred
points.
When I heard this, I was sold.
He was so detailed, so fanatical, that he had optimized down to the
level of towel usage. I had met my hero.
Chris Hutchins is the CEO of Grove (hellogrove.com), a financial
planning service geared toward young professionals. He also happens to
be extremely skilled in optimizing travel rewards.
My goal was to build a “playbook” of how to use credit cards to
maximize rewards for my personal and business lives. My assistant, Jill,
spent weeks working with Chris, analyzing my spending and upcoming
expenses. The goal was to boil it down to a simplified “playbook” that
Jill could use when making purchase decisions. The entire document is
15 pages long. But here is the key takeaway:
If you’re booking travel or eating out, use a travel card to maximize
rewards. For everything else, use a cash back card.
The card I use for travel and eating out is the Chase Sapphire
Reserve. For everything else, I use an Alliant cash back card. And for
business, I use a Capital One cash back business card. For extra
benefits, I have an Amex Platinum card.
The result of this is thousands of dollars in cash back each year,
millions of rewards points, and a new life motto: MBWOSIS.
My Body Will Only Sleep in Suites.

The Six Commandments of Credit
Cards

Now it’s time to go on offense and take full advantage of your cards. You’ll
improve your credit while automatically being rewarded for the purchases
you’re already making. Optimizing your credit is a multistep process. One of
the most important factors is getting out of debt, which we’ll tackle at the end
of the chapter. But first, we’ll set up automatic credit card payments so you
never miss a payment again. Then, we’ll see how to cut fees, get better
rewards, and take everything you can from the credit card companies.
1. Pay off your credit card regularly. Yeah, we’ve all heard it, but what you
may not know is that your debt payment history represents 35 percent of your
credit score—the largest chunk. In fact, the single most important thing you
can do to improve your credit is to pay your bills on time. Whether you’re
paying the full amount of your credit card bill or risking my wrath by paying
just part of it, pay it on time. Lenders like prompt payers, so don’t give your
credit card company the opportunity to raise your rates and lower your credit
score by being a few days late with your payment. This is a great example of
focusing on what will get you rich, not on what’s sexy. Think about your
friends who search every single website to get the best deals on travel or
clothes. They might be thrilled after saving $10—and they can brag to
everyone about all the special deals they get—but you’ll quietly save
thousands by understanding the invisible importance of credit, paying your
bills on time, and having a better credit score.
Today, most people pay their credit card bills online, but if you haven’t set
up automatic payment yet, log on to your credit card’s website to do so now.
Note: Don’t worry if you don’t always have enough money in your checking
account to pay off the full amount on your credit card. You’ll get a statement
from your card company each month before the payment goes through so that
you can adjust your payment as needed.
I totally forgot the due
date for my credit card.
So not only did they
charge me a late fee,
but they charged me
interest on that month’s
and
the
previous
month’s purchases. I
called up the customer
service line of the card
and told them that I
had been a good
customer in the past

and asked if they could
do anything for me
with the fees. The
representative removed
the late fee and
refunded $20 of the
interest charge back to
my account. They
returned a total of $59
to me with one phone
call.
—ERIC HENRY, 25

AWFUL CONSEQUENCES
If you miss even one payment on your credit card, here are four terrible,
horrible, no good, very bad results you may face:
1. Your credit score can drop more than 100 points, which would add
$227/month to an average 30-year fixed-rate mortgage.
2. Your APR can go up to 30 percent.
3. You’ll be charged a late fee, usually around $35.
4. Your late payment can trigger rate increases on your other credit cards
as well, even if you’ve never been late on them. (I find this fact
amazing.)
Don’t get too freaked out: You can recover from the hit to your credit
score, usually within a few months. In fact, if you’re just a few days late
with your payment, you may incur a fee, but it generally won’t be
reported to the credit bureaus. Find out what to do if you miss a
payment.
2. Try to get fees on your cards waived. This can be a great way to optimize
your credit cards, because your credit card companies will do all the work for
you. Call them using the phone number on the back of the card and ask if
you’re paying any fees, including annual fees or service charges. It should go
a little something like this:
YOU: Hi, I’d like to confirm that I’m not paying any fees on my credit card.

