Wealth Management – 201 Basics

Summary
After watching all of the videos below these are main key points.

Definitions
Liability is anything that takes money out of your bank account.
Asset is anything that puts money into your bank account.

Key Points
Average people spend money on liabilities.
Wealthy spend money on assets. The income from assets can be spent on liabilities.
Time is your most valuable asset.

Additional details about the Key Points.

Liability
-There was some disagreement about whether a house was a liability to or asset. In the true sense, a mortgage does take money out of your pocket. Other speakers considered this to be an investment. I believe a conservative approach is to consider it a liability. If it does eventually gain value as an investment that is a plus. If your mortgage goes the full term the total amount paid, including interest, will be more than what it’s worth. It can be an asset by generating revenue if you rent out a room or list on AirBnB.

Assets
-Assets are purchased with principal. This is the initial upfront cost. As an asset generates revenue you can withdraw those gains and spend it one liabilities. You should never withdraw principal to spend on liabilities.

Time
-“Time is your most valuable asset.” I think everyone has heard this before but it’s difficult to put into action. At work we effectively exchange time for money. The money goes to paying bills and buying groceries. We can’t quit our jobs to free up this “valuable” time. I think it means we should use some of our free time to learn. Pick a skills or knowledge area you want to learn about and set time aside to study and research. Don’t feel like you have to pay for a class. There is so much information available online that you can self-study a wide range of topics.

Wealth management pre-requisites from Personal Finance.

  • Budget tracking
  • Emergency fund
  • Zero credit card balance

Money spent to save time is worth it.

Need to watch again and finish notes. 

Summary
Video is long but is worth watching. He makes very clear points and is easy to follow.

  • He focuses on keeping it simple. This could be an extension of the 80/20 rule. 80% of the results can be achieved with 20% of the effort. To achieve the additional 20% of results you have to expend the remaining %80 of effort. 
  • I like the fact that he tells people learn and do some research. He seems to be objective, even about his own content.
  • He makes the point that everyone thinks they can be above average and out perform. Some financial industries have used this natural thought process as a marketing tool for their own gain.
  • Even though an index returns the average of the underlying stocks, it still has returns above the average investors.
  • Continue being curious, continue trying and continue researching/learning.
  • Not all decisions have to be driven by financial considerations but you should always understand the financial impact of what you decide to do. 

Summary
The video is basic but good. It illustrates an important concept.

  • Another video focuses on time allocation. Setup process to free up your time so you can continue improving.
  • Live within your means.
  • Invest principal. If spending, only spend gains not principal.
  • Start small with revenue generating assets.

Summary
Real good explanation of good vs bad debt. This is actually a really good overall summary of financial principals.

  • Covers the definition of liabilities/assets.

Summary
Has some basic information that was pulled from other videos. It’s an ok video with important concepts. Ends up being a marketing plug for something else at the end.

Wealth is the ability to create streams of income.

  • Pay yourself first. Several of these videos copy this rule. I assume this is the money that goes to build the emergency fund. 
  • Make your money work for you. Money spent can’t be invested to generate revenue. 
  • Your money will slip away if you invest in unfamiliar things. Must have insight into the investment. Spending time investing in yourself by learning.
  • Protect your money by finding mentors. Get expert advice, find a mentor, find people that can help you avoid mistakes.
  • If it looks too good to be true, it probably is. Do thorough research

Overall a good video to explain concepts but speaker drags on a little.

Good information about how the overall economy works. This will aid in understanding the role of money.

Summary
Overall a good video. Has some basic information.

Track everything

  • Ask a random person how much they spent on entertainment last month and they wouldn’t know. Ask how much they saved last month and they wouldn’t know.
  • Diligently track spending. Connect to budgeting app for ease.
  • “What isn’t tracked, isn’t managed.”

Financial Discipline

  • Spending money on things only in the budget.
  • Driving an economic car that is paid off vs. a nice car with a payment.
  • Saving money is a foundation of building wealth. Savings allow you to maintain investments or reinvest when things are down.
  • May also need to earn more money.

Live Within Means

  • When most people start earning more money they start spending more instead of paying down debt.
  • This is caused by a lack of discipline.

Put Money to Work

  • Rich put their money to work through investing.
  • An average person spends their money or continues to put money in savings account beyond emergency fund.
  • Need to think about how you are investing your money and time. Rich also invest in self-development.
  • Never spend the principal funds used to initiate an investment. If you buy stock for $1,000 and it grows to $1,500 you can only spend the $500 gain.
  • Money spent must be generated by an asset. Action: Need to expenditures and determine if any need to be cut until they are paid by an investment.
  • Only spend money that has been generated by an asset.

Passive Income Options

  • Investment properties
  • Divident stocks
  • REITs – Mutual fund for real estate investing

Summary
Speaker is very annoying but makes some good points. Video is short and simple. Video is not worth watching if you just read the list below.

5 Things to manage money:

  • Have a written plan / budget.
  • Get out of debt.
  • Live on less than you make.
  • Be generous / help people

Summary
Video has a lot of fluff but also makes some interesting points. The video is worth watching. Focuses on the idea that time is our most valuable resources. Encourages you to find problems and come up with solutions. This will serve you better than chasing money.

