My Note
My highlights
104 highlights from Kindle. These are the lines I stopped at.
Personally, there is nothing I’d rather buy or own than F-You Money.
You’re young, smart, healthy and tough. By your thirties you’ll have F-You Money and you should have a blast getting there. Once you’ve got it, it will continue to expand, as will your personal options.…
To consider buying a house, if you are so inclined. But don’t be in a hurry. Houses are not investments, they are expensive indulgences. Buy one only when you can easily afford it…
To have children, if you plan to. You are still plenty young enough, financially secure and with financial independence you can arrange your affairs in such a…
To think about giving like a billionaire as we discussed…
To begin expanding your lifestyle. Just be sure to keep your spending level at…
This growth of your assets will, in turn, accelerate the growth of the spendable dollar amount 4% represents. As long as you are working, VTSAX can serve all your investing needs. The money you add along the way will smooth the ride. Once you decide you are done working, diversify into…
Note: You don’t have to implement these last three points literally. Rather, this is a way to think about your assets and income. Most likely, in executing this concept you will want to spend from your earned income…
If you keep working, invest 100% of your earnings. You are living on your investments now. This will dramatically…
Once you are financially independent, begin living on your investments. At the point you become financially independent, you can decide if you are still having fun and want…
As you can see, being financially independent is every bit as much about controlling your needs as it is…
That is, if you are living on $20,000 you have reached financial independence…
Once 4% of your assets can cover your expenses, consider yourself financially independent. Put another way, financial…
But never fall prey to thinking you (or anyone else) can anticipate or time these drops. Sometime in your early to mid-thirties (or 10-15 years after you start) two things will happen: Your career will be hitting its strongest…
If you get lucky with the market you’ll get there sooner. If not, it will take a bit longer. During this accumulation phase, celebrate market drops. While you are in the wealth accumulation phase, these are…
Do this for the next ten years or so and you’ll be well on your way to financial independence. Save more than 50% and you’ll get there sooner.…
Fund any 401(k)-type employer tax-advantaged plan you are offered. Fund your Roth IRA when your earnings and the income taxes on them are low. Fund your Traditional IRA once your…
Take those low-cost college living skills you’ve honed and use them to pursue any number of new adventures. Don’t get trapped by an expanding lifestyle or unwind it if you already are. Save and invest at least 50% of your income. Put this in…
Avoid debt. Nothing is worth paying interest to own. Avoid fiscally irresponsible people and certainly don’t marry one. Spend the next decade or so working your ass off building your career and your professional reputation. This is not meant to suggest you must be some sort of office drone. Think of your career in the most expansive of terms. The possibilities are endless.
My path for my kid: The first 10 years
You need to do your homework. In addition to scams, many charities simply aren’t very efficient in delivering your dollars to those in need.
Never give to phone solicitors.
Giving small donations to many charities might be satisfying to you, but it dilutes the impact and a greater percent of your gift is eaten up in the processing of it.
It is best to concentrate your giving. We have selected just two charities.
Because it is run through Vanguard, expenses are rock bottom.
You decide which charities receive your money, how much, and when. You can set this up to happen automatically.
If you have stocks, mutual funds or other assets that have appreciated in value you can move these directly into your charitable foundation.
You get the tax deduction in the year you fund your foundation. So I got to take the tax benefits when they mattered most to me.
You don’t have to be a billionaire. You can open your own foundation with as little as $25,000. Fancy building not included.
My recommendation Plan your financial future assuming Social Security will NOT be there for you. Live below your means, invest the surplus, avoid debt and accumulate F-You Money. Be independent, financially and otherwise. If/when Social Security comes through, enjoy.
Do you think Social Security will collapse and stop paying? If you believe this, clearly you’ll want to collect while the collecting is good. For what it’s worth, I happen to think you’re wrong and I’ll explain why further on.
But each month you delay, your monthly check gets bigger.
When do I need the money? If you genuinely need the money right now, nothing else matters.
described. I’ve read a bunch and my view is in the end it’s really pretty simple: Since the government actuarial tables are as good as they get, the payments are pretty much spot on with the odds.
Once you reach age 62, you can begin receiving Social Security. The catch is, the sooner you start, the smaller your checks. The longer you delay (up until age 70), the bigger the checks. Of course, the longer you delay the fewer the years you’ll be collecting.
True financial security—and enjoying the full potential of your wealth—can only be found in this flexibility. As the winds change, so will my withdrawals. I suggest the same for you.