CREDIT CARD REP: Well, it looks like you have an annual fee of $100.
That’s actually one of our better rates.
YOU: I’d rather pay no fees. Can you waive this year’s annual fee?
Earlier I mentioned that it can be worth paying annual fees for rewards
cards. This is true—but why not ask? Remember, credit card companies
compete ferociously with each other, which can benefit you. Call them a
month before your new annual fee kicks in and ask them to waive it.
Sometimes it works, sometimes not.
If you decide that your credit card fee isn’t worth it, ask your credit card
company what they’ll do for you. If they waive your fees, great! If not, switch
to a no-fee card. I suggest you do this at the same credit card company to
simplify your life—and so you don’t have to close one account and open
another, which will temporarily affect your credit score.
3. Negotiate a lower APR. Your APR, or annual percentage rate, is the
interest rate your credit card company charges you. APRs fluctuate, but in
general, they hover around 13 to 16 percent. That is very high! This makes it
extremely expensive if you carry a balance on your card. Put another way,
since you can make an average of about 8 percent in the stock market, your
credit card is getting a great deal by lending you money. If you could get a 14
percent return, you’d be thrilled. You want to avoid the black hole of credit
card interest payments so you can earn money, not give it to the credit card
companies.
So, call your credit card company and ask them to lower your APR. If they
ask why, tell them you’ve been paying your bill in full on time for the last few
months, and you know there are a number of credit cards offering better rates
than you’re currently getting. (See sample script.) In my experience, this
works about half the time.
It’s important to note that your APR doesn’t technically matter if you’re
paying your bills in full every month—you could have a 2 percent APR or 80
percent APR and it would be irrelevant, since you don’t pay interest if you
pay your total bill each month. But this is a quick and easy way to pick the
low-hanging fruit with one phone call.
Reading IWT, I’ve
probably
saved
$15,000 to $25,000 in
interest alone. I’ve
negotiated car loans,
student loans, home
loans, etc.

—LYLA NUTT, 30

4. Keep your main cards for a long time, and keep them active—but also
keep them simple. Lenders like to see a long history of credit, which means
that the longer you hold an account, the more valuable it is for your credit
score. Don’t get suckered by introductory offers and low APRs—if you’re
happy with your card, keep it. Some credit card companies will cancel your
account after a certain period of inactivity. To avoid having a card you rarely
use shut down, set up an automatic payment on it. For example, I set it up so
that one of my credit cards pays a $12.95 monthly subscription through my
checking account each month, which requires zero intervention on my part.
But my credit report reflects that I’ve had the card for more than five years,
which improves my credit score. Play it safe: If you have a credit card, keep it
active using an automatic payment at least once every three months.
Now the one tricky part: If you decide to get a new card, should you close
your old card? I’ve changed my view here over the years. The typical advice
is to keep cards open for as long as possible, which is generally smart. But if
you have lots of cards that you never use, reconsider this. Some of my readers
have opened over twenty-plus cards to “churn” rewards, and now they can’t
keep track of all their cards. This is where you have to make a decision on
risk versus reward and simplicity versus complexity. There’s lots of advice
warning against closing credit cards, but as long as you’re paying your
balances on time and have good credit, closing an old card will not have a
major long-term impact on your credit score.
Think balance: For most people, having two or three credit cards is perfect.
If you have a special reason to have more cards—for example, if you own a
business or are intentionally maximizing temporary sign-up rewards—great.
But if you find yourself swamped with the number of cards you have, close
the inactive ones. As long as you have good credit, the long-term impact will
be minimal and you’ll sleep easier at night with a simple financial system you
can easily keep track of.

WHAT TO DO IF YOU MISS A
PAYMENT
Nobody’s perfect. Despite my warnings, I understand that accidents
happen and you might miss a payment at some point. When this

