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Startup

Guide
2013 Edition

The

SHARE FREELY

Building a Better World Through Entrepreneurship

RYAN ALLIS With Ellen Daly


CEO of Connect.com
More slides at www.startupguide.com

Money
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SECTION 6

MONEY

ABOUT THIS PRESENTATION

THIS presentation IS PART OF A LARGER slide DECK on building a better world through entrepreneurship

For more slides & CONTENT visit:

Startupguide.com
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money Key lessons

MONEY IS A REALLY IMPORTANT TOPIC

TO UNDERSTAND
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money Key lessons

MONEY IS SIMPLY A STORE OF VALUE WHICH ENABLES TWO PARTIES TO EXCHANGE EVEN IF they cannot barter
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money Key lessons

HERE ARE THREE KEY LESSONS

ABOUT MONEY
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money Key lessons

SPEND LESS MONEY THAN YOUR EARN

EVERY MONTH
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money Key lessons

NEVER GO INTO DEBT FOR SOMETHING THAT

YOU DO NOT NEED


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money Key lessons

SAVE UP EARLY IN LIFE AS the law of compound INTEREST HELPS A LOT

OVER TIME
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money Five Keys to wealth

HERE ARE FIVE KEYS TO BUILDING

WEALTH
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money The secrets to wealth

PAY OFF DEBT

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money The secrets to wealth

BUILD UP SAVINGS

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money The secrets to wealth

3 3

INVEST IN CASH PRODUCING ASSETS


Savings Accounts Certificates of Deposit Treasury Bonds Municipal Bonds Corporate Bonds LendingClub Notes PRIVATE COMPANY STOCK PUBLIC COMPANY STOCK VENTURE FUNDS HEDGE FUNDS
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money The secrets to wealth

THEN USE THE CASH FLOW FROM YOUR INVESTMENTS TO MAKE MORE INVESTMENTS
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money The secrets to wealth

earn equity in companies you work for or start


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money The secrets to wealth

CONTINUE THIS CYCLE For 40 years


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money The secret to wealth in REVIEW

1. 2. 3. 4.

PAY OFF DEBT BUILD UP SAVINGS INVEST IN CASH PRODUCING ASSETS THEN USE THE CASH FLOW TO INVEST IN MORE CASH PRODUCING ASSETS 5. EARN EQUITY IN COMPANIES YOU WORK FOR OR START 6. THEN CONTINUE THIS CYCLE OVER AND OVER
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money The middle class vs. the rich


Individuals in the middle class accumulate more debt as they become more successful. A pay raise qualifies them to borrow more money from the bank so they can buy personal items like bigger cars, vacation homes, boats, and motor homes. Their wage income comes in and is spent on current expenses and ONLY then on paying off their personal debt. SO As their income increases, so does their personal debt. This is what we call the rat race.

- Robert kiyosaki
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money The middle class vs. the rich

The rich have their assets work for them. They have gained control over their expenses (by saving and investing money each month) and focus on acquiring or building assets. Their businesses pay more of their expenses, and they have few, if any, personal liabilities.
- Robert kiyosaki

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money Key lessons

IF YOU SAVE UP & INVEST HERE IS WHAT YOU CAN

EXPECT TO HAVE
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money What you can expect to retire with

WHAT YouLL HAVE IF YOU SAVE & INVEST


Monthly SAVINGS $1,000 $2,000 $3,000 $4,000 20 Yrs $0.52M $1.05M $1.57M $2.09M 25 Yrs $0.81M $1.63M $2.44M $3.26M 30 Yrs $1.22M $2.45M $3.68M $4.91M 35 Yrs $1.81M $3.63M $5.44M $7.25M 40 Yrs $2.64M $5.29M $7.94M $10.58M 45 Yrs $3.82M $7.65M $11.47M $15.29M 50 Yrs $5.50M $10.99M $16.49M $21.97M

ASSUMES 7% AFTER INFLATION ANNUAL RETURN FROM INVESTING | ADD ADDITIONAL TIME TO PAY OFF ANY CURRENT DEBT
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money Two types of investments

THERE ARE TWO TYPES OF INVESMENTS

DEBT & EQUITY


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money Two types of investments

DEBT INVESTMENTS ARE LOANs IN WHICH YOU EARN A FIXED INTEREST RATE RETURN
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money Two types of investments

EQUITY INVOLVES INVESTMENTS in EXCHANGE FOR PARTIAL OWNERSHIP IN A COMPANY


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money Two types of investments

WITH EQUITY YOU MAKE MONEY WHEN THE VALUE OF THE COMPANY GOES UP
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money types of investments