Either way, once a year I’ll reassess. The ideal time is when we are adjusting our asset allocation to stay on track. For us, that’s on my wife’s birthday or whenever the market has had a 20%+ move, up or down.
4%. Maybe more. So, you’ve followed the simple path big three: You’ve avoided debt You’ve spent less than you’ve earned You’ve invested the surplus
Let’s finish this chapter with the recommendation that, whenever possible, you roll your 401(k)/403(b) (but not your TSP) accounts into your personal IRA.
Once your income tax rate rises, fully fund a deductible IRA rather than the Roth. Keep the Roth you started and just let it grow. Finish funding the 401(k)-type plan to the max. Consider funding a non-deductible IRA if your income is such that you cannot contribute to a deductible IRA or Roth IRA. Fund your taxable account with any money left.
Fund 401(k)-type plans to the full employer match, if any. Fully fund a Roth if your income is low enough that you are paying little or no income tax.
With all this in mind, here is my basic hierarchy for deploying investment money:
If you want a portfolio that’s as simple as possible and still effective, TRFs are for you. They have The Simple Path to Wealth stamp of approval.
Put all your eggs in one basket and forget about it.
Screw that! You’re young, aggressive and here to build wealth. You’re out to build your pot of F-You Money ASAP. You’re going to focus on the best performing asset class in history: Stocks.
To buy the index is to accept the market’s “average” return. People have trouble accepting the idea of themselves or anything in their life as average.
Ah, no. Index investing is for people who want the best possible results.
Subtract your age from 100 (or more aggressively 120). The result is the percentage of your portfolio that should be in stocks.
Most of us are, or should be, long-term investors.
If you don’t yet have yours, I suggest you start building it now. It is never too late to start. Be persistent. Life is uncertain. The job you have and love today can disappear tomorrow. Remember that nothing money can buy is more important than your fiscal freedom. In this modern world of ours, no tool is more important.
F-You Money is critical.
Simple is good. Simple is easier. Simple is more profitable.
To be strong enough to stay the course you need to know these bad things are coming—not only intellectually but on an emotional level as well. You need to know this deep in your gut. They will happen. They will hurt. But like blizzards in winter they should never be a surprise. And, unless you panic, they won’t matter.
This is why you have to toughen up, learn to ignore the noise and ride out the storm; adding still more money to your investments as you go.
The next 10, 20, 30, 40, 50 years will have just as many collapses, recessions and disasters as in the past. Like the good Professor says, it’s not possible to prevent them. Every time this happens your investments will take a hit. Every time it will be scary as hell. Every time all the smart guys will be screaming: Sell!! And every time only those few with enough nerve will stay the course and prosper.
Everybody makes money when the market is rising. But what determines whether it will make you wealthy or leave you bleeding on the side of the road is what you do during the times it is collapsing.
Unfortunately, too many people take this at face value and leap to the conclusion that Mr. Buffett has found a magical way to dance in and out of the market, avoiding the inevitable drops.
One of the beauties of being financially independent is that by definition, you have enough money such that the power of compounding is greater than the opportunity cost of what you spend. Once you have your F-You Money, all you need do is make sure you continue to reinvest to outpace inflation and keep your spending below the level your stash can replenish.
However, distressingly it appears that most people don’t understand that in choosing to lease or borrow money to buy their car they are basically saying, “Geez. I don’t want to pay twenty thousand dollars for this car. I want to pay much, much more.”
Stop thinking about what your money can buy. Start thinking about what your money can earn. And then think about what the money it earns can earn. Once you begin to do this, you’ll start to see that when you spend money, not only is that money gone forever, the money it might have earned is gone as well. And so on.
You don’t have to go far to meet someone who will tell you about all the things they can’t live without. You likely know your share of people like this. But if you want to be wealthy—both by controlling your needs and expanding your assets—it pays to reexamine and question those beliefs.
Money can buy many things, none of which is more important than your financial independence. Here’s the simple formula: Spend less than you earn—invest the surplus—avoid debt
Being independently wealthy is every bit as much about limiting needs as it is about how much money you have. It has less to do with how much you earn—high-income earners often go broke while low-income earners get there—than what you value.
I may not have owned a Mercedes, but I owned my freedom. Freedom to choose when to leave a job and freedom from worry when the choice wasn’t mine.
Those who live paycheck to paycheck are slaves. Those who carry debt are slaves with even stouter shackles. Don’t think for a moment that their masters aren’t aware of it.
