January 9, 2024

“saving is for the poor and investing is for the rich”

4:59 PM

“In this chapter we will cover the three primary reasons why you should invest: 1. To save for your future self. 2. To preserve your money against inflation. 3. To replace your human capital with financial capital.”

5:06 PM

“Despite how different your future self might be from your present self, research has shown that thinking about your future self is one of the best ways to improve your investment behavior.”

5:09 PM

“Individuals who saw the older versions of themselves allocated about 2% more of their pay (on average) to retirement than people who didn’t see such photos.[61](#footnote-059) This suggests that seeing a realistic older version of yourself may be helpful in encouraging long-term investing behavior.”

5:10 PM

“This means that other financial goals like saving for your children, saving for a vacation, or saving for a home were not associated with improved savings behaviors. However, saving for retirement was.”

5:10 PM

“The last reason why you should invest your money is to replace your human capital with financial capital.”

5:16 PM

“we first must figure out how much your human capital is worth today. We can do this by approximating the present value of your estimated future earnings.”

5:17 PM

“Present value is the amount of money that a future payment stream is worth today.”

5:18 PM

“the $101 in the future is discounted to the present using a 1% interest rate, commonly called the discount rate”

5:18 PM

“This is an important point because your human capital is a dwindling asset. Each year you work reduces the present value of your human capital because you have one less year of future earnings.”

5:20 PM

“This is what should happen as you save and invest over your lifetime. Each year, a portion of the money you get while working should be converted into financial capital. When you start looking at money in this way, you will realize that it can be used both to consume goods and to produce more money for you as well.”

5:22 PM

“by investing your money you are rebuilding yourself as a financial asset equivalent that can provide you with income once you are no longer employed”

5:23 PM