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

• 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