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The Ultimate Personal Finance Guide CPRPRXJJ
The Ultimate Personal Finance Guide CPRPRXJJ
• Budget
• cash Flow
• Net Worth statement
• Financial rules and principles
Net Worth
• car loans
• credit cards
• student debt
• home mortgage
• mortgages on real estate
Cash
Investments
• art
• bonds
• crypto
• equities
• real estate
• collectibles
• cost base
• market value
Personal home
Despite what many well-intentioned pundits tell you, you should include your home in your net worth.
Bottom line: you can sell your house for cash, which is the definition of an asset.
Emergency fund
An emergency fund is meant to cover financial surprises life will throw at you, and should be cash or
highly liquid.
When you increase your net worth, you can use lines of credit as your emergency fund.
Car loans
If you are going to buy your car with debt, secure a low-interest rate.
• buy used
• choose economy
• rent luxury to 'feel good'
Credit cards
CC Pros:
• points
• convenience
• deferral of spend
CC Cons:
• interest
• overspending
• lack of visibility
If you can control yourself and your behaviors, use credit cards.
Student debt
Home mortgage
Your interest rate on your home mortgage will likely be your cheapest debt.
If your tenants' rent covers the mortgage and property upkeep costs, then it's good debt.
Budget
• Earnings
• Expenses
• Investments
• Earnings
• Your job
• Side hustles
• Investment income
Increase earnings
Three ways you can increase your income are:
• get a raise
• start a new job
• generate side income
Research shows if you stay in the same job for more than two years, it costs you money.
Your manager can only give you a minimal annual raise, but you go back to the market when you start a
new job.
• desire
• an idea
• a phone
• commitment
Expenses
Fixed expenses remain consistent month to month - your rent, car payment, etc.
Variable expenses change with your behaviors: gas, eating out, food, and entertainment.
Wants are what they sound like - it's spending money on what you want.
The Big 3
• transportation
• housing
• food
• basic transit
• a roof over your head
• sufficient food to live life
Productive wants
If you can't enjoy life, you aren't living, but there's a better way.
Investments
• Invest in you
• pay yourself first
• put your army to work
Invest in you
Don't: receive your pay, spend your monthly bills, and invest the rest.
• real estate
• dividend stocks
50 - 30 - 20
50% - investment
30% - needs
20% - wants
Cash flow
Your cash flow is your income minus your expenses and should be tracked monthly.
• inflows
• outflows
Inflows
• your job
• side hustles
• investments
• stock options
• deferred bonuses
• investment appreciation
Outflows
Cash outflows are cash you pay for variable and fixed expenses.
1. Do I need this
2. Will I use it
If you don't need it and won't use it, don't spend on it.
Seasonal workers
You need to learn to save extra cash that you'll use during lean months.
You'll pay expenses one month and not owe money until your credit card is due, and you'll earn points.
If you receive bonuses during the year and intend to make large purchases, align the inflow with the
outflow.
Some will put the purchase on credit, knowing they can pay it in time; however, they'll incur carrying
costs.
Too many people get paid, spend on their lifestyle, and then invest.
You need to invest at least 20% of your pay FIRST and then spend what's left.
When you get a raise at your job, don't spend it. Invest it.
1. Increased investing
2. Decreased lifestyle creep
People tell you to reduce your spend as the way to financial success, and
They're wrong.
• get a raise
• start a new job
• generate side income
Frugal spends
1. Do I need this
2. Will I use it
If you don't need it and won't use it, don't spend on it.
Automate
• get paid
• auto-transfer to savings
• auto-transfer to investments
• set up auto-bill pay for your bills
Network
You are the sum of the people you surround yourself with.
Your network will determine your net worth: mentally, physically, and financially.
Surround yourself with people that make you better in each of these areas.
Match
• Books
• Coaches
• Online courses
• Business teachers
A wealthy person focuses on the $10,000 value they will get from it.
4% Rule
The 4% rule is the safe withdrawal rate, and indicates how much you can withdraw from your
investments without drawing down your principal.
Said differently:
20-40-10
Rule of 72
Compounding is the 8th wonder of the world and has the power to make or break you.
Rule of 72 indicates how long it'll take your money to double taking compounding into account.
If an investment earns 18% per year, it will double roughly every four years.
Rule of 114
The Rule of 114 is comparable to the Rule of 72, but it tells you how long it will take for your money to
triple.
I only learned this one in the last 6 months and am fascinated by it.
$27.40 Rule
If you save $27.40 every day, you will save $10,000 per year.
If you start investing $10,000 per year at 8% at 20, you'll have $2 million at 55.
I wish I'd started investing $10,000 per year sooner - don't make that mistake.
Subtract 100
Subtract your age from 100 and put that percentage of assets into stocks.
If you're 20, you should have 80% stocks and 20% in bonds.
Some argue, given longevity and retirement horizons that you should put more into equities.