happens, I use my Indian heritage to beat the companies by negotiating
with them, and you can, too:
YOU: Hi, I noticed I missed a payment, and I wanted to confirm that
this won’t affect my credit score.
CREDIT CARD REP: Let me check on that. No, the late fee will be
applied, but it won’t affect your credit score.
(Note: If you pay within a few days of your missed bill, it usually
won’t be reported to the credit agencies. But ask to be sure.)
YOU: Thank you! I’m really happy to hear that. Now, about that fee . . .
I understand I was late, but I’d like to have it waived.
CREDIT CARD REP: Why?
YOU: It was a mistake. It won’t happen again, so I’d like to have the
fee removed.
(Note: Always end your sentence with strength. Don’t say, “Can you
remove this?” Say, “I’d like to have this removed.”) At this point, you
have a better-than-50-percent chance of getting the fee credited to your
account. But just in case you get an especially tough rep, try this.
CREDIT CARD REP: I’m very sorry, but we can’t refund that fee. I
can try to get you our latest blah blah marketing pitch blah blah . . .
YOU: I’m sorry, but I’ve been a customer for four years and I’d hate for
this one fee to drive me away from your service. What can you do to
remove the late fee?
CREDIT CARD REP: Hmm . . . Let me check on that . . . Yes, I was
able to remove the fee this time. It’s been credited to your account.
You don’t believe me that it can be so simple? It is. Anyone can do it.
5. Get more credit. (Warning! Do this only if you have no debt.) This one is
counterintuitive, and to explain it, I have to reach into personal finance
lessons of yore. Many people don’t realize this, but in the classic ’80s Salt-NPepa song “Push It,” when they say that the dance isn’t for everybody—“only
the sexy people”—they are actually detailing a sound personal finance
strategy.
Before I explain, I want to first acknowledge that, yes, I did just quote
Salt-N-Pepa in an actual, published book. Anyway, when Salt-N-Pepa talk
about “only the sexy people,” what they really mean is “This tip is only for
the financially responsible people.” I’m serious about this warning: This tip is

only for people who have no credit card debt and pay their bills in full each
month. It’s not for anyone else.
It involves getting more credit to improve something called your credit
utilization rate, which is simply how much you owe divided by your available
credit. This makes up 30 percent of your credit score. For example, if you
owe $4,000 and have $4,000 in total available credit, your ratio is 100 percent
(($4,000/$4,000) x 100), which is bad. If, however, you owe only $1,000 but
have $4,000 in available credit, your credit utilization rate is a much better 25
percent (($1,000 / $4,000) x 100). Lower is preferred because lenders don’t
want you regularly spending all the money you have available through credit
—it’s too likely that you’ll default and not pay them anything.
To improve your credit utilization rate, you have two choices: Stop
carrying so much debt on your credit cards (even if you pay it off each month)
or increase your total available credit. Because we’ve already established that
if you’re doing this, you’re debt-free, all that remains for you to do is to
increase your available credit.
Here’s how: Call up your card company and ask for a credit increase.
YOU: Hi, I’d like to request a credit increase. I currently have five thousand
dollars available, and I’d like ten thousand.
CREDIT CARD REP: Why are you requesting a credit increase?
YOU: I’ve been paying my bill in full for the last eighteen months and I have
some upcoming purchases. I’d like a credit limit of ten thousand dollars. Can
you approve my request?
REP: Sure. I’ve put in a request for this increase. It should be activated in
about seven days.
I request a credit-limit increase every six to twelve months. Remember, 30
percent of your credit score is represented by your credit utilization rate. To
improve it, the first thing you should do is pay off your debt. Only after
you’ve already paid off your debt should you try to increase your available
credit. Sorry to repeat myself, but this is important!
When my husband and
I were in college, we
got a free T-shirt or
something and got
credit
cards
with
reasonable
limits
($500). Sure, I had no
income, but that didn’t

seem important at the
time. Wouldn’t you
know
it,
I
was
responsible enough to
have my limit raised to
$2,000 after a very
short period of time!
Except that I wasn’t
actually responsible,
and I paid thousands
of dollars in interest
and late fees and
wrecked my credit
rating for several
years. It took many
years for us to clear up
this debt. I can’t name
one purchase that was
truly necessary.
—MICHELE MILLER, 38

6. Use your credit card’s secret perks!Before I get into rewards programs, let
me say this: Just like with car insurance, you can get great deals on your
credit when you’re a responsible customer. In fact, there are lots of tips for
people who have very good credit. If you fall in this category, you should call
your credit cards and lenders once a year to ask them what advantages you’re
eligible for. Often, they can waive fees, extend credit, and give you private
promotions that others don’t have access to. Call them up and use this line:
“Hi there. I checked my credit and noticed that I have a 750 credit score,
which is pretty good. I’ve been a customer of yours for the last four years, so
I’m wondering what special promotions and offers you have for me . . . I’m
thinking of fee waivers and special offers that you use for customer
retention.”
As discussed, credit cards also offer rewards programs that give you cash
back, airline tickets, and other benefits, but most people don’t take advantage
of all the free stuff they can get. For example, when I had to fly to a wedding
in an obscure town in Wisconsin, I redeemed my credit card’s travel reward to
save more than $600 on the flight. That’s an easy example, but there are even
more rewards: Did you know that credit cards automatically give you
amazing consumer protection? Here are a few examples you might not know
about:

