Cold Hard Truth On Family, Kids And Money by Kevin O'Leary pt. 2

Not my photo.

Part Two: Marriage

Chapter 4: (What to look for in a mate)

1) Homogamy. noun - Interbreeding of individuals with like characteristics. Pretty much O’Leary is saying, aim to marry someone with a similar sociological background to you if possible.

2) Health. Marry someone who is relatively healthy. Research has shown that couple who exercise together enjoy lower stress levels and greater happiness.

3) Social tendencies. Look for someone who is social. Studies have shown that couples do best when they engage in the larger community, be it through clubs, service organizations or religious groups. Invite friends over for dinner… join a hiking group.

4) Education. The better educated you are the better off your marriage will be.

5) Money. Look for someone who is good with money. A Meanie, who saves, invests and spends within his means.

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Chapter 5: Establish your Financial Indepdence

Save 10% of your income for future use. Hire a financial planner or broker* separate from your spouse’s . You both need one. If one person ends up losing their money you can rely on the savings/investments of the other. And, in case of divorce, you’ll be protected. A divorce is so much easier if you have your own advisor and your own funds; you’ll be able to split your assets without missing a beat.

*note: Financial planners can only buy mutual funds while brokers can buy stocks and bonds.

Kevin also says you should sign a prenuptial agreement before getting married. (p 213)

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Kevin O’Leary’s Investment Philosophy

1) Never let a stock, bond, commodity or any investment become more than 5% of your portfolio.

2) Never purchase a stock or bond that does not pay a dividend or interest. In the last 40 years, over 70 percent of stock market returns have come from dividends, not capital appreciation.

3) Keep a balanced portfolio. O’Leary personally keeps his portfolio 50% stocks and 50% bonds. He actually isn’t a good stock or bond picker. That’s why he created O’Leary Funds. He lets the professional managers pick the stocks and bonds he owns and gets a dividend and/or interest check every month.

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Chapter 6: Build the Bedrock of your Partnership

Setting financial goals, making a plan and sticking to a budget are the mortar that will make a solid, good life possible.

O’Leary suggests calculating all your income (net salary, bonuses, interest/dividends earned etc.) over a 3-month period. Then do the same with all your expenses (rent, mortgage, utilities, insurance, car payments, property tax, groceries, child care, health care, gas, eating out, clothing, entertainment, magazines, donations… even that pack of gum you bought… everything.

Add up your income and minus your expenses. If you’re in the black, good. If you’re in the red, you’re in trouble. It’s time to declare a state of emergency. Eliminate the car you can’t afford. Stop taking vacations. Do not go out to dinner. You have to correct your bad spending habits now.

You only have two financial goals: get out of debt and pay off your mortgage; and keep putting 10% away in your Secret 10 (that’s 10% of your income that you’re putting away and saving for later). For every dollar you earn, 90 cents should go to paying off debt, and 10 cents should go to your Secret 10. The 90/10 rule supersedes everything until you’ve paid off all your debt.

When you get a mortgage, you want to design it so you can pay it off as soon as you can. Don’t invest in anything until you’ve paid it off. If a fixed mortgage goes up to 7% or 8%, your rate of return is 7% or 8%. Good luck with getting that sort of return with no risk or volatility in the stock market.