• There
is no free lunch (Milton Friedman).
•
There’s no free income either.
• The
essentials of life are cheap. Only
the luxuries are expensive.
• A
bad product is always a bad deal.
Don’t buy a car or appliance with
a poor service record. Don’t buy
a house with a cracked foundation.
•
A good product can be a bad deal
if the price is wrong. How do you
know a good price? Shop around and
be willing to walk away from any
“deal.”
•
The purpose of insurance is to protect
against financial disaster. Any
loss that is non-financial cannot
be remedied by insurance.
• Any
loss that is not a disaster does
not require insurance.
• Financial
products are simply agreements written
on paper. Although written in English,
they are written by lawyers and
designed so you won’t read them.
Read them anyway, and read them
again, and again, until you understand
them.
• The
price of borrowing money is interest
— and worry. Keep all borrowing
below the worry point, and don’t
borrow to buy things that depreciate;
you will lose on both ends.
•
Don’t rely on appreciation of the
asset. If the price is too high,
wait. It’s too high for everyone
else as well, and they will realize
it in due time. The public tends
to extrapolate trends long after
the financial justification is gone.
Read our essay Wake
Up America—Houses Don't Make You
Money.
• Any
agreement has two parties; the other
person will be working for himself.
Figure out whether he is working
for or against you. Always check
one level deeper and follow up.
• The
assumptions that you make consciously
won’t hurt you. The assumptions
you take for granted — what “everybody
knows” — will kill you. Always check
the assumption behind the assumption
you make.
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• If it’s
complicated, it is probably a bad deal.
• If you
don’t understand it, it is a bad deal.
Don’t buy any product or service from
someone who can’t or won’t explain it
to you in terms you understand.
• Don’t
confuse income and wealth. Income can
end with a dismissal notice or a change
in interest rates.
• Don’t
confuse wealth with the current price
of an asset. People get carried away with
prices — up and down.
• Don’t
count on Social Security. The benefits
you receive will be a small fraction of
what your grandparents now receive.
• People
think of inflation as prices going up.
It’s not. It’s the value of money going
down.
• There
are no guarantees, there are only guarantors.
The phrase, “It’s guaranteed,” requires
the response, “By whom?”
• Only the
Ten Commandments were written in stone.
All other laws are at the whim of politicians
who will change them in response to current
pressures.
• When you
change the rules a little, you change
the game a lot.
•
Convenience is usually expensive. Ignorance
is deadly.
• “Collectibles”
are faddish. They come and go. When everyone
knows it’s a “collectible,” the game is
over.
• You can’t
spend yourself rich. You’ve spent a lot
of time and effort to make a buck pretax.
The money you don’t spend is worth more
than the money you earn — it’s after tax.
• Fund your
IRA every year — early if possible. Invest
in an equity or total-return mutual fund.
Equity returns compounded over long periods
can be truly amazing.
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