One problem with the internet is sometimes there is too much content! Because of this, it sometimes hard to find the advice you’re looking for. This goes for the personal finance blogsphere as well. To help you cut through the electronic flotsam, we’re following up on our series of personal finance tips by Eric Tyson. Tyson’s advice is mostly good, so we’re elaborating it here for you.
Five points to consider when putting your personal financial life together. These hold true regardless of whether you’re single or not.
1. Avoid making emotionally based financial decisions. If you’re stock market investing, don’t panic and sell after a market correction. Similarly, be careful about making important financial decisions after a major life change like a divorce or a death in the family. My wife and I reached the same conclusion about the importance of emotion in decision making even before reading Tyson.
2. Make investing decisions based upon your needs and the long-term fundamentals of what you’re buying. Ignore the predictions of talking heads and don’t make knee-jerk decisions based on headlines. – On this point, I disagree with Tyson. Some stock market analysts are quite good and can be trusted to make level headed evaluations of securities and market conditions. Personally, I think Greg Badinshanian at Citigroup is worth listening to.
3. Own your home. Unless you have a terrific rent control deal, owning is more cost effective than renting. However, don’t think about buying unless you can stay put for a while. We DINKs agree.
4. Purchase insurance only for catastrophes. Buying insurance to cover small unexpected costs is expensive. You really should buy insurance to cover really big events like house fires or floods. A few months ago, my wife and I were discussing this topic before going to bed and we agree this is proper approach. The main reason is that higher deductibles result in lower premiums. That is, you actually save money when you cover the small stuff out of pocket.
5. If you’re married, make time to discuss joint goals, issues and concerns. Be accepting of your partner’s money personality. Also, learn to compromise and manage as a team. Relatively speaking, my wife and I have well integrated financial lives. This is because we set joint goals and work together to achieve them.
If you’d like more of Eric Tyson’s advice, you might consider picking up a copy of his book Personal Finance for Dummies. Its gotten good reviews from the people I’ve lent it to. It’s especially useful if you don’t know much about finance or are interested in a place to get started in finance.
Best,
James
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