Closed nickumia closed 7 months ago
Another cool table:
Classification | Put | Call |
---|---|---|
At the Money | Strike Price = Cost Price | Strike Price = Cost Price |
In the Money | Strike Price > Cost Price | Strike Price < Cost Price |
Out of the Money | String Price < Cost Price | Strike Price > Cost Price |
Tangentially related terms:
More concepts to retain:
Financial lifestyles
Things to consider
Risks
Pillars
Extra pillars
Types of incomes
Dimensions
Basic concepts
If Nick lives above his means, his net worth will have a decreasing trend. It is hard to sustain any level of true net worth in this type of lifestyle. Either Nick will use his own money, depleting his money directly, OR he'll take on debt that will effectively reduce his net worth, if he is not able to pay off or satisfy the debt through other means.
It's hard to manage living above your means while being in a Net Worth mindset.
If Nick lives above his means, he will require an increasing income to meet the need of always spending more than he has. With only active income, this will be mentally, psychologically and physically demanding to maintain. Passive income helps to assist in the management required to sustain increasing income.
Constantly needing to increase income to sustain living above your means is unsustainable. Some people might revel in this, but the great majority probably don't.
If Nick lives at his current means, his net worth will remain constant. If nothing else changes in life, this is the "goldilocks" condition. It might be manageable if his current net worth can weather him through changes or unexpected events over the rest of his life. With a high net worth, there is flexibility (and possibly freedom). With a low net worth, this is a bit dangerous.
There is no real concept of Net Worth in this scenario because whether your Net Worth is $1T or $100, there is no difference in practical application.
If Nick is living at his means, he simply needs to maintain the activities generating his current level of income. Alternatively, he can shift asset classes to earn the same level of income through other means. He has the freedom to explore without needing to constantly be looking for more. If Nick's net worth is high enough, it can used to generate income.
There is some flexibility in managing income in this scenario.
If Nick lives below his means, his net worth will have an increasing trend. If he is looking to accumulate financial resources to achieve a goal, this is the only method to achieve that. There is safety in this scenario because there is freedom to use an increasing net worth to improve the quality of life.
Living below your means is the only way of increasing financial Net Worth.
P.S. I added "financial" before Net Worth because we all technically have an infinite net worth in untapped potential.
If Nick lives below his means, he has freedom to not spend as much attention to his income activities. There is safety in knowing that his income can face some interruption and he'll be able to satisfy ends meet. If he wants to save money for unexpected future expenses, he has that luxury. If he wants to increase his income to increase his net worth faster, he has that option as well.
Living below your means gives freedom from income.
"Living above one's means" generally requires an "Income" mindset and "Living below one's means" generally allows for a "Net Worth" mindset. "Living above one's means" is more restrictive and demands more effort from a person. "Living below one's means" gives freedom from financial stress.
All of this doesn't mean that a person can't "live above their means" AND have a "Net Worth" mindset. It also doesn't mean that a person can't "live below their means" AND have an "Income" mindset.
"Living above one's means" and having a "Net Worth" mindset means that an increasing "Income" will be a byproduct.
"Living below one's means" and having an "Income" mindset will have a high "Net Worth" as a byproduct.
I made a general financial literacy page. It doesn't have the stock stuff above. But that's not a priority. If I want to revive that at some point, I'll make a new ticket for it.
Related to
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All of these high-level tickets are essentially me deciding on how to fuse all of these elements together. There's lots of facets to this "financial concepts" work and I honestly don't want to be a finance expert (or have finance define who I am or what I know). I know lots of finance things though that I think would be useful for others, so incorporating that into my platform would be cool.
A super nice table that summarizes options trading that was 🤯 when I first created it (August 2020):
Definitions: