Most people never learn money or real estate; these are the best introductory money lessons we learned while saving >50% of our incomes, advising dozens of people, and completing a $90k UW MBA.
401k - employer sponsored retirement account, max contribution
IRA - Individual Retirement Account, max contribution in $6.5k/yr in 2023
ROI - Return on Investment, how we compare investments. 10% ROI means expecting to have $1.1 for every $1 invested, in 1 year.
Utility - happiness, often evaluated per $ spent
VFMMX - A money market fund yielding 5.3% interest in 2023; risk comparable to a bank account
VOO - Index fund of the top 500 US companies
VTI - Index fund of the entire US stock market
Popular examples are: no bad debt, education, a home (see RE 101), family, travel, financial security, early retirement (see Money 201), or effective altruism. Defining your goal and tracking Net Worth can make saving a fun competition.
Assets - Liabilities
Accounts + Home + Vehicles - Debts
Massive life milestones include net worth = $0, $10k, $100k, and $1M, aka a millionaire
NW Tool: https://www.bankrate.com/smart-spending/personal-net-worth-calculator/
1. Mint Mobile: Phone plan for $15/mo/person.
2. Internet: If you live in an apartment with local "XFINITY" or "xfinitywifi" hotspots, borrow a friend's log in for free internet. I did this for years. If not, Xfinity has a $25/mo option
3. Never buy a car that isn't at least 3 years old, to save thousands of $/yr.
4. Eat less: Seriously. Unless plain chicken breast sounds good, you're not hungry, you're bored. Swapping beef/pork for chicken has the triple win of being better for your health, wealth, and planet.
5. Cap restaurant visits and coffee/drinks to 1 date and 1 hang out per week.
6. For men: The moment you notice a receding hairline or your scalp behind your wet hair, $5/mo of finasteride now is likely better than a $10k-20k hair transplant later. I learned this lesson too late 🙂
401k/IRA can be Roth or Traditional. Traditional you pay taxes when you retire; Roth you pay now.
Parent tip: $ in retirement accounts and a home are not considered when your child applies for tuition aid
Pick your long-term career then the education that corresponds to it; most students do the opposite.
Don't pay $1000s for something until you are confident it'd pay the bills and you'd want to do it for 10-40 years.
1. Put $500/month in a Roth IRA index fund for 23 years.
2. Buy a $750k home, pay the mortgage and let it appreciate for 15-18 years.
3. Do both, with more $, or while house hacking (see RE 101).
Note: the average millionaire reached that milestone at 49.
More info: www.youtu.be/kM8-eYUC53k?si=aks4ZRNsMZesHLl7
Likely a lack of financial discipline and because inflation has outpaced wages for >40 years.
Yes. Most people benefit from slashing things that have a low happiness per $, and investing more on high happiness/$ things. Everyone has different "Utility Curves", your happiness per $ spent on food and housing, will be different than mine.
This is a complex 3 hour MBA lesson abridged to 60 seconds.
If you pay on time, lower your debt, and increase your credit limit, consistently, your score will go up. See creditkarma.com to learn more about credit scores.
Parent tip: put a child on your autopay credit card to give them an amazing credit score and lower interest rates
https://www.ramseysolutions.com/dave-ramsey-7-baby-steps
Start there, then someday you may advance to the Financial Order of Operations
You may also consider balance transferring to a 1 year 0% interest card then freezing your cards.
If you don't pay your credit cards in full each month, put your card in an ice block till you do! If you can set the credit card on autopay, I like the Chase Flex and Wells Fargo Active Cash cards ($200+2% on everything). Warning, people spend 16% more when using credit cards and we're not an exception.
When you have a >3 month emergency fund and a Roth IRA... maybe I'll share my credit card secrets.
Is opportunity cost. It is completely invisible to most people. Say a degree costs $100k, it actually costs $100k + 4 years of lost wages, so perhaps >$300k + investment gains. Going to the movies costs ~$15 + the best thing you could do in 3 hours.
You may be in the 22-24% tax bracket, but that rate only applies to a fraction of your income.
Example: John and Jane earn $115k total, and take the standard married deduction of $27.7k. Jane gets a $5k raise and HR says this bumps them from the 12% to 22% tax bracket. Concerned that this means they will have to pay an extra ~$12k in taxes (+10%), they try to reverse the raise.
But really their taxes go from
2200 + (115000-22000-27700)*0.12 = $10036 to
10294 + (120000-89451-27700)*0.22 = $10921
Their new tax bracket is 22% but their effective tax rate is <10%... +7.65% for Social Security and Medicare.
Graphic: image.cnbcfm.com/api/v1/image/107136829-1666125948655-lh8qe-marginal-tax-brackets-for-tax-year-2023-married-filing-jointly_1.png?v=1666125962
Favorite: House hacking, landscaping, day care ($100/child/day), notary, cleaning
Least favorite: Uber (depreciating asset, revenue ≠ income), drop shipping, influencer (success rate is akin to acting)
Your success in life is largely determined but how many uncomfortable conversations you're willing to have. If you don't ask, the answer will always be no. Career, relationships, major purchases, etc.
Day trading is gambling, >90% lose, and we're no exception. Conversely, long-term index investors average 8-11%/yr.
Crypto, NFTs, etc. will boom and bust again. Crypto is as much gambling as day trading or playing the lottery. It is not investing like index funds and buying a home. If you must gamble on the next crypto boom, stick to the top 2 and never bet >10% of your net worth.
The American Stock Market has a >10% sale every 1.2 years and >20% sale every 3-5 years, when everyone gets scared. When the news says we're in a "Correction" or "Bear Market," that means the American economy is on sale; take advantage. The market tends to perform better the days and months after these sales begin.
The alternatives are great too, generally nearly identical or more expensive fees. Jack Bogle pioneered the low-cost index fund that has earned and saved regular Americans billions of dollars.
https://youtu.be/4hiVQf9MPzg?si=ABZhI2Qeqw58anAU
If you want to upgrade your resume, I've helped a lot of people with that too; we can fit it into a consultation
The difference between sales and Multi-Level Marketing schemes is whether you have to buy the product. If so, you are the customer and it is a scam to take your money.
MLM by John Oliver: https://www.youtube.com/watch?v=s6MwGeOm8iI
Economics: Economics Explained
Financial Advisor: The Money Guy Show, Dave Ramsey or George Kamel (fun millennial Ramsey)
General: How Money Works, Two Cents, Graham Stephen (particularly his original stuff)
Favorite overall: The Money Guy Show
Books: The Millionaire Next Door, Rich Dad Poor Dad, Richest Man in Babylon
Money Tips: https://www.reddit.com/r/personalfinance/top/?t=all
General: Anything by Warren Buffett
Favorite Overall: The Millionaire Next Door