Most people never learn money or real estate; these are the best advanced money lessons we learned while saving >50% of our incomes, advising dozens of people, and completing a $90k UW MBA.
3 Factor Model - CAPM + Value + Small Cap
Beta - how risky something is relative to VTI. Hint, most things have an ROI/Beta < VTI.
CAPM - Capital Asset Pricing Model
LLC - Limited Liability Company, very common organization for a small business
ROI - Return on investment
Or at least reduce suffering
1. Teach them forced scarcity; see The Millionaire Next Door (book), Google, or YouTube
2. Hire your newborn to model for baby photos, pay them $3000 in a custodial Roth IRA + VTI. Don't tell them till they open a Roth IRA. $3000*1.1^65 = $1.5M expected value at retirement, tax-free.
If the US replaced Social Security with this...
Save 50% of your income for 14 years in an index fund (ideally in a Roth IRA), retire.
More info: www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
Most time/money investments should be benchmarked relative to an index fund with a ~10% average ROI, potentially the most passive investment, and 0% failure rate over the last 200 years. This is our default opportunity cost and benchmark
HSA: If your employer has a high deductible medical plan, these are fantastic. The money doesn't get taxed when it goes in, it compounds tax-free, and it doesn't get taxed when you use it!
FSA: Available for low/standard deductible medical plans. Contributions are a tax deduction but no compounding and the $ is use it or lose it each year.
... is opportunity cost. It is completely invisible to most people. Say a degree costs $100k, it actually costs $100k + 4 years of lost wages at say $50k/yr, so it actually costs $300k or more.
If you have a >3 month emergency fund and a Roth IRA, you can ask me about 0% interest loans and maximizing credit card rewards
If you have an emergency fund and ideally limit this to <10% of your portfolio: when the annual correction/bear market sale occurs, one can slowly buy UPRO, a 3x leveraged S&P500 index fund, to potentially get a >30% profit from a >10% recovery. Note, I view this as a far lesser evil than buying individual stocks on margin, though do not advise it for most people. Time in the market beats timing the market.
More info: www.youtube.com/watch?v=Ll3TCEz4g1k&ab_channel=BenFelix
Dental Office 2%
Primary Residence 5% (foreclosure rate)
Laundromat 5%
Agriculture, Forestry, Fishing and Hunting 29%
Rental and Leasing 36%
Retail Trade 38%
Manufacturing 39%
Arts, Entertainment, and Recreation 41%
Accommodation and Food Services 41%
Utilities 42%
Educational Services 42%
Construction 42%
Finance and Insurance 44%
Health Care and Social Assistance 45%
Transportation and Warehousing 47%
Management of Companies and Enterprises 47%
Administrative and Waste Services 48%
Wholesale Trade 48%
Professional, Scientific, and Technical Services 50%
Average 50%
Information 53%
Mining, Quarrying, and Oil and Gas Extraction 60%
Restaurant 80%
Real Estate Agent 87%
Unfortunately, real estate agents and restaurants are among the most common business ideas.
Primary reference: https://www.lendingtree.com/business/small/failure-rate/
A business only makes sense if
Most businesses are not profitable for years and often never pass your current income, yet the ones that do can be very lucrative.
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.
70-90% of American CFOs use the CAPM model to evaluate investing opportunities https://www.investopedia.com/thmb/4kbPpZQoI05FHWNXyp3JKm7zsV8=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/dotdash_INV_final_Calculating_CAPM_in_Excel_Know_the_Formula_Jan_2021-01-547b1f61b3ae45d7a4908a551c7e7bbd.jpg
The 3 factor model expands on the CAPM model; by saying, in addition to market risk, smaller, value businesses generally outcompete large growth businesses.
More info: https://www.youtube.com/watch?v=2MVSsVi1_e4&t=79s&ab_channel=BenFelix
Roth IRAs are so great that high incomes (single earning >$138k/yr or married >$218k/yr) aren't allowed to use them as much. However, you can get around this by contributing the funds to a Traditional IRA then immediately rolling it over to a Roth IRA, hence "Back-Door"
Bonus: Mega Back-Door Roth IRA
The 2023 401k contribution limit is $22.5k... kinda. Your 401k limit including Roth/traditional contributions + employer match + your after-tax contributions is $66k. HR rarely asks to enable after-tax contributions and in-plan distributions in their 401k plan. Microsoft did and your workplace or future business could too.
Most problems exist, not because there aren't technical solutions, but because there aren't economical solutions. If you surpass the income needed to solve your important problems, consider saving for your kids, early retirement, or effective altruism
Early Retirement: https://www.youtube.com/watch?v=8-Li_sFNc4Q&ab_channel=Mr.MoneyMustache
Effective Altruism: https://www.youtube.com/watch?v=Diuv3XZQXyc&ab_channel=TED
Real Estate: BiggerPockets
Economics: Economics Explained
Investing Strategy: Common Sense Investing
Financial Advisor: The Money Guy Show
Marketing: Alex Hormozi
Favorite overall: Alex Hormozi or The Money Guy Show
Books: The Millionaire Next Door, The Intelligent Investor
Early Retirement: https://www.reddit.com/r/financialindependence/top/?t=all