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To find your annual salary, just take your hourly rate, double it, and add three zeros to the end. If you make PS20/hour, you make approximately PS40,000/year. If you make PS30/hour, you make approximately PS60,000/year. This also works in reverse. To find your hourly rate, divide your salary by two and drop the three zeros. So PS50,000/year becomes approximately PS25/hour.

The Rule of 72 is a fast trick you can do to figure out how long it will take to double your money. Here's how it works: Divide the number 72 by the return rate you're getting, and you'll have the number of years you must invest in order to double your money. (For the math geeks among us, here's the equation: 72 / return rate = number of years.) For example, if you're getting a 10 percent return rate from a tracker fund, it would take you approximately seven years (72 / 10) to double your money. In other words, if you invested PS5,000 today, let it sit there, and earned a 10 percent return, you'd have PS10,000 in about seven years. And it doubles from there, too. Of course, you could have even more by adding a small amount every month using the power of compounding.

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, diet pills, and Atkins versus South Beach.

If I invited you to a blind taste test of a $12 wine versus a $1,200 wine, could you tell the difference? I bet you $20 you couldn't. In 2001, Frederic Brochet, a researcher at the University of Bordeaux, ran a study that sent shock waves through the wine industry. Determined to understand how wine drinkers decided which wines they liked, he invited fifty-seven recognized experts to evaluate two wines: one red, one white. After tasting the two wines, the experts described the red wine as intense, deep, and spicy--words commonly used to describe red wines. The white was described in equally standard terms: lively, fresh, and floral. But what none of these experts picked up on was that the two wines were exactly the same wine. Even more damning, the wines were actually both white wine--the "red wine" had been colored with food coloring. Think about that for a second. Fifty-seven wine experts couldn't even tell they were drinking two identical wines.

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 (and not just because of the credit crisis), 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 pounds on these purchases. Credit has a far greater impact on your finances than saving a few pounds a day on a cup of coffee.

Lifecycle funds are simple funds that automatically diversify your investments for you based on age. Instead of having to rebalance stocks and bonds, lifecycle funds do it for you. If more Americans owned lifecycle funds, for example, far fewer retirees would have seen precipitous drops in their retirement accounts, because the lifecycle funds would have automatically changed to a more conservative asset allocation as they approached their golden years.

These allocations are just general rules of thumb. Some people prefer to have 100 percent in stocks until they're in their thirties or forties. Others are more conservative and want some money in bonds. But the big takeaway here is that, if we're in our twenties and thirties, we can afford to be aggressive about investing in stocks and stock funds--even if they drop temporarily--because time is on our side.

Asset allocation is your plan for investing, the way you organize the investments in your portfolio between stocks, bonds, and cash. In other words, by diversifying your investments across different asset classes (like stocks and bonds, or, better yet, stock funds and bond funds), you could control the risk in your portfolio--and therefore control how much money, on average, you'd lose due to volatility. It turns out that the amounts you buy--whether it's 100 percent stocks or 90 percent stocks and 10 percent bonds--make a profound difference on your returns.

Pension Benefit 1: Using Pretax Money Means an Instant 25 Percent Accelerator: Retirement accounts offer you a deal: You promise to invest your money for the long term, and in exchange they give you huge tax advantages. Because the money you're contributing isn't taxed until you withdraw it many years later (this is called "pretax money"), you have much more money to invest for compound growth--usually 25 to 40 percent more (although this could change for some higher earners in 2010).

DON'T MAKE THE FIRST OFFER. That's their job. If they ask you to suggest a number, smile and say, "Now come on, that's your job. What's a fair number that we can both work from?"

NEGOTIATING TACTIC: Most of the negotiation happens outside the room. Call your contacts. Figure out the salary amount you'd love, what you can realistically get, and what you'll settle for. And don't just ask for money. Literally bring a strategic plan of what you want to do in the position and hand it to your hiring manager. Do you realize how few people come to a negotiation with a plan for their role? This alone could win you $2,000 to $5,000. And, of course, it allows you to negotiate on the value you're going to bring to the company, not just the amount they'll pay you.

