In Part four of Common Sense Economics, Gwartney et al talk about the “Twelve Key Elements of Practical Personal Finance.” They introduce this part of the book by talking about today’s Americans and their incredibly high-income levels. As income rises, doubts about financial security start to rise as well, but financial insecurity is mainly the result of the choices we make, not the incomes we earn. Gwartney et al’s goal is to enhance people’s ability to choose options that will lead to a more successful life, and they believe that the single-minded pursuit of money and wealth makes no sense.
The introduction is concluded with them stating that “no matter our objectives in life, they are easier to achieve if we have less debt and more wealth.” …show more content…
The imprudent use of credit cards can be a huge stumbling block to financial success, since many people act as if unused balanced on a credit card is like money in the bank; a blatantly false and dangerous thinking according to Gwartney et al. In addition to avoiding credit card debt or paying it off immediately, money can also be stretched by buying used items when they will serve you almost as new ones. The sixth element talks about a rainy day savings account. Because of certain emergencies that might arise, it makes sense to plan for them through a rainy day savings account. This account will help people deal with unexpected bills that could otherwise put people under severe emotional stress and into a financial bind. A rainy day savings account will allow you to purchase a little ice of mind rather than worrying about the financial bumps of life. The seventh element talks about putting the power of compound interest to work for you. There is a big payoff that comes from starting early; the key to converting a small amount of money now into a large aunt later is to start saving immediately to take full advantage of the …show more content…
As a general proposition, Gwartney et al. suggest buying bonds that mature at about the time you will need the funds. As people earn more and live longer, saving for retirement expenses become ever more important. As retirement approaches it is recommended to switch into bonds, and the goal is to primarily avoid the need to sell stocks at temporarily low prices. The eleventh element talks about taking steps that will reduce risk when making investment decisions. These steps include thinking about renting before buying a house since the cost of a house goes beyond the mortgage. In terms of education it is recommended to apply for grants and scholarships before taking out loans, as well as making informed choices. Having realistic expectations about future income is a vital ingredient in making better decisions about postsecondary education, but this can apply to anything in life. Lastly, the twelfth element talks about the use of insurance to manage risk. Life involves risks that range from the small and financially insignificant, to the large and financially devastating. While you cannot eliminate risk, you can take steps to
The introduction is concluded with them stating that “no matter our objectives in life, they are easier to achieve if we have less debt and more wealth.” …show more content…
The imprudent use of credit cards can be a huge stumbling block to financial success, since many people act as if unused balanced on a credit card is like money in the bank; a blatantly false and dangerous thinking according to Gwartney et al. In addition to avoiding credit card debt or paying it off immediately, money can also be stretched by buying used items when they will serve you almost as new ones. The sixth element talks about a rainy day savings account. Because of certain emergencies that might arise, it makes sense to plan for them through a rainy day savings account. This account will help people deal with unexpected bills that could otherwise put people under severe emotional stress and into a financial bind. A rainy day savings account will allow you to purchase a little ice of mind rather than worrying about the financial bumps of life. The seventh element talks about putting the power of compound interest to work for you. There is a big payoff that comes from starting early; the key to converting a small amount of money now into a large aunt later is to start saving immediately to take full advantage of the …show more content…
As a general proposition, Gwartney et al. suggest buying bonds that mature at about the time you will need the funds. As people earn more and live longer, saving for retirement expenses become ever more important. As retirement approaches it is recommended to switch into bonds, and the goal is to primarily avoid the need to sell stocks at temporarily low prices. The eleventh element talks about taking steps that will reduce risk when making investment decisions. These steps include thinking about renting before buying a house since the cost of a house goes beyond the mortgage. In terms of education it is recommended to apply for grants and scholarships before taking out loans, as well as making informed choices. Having realistic expectations about future income is a vital ingredient in making better decisions about postsecondary education, but this can apply to anything in life. Lastly, the twelfth element talks about the use of insurance to manage risk. Life involves risks that range from the small and financially insignificant, to the large and financially devastating. While you cannot eliminate risk, you can take steps to