SlideShare uma empresa Scribd logo
1 de 26
Baixar para ler offline
PERSONAL
FINANCE FOR
ENGINEERS
CS 007: SESSION 5
ASSETS &
NET WORTH
CS 007
LIQUIDITY
access to money when you need it
WHAT IS LIQUIDITY?
• How quickly can you get access to
cash when you need it?


• Market liquidity refers to the extent
a marketplace allows assets to be
bought & sold at stable prices.


• Accounting liquidity measures the
ease an individual or company can
meet their financial obligations with
the liquid assets available to them.


• Don’t underestimate the value of
liquidity. Liquidity matters.
WHY DOES LIQUIDITY MATTER?
• Liquidity is the only thing
that matters when you
need to pay for
something.


• Liquidity is the power to
take advantage of
investment opportunities.
LIQUIDITY & RETURNS
• Liquidity is typically inversely
correlated with returns


• Examples


• Cash is very liquid


• Private Equity is very illiquid


• Safety ≠ Liquidity


• 5 Year CD is safe,


but illiquid


• Tesla stock is liquid, but
volatile!
EMERGENCY FUNDS
a financial buffer to protect your goals
8: WHAT % OF AMERICANS HAVE $400 FOR EMERGENCIES?
• Commonly misquoted statistic.


• US Federal Reserve reported in 2017 that
40% of Americans do not have sufficient
savings to cover a $400 emergency
expense.


• Actual survey question reveals the
number is 12% that self-reported that
they could cover the emergency.


• Liquidity means having access to money
when you need it.


• Don’t underestimate the value of
liquidity. Liquidity matters.
WHY EMERGENCY FUNDS?
• Practical outcome of need
for liquidity


• Example of “mental
accounting” used for
financial health


• Goal is to protect your long
term assets / plans from
unexpected short term
needs.
HOW LARGE SHOULD AN EMERGENCY FUND BE?
• Standard recommendation is at
least 3 months of living
expenses in cash or cash-
equivalents


• Calculated based on impact of
losing employment


• National average is 3-6 months
to find a job of equal pay.


• Time increases in recession &
based on your seniority.
COMMON MISTAKES WITH EMERGENCY FUNDS
• Don’t focus on investment
return or opportunity cost.


• Think of it as a buffer, or as
insurance. Not as an asset.


• First on the list to fill, first to
refill if tapped for
emergency.


• Do not tap it for frivolous
needs. It is for emergencies.
ASSETS & LIABILITIES
what you own & what you owe
WHAT IS AN ASSET?
• Any resource with
economic value


• Financial assets are
investments in cash, bonds,
stocks, etc.


• Real assets are
investments in real estate,
collectibles, commodities,
etc.
DIFFERENT TYPES OF ASSETS
• Liquid vs. Illiquid


• Financial vs. Real


• Appreciating vs.
Depreciating


• Tangible vs. Intangible


• Debt owed to you
* https://www.wealthfront.com/plan
WHAT ABOUT HUMAN CAPITAL?
• Easy to argue that your
skills & capabilities are the
largest asset you have.


• Don’t ignore “intangible
assets” - sometimes they
are the best investments.


• Do remember that human
capital varies significantly
in liquidity.
* https://www.wealthfront.com/plan
WHAT ARE LIABILITIES?
• A liability is a financial
obligation, typically debt.


• Most common personal
liability is a loan.


• Common types


• Mortgage


• Auto Loan


• Student Loan


• Credit Cards


• Tax Liability
DIFFERENT TYPES OF LIABILITY
• Short term vs. Long term


• Secured vs. Unsecured


• Tax Liability
CREDIT SCORES
• Lenders report to 3 major centralized
credit agencies when you apply for debt,
receive debt, and when you pay off debt.


• Building a good credit score is essential
for qualifying for most loans. It can affect
other services too, as it is used for
identity verification.


• Issues that affect credit score: length of
history, on time payment, percent of
capacity utilized, new applications for
debt, bankruptcy.


• Credit Karma 💯


http://www.creditkarma.com
IS DEBT A BAD THING?
• Modigliani-Miller


market value is determined by
earning power & risk of
underlying assets, not by the
method of financing.


• Assumes no taxes, transaction
costs, bankruptcy costs


• Tradeoff Theory of Leverage


There is an optimal capital
structure.
SHOULD I PAY OFF ALL OF MY DEBT?
• More debt = more risk


• Not all debt is the same


• Compounding is not your friend with
debt, especially high interest debt.


• Some debt is subsidized (e.g.
Mortgage, Student Loans)


• Paying off debt can be emotionally
satisfying, but financially irrational.


• Paying off debt can improve savings
rates over time.
BALANCE SHEET
know your net worth
WHAT IS YOUR NET WORTH?
• Assets - Liabilities


• Total net worth includes all
assets.