I may not have known at first what it was called, but I knew what it was and why it was important. There are many things money can buy, but the most valuable of all is freedom. Freedom to do what you want and to work for whom you respect.
We are creating a generation of indentured servants. It’s hard to see the ethics or benefits in that.
I am a firm believer in personal responsibility and that debts freely taken on should be faithfully repaid. But the ethics of encouraging 17 and 18-year-olds—who likely have little financial savvy—to almost automatically accept this burden give me serious pause.
Youth should be spent exploring—building and expanding one’s horizons—not grinding away in chains.
Rather than the pursuit of learning and culture, it has become the pursuit of job training in an effort to secure employment that will justify the astounding cost and debt incurred.
But don’t let yourself be blinded by the idea that owning one is necessary, always financially sound and automatically justifies taking on this “good debt.”
Houses are an expensive indulgence, not an investment.
Remember, the more house you buy, the greater its cost. Not just in higher mortgage payments, but also in higher real estate taxes, insurance, utilities, maintenance and repairs, landscaping, remodeling, furnishing and opportunity costs on all the money tied up as you build equity.
If your goal is financial independence, it is also to hold as little debt as possible. This means you’ll seek the least house to meet your needs rather than the most house you can technically afford.
But debt is always a dangerous tool and the history of commerce is littered with failed companies ruined by the debt they took on.
Less than 3%, pay it off slowly and route the money to your investments instead. Between 3-5%, do whatever feels most comfortable: Either put the money to debt payment or investments. More than 5%, pay it off ASAP.
If you intend to achieve financial freedom, you are going to have to think differently. It starts by recognizing that debt should not be considered normal. It should be recognized as the vicious, pernicious destroyer of wealth-building potential it truly is. It has no place in your financial life.
Look around at those people again. Most will never achieve this, and their acceptance of debt is the single biggest reason why.
But let’s be clear. This book is about guiding you towards financial independence. It is about buying your financial freedom. It is about helping you become wealthy and putting you in control of your financial destiny.
What you’ll often see, if you scratch the surface just a bit, is an unquestioning acceptance of the single most dangerous obstacle to building wealth: Debt.
But first, please be sure to carefully read the important notes that follow.
F-You Money buys you the freedom, resources and time to explore it on your own terms. Retired or not. Enjoy your journey.
The older I get the more I hold each day precious. I’ve become steadily more relentless in purging from my life things, activities and people who no longer add value while seeking out and adding those that do.
One of my very few regrets is that I spent far too much time worrying about how things might work out. It’s a huge waste, but it is a bit hardwired into me. Don’t do it.
stock picking was a sucker’s game or that swinging for the fences isn’t needed to reach financial independence.
Finally embracing the indexing lessons Jack Bogle—the founder of The Vanguard Group and the inventor of index funds—perfected 40 years ago.
Avoiding debt. We’ve never even had a car payment.
Our unwavering 50% savings rate.
You’ll also see I’m not a fan of the “multiple income stream” school of investing. Simple is, in my book (pun intended), better. So we have no cattle, gold, annuities, royalties and the like.
“We have F-You Money,” I said. “We don’t care about fancy cars or a bigger house. If you kept working what could we possibly buy with the money that would have more value than you being home with our daughter?”
For me, the pursuit of financial independence has never been about retirement. I like working and I’ve enjoyed my career. It’s been about having options. It’s been about being able to say “no.” It’s been about having F-You Money and the freedom it provides.
When you can live on 4% of your investments per year, you are financially independent.
Nobody can predict when these drops will happen, even though the media is filled with those who claim they can. They are delusional, trying to sell you something or both. Ignore them.
This will be much, much harder than you think. People all around you will panic. The news media will be screaming Sell, Sell, Sell!
But realize the market and the value of your shares will sometimes drop dramatically. This is absolutely normal and to be expected. When it happens, ignore the drops and buy more shares.
The stock market is a powerful wealth-building tool and you should be investing in it.
The beauty of a high savings rate is twofold: You learn to live on less even as you have more to invest.
Try saving and investing 50% of your income. With no debt, this is perfectly doable.
The greater the percent of your income you save and invest, the sooner you’ll have F-You Money.
Life choices are not always about the money, but you should always be clear about the financial impact of the choices you make.
Money can buy many things, but nothing more valuable than your freedom.
You own the things you own and they in turn own you.
It’s your money and no one will care for it better than you.
Here’s an important truth: Complex investments exist only to profit those who create and sell them. Further, not only are they more costly to the investor, they are less effective.