I love to laugh at people when they talk about investing. People think that investing means "buying stocks," so they throw around fancy terms like hedge funds, derivatives, and call options. Sadly, they actually think you need this level of complexity to get rich because they see people talking about this stuff on TV each day. Guess what? For individual investors like you and me, these options are completely 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.

USE THE ENVELOPE SYSTEM TO TARGET YOUR BIG WINS All this conscious spending and optimizing sounds nice in theory, but how do you do it? I recommend the envelope system, in which you allocate money for certain categories like eating out, shopping, rent, and so on. Once you spend the money for that month, that's it: You can't spend more. If it's really an emergency, you can dip into other envelopes at the cost of spending in that category. These "envelopes" can be figurative (like in Kublax or Excel) or literally envelopes that you put cash in. This is the best system I've found for keeping spending simple and sustainable.

DON'T ASK "YES" OR "NO" QUESTIONS. Instead of "You offered me fifty thousand pounds. Can you do fifty-five thousand?" say, "Fifty thousand pounds is a great number to work from. We're in the same ballpark, but how can we get to fifty-five thousand?"

LOWER EXPENSES. As I discussed in Chapter 6, nothing kills your investment performance more than expensive funds that invisibly drain your returns. Investing in them is especially ridiculous when you can earn better returns with lower fees. Why would you pay for the privilege of losing your money? With Automatic Investing, you invest in low-cost funds--which replace worthless, expensive portfolio managers--and you save tens of thousands of pounds in trading fees, taxes, and overall investment expenses, outperforming most investors.

The single most important thing you can do to be rich is to start early.

To get the most out of using credit, you need to optimize your credit card(s) and use them as a spearhead to improve your overall credit.

SELL YOUR CAR IN FEWER THAN SEVEN YEARS. The real savings come once you've paid off your car loan and driven it for as long as possible. Most people sell their cars far too early. It's much cheaper to maintain your car well and drive it into the ground.

When you rent, you're not paying all those other assorted fees, which effectively frees up tons of cash that you would have been spending on a mortgage. The key is investing that extra money. If you do nothing with it (or, worse, spend it all), you might as well buy a house and use it as a forced savings account.

(An index is a way to measure part of the stock market. For example, the FTSE 100 represents the UK's 100 largest publicly-owned companies; other UK indexes track technology companies or smaller businesses. There are international indexes and even retail indexes.)

If you really want to look into hiring a financial adviser, here's an introductory e-mail you can adapt and send: Hi, Mike, I'm looking for a fee-based financial planner, and I found you on www.financialplanning.org.uk. A little bit about me: I'm 29 and have about PS15,000 in total assets. At the moment my money is split between a stocks and shares ISA and a stakeholder pension, although I also have some cash. I don't need the money any time soon, so I'm looking for investments that will maximize long-term returns while minimizing costs. If you think you can help me, I'd like to meet for half an hour and ask you some specific questions. I'd also like to hear details on other situations in which you've worked with similar people with similar goals. Would next Friday, 2/6, at 2 P.M., work at your office? Alternatively, Monday, 2/9, is wide open for me. Thanks, Ramit For your thirty-minute meeting--which shouldn't cost you anything-- you'll want to come prepared with questions. There are hundreds of sample questions available online (search for "financial adviser questions"), but at the very least, ask these three: How do you make your money? Is it through commission or strictly fee based? Are there any other fees? (You want a fee-based adviser with no hidden fees.) Have you worked with other people like me in similar situations? What general solutions did you recommend? (Get references and call them.) What's your working style? Do we talk regularly or do I work with an assistant? (You want to know what to expect in the first thirty days, sixty days, and ninety days.)

Cheap people care about the cost of something. Frugal people care about the value of something.

"I believe that 98 or 99 percent--maybe more than 99 percent--of people who invest should extensively diversify and not trade. That leads them to [a tracker] fund with very low costs." --WARREN BUFFETT,

It is important to diversify within stocks, but it's even more important to allocate across the different asset classes--like stocks and bonds. Investing in only one category is dangerous over the long term. This is where the all-important concept of asset allocation comes into play. Remember it like this: Diversification is D for going deep into a category (for example, buying different types of stocks: large-cap, small-cap, international, and so on), and asset allocation is A for going across all categories (for example, stocks and bonds).