• Liquid net worth excludes
illiquid assets & primary
home (and related liabilities)


• Do not confuse with cash
flow. Very different.
* https://www.census.gov/data/tables/2018/demo/wealth/wealth-asset-ownership.html
WHAT IS A BALANCE SHEET?
• A balance sheet is a financial
statement that summarizes a
companies assets, liabilities &
shareholders’ equity.


• Assets = Liabilities + Equity


(see, it has to balance)


• Common ratios


• Cash Ratio


• Quick Ratio


• Debt to Equity


• Asset Turnover


• ROA (Return on Assets)
* http://www.investopedia.com/articles/04/031004.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
CREATING YOUR PERSONAL BALANCE SHEET
• Very simple summary of a
personal balance sheet


• Some recommend
excluding primary
residence (and related
mortgage)


• Very different than income
statement, but useful for
evaluating progress
(excluding primary residence)
QUESTIONS
CS 007
WEEK 6: CREDIT & DEBT. DIGGING OUT.
• Different types of Debt:


Student Loans, Auto, Credit Cards,
Mortgage


• Secured vs. Unsecured Loans


• Loans & Rates


• Credit Scores


• Compounding in Reverse

Mais conteúdo relacionado

Mais procurados

Stanford CS 007-07 (2018): Personal Finance for Engineers / Investing
Stanford CS 007-07 (2018): Personal Finance for Engineers / InvestingStanford CS 007-07 (2018): Personal Finance for Engineers / Investing
Stanford CS 007-07 (2018): Personal Finance for Engineers / InvestingAdam Nash
 
Stanford CS 007-08 (2018): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2018): Personal Finance for Engineers / Financial Plannin...Stanford CS 007-08 (2018): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2018): Personal Finance for Engineers / Financial Plannin...Adam Nash
 
Stanford CS 007-2 (2020): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2020): Personal Finance for Engineers / Behavioral FinanceStanford CS 007-2 (2020): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2020): Personal Finance for Engineers / Behavioral FinanceAdam Nash
 
Stanford CS 007-10 (2021): Personal Finance for Engineers / Additional Topics...
Stanford CS 007-10 (2021): Personal Finance for Engineers / Additional Topics...Stanford CS 007-10 (2021): Personal Finance for Engineers / Additional Topics...
Stanford CS 007-10 (2021): Personal Finance for Engineers / Additional Topics...Adam Nash
 
Stanford CS 007-10 (2020): Personal Finance for Engineers / Additional Topics...
Stanford CS 007-10 (2020): Personal Finance for Engineers / Additional Topics...Stanford CS 007-10 (2020): Personal Finance for Engineers / Additional Topics...
Stanford CS 007-10 (2020): Personal Finance for Engineers / Additional Topics...Adam Nash
 
Stanford CS 007-03: Personal Finance for Engineers / Getting Paid
Stanford CS 007-03: Personal Finance for Engineers / Getting PaidStanford CS 007-03: Personal Finance for Engineers / Getting Paid
Stanford CS 007-03: Personal Finance for Engineers / Getting PaidAdam Nash
 
Stanford CS 007-09 (2019): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2019): Personal Finance for Engineers / Real EstateStanford CS 007-09 (2019): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2019): Personal Finance for Engineers / Real EstateAdam Nash
 
Stanford CS 007-09 (2021): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2021): Personal Finance for Engineers / Real EstateStanford CS 007-09 (2021): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2021): Personal Finance for Engineers / Real EstateAdam Nash
 
Stanford CS 007-07 (2019): Personal Finance for Engineers / Investing
Stanford CS 007-07 (2019): Personal Finance for Engineers / InvestingStanford CS 007-07 (2019): Personal Finance for Engineers / Investing
Stanford CS 007-07 (2019): Personal Finance for Engineers / InvestingAdam Nash
 
Stanford CS 007-05 (2019): Personal Finance for Engineers / Assets & Net Worth
Stanford CS 007-05 (2019): Personal Finance for Engineers / Assets & Net WorthStanford CS 007-05 (2019): Personal Finance for Engineers / Assets & Net Worth
Stanford CS 007-05 (2019): Personal Finance for Engineers / Assets & Net WorthAdam Nash
 
Stanford CS 007-09 (2018): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2018): Personal Finance for Engineers / Real EstateStanford CS 007-09 (2018): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2018): Personal Finance for Engineers / Real EstateAdam Nash
 
Stanford CS 007-01: Personal Finance for Engineers / Introduction
Stanford CS 007-01: Personal Finance for Engineers / IntroductionStanford CS 007-01: Personal Finance for Engineers / Introduction
Stanford CS 007-01: Personal Finance for Engineers / IntroductionAdam Nash
 
Stanford CS 007-01 (2020): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2020): Personal Finance for Engineers / IntroductionStanford CS 007-01 (2020): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2020): Personal Finance for Engineers / IntroductionAdam Nash
 
Personal Finance for Engineers
Personal Finance for EngineersPersonal Finance for Engineers
Personal Finance for EngineersAdam Nash
 
Stanford CS 007-06 (2021): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2021): Personal Finance for Engineers / DebtStanford CS 007-06 (2021): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2021): Personal Finance for Engineers / DebtAdam Nash
 
Stanford CS 007-01 (2018): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2018): Personal Finance for Engineers / IntroductionStanford CS 007-01 (2018): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2018): Personal Finance for Engineers / IntroductionAdam Nash
 
Stanford CS 007-10 (2018): Personal Finance for Engineers / Additional Topics
Stanford CS 007-10 (2018): Personal Finance for Engineers / Additional TopicsStanford CS 007-10 (2018): Personal Finance for Engineers / Additional Topics
Stanford CS 007-10 (2018): Personal Finance for Engineers / Additional TopicsAdam Nash
 
Stanford CS 007-2 (2018): Personal Finance for Engineers / Compensation
Stanford CS 007-2 (2018): Personal Finance for Engineers / CompensationStanford CS 007-2 (2018): Personal Finance for Engineers / Compensation
Stanford CS 007-2 (2018): Personal Finance for Engineers / CompensationAdam Nash
 
Stanford CS 007-10 (2019): Personal Finance for Engineers / Additional Topics
Stanford CS 007-10 (2019): Personal Finance for Engineers / Additional TopicsStanford CS 007-10 (2019): Personal Finance for Engineers / Additional Topics
Stanford CS 007-10 (2019): Personal Finance for Engineers / Additional TopicsAdam Nash
 
Stanford CS 007-08 (2021): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2021): Personal Finance for Engineers / Financial Plannin...Stanford CS 007-08 (2021): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2021): Personal Finance for Engineers / Financial Plannin...Adam Nash
 

Mais procurados (20)

Stanford CS 007-07 (2018): Personal Finance for Engineers / Investing
Stanford CS 007-07 (2018): Personal Finance for Engineers / InvestingStanford CS 007-07 (2018): Personal Finance for Engineers / Investing
Stanford CS 007-07 (2018): Personal Finance for Engineers / Investing
 
Stanford CS 007-08 (2018): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2018): Personal Finance for Engineers / Financial Plannin...Stanford CS 007-08 (2018): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2018): Personal Finance for Engineers / Financial Plannin...
 
Stanford CS 007-2 (2020): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2020): Personal Finance for Engineers / Behavioral FinanceStanford CS 007-2 (2020): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2020): Personal Finance for Engineers / Behavioral Finance
 
Stanford CS 007-10 (2021): Personal Finance for Engineers / Additional Topics...
Stanford CS 007-10 (2021): Personal Finance for Engineers / Additional Topics...Stanford CS 007-10 (2021): Personal Finance for Engineers / Additional Topics...
Stanford CS 007-10 (2021): Personal Finance for Engineers / Additional Topics...
 
Stanford CS 007-10 (2020): Personal Finance for Engineers / Additional Topics...
Stanford CS 007-10 (2020): Personal Finance for Engineers / Additional Topics...Stanford CS 007-10 (2020): Personal Finance for Engineers / Additional Topics...
Stanford CS 007-10 (2020): Personal Finance for Engineers / Additional Topics...
 
Stanford CS 007-03: Personal Finance for Engineers / Getting Paid
Stanford CS 007-03: Personal Finance for Engineers / Getting PaidStanford CS 007-03: Personal Finance for Engineers / Getting Paid
Stanford CS 007-03: Personal Finance for Engineers / Getting Paid
 
Stanford CS 007-09 (2019): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2019): Personal Finance for Engineers / Real EstateStanford CS 007-09 (2019): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2019): Personal Finance for Engineers / Real Estate
 
Stanford CS 007-09 (2021): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2021): Personal Finance for Engineers / Real EstateStanford CS 007-09 (2021): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2021): Personal Finance for Engineers / Real Estate
 
Stanford CS 007-07 (2019): Personal Finance for Engineers / Investing
Stanford CS 007-07 (2019): Personal Finance for Engineers / InvestingStanford CS 007-07 (2019): Personal Finance for Engineers / Investing
Stanford CS 007-07 (2019): Personal Finance for Engineers / Investing
 
Stanford CS 007-05 (2019): Personal Finance for Engineers / Assets & Net Worth
Stanford CS 007-05 (2019): Personal Finance for Engineers / Assets & Net WorthStanford CS 007-05 (2019): Personal Finance for Engineers / Assets & Net Worth
Stanford CS 007-05 (2019): Personal Finance for Engineers / Assets & Net Worth
 
Stanford CS 007-09 (2018): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2018): Personal Finance for Engineers / Real EstateStanford CS 007-09 (2018): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2018): Personal Finance for Engineers / Real Estate
 
