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Managing Your Financial Life 精选

已有 8220 次阅读 2012-11-19 23:15 |系统分类:教学心得|关键词:office 3 center normal color

Reasons for saving (1).docx

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Recently several of myyoung Chinese American friends asked me about financial advices. This led me tothink and write about the title of this blog article. While mostly this articleis written for people living in the US, I choose to post it here on ScienceNetbecause

1.   There is a large enough North American group of readers of my blog

2.   Although I am notcognizant of the Chinese financial scene, what I write below contains some universal, country-independent, and applicable principles.

Thus, happy readings!

“Money is theroot of all evil” is a well-known saying. But I rather think “Money is the root of all things, good or bad” in the sense not only we cannot avoid it but it can also do good. First of all, we all need money to live and to survive. Thus, unless you are resigned to a life of subsistence on welfare, then you need to manage your financial life whether or not you like it. Note saying “No plan -I’ll let nature takes its course and don’t worry about money” is still a financial plan (probably a bad plan). The good thing is that to manage your financial life well is to enable you to live the life you really want which is THE goal of financial management. This is important, so let me repeat it. The goal of financial management is to allow you to lead the life you want not necessarily to be superrich unless that IS your life goal (wise saying due to my smart adult daughter).  Too many of us avoid managing our finances because it brings up nagging feelings of being told by our parents or spouses that we must save more money, make more money,or budget more carefully. Or we may be so tired of hearing friends boast about making money from a particular investment that we don't want to have anything to do with money (Note: Almost no one tells you the mistakes they made).  But the point of managing your money is to please yourself -- NOT to please your friends or relatives, not to make you a more virtuous person (it doesn't), and not even necessarily to make you rich if you don't yearn to be. The goal of managing your finances is so that you can live the life you want, withoutworrying financially about your present or future.

Thus, you need to decide first for yourself what is the goal of your life. Note this is not a one time thing. As you grow and age, your life goal will change and hence also the management of your finance. But the important thing is to continuously monitor your goal and adapt your plan accordingly. If you are very wealthy, you can hire a trusted and capable financial planner to do this for you year in and year out and free yourself or your family from this task. Even so, we continuously hear stories of movie stars and great athletes who were cheated or lost their fortune due to trusting bad financial planners. Furthermore, 98% of us are not in this category. What is there to do then?

Many of us amateurs tend to pick up some financial advices or tips here and there from well-meaning friends or casual reading. We follow them and sometimes with even good results. But do they remain good as the circumstances of your family change? How would you know one way or another? The legendary Warren Buffet has one rule: he never invests in things he does not fully understand. Thus, I maintain the only way is to be an educated consumer and do-it-yourself. All you need to have is an understanding of the principles behind financial management which are actually very simple (nothing but simple arithmetic and compound interest http://blog.sciencenet.cn/blog-1565-542609.html) and an understanding of yourselfand your family’s attitude towards risk which varies among person to person.Here you actually have an advantage over a financial planner because no one knows you and your goal better than yourself and has ONLY your interest atheart.

Now how do you get started? For beginners, I recommend the book “The Only Investment Guide You'll Ever Need[Paperback] by Andrew Tobias”. Why? 1. that is how I started, 2. It is really the only guide you need, 3. He is funny (not dry like most finance books) to read, 4. It is in paperback and you can get it as inexpensively as $2.00 (used on amazon.com). But be sure to get the latest edition (remember financial conditions and rules change). After that you will be able to make up your own mind as to the plethora of financial management, from the mundane to the most exotic, books you can study and read further. It also pays to subscribe to a financial magazine such as MONEY (for the basic) or SMART MONEY(for the more advanced) just to keep up and test your own understanding, i.e.,either finding nothing new to learn which gives you peace of mind or discover a new angle to take advantage of due to changing financial laws or circumstances.Overtime, you may even find financial management for your family to be a very interesting and absorbing hobby and the only hobby that does not cost but makes money for you. Finally, you can still hire a financial planner if you want. But this time you are an educated consumer and can separate the good from the bad. In fact I don’t want to give the impressionthat I am against financial planners. I myself use one and talk to him once a year. In the 11 years since my retirement, he has given me one piece of good advice that I know but have forgotten. Furthermore he monitors my major financial moves and has authorization to notify my adult children should I lose my mind and begin to do foolish things in his opinion.

One last thing, as you gain financial knowledge you will find more and more interesting ways to make more money. Some of these ways are real if you are willing to spend the time and energy to do it and accumulating more money is your goal; some of them are dubious; some are down right fraudulent. Remember the Credit Default Swaps (CDS) of 2008 where many financial experts who should know better were taken, trillions of dollarswere lost, and cause the nation-wide panic/crisis. These were essentially fraudulent financial instruments. There are thousands lesser known frauds and scams that are pitched to ordinary people like you and me every day who aretempted to make more money. Again if you are a knowledgeable consumer and knowyourself then you are in the best position to not fall into these traps (I am no exception, someday I can tell you the traps/mistakes I have fallen into or made in my younger days.) In summary, I repeat

·       The purpose of money is for you to do what you really please. Be it 1. more money 2.live comfortably and not have toworry, 3. Free to do what you want.

·       Nobody knows you and your goal betterthan yourself and will only have your interest at heart. Thus be an educated consumer even if you want to hire a FP to do it for you.

·       Continuously review your life goaland change your financial management accordingly

I am proudto say that my own family is a living example through trial and tribulation of the above advices. We started with nothing 50+ years ago, raised and educated our children, and although not belonging to the Romney’s upper 2% but now living in happy retirement with no worries except doing exactly what please us and give back to the Society for providing us with the opportunities.

Note added 4/26/2013: Financial rules and circumstances change. Thus you need to keep up. Reading financial magazine mentioned above is one way. My adult daughter recently told me two web sources one can read and use:

http://moneyning.com/

http://www.mrmoneymustache.com/

I sampled them and found them to be very useful!

Note added 1/30/2016: A more recent article said it even better I attach it here (see top of page).




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