Basic Principle #1 is to “Create Income from Investment Assets”

Work to Create Income from Investment Assets vs. from Working at a Job

Life teaches Financial Concepts if you’re Receptive. In his book “Rich Dad Poor Dad”, Robert Kawasaki writes “have you ever noticed that there are lots of accountants who aren’t rich? And bankers, and attorneys, and stockbrokers and real estate brokers? They know a lot, and for the most part they’re smart people, but most of them are not rich. Since our schools do not teach people what the rich know, we take advice from these other people. But one day, you’re driving down the highway stuck in traffic, struggling to get to work, and you look over to your right you see your account stuck in the same traffic jam, you look to your left and you see your banker. That should tell you something.” But this Compendium is about gathering together the best practices that are not necessarily studied in school, but are necessary to understand how to invest in order to have the best possible financial personal underpinning. Some of these concepts are taught in schools but the trick of course is to how to know to apply them to real life. Providing that guidance is the purpose of this Compendium.

To get started, the most important thing is about the attitude we each bring to our personal finances. The most important aspect of attitude is one’s outlook on learning. In learning, we’re talking about not what they teach you in school. For what you learned in school is not necessarily what life teaches you, and I would say that life is the best teacher of all. Most the time, life does not talk to you. It just pushes you around. Each push is like saying “wake up there something I want you to learn”. And being self-observant about these opportunities for learning is the first step in personal financial well-being.

Life pushes all of us around. Some give up, others fight. What you want to do is learn the lesson and move on. You want to welcome life pushing you around. To these few people, it means seeing a gap and wanting to learn something. They learn and move on. Ray Dalio is my role model in this regard.

Most people quit or fight, but the successful people learn. If you learn to learn you will become a wise, wealthy and happy person. If you don’t, you’ll spend your life blaming a job, low pay, your spouse, or your boss for your problems. You will live your life live life hoping for a big breakthrough that will solve all your money problems. In addition if you’re the kind of person who has no guts, if you just give up every time life pushes you, you live life playing it safe, doing the right things, and saving yourself for some event that never happens. But the truth is, if you let life push you into submission you really won’t get the kind of life that provides excitement and stability. And for those people that don’t let themselves get pushed along, they might quit their job and go looking for another job, a better opportunity, and higher pay, actually thinking the new job or more pay will solve the problem. In most cases however it won’t. So the first lesson is to remember “the poor and the middle class work for money.” “The rich have money work for them.” And so this book is really about the latter point, how to have your money work for you.

Emotions: On moving forward it’s important to understand there are two emotions that are key to personal finance security. Those are fear and desire. Together these two emotions can lead you in the life’s biggest trap, if you’re not aware of them controlling your thinking. To spend your life living in fear, never exploring your dreams, is cruel to work hard for money, thinking that money will buy you things will make you happy is also cruel. To wake up in the middle of night terrified about pairing paying bills is a horrible way to live. To live a life dictated by the size of a paycheck is not really a life. Being that a job will make you feel secures lying to yourself. That is cruel, and that’s a trap you should avoid if possible. In this point is made because ignorance about money is what causes so much fear and so much greed. And it’s important to use your emotions to think, not to think with your emotions.

Most people fail to realize that life, it’s not how much money you make, its how much money you keep. There are professional athletes who make millions early in their life and were in the poor house by their mid-30s.

So the few simple rules to remember for the following:

Know the Difference Between an Asset and a Liability

You must know the difference between an asset and a liability, and buy assets. “Rich people acquire assets. The poor and middle class acquire liabilities, but think they are assets”. A simple example is if you need transportation and want to purchase a car to supply it among other things you have two choices between buying an old car in a new car. Buying a brand-new mass-produced car would be buying a liability. Buying old classic car investing the difference in keeping it running would be buying an asset.

Become Financially Literate

Another way to look at this is that it is the cash flow pattern of an asset that makes it one. In short assets provide income. Liabilities become expenses and are disposed of. “The Cash Flow Pattern of an Asset” and “The Cash Flow Pattern of a Liability” figures illustrate this.

This pictorial form is shown because later on, when you put together your personal financial plan, it is useful to think of listing all of the sources of income and expenses that you have in any given year (called your cash flow statement) as well as a second spreadsheet showing your assets and liabilities (called a balance sheet). Knowing the relationships between assets and income and liabilities and expenses is a good tool for knowing which items belong in which category.

In “The Cash Flow Pattern of a Poor Person” figure, or young person still at home, is shown. Such a person typically has no assets or liabilities, but has a job which produces income, which is then spent flowing into expenses, as shown. In “The Cash Flow Pattern of a Middle Class Person” figure shows how a job produces income which is then used for expenses and to purchase liabilities which also add to the expense line. “The Cash Flow Pattern of a Wealthy Person” figure shows the listing the assets the person holds and how that flows into an annual income stream for that person to wisely spend or reinvest.

The Cash Flow Pattern of a Wealthy Person

The Cash Flow Pattern of a Middle Class Person

All these diagrams were obviously oversimplified. Income from a job varies over a lifetime, and as one approaches retirement switches from a job as the source to retirement benefits and assets as a source as shown in the “Income over a Work-life and Retirement” figure. It is critical to not use retirement benefits and assets to fund or be used as an income source before retirement age is reached, or else, as the individual represented in the figure shows, retirement income can be substantially lower.

On the expense side of the coin, everyone has the need for food, shelter and clothing. But these graphs do illustrate one important point and that is “the flaw in thinking that spending money will solve all problems”. Spending more money on desired items and experiences will often not solve the problem and may in fact actually accelerate personal problems depending upon one’s spending habits. The key is to take the income and wisely divide it between spending on expenses, assets and liabilities, with the tendency to spend it as much as possible on assets.

To illustrate this point just a little more, take the case of buying a newer bigger car or a newer bigger home. In both cases newer bigger vehicles and homes typically mean bigger expenses and so, since these are liabilities, the net effect is to increase expenses. So in selecting a home one has to resist the impulse to buy a bigger, flashier house, because you realize it would not be an asset, it would be a liability, since it would take money out of your pocket. This is difficult because a nice home is an emotional thing. And when it comes to money, high emotions tend to lower financial intelligence. As a matter of observation I know from personal experience that money has way of making every decision emotional. The following points can be made when it comes to buying a house:

1. When it comes to houses most work all their lives paying for home they never own. In other words, most people buy a new house every so many years each time incurring a new 30 year loan to pay off the previous one. Even though people receive a tax deduction for interest on mortgage payments, they pay for all the other home expenses with after-tax dollars. This is true even after they pay off their mortgage.

2. Property taxes have a way of going up and up. This is especially problematic after you retire, because every increase puts a strain on the retirement budget and for some people it forces them to move.

3. Houses do not automatically go up in value. There are many times when the market falls or stays flat for decades.

4. The greatest losses of all are from those of missed opportunities. If you have all your money tied up in a house you are forced to work harder because your money continues blowing out the expense column, instead of adding to the asset column. This is the classic middle class cash flow pattern. If young people would put more money into their asset column early on, their later years would get easier, especially as they prepared to send their children to college. Their assets would’ve grown and they would be available to help cover expenses. All too often, a house only serves as a vehicle for incurring home-equity loan to pay for mounting expenses.

In summary, this example shows the end result in making the decision to own a bigger house or bigger car that is too expensive and lose the chance to start an investment portfolio early on. This impacts an individual’s financial well-being in the following three ways:

1. Loss of time, during which other assets could’ve grown in value.

2. Loss of additional capital, and which could have been invested instead of paying for high maintenance expenses related directly to the home.

