Financial Freedom: A Proven Path to All the Money You Will Ever Need

I think I heard about this book in an interview with Vicki Robin, of Your Money or Your Life fame (which it looks like I read twice, in 2007 and in 2013). Grant’s main point seems to be that all the previous advice we get is wrong about putting away a small percent each year toward retirement then hoping it’s enough when we reach 65. Instead, he advises you to supercharge it so you can take advantage of the magic of compounding. And other sources talk about maximizing one of the levers of saving, earning, and expenses—Grant tells you to focus on all 3 at once. Side hustles is the name of the game (unless you’re like me, running your own biz). Most interesting was the section on Roth IRA conversion ladder – I didn’t realize once you convert, you can withdraw without penalty 5 years later.

Playing with FIRE (Financial Independence Retire Early)

One of the better books on FIRE, Scott tells the story of how he and his wife turned their back on their high-spending lifestyle in order to focus on what really matters: being able to spend time doing the things they love doing. They went from earning $140k and spending $120k a year to earning the same and spending half that amount, moving from California to Bend, OR, cooking more/all meals at home, investing their savings in an index fund, giving up a car lease in order to buy one for $5k, etc. Not as annoying as it could be, and brimming with the kind of practical common sense advice that everyone needs to be reminded of.

Meet the Frugalwoods: Achieving Financial Independence Through Simple Living

Zzzzzzzzzz. I need to come up with a term for books like this, stretched out prose pulled from a blog by print publishers desperate for eyeballs. My own eyeballs got strained by rolling in their sockets at the obvious tips: stop eating at restaurants! that daily coffee adds up! wow, why do women spend so much money on makeup & clothes?! look how cheap we can get furniture on Craigslist! Besides the lack of anything interesting to say w/r/t frugal living, you have to suffer through the tale told from the perspective of a woman who has been begging this guy to marry her as soon as they graduate college (barf) and then them desperately trying to have a baby (double barf and also contrary to frugality). In the end they win b/c they find a decent house to buy in Cambridge, MA, that they rent out and survive on that income while living on their homestead in Vermont which miraculously came with fiber Internet already installed.

Your Money or Your Life

The author of How To Find Fulfilling Work, recommended YMOYL as a good companion book. It’s got a nine step program to breaking the shackles, with no huge surprises but some good mantras and quotable bits. Step 1 is figuring out how much you’ve ever made in your working life, and what do you have to show for it now (assets/liabilities). I like the framework of Step 2: Tracking your life energy (how much does your job really cost you if you include various things like commuting, the beer after work to wind down, etc.), which also advocates tracking every penny that enters/leaves your life. This leads to Step 3: Where does the money go, where you balance your income and outgoing totals then convert those dollars into hours of life energy. This leads to thinking twice about buying something you don’t need because it took you 20 hours of life energy to earn that money.
Step 4 requires you to look at your spending categories and ask if you got fulfillment, satisfaction, and value in proportion to how much life energy you expended. Step 5 makes visible your progress, in the form of a wall chart to see income/expense, to keep you mindful of the program. Step 6 is to minimize spending by practicing intelligent use of life energy (money). Step 7 is to maximize income and break the link between work and wages. How do you want to spend the remaining hours you have on the planet? Break the link between who you are and what you do for a living. Step 8 is about the crossover point where your expenses are covered by your monthly investment income. Step 9 is managing your finances long term.
My favorite bits along the theme of employement always center around the history of work, looking at this from an evolutionary perspective:

For most of human history, people only worked for two or three hours per day. As we moved from agriculture to industrialization, work hours increased, creating standards that label a person lazy if she doesn’t work a forty-hour week… The very notion that everyone should have a job only began with the Industrial Revolution.

“Money is something we choose to trade our life energy for.”

Women & Money

Skimmed this last night. There were some interesting bits about Suze’s early life, borrowing $50k from the patrons of a restaurant she worked in Berkeley, losing the money in an ill-advised investment, then going to work for that investment firm.
Includes a great deal for people just getting started:
TD Ameritrade will give $100 to people who set-up auto deposit of $50 or more each month for a year.
1. Go to SaveYourself.com by 3/31/08.
2. Enter offer code 701.
3. Open a new TD Ameritrade account
4. Set up direct deposit for $50/month for 12 months
5. After a year, TD deposits $100 into your account.

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Your Money or Your Life

Skimmable, easily digestible book of the usual financial advice. One of the items that resonated with me is the idea of considering each purchase you’re about to make– will it give you fulfillment, satisfaction, and value in proportion to the amount of life energy spent on it? Another surefire way to save money is to stop shopping.
This book has been all the rage lately with the idea of the Crossover Point (aka the FU point), where your investments generate enough cash to cover your expenses and you can do what you want with life.
Take the spreadsheet for a stroll with your own numbers to find out your personal FU point.

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Real Estate Riches

Great entry-level book to get your brain juices flowing about the possibility to own real estate. He makes a compelling case for borrowing most of the cash to finance the purchases; better to take $4k and invest $1k down in 4 properties, borrowing the rest, since there are so many tax advantages. Make the most of banks’ willingness to finance your real estate investing. Commercial vs. residential real estate also looks to be the most lucrative & easy way to go. Look at 100 properties, pick 10 to bid on, 3 will accept, find financing for 1. It’s all about the internal rate of return.
Good rah-rah book, a little weak on details of paying off mortages & how to go about getting started.

