“A unique voice on money,
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founder and writer of
ToBE No Guilt.
I Will Teach You to Be Rich
The Ladder of Personal Finance
worry. You can still feel great, since most people never even get to the
system runs itself with just a few hours of work per year—but remember,
opening these accounts and getting started is the most important step.
Rung 1: If your employer offers a 401(k) match, invest to take full
advantage of it and contribute just enough to get 100 percent of the
match. A “401(k) match” means that for every dollar you contribute to
your 401(k), your company will “match” your contribution up to a certain
amount. For example, for easy math, let’s assume you make $100,000.
A “100 percent match up to 5 percent of your contribution” means that
you’ll contribute $5,000 and your company will match it with $5,000.
This is free money and there is, quite simply, no better deal.
Rung 2: Pay off your credit card and any other debt. The average credit
card APR is 14 percent, and many APRs are higher. Whatever your card
return. For the best ways to do this, see page 40 in Chapter 1.
Rung 3: Open up a Roth IRA (see page 83) and contribute as much money
as possible to it. (As long as your income is $101,000 or less, you’re
allowed to contribute up to $5,000 in 2009.)
Rung 4: If you have money left over, go back to your 401(k) and contribute
as much as possible to it (this time above and beyond your employer
match). The current limit is $15,500.
Rung 5: If you still have money left to invest, open a regular nonretirement
account and put as much as possible there. For more about this, see the
next page. Also, pay extra on any mortgage debt you have, and consider
investing in yourself: Whether it’s starting a company or getting an
additional degree, there’s often no better investment than your own career.
Remember, this ladder of personal finance only shows you where to
invest your money. In Chapter 7, I’ll show you what to invest in.
Get the full
About the book
At last, for a generation that's materially ambitious
yet financially clueless comes I Will Teach You To
Be Rich, Ramit Sethi's 6-week personal finance
program for 20-to-35-year-olds. A completely
practical approach based around the four pillars of
personal finance—banking, saving, budgeting, and
investing—and the wealth-building ideas of