'I'll Teach You How to Be Rich' Author Ramit Sethi Says Young People Make 3 Mistakes Over and Over When Building Wealth

‘I’ll Teach You How to Be Rich’ Author Ramit Sethi Says Young People Make 3 Mistakes Over and Over When Building Wealth

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  • The most common mistake young people make is waiting too long to start investing.
  • Instead of waiting until you are out of debt to start investing, get into the habit of investing small amounts now.
  • If you still go for crypto, consider limiting your crypto investments to 5% of your overall portfolio.

Ramit Sethi, author of the best-selling personal finance book ‘I’ll Teach You How to Be Rich’ and a new journal to accompany the book, has seen young people make too many of the same mistakes while building wealth.

According to Sethi, the biggest mistake most young people make is waiting too long to start investing.

Sethi advises young people to use compound interest to their advantage and start investing as soon as possible. “Time is on your side. When you’re young, you feel like $100 a month wouldn’t be that much. But when you do the math, it’s pretty powerful.”

Here are three common mistakes young people make when building wealth, and what you can do instead.

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Wait until quarantine to start investing

Instead: start investing small amounts regularly

“The #1 mistake by far,” says Sethi, “is that young people wait to start investing until they are late in their 40s.” He adds that most young people justify postponing the investment because they think they don’t have enough money to start with.

However, starting with as little as $50 per paycheck can go a long way in the long run. Instead of postponing your investments, do your research and start small.

Wait until you have repaid all your debts to start investing

Instead: start investing and paying off debt at the same time

“It’s part math and part psychology,” says Sethi. “Purely mathematically speaking, if your interest rates are really high, like 9% or more, you should pay down that debt aggressively. But psychologically, it’s important to do both because you’re building the habit.

Sethi recommends paying a little less for your debt each month, if possible, and using that money to invest small amounts on a regular basis. Once you are done paying off your debts, you can redirect that monthly payment directly to the investment. At this point, Sethi says, investing on a monthly basis will be a habit deeply embedded in your financial routine.

Not exercising “financial discipline” when investing in trends such as crypto

Instead: if you want to invest in crypto, limit it to 5% of your portfolio

“If you’re still getting into crypto, I’d say you’re addicted to gambling and probably doomed. It’s only a matter of time,” Sethi says.

If you still want to invest in crypto after all the horror stories of people losing their life savings, Sethi recommends limiting crypto to 1% to 5% of your overall portfolio, while keeping the majority of your assets in larger investments. safe, such as index funds or I links.

Sethi says, “I don’t mind people who decide they have a fully diversified portfolio, and they decide to take 1% to 5% and have fun, maybe you invest in alternative assets, individual stocks, maybe even their friend’s bar in Brooklyn, but you rarely see that kind of discipline in crypto.

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