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Smart and Simple Financial Strategies for Busy People

This is a good back-to-basics book on financial health. Quinn’s first rules:
* Only a few things work, and they work really well.
* Set up a system that runs automatically and you can’t fail
* Success comes from starting right, then keeping your itchy fingers off
On saving– make it automatic, with 401k deductions from your paystub and automatic deposits into investment accounts. Compound interest really works. Think twice before purchasing toys or non-essentials. Keep a 3 month cushion fund for emergencies. Enroll in DRIPs. For retirement, you MUST save 10-15%. Pay off everything (retirement, debt, cushion fund, college plans) before prepaying your mortgage.
Check your credit score annually (for free). Auto/home insurance: shop around, and opt for the highest deductable (to ensure lowest monthly rates). Make a will and living trust. She’s got great info on buying a house, mortgage types, how much house you can afford, ARM vs. fixed rate, etc.
There’s also chapters on reducing debt and saving for college.
Her best chapter was on No Worry Investing. Since I’m currently invested in stocks only, this was a big wake up call for me, and a lot of the info resonated– I’m not a professional investor and I can’t put enough time into managing my investments to ensure that I end up ahead. So why don’t I just dump everything into an index fund and call it a day? She loves the Vanguard Target Retirement funds b/c they diversify, choose appropriate assets for age/situation, hold down costs, limit your risk. Index funds are also big with her- particularly the Vanguard S&P 500 index fund. Index funds consistently beat out actively managed funds over time, and they’re cheaper– win/win!
Her recipe for success with No Worry Investing:
1. Funds that track the entire US stock market (Fidelity Spartan total market, Vanguard Total Stock Market, T.Rowe Price Total Equity index)- 40%
2. Funds for international stocks (fidelity spartan int’l fund, Vanguard Total Int’l Stock fund)- 20%
3. Index fund for REIT (Vanguard REIT index)- 10%
4. Bond index funds (vanguard total market bond index fund, fidelity US bond index fund)- 20%
5. Commodities index fund- Pimco’s Commodity Real Return Strategy Fund- 10%
Other funds of interest:
1. Funds that track S&P 500 (Fidelity Spartan 500, Vanguard 500 index)
2. Funds that track small/midsize stocks (Extended market funds)
3. Fund for socially conscious investors (Vanguard Calvert Social Index fund)
She wraps up with her last rules:
* You can’t see the future
* If you’re saving money steadily, that doesn’t matter
* All that really matters is getting more out of life

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Why smart people make big money mistakes–and how to correct them

Yes, I’m still on the economic book bent.
This one was well-written and entertaining. Basic premise is that we prevent ourselves from making good financial choices, by simple human pyschology. We mentally account for money differently based on source of money (i.e. you go out and think nothing of spending that birthday check on an expensive coat, but you’d never do that with your paycheck) and keep pouring cash into the car that keeps breaking down simply because we have already put so much into the car so far.
Other tricks used against us are the anchoring effect of a listed price– maybe something isn’t worth $200, but when we see it marked down from $500 to $250, we can’t resist buying it. Anchor effect also hugely impacts the final price on your house sale. Overconfidence in our own abilities to time the market or to have the inside scoop on a stock also hamper us. On the opposite side, the herd effect of “everyone’s buying it” similarly hampers effective financial decisions.

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The Millionaire Next Door

This one was recommended by a myriad of financial blog sites, so I finally dug in and read it. Basic premise is no shocker– the wealthy do not flaunt their wealth– they’re the ones buying used Hondas and reasonably priced suits and modest housing. Instead of buying “stuff” they are investing in stocks, businesses, real estate. They are frugal.
Here are the seven factors of those who successfully build wealth:
1. Live well below your means.
2. Allocate time, energy, & money efficiently in ways conducive to building weath.
3. Believe that financial independence is more important than display of social status.
4. Parents did not provide economic outpatient care.
5. Children are economically self-sufficient.
6. Proficient in targeting market opps.
7. Choose the right occupation.
The book also touted the pursuit of occupations to serve the wealthy, such as estate and tax law, accountancy, brokerage.
How to determine if you’re wealthy:
Multiply age times realized pre-tax annual household income from all sources.
Divide by 10.
This is what your net worth should be. Got some work to do on this one too.
PAW (prodigious accumulator of wealth) vs. UAW (under-accumulator of wealth).
PAWs are worth twice their expected net worth.
Overall, not a bad book. Quick read, and reinforces ideas you probably already have (especially if you’re motivated to pick up the book).

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One Up on Wall Street

Yeah, I never thought I’d be reading books about the stock market, much less admitting this publicly. Yet here I am, shouting “Hooray for Peter Lynch” from the rooftop of my SF flat. If you’re thinking about investing, read this book. If you already are investing and feel slightly clueless about your actions, read this book. If you’re confident in your abilities as an investor, read this book. Nothing dry and boring in this classic; the tone is friendly, engaging, and extremely readable.
Notes:
Individual investors have advantage over Wall St. b/c they can buy companies they see in their daily lives as up-and-comers. (i.e. The Limited clothing store circa 1982)
Final Checklist
Stocks in General
– P/E ratio: high or low for this company, compare it to similar cos in same industry
– % institutional ownership: lower the better
– are insiders buying? is company buying back own shares? good sign
– record of earnings growth to date, are earnings sporadic or consistent?
– strong balance sheet (debt to equity ratio)
– cash position

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A Random Walk Down Wall Street

Great guide for novice investors/peeps who don’t know what to do with their slight and tiny nest egg. One thing that stands out is the idea that an IRA is good b/c all interest, capital gains earned with it is tax deductible until you take the money out of the IRA (at which time you might be in a lower tax bracket).
Solid stuff, easily understood advice (buy stocks you want to hold onto for awhile b/c the transaction cost of buying and selling can cut into your bottom line).

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