Stanford CS 007-01: Personal Finance for Engineers / Introduction
Stanford CS 007-01: Personal Finance for Engineers / IntroductionStanford CS 007-01: Personal Finance for Engineers / Introduction
Stanford CS 007-01: Personal Finance for Engineers / Introduction
 
Stanford CS 007-01 (2020): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2020): Personal Finance for Engineers / IntroductionStanford CS 007-01 (2020): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2020): Personal Finance for Engineers / Introduction
 
Personal Finance for Engineers
Personal Finance for EngineersPersonal Finance for Engineers
Personal Finance for Engineers
 
Stanford CS 007-06 (2021): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2021): Personal Finance for Engineers / DebtStanford CS 007-06 (2021): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2021): Personal Finance for Engineers / Debt
 
Stanford CS 007-01 (2018): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2018): Personal Finance for Engineers / IntroductionStanford CS 007-01 (2018): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2018): Personal Finance for Engineers / Introduction
 
Stanford CS 007-10 (2018): Personal Finance for Engineers / Additional Topics
Stanford CS 007-10 (2018): Personal Finance for Engineers / Additional TopicsStanford CS 007-10 (2018): Personal Finance for Engineers / Additional Topics
Stanford CS 007-10 (2018): Personal Finance for Engineers / Additional Topics
 
Stanford CS 007-2 (2018): Personal Finance for Engineers / Compensation
Stanford CS 007-2 (2018): Personal Finance for Engineers / CompensationStanford CS 007-2 (2018): Personal Finance for Engineers / Compensation
Stanford CS 007-2 (2018): Personal Finance for Engineers / Compensation
 
Stanford CS 007-10 (2019): Personal Finance for Engineers / Additional Topics
Stanford CS 007-10 (2019): Personal Finance for Engineers / Additional TopicsStanford CS 007-10 (2019): Personal Finance for Engineers / Additional Topics
Stanford CS 007-10 (2019): Personal Finance for Engineers / Additional Topics
 
Stanford CS 007-08 (2021): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2021): Personal Finance for Engineers / Financial Plannin...Stanford CS 007-08 (2021): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2021): Personal Finance for Engineers / Financial Plannin...
 

Semelhante a Stanford CS 007-05 (2021): Personal Finance for Engineers / Assets & Net Worth

Investments handout
Investments handoutInvestments handout
Investments handoutherbison
 
Stanford CS 007-08 (2020): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2020): Personal Finance for Engineers / Financial Plannin...Stanford CS 007-08 (2020): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2020): Personal Finance for Engineers / Financial Plannin...Adam Nash
 
E-learning Personal Finance Management - with design v23 .pptx
E-learning Personal Finance Management - with design v23 .pptxE-learning Personal Finance Management - with design v23 .pptx
E-learning Personal Finance Management - with design v23 .pptxakinsumboayomide
 
Cashflow management
Cashflow managementCashflow management
Cashflow managementHarryDao
 
What Young Adults Need to Know About Money-03-16
What Young Adults Need to Know About Money-03-16What Young Adults Need to Know About Money-03-16
What Young Adults Need to Know About Money-03-16Barbara O'Neill
 
Stanford CS 007-08: Personal Finance for Engineers / Financial Planning & Goals
Stanford CS 007-08: Personal Finance for Engineers / Financial Planning & GoalsStanford CS 007-08: Personal Finance for Engineers / Financial Planning & Goals
Stanford CS 007-08: Personal Finance for Engineers / Financial Planning & GoalsAdam Nash
 
Investment Club Types of Investors
Investment Club Types of InvestorsInvestment Club Types of Investors
Investment Club Types of InvestorsSamPurcell4
 
Basics of investing - Balance Sheet Approach
Basics of investing - Balance Sheet ApproachBasics of investing - Balance Sheet Approach
Basics of investing - Balance Sheet Approachaditya72
 
Making Financial Success Happen - Make Your Dream a Reality
Making Financial Success Happen - Make Your Dream a Reality Making Financial Success Happen - Make Your Dream a Reality
Making Financial Success Happen - Make Your Dream a Reality Career Communications Group
 
Personal Finance for Everyone (Dropbox 2014)
Personal Finance for Everyone (Dropbox 2014)Personal Finance for Everyone (Dropbox 2014)
Personal Finance for Everyone (Dropbox 2014)Adam Nash
 
Personal Finance for Everyone (Eventbrite 2014)
Personal Finance for Everyone (Eventbrite 2014)Personal Finance for Everyone (Eventbrite 2014)
Personal Finance for Everyone (Eventbrite 2014)Adam Nash
 
Personal Finance for Engineers (Stanford 2015)
Personal Finance for Engineers (Stanford 2015)Personal Finance for Engineers (Stanford 2015)
Personal Finance for Engineers (Stanford 2015)Adam Nash
 
