| I've figured out the following concepts. This is what worked for me: - learn accounting especially cash flow accounting. Not at Deloitte partner level, the basics aren't hard, high school level understanding is enough. Doesn't matter how "rich" you are are on paper; bad cash flow makes you insolvent and then the banks starts grabbing assets. - Net Present Value and how future cash streams are discounted. Very theoretical. Very important to understand - compound interest. This is of dubious utility for investments (who can guarantee a return? Who knows tomorrow's interest rate? And the inflation rate) but fundamentally important to understand how nasty high interest rate loans are - learn about the market portfolio and the basics of risk. The market port. is built on dubious assumptions (a risk free non zero return asset, market efficiency, etc) but really drives home the importance of diversification and having a safe asset as a fulcrum - Save at least 10% of your income (when you're very young). Better 30-40%. Make sure its not all cash. But make sure you have >4 months cash on hand, or a roof repair which ever is greater. My goal is to avoid insolvency while putting as much aside as I can. I invest in rental properties primarily because that's what I like to own (we have two), but I have a 401k to match my employer contribution (obviously). |