3. Every dollar is an investment. Even if you are going to Disneyland, it is an investment into your personal happiness and an investment into the relationships you are building with your companions. Every dollar you spend must be advancing you in some way. This will fight off instant gratification.
4. Always expand your knowledge on making financial choices. You have never learned everything you need to know. I don’t care what school you went to. Keep reading, keep learning.
5. Don’t listen to false prophets. Just as I encourage you to learn more, it is important to tune out of the advice of people who set bad examples. If your dad is 65 years old and still has not retired, you might want to think twice about following his instructions. Instead, listen to high-identity people.
6. Set yourself up for financial security, don’t have your job do it for you. This is so important, and yet absolutely no one follows this rule. If you get a job, your employer will sit you down with HR, and an unqualified person from HR will give you deferred compensation options. This person is not licensed in financial options, and so cannot legally advise you. Choose your own retirement vehicles, because it is very likely you can hop employers.
7. Minimize your taxes. Do you like financing war? Me neither. Learn how to store and grow your money tax free. If the top 1% can do it, so can you. There are ways. Message me if you think I’m wrong.
8. Shop for competing prices for everything and never buy anything at full price!Clothes, car maintenance, insurance. If you are ever paying full price for a service, you are being exploited.
9. Take care of yourself physically and legally. Smoking will raise your life and health premiums. Getting a DUI will disqualify you from life insurance all together. This closes doors that can save you from being a slave till the end of your days.
10. Your hourly earnings are important. Your annual earnings are not. Someone making $50,000 a year at $500 an hour has more of their time (meaning their life) than someone making $100,000 at $50 an hour. This is the single most important concept in understanding who is rich and who is not. Someone is not living an enriched life because they have amassed wealth and material possessions. Someone is living an enriched life because they have the freedom to spend their time how they wish!
Places of which I’ve gained wisdom:
*The Four Hour Work Week
*Think and Grow Rich
*Finance Marketing Training
- Live within your means
- Start saving from your first paycheck
- Set up a retirement account as early in your work career as possible
- Appreciate the concept of compounding interest
- Setup a household budget and stick to it
- Personal sacrifice will result in more savings, but you should treat yourself to the things you want every once in a while (i.e. don’t make splurging your lifestyle)
- When your credit card bill comes, pay it off in its entirety.
- If you don’t have the money, you shouldn’t buy (excludes house, car and other big ticket items)
- Educate yourself how you can live frugally, so you can make better buying choices
- Your income will grow over your working life. You may struggle to make your mortgage payments early in your career, but 10 or 20 years from now, it will progressively get easier as your income grows. Consider making additional principal payments in the latter years.
B) Don’t invest any of your money. Investing is for wealth preservation, not wealth creation, so first you have to make wealth
C) Come up with ten ideas a day. This doesn’t seem like “personal finance” but it is.
D) Don’t try to save money by not buying expensive coffee or taking subways instead of cabs. That’s a myth. The best way to save money is to make more.
E) Learn how to copywrite.
F) Come up with ten ideas for how two people can help each other. Introduce them and stay out of the way. This is real networking. Not fake networking where people hand business cards to strangers.
G) When you have wealth, never invest more than 2% of your wealth in any one idea.
H) Don’t enter a business with a lot of competition. Enter a business with a monopoly. This means high profits, high perks, great education.
I) Read a lot about things that have nothing to do with finance. Then combine them.
J) Sleeping 8 hours a day might be the most important personal finance rule.
K) Be around people who love you and who you love. Eliminate people who bring you down.
L) Gratitude = Abundance. You can only be grateful for what is abundant in your life or what will be abundant in your life. So practice gratitude / abundance all day long.Trust your body. With everything you do, everyone you meet, ask, “is this good for me?” Your unconscious brain will tell you yes or no. Wait for it to answer.
Once it answers, follow the advice.
Look everywhere for what is hidden. The people who know personal finance hide the money very carefully.
The people who don’t know personal finance, have TV shows about it.
Be skeptical. Even of me.
2. Spend more of your money on assets that have enduring value, and less on entertainment and travel.
3. Understand that managers of mutual funds are not allowed to “time the market” to get you out near the top and avoid a crash. That’s called “style drift,” and they can lose their job if they do it. Their job is to invest in what the fund prospectus says it invests in. Deciding when to get out is your job.
