The College of Weakonomics series has been very successful so far. I’m managing a spreadsheet of the courses I’ve done and the courses still to be done. Admittedly, I’ve been avoiding this one. As a term, personal finance covers a broad range of topics. In an effort to simplify the topic, I borrowed from the coursework for the Certified Financial Planner designation. It covers 6 topics, which I’ve come to think, might be the foundation of personal finance. Without further ado, welcome to Weakon 201 – Personal Finance.
Financial Planning
This topic covers a diverse range of topics on its own. Perhaps the most important is budgeting. In order to exercise proper personal finance, you must budget. My budget is loose, but I do allocate my funds before they come in. Financial planning topics will also cover debt management. Since most people aim to own homes someday, one must surely understand the dos and don’ts of debt. This topic is all about identifying needs, wants and goals with your finances.
Insurance
Everyone’s favorite topic. You’re smart so you know its important. You know the basics: life, auto, health. Depending on your situation, you will have others. An insurance salesmen will always say you can never have too much insurance, but we know better. After the financial planning process, its important to determine what aspects of your world need to be insured. There are right and wrong answers, shop around, get multiple opinions.
Taxes
Feels like we get taxed for every dollar a couple of times doesn’t it? Taxed on in income and then taxed on the outflow (sales tax). We’ll save that argument for another day, but as our finances change so do our tax needs. Parents, you know your kids are tax deductions (and bottomless pits of your funds). Many first time parents likely don’t realize that. Due to our tax code being so complicated most of us pay someone to pay our taxes for us. It’s important to make sure we pay no more that we owe and to take advantage of any breaks the IRS gives us. Don’t ignore taxes.
Retirement
While similar to financial planning, retirement planning can have different needs that are age specific. We all know about saving for retirement, but what about after retirement? How much do you need? What are your expenses going to be? Pensions, annuities, and long term care oh my! Though only in my twenties, I am already developing strategies for handling my finances come retirement.
Investments
Finally something fun. We know about retirement accounts, which would fall in between the two categories, but most of us have investments that are not in special accounts also. Its important to have an understanding of the intended use of your investments. This allows you to place your money in investment classes that work with your market risk sensitivity and investment goals.
Estate
Like the runt of the litter, estate planning is the ugly and often ignored aspect of personal finance. Got people you love? Make sure they get your money when you die. You’re going to die, many of us avoid this reality by never setting up their estates properly. You need a will and trusts are fast becoming the norm for estate planning.
We all have our weaknesses in personal finance. I must admit estate planning is my kryptonite. As a promise to you readers, I’m going to learn more about it and report back. Don’t ignore any of the 6 topics of personal finance. They are all equally important. Class adjourned!
 By The Weakonomist |
The Weakonomist is the founder of Weakonomics. Clicking the picture of the puppy will tell you more about him. If you like what you're reading consider subscribing to the blog, following him on Twitter, and checking out the related posts below. Please consider a donation if you really enjoy Weakonomics. Also keep in mind that nothing I say can be construed as financial advice. |
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