There is debate about how low inflation should go. People get worried when inflation approaches zero percent. While it's good when products get cheaper because of competition and greater productivity, most economists don’t want overall prices in the economy decrease. This is deflation, the most severe example of which was during the Great Depression. Nobody wants a repeat of the Great Depression.


Spend $36,000 out of $60,000, save the difference: $24,000/$60,000 = 40%


The Social Security “trust fund” people talk about is extra money that was built up when FICA taxes collected were more than the benefits being paid to retirees. Today more money is going out than coming in and the fund is shrinking.


Many banks almost automatically give you a savings account when you open a checking account. You don’t need to use this account if it doesn’t pay a high interest rate. It’s okay to open another savings account somewhere else that does.


Amanda Dixon, “Our Long, Long, Long Relationships With Banks: Are We Missing Out On Better Deals?”, 10/23/2017,, accessed 11/26/2 019


Elizabeth Warren and Amelia WarrenTyagi, All Your Worth: The Ultimate Lifetime Money Plan, Simon & Schuster Inc., New York 2005.


12 CFR § 205.6 - Liability of consumer for unauthorized transfers, Cornell Law School Legal Information Institute,


Travel and credit card points are big business. Check out for some of the latest deals


JP Koning, “Starbucks: Monetary Superpower”, blogpost, 8/21/2019, accessed 10/27/2019


Data sources: The Wall Street Journal,; U.S. Department of Education,;,;,; accessed 10/30/2019


Gail Hillebrand, “How to Understand Special Promotional Financing Offers on Credit Cards”, Consumer Financial Protection Bureau, 6/8/2017,, accessed 4/3/2021


Rick Popely, Car Depreciation and How Much it Costs You,, 2/3/2021, accessed 4/3/2021


Ben Eisen and Adrienne Roberts, “The Seven-Year Auto Loan: America’s Middle Class Can’t Afford Its Cars”, The Wall Street Journal, 10/1/2019, accessed 11/9/2019


Remember, interest is the balance times the APR/12, in this case $291,000 x 0.0388/12 = $940.90


This assumes a mortgage with the average APR in 1990, which was 10.31%. Price changes are based on the yearly average S&P/Case Shiller National Home Price Index. Data from the Federal Reserve Bank of St. Louis.


See for example



A number of states have student loan programs as well.

[18] accessed 11/5/2019


See paper by Kimberly Rodgers Cornaggia and Han Xia accessed 11/30/2020


See, accessed 11/5/2019


Acorns charges a reasonable $3 per month fee for a three-account combination: checking account, investment account, and IRA account, and provides other benefits such as free ATM withdrawals.

[21], accessed 11/22/2019


One technique is to use other money to pay for routine health related costs and save receipts. Let your HSA savings grow tax-free. When you take money out later you can use it for anything as long as you can show that you spent that amount on healthcare while the account was open.

[23], accessed 3/22/2020


Some employers also offer separate flexible spending accounts that can be used for childcare or dependent care expenses.


See and for more on SIPC protection. Large brokerages provide additional coverage--over and above the SIPC limit--by buying insurance.


I am using “interest” here, but the math works for any constant return, whether yield, capital gains, or a combination of both.


This is the future value of an annuity due. You can calculate your own here.


The list of companies included changes from time to time as some become less relevant or go out of business and others grow in importance.


Treasurys with maturities of less than a year are called Treasury Bills, those with maturities of 1 to 10 years are called Treasury Notes, and those with maturities of more than 10 years are called Treasury Bonds. The most recently issued 30 Year Treasury Bond is colloquially known as the Long Bond.


This can be a source of confusion. To get the intuition try the following example. Say you just bought a bond for $100 that will pay you back $100 when it matures and interest of 3% ($3 a year) in the meantime. The next day interest rates in the market go to 4%. If you try to sell your bond now, buyers won’t give you $100 for your 3% bond because newly issued bonds earn 4% ($4 a year). They’ll pay you a price that makes the $3 a year equivalent to a 4% interest rate. What’s that price? That depends on the maturity of the bond: if it is close to maturity (perhaps an interest payment or two to go) it may be $98 to make up for a couple of payments of $3 instead of $4. If the bond has ten years to go, the discount is going to be much larger; perhaps it’ll only be worth $90. Note that while the market value of the bond goes down today, it still pays back principal of $100 back when it matures. The fact that you lose out on some interest in the meantime is what makes it worth less.


The differences between mutual funds and ETFs are not terribly important. The main one is that the price of mutual funds is only updated once a day, whereas ETFs continuously trade on the stock exchange. What matters is what they are invested in.


