Let’s take a shot at this Napkin Finance stuff. Pretty much everything I know about finance from working in the investing world for 15 years and going to undergrad and graduate school can be simplified on a 6×6 Blue Napkin.
1. Work while in college to keep from racking up high college debt. Sure you’ll miss a few parties, but the head start in your finances will thank me later. Also don’t take 7 years to get a 4 year degree. I did it in 3.
2. Time Value of Money- If you don’t know what this is…learn it now. Plenty of info on the web and a write up coming soon here. FV=PV(1+r)^n
3. Start Investing Early (look at the exponent, “n” = number of years, from number 2 above. I started buying savings bonds at the age of 5. Stock investing at the age of 16 with money from my first job (also maxed out my IRA at that age too).
4. Don’t waste money of Crap (track your spending). Should be self explanatory. We all have “shit” laying around the home that goes unused. Stop blowing your hard earned money.
5. Payoff Debt ASAP!!! This includes mortgage debt. I worked 2 jobs out of college for about 2 years. The little extra income from the weekend job helped eliminate my debts and build up a little money for a down payment on my first place at the age of 22. So “cowboy the fuck up”. You sleep well at night when you have absolutely no debt.
6. Embrace Stock Investing. My investment style preference is dividend growth investing. Yes, you’ll sometimes lose money, but don’t freak the fuck out and you should be fine over time.
7. Buy less house than the mortgage company approves you for. Their job is to make as much in fees and interest from you. They could care less if you have enough disposable income to have fun after the mortgage is paid. My first place was a $50k condo, pretty close to work, family, and friends. I had a blast in that place. Condo fees, utilities, and mortgage payments amounted to about $500 monthly, cheaper than rent, lots of free disposable income to have fun. The mortgage company preapproved me for $250k.
8. Learn!!! I’m self taught on home repairs (electrical, plumbing, etc), car repairs, and the important finance stuff (money). Sweat equity is instant savings and it feels good to figure things out. The world wide web is full of free info.
9. KISS- Keep It Simple Stupid!!! Words to live by in life. I can do the most complicated derivatives trades out there. Guess what…it doesn’t really matter. Simple is better. Simplify your life. Consolidate the number of bank accounts, credit cards, and companies that you deal with.
10. Max Out your 401(k), IRA, and don’t just stop there. Open a brokerage account to invest as well- these accounts have no limits.
11. Keep Fees and Expenses Low- (Bank, Investing, Credit Card Fees, and living expenses). If I left my old retirement plan with my previous employer I would have been raped for $64,000 in fees over the next 10 years. Instead I rolled it to my IRA and paid $600 total. Ameritrade also gave me $600 in cash, so it nets out to $0 in fees.
12. Live Below Your Means- There’s no need to show off in this world and guess what, you’re fancy looking neighbors are probably broke. I look anything but like a millionaire. I drive a 13 year old Nissan, love wearing jeans with Chuck Taylors or cowboy boots and yes I have a belt buckle. I speak slow and still have a slight southern accent. Most people hear me and probably mistake me for being stupid or a retard:
13. Learn to Invest in Stocks or Just Use ETFs. Most mutual funds are overpriced. Investment advisors are overpriced and not worth the fees.
14. Avoid Lifestyle Inflation. Be happy with what you have, treat yourself from time to time, but don’t go balls out all the time. That’s what makes things special is the limited use. Avoiding lifestyle inflation also allows you to invest more, pay down debts, and get ahead. Famous words from the Buffster “live like no one else today, so you can live like no one else tomorrow”.
15. Nobody cares about your stuff like you will (or should)!!! There are plenty of people trying to separate you from your money. Don’t rely on someone else to care about your money for you.
16. Take care of loved ones. Should go without saying. I only have a small inner circle of friends these day. Take care of them and your family always comes first. I’m loyal to a fault to the people I love.
17. Remember you can’t take it with you. It being money. I still struggle with this, but I’m working on it. Also, refer back to number 16 above.
18. Calculate and track your net worth. You won’t know where you’re going, if you don’t know where you’re at. Financial independence is an amazing feeling. It’s freedom. Money is a disruptor.
What would you add or change on your napkin finance? Sound off in the comments section.Follow me on the social medias: