• When it comes to weight loss, the keys are to eat less and exercise more. But instead of focusing on these 2 fundamental things, we discuss trans fat, supplements,…
  • It’s the same with personal finance. There are only 3 key points:
    • Cut costs
    • Earn more
    • Optimize your existing spending
  • Spend consciously:
    • Define your rich life standard.
      • What being rich means to you since it’s different for everyone because we value things differently.
      • What is important and what not.
    • Spend extravagantly on these you value, ruthlessly cut down the cost for everything else. For example:
      • Rather spending money on expensive car and big houses, spend them on experiences with friends and people I love.
      • Can also spend money on different hobbies such as making movies, opening restaurants, universities…
    • 4 major spending buckets:
      • Fixed costs (50-60%): rent, utilities, cell phones, medical insurance, car payment, public transportation, groceries, clothes, internet/cable
      • Investment (10%): 401k, Roth IRA
      • Savings (5-10%): house down payment, vacations, gifts, emergency
      • Guilt-free spending money (20 - 35%): dining out, drinking, movies, clothes, shoes
    • Credit cards are worth having as long as you manage them well.
      • Completely pay off your bill at the end of the money - own nothing, no interests - like free short-term loan but better because of perks and rewards.
      • Large purchases are almost made by credits. If you have a good credit score, the interest rates is low, you can save a lot of money.
      • Increase the credit line every 6-12 months.
  • Negotiate a raise:
    • Getting a raise is not about you - nobody cares if your expenses are higher. It’s about demonstrating your value.
    • 3-6 months before your review: become top performer, exceed every expectations
    • 1-2 months before: prepare evidences
    • 1-2 weeks before: practice the conversations
    • It’s important that you regularly communicate your process - update every week or two
  • Saving is not enough. Make money works for you.
    • Open a high-interest saving bank account and set up automatic transaction.
    • Invest early.
      • Think about the big picture.
      • Compound interests are huge in the long run.
      • “Compounding is mankind’s greatest invention because it allows for the reliable, systematic accumulation of wealth.” - Albert Einstein
    • Investment isn’t about being sexy, aka picking stocks. It’s about making money.
    • Everyday you don’t invest, you actually lose money due to inflation. You will not realize this until you are old. That said, think long-term, start invest early.
      • Take full advantage of 401k by contributing enough to get 100% of the match - this is free money.
      • Contribute as much as possible to Roth IRA (check current limits).
      • If there’s money left over, keep contributing to 401k (check current limits).
      • Then, Health saving account (HSA).
      • Then, Non-retirement investment account.
  • 401k vs Roth IRA.
    • 401k
      • Pros:
        • Money is not taxed until you withdraw years later. Have more for compound grow.
        • Employer match - free money
        • Make 60k, contribute 3k, match 5% -> 6k, start at age 25, earn 8%, earn 1.6 mil when you retire.
        • Automatic - don’t have to care about it.
      • Cons:
        • Cause it’s a retirement account. Withdrawing before results in 10% penalty.
        • Have to pay taxes afterward!
        • Burden when switching job.
    • Roth IRA - pay taxes on the amounts you contribute.
    • Conclusion:
      • Both of them are for long-term investment>
      • It’s kind of lock-in because it’s your retirement money but
        • You can withdraw your money you contribute penalty free
        • Access your money in certain cases - hardship distribution.
  • Other investing advices:
    • Rich people tend to become more conservative when it comes to investing because 2-3% of millions is a lot already!
    • Stocks has highest risk, brings the best return - 11.5% on average.
    • Bond has lower risk, 5.2%.
    • Cash/saving account is the safest, 2-4%.
    • The rule of thumb is that: when you’re young, invest aggressively on stocks and bonds.

References: