Financial Security For Dummies. Eric TysonЧитать онлайн книгу.
have far more features, especially safety features like air bags and anti-lock brakes, compared to those from a generation or two ago. Today’s cars are dramatically more fuel efficient too.
Just walk through most homes and apartments today and you’ll find all sorts of devices like microwave ovens, printers, HDTVs, washers and dryers, dishwashers, and so on, which are far better and relatively less costly than in prior generations. And in some cases, these devices didn’t exist or weren’t widespread not that many generations ago.
So, I urge you to step back and think about what it is that you value and to recognize how “luxurious” are so many of the choices and options that we have in modern American society. With many products and services, we get far more for our money than did folks a generation or two ago.
That said, we can all think of some expense categories like higher education, housing in some higher-demand cities (such as New York City and San Francisco) and portions of the healthcare industry where the rate of price increases (inflation) may exceed increases in typical wages and the general cost of living. These categories are the exception, not the rule, and you can take steps and actions to mitigate and blunt some or even much of the excessive price increases through the strategies I discuss in this book.
Assessing where you are
What’s your current personal financial health? There are numerous ways to measure that. When I’ve worked with clients as a financial counselor and as an educator, I’ve found the following exercises to be valuable:
Net worth analysis: Your ability to accomplish important financial goals, such as buying a home and someday retiring from full-time work, depends upon your net worth. To derive your net worth, you total up your financial assets and subtract your financial liabilities. I typically exclude a person’s home in this analysis unless they plan to tap some portion of their home’s equity, by trading down to a lower-priced property.
Spending analysis: You should know where your money goes in a typical month or year, especially if you’d like to save a greater portion of your employment income. Analyzing your historic spending can tell you just that.
Saving analysis: Over the past year, what portion of your work income were you able to save? Many people don’t know the answer to that important question, and if you don’t, you can’t really know whether you’re on track to accomplish your financial and personal goals.
Your investment portfolio: Can your investment portfolio be improved? Do you understand your current investments? How do your current holdings stack up in terms of costs/fees and performance within their respective peer groups? Do your current investment holdings match your risk and return preferences?
Your home: If you currently rent or own a home but are looking to sell and buy another, that takes some advance planning and analysis. Since housing costs can consume a significant portion of your income and budget, you should ensure that a change in your housing situation fits with your financial and personal goals and planning.
Insurance review: You should have insurance to protect you against losses that could be financially catastrophic to you and your loved ones. I know from my counseling work that many folks have gaps in their insurance coverage and are wasting money on overpriced or unnecessary policy features.
Employee benefits review: Plenty of employees don’t bother to read and review their employee benefits, which typically include various insurance coverages and possibly a retirement savings plan. Employee benefits can actually be quite valuable and should be coordinated with your overall financial plan.
These elements form a personal financial plan. You can hire a competent and ethical financial planner to assemble such a plan for you, but you should beware that many folks sell products on commission or charge hefty ongoing money management fees. Others aren’t interested or experienced enough to help you with nuts-and-bolts issues like analyzing your spending. See Part 4 for more details on getting your personal finance house in order.
Grasping financial lingo and trends
Personal financial knowledge and literacy is an enormous obstacle for too many people, including those who have invested tremendous time, energy, and money into their formal educations. Unfortunately, such education rarely includes the vital topic of personal finance.
Ubiquitous gurus are another common obstacle. Everywhere you look, especially online and in the media, there are plenty of anointed experts predicting what will supposedly happen with the economy, financial markets, and all sorts of other economic variables. Listening to all these supposed experts and their often-conflicting opinions can paralyze you or make you feel that you need to hire them (or others like them) to manage your money since it appears that they know so much more than you do.
Trying not to avoid money
One big obstacle is that just about everybody avoids dealing with some aspect of money. For some, it’s as simple as avoiding looking regularly at their checking account and verifying transactions and the account balance or making decisions about where to invest saved money. Others neglect needed insurance coverage, perhaps out of fear of confronting their own mortality and vulnerabilities. Some people are plagued by broader problems such as feelings of guilt and shame about money or feeling that money seems dirty and evil.
The fact that money-related issues aren’t always at the top of your priority list may well be a good sign. Perhaps you spent the past weekend with friends and family or were engrossed in a captivating book or newly discovered streaming series. But continually avoiding money or some aspect of your finances can result in unnecessary long-term pain.
Some personal finance procrastinators can get away with their ways for a number of years. However, whether it’s in the short term or the long term, eventually, problems do occur from avoiding dealing with money and related decisions, and sometimes the damage can be catastrophic.
Some money avoiders don’t plan ahead and save toward future goals. Often, the reality hits home when they contact the Social Security Administration (SSA) or get an update from the SSA and discover what monthly retirement benefit amount they’ll get at full retirement age (which is around age 66 to 67 for most people). The reality for many people means the realization that they’ll have to continue working into their seventies in order to maintain the modest standard of living to which they’ve become accustomed.
Several issues typically cause a lack of retirement funds. Many money avoiders could save more money, but they typically aren’t motivated and organized enough to do so. Generally, they haven’t bothered to conduct even basic retirement analysis to understand how much they should be saving to reach their retirement goal (or even think about if and when they want to retire).
Because money avoiders dislike dealing with money, what they’re able to save often gets ignored and languishes in low- or no-interest bank accounts. Avoiders also tend to fall prey to the worst salespeople, who push them into mediocre or poor investments with high fees. When avoiders choose their own investments, they often do so based on superficial research