The Tank

THE TANK — YOUR MONEY IS WATER Finance, chapter 1 · twelve lessons · no currency on this board: water is the same in every country THE SCENE INCOME — the inlet your tank what you have, right now INSURANCE — a little every month so one storm cannot sink the tank pay yourself first savings, invested slices of ships, loans to others RESERVOIR — refills from its own level that is compounding RAIN BARREL 3-6 months of spending, kept boring and reachable the emergency fund SPENDING — the taps you choose how far they open the slow leak you never see: fees and inflation DEBT — a pipe that drains faster than it fills pay only the interest and it never empties THE ONE NUMBER: inlet minus taps. It is the only thing that moves the level. Everything else on this board is what you do with the difference. TWELVE STOPS, IN ORDER 1 Nineteen and six: where the water goes cash flow · budget · surplus 2 Why a coin today beats a coin next year time value · present value · discounting 3 The rain barrel for the dry season emergency fund · liquidity 4 The pipe that drains faster than it fills debt · APR · amortisation · the minimum payment 5 Paying a little so a lot cannot sink you insurance · risk pooling 6 Owning a slice of the ship stocks vs bonds · equity vs debt 7 The bet on the whole haystack index vs active · costs 8 Thirty-four years to break even horizon · risk capacity · asset mix 9 The same seed in a sheltered pot tax-sheltered accounts · pensions 10 The sale made at the bottom the behaviour gap 11 Returns too smooth to be true Ponzi schemes · red flags 12 One page for the whole tank the plan · problem set next: chapter 2, the valley's water market where tanks are filled by rivers, and rivers by weather education, not financial advice JARGON, DECODED cash flow = what comes in minus what goes out · present value = what water promised later is worth today · liquidity = how fast you can get it out without a loss APR = the yearly interest rate on a loan · amortisation = each payment split into interest plus paying the loan down · compounding = growth on the growth index fund = owning every share in a market at once, at low cost · diversify = many small bets instead of one big one · inflation = prices rising, so stored water shrinks