3. Loss of education. Too often, people count their house, savings and retirement plan as an asset, and because they have no money to invest, they simply do not invest. This costs them investment experience. Most never become what the investment world calls a “sophisticated investor”. It should be noted with emphasis that the best investments are usually first sold to “sophisticated investors”, who then turn around and sell them to people playing it safe.

I’m not saying don’t buy a house; I am saying “understand the difference between an asset and a liability”. When I want a bigger house, I first buy the assets that will generate the cash flow to pay for the house.

“An educated middle-class person’s financial statement” figure shows pictorially that the amount of assets generating income is represented as a very small box and the person is constantly trapped in a rat race. In contrast is a Rich person’s personal financial statement that results in a life dedicated to investing and minimizing liabilities as shown in the “Rich Person’s Financial Statement” figure. This shows pictorially why the rich get richer. The assets (large box) generate more than enough income to cover expenses with the balance invested in more and more assets which continue to grow. Therefore the income these assets produce grows as well.

Just to close on this point, the “Why the Rich Get Richer” and “Why the Middle Class Struggles” figures show pictorially the patterns just described.

Understand Expenses So That Funds Can Flow into Assets

In order to know how to balance the money you should put away for your current lifestyle, your future needs, and your investments, requires an understanding of human psychology and human needs. The most common and best model for this is Maslow’s Hierarchy. Excerpting from Wikipedia, along with edits related to financial planning, we have:

Maslow’s hierarchy of needs is an idea in psychology proposed by American Abraham Maslow. The theory is a classification system intended to reflect the universal needs of humans. The hierarchy of needs is split between deficiency needs and growth needs as shown in the figure “Maslow’s Motivation Model”. Deficiency needs are what you need to do to just survive as a human (physical and mental). Growth needs are what you need to acquire to thrive as a human (mental and spiritual).

The hierarchy of needs is used to study how humans intrinsically partake in behavioral motivation. In our case, we will use it to categorize and prioritize our financial expenses. This approach works because Maslow’s theory was “in order for motivation to arise at the next higher stage, each prior lower stage must be satisfied by an individual”. Translating to finances, this means we much fund our expenses related to each level from bottom to top. Although the original hierarchy states that a lower level must be completely satisfied and fulfilled before moving onto a higher level; there is evidence to suggest that levels continuously somewhat overlap each other. This is important as we apply this model to our own finances.

To apply this model to our own finances, we’ll focus on the lower levels and simplify the original model. This is commonly done by re-representing the model for business and finance applications as a five-step model shown in the figure “Simplified Hierarchy of Needs”.

Recapping, from a financial planning perspective, we will be driven to spend our money first on Basic Needs, and specifically the Physiological Needs of paying for our food, water, warmth, and rest. If we have money left over after obtaining these necessities of life, we’ll start spending on our Safety Needs of security and safety. This goes on right on up the pyramid.

Complicating this approach is that instead of this being a literal “pay for these expenses first without paying for anything at a higher level” guidance, Maslow also stated that although a certain need “dominates” a human’s drive at any point in time, he also acknowledged the likelihood that the different levels of motivation could occur simultaneously in the human mind. We will take this additional guidance to blend somewhat the levels of the pyramid.

Blending pyramid levels over a human’s lifetime is shown in the figure “Needs vs. Personal Development”. The needs rise and fall during our lifetimes because we are constantly growing our ability to take care of ourselves, rather than completely relying on our parents. You also see that at any point ni our lives we have a blend of levels we’re funding, with the dominant ones being any unfulfilled lower ones. We also must take into account that over our lifetimes we are growing our income, and acquiring durable assets (like silverware, cooking utensils, furniture, sports/game equipment) that once acquired don’t need replacement (with the proviso that we understand that when we replace something like cooking utensils for newer ones, we’re really doing so not for Physiological Needs but for higher Esteem Needs). Being honest with ourselves about how we are categorizing our expenses in the Maslow Hierarchy is key to successful financial planning.