4. There is a maximum window of profit opportunity for everything. Like nature abhors a vacuum, the markets abhor an excess profit, and competition will do something similar to what you (or the company you invest in) is doing cheaper, for less profit; the market will mature when everyone who wants one has one; or new technology will make yours obsolete. Earnings history and past performance are rarely an indicator of future performance — you are investing in what it is going to do, not in what it has done. Only one member of the original Dow Jones Industrials is still in business. Buying and holding for the long term is a fool’s errand.
5. Diversification is for people who don’t know what they’re doing. Put your eggs in your best basket, and watch the basket closely.
6. Money managers and financial planners make their money by selling more accounts and making fees grow by growing assets under management, not by closely watching your investments. Sometimes it’s best to not be invested, but they have a financial disincentive to tell you that.
7. Don’t expect to know when the market has topped. If it’s obvious to you, it will be obvious to others sooner, and it will be too late to avoid big losses. Leave the last 5% for the other guy.
8. Fundamental analysis (financial statements, etc.) are ancient history. If something negative is going to affect your investment, an insider will know long before it becomes public, and it will already be priced into the market before you learn about it.
9. Learn Technical Analysis (“chart reading”). Learn how to define trading ranges and trends. Let the market tell you what it is doing now, this minute; the news only tells you what it has done in the past, and everybody’s guesses and speculations as to why it happened. Understand that all market prices are an equilibrium between forces that think the price should go up, and forces that think it should go down. If it is certain to go up or down from the current price, it would already be there. If the price is breaking out of its trading range, you don’t need to know why, just that it is. Do not ride the up and down swings of the trading range; buy near the lows and sell near the highs. Trust the reversion to the mean; “breakouts” can get your teeth kicked in.
10. There is no substitute for knowing what you need to know to make your own decisions. Read and learn. Start with “Extraordinary Popular Delusions and the Madness of Crowds,” Charles Mackay (1842).As a wise man told me 50 years ago, “There are two kinds of people in the world: those who earn interest, and those who pay it.” Many years ago in my Financial Planning days, I met with a young couple who were excited about how I was going to tell them about how to get rich. I said, “What if I told you how to make an 18%, guaranteed, tax free return on your money?”
The guy’s eyes opened wide and he said, “Wow! How can I do that?”
I replied, “Pay off your credit cards.”
- Start working as soon as possible , don’t wait to be 30 something to receive your first check
- Don’t waste time on unnecessary degrees , MA is more than enough
- Always try to be practical as much as possible ,unless you are in academia, world respects theories but rewards only results and action
- Consider careers that are in demand now and in the next 10 years
- Save between 50-70% of your sallary for the first several years, maintain student life style but earn a lot
- Learn about investing, read as much as possible
- Marry the right person who is ambitious, hard working and frugal
- Have fun and enjoy small and often and reward yourself
- Always strive for more, read every day , learn and polish your skills every day
- make business connections as early as possible
- read a lot about success ,motivation, personal development, leadership
- Work out regularly – it will give you energy and health
- Always be positiv and optimistic
- Make people like you
- Make others happy , they will know to return the favor
– Don’t buy things you can’t afford
– Don’t buy on credit
– Be happy with what you have, don’t envy your neighbors new car (probably bought on credit)
2. Save whatever you can
– Having a cushion can help you make the right decisions elsewhere in life (for example, choosing to leave a bad job is much easier when you have savings, deciding on the right medical work is easier if you aren’t risking financial ruin, a car repair bill won’t prevent you from eating this month if you have built up some savings.
– Save for retirement if you can
– Save for your children’s college
– Save for a new house to let you stop paying rent
2. Assets have two values: regular and distressed. If you have to convert to cash quickly, you are prone to receiving the distressed value. As such, insure investments with a high delta are ones you will not have to sell in a distressed position.
3. An extra 3% of almost nothing is still almost nothing. Concentrate on the variables of greatest impact. Early in your career, increasing savings will give you far more money than chasing yield.
