Personal Financial Advice
According to Arends, management of personal finances is not as complicated as people think. To him, personal financial management is simpler. Arends pointed out that people who wish to manage their personal finances ought to first discard pontificating, jargon, and technical stuff. Arends further suggested how people should effectively manage their personal finances. To Arends, financial and economic forecasts are meant to create jobs for forecasters, and they should be ignored. On financial investments and strategies, the idea is to keep simple because the reason why they appear complex is to create jobs for salesmen and managers. There is no point purchasing fashionable investments. Instead, one ought to purchase individual stocks just like a gamble. Despite the fact that equities are volatile, Arends advice that when it comes to the long-term portfolio, people should consider investing in equities. Rather than investing only in the US, it is very important to consider the global market. Besides investing in stocks, one should consider investing in Treasury inflation-protected securities as well as long-term Treasury bonds. While the lottery always run at a profit, the player runs the risk of loss. The best idea is to avoid buying a lottery ticket since a study even show that those who won lottery tickets ended up in frustration than those who lost it. People should also know themselves so that they avoid pursuit of complex tax or financial strategies if they are not keen to detail. On buying a home and car insurance, the best option is to go for highly-deductible ones. People should not only start saving early but also saving often. Instead of putting so much hope on the next stock windfall or pay raise, it is wiser to make the best of what one has. Since a third of one’s adult life come after the age of 65, one should always try to plan for a long life. One approach is to clear paying the mortgage and start saving at least 10 times of annual salary by the time of retirement. Cutting wastes are very important including wastes associated with cellular bills, cable bills, cars, and eating. Avoid spending money to show off by buying luxury items such as designer brands. Children ought to be taught about financial issues early in their life and also often. One should protect his/her nest egg by avoiding draining retirement savings to pay education for an own child in college.
Koh also presented her own advice on how people should manage their personal financial issues. Koh observed that consumers face challenges choosing from the many available financial pieces of advice since many people have their own perspectives of what they think is the best. Koh presented rules on personal finance management. When taking a student debt, she suggested that the debt should not be in excess of 8% of the debt payment/income ratio. Individuals ought to put at least 10% of their salary into their 401K. On housing costs, Koh pointed out that they should be kept below 30% of income while on transportation, it should be less than 15% of monthly earnings. People should minimize their expenditure on an engagement ring. One major reason people should get a prenup is for the purposes of financial conversations. Expenses on a child should not exceed $10 per year. On switching jobs, Koh advice that people should not switch jobs just because of money.
Arends’ and Koh’s advice on personal financial management are similar in that both advocate for minimization of wasteful expenditure and increasing on savings. While Koh’s advice is brief and expressed in quantitative terms, Arends’ advice are elaborate and mainly qualitatively expressed. Although Arends’ advice are elaborate, they might not be easy to follow. For example, Arends’ pointed out that people should not spend a lot on housing. On her part, Koh pointed out that expenditure on housing should not exceed 30% of monthly income. Koh’s advice is specific and acts as a better guide. However, Koh’s advice are brief and failed to cover many topics. One would get a holistic view of personal financial management by merging both Arends’ and Koh’s advice.
Works cited
Arends, Brett. Simple, Bedrock Rules on Personal Finance. Wall Street Journal, 7 Feb. 2015. Web. 24 April 2016.
Koh, Shiyan. The Golden Rules of Personal Finance. Nerdwallet, 2016. Web. 24 April 2016.