Examples of being honest with categorizations are:

When making a budget put into Physiological needs: basic clothing, nutritional food, basic utilities (potable water, sewer, trash, electric, heating gas, etc.), hygiene, medical bills, shelter (rent or equivalent rent if you own a home or condo), basic furniture. These are the very basic essentials of life.
Put into Safety needs: Expenses to have access to a secure job (transportation, clothing), insurance policies (medical, dental, eye, unemployment), expenses to build and keep a “Safety Net” bank account equivalent to 6-months take home pay, additional rent (or home expenses) required to live in a safe dwelling (i.e. pest, toxin and crime free), and formal education expenses.
Put into Love and Social Belonging needs: Expenses to have access to social groups, regardless of whether these groups are large or small (i.e., clubs, co-workers, religious groups, professional organizations, sports teams, and online communities.), expenses related to spending quality time with a partner, family or very close friends.
Put into Esteem needs (self-respect and respect from others): Expenses to get self-respect by acquiring or maintaining a new aesthetic skill such as painting, playing an instrument, dancing, etc., and expenses to obtain respect from others from a physical item such as a nice car, home, boat, etc.
Put into Self-Actualization needs: Expenses related to just yourself related to continuing education after formal education has been completed, books, theater, travel, utilizing and developing talents and abilities.
The difficulty comes when an expense might be in several categories:
- Food that meets our daily nutritional requirements is a Physiological expense, snacks and drinks with friends is a Belonging & Love expense, and eating at restaurants or take out is meeting an Esteem expense.
- Mass transit access, bicycle, or old car used to shop or go to work is a Physiological expense, whereas a new car with safety features is a Safety expense, and a nice car is an Esteem expense.
- When creating or reviewing your financial plan it isn’t critical to get it all right down to the last penny, but to get a rough feel for what you are really doing.

So, the process now is to review your expenses over the last month, 6-months or preferably year (to smooth out payments like an annual membership expense) and put them into the above categories. Having done this, it is time to recall the Chapter 1 section on “You Must Become Financially Literate”. The goal is to divert money from our Income box into our Asset box, rather than have all our income go into the expenses box.

To do this we want to reduce our expenses to be less than our income (take home pay). The steps are:

Pay all the Physiological needs first.
1. If you don’t have enough money to do this, you have extremely hard choices to make:
  1. You have to stop spending on all other “needs” expenses
  2. If you still don’t have enough money, the best option is typically to reduce your shelter expense by moving in with others
If you have enough money to do the above, you then pay all your Safety needs second:
1. If you don’t have enough money to do this, you still have hard choices to make:
  1. You have to stop spending on all other higher “needs” expenses
  2. If you still don’t have enough money, the best option is to build your safety net slower, and consider a less safe environment.
If you have enough money to do the above, you then pay all your Love and Belonging needs third:
1. If you don’t have enough money to do this, you have choices to make that may be tough emotionally, but ones that are more “trade-offs” versus “life-threatening”:
  1. You have to stop spending on all other higher “needs” expenses
  2. If you still don’t have enough money, the best option is to look carefully at how to spend real quality time with others. You don’t have to go to fancy bars, restaurants, clubs to meet up with people. Public parks, libraries, churches are equally healthy ways to meet this human need at a much-reduced price point.
    1. Work hard on this point as now is the first opportunity to change your life by switching some of your income into assets versus expenses. Once you can do this, remember you are now on the road to becoming wealthy. Once this pathway starts, you have a great chance of living a completely different life.
If you have enough money to do the above, you then pay all your Esteem needs fourth:
1. If you don’t have enough money to do this, you have choices to make that may be tough emotionally, but ones that are more “ego-related” than anything else:
  1. You have to stop spending on all other higher “needs” expenses
  2. If you still don’t have enough money, the best option is to look carefully at what you are spending on self-respect versus respect from others.
    1. Stop spending on the “respect from others” expenses first. Most spiritual/religious advice is that “buying respect from others is a very poor life choice”. There is a strong human drive to do get respect from others, so actually walking-this-talk may be harder for some people than others.
      1. If you now have enough money, put the excess into your “investment/assets” bank account.
    2. If you still don’t have enough money, you should look carefully at the things you are spending money on for your own self-respect. Remember that being financially independent is a form of self-respect in itself!
      1. If you can reduce your spending on your own self-respect so that you have an excess of income over expenses, then put the excess into your “investment/assets” bank account.
    3. If you still don’t have enough money, you should look even more carefully at the things you are spending money on for your own self-respect, prioritizing them carefully to obtain the most “self-respect” for the money spent.
2. Hopefully, you are now changing your life by switching some of your income into assets versus expenses.
  1. We’ll talk in the next section and in later chapters on what specific investments in assets to make.
Self-Actualization expenses are typically low compared to other categories, so most people that have been able to pay all the other “needs” categories have no problem also funding their self-actualization expenses.