■ Automatic warranty doubling: Most cards extend the warranty on your
purchases. So if you buy an iPhone and it breaks after Apple’s warranty
expires, your credit card will still cover it up to an additional year. This is
true for nearly every credit card for nearly every purchase, automatically.
■ Car rental insurance: If you rent a car, don’t let them sell you on getting the
extra collision insurance. It’s completely worthless! You already have
coverage through your existing car insurance, plus your credit card will
usually back you up to $50,000.
■ Trip-cancellation insurance: If you book tickets for a vacation and then get
sick and can’t travel, your airline will charge you hefty fees to rebook your
ticket. Just call your credit card and ask for the trip-cancellation insurance
to kick in, and they’ll cover those change fees—usually between $3,000 to
$10,000 per trip.
■ Concierge services: When I couldn’t find LA Philharmonic tickets, I called
my credit card and asked the concierge to try to find some. He called me
back in two days with tickets. They charged me (a lot, actually), but he
was able to get them when nobody else could.
Most important, your credit card automatically tracks your spending,
making it easy for software to download and categorize your expenses. For
these reasons, I put almost all my purchases on a credit card—especially the
large ones.
Your key takeaway: Call your credit card company and ask them to send
you a full list of all their rewards. Then use them!
We paid for our entire
3-week
honeymoon
using points, including
first-class, round-trip
direct flights from NYC
to Vegas, luxury suite
at the Venetian, luxury
car rental and all other
accommodations,
attractions, and food
(yeah, even food). We
literally didn’t spend a
penny (and came home
with +$200. Thanks,
blackjack!).
—TE ROMEO, 34

My honey and I go to Hawaii and Italy/Europe each year almost
entirely on points. It looks like we are living large and lavish, but our
last 9-day trip to Italy cost us $350, and that was only because our
favorite hotel in Sienna doesn’t take any points.
—ROBYN GINNEY, 45

ALWAYS TRACK YOUR CALLS TO
FINANCIAL COMPANIES
Unfortunately for you, credit card companies are very good at using BS
late fees to increase their revenues. Unfortunately for them, I’m giving
you a script for getting these fees reversed (see What to Do If You Miss
a Payment). One of the best ways to improve your chances of having
fees waived is by keeping track of every call to your financial
institutions, including credit card companies, banks, and investment
companies. When I call to dispute anything, I open a spreadsheet that
details the last time I called them, whom I spoke with, and what was
resolved. If only criminals were as diligent as I am.
Create a spreadsheet that looks like this:

The Pocket Tracker for Tracking Credit Card
Calls

Call Date

Time

Name of Rep

Rep’s ID#

Comments

Whenever you make a call regarding a dispute on your bill, you
wouldn’t believe how powerful it is to refer back to the last time you
called—citing the rep’s name, the date of the conversation, and your call
notes. Most credit card reps you talk to will simply give in because they
know you came to play in the big leagues.
When you use this to confront a credit card company or bank with
data from your last calls, you’ll be more prepared than 99 percent of
other people—and chances are, you’ll get what you want.

Mistakes to Avoid
Think ahead before closing accounts. If you’re applying for a major loan—
for a car, home, or education—don’t close any accounts within six months of
filing the loan application. You want as much credit as possible when you
apply.
However, if you know that an open account will entice you to spend and
you want to close your credit card to prevent that, you should do it. You may

take a slight hit on your credit score, but over time, it will recover—and that’s
better than overspending.

DISPUTING A CHARGE: HOW TO
MOBILIZE YOUR CREDIT
CARD’S ARMY FOR YOU
Once, when I canceled my cell phone service, they told me my account
had a $160 charge. “For what?” I asked. Wait for it . . .
“An early cancellation fee.”
Yeah, right. I knew I didn’t have a contract, and I had negotiated out
of an early cancellation fee a long time before that. (Cell phone
companies make a lot of money from trying these shady moves, hoping
customers will get frustrated, give up, and just pay.) But I’m not the one
to try this on: Ever since the company had started trying to rip me off
three years before, I had kept records of every phone conversation I’d
had with them. The customer service rep was very polite, but insisted
she couldn’t do anything to erase the charge.
Really? I’d heard this tune before, so I pulled out the notes I had
taken the previous year and politely read them