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My wife and I never fight about money. Why? Because of the system we use.

I call it the "Separate + Joint Method" and here's how it works:

All of our income flows into one joint account. All of our shared expenses come out of the same account. Any excess gets split equally into our separate accounts each quarter.

The key rule: Whatever one person withdraws from the joint account, the other can too. If I take $1,000 out to buy myself a nice guitar, my wife gets to withdraw $1,000 to spend as she sees fit as well.

This works regardless of who earns more and it provides financial independence to both parties. More importantly, if one partner steps back from paid work, they aren't financially punished for it.

I wrote more about it here: https://lnkd.in/ehBHncQW

Nick Maggiulli

NY Times Bestselling Author | COO at Ritholtz

Your career is an asset class.

If you work in tech, you shouldn't own a lot of tech stocks. If you're a real estate agent, you shouldn't invest in a bunch of rental properties. Why?

Because you are inadvertently doubling down on the same set of risk factors.

Most people think of their career and their portfolio as distinct buckets. Your career is your income and your portfolio is your wealth.

But they are deeply connected.

If you're an engineer at Google and tech sells off, you risk losing your job and the portion of your wealth linked to technology stocks. If you're a real estate agent and the housing market slows, you risk losing commissions and rental income.

I work at a wealth management firm whose revenue is directly tied to the stock market. Do you think my personal exposure to financial assets should be the same as someone working in fashion or retail? Should we both just buy the S&P 500 and call it a day?

I don't think so.

Your career is an asset class. Hedge it accordingly.

Lump sum investing beats dollar cost averaging 70%-80% of the time over the next year.

This was true across nearly every asset class. It was true in bear markets. It was true in bull markets. It was true whether you were near an all-time high or not.

Why is this the case? Because most assets tend to appreciate over time. Whether from inflation or real growth in value.

Bottom line: When it comes to investing, it usually pays NOT to wait.

You don't just have one emergency fund. You have two.

Your first emergency fund is the money you have set aside for a rainy day.

But your second emergency fund is your skill set, your network, and your ability to deal with hardship.

Everyone focuses on the first one, few focus on the second.

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Hot take: Instead of sending your kids to private school, invest the tuition and give it to them when they turn 30. The lump sum will benefit them more than the private school education ever could have.

I find it ironic that many of the people who advocate "retiring early" seem to work more than those with traditional jobs. 

Podcasts, blogs, consulting, speaking. Their plates are often fuller than many with a 9-5. I have nothing against this, but why call it early retirement then?

While you have retired from being a W2 employee, you haven't stopped working. You've just traded one type of work for another. That's not a problem, but call it what it is—career transition, becoming a freelancer, or running your own business.

I fully support this lifestyle, but it's not early retirement.

You can't budget your way to $10 million. You can't coupon your way to financial freedom.

There's a mathematical limit to how much you can cut your expenses (it approaches zero). Even the top 20% of earners have to spend something on their necessities (see chart).

But there's no limit to how much you can increase your income.

There's a reason why those with the highest incomes also have the highest savings rates—they have far more than they need.

Stop trying to reduce your budget by 10% and start trying to increase your income by 50%.

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The ideal level of wealth (in the U.S.) is $2M-$5M.

Most people will say that the ideal level of wealth is "enough to live life on your own terms." But that advice is too vague to be useful.

So I ran the numbers on what a comfortable lifestyle costs and how much wealth you'd need to support it.

Turns out there are a few ways to get there. And some are much easier than others.

Find out more:

ofdollarsanddata.com

The Ideal Level of Wealth

Most financial advice treats people like they're the same. The 25 year-old with $10k and the 55 year-old with $500k are both told to keep fees low, think long-term, and max out their retirement accounts.

While this advice isn't wrong, the impact is completely different. The 25 year-old may focus too much on their investments (instead of their career), while the 55 year-old may overlook how much risk they're taking.

The better approach is to provide advice that changes based on where you are in life. You could do this based on age, but I do it based on net worth. This is why I came up with the six levels of wealth in The Wealth Ladder:

•Level 1 (<$10k)
•Level 2 ($10k-$100k)
•Level 3 ($100k-$1M)
•Level 4 ($1M-$10M)
•Level 5 ($10M-$100M)
•Level 6 ($100M+)

Once you know your wealth level, you know where to focus. Instead of relying on generalized financial advice, find the strategy that's right for you, right now.

Find your strategy: https://amzn.to/47BuCzw

Owning a lot of different asset classes doesn't mean you're diversified.

When times are good, different asset classes can provide real diversification benefits. But when times are bad, there's no guarantee.

Your stocks fall.
Your crypto plummets.
You can't sell your real estate.
Your private investments are untouchable.

When the correlations go to 1, you realize how un-diversified you truly are.

This is why I've changed how I think about diversification. Instead of asking myself whether I own enough asset classes, I now ask:

Do I have enough cash?
Can I sell these quickly?
What will happen to these in a panic?

True diversification works on both the upside and the downside. Make sure you know which one you have...before it's too late.

Most wealthy people needed a little luck, not a lot, to succeed.

Their real skill wasn't having more good fortune, but not wasting any blessings life threw their way. After all, many people receive big career breaks, sizable inheritances, and windfalls from investments they barely understood. But what do they do next? 

Do they treat that newfound money as permission to spend more? Or do they see it as the foundation for something bigger? Do they take on more risk? Or do they protect what they've built?

The wealthy people who stay wealthy understand something that most others don't—you only need to get rich once. 

After that, the game changes from accumulation to preservation.

This is why lottery winners and professional athletes often go broke and why inheritance can disappear within a generation.

It's not that they didn't get lucky. They definitely did. But they didn't have the discipline to hold onto it.

Wealth can be built through luck, but it's kept through skill.

Return on Hassle > Return on Investment

Focus on maximizing sleep, not maximizing returns.

If you know, you know.

When was the last time you got called in the middle of the night about your index fund?

One of the biggest myths I hear in finance is that property investing gives ‘passive income’.

In reality, property/real estate is one of the least passive investments there is.

This graph from Nick Maggiulli illustrates it well.

Property can be a great investment - there are plenty of benefits that come with it.

But it’s not passive. 

You aren’t going to get a call in the middle of the night about your index fund.

You might get one about your rental property.

Make sure the extra return is worth the extra hassle.

I think I've found the mortgage-backed security (MBS) of our era. It's called conduit debt financing and it might be how the AI bubble eventually pops.

My latest on the obscure financial structure that could trigger the next crisis:

https://lnkd.in/epB_-n8Q

The worst investments I've ever owned all share one thing in common—I couldn't sell them.

My latest on the high price of illiquidity and how I learned this lesson the hard way: https://lnkd.in/eai8tggt

There are two types of risk in life: Fast Risk and Slow Risk.

Fast Risk is the stuff that makes headlines. It’s the things that we are warned about everyday:

"Don’t drive without a seatbelt."
"Don’t cheat on your spouse."
"Don’t use too much leverage."

The reason for this is simple—the consequences of Fast Risk are immediate and usually devastating. You get severely injured. You get divorced. You go broke. There’s a clear line between how your life was before and after the risk materialized.

But then there’s Slow Risk. 

Slow Risk is the accumulation of bad decisions that eventually leads to an unwanted outcome:

It’s developing heart disease after decades of improper eating. 
It’s getting divorced after neglecting your spouse for years. 
It’s sitting in cash while you wait to buy the dip.

With slow risk, there’s no single event that you can point to and say, “Here’s where I went wrong.” No. It’s the cumulative effect of your improper decision-making that leads you astray.

Everyone thinks about Fast Risk, but intelligent investors focus on Slow Risk too.

Should you buy stocks at all-time highs?

With the S&P 500 hitting its 36th all-time high last week, many investors are asking this question. To help answer it, I analyzed how all-time highs impact future returns in:

•U.S. stocks
•Developed stocks
•Emerging market stocks
•Bitcoin
•Gold

The results might surprise you:

https://lnkd.in/eKuVRqQq

This is the nicest book I’ve ever owned. 

It’s the Pathless Path by Paul Millerd. Incredible book and an even better design. Very cool that he sent it to me. Feels like art.

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