📚The simple Path to Wealth - book notes

Your road map to financial independence and a rich, free life

author:: JL Collins
tags:: politics/economy,money,wealth

Overview

If you reach for a star, you might not get one, but you won't end up with a handful of mud either

main points

• complex investments only serve the ones who create and sell them - rarely do they behoove the investor.
• Don't have debt
• invest in VTX (stocks and bonds )
• LIVE BELOW YOUR MEANS
  • Don't let the lifestyle creep in
• market always goes up and down, ultimately up

3 considerations

Wealth stages

• wealth preservation - not working / producing money
• wealth accumulation - working / producing money

risk tolerance

keep in mind your tolerance for risk when making investments

event horizon

long term(10+years) / short term

3 tools

glossary

inflation - when prices rise, making your dollar less valuable
deflation - when prices drop, making your dollar more valuable

• Stocks 70% - vtsax - tracks the whole STOCK market
  • best returns over time
  • inflation hedge
  • core wealth building tool
• Bonds 25% - vbtlx - tracks the whole BOND market
  • provide income
  • deflation hedge
• Cash 5% -
  • routine expenses
  • king during deflation - the more prices drop - the more cash can buy

Taxes

interesting reads

• never pay taxes again
  • Choose leisure over labor
    • Live well for less
    • Leverage Roth IRA Conversions
    • Harvest Capital Losses AND Capital Gains
    • gcc vs rmd
    • early retirement strategies and roth conversions
    • traditional ira vs roth ira
    • retire even earlier

RMDs (required minimum distribution)

• at age 70.5 folks must WITHDRAW a minimum and pay due taxes or the feds take 50%
• between retirement age and 70.5, one can make deductions to minimize taxes , if married/filling jointly, it is best to do a joint effort to minimize taxes.

HSAs (health savings accounts)

• Can be invested anywhere, including VTX.
• contributions are tax deductible
• must be insured with high deductible health insurance plan to have an HSA
• withdraw money to pay qualified medical expenses
• no taxes when paying medical expenses, if withdrawal is made for non medical expenses, a 20% tax is incurred
  • qualified medical expenses include dental and vision.
• in case of death, spouse inherits HSA with same benefits
  • other heirs, account is considered income and taxed accordingly
• any money in your HSA and any money it earns, is yours until you use it
• anyone with a high deductible insurance, should fund an HSA.

CHARITAble giving

The vanguard charitable endowment program

• open with as little as $25,000
• get tax deduction on year foundation is funded
• faced with RMDs , you can roll all or part of a tax advantaged account into a charitable foundation tax free
• Chose an investment so donation grows tax free until you chose to allocate it
• you decide which charities get your money, when and how much
• you can add more money whenever (charged 250 annually if account falls below 15,000)