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

Updated: Mar 7



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

  • Investment in line with my values

  • Risk Tolerance

  • Diversification

  • Is this the current and future income I need?

  • How easily can I liquidate?

  • Sales charges or penalties incurred

  • Federal, State, and Local tax implications of this investment

Money Talk Questions

  • What are you putting in place now to keep you afloat as you age?

  • In a pinch, what could you do to make extra money?

  • Whom or what would you trust to help you invest your money?

  • What’s been your experience to date with investing? What are your hopes

  • What values and beliefs do you bring to investing?

  • What is your risk tolerance-in money and life?

  • What does Financial Independence mean to you?


Bibliography

Robin, Vicki. Dominguez, Joe. Your Money or Your Life. New York: Penguin Books, 2018, pp 276 - 306

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© 2018 by Roshan Loungani, CFP®, CRPC®.  Vienna, Virginia

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