Investor Real Estate Workshops | Wealth Migrate | May 2017
Investor Real Estate Workshops | Wealth Migrate | May 2017Investor Real Estate Workshops | Wealth Migrate | May 2017
Investor Real Estate Workshops | Wealth Migrate | May 2017Wealth Migrate
 
Stanford CS 007-04 (2021): Personal Finance for Engineers / Savings & Budgets
Stanford CS 007-04 (2021): Personal Finance for Engineers / Savings & BudgetsStanford CS 007-04 (2021): Personal Finance for Engineers / Savings & Budgets
Stanford CS 007-04 (2021): Personal Finance for Engineers / Savings & BudgetsAdam Nash
 
Personal Finance for Everyone (Box 2014)
Personal Finance for Everyone (Box 2014)Personal Finance for Everyone (Box 2014)
Personal Finance for Everyone (Box 2014)Adam Nash
 
Reichman Partners -Investment for your better future
Reichman Partners -Investment for your better futureReichman Partners -Investment for your better future
Reichman Partners -Investment for your better futureReichman Partners
 
Understanding Your Personal Credit
Understanding Your Personal CreditUnderstanding Your Personal Credit
Understanding Your Personal CreditMelanie Skaggs
 
Personal Finance for Engineers (Yelp 2014)
Personal Finance for Engineers (Yelp 2014)Personal Finance for Engineers (Yelp 2014)
Personal Finance for Engineers (Yelp 2014)Adam Nash
 

Semelhante a Stanford CS 007-05 (2021): Personal Finance for Engineers / Assets & Net Worth (20)

PFRM (1).pptx
PFRM (1).pptxPFRM (1).pptx
PFRM (1).pptx
 
Investments handout
Investments handoutInvestments handout
Investments handout
 
Financial literacy
Financial literacyFinancial literacy
Financial literacy
 
Stanford CS 007-08 (2020): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2020): Personal Finance for Engineers / Financial Plannin...Stanford CS 007-08 (2020): Personal Finance for Engineers / Financial Plannin...
Stanford CS 007-08 (2020): Personal Finance for Engineers / Financial Plannin...
 
E-learning Personal Finance Management - with design v23 .pptx
E-learning Personal Finance Management - with design v23 .pptxE-learning Personal Finance Management - with design v23 .pptx
E-learning Personal Finance Management - with design v23 .pptx
 
Cashflow management
Cashflow managementCashflow management
Cashflow management
 
What Young Adults Need to Know About Money-03-16
What Young Adults Need to Know About Money-03-16What Young Adults Need to Know About Money-03-16
What Young Adults Need to Know About Money-03-16
 
Stanford CS 007-08: Personal Finance for Engineers / Financial Planning & Goals
Stanford CS 007-08: Personal Finance for Engineers / Financial Planning & GoalsStanford CS 007-08: Personal Finance for Engineers / Financial Planning & Goals
Stanford CS 007-08: Personal Finance for Engineers / Financial Planning & Goals
 
Investment Club Types of Investors
Investment Club Types of InvestorsInvestment Club Types of Investors
Investment Club Types of Investors
 
Basics of investing - Balance Sheet Approach
Basics of investing - Balance Sheet ApproachBasics of investing - Balance Sheet Approach
Basics of investing - Balance Sheet Approach
 
Making Financial Success Happen - Make Your Dream a Reality
Making Financial Success Happen - Make Your Dream a Reality Making Financial Success Happen - Make Your Dream a Reality
Making Financial Success Happen - Make Your Dream a Reality
 
Personal Finance for Everyone (Dropbox 2014)
Personal Finance for Everyone (Dropbox 2014)Personal Finance for Everyone (Dropbox 2014)
Personal Finance for Everyone (Dropbox 2014)
 
Personal Finance for Everyone (Eventbrite 2014)
Personal Finance for Everyone (Eventbrite 2014)Personal Finance for Everyone (Eventbrite 2014)
Personal Finance for Everyone (Eventbrite 2014)
 
Personal Finance for Engineers (Stanford 2015)
Personal Finance for Engineers (Stanford 2015)Personal Finance for Engineers (Stanford 2015)
Personal Finance for Engineers (Stanford 2015)
 
Investor Real Estate Workshops | Wealth Migrate | May 2017
Investor Real Estate Workshops | Wealth Migrate | May 2017Investor Real Estate Workshops | Wealth Migrate | May 2017
Investor Real Estate Workshops | Wealth Migrate | May 2017
 
Stanford CS 007-04 (2021): Personal Finance for Engineers / Savings & Budgets
Stanford CS 007-04 (2021): Personal Finance for Engineers / Savings & BudgetsStanford CS 007-04 (2021): Personal Finance for Engineers / Savings & Budgets
Stanford CS 007-04 (2021): Personal Finance for Engineers / Savings & Budgets
 
Personal Finance for Everyone (Box 2014)
Personal Finance for Everyone (Box 2014)Personal Finance for Everyone (Box 2014)
Personal Finance for Everyone (Box 2014)
 
