11 Basic Financial Principles They Should Teach At School /THREAD/

1. Budgeting Keep track of your expenses every month Pay yourself first and then spend what is left after saving for emergencies and investing Make sure you know where your money is going instead of wondering where it went Assign a job to your money and let it work for you

2. Accounting Assets are bringing money to your account • Stocks • Real estate • Personal business Liabilities are taking money from your account • Expensive clothes • Brand new cars • Status items Focus on buying assets instead of liabilities

3. Taxes As Benjamin Franklin said taxes and death are inevitable Educate yourself on • Non-taxable investment accounts • Corporate structures for side projects • Tax deductions for your personal and business expenses Learn how to take advantage of the tax code like the 1%

4. The 4% Rule Calculate your FIRE number, i.e. how much you need in assets and cashflows to retire early and become financially free Multiply your desired annual expenses adjusted for inflation by 25 Then withdraw each year in retirement 4% to never run out of money

5. Diversification Never keep all your eggs in one basket Diversify your • Investments • Income streams • Skills and knowledge • Network and connections Always have a backup plan for a rainy day

6. The Rule of 72 This simple rule helps you calculate how many years it will take to double your investments on a given annual return You just divide 72 by the return number (e.g. 8 for 8% annual return) Use it to create a timeline for your investments

7. Compound interest Learn the power of compound interest and how it works for you and against you It works against you in credit card or loan interest It works for you in your investments Einstein called it the world's 8th wonder

During the first years, your investments may not seem to grow much But after that, once the wonder of compounding starts working they will skyrocket Warren Buffet acquired more than 99% of his net worth after his 50s

8. Index fund investing The best option for everyday investors with not much time or interest for investing is a low-cost index fund Index funds are simply tracking an index of companies, with S&P 500 being the most notable one Set it and forget it

9. Opportunity cost This principle represents the potential benefits you miss out when making a specific choice versus another one You need to weigh all the potential benefits and costs between two options before making a choice This applies to investing and in everyday life

10. Dollar-Cost Averaging (DCA) Stop trying to predict what's the best time to invest in the market or a specific company Instead, invest consistently every month in regular installments, also know as Dollar-Cost Averaging

11. Inflation Inflation is the rise in prices of consumer goods over time It eats away the purchasing power of your money every year Your weapons against it? • Stocks • Real estate • Cryptocurrencies Use your money to make more money for yourself and not lose its value

To summarize: 1. Budgeting 2. Accounting 3. Taxes 4. The 4% Rule 5. Diversification 6. The Rule of 72 7. Compound interest 8. Index fund investing 9. Opportunity cost 10. Dollar-Cost Averaging (DCA) 11. Inflation Learn these principles and be ahead of 95% of people /END/

If you liked this thread click below and retweet the first tweet, and follow me to stay updated

Check below my master thread with all my threads on • Finance • Investing • Stock market history

Follow us on Twitter

to be informed of the latest developments and updates!

You can easily use to @tivitikothread bot for create more readable thread!
Donate 💲

You can keep this app free of charge by supporting 😊

for server charges...