Forget budgeting. Instead, let's create a Conscious Spending Plan. What if you could make sure you were saving and investing enough money each month, and then use the rest of your money guilt-free for whatever you want? Well, you can--with some work. The only catch is that you have to plan where you want your money to go ahead of time

MONTHLY FIXED COSTS Fixed costs are the amounts you must pay, like your rent/mortgage, utilities, mobile phone, and student loans. A good rule of thumb is that fixed costs should be 50-60 percent of your take-home pay. Before you can do anything else, you've got to figure out how much these add up to.

Rent/mortgage Utilities Mobile phone, landline Insurance, bills Car payment Public transportation Loans Food Clothes Internet/cable

What does being rich mean to you? Most people never spend even ten minutes thinking through what rich means to them. Suckers. 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. Dan loves eating out at super gourmet restaurants where a meal might cost $100. Anton loves traveling. And Jen loves buying jeans. 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:

Invest as much as possible into tax-deferred accounts like your pension and ISA. Because retirement accounts are tax advantaged, you'll enjoy significant rewards. Your pension money won't be taxed until you withdraw it many years down the line, and your ISA earnings won't be taxed at all.

Rung 1: If your employer offers a pension scheme where they will match your contributions, invest to take full advantage of it. If it's a final salary scheme (sometimes called defined benefit), your employer will pay in a lot more than your own contributions. If not, find out how much you should contribute to get the maximum contribution from your employer. If you earn PS40,000 and your employer offers a 100 percent match up to 5 percent of your salary, if you pay in PS150 a month, your company will match it. This is free money and there is, quite simply, no better deal.

People worry about taxes too much, and they make all kinds of bad decisions to avoid them. Listen to me: You pay taxes only if you make money. If you're paying 30 percent in taxes on something, it means you made 70 percent elsewhere, so do not freak out about taxes.

SAVINGS ACCOUNTS I would not encourage anyone to use a standard branch-based savings account. Online savings accounts let you earn dramatically more interest with lower hassle. And because you'll primarily be sending money there, not withdrawing it, what does it matter if it takes a few days to get your money?

The first thing you want to do when picking tracker funds is to minimize fees. Look for the management fees ("expense ratios") to be low, around 0.2 percent, and you'll be fine. Really, anything lower than 0.75 percent is okay. Most of the tracker funds at Vanguard, Fidelity, and HSBC have relatively low costs. Remember: Expense ratios are one of the few things you can control, and higher fees cost you dearly--and they just put money in Wall Street's pocket.

Keep your cards for a long time and keep them active. 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

the single best time to negotiate salary is when you're starting a new job. You have the most leverage then and--with some basic preparation--you can earn PS3,000 or PS6,000 in a simple ten-minute conversation, then retire to a nearby cafe for a light lunch. Delightful.

Have another job offer--and use it. This is the single most effective thing you can do to increase your salary. When you have another job offer, your potential employers will have a newfound respect for your skills. It's like seeing the hot girl in the bar who's surrounded by guys. You want her more because everyone else does, too.

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 and 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, here's what to say. 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?

But because bonds are such a safe, low-risk investment, the return--even on a highly rated bond--is much lower than it would be on an excellent stock. Investing in bonds also renders your money illiquid, meaning it's locked away and inaccessible for a set period of time. Technically, you can withdraw early, but you'll face severe penalties, so it's a bad idea.

AVOIDING MONTHLY FEES Maybe I'm too demanding, but if I'm lending a bank my money to re-lend out, I don't believe I should have to pay them additional fees. Think about it: If your Big Bank charges you a PS5 monthly fee, that basically wipes out any interest you earn. This is why I'm fanatical about my savings and checking accounts having no fees of any kind, including monthly fees, overdraft fees, or setup fees. If you already have an account at a bank you like, but they're charging a monthly fee, try to get them to waive it. They will often do this if you set up direct deposit, which lets your employer deposit your paycheck directly into your account every month.