Reichman Partners -Investment for your better future
Reichman Partners -Investment for your better futureReichman Partners -Investment for your better future
Reichman Partners -Investment for your better future
 
Understanding Your Personal Credit
Understanding Your Personal CreditUnderstanding Your Personal Credit
Understanding Your Personal Credit
 
Personal Finance for Engineers (Yelp 2014)
Personal Finance for Engineers (Yelp 2014)Personal Finance for Engineers (Yelp 2014)
Personal Finance for Engineers (Yelp 2014)
 

Mais de Adam Nash

Stanford CS 007-03 (2022): Personal Finance for Engineers / Compensation
Stanford CS 007-03 (2022): Personal Finance for Engineers / CompensationStanford CS 007-03 (2022): Personal Finance for Engineers / Compensation
Stanford CS 007-03 (2022): Personal Finance for Engineers / CompensationAdam Nash
 
Stanford CS 007-02 (2022): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-02 (2022): Personal Finance for Engineers / Behavioral FinanceStanford CS 007-02 (2022): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-02 (2022): Personal Finance for Engineers / Behavioral FinanceAdam Nash
 
Stanford CS 007-01 (2022): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2022): Personal Finance for Engineers / IntroductionStanford CS 007-01 (2022): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2022): Personal Finance for Engineers / IntroductionAdam Nash
 
Stanford CS 007-2 (2021): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2021): Personal Finance for Engineers / Behavioral FinanceStanford CS 007-2 (2021): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2021): Personal Finance for Engineers / Behavioral FinanceAdam Nash
 
Stanford CS 007-01 (2021): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2021): Personal Finance for Engineers / IntroductionStanford CS 007-01 (2021): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2021): Personal Finance for Engineers / IntroductionAdam Nash
 
Stanford CS 007-09 (2020): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2020): Personal Finance for Engineers / Real EstateStanford CS 007-09 (2020): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2020): Personal Finance for Engineers / Real EstateAdam Nash
 
Stanford CS 007-06 (2020): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2020): Personal Finance for Engineers / DebtStanford CS 007-06 (2020): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2020): Personal Finance for Engineers / DebtAdam Nash
 
Stanford CS 007-06 (2019): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2019): Personal Finance for Engineers / DebtStanford CS 007-06 (2019): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2019): Personal Finance for Engineers / DebtAdam Nash
 
Stanford CS 007-2 (2019): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2019): Personal Finance for Engineers / Behavioral FinanceStanford CS 007-2 (2019): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2019): Personal Finance for Engineers / Behavioral FinanceAdam Nash
 
Be A Great Product Leader (Amplify, Oct 2019)
Be A Great Product Leader (Amplify, Oct 2019)Be A Great Product Leader (Amplify, Oct 2019)
Be A Great Product Leader (Amplify, Oct 2019)Adam Nash
 

Mais de Adam Nash (10)

Stanford CS 007-03 (2022): Personal Finance for Engineers / Compensation
Stanford CS 007-03 (2022): Personal Finance for Engineers / CompensationStanford CS 007-03 (2022): Personal Finance for Engineers / Compensation
Stanford CS 007-03 (2022): Personal Finance for Engineers / Compensation
 
Stanford CS 007-02 (2022): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-02 (2022): Personal Finance for Engineers / Behavioral FinanceStanford CS 007-02 (2022): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-02 (2022): Personal Finance for Engineers / Behavioral Finance
 
Stanford CS 007-01 (2022): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2022): Personal Finance for Engineers / IntroductionStanford CS 007-01 (2022): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2022): Personal Finance for Engineers / Introduction
 
Stanford CS 007-2 (2021): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2021): Personal Finance for Engineers / Behavioral FinanceStanford CS 007-2 (2021): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2021): Personal Finance for Engineers / Behavioral Finance
 
Stanford CS 007-01 (2021): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2021): Personal Finance for Engineers / IntroductionStanford CS 007-01 (2021): Personal Finance for Engineers / Introduction
Stanford CS 007-01 (2021): Personal Finance for Engineers / Introduction
 
Stanford CS 007-09 (2020): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2020): Personal Finance for Engineers / Real EstateStanford CS 007-09 (2020): Personal Finance for Engineers / Real Estate
Stanford CS 007-09 (2020): Personal Finance for Engineers / Real Estate
 
Stanford CS 007-06 (2020): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2020): Personal Finance for Engineers / DebtStanford CS 007-06 (2020): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2020): Personal Finance for Engineers / Debt
 
Stanford CS 007-06 (2019): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2019): Personal Finance for Engineers / DebtStanford CS 007-06 (2019): Personal Finance for Engineers / Debt
Stanford CS 007-06 (2019): Personal Finance for Engineers / Debt
 