DEBT
Savings Accounts Treasury Bonds Municipal Bonds Corporate Bonds P2p LENDING

EQUITY
Mutual Funds Index Funds/ETFS Small Cap Stocks MID CAP STOCKS LARGE CAP STOCKS VALUE STOCKS GROWTH STOCKS Emerging Market Stocks options VENTURE FUNDS HEDGE FUNDS PRIVATE COMPANIES
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money Average returns

HERE IS A SIMPLIFIED EXAMPLE OF HOW YOU CAN HAVE

$1M in 30 years
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money To have $1m in 30 years

To have $1m in 30 years SAVE $1k every month

AND INVEST IT
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money To have $1m in 30 years

To have $1m in 20 years SAVE $2k every month

AND INVEST IT
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money

Two ways TO BECOME FINANCIALLY WEALTHY

THERE ARE TWO MAIN WAYS TO BECOME A MILLIONAIRE

1) Build a business 2) Save & Invest wisely for 30 years

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money

Two ways TO BECOME FINANCIALLY WEALTHY

If entrepreneurship isnt for you Heres how to become a millionaire Automatically

1. Save $1000 per month 2. Invest it at a 7% after inflation return 3. Dont take any out for 30 years
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money

ANNUAL RETURNS OF INVESTED CAPITAL

BUT HOW CAN YOU MAXIMIZE YOUR CHANCES OF EARNING a 7% AFTER INFLATION RETURN?
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money Average returns

HERE IS A TABLE OF AVERAGE YEARLY RETURNS BY

TYPE OF INVESTMENT
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money HISTORICAL RETURNS

OF COURSE PAST RETURNS Arent ensured in the future


But they are STILL HELPFUL
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money Table of average returns after inflation


Investment Type Savings Accounts Certificates of Deposit Treasury Bonds Municipal Bonds Corporate Bonds LendingClub A-C Notes S&P 500 Index Fund Dow Jones Index Fund LendingClub D-F Notes
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Approx.. Avg. Annual Return 0.10% 1.70% 2.50% 4.50% 6% 8% 10.60% 11.10% 12.10%

After Inflation (-2.8%) -2.70% -1% -0.30% 1.70% 3.20% 5.20% 7.80% 8.30% 8.90%
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money How to invest

ONE INTERESTING NEW INVESTMENT OPTION IS PURCHASING

LENDINGCLUB NOTES
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money Price to earnings ratio

ONE KEY METRIC TO LOOK AT WHEN INVESTING IN A PUBLIC COMPANY IS THE

PRICE TO EARNINGS RATIO


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money PE RATIOS

I AVOID INVESTING IN BUSINESSES WITH PE RATIOS ABOVE 30 AND LOOK INTENTLY AT INVESTING IN BUSINESSES WITH PE RATIOS

BELOW 15
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money CASHFLOWS

THE BEST WAY TO DETERMINE THE TRUE VALUE OF A PUBLIC COMPANY IS TO CREATE A DISCOUNTED CASH FLOW (DCF) FORECAST

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money Buffets margin of safety

BUFFETs investing method INVOLVES UNDERSTANDING A FIRM WELL CALCULATING WHAT HE BELIEVEs THE fiRM IS ACTUALLY WORTH THEN PURCHASING SHARES WHEN Enough of a margin of safety exists
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money CASHFLOWS

WARREN BUFFET IN ESSENCE CREATES DCF MODELS ON EACH COMPANY HE INVESTS IN AND ENSURES THERES A BIG MARGIN OF SAFETy BETWEEN WHAT HE THINKS THE FIRM IS WORTH AND WHAT THE MARKET THINKS THE FIRM IS WORTH
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money Portfolio theory

PORTFOLIO THEORY STATES THAT FOR THE AVERAGE INVESTOR RETURNS ARE MAXIMIZED BY DIVERSIFYING YOUR INVESTMENTS AND INCLUDING LOW CORRELATING ASSET CLASSES
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money Portfolio theory

BUT IN PRACTICE THE HIGHEST RETURNS ARE SEEN WHEN YOU INVEST IN JUST A FEW ASSETS YOU UNDERSTAND VERY WELL
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money Summary of money section

YOU CAN BECOME WEALTHY OVER TIME BY


PAYING OFF DEBT SAVING INVESTing USING PROCEEDS FROM INVESTING TO INVEST MORE AND NOT GOING into debt FOR UNNEEDED THINGS
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money Summary of money section

THERE ARE TWO SEGMENTS OF PEOPLE IN THE WORLD


1

PEOPLE WHO PAY INTEREST ON LOANS AND WORK AT COMPANIES PEOPLE WHO RECEIVE INTEREST ON LOANS and own PARTS Of companies

WHICH SEGMENT ARE YOU IN?


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Startup Guide
2013 Edition

The

SHARE FREELY

Building a Better World Through Entrepreneurship

RYAN ALLIS With Ellen Daly


CEO of Connect.com
More slides at www.startupguide.com