Accredited investors are required to have annual income of $200,000 or a net worth of $1,000,000 excluding their primary residence. See


To dredge up your high school statistics, volatility is usually measured by the standard deviation of returns. People use different time periods and intervals to calculate standard deviation so the numbers you might see aren’t always comparable.


Henrik Bessembinder, “Do Stocks Outperform Treasury Bills?”, Journal of Financial Economics, Vol 129, Issue 3, September 2018, pp. 415-628.


The quote is attributed to economist Harry Markowitz.


Real returns are what you expect to earn over and above inflation. To get "nominal" returns that include inflation add the inflation rate to each real return. Based on the market for TIPS I assumed future inflation to be 1.7% a year.

The truth is that market forecasts are guesses clothed in more or less elaborate financial models. But you have to assume something. The numbers in the worksheet are derived from AQR for stocks; TIPS and bond yields from FRED; and CD and savings rates from; all as of January 2020.


This kind of document comes with a fancy name, Investment Policy Statement (IPS), but it doesn’t need to be fancy. Every investor large and small should have one.


The previously mentioned Harry Markowitz is often considered the inventor of modern portfolio theory. Other luminaries include William Sharpe, inventor of a famous model called the "capital asset pricing model", and Eugene Fama who is credited with the "efficient market hypothesis." All three received Nobel prizes for their work.


The first type of "irrational" behavior is known as "loss aversion," the second as "recency bias," and the third as "confirmation bias." Daniel Kahnemann and Richard Thaler are among the pioneers of what has become known as "behavioral economics." Both received Nobel Prizes.


These are actual market changes in 2020 (applied to the made-up balance of $91,500.) It turned out the market rebounded shortly thereafter.


Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.


The date gets pushed out if April 15 falls in a weekend or holiday. You can also receive an automatic extension to October 15, but this is for filing the return only. Any taxes you owe must still be paid by April 15th.


A handful of states don’t have income taxes: Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. And most states don’t make you pay taxes on income on which you’ve paid taxes to another state.


This is simplified. The actual “taxable income” to which the rate is applied involves a number of calculations that you go through when filing a return. Taxable income is usually lower than your gross income.


With taxes, there’s always a “but.” There are a few areas of the tax code that can raise your marginal tax rate to more than 100%, meaning you pay more in extra tax than the extra income. The most common are related to various credits that phase out as income increases.


This estimate precedes the impact of COVID-19. See


These are high-level estimates based on common “withdrawal rates” of 3%, 4%, and 4.5% respectively. There is lots of research on withdrawal rates and many tools to refine the calculations. If you’re approaching retirement, it might be worth having a financial planner crunch some more numbers for you.


There are optional features that guarantee you get some minimum amount, but you get lower regular payments.

[48] accessed 6/2/2020

[49] accessed 3/28/2020

[50] accessed 3/28/2020

[51] accessed 3/28/2020

[52], accessed 10/22/2019


Quote for a 30-year old healthy female non-smoker retrieved from on 3/28/2020


Berkshire Hathaway letter to shareholders, February 26, 2010, p. 6

[55], accessed 6/25/2020


In certain circumstances you may be eligible for 36 months of COBRA coverage. COBRA stands for Consolidated Omnibus Budget Reconciliation Act – you had to ask, didn’t you?

[58], accessed 3/31/2020


You can delay enrolling if you’re still working and have insurance through work. But make sure your insurance is “eligible.”


This section draws from two authors; both are MDs and have done extensive research and reporting on these issues. See Elisabeth Rosenthal, An American Sickness: How Healthcare Became Big Business and How You Can Take It Back and Marty Makary, The Price We Pay: What Broke American Healthcare –And How to Fix It.

[61], accessed 4/1/2020

[62], accessed 4/14/2020

[63], accessed 4/14/2020


These programs were PC Magazine’s Editors’ Choice, accessed 4/14/2020


This is what allowed Bernie Madoff to make off with billions of dollars of his clients’ money.


Taxpayers who do not itemize may deduct cash contributions of up to $300 in 2020 and 2021.



Recalling the debt terminology from Chapter 7, the margin loan is secured by the VTI shares.


Options can be bought on most large stocks and on many other kinds of assets.


In practice you don’t have to put up the money to buy VTI. You can simply sell the option and realize the gain.



Calculated as the total number of coins that have been created times the dollar value per coin. Source:, accessed 11/3/2021.


The tokens can also be thought of as certificates of ownership. Since each token is linked to a different underlying object they are not simply interchangeable or fungible, like a unit of currency.


See Chapter 27 for a general discussion of leverage.

[74] accessed 11/11/2021.


China Says All Crypto Transactions Are Illegal | Time accessed 11/11/2021.


These include ETFs from Proshares (BITO), Valkyrie (BTF), and VanEck (XBTF).

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