I get e-mails from people wondering what I think about oil, currency markets, or Google every single day. Who knows about those things? I certainly don't, especially in the short term. Unfortunately, the fact is that nobody can predict where the market is going. Still, the talking heads on TV make grandiose predictions every day, and whether they're right or wrong, they're never held accountable for them.

The only long-term solution is to invest regularly, putting as much money as possible into low-cost, diversified funds, even in an economic downturn.

Rung 3: Open up a stocks and shares ISA account and contribute as much money as possible to it. ISA limits are increasing to PS10,200 a year--including up to PS5,100 in a cash ISA.

Simple, long-term investing works.

the little-known but true fact is that the major predictor of your portfolio's volatility is not due, as most people think, to the individual stocks you pick, but instead your mix of stocks and bonds. In 1986, researchers Gary Brinson, Randolph Hood, and Gilbert Beebower published a study in the Financial Analysts Journal that rocked the financial world. They demonstrated that more than 90 percent of your portfolio's volatility is a result of your asset allocation.

There are many different investments besides stocks, bonds, and tracker and lifecycle funds. You can buy precious metals, real estate, or even art; just don't expect very good returns. And despite all my dire warnings, you can also buy a couple of stocks you really like.

if you were to invest in stocks, you'd want to diversify, buying all different types of stocks or stock funds to have a balanced portfolio.

INVESTING IS THE SINGLE MOST EFFECTIVE WAY TO GET RICH By opening an investment account, you give yourself access to the biggest moneymaking vehicle in the history of the world: the stock market.

If your employer offers a defined contribution pension scheme, find out how much your employer will contribute and how much you need to pay into the scheme in order for them to match you at maximum levels,

the vast majority of young people don't need a financial adviser to help them get rich. We need to set up accounts at a reliable no-fee bank and then automate savings and bill payment. We need to know about a few things to invest in, and then we need to let our money grow for thirty years.

Up-sells to expensive accounts ("Expedited customer service! Wow!"). Most of these "value-added accounts" are designed to charge you for worthless services.

Remember, knowing how to invest isn't obvious. And that's the problem. When it comes to money, it's actually very easy to end up like most other people: You just... do nothing.

Your starting salary is even more important than you think because it sets the bar for future raises and, in all likelihood, your starting salary at future jobs. A PS1,000 or PS2,000 salary increase, in other words, can equal many times that over your career. Now let me show you how to get thousands by negotiating for a better salary.

Have a toolbox of negotiating tricks up your sleeve. Just as in a job interview, you'll want to have a list of things in your head that you can use to strengthen your negotiation. Think about your strong points and figure out ways you might be able to bring them to the hiring manager's attention. For example, I often ask, "What qualities make someone do an extraordinary job in this position?" If they say, "The person should be very focused on metrics," I say, "That's great that you said that--we're really on the same page. In fact, when I was at my last company, I launched a product that used an analytical package to..."

Your credit score is a single, easy-to-read number between 0 and 1000 that represents your credit risk to lenders.

The Smartest Investment Book You'll Ever Read,

NEGOTIATING TACTIC: Your line is "Let's talk about total comp," which refers to your total compensation--not just salary, but everything. Treat them each as levers: If you pull one up, you can afford to let another fall. Use the levers strategically--for example, by conceding something you don't really care about--so you can both come to a happy agreement.

If you want to build wealth over your lifetime, the only sure way to do it is to get your plan on autopilot and make everything that's financially important in your life automatic.... I recommend that people automate a handful of things in their financial lives. You can set it up once in less than an hour and then go back to your life.

NEGOTIATING TACTIC: Your line here is "I understand you can't offer me what I'm looking for right now. But let's assume I do an excellent job over the next six months. Assuming my performance is just extraordinary, I'd like to talk about renegotiating then. I think that's fair, right?" (Get him to agree.) "Great. Let's put that in writing and we'll be good to go."

Although I may be aggressive with my asset allocation, I'm conservative when it comes to real estate. That means I urge you to stick by tried-and-true rules, like 25 percent down, a 5-year fixed-rate mortgage, and a total monthly payment that represents no more than 30 percent of your gross pay. If you can't do that, wait until you've saved more. It's okay to stretch a little, but don't stretch beyond what you can actually pay.