A personal finance blog dedicated discussing such topics as budgeting, asset allocation, 401K, IRA, cash flow, insurance, financial planning, portfolio management, and other areas in personal finance.


Wednesday, June 29, 2005

Twelve Key Elements of Practical Personal Finance

There's a neat little book by James Gwartney, Richard L. Stroup, and Dwight R. Lee called Common Sense Economics. I have referred to this book in the past. The last section of the book is dedicated to the Twleve Key Elements of Practical Personal Finance, which are:

1. Discover your comparative advantage.

2. Be entrepreneurial. In a market economy, people get ahead by helping others and discovering better ways of doing things.

3. Spend less than you earn. Begin a regula savings program now.

4. Don't finance anything for longer than its useful life.

5. Two ways to get more our ot your money: Avoid credit=card debt and consider purchasing used items.

6. Begin paying into a "real-world" savings account every month. (this seems identical to number 2, but the authors have it listed again.)

7. Put the power of compound interest to work for you.

8. Diversity - Don't put all of your eggs in basket. (Remember, the name of the book is Common Sense Economics!)

9. Indexed equity funds can help you beat the experts without taking excessive risk.

10. Invest in stock for long-run objectives; as the need for money approaches, increase the proportion of bonds.

11. Beware of investment schemes promising high returns with little or no risk.

12. Teach your children how to earn money and spend it wisely.

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