Posts filed under 'Introduction'
If you want to learn about personal finance, Suze Orman can be terrific. She is knowledgeable and helpful. But she can also be intimidating, patronizing, and borderline mean. Her approach is to treat folks like their nagging mother when they’ve been bad. Regardless of what you think is best for you Suze usually thinks it is a lousy idea. To prove her point, she nags, cajoles, occasionally bullies, and otherwise makes people feel like they are letting her, and more importantly themselves, down.
That said, often she’s right. But there is a healthier way to help folks who want to do a better job managing their money – which doesn’t require scolding. Chances are you already know you should learn more about managing your own money. You often already know the right answer to whatever question you have and, equally as often, you either don’t trust yourself or find managing your money a drag, boring or just plain anxiety producing. (For some, the mere thought of money management drives them to straight to the bar.)
Here’s a dirty little secret that Suze doesn’t want you to know about – finance does not have to always invoke your mother! You don’t have to feel like a “bad” girl every time you want to buy something. On the contrary, finance is a valuable tool you don’t have to dread learning about and understanding. And it can actually be fun – after all the better you understand your finances, what you have and what you don’t, the more you know what can an can’t do. Hello, shopping!
If you’ve read my blog before, you know that most people get into trouble with their money because they don’t create a budget or worse, do, but promptly ignore it. Contrary to what Suze might tell you, this is not a personal failing. The reasons most budgets fail is not because of how you budget – it’s how you use your budget. Attitude is everything. Most budgets fail because they seem to stop you from doing what you want: “It’s not in my budget.” But a good budget really tells you what you can spend. “It’s in my budget.” Start thinking of a budget as a way to help you achieve your life’s goals and dreams. A budget doesn’t tell you what you can’t do, it tells you what you can do. There, isn’t that more fun. No putting you down for your shoe habit. No pointing out what you are doing wrong. Just a reminder that making and using a budget helps you manage your money.
So even if you blow it (or are about too) you can get beat up by Suze or remember,on rare occasions, being bad is good!
http://www.nytimes.com/2009/05/17/magazine/17orman-t.html?hp
May 19th, 2009
Since you have a finite amount of money with which to make decisions, every decision has consequences. Opportunity cost is what you might be giving up with each decision you make. So consider what something is really costing you – today and in the future. The good news is that opportunity cost is not really a number so, no math. Rather, it is a set of alternatives. For example, if you stay in a less-than-fulfilling relationship, you may be giving up the opportunity to meet a new, more compatible person. And, obviously, if you purchase an outfit at Juicy Couture, unless you have an unlimited shopping budget, you give up the opportunity to purchase something even cuter at Urban Outfitters. In finance, opportunity cost refers to the price you may pay in lost opportunities by choosing one alternative over another. So it behooves you to think about the opportunity cost as you weigh decisions.
As a Fashionista you think about this every day. If I skip dinner for a week or two to pay for those boots, will I be too wiped-out to enjoy wearing them? If I skip on cosmetics to support my Starbucks habit, will I drink my coffee alone? If I use my rent money to buy a whole new wardrobe, will I have a closet to put it in? Opportunity costs loom large in such decisions.
May 5th, 2009
Too good to be true? Actually yes, but we’re getting closer. Scientists have discovered a type of fat in our bodies called brown fat. I know more fat is hardly cause for celebration. But we LIKE brown fat! Turns out, brown fat burns calories. Yes, you did read that correctly, burns calories. And, even better, it’s activated by low temperatures. So turn off your thermostat, don’t buy that pea coat, and scrimp on sweaters. You’re wallet and waistline will thank you!
http://www.cnn.com/2009/HEALTH/04/10/brown.fat.obesity/
April 13th, 2009
You dream about what you’ll buy. (Maybe you can finally get that pony!) Or, what debts you’ll pay off. (“Credit Card Company, kiss my rear-end.”) The only fun thing about tax time is thinking about the refund check.
However, some of you – and I’m not pointing any fingers – are struck by “refund anticipation” disease. You sign a piece of paper and get an advance from your tax preparer on your refund check.
There is a serious side-effect from “refund anticipation” disease you may not realize: The advance loan comes with super high interest rates. Fortunately, there is a quick cure – don’t take out an advance against your tax refund. After all, why pay super high rates for borrowing your own money? Instead, simply wait for the check to arrive.
What if you need the money not for impulse shopping but because you really need it? Try as hard as you can to refrain. The high interest rates will cause you to fall further into debt – remember refund advances are short-term loans which are due and payable – high interest payments and all.
March 30th, 2009
Why is it, women can talk about ANYTHING with each other except money? We chat, chat, chat about everything except really important economic matters like how we are holding up in this recession, whether any area of our financial lives is out of control, or how we can use what is happening in the economy now to educate ourselves better.
Talking about money is key to understanding it – and understanding it is key to having more. So grab the girls, talk a walk (burn some calories and avoid spending cash on drinks) and talk about the economy or investing or money in general – you’ll be healthier, wealthier and wiser.
