The IRS breaks income into three types - earned, portfolio and passive. However, that is too simplistic for our purposes. If broken down not based on IRS qualifications, but by how the income is derived from the perspective of your activity to generate it, we have 7 types of income. Earned Income | You are a Worker … [Read more...] about Eight Income Streams of Wealth Generation
Archives for January 2024
Basic Math: Trim Mean Average
A trimmed mean is a system of averaging numbers where a certain percentage of the smallest and largest values are excluded prior to calculating the average. In other words, averaging a set of numbers but excluding the “outliers”. Trimmed means are a way to smooth out data by minimizing the impact of outlier data points. Trimmed means are sometimes also referred to as truncated … [Read more...] about Basic Math: Trim Mean Average
Financial Planning Continuous Improvement
In my opinion, personal finance isn’t something that you do for a few weeks, months or years until you’re financially well off – and then stop. To be truly successful at building wealth, it needs to become a lifestyle. Something you just do. Like breathing. … [Read more...] about Financial Planning Continuous Improvement
Eleven Elementary Rules of Personal Finance
I like principles. I like rules. I don't always follow them, mind you! And I certainly know when to purposely break them, in order to get where I need to be, or do what I need to do. However, I like getting knowledge that has been 'tested' out by people who came before me. Knowledge transferred saves me having to learn lessons the hard way. … [Read more...] about Eleven Elementary Rules of Personal Finance
Basic Math: Geometric Mean Average
The geometric mean is the average of a set of numbers by using the product of their values, as opposed to using the sum, as in the arithmetic mean. The value of this method of calculating average can be seen commonly when calculating the performance of an investment or portfolio. … [Read more...] about Basic Math: Geometric Mean Average
Seven Stages of Wealth Building
One of the biggest problems I had when I was first starting my personal finance journey was figuring out what were 'reasonable' targets. I wanted a more definitive set of targets to strive for that also had a basis in real changes to one’s quality of life, stage of living, wealth position, etc. I wanted these targets to be... … [Read more...] about Seven Stages of Wealth Building
Net Worth Components
Breaking out your net worth into short-term vs. long-term components You can break out assets and liabilities into short term/liquid and long term/non-liquid. This allows you to differentiate between assets that could be accessed quickly and without penalty (market or regulation) and those longer-term assets where we would pay a price penalty to convert them to cash … [Read more...] about Net Worth Components
Basic Math: Arithmetic Mean Average
This calculation, outside of simple addition and subtraction, is likely to be the most used math function in all of your personal finance activities. Almost all that we do is averaging our money, returns and expenses, and then comparing them to various targets. These include things like the S&P 500 or Nasdaq or inflation – which are themselves – averages! … [Read more...] about Basic Math: Arithmetic Mean Average
Personal Finance Math: The Math that’s Actually Useful and Fun!
For most Americans, math class seems less than useful. Trust me though, math is very useful. You just have to know how to use it to make money! Whether we are talking about how long it’s going to take you to pay off a debt or how to figure out how much an investment is going to make by the time you’re ready to buy that Maserati – math is a requirement. Not Revenge of the … [Read more...] about Personal Finance Math: The Math that’s Actually Useful and Fun!
How to Calculate your Net Worth
Wealth and Net Worth, for all intents and purposes, are synonymous. In personal finance, it is the single most important metric to track. It is the yardstick by which we measure our progress. … [Read more...] about How to Calculate your Net Worth
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