Common Cents (12 Observations on Money)

I believe that every state should mandate a high school course teaching students personal financial management. Normally parents are expected to pass down their knowledge on this subject but just like sex education, the message does not always get passed or understood. Students would be taught the following lessons:

  • How and where to save money
  • Building an emergency cash fund
  • How to create a budget
  • How, when and where to apply for debt
  • How to maintain an excellent credit rating (FICO)
  • Principles of smart shopping (car, clothes, etc.)
  • Student loan programs for college (qualifications, terms, costs)
  • Paying personal Income and other taxes
  • Mortgages and Home Equity lending
  • Purchasing Insurances (car, renters, health, home)
  • Principles Of Investing (Stocks, Bonds, Gold)
  • Retirement Planning

In lieu of the course, this is the type of financial guidance I would offer young people about to graduate high school or college. These observations also apply to  those who are a bit older:

  1. For many young people, a university education may not be worth the costly tuition in terms of return of your investment, and like a new car leaving the dealership, may become a depreciating asset.
  2. Often the person most responsible for your financial success or failure is not your banker, your financial advisor, Jim Cramer or your accountant. It’s your spouse or life partner, so choose wisely!
  3. The same foolproof strategy applies to both successfully investing in the stock market and gambling in a casino: Luck 
  4. In investing, the only “sure thing” is that there is no sure thing.
  5. The best skills for financial management in business or personally are the abilities to first, create a workable budget and second, keep to the budget.
  6. Before retirement, your focus should be on stoking your retirement funds with contributions and a smart investment strategy. After retirement, you should be focused on your burn rate (how quickly and smartly you spend your retirement dollars). A controlled burn rate can mitigate shortfalls in your retirement strategy.
  7. The smartest career strategy in terms of financial independence is to transition from getting a paycheck (employee) to either issuing paychecks to your employees (as a business owner) or collecting receivables (as an entrepreneur)
  8. The most satisfying experiences are gained from, as a businessman, turning around a failing company and from as a caring person, turning around an individual who needed help and guidance.
  9. Buy lifelong experiences as opposed to buying things whose pleasure is transitory.
  10. The greatest investment of your time and energy should be in your health not your wealth.
  11. Despite their advertising, banks are not your friend or your “neighbor”. They are in business to make money off of you. They collect your deposits and pay you .01% interest while charging you 100+x more for interest if you borrow for a mortgage or car loan.
  12. You should be as dubious about the accuracy of the numbers on a corporate balance sheet as you would the age of an actress or the net worth of President Trump. 

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