Increasing Financial IQ
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Billionaries are made during economic turmoil. Financially educated people see this as opportunities as they know economy has its own life cycle.
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Master the rule of 72. 6% when divided by 72 will tell how long it will take to double.
72 / 6 = 12
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72 hour rule. Wait to buy anything for 72 hours. In the mean time, look for options and study/research of that thing.
- Minimum is to have a 48-hour rule. Anything i see and think, “i want that,” i wait at least 2 days. If im still thinking about it and want it then i wait another 24 hrs. If i STILL want it, then i get it. Around 85% of the shit i think i want doesn’t past this test.
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Study and Analyze financial success and failures of others and learn from it
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Zero Based Budgeting – Budget all the money.
Investing mistakes rich don’t make
Being emotional about money - Deal-flow relates to number of investments and opportunities you have access to. More deals you make, more your decision making mechanism become and less emotional you be about money. Do the Due Diligence, know the numbers under the hood. Rich do it, newbies dont.
Trying to time the market - Quality investments go linearly through time in decades instead of months
Short term bets, trades and short term thinking - Poor people enter casino to earn money. Rich are there for entertainment and they know they are not going to walk out with money, for them casino is like a theme park.
Putting all your eggs into one basket - Understand Risk. 90% should be split on your expertise, rest is play money.
Spreading yourself too thin - Dont diversify too much.
Investing in something just because X invested in it - When cloning someone, the HNI might have entered at very low price which you might not know like VCs.
Investing in things they don’t understand - Ultra wealthy stick to the beaten path, they know their path might be slow but it will get them there.
Failing to rebalance a personal portfolio - Rebalance your portfolio according to your strategy or review it yearly, is it according to your strategy.
Panic selling - When market crashes, revisit your companies to check for fundamentals to see if anything has changed. If nothing has changed and its profitable, Average.
Constantly checking your investments - If you are checking portfolio overnight then you are over-invested on risky stocks.
Thinking “this time is different” - Sometimes taking loss is better.
Money takes over your life - Do not take money take your health away or keep you away from family. Try searching for balance.
Ways to Create GENERATIONAL WEALTH
- Buy Land
- Buy Cash-flowing Property
- Rental or Shopping Building
- Build an Evergreen Business
- Buy S&P 500
- Buy. Borrow. Die.
- Buy only what appreciates over time
- If you need money, never sell an asset, you borrow against it.
- Everybody dies, look for a way to transfer generational wealth without paying much in tax.
- Buy & Hold Gold, Silver and Gemstones
- Never stop earning & Minimize taxes
- You perpetually compound wealth and knowledge
- Marry well
- Mentor your kids to takeover the business or build bigger than you did
- If your kids, don’t start off better than you did, you failed somewhere as a parent, whether intentionally or unintentionally.
- Set up a trust
- Allow children to only withdraw no more than 5% per year out of the trust
- Write a Will
Other notes from Alux Channel - 162-rules-of-life