If you’re a long time reader of the DINKs, you’ll know that we make an effort to bring high quality personal finance information. To whit, we wanted to share some key recommendations made byEric Tyson. Tyson is a former journalist with the San Francisco Chronicle, and has taught courses on personal finance at several universities in the bay area. Tyson’s book Personal Finance for Dummies is the best all around introduction to the topic I’ve read in years.
Tyson gives a number of tips worth considering:
1) Don’t Procrastinate: If you wait to meet your financial goals, you’re putting yourself at a disadvantage. Don’t wait to starting putting your financial life together. Here is a good explanation why.
2) Don’t Buy Consumer Items on Credit: This is sound advice. Most consumer goods eventually loose value over time. Either market forces oblige a decline in the value of stuff (in the case of computers) or your belongings just wear out. Either way, borrowing on credit is NOT good for your financial health. If you do, you’ll be stuck with worthless stuff AND debt. If you paid with cash, you’d just have the stuff.
3) Use Credit Card For Convenience, Not For Carrying Debt: The idea behind this is obvious, credit card companies charge a TON for using their money. Sometimes interest and fees can be upwards of 68% annually.
I do disagree with Tyson on this point. Tyson says its okay to have a card, as long as you don’t run up debt on it. In contrast, in my view, its generally better to avoid credit cards altogether. I feel this is because the credit card industry sometimes encourages hype and sometimes assesses abusive fees. However, many people do not share this opinion, including my wife.
4) Live Within Your Means: According to Tyson, spending more than you earn is a ticket to the poorhouse. Conspicuous consumption usually means borrowing against your future, which isn’t something you want to do. For example it doesn’t makes sense to stretch your budget to lease a BMW, or to buy expensive clothing that you really can’t afford.
5) Save and Invest At Least 5 to 10 Percent of Your Income. This is good advice. The more wealth you have put away, the better off you’ll be. Preferably, save through a retirement vehicle to reduce your taxable income and/or allow your profits to grow free of taxation. This is a solid recommendation, I’d just add that if you save more than 5-10% of your income, you’d be even better off.
Finally, if you’d like to hear more about what Tyson has to say, you should consider picking up a copy of his book, Personal Finance for Dummies. It’s loaded with good advice, and is an excellent starting point for learning the basics of personal finance.