Money and Personal Finance



            Money is little more than a device for keeping the record of our productivity.  It is a common denominator that we use to exchange our productivity for the productivity of others.  Nevertheless, money elicits powerful, albeit divergent, responses from almost everyone.  George Bernard Shaw has said: “Lack of money is the root of all evil.”  While Robert Louis Stevenson shows a compelling disdain for money when he hyperbolically declares: “The price we have to pay for money is paid in liberty.”  I suspect that Thomas Babington was right when he said:  “Even the law of gravitation would be brought into dispute were there a pecuniary interest involved.”

            Usually, whether we realize it or not, money is typically used to buy some pleasurable sensation.  When we spend, we get that sensation soon.  When we save and/or invest, we get the pleasure later.  Sometimes, the pleasure last moments (e.g., ten minutes with a prostitute, or a scoop of Haagen Daz).  Other purchases, like a house, provide pleasures potentially for a lifetime.  Often, when considering an expenditure, it is useful to ask exactly what pleasurable sensations you are buying, how intense they are, how they compare to others that could also be purchased, and how long the pleasure will last.   Interestingly, the cost of many products and services is in no manner proportional to the relative pleasure derived.  Does a $200 bottle of Cabernet Sauvignon really taste ten times better than a $20 bottle?  Is the difference anything more than hype and illusion?  We are often depleting our personal financial resources on differences without a difference.

            Money and monetary value are often very useful in understanding a human conflict.  It is often useful to ask: “Could I make this conflict disappear by an expenditure of money?”  It is surprising how often that money will solve a conflict, and it is even more surprising how little it often takes.  It may not be wise to spend the money that it will take to end a person-to-person conflict, but it is almost always helpful to do that evaluation.


Advice on Money

1.  Always struggle to save some money, if even a little, on a monthly basis, in case of an unexpected emergency.  Do this even if it requires sacrificing some pleasures.

2.  Save in order to buy the more expensive better quality, longer lasting, item, rather than impulsively buying an inferior product that will need replacing or which you won’t like.

3.  Don’t buy on credit unless the item being purchased is immediately necessary for survival or temporary emergency purposes.  Every month, you should pay off the entire balance of your credit cards.  If you can’t do this, you must spend less and reevaluate how you spend your money.  The one major exception to this is the buying of a house.

4.  Husbands and wives should have separate checking and savings accounts.  They should also have separate credit cards, in their own names.

5.  Don’t borrow money from friends, fellow employees, and relatives.  Pay back all of your debts and obligations promptly.

6.  Early in life a person should develop the following monetary devices:  2 major credit cards, a checking account, a savings account and a check guarantee card.  Early in life, you should learn how to use the bill paying device available within online banking services.

7.  Plan your monthly expenditures by subtracting from your pay, your known expenses (rent, phone, food, utilities, savings, etc.) and then allot the remainder to yourself as a pleasure allowance (for movies, books, etc.).  Always buy what you really need first, then buy what you want or gives you pleasure.  Most people have a very distorted view of what they “need.”  You need much less than you think.

8.  If you are divorced and plan to remarry, then document what assets you had prior to your new marriage and ask that your new spouse sign an agreement (written by an attorney) that acknowledges that these assets (money and property) are not part of your joint community property.  Do this even though it is unromantic.

9.    Generally, over your lifetime, you should take the greatest risks with your money when you are younger, and you should decrease your risks as you get older.  After age 45, you should be very conservative and risk-averse in your investments and use of money.  Prior to age 35, you should make some high risk investments that may have a very substantial return over the long run.

10.  Don’t invest money in a business venture that you are not going to run, unless you a) have thoroughly investigated the people involved, and b) and can afford to lose all your money.  Treat such investments as a form of gambling.

11.  Don’t make large purchases and financial decisions impulsively.  Take your time.  Suspect anyone who rushes you to make purchases or investments as a con man (especially when large amounts of money are involved).

12.  Keep a running balance in your checkbook so you always know where you stand.

13.  When you use a credit card, immediately subtract the amount from your checking account, just as if you wrote a check, so that when the bill comes, you can pay it immediately by check without your checking balance suddenly changing.

14.  Keep hidden, somewhere in your house, a good sum of money, say $500.00 in cash, in case you have an emergency need for quick cash.

15.  In the ash tray of your car, have small change for use in meters, etc.

16.  Keep hidden in your car $100.00 in case of an emergency.

17.  During early childhood, ages five to eight, give your children a daily small allowance for doing certain special chores (not chores that you require).  As your children get a little older, eight to thirteen, give the allowance on a weekly basis.  Finally, in adolescence, ages thirteen on, give allowance on a monthly basis.  Allowance should be given after work is complete, and older children should buy certain “necessities,” (like sports equipment) from this allowance.

18.  Children over eighteen, who are not in school and who are living at home, should make a financial contribution to the house for room and board, or, if this is impossible during hard times, they should be required to do work around the house.  Several months prior to a young person’s leaving home, this contribution should be saved by the parent and given back to the child on leaving to aid in initial expenses (first and last months’ rent, etc.).

19.  Couples living together, without children, should attempt to share expenses equally.  If one person makes a lot more money then there should be a clear agreement on how to divide expenses and a written agreement on who owns what, especially property, if they separate.

20.  Don’t buy a house with a lover that you are not married to, or do not plan to marry.

21.  A woman should not have children until she feels certain that she can afford not to work for six months after childbirth.

22.  When buying products, e.g., food, stereos, cars, clothes, etc., pay for real differences in quality or functionality, e.g., taste, lowered future repair costs, durability, etc.  Do not pay for fancy trade names or differences that salesmen point out, but which you can’t understand, see, feel, or otherwise experience.  Don’t buy things just because they are popular, the newest fad, or “in.”  Focus on function not image.

23.  Try to own a home or a condominium by age 40.  Save carefully to do so.

24.  Every once in a while, give yourself permission to make a foolish expenditure.

25.  In general, buy things, not services.  Attempt to buy objects that hold their value or increase in value.  Males, especially, should avoid spending significant sums on expensive cars designed to impress.  These cars don’t make you more valuable as a person, and, over time, the wasted money will interfere with smart savings and investing.  Women should follow the same advice regarding clothes and jewelry. 

26.  If you have children, then buy some life insurance and name your husband or wife as beneficiary.

27.  Don’t