A mental/emotional challenge always comes up with expenses in the Love/Belonging, Esteem, and Self-Actualization needs. It has to do with each person’s risk tolerance. This risk tolerance is obtained from our parents and what happened to us in childhood. Such deep emotions are very hard to change. The conflict typically comes up not with individuals, but with partners having differing risk tolerances. It shows up in areas such as how much to spend on retirement, child education, entertainment, travel, etc.

Combining and categorizing all the partners income and expenses as detailed above is often a good way to start a thoughtful discussion around the trade-offs among specific higher-level expenses. It creates clarity around what type of emotions and spiritual needs are being met by a particular expenditure for each person. This clarity is useful for each partner’s self-insight in setting a couple’s priorities.

Since the underlying risk tolerance is buried so deep in our brain, a useful tactic is to talk with old people about what things and activities have given them the most happiness in their lives. What usually comes back is that a balance between future financial security versus durable things and vivid activities is the answer to old age serenity. For the ratio between them, consider using a Risk Tolerance Tool supplied by many investment firms. One example is https://njaes.rutgers.edu/money/assessment-tools/investment-risk-tolerance-quiz.pdf At the end of such tools a self-assessed risk score is usually assigned along with a general description such as Low risk tolerance (i.e., conservative investor), Below-average risk tolerance, Average/moderate risk tolerance, Above-average risk tolerance, and High risk tolerance (i.e., aggressive investor).

Applying this investor’s risk to Maslow’s hierarchy, low risk investors tend to favor excessive (too much or too soon) funding of lower Maslow expenses in favor of funding higher level Maslow expenses with excess funds. When they look back upon their lives they regret not having vivid memories of good experiences with family and close friends. High risk investors look back on their lives often feeling they spent too much of their time and funds on impressing others, or false self-respect, instead of saving for a safe and secure retirement free from dependency upon others. Of course, there is no “right” answer here. Each human is on their own life journey so the tools provided above are only helpful in gaining insight, not to be used as hard-and-fast guides. If there are real differences in a couple’s individual perspectives, it is advisable to get professional help in understanding and resolving them. Perhaps somewhat counter-intuitively, experience has shown it is actually much cheaper in the long run.

Hopefully, various risk tolerances are easily understood and resolved, and also that there are funds that can be made available for funding your Assets. In this environment, the next task is to decide what general categories these excess funds can be invested in. Here is where the Bucket allocation model will come into play. But first…..

Create and Manage your own Business

This rule means that in addition to generating income from your job you should also proactively create and manage an income stream from the assets you hold. Over the long run your income will shift from income generated from working for others to income generated from your own assets. This becomes true for everyone at their retirement but some people convert their job into their own business offering much earlier in life.

To make the distinction here, when someone asks us “what business we are in”, we often reply with what our profession is. Physicians often state that their business is practicing medicine, but this is really their profession. For those physicians that own and operate their own practices their true profession is really the accumulation of income producing real estate, as they purchase real estate office space that they rent to themselves and to others. Businesses do not require my presence. I own them, but they are managed or run by other people. If I have to work there, it’s not a business. It becomes my job. Examples of our businesses are our stocks, bonds, mutual funds, income generating real estate, notes and IOUs, royalties from intellectual property such as music scripts, and patents, etc.

Just as people tell you to “find a job that you love”, advice for financial security is defined as “find assets you love”. If you don’t love it, you won’t take care of it. The goal of course is that once a dollar goes into an asset it never comes out, it just stays there and continues to compound until you need it in retirement or for an emergency.

Take Advantage of Taxes and Utilize the Power of Being a Corporation

As one’s asset base grows larger and in particular if one starts their own “LLC” or “S Corporation”, they can take advantage of the government’s tax structure significantly reduce the taxes they pay in the amount of assets they can protect from government taxes. This utilizing a Corporation wrapped around the technical skills of accounting, investing, and markets can fuel explosive growth in one’s financial position. An individual with the knowledge of the tax advantages and protection provided by a Corporation can get rich so much faster than someone who is just an employee or small business sole proprietor. The difference is profound when it comes to long-term wealth.

These statements are true because a Corporation can do many things that an individual cannot. Like pay for expenses before it pays taxes. Said simply an employee’s earning get taxed and then the employee try to live on after-tax income. The Corporation, in contrast, earns money, spends everything it can on what it needs, and then is taxed on the remainder after expenses. It is one of the biggest legal loopholes that the rich use.

When thinking about taxes it’s important to remember there are three different types of income as an accountant sees it. They are (1) earned income, (2) passive income, and (3) portfolio income. When someone tells you to go to school, get good grades, and find a safe secure job, they are recommending that you work for earned income. When the book “Rich Dad Poor Dad” said “the rich don’t work for money, they have their money work for them”, it was talking about passive income and portfolio income. Passive income, in most cases, is derived from real estate investments. Portfolio income is derived from paper assets such as stock, bonds, and mutual funds. The key to becoming wealthy is the ability to convert earned income into passive income and/or portfolio income as quickly as possible. Remember that the taxes are highest on earned income. The least taxed income is passive income. This is yet another reason why you want your money working hard for you. The government taxes income you work hard for at a much higher rate than the income created when your money works hard for you.

Exercise: Make an excel spreadsheet with one sheet each for your Income, Expenses, Assets, and Liabilities. The Income sheet entries (categories and amounts) can come from your tax returns or checking account statements. The expense sheet entries typically come from checking account and credit card statements (unless you are still using cash as a payment vehicle). Typical expense categories are food and clothing, housing, utilities, transportation, insurance, healthcare costs not covered by insurance, taxes, debts, education, gifts, savings and investments, recreation, care for yourself or others, and miscellaneous. The list of assets is usually small and you can list the items (paperwork) you are keeping in your safe deposit box or home safe. The list of liabilities can be derived from looking at where some of your expense items are coming from (taxes and maintenance on a car). The remaining liabilities are from notes you owe that are in your safe deposit box or home safe (like a home mortgage). Consider updating these spreadsheets at the end of each calendar year (usually in January). Make a summary sheet to show how for you, your income, expenses, assets and liabilities are changing over time.

Rules Of Thumb for a Successful Financial Life

Three Rules of Thumb:

(1) Don’t have debt rise faster than income, (2) Don’t have income (or certainly your expenses) rise faster than your productivity (your fair market value), and (3) Do all you can to raise your productivity (seek educational and learning experiences).

Twenty Finance Laws to Live By:

1. Avoid credit card debt like the plague. Pay off credit cards before the interest on that debt snowballs.

2. Building credit is important. Take the steps necessary to raise your credit score to 740. Pay your bills on time, pay attention to your debt utilization ratio, and watch for hard inquiries and errors on your credit report.

