I wasn't sure where to put this thread. Since very personal things, like risk tolerances, life-style, and goals (financial or otherwise) need to be taken into account, I put it under philosophy. I believe that outside a market, the value of money is subjective.
What prompted this discussion is some stuff from another thread. The how do you decide what is true thread.
My general beliefs:
- Money is subservient to us, not the other way around. I would never start a corporation that wasn't a "B" (for "benefits") corporation. The reason is that other corporations are legally obligated to maximize return to shareholders. "B" corporations can be chartered to maximize something else while still turning a profit.
- Where money is concerned, it is all about Net-Present-Value(NPV).
You can calculate your assets minus your liabilities to get your "net-worth".
But this sort of calulation is not "design-oriented" (paying homage to my most recent hero R.D. Middlebrook), in that it that the analysis does not yeild insight into what we "should" do.
The NPV calculation, can in theory be used to look at how desicions you make now will likely affect you. There is a whole system of cashflows and tables that allow you to make these calculations. The math is simple, and the idea even simpler.
You can look into it yourself, but it can be sumarized it as aim to "maximize the return on investment". Of course, when you make any type of coherent plan it is good idea to test for sesitivity of your NPV to the assumptions you make.
- The first principle overrides the second when there is a conflict. One of my goals (which is largely a financial one) is be free to do what I want for the rest of my life. The current scheme I am pursuing is regarding finances is
- Own my home free-and-clear, so I only have to pay property taxes, and repairs (not rent or mortgage).
- Get enough residual income (rental property, dividends, interest payments, royalties, pension?, social security?, and the like) to pay for whatever is left (which will be mainly food and entertainment)
- Get there as quickly as possible. Being financially free early is worth a lot more to me than eventually being filthy rich.
That's it. That is my whole philosophy of money.