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

Updated: Mar 7, 2020



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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Arete Wealth Advisors LLC and Arete Insurance Agency LLC are affiliates of Arete Wealth Management, LLC. Advisory services offered through Arete Wealth Advisors, an SEC registered investment advisor. Securities offered through Arete Wealth Management, LLC, member FINRA, SIPC and NFA.

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

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