Summary

Debt is slavery. F-you money is freedom. The path: avoid debt, save 50%, invest in low-cost index funds (VTSAX), and don't touch it. The market always goes up long-term — crashes happen, don't panic sell. Almost all actively managed funds underperform indexes while charging higher fees. "Simple is good. Simple is easier. Simple is more profitable." Use tax-advantaged accounts (401k, IRA, HSA). Withdraw at 4% in retirement.

Key Takeaways

Notes

Beginnings

• F you money = freedom
• Financial independence
• 3 principles
  1. Save 50%
  2. No debt
  3. Embrace indexes
• “It’s a big, beautiful world and money is a small part of it”
• (all came off as very self-centered)

1: Orientation

1: Debt: the unacceptable burden

• Debt makes you a slave
• Narrowed focus, high stress
• Business debt vs personal debt
• Spiraling college cost and debt sets you on the wrong foot

2: Why you need f-you money

• Most important use of money is freedom

3: Can everyone really retire a millionaire?

• It’s as much about limiting needs as how much you earn
• The lines between need and want are intentionally blurred by business suiting its needs
• Target: $25k/y income → $1M saved

4: How to think about money

• As a way to spend or earn?
• Opportunity cost
• Don’t be worried about day-to-day fluctuations
• Index fund stock = ownership in millions of people working hard to prosper

5: Investing of a raging bull / bear market

• You can’t time the market
• Fear + greed

2: Stocks

6: Stock market crashes

• Efficient market hypothesis vs adaptive markets hypothesis
• Don’t panic sell - they will happen and will hurt
• The markets always go up

7: The market always goes up

• Powerful upward bias of indexes since stocks can 1000x or go to 0

8: Why most lose in the market

• Buy high sell low human tendency
• 3700 publicly traded stocks, 4300 mutual funds
• Almost all perform below indexes
• Focus on beer > foam

9: The big ugly event

• Crash of 1929: down 90%, 26y recovery
• Inflation and deflation*

10: Keeping it simple: considerations and tools

• “Simple is good. Simple is easier. Simple is more profitable”
• Considerations:
  • Stage: accumulation or preservation?
  • Risk tolerance
  • Time horizon
• Stocks, bonds, cash

11: Index funds

• “For lazy people” is false
• Better than 82-99% of funds
• 0.5% vs 1.25% management fee
• Hedge against inflation

12: Bonds

• Hedge against deflation
• Interest rate + term
• Default risk (AAA - D)
• Interest rate risk (changing rates on secondary sale)
• Broad-based bond index funds typically fix all of ↑

13: Portfolio ideas

• Accumulation: all eggs into one large diversified basket (stock index)

14: Selecting your asset allocation

• Risk tolerance, flexibility, etc.
• Rebalancing cadence (annual)

15: International funds

• Why not? Added risk, added expense, already got it covered
• Int’l already covered by global public US businesses

16: TRFs: the simplest path to rule them all

• Target retirement funds
• Mix of ↑ (US + Int’l stocks + bonds)

17: What if you can’t buy VTSAX?

• $10k minimum for 0.05% fee
• Can also do ETF (no min) for 0.5% fee

18: What is it about Vanguard anyway?

• Vanguard: client-owned and operated at-cost
• Private vs publicly owned
• Not investing in Vanguard itself, rather the mutual funds it operates

19: The 401(k), Roth etc. buckets

• US taxes dividends, interest, capital gains
• Tax-advantaged buckets to encourage savings
• Bonds should be in tax-advantaged buckets, stocks in ordinary bucket
• Employee-based tax advantaged buckets (capped)
  • Max out employee matching
• IRA: separate from employer
• Suggested plan:
  1. Fully fund 401(k)
  2. Fully fund Roth
  3. Fully fund a deductible IRA (once income rises)
  4. Keep the Roth you started and just let it grow
  5. Finish funding 401(k) to the max
  6. Consider funding a non-deductible IRA
  7. Fund your taxable account with any money left

20: RMDs

• Required minimum distributions
• Roth based on when not actively working
• Start pulling before RMDs

21: HSAs

• Tax-deductible for health expenses
• HSAs roll over, FSAs don’t
• No penalties after 65yo
• Can basically treat like a Roth IRA

23: Investment advisors

• “Expensive at best and will rob you at worst”
• 1-2% vs 0.05%

3: Index funds

24: Jack Bogle, bashing of index funds

• Buffet: 10% bonds, 90% vanguard index
• Principal agent

25: Why you can’t pick winners

• Can’t beat the experts
• Have some humility

26: Why not dollar cost averaging

• Split over 12mo
• Only makes sense if market is going down

27: Stock market gurus

• Keep predicting a dramatic change until it works, then issue a press release
• Capitalize on the limelight before you get it wrong again

28: Con artists

• The best cons are the least suspecting
• 99% truth, 1% harmful lie
• Eg. send 500

4: When you get there

29: Withdrawal rates

• 4% works 96% of studied years
• 3-7% based on risk tolerance
• 96% → 84% → 65% with 0,1,2% fees

30: How to pull your 4%

• Be flexible

31: Social security

• Surplus-generating thru 2011
• 2021-2033: deficit
• 2033: 2.7T trust fund gone
• Can start collecting between 62-70
  • Based on 84-yo life expectancy
• Anyone over 55 is good
• Plan assuming no SS

32: How to give like a billionaire

• If >$12k in standard deductions, better to itemize (eg. charity)
• Vanguard admin has rock bottom prices

Afterword

33-35:

• Save 50%
• Get yourself flexibility
• Live on your own terms