Outright vs Pooled Ownership

Bad investing advice can come from many quarters, such as wealth expos or financial advisors. If anyone promises you any type of return over 12%, 99% of the time, they are probably playing you.

There are great financial advisors out there, but many people who sell investment products just want your money. However, it's not that hard to invest for yourself.

1. Never buy a financial or investing product from someone you just met.
2. Getting returns over 12% per year is ridiculously hard. If it sounds too good to be true, it is.
3. If you don't understand it, don't invest in it.
4. If one of your friends recommends an investment that's making them a lot of money, they are probably suckers too. If you see the "results not typical" on any marketing materials, move on.
5. There are no "secrets of the super-wealthy" that anyone will sell you for $500 or that you can take advantage of unless you have hundreds of thousands of dollars.

Banks don’t like to give away their money. That mindset is reflected in the interest rates of checking and savings accounts of 0,5% and 0.9% avg. annual interest respectively.

When you deposit your money in the bank, the bank turns around and invests that money at 7% a year or more. After they collect their profit, they give a tiny shaving of it to you.

• Your portfolio reflects your long-term wealth building investment strategy – not the short term. It includes everything you own. Your retirement accounts, your investment accounts, even your home are types of investments.
• Diversification is a way to describe owning multiple types of investment assets. Diversification is smart because you both protect yourself from failure and position yourself to take advantage of multiple robust methods for building wealth.

• Create a full inventory of expenses in front of you: Categorize them into fixed and variable; urgent and non-urgent; necessities and luxury; avoidable and unavoidable.
• You can create a hierarchy of needs and decide which one’s to address first. It’s all about prioritizing. 
• Accept that you have limited resources and unlimited wants. But you have to manage your resources. The sooner you accept this fact, the better you can control your impulses towards avoidable expenditures.

It’s a statement wherein you can jot down your assets and liabilities.

• Pull together your bank statements and other proofs of the liabilities
• List down your assets like the bank balance, all investments, home value, and value of other assets.
• Take a sum of all the assets to arrive at the total value of your assets.
• List down your liabilities the (car loan, home loan, credit card balances etc.)
• The sum of all the liabilities will show the value of the money you owe.
• When you subtract the value of liabilities from assets, you get your Net Worth.
  

Many times, partners do not see eye to eye, have different preferences or moods. Money is the No.1 issue that couples argue about, according to studies.

It is crucial to discuss financial goals and retirement plans with one's spouse, figuring out a strategy in advance, to avoid any confrontation later.

• Firstly, save up for the emergency fund, which is three to six months of expenses, and set it aside. After that, least 15% of your combined gross household income should go towards your retirement, once all debt is cleared.
• If only one of the partner works, you still can save up for retirement using a Spousal IRA, provided a joint tax return is filed. For details, you can consult an investing professional.
• It is also a good idea to clear up the old 401(k) accounts which are hanging around from the old jobs and put one's investments in order.

1. Add up the total valued of your cash and other assets. Items could be cash, stocks, bonds, DCs, 401(k), real estate, the money you're owed. Your goal is to determine how much these assets would be worth if you were to convert them into cash.
2. Then subtract all your outstanding liabilities, such as credit card balances, student loans, mortgage(s), medical debt, car loans, private loans, payments remaining on a home or car lease.

• Knowing your net worth provides you with an actual state of your finances.
• It can also tell you how close you are to achieving financial independence.
• Tracking over time helps you know if you're spending too much month after month.
• When opening a bank or brokerage account, your net worth will be considered. Knowing up front can help you see whether you're eligible for certain investments.

• A stock market is simply a place where buyers and sellers meet to sell shares.
• A share is a divided-up unit of the value of a company.
  
• Shares exist to boost profits of firms to turn a business into a financial success.
• Enter a stock market: in return for your cash, a business offers you a share in its future – so you essentially own a tiny slice of that company and become a 'shareholder'.
• This slice of the company you own can then be traded with anyone who wants to buy it.

• The price is initially set by the firm offering shares.
• Its price on any given day can be determined by poor financial results, the economic health and so-called 'sentiment', ie, if City buyers think a firm will struggle, its price can fall. 
• Shares are listed on an 'index'.

A consumer spends money and follows trends while an investor puts capital to work and takes advantage of trends.

Chronic consumers often go broke, and persistent investors often get rich.

• You feel the need to reward yourself after a hard day of work by buying new clothes/accessories or eating out.
• Lifestyle creep controls your expenses. When your income increases, you buy a new car or a more expensive house.
• You reserve your credit card for unexpected expenses instead of using an emergency fund.
• You rationalize using a credit card to buy things you might not purchase with a debit card.
• When something is on sale, you feel the urge to buy it, even if you wouldn't have otherwise bought it.
• You follow social trends.
• You don't think you have money to invest or the time for it.

Assets are anything of value that you own that can be converted into cash. Examples include:

• Investments
• Bank and brokerage accounts
• Retirement funds
• Real estate
• Personal property: vehicles, jewellery and collectables.
• Cash

Your liabilities represent your debts, such as loans, mortgages, credit card debt, medical bills and student loans.

Determine your target net worth - where you want to be in the near-term and long-term future.

The following formula is helpful:

Target Net Worth=[Your Age−25]∗[1/5∗Gross Annual Income]

A 50-year-old with a gross annual income of $75,000 might aim for a net worth of $375,000 ([50 - 25 = 25] x [$75,000 ÷ 5 = $15,000])
Your net worth can be much more or much less than the amount indicated by the guideline.