Get Money Smart Series

You may find that this is the most valuable lesson in the entire course. It’s simple. Deceptively simple, actually. But don’t let that deceive you.

Who knows? You may just look at the world differently at the end of this.

Are you ready for an exciting lesson?!

Don’t you just love these guys who make these books trying to sell something? They’re all hyped up on who knows what and make it seem like whatever junk they are promoting is the greatest thing on the face of the Earth. “I’m so excited! Thank you for coming here! I have this absolutely amazing, game changing, epic, mind blowing product that will radically change your life. I’m so excited about this product! My blood pressure is going through the roof and I’m going into cardiac arrest, but before I do, let me tell you about, uh, let me see what kind of crap I’m selling today. . .”

Pop Quiz! Compound interest, compound fracture, compound fraction – one of these can help you become filthy rich, and another can guarantee you’ll be a slave to debt and broke. Can you guess which is which?

Cash flow. You might be thinking, “Cash flow? My cash doesn’t flow. It trickles.” Whatever your cash does, it’s a good idea to check your cash flow from time to time because it has a big impact on how quickly your net worth goes up.

What do we know about cash flow? It’s good. Okay. My work is complete.

Not quite. What else do we know?

What do you think I should be putting away? What’s a good rule of thumb for how much money I should set aside each month? Is there a right amount I should be saving?

Are you ready for some high level stuff? I think you’re ready for it. I don’t share what I’m about ready to share with just anyone. I reserve it for special people and special occasions. I think you’re the person and this is the occasion.

First things first. What’s a rainy day emergency fund? It’s simply some money you’ve set aside just in case of an unexpected situation where money can help, such as a job layoff, needed medical treatment, or bail (it happens!).

I get this question a lot, and I can understand why. From an outsider’s perspective, someone not in the financial or investment industry, I can only imagine how ridiculous it must look.

As an investor, my guess is a good deal of your portfolio will be in stocks and bonds. These are the two primary types of investments for most investors.

Knowing the differences is critical in your journey to being truly money smart.

You may already have a good grasp of what a stock is, but stick with me for this short lesson, as there might be a nugget or two of new information you’ll learn.

In the last lesson, you learned about stocks, which is ownership in a company. What’s a bond then? Well, it’s not ownership. Instead, it’s an IOU.

Imagine you have a friend who needs to borrow $1,000 from you...

It’s kind of like asking, “What’s better, chocolate or vanilla ice cream?” Both are great for different reasons.

First, why stocks?

You will hear about different types of investments, things like indi- vidual stocks or bonds, mutual funds, exchange traded funds, REITs, and even limited partnerships. They are all a slightly different, so it makes sense to have a little understanding of what these are and how they work.

Let’s start at the beginning...

Your Get Money Smart education would not be complete if we didn’t talk briefly about this next type of investment...