dad's rules for money - rule #1

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Page 1: Dad's Rules for Money - Rule #1
Page 2: Dad's Rules for Money - Rule #1
Page 3: Dad's Rules for Money - Rule #1
Page 4: Dad's Rules for Money - Rule #1
Page 5: Dad's Rules for Money - Rule #1
Page 6: Dad's Rules for Money - Rule #1

Future

Page 7: Dad's Rules for Money - Rule #1

My New Ride!

Page 8: Dad's Rules for Money - Rule #1

Future

Page 9: Dad's Rules for Money - Rule #1
Page 10: Dad's Rules for Money - Rule #1

Make saving a priority.

Page 11: Dad's Rules for Money - Rule #1

Paying yourself is your #1 expense, even higher

than rent.

Page 12: Dad's Rules for Money - Rule #1

Force yourself. Don’t wait for it to get easy….

IT WON’T!

Page 13: Dad's Rules for Money - Rule #1

Automatic…Automatic…Automatic! Your success is greatly improved when paying yourself is automatic.

Page 14: Dad's Rules for Money - Rule #1

Short Term Savings

–Emergency fund, vacation savings, etc

–Less than 1 year from now

–Savings accounts

Page 15: Dad's Rules for Money - Rule #1

Mid Term Savings

–House, Cars or other large purchases

–Between 1 to 10 years from now

–Brokerage account or savings accounts

Page 16: Dad's Rules for Money - Rule #1

Long Term Savings

–Retirement, 401K, etc

–10 years or more from now

–401K, IRA, Brokerage accounts

Page 17: Dad's Rules for Money - Rule #1

Start now, don’t wait. Now!!! And Forever!!!

Page 18: Dad's Rules for Money - Rule #1

Raschel turns 18 and follows rule #1 for the next 10 years. When

she is 28, she says

“The old man is crazy! I am tired of saving. I want to have

fun and buy some new clothes!”

Page 19: Dad's Rules for Money - Rule #1

Presley turns 18 and says

“I am just starting out. I am poor and I cannot afford to save yet. Let me work some things out and then start saving later.”

Then when she is 28, she realizes that she better start saving. She starts saving from every paycheck for the next 37 years.

Page 20: Dad's Rules for Money - Rule #1

Who did better?Presley saved for the 37 years non-stop after skipping the first 10 years.

So Raschel saved for 10 years, then stopped and never saved another dime.

“I did” “No, I did. Obviously!”

Page 21: Dad's Rules for Money - Rule #1

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

Age 1

9

21

23

25

27

29

31

33

35

37

39

41

43

45

47

49

51

53

55

57

59

61

63

65

Raschel Presley

“What?”

“Yippee”

Raschel Did

Page 22: Dad's Rules for Money - Rule #1

Presley saved almost four times more than Raschel, but Raschel ended up with twice as much money!

How is that possible?

Presley’s

Raschel’s

Page 23: Dad's Rules for Money - Rule #1

That’s the magic of Compounding!

Page 24: Dad's Rules for Money - Rule #1

Compounding is when you put in money

Page 25: Dad's Rules for Money - Rule #1

And your money earns money

Page 26: Dad's Rules for Money - Rule #1

And your moneys money earns money

Page 27: Dad's Rules for Money - Rule #1

And your money’s money’s money earn money

Page 28: Dad's Rules for Money - Rule #1

Lets save that one for college. Let me simplify…

The math formula for compound interest:

“Ugh. That looks painful.”

Page 29: Dad's Rules for Money - Rule #1

Dad’s Simplified Compounding Formula:

FV = PV x rt

Page 30: Dad's Rules for Money - Rule #1

Future Value, the value of what it will be

tomorrow

FV = PV x rt

Page 31: Dad's Rules for Money - Rule #1

Present Value, the value of what it is today

(what you save)

FV = PV x rt

Page 32: Dad's Rules for Money - Rule #1

The rate of return

FV = PV x rt

Page 33: Dad's Rules for Money - Rule #1

FV = PV x rt

The t is the most important part of compounding. It stands for time. And it is not a multiplier like the others, it is a power!

That makes the curve exponential. The more time that passes, the more it accelerates!

Page 34: Dad's Rules for Money - Rule #1

Exponential curveAs more time passes, the

curve gets steeper and steeper

Linear curveAs more time passes, it just increases at the same rate

Page 35: Dad's Rules for Money - Rule #1

Most of your friends will not understand compounding. Most will not understand the

importance of time. And most will not save a dime before they hit 35 or 40.

Started at age 38 Age 41 Age 46 Age 35Age 55! Oops!

Page 36: Dad's Rules for Money - Rule #1

They think the curve is linear, so it doesn’t matter if they have some fun while they are young . They believe

they can catch up later.

The curve is going up!” “Yep!” “It sure is!”

“I had a great time for the

last 15 years!”

Good Times for the last 35 years!”

Page 37: Dad's Rules for Money - Rule #1

Most will also put money in a savings account, but never invest anything. This lowers the r and loses

most of the compounding power.

“I like saving accounts”

“Yep, me too!” “I don’t trust the stock market!”

“Yep, me either!”

“I don’t know nothing about Wall Street, except don’t trust it.”

Page 38: Dad's Rules for Money - Rule #1

"My wealth has come from a combination of living in America, some lucky genes, and

compound interest."

– Warren Buffett

Worth $63.3 Billion (yep, thats B for Billion)

99% of Buffett's wealth was earned after his 50th birthday.

In 2013, Buffett made on average $37 million per day!

Page 39: Dad's Rules for Money - Rule #1

Remember Time!

Your life will have ups and downs. You can recover the money you save (the PV). You can also try to get better

returns (the r).

The one thing you cannot control. The one thing you can never get back, is time.

Don’t wait. Start early.

Page 40: Dad's Rules for Money - Rule #1

Saving does not get easier. Its always hard. Force yourself. Make it your top priority.

To Pay yourself first!Remember

Page 41: Dad's Rules for Money - Rule #1

Its going to rain. Bad stuff happens. It happens to everyone.

You don’t know when, or what it will be. So you must prepare to keep

it from doing too much damage.

Remember

“I got run over by agrizzly bear.”

Page 42: Dad's Rules for Money - Rule #1

What is Dad’s rule #1?

Page 43: Dad's Rules for Money - Rule #1

What are the two things that saving will

allow you to do?

Page 44: Dad's Rules for Money - Rule #1

What is compounding?

What is the most important piece of compounding?

Page 45: Dad's Rules for Money - Rule #1

Save early, save often, and let the laws of math work for you. You will make good things happen,

and prevent bad things from hurting you.

You will be financially happy forever and ever!

“I’m in the money!”