I Will Teach You To Be Rich: No Guilt. No Excuses. No BS. Just a 6-Week Program That Works

Sethi opens Chapter 4 with an anecdote about immigrant values. You can tell an immigrant, he says, by how much meat they eat off a chicken wing. Immigrants pick their wings clean. The anecdote relates a moral about waste: Americans unconsciously waste money because they don’t know how much they’re spending. In this chapter, Sethi shows readers how to create a “Conscious Spending Plan.”

“Create a budget” is the beloved mantra of personal finance advisers (127), but most people fail to maintain a budget for longer than two days. 80% of people polled say that they have a budget, but the truth is that nobody ever makes a budget and sticks to it. Sethi’s solution is to abolish budgets and instead create a Conscious Spending Plan built on “cutting costs mercilessly on the things you don’t love, but spending extravagantly on the things you do” (129). A Conscious Spending Plan gives readers permission to say yes to the things they care about rather than asking themselves to comply with draconian budgets.

After differentiating between being cheap and spending consciously, Sethi draws character sketches of three friends who consciously spend: The first spends $5,000 per year on shoes but lives with a roommate and eats for free at work; the second spends $21,000 a year on going out, guilt-free, but he doesn’t feel the need to take overseas vacations or buy decorations for his apartment; the third is a nonprofit employee who makes $40,000 but saves $6,000 a year by cooking at home and sharing rent in a small apartment. When these friends spend money, they do not feel guilty because they spend only on what they love. Here, Sethi weighs in on an important question: Does money make us happy? Sethi’s answer is that “money is a small, but important, part of a Rich Life” (134). Money is not the only thing that contributes to happiness, but it is important.

In the following section, Sethi lays out the details of a Conscious Spending Plan, first enumerating what percentage of take-home pay should go to fixed costs, investments, savings goals, and guilt-free spending money. A table lists items in these categories in rows—rent, utilities, medical bills, car payment, public transportation, debt payment, groceries, clothes, internet, and phone—with an empty column for the reader to fill in monthly costs. Alternatively, Sethi offers the “60% solution”: Spend 60% on basic expenses, then 10% each on retirement, long-term savings, short-term savings, and fun money.

Sethi explains how to optimize Conscious Spending Plans by identifying “big wins” and limiting the money spent on other areas. The first step is tracking spending, for which Sethi recommends You Need a Budget software and Mint.com. Then, target one or two problem areas and slowly decrease spending. Negotiate a lower APR for credit card debt, for example, or cancel subscriptions. Sethi urges readers to “[c]hoose Big Wins that would really make an impact on [their] total dollar amount” (150). Most important, set realistic goals and make change slowly. Reduce spending on eating out, for example, by $25 a month.

Sethi proceeds to address another potential problem: What if you don’t make enough money? Sethi first suggests negotiating a raise. He outlines a six-month plan for managing work that culminates in a scripted conversation asking for a raise based on stellar performance. He then suggests getting a higher paying job; his third piece of advice is to do freelance work.

Finally, Sethi explains how to maintain a Conscious Spending Plan by setting aside money each month for unexpected and irregular expenses. Determine how much is needed for irregular expenses, such as Christmas gifts, and then divide that number by 12, setting aside that amount each month. Similarly, set aside a certain amount each month for irregular unknown events. Once readers have settled on a Conscious Spending Plan, they should allow it to guide their decisions so that they don’t have to spend time thinking, deliberating, or feeling guilty.

The chapter ends with an action list: Get your paycheck, determine what you’ve been spending, and figure out the categories of your Conscious Spending Plan; optimize your Plan; pick your Big Wins; and maintain your Plan.