Stanford CS 007-2 (2019): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2019): Personal Finance for Engineers / Behavioral FinanceStanford CS 007-2 (2019): Personal Finance for Engineers / Behavioral Finance
Stanford CS 007-2 (2019): Personal Finance for Engineers / Behavioral Finance
 
Be A Great Product Leader (Amplify, Oct 2019)
Be A Great Product Leader (Amplify, Oct 2019)Be A Great Product Leader (Amplify, Oct 2019)
Be A Great Product Leader (Amplify, Oct 2019)
 

Último

Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfAdnet Communications
 
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...mwangimwangi222
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfMichael Silva
 
The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...Antonis Zairis
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023SkillCircle
 
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxSlideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxOffice for National Statistics
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismBrian Lin
 
Stock Market Brief Deck for 3/22/2024.pdf
Stock Market Brief Deck for 3/22/2024.pdfStock Market Brief Deck for 3/22/2024.pdf
Stock Market Brief Deck for 3/22/2024.pdfMichael Silva
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Commonwealth
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?Stephen Perrenod
 
LIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxLIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxsonamyadav7097
 
Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Guillaume Ⓥ Sarlat
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent PreferencesGRAPE
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707harshan90
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoCoinGecko
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingHenry Tapper
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfMichael Silva
 

Último (20)

Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdfLundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
Lundin Gold March 2024 Corporate Presentation - PDAC v1.pdf
 
Effects & Policies Of Bank Consolidation
Effects & Policies Of Bank ConsolidationEffects & Policies Of Bank Consolidation
Effects & Policies Of Bank Consolidation
 
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...Solution manual for  Intermediate Accounting, 11th Edition by David Spiceland...
Solution manual for Intermediate Accounting, 11th Edition by David Spiceland...
 
Stock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdfStock Market Brief Deck for March 19 2024.pdf
Stock Market Brief Deck for March 19 2024.pdf
 
Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024Commercial Bank Economic Capsule - March 2024
Commercial Bank Economic Capsule - March 2024
 
The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...The unequal battle of inflation and the appropriate sustainable solution | Eu...
The unequal battle of inflation and the appropriate sustainable solution | Eu...
 
India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023India Economic Survey Complete for the year of 2022 to 2023
India Economic Survey Complete for the year of 2022 to 2023
 
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptxSlideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
Slideshare - ONS Economic Forum Slidepack - 18 March 2024.pptx
 
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for TourismTaipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
Taipei, A Hidden Jewel in East Asia - PR Strategy for Tourism
 
Stock Market Brief Deck for 3/22/2024.pdf
Stock Market Brief Deck for 3/22/2024.pdfStock Market Brief Deck for 3/22/2024.pdf
Stock Market Brief Deck for 3/22/2024.pdf
 
Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]Monthly Market Risk Update: March 2024 [SlideShare]
Monthly Market Risk Update: March 2024 [SlideShare]
 
The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?The Power Laws of Bitcoin: How can an S-curve be a power law?
The Power Laws of Bitcoin: How can an S-curve be a power law?
 
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
New Monthly Enterprises Survey. Issue 21. (01.2024) Ukrainian Business in War...
 
LIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptxLIC PRIVATISATION its a bane or boon.pptx
LIC PRIVATISATION its a bane or boon.pptx
 
Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024Sarlat Advisory - Corporate Brochure - 2024
Sarlat Advisory - Corporate Brochure - 2024
 
Contracts with Interdependent Preferences
Contracts with Interdependent PreferencesContracts with Interdependent Preferences
Contracts with Interdependent Preferences
 
Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707Mphasis - Schwab Newsletter PDF - Sample 8707
Mphasis - Schwab Newsletter PDF - Sample 8707
 
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGeckoRWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
RWA Report 2024: Rise of Real-World Assets in Crypto | CoinGecko
 
Work and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB fundingWork and Pensions report into UK corporate DB funding
Work and Pensions report into UK corporate DB funding
 
Stock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdfStock Market Brief Deck for March 26.pdf
Stock Market Brief Deck for March 26.pdf
 

