Audiobook Learning Companion

The Cash Flow Funnels

How people normally think about cash flow and saving.

Chapter 3, page 55

The Power of Compounding

Saving now versus later.

Chapter 5, page 77, 7% assumed rate of return

The Go-Getter saves for the first ten years and then stops. The Slowpoke waits ten years, then saves for the next thirty-three. The Slowpoke puts in more than three times as much money — $181,500 against $55,000 — and still ends up behind.

The Power of Compounding

Saving now versus later - saving big.

Chapter 5, page 80, 7% assumed rate of return

Here both savers keep going for the full forty-three years. The Slowpoke never catches up, and the gap keeps widening.

Two-thirds of the Time, one-third of the Dollars

Chapter 5, page 82

The first two-thirds of the time period, you only accumulate one-third of the dollars of wealth you need. The last one-third of the time, you accumulate two-thirds of the wealth you need.

The Geometric Jump

Chapter 5, page 83

If you have saved faithfully, the "magic" of compounding occurs in the last one-third of the time, generating two-thirds of the returns.

Tax Savings Savings Effect

(Or how to turn $3,000 into $5,000 without working harder.)

Chapter 6, page 91 · 40% assumed tax bracket

To save $3,000 outside a tax shelter, you have to earn $5,000 and pay $2,000 in income taxes. Shelter it instead — in a 401(k), say — and you can run the same cascade in reverse.

Leveraging the equity in your home to create investable cash

Take out a $250,000 mortgage at 4 percent, invest it for returns of 7 percent.

Chapter 6, page 98

Sophie increased her net cash flow by $6,250 a year without working one day longer — and by more than that after tax, because she could deduct the mortgage interest.