cheat_sheets

cheat_sheets

Mini-Course Cheat Sheets

Quick Reference: Key Definitions

Rich: Having enough money to buy what you want (visible consumption).

Wealthy: Money you did not spend, providing independence and autonomy (hidden savings).

Compounding: Earning returns on your initial investment plus accumulated interest from previous periods.

Dollar-Cost Averaging (DCA): Investing a fixed amount at regular intervals, regardless of market conditions.

Index Fund: A single fund that owns hundreds or thousands of stocks, providing broad market exposure.

Time Horizon: The amount of time between now and your financial goal.

The Wealth-Building Formula

  1. Live Below Your Means: Spend less than you earn.
  2. Save Consistently: Automate regular savings/investments.
  3. Invest in Index Funds: Broad market exposure with low fees.
  4. Stay the Course: Don’t try to time the market.
  5. Build a Cash Buffer: 6-12 months of expenses for emergencies.
  6. Keep Learning: Adapt as circumstances change.

The Happiness Equation

Happiness = Reality - Expectations

  • Lower expectations to increase happiness
  • Avoid comparison with others
  • Focus on what you have, not what you lack
  • Remember: nobody cares about your stuff as much as you do

Emergency Fund Guidelines

Minimum: 3 months of expenses Recommended: 6-12 months of expenses Optimal: An amount that feels like ‘too much’

Where to Keep It: High-yield savings account (easily accessible, not invested)

Investment Principles

  1. Time in Market > Timing the Market
  2. Consistency > Perfection
  3. Diversification > Stock Picking
  4. Low Fees > High Fees
  5. Patience > Panic

Risk Management Framework

Prediction: Impossible and unreliable Preparedness: Essential and controllable

Key Risks to Prepare For: - Job loss - Medical emergencies - Economic downturns - Unexpected major expenses

Growth Mindset Mantras

  • “This setback is data, not destiny”
  • “Discomfort often precedes breakthrough”
  • “What can I learn from this failure?”
  • “Embrace the weird opportunities”
  • “Stay humble, stay hungry”

Time Horizon Considerations

Young (20s-30s): - Higher risk tolerance - Focus on growth - Build emergency fund first - Consider ‘weird’ career opportunities

Middle-aged (40s-50s): - Balance growth and stability - Increase emergency fund - Plan for major expenses (children’s education, etc.)

Pre-retirement (55+): - Shift towards stability - Preserve wealth - Plan withdrawal strategy

Red Flags to Watch For

  • Trying to time the market
  • Investing money you can’t afford to lose
  • Making decisions based on emotions
  • Comparing yourself to others constantly
  • Becoming complacent after success
  • Ignoring changing circumstances

Quick Decision Framework

Before making any financial decision, ask:

  1. Does this align with my values and goals?
  2. Am I making this decision from fear or greed?
  3. What would I do if money weren’t a factor?
  4. How will I feel about this in 10 years?
  5. Am I trying to impress others or genuinely improve my life?