4. Average yield is a misnomer. Many investments have minor and major cycles. In many cases, a high yield merely indicates a peak of a major cycle.
5. The income from an investment is never lost. Capital is transitory.
6. There is nothing wrong with capital appreciation. Capital depreciation sucks.
7. Pursuant to 6, price to book ratio (P/B) refers to the premium you are paying for the assets of a company. Since those assets are productive, you can expect to pay a premium.
8. Pursuant to 6, price to earnings ratio (P/E) refers to the premium you are paying for the present capital appreciation. A PE of 20 implies a 5% return on investment. Companies however try to grow earnings, so your price paid to earnings will go down over time which is why you are willing to pay a premium. This should be reflected in increased share value in the future.
9. Equity investments such as stocks can take 3 years to recover their price after a crash in normal circumstances. Particular stocks can and have lost their entire value.
10. Asset investments such as houses or real estate have carrying costs. Insurance, property taxes, and utilities would be examples. With uneven income (and sometimes expense) streams, you need cash or an accessible line of credit in order to cash flow these investments. These investments fail more often than not due to cash flow problems and not extrinsic factors.
2) live substantially below your means, very substantially if possible, deferred gratification is the name of the game, this allows one to gracefully survive the inevitable downturns in economy, preserving family, kids and friends without disruption as you can adapt to a lower income for an extended period of time. This gives you options, flexibility, stability and most importantly makes you a self reliant responsible person.
3) rid yourself of debt as quickly as possible, debt is four letter word, people in debt are never financially free, be realistic it might take 5 or 10 years but create an aggressive plan to eliminate debt and follow thru. yes paying off your student loans is a great thing, owning your house outright is even better. If you cannot be debt free, do not despair minimize your debt as much as possible. debt is a cancer, it bleeds one dry, its drains one financially. debt is useful for instance in buying a house, but then one should pay off the mortgage as quickly as possible, again live below your means
4) distinguish between assets and expenses, for instances a car is an expense not an asset, it devalues to nothing over time, a house is an asset, it may appreciate over time, it saves one from paying rent (rent like debt is a four letter word). accumulate assets over time, especially ones like house that reduce your expenses (e.g. no rent). purchase assets, avoid expenses
5) invest in low cost broad index stock mutual funds (total market index from vanguard corp btw). No more , nothing less, keep it simple stupid, this works well for 99% of the people, never sell, dollar cost average, invest weekly, never vary, never panic, never change course, be relentless, be fearless, be resolute, it is you retirement, it is your freedom. ideally you max out you retirement accounts as well as having a taxable investment account because having retirements account alone will fund an adequate but not great retirement
6) chart your monthly expenses as an aggregate and graph them with 1, 2 , 3, year moving averages to gauge how your yearly outgo is changing, no need to micromanage each expense, just be aware of the overall out go, again live substantially below your means, this is the high level check to make sure you are doing this
7) have a substantial store of liquid cash for emergencies and unforeseen events, this is required because well unforeseen crap always remains unforeseen until to you see it, do not sell you stocks to cover this
8) if you have kids, teach them well, teach them all of the above, they are wonderful creatures but my become financial liabilities, led by example, support them, they are your responsibility
9) the finish line, when you know your longterm expenses and outgo, your current assets (short term cash, illiquid (house for instance) and stock investments), one can predict a safe retirement scenario. One for instance can withdraw and spend something around 3% – 5% of assets for many. decades. deferring social security until age 70 gives one an extra 8% for each year deferred for life. Once you quit working there is really no turning back, make sure you have enough and again live within your means.
2. Know your risk tolerance
3. Know other constraints you have regarding investment (time horizon, liquidity needs, unique circumstances, etc)
4. Know the basic asset allocation in a portfolio (equities, bonds, REIT, other instruments)
5. Know the risk and return features of each instrument
6. Make arrangements to talk to several financial advisors to figure out your options (even if you want to manage your own money, you can learn a lot from the conversations)
7. Make a plan and stick to it
8. Constantly monitor portfolio performance
9. Rebalance as necessary
10. Discipline is the most important thing in your personal wealth management; always try to make rational decisions and thing of investments in a long term perspective.