March 20th, 2009
(Yes, Really)
Adam Smith: Optimist – individuals should be allowed to pursue their own private economic interests as much as possible. And, the free market, while appearing chaotic and unrestrained, is actually guided to produce the right amount and variety of goods by an “invisible hand”.
Translation: Buy whatever you want so long as it looks good on you.
Thomas Malthus: Pessimist – population will increase at a geometric rate, the numbers of workers on farms will increase at a slower pace, productivity and wages will not keep up, and our overall lot will not improve and everyone starves to death.
Translation: Don’t buy anything regardless of how it looks on you.
John Keynes: Realist – allowing individuals to pursue their own interests sometimes leads to inefficient outcomes, requiring policy responses from the government.
Translation: Bring a friend to make sure what ever you buy really does look good on you.
Karl Marx – Revolutionary – the “inevitable” cycles of economic breakdown from individuals pursing their own interests leads to revolution.
Translation: Be careful of trends.
Joseph Schumpeter: Creative Destructionist – innovation lays at the heart of economic development and requires entrepreneurship
Translation: “Fashion is made to become unfashionable”, Coco Chanel
March 17th, 2009
Dorothy Parker once said: “Take care of the luxuries and the necessities will take care of themselves.” She obviously said this before this recession started (plus she died in 1967).
These days, you must take care of the necessities. One important necessity people often forget about is a cash cushion – ideally three months of living expenses. Start by saving up to one month’s worth of living expenses. This may take awhile, but it is really crucial. You want to be able to take care of yourself if you hit any bumps. Work your way up to three months and then promise yourself you won’t touch that money unless there is an emergency.
The sooner you start saving, the better. I urge you to start saving now – even if you only have a little bit left over every month. For example, if you are 21 and do not have any savings, but can start saving one hundred dollars per month (25 dollars per week), and earn five percent interest on your money, by doing nothing more, you will have saved a little over 78,000 dollars by the time you are fifty. (See my January 19, 2009 blog on Interest). If you wait until you are 31 to start saving the same 100 dollars per month, when you are 50 you will have a little less than 38,000 dollars. In this example, by waiting 10 years to start your savings meant you saved 40,000 dollars less. The higher the interest, the bigger the difference will become between saving now and saving later.
Dorothy Parker also said, “I’ve never been a millionaire but I just know I’d be darling at it.”
Fashionista Fact:
Dorothy Parker (www.en.wikipedia.org/wiki/Dorothy_Parker) was an American writer and poet who is best known for her acerbic wit, wisecracks and sharp eye. You could do a lot worse than to read her.
March 10th, 2009
What’s hot? What’s new? What’s now? What to buy? Keep? Store? It can be hard to stay in style. What’s the hottest fashion trend these days? Learning how to manage your money. Whether it’s getting out of debt, making and using a budget, or simply spending less and saving more – understanding personal finance, and the economy at large is totally in.
Fashionista Fact:
Economics is the new hot major on campus!
http://www.npr.org/templates/story/story.php?storyId=101321353
March 3rd, 2009
Finance, and therefore money, often gets a bad rap. Women who like money and want more of it are too often considered ambitious, greedy or gold diggers. However, having money can be a truly enjoyable – even life changing – experience. At its best, money is about freedom and choices, about having options and opportunities. It’s about being able to live the life you want to live in the way you want to live it. Money allows you to travel, to go to school, or to work at something that offers you full satisfaction, regardless of compensation, instead of being stuck in a job you hate just to pay the bills. Money gives you the freedom to choose whether to buy that Prada bag or the Gucci boots or, in a perfect world, both. Money allows you to be self-sufficient; with the confidence that comes with being independent and the freedom to make life choices that are right for you. It doesn’t guarantee all this, but it certainly ups the odds. It’s a means to an end we all aspire to.
So knowing how to manage your money is vital. There are a lot of decisions to make (student loans, buying a car, buying a house, how many pairs of shoes you can own without being obscene) which will rely on your having a basic understanding of your personal finances. Money can be cheap or expensive, depending on what you know about how to use it. For example, if you charge those Manolo Blahnik shoes – the ones you know perfectly well you can’t afford – to your credit card and don’t pay the bill in full when it arrives in the mail, the shoes become a lot more expensive than the original number that was on the price tag because of the interest the credit company charges.
I know many of you think finance is boring and that you are not good at math. But understanding the basic connects of money management is crucial – just look at the mess the economy is in. So please make an effort – I promise it will be worth it. (Especially when you are able to afford whatever it is you want without having to stress about when the credit bill is coming).
February 23rd, 2009
In this recession, even wedding vows are suffering: http://www.thebigmoney.com/articles/hey-big-gender/2009/02/12/forget-dow-check-vows. Marrying well is never a sound financial plan – they can always leave. What you need are skills and a budget. That way, you will always be able to care of yourself.
February 16th, 2009
Next Posts
Previous Posts