Stanford CS 007-05 (2021): Personal Finance for Engineers / Assets & Net Worth

  • 3. LIQUIDITY access to money when you need it
  • 4. WHAT IS LIQUIDITY? • How quickly can you get access to cash when you need it? • Market liquidity refers to the extent a marketplace allows assets to be bought & sold at stable prices. • Accounting liquidity measures the ease an individual or company can meet their financial obligations with the liquid assets available to them. • Don’t underestimate the value of liquidity. Liquidity matters.
  • 5. WHY DOES LIQUIDITY MATTER? • Liquidity is the only thing that matters when you need to pay for something. • Liquidity is the power to take advantage of investment opportunities.
  • 6. LIQUIDITY & RETURNS • Liquidity is typically inversely correlated with returns • Examples • Cash is very liquid • Private Equity is very illiquid • Safety ≠ Liquidity • 5 Year CD is safe, 
 but illiquid • Tesla stock is liquid, but volatile!
  • 7. EMERGENCY FUNDS a financial buffer to protect your goals
  • 8. 8: WHAT % OF AMERICANS HAVE $400 FOR EMERGENCIES? • Commonly misquoted statistic. • US Federal Reserve reported in 2017 that 40% of Americans do not have sufficient savings to cover a $400 emergency expense. • Actual survey question reveals the number is 12% that self-reported that they could cover the emergency. • Liquidity means having access to money when you need it. • Don’t underestimate the value of liquidity. Liquidity matters.
  • 9. WHY EMERGENCY FUNDS? • Practical outcome of need for liquidity • Example of “mental accounting” used for financial health • Goal is to protect your long term assets / plans from unexpected short term needs.
  • 10. HOW LARGE SHOULD AN EMERGENCY FUND BE? • Standard recommendation is at least 3 months of living expenses in cash or cash- equivalents • Calculated based on impact of losing employment • National average is 3-6 months to find a job of equal pay. • Time increases in recession & based on your seniority.
  • 11. COMMON MISTAKES WITH EMERGENCY FUNDS • Don’t focus on investment return or opportunity cost. • Think of it as a buffer, or as insurance. Not as an asset. • First on the list to fill, first to refill if tapped for emergency. • Do not tap it for frivolous needs. It is for emergencies.
  • 12. ASSETS & LIABILITIES what you own & what you owe
  • 13. WHAT IS AN ASSET? • Any resource with economic value • Financial assets are investments in cash, bonds, stocks, etc. • Real assets are investments in real estate, collectibles, commodities, etc.
  • 14. DIFFERENT TYPES OF ASSETS • Liquid vs. Illiquid • Financial vs. Real • Appreciating vs. Depreciating • Tangible vs. Intangible • Debt owed to you * https://www.wealthfront.com/plan
  • 15. WHAT ABOUT HUMAN CAPITAL? • Easy to argue that your skills & capabilities are the largest asset you have. • Don’t ignore “intangible assets” - sometimes they are the best investments. • Do remember that human capital varies significantly in liquidity. * https://www.wealthfront.com/plan
  • 16. WHAT ARE LIABILITIES? • A liability is a financial obligation, typically debt. • Most common personal liability is a loan. • Common types • Mortgage • Auto Loan • Student Loan • Credit Cards • Tax Liability
  • 17. DIFFERENT TYPES OF LIABILITY • Short term vs. Long term • Secured vs. Unsecured • Tax Liability
  • 18. CREDIT SCORES • Lenders report to 3 major centralized credit agencies when you apply for debt, receive debt, and when you pay off debt. • Building a good credit score is essential for qualifying for most loans. It can affect other services too, as it is used for identity verification. • Issues that affect credit score: length of history, on time payment, percent of capacity utilized, new applications for debt, bankruptcy. • Credit Karma 💯 
 http://www.creditkarma.com
  • 19. IS DEBT A BAD THING? • Modigliani-Miller 
 market value is determined by earning power & risk of underlying assets, not by the method of financing. • Assumes no taxes, transaction costs, bankruptcy costs • Tradeoff Theory of Leverage 
 There is an optimal capital structure.
  • 20. SHOULD I PAY OFF ALL OF MY DEBT? • More debt = more risk • Not all debt is the same • Compounding is not your friend with debt, especially high interest debt. • Some debt is subsidized (e.g. Mortgage, Student Loans) • Paying off debt can be emotionally satisfying, but financially irrational. • Paying off debt can improve savings rates over time.
  • 22. WHAT IS YOUR NET WORTH? • Assets - Liabilities • Total net worth includes all assets. • Liquid net worth excludes illiquid assets & primary home (and related liabilities) • Do not confuse with cash flow. Very different. * https://www.census.gov/data/tables/2018/demo/wealth/wealth-asset-ownership.html
  • 23. WHAT IS A BALANCE SHEET? • A balance sheet is a financial statement that summarizes a companies assets, liabilities & shareholders’ equity. • Assets = Liabilities + Equity 
 (see, it has to balance) • Common ratios • Cash Ratio • Quick Ratio • Debt to Equity • Asset Turnover • ROA (Return on Assets) * http://www.investopedia.com/articles/04/031004.asp?ad=dirN&qo=investopediaSiteSearch&qsrc=0&o=40186
  • 24. CREATING YOUR PERSONAL BALANCE SHEET • Very simple summary of a personal balance sheet • Some recommend excluding primary residence (and related mortgage) • Very different than income statement, but useful for evaluating progress (excluding primary residence)
  • 26. WEEK 6: CREDIT & DEBT. DIGGING OUT. • Different types of Debt: 
 Student Loans, Auto, Credit Cards, Mortgage • Secured vs. Unsecured Loans • Loans & Rates • Credit Scores • Compounding in Reverse