3. Income is not the same as savings. High income doesn’t make you rich; low income doesn’t make you poor. It’s all about what you set aside, not what you spend.

4. Saving is more important than investing. You have no control over things like recessions or interest rates. What you can control is how much you save. Here’s some simple advice: Pay yourself first and set a high saving rate.

5. Live below your means, not within your means. You should live below your means for the first half of your life. That way, in the second half, you can live at/above those means.

6. If you want to understand your priorities, look at where you spend money each month. Spend on what really matters. Ask yourself if your spending is really on target or impulsive.

7. Automate everything. A lot of people automate payments because late or missed payments can hurt your credit score, but if you do remember to audit your statements for errors. You can also set a calendar reminder to make sure you pay on time each month.

8. Get the big purchases right. This is an elegant way of saying, “It’s the big things that count.” Don’t overextend yourself on things like housing, transportation, and education because they aren’t fixed costs. The added expenses can really add up. If you save money before your purchase, it will take the pain out of that expense.

9. Build up your liquid savings account. You have to build your emergency fund before you even think about investing. Save $10,000 or six months’ worth of expenses, whichever is greater. Don’t count on someone else bailing you out if you get in a jam.

10. Cover your insurable needs. You should have life insurance equal to 2X your income for each dependent. Choose your provider as carefully as you choose your policy.

11. Always get the match. If your employer-sponsored retirement plan comes with a match, you have to take advantage of it. That’s free money. Make the minimum contribution, and preferably more.

12. Save a little more each year. The average person spends $67 a day. That’s $6,000 a year just on discretionary items like gas, streaming TV subscriptions, and takeout food. If you save just $20 of that, you can fund an IRA where you have the opportunity to earn interest and/or dividends.

13. Choose your friends, neighborhood, and spouse wisely. Warren Buffett said the two most important decisions you’ll ever make are your career and your spouse. Life is a lot easier when you’re with someone who agrees with how to spend money. Have those hard conversations before you say “I do” to someone with a different money mindset.

14. Talk about money more often. Most people don’t like to talk about money. I’m not scared to talk about it. Because it pays to establish a healthy relationship with money.

15. Material purchases won’t make you happier in the long run. I disagree with this one. Moderation in everything. Depriving yourself of your daily Dunkin’ run or other small luxuries will make you miserable.

16. Read a book or 10. Invest in your financial education. I have been reading about the markets for two decades, and I have no plans to stop. The more you know about how the markets work, the less likely you are to fall for a financial fast-talker who promises you easy or instant riches.

17. Know where you stand. What is your net worth? What do you want it to be? Set some goals. Paying off debt means no more interest charges. You can do a lot of things with that money, like build an emergency fund, invest, or buy something that will bring you happiness.

18. Taxes matter. Personal finance is mostly about the big stuff, and that includes taxes. Not just the ones you pay on your income. Depending on where you live, property taxes can affect your home’s value… and that impacts your bottom line.

19. Make more money. A lot of people say, “What’s the point of making more money? You just move the goal posts. You are never happy.” Just because you move the goal posts doesn’t mean you aren’t happy. It’s perfectly natural and healthy to want more. Switching roles or jobs is the typical means to this end.

20. Don’t think about retirement, but financial independence. It’s never too late to start saving and investing for retirement. You don’t have to retire, per se. Keep reinventing yourself so you can “work”—and earn—on your terms. Your goal is to live a stress-free financial life. Put a plan in place so that your needs—and your family’s—can be taken care of.

Sources and References:

“Rich Dad, Poor Dad”, Robert Kiyosaki, Warner Business Books, 1997
“Principles: Life and Work”, Ray Dalio, Simon & Schuster; First Edition (September 21, 2017)
“Maslow Hierarchy of Needs”, https://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs
“20 Finance Laws to Live By” by Jared Dillion, The Jared Dillian Letter, Jared Dillian Money, LLC., Fernandina Beach, FL, August 9, 2023