Effective
MONEY
Management
What It Is & Why It Matters
The individual(s) reported that no relevant financial relationship(s) exist.
This presentation is for educational purposes only and should
not be taken as financial or investment advice.
Effective money management
Psychology / How
We Think
Dealing With
Uncertainty
Financial Decision
Making Process
Financial
Understanding &
Analysis
Budgeting
Saving
Investing
Debt
Repayment
Giving
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Mind over matter
Effective money management
is not about money.
It’s about psychology.
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Mind over matter
Principles -> Values -> Actions
This presentation is for educational purposes only and should not be taken as financial or investment advice.
How we think
3 keys
Objectivity.
Honesty.
Intellectual rigor.
This presentation is for educational purposes only and should not be taken as financial or investment advice.
How we think
You must
have a
philosophy
about money
management.
Decision
Making
Process
Budgeting
Saving
Giving
Debt
Investing
Speculating
This presentation is for educational purposes only and should not be taken as financial or investment advice.
How we think
Your philosophy has to be your own.
It cannot be based on
what others tell you.
You must intellectually understand
and believe it (or don’t do it.
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Ambiguity & Uncertainty
“We favor the visible, the embedded, the
personal, the narrated, and the tangible;
we scorn the abstract.”
“When things go our way we reject the
lack of certainty.”
― Nassim Nicholas Taleb, Fooled by Randomness
This presentation is for educational purposes only and should not be taken as financial or investment advice.
How we think
We don’t know what we don’t know.
We’re blind to our blindness.
We must increase our awareness of what
we know and of what we don’t know.
This presentation is for educational purposes only and should not be taken as financial or investment advice.
How we think: Thinking beyond tomorrow
How will my decisions today effect
me 10, 20, or 30 years from now?
Everything has an opportunity
cost, something we give up.
This presentation is for educational purposes only and should not be taken as financial or investment advice.
How we think: Thinking in context
Understanding the context of
financial decisions.
Having a conscious
decision making process.
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Opportunity Cost
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Opportunity Cost
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Opportunity Cost
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Budgeting
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Budgeting
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Saving & Budgeting
+ After Tax Income
Live on (much) less
than you make.
Discretionary
Income
Know where you are.
- Basic Living Expenses
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Saving & Budgeting
+ After Tax Income
SPECULATING
WASTING
INVESTING
SAVING
GIVING
Discretionary
Income
- Basic Living Expenses
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Paying off DEBT VS. SAVINGS
DEBT IS NOTHING MORE THAN
USING FUTURE EARNINGS TODAY.
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Paying off DEBT & SAVINGS
DEBT
SAVINGS
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Paying off DEBT & SAVINGS
($75,000)
($50,000)
$25,000
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Understanding Interest Rates
12% vs. 6%
Average vs. True ROR
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Understanding Interest Rates
Symmetry vs. Asymmetry
• Over five years, which average annual ROR would you pick?
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Time value of money
PV, FV, I/Y, N
Compounding interest
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Debt Repayment
How it works.
Snow ball?
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Investing
Analyzing opportunities.
Stocks, real estate, businesses,
commodities, cash.
This presentation is for educational purposes only and should not be taken as financial or investment advice.
The
Investing
hubris of predictions…
"The horse is here to stay but the automobile is only a novelty—a fad."
– President of the Michigan Savings Bank advising Henry Ford's lawyer not to invest in the Ford Motor Co., 1903
"If excessive smoking actually plays a role in the production of lung
cancer, it seems to be a minor one."
W.C. Heuper, National Cancer Institute, 1954
"Television won't last because people will soon get tired of staring at a
plywood box every night."
Darryl Zanuck, movie producer, 20th Century Fox, 1946
"There is not the slightest indication that nuclear energy will ever be obtainable. It
would mean that the atom would have to be shattered at will."
Albert Einstein
"Stocks have reached what looks like a permanently high plateau."
Irving Fisher, 1929
This presentation is for educational purposes only and should not be taken as financial or investment advice.
Market Chart: What is going to happen next?
Use your predictive powers…
15.07
4.59
15.87
15.53
8.51
6.96
This presentation is for educational purposes only and should not be taken as financial or investment advice.
The Importance of Study
Do not do what you do not understand.
But make the effort to understand it.
This presentation is for educational purposes only and should not be taken as financial or investment advice.