Manage Your Money Like A Diet!

  • I Will Teach You to Be Rich

    Over the weekend, in a brief and unexpected bout of responsibility, I found myself in the personal finance section of the bookstore. There I stumbled across I Will Teach You to Be Rich, the brightly colored paperback from New York Times best-selling author Ramit Sethi. MainStreet has written about Sethi in the past, but that was before my time, so I decided to skim a few chapters. According to Sethi, setting up a successful personal finance strategy is a lot like getting into the groove of a good diet. He gave us five valuable insights that you will find as intriguing as I did. Photo Credit: uxud
    #1: Don’t be a calorie counter
  • #1: Don’t be a calorie counter

    Diets don't necessarily require meticulous record-keeping, and neither does a sound personal finance strategy. “Stop trying to track your spending and calorie intake. It doesn't work! Witness the millions of people who get motivated every January, try 100% tracking for 2 weeks, then give up. Instead, use a service like Mint.com, which will automatically track your spending for you,” he told us. Throughout his book and on his popular blog, Sethi advocates automating your personal finances just like you would a diet or exercise regimen — take the work out of it with regularly scheduled direct deposits, payroll deductions, etc. This lowers the odds that you'll become unmotivated after a couple of weeks. Photo Credit: Getty Images
    #2: Don’t debate endlessly
  • #2: Don’t debate endlessly

    Dieters arguing over the next hot diet fad or newest workout equipment are spinning their wheels. It's the overall picture that matters. “The main thing we need to do is focus on the Big Wins. For exercise, this means exercising more and eating less. For finances, this means saving more and earning more.” Stop swapping personal finance urban legends and speculating with your friends. Stick to what you actually know: Spending less than you earn is the certain path to growing wealth — and paying down debt. Photo Credit: Getty Images
    #3: Even small steps are helpful
  • #3: Even small steps are helpful

    You don't have to exercise for five hours straight, nor do you have to put 80% of your paycheck this month into a savings account or IRA. Strike a healthy balance. “Save without sacrifice. Just as you can get invisible benefits from simple things like walking a short distance a day, you don't have to sacrifice to save large amounts. For example, I teach my readers how to Negotiate Like an Indian, using pre-written scripts from my book. They call up their banks, cable companies and credit cards to save hundreds of dollars with one phone call.” If the sacrifice is too big, you won’t stick with it. Before even hearing about Sethi, I knew about the power of politely bothering your cable company and other utilities – here’s how it worked out for me. Photo Credit: Getty Images
    #4: Listen to the gurus, not to friends
  • #4: Listen to the gurus, not to friends

    Choose a personal finance expert who makes sense to you and be consistent in your approach to saving. Don’t just pick and choose theories from your circle of friends. If you were dieting, you would want the advice of a tried and true personal trainer or nutritionist. Your finances are no different. “Notice how you value anecdotal advice over true research. Last year, I decided to gain weight (because I'm a huge weirdo). When I told a few friends what I was doing, suddenly everyone had an opinion. ‘Don't run because it will burn too much fat! Be sure to eat figs! Try pork ... it has a lot of fat.’ I ignored all of these people. Just because everyone has an opinion doesn't mean it's right, and you'll hear it when it comes to your finances, too. Ignore your friends and pick up a good book.” Photo Credit: Getty Images
    #5: Doing is more important than reading
  • #5: Doing is more important than reading

    Just as reading a hundred books about dieting without actually dieting won’t get you into better shape, reading every personal finance strategy on Earth without committing to one will not make you wealthier. “We read more than we implement. Call it the Manifest Destiny Fallacy, where we constantly think we need more information before we make a good decision. Wrong -- someone who reads one book and implements the financial tips is far better off than someone with an encyclopedia knowledge of personal finance. Reading matters, but not as much as education.” Find a plan that works for you and start investing today, not tomorrow. Just make sure the amount is reasonable enough that you’ll stick with it. As with a good diet, you aren’t looking for overnight results. Photo Credit: Getty Images
    #6: Balance is key
  • #6: Balance is key

    We have a couple tips of our own along these lines to add here. First, it's OK to go for ice cream or a doughnut once in a while, as long as it does not become a daily after-gym routine. Similarly, don't torture yourself financially. If you want to splurge every once in a while on a new pair of pants, a night out, or a weekend road trip -- that's OK. You're allowed to be human. You can still save over the long haul if you're frugal overall and have budgeted for entertainment. Balance is also about diversification. Put some money into your 401(k) at work, but also build up a rainy day fund, contribute to an IRA and consider high-yield certificate of deposit offerings. When you exercise, you want to do both cardio and strength training. Photo Credit: Getty Images
    #7: Avoid absurd fads
  • #7: Avoid absurd fads

    Just as you should avoid potentially dangerous and unproven dieting herbs and pills, stay away from "too good to be true" money making plans. These include non-FDIC insured savings products, sketchy real estate investments, penny stocks and that one "sure thing" stock tip your friend keeps bothering you about. Stick to investment products with a proven track record of success and most importantly, do your homework! Photo Credit: Getty Images
    Learn more
  • Learn more

    Sethi writes about personal finance regularly on his Web site and even highlights the stories of people who have followed his advice and saved big time. Have your own unique saving or wealth-building strategy? Tell us about it on our Facebook page, or post it here in the comments. Photo Credit: IWillTeachYouToBeRich.com
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