Chapter 9: Where to Stash Your Cash for Long-Term Financial Freedom

Your Money or Your Life by Vicki Robin & Joe Dominguez

Chapter 9: Where to Stash Your Cash for Long-Term Financial Freedom

Notes by Roshan A. Loungani, CFP® CRPC®

Retirement Specialist

- “Empower Yourself”

Take back the power that you have inadvertently given over to money

- Investment is somewhere you put your money to make more money

Conservative Bonds
Revolving loan funds
Invest within your IRA, 401(k), or brokerage account which gives access to mutual funds and ETFS
Real Estate- Live and Rent out
Invest in business by becoming a partner or through lending

- Gaining the right knowledge and sophistication about investment instruments in order to free yourself from fear and confusion in personal investments

- Risk Tolerance

The Spectrum ranges from conservative to aggressive
Effected by age , personality, how marketable your skills are, and life experience

- Asset Classes (stocks, fixed income, real estate, commodities, and foreign currencies)– diversifying across asset classes is one way to manage risk

- Investment Income can be earned through interest, dividends, capital gains, rents, and royalties

- Identifying your time horizon can highlight the appropriate risk you should take

Conventional wisdom suggest young investors should risk more to gain more wealth and as you begin to age lower your risk to more stable income

- Transaction and management costs increases with the more people involved in the buying and selling of your investments

- Alternative to investing yourself is hiring an adviser to help

Financial Advisers monitor performance, rebalancing holdings given market conditions, and financial planning.

- Socially responsible investing gives investors the ability to align their money with their values and beliefs

Conscience returns

- Evaluate your circumstances, for having a safe, steady income throughout your life apart from work

1980s Treasury bonds had substantially high yields that declined over the year
Joe’s Plan (Not viable today, but worth reviewing) - Greatest Safety of capital - Exemption from state and local taxes - Noncallability - Easiest availability - Cheapest availability - Duration

- Nothing is certain

Geopolitical and economic conditions shift the certainty of investments.

Index funds are also a passive investment approach and alternative to bonds that allow investors to “set it and forget it”

“A Low-cost fund is the most sensible equity investment for the great majority of investors.” Buffet - Index funds are mutual funds or ETFs that track the performance of stock market indices - Low fee and diversification
Diversifying index funds across multiple asset classes (stocks, bonds, large to small capital funds) can expose you across the global market while lowering your risk

- Employer retirement plans offer exposure index funds and gives the ability to lower your overall taxes through contributions

- The only day you care about an investment’s value is the day you buy and the day you sell.

- A Few Simple Rules to Remember from the Bogleheads

Pay off debt and avoid it in the future
Live Below your means by spending less than you earn
Invest the rest in low cost index funds
Hold on to the funds for many years

- Real Estate provides investors with a steady stream of income through mortgage payments, or rent.

Factors to consider when evaluating a multifamily building: - Location - Cash Flow (Gross Rent) - Expenses (repairs, utilities, and homeowner association fees)

- Author highlights 4 income streams (Bonds, Real estate, Social Security, and Local Lending)

Checklist of Things to consider when investing