2. Save more money every year.
3. Earn more money every year.
4. Spend like you are living on your last year’s salary
4. Don’t bother investing if you can reliably increase your income every year. It’ll be easier for you to become more proficient at your current job, then it will be for you to become a competitive investor. If you must invest do it in a low cost diversified equity index fund even the market is cold and hold it.
5. Prevent health problems today. Bad health destroys future wealth.There are no more rules.
Figure out your Goals
The very first step, is simply to figure out what your goals are. Do you want to retire at 65 with a million dollars? Retire at 65 as a multi-millionaire philanthropist? Retire at 45 with just enough money to live a frugal, relaxing life? Save up $200,000 in the next 20 years so that you can send your kids to the best private colleges? These are all equally valid answers, and there’s a different one out there for every person. You simply need to figure out what your own life goals are.
Some resources that can help you figure this out:
Guidelines for how much money you need in retirement
Calculator for how much money you’ll need in retirement
Guidelines for saving for your kids’ college
Budget your Savings
Once you have figured out your goals, the next step is to figure out how you can get there. Too many people spend whatever they feel like spending, and save the rest. The first step towards achieving your financial goals is to flip the equation.
First figure out what you need to save every month, in order to achieve your goals. And then, spend only whatever is remaining.
Calculators like this, can help you figure out exactly how much you need to save every month to achieve your goals.
Some of you may find this minimum-goal to be “too easy.” You may want to challenge yourself to save even more money, and are wondering how to strike the right balance between saving for the future & enjoying the present. If you’re one such person, give yourself a pat on the back. You’re on the right track. There is no single answer to this question, but the approach I’ve used is to split my money evenly between savings & luxury spending.
For example, suppose you’re making $5000 per month. Break down all your basic living expenses:
- $1500 – taxes
- $600 – rent and utilities
- $75 – car insurance
- $180 – medical insurance, life, ad&d
- $500 – groceries
- $1000 – minimum retirement savings to meet your goals
This leaves you with around $1000 left over. Split this money equally between your savings & luxury spending. Put an additional $500 into your savings every month, and allow yourself to spend the remaining $500 on whatever luxuries or hobbies you like, free of guilt. Whenever you get a raise or bonus at work, put half of it into your savings, and allow yourself to spend the other half on anything your heart desires. You may want to pick your own ratio, but I personally find this 50-50 balance helps me enjoy life to the fullest, while still sleeping soundly at night.
One quick note to mention here: There’s a huge difference between nominal dollars, and dollars indexed for inflation. One million dollars in 2040 is worth less than $500,000 when indexed for inflation. Whichever term you prefer to use when doing your calculations and looking up online tools, make sure to stay consistent.
Maintain Separate Accounts & Automate It
Once you know exactly how much you need/want to save, you need a surefire way of keeping your nest egg safe and separate from your spending money. Mixing the two of them together, is the easiest way to wreck all your careful plans & eat into your nest egg without even realizing it.
The best & easiest way I’ve found to do this, is to set up separate bank accounts. At the very minimum, set up one account for your savings, and another account for everything else. I personally keep 3 different accounts. One checking account for all my basic life expenses. Another checking account for luxury spending. And a third account on ETrade, where I keep & invest all my savings.
Once you have your different accounts in place, set up your paychecks to direct deposit money into each of the accounts automatically, from every paycheck. If you know you need $1500/month for your basic living expenses, hav… (more)
If you want to have one understand everything there is to know about them, basically think of the amount of taxes you have to pay each check is a seed; and when you are differing your taxes to a later time, you are making that seed grow and collect interest which is also taxed in this case, and then if you withdraw from it before age 59 and 1/2 you will be penalized an additional 10% taxes on top of the tree of taxes you pay.
Now the only reason why I don’t tell all my friends to stay away from 401ks altogether is because of company matching plans. As long as you never put in more than they are matching, then it is ok, because it is free money, again just make sure that you withdraw after you are 59 & 1/2.
#2 Learn the difference between a real asset and a liability, If you buy a house for $100,000 have it for a year and pay an additional $50,000 for property tax, maintenance, and then after deciding to sell if you want to do some upgrades on it. After waiting for 6 months you only receive 1 offer for $125,000. Even though you paid $25,000 less for the home, this was a liability because you spent more on it than you made.