What You Were Taught About Money

  • Money = Salary From A Job. The most valuable resource that we have is time. Need to think more about how you are investing your Time. 
  • Jobs generate $X per hour.

Money and Wealth

  • It’s not about how hard you work. It’s about how valuable the market perceives you.
  • If you want money, solve problems. Side note: SJ may not have been a large enough problem.
  • Think about all the problems that Amazon solves.
  • Action: Looks for problems and develop solutions for those problems. And then you will make money. Build a business around solving the problem. Always start with a problem. What are people saying they don’t like, frustrates them, is inconvenient.

A Problem Worth Solving

  • Evaluate the size of the problem. A restaurant doesn’t scale well. SJ has a very limited potential client base. A franchise is more scalable.
  • Software scales easily.
  • A yoga instructor still generates $X per hour and requires your time. Don’t get another job disguised as a business. An online yoga class with pre-recorded videos is more scaleable.
  • Systems and processes will help keep business running smoothly. Don’t task yourself with everything.
  • Once you find a solution make sure that solution can be accessed by everyone in your market.

Your Money or Your Life

  • It’s more about doing what you want than money.
  • The main point is that time is the most valuable resource.

Conclusion

  • Fail fast and move on.

Side note: A lot of these videos end up saying the same things in a different way. Then they market their own “strategy” to achieve it. There are a basic set of underlying rules/principals. People can’t instantly implement all rules or instantly. People need a personalized transition plan to takes steps towards the right track. This is an opportunity to help others. 

Some of the videos have good speakers with time wasting content. Some of the videos have bad speakers with good content. As you watch videos continually ask if this sentence is fluff or an lesson that can be implemented. 

Move video to personal finance

Summary
Basic rules are good starting point. Overall his approach are a little different but probably better for most personality types.

Dave Ramsey’s basic first steps

  • Save $1,000
  • Pay all debts except your home from smallest to largest
  • Emergency fund of 3 – 6 months

Interesting that he wants all debts paid before the emergency fund. 

Summary
Overall a pretty good summary. Video is worth watching.

  • Create a plan and manifest into it. Write down your goals and plan. Constantly review your plan.  Create a list of mistakes and lessons learned from them so you don’t make the same mistakes again. 
  • Save no to debt. Don’t use debt to purchase items that don’t appreciate in value. Create a plan to pay debt and makes this the first step on your plan. Don’t invest until debt is paid. Follows the concept of spending from gains only, not principal and especially not debt. 
  • Start saving. It’s easier to save when you are debt free. There are several suggested ratios. Need to determine what is best for you. Example (30% to savings, 20% to entertainment and 50% to bills)
  • Add to your retirement fund. (Insert link to difference)
  • Identify investment opportunities. Don’t rush, spend time researching and learning.
  • Keep an eye on growth and review investments.
  • Seek out good advice. Make sure they are qualified and have a good track record.
  • Spend time learning about wealth management.
  • Maintain all assets well. Manage, measure and keep track of progress towards plan.

Summary
Overall good principals. Video is worth listening to again. They also describe the lessons well.

  • Understanding how money works. Spend time research money and finance. Learn about taxes, interest, budgeting, retirement, etc. The poor usually don’t talk about money at home.
  • Difference between an asset and a liability. The poor spend money on liabilities. Anything that doesn’t generate money is a liability. The rich focus on acquiring more assets that generate revenue. Money spent on liability to should come from asset revenue, not principal.  Rentals, business ownership, stocks, etc. Assets need to pay for the liabilities.
  • Not entitled to anything. The world can take everything away. Need to remain focused on growth.
  • How to be sociable and connect with other people. There is value in connecting and being liked by other people.
  • Stop expecting immediate results and avoid magical thinking. Wealth and happiness don’t fall into this “instant gratification” category. It takes time. Need to think long term.
  • How to create daily habits that have long term advantages. Need to evaluate daily habits. This is part of evaluating how you are spending time.
  • Money is a tool and it’s a good thing. Most people reach a level of understanding and progress no further. Money is a knowledge base that takes time, research, practice, etc.
  • Increase income instead of lower expenses. Time spent on increasing income will be more efficient.
  • Knowledge is more valuable than money in the long run. This aligns with the idea that time spent learning trumps all else. 
  • Don’t work for money, have money work for you. There is no dollar amount per hour that will make you wealthy. A smaller amount gained by a revenue generating asset is better than $X per hour.
  • Problem solving is the quickest way to get rich. Seeing this in multiple videos. Focus on identifying problems and providing solutions. Also need to consider the market that would be interested in the solution.
  • Don’t waste time on things that don’t correlate to the real world. “We’re lending money we don’t have to kids who will never be able to pay it back for jobs that no longer exist.” Warning about being able to evaluate a reasonable return. It’s difficult to be realistic about how much a given degree will earn after college. 
  • How to use good debt instead of bad debt. Bad debt makes you poor. Good debt makes you rich. What is the purpose. Debt to buy liabilities is a problem. The rich only borrow money for the purpose of generating more money. Liabilities are only purchase from revenue generated from assets.
  • 80% of the results come from 20% of the effort. The time spent to obtain the remaining 20% result is not worth the investment of time.
  • Having money doesn’t make you a better person, it just solves some of the problems.
  • Raise expectations. Don’t put up with people/things that are wasting your time.