Same situation for a car; in the literal sense it’s only an asset if you sell it for more than the cost paid plus all gas and maintenance.
Now they are both assets in the sense that without a home or car, your life would be less pleasant, but we are only referring to the monetary.
#3 I am not getting paid to put any of this here: Read Rich Dad Poor Dad by Robert Kiyosaki) I also highly recommend the free online game at his websitewww.RichDad.com called cashflow (which is also a board game and an app) I play it sometimes myself; it is kind of like Monopoly for adults.
#4 Focus on getting Multiple Sources of Passive Residual Income. I have been a musician for years so I took what I knew and realized that musicians, authors (I also wrote a couple e-books), actors on tv all earn royalties, which is a form of passive income that is often residual. The easiest way to describe it is: you reap what you sew.
Musicians write a song 1 time, then do a little bit of work to advertise it properly and get it out to the right people, then boom, they permanently earn money from their song every time someone buys it or it is in a commercial or movie, etc. Same with an author or actor on a tv show.
Each time your book is bought you earn royalties, and each time a show you are in plays on tv, you earn royalties. You work 1 time and earn for ever; passive income is set it and forget it… Infinitely better than having a boss and a 9-5 if I don’t say so myself. I also happen to know one legal tax loophole. (still not getting paid to say any of this)
learn everything there is to know about equity indexed universal life from National Life Group ( I know a very good agent who can answer all your questions).
#5 I know this isn’t about finances, but it is a good idea to write out your goals. and write out steps you can take towards your goal so you can see step by step how to achieve anything you want.
#6 Take what you have learned from all of the above and apply it to real life, I personally couldn’t afford (and was a little intimidated) to go into real estate or to much in stocks, so I did what I know…
I learned this information and turned my passion of music into my career, and now create instrumental music professionally. Much of it because of #1-5 I recently had a company purchase one of my songs to be in their upcoming video game. So I will be receiving an initial payment for the licensing and then royalties each time the game is sold. I also have 4 albums out on iTunes, Google Play, Amazon, etc. but my music really is not made for fans as much as companies (background music, etc.) though I do have some fans…
Anyways thanks for reading and good luck to you in all your endeavors!
2. Understand the magic of compound interest and what it can do for your investments
3. Set up an auto debit facility to wire 10% of your monthly pay check into a savings account you wont touch
4. Read biographies of successful people such as Warren Buffet etc to learn how they did it
5. Always have a financial plan. Doesn’t matter if this plan changes every month. Just have a plan.
6. Get technical about the stock markets and other investment options. Check out this course – Finance for Non Finance Professionals | DeZyre.com
7. Invest in yourself – learn, experiment, take jobs for what you will learn not how much they pay
8. Monitor your financial portfolio every week. “Invest and forget” works well for Warren Buffet. May not work for you since you need to be constantly liquid.
9. Don’t invest in things you don’t understand. Get technical on any asset class before you make an investment.
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Why it is so important? Well, our king from below story can tell you better…
Once upon a time there was a king known for his generosity and keeping his word. A famous and intelligent prisoner was awaiting his death sentence and was brought in front of the king. The king was playing chess when the prisoner was brought in front of him. Here’s the dialogue that followed.
King: What is your last wish?
Prisoner: Your Majesty, I wish to make provisions for my family to survive after my death.
King: Well! Tell me what you want.Prisoner: Give me the number of grains of rice on the last square of the chess board, if a single grain was kept on the first square and then doubled on every next square (1 on first, 2 on second, 4 on third, 8 on fourth, 16 on fifth and so on, till the 64th square), and I shall give it to my family before I die.
King: (thinking what a paltry demand the prisoner had made) Wish granted.
The king then ordered his ministers to have the amount of rice calculated and given to the prisoner. But he was in for a rude surprise. The amount calculated was so large that the king lost his entire kingdom and was indebted to the prisoner all his life.
To give you some perspective, today that amount of rice would be equal to
.
.
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$92 TRILLION.
World GDP was $72 Trillion in 2012.
No wonder it’s called 8th wonder of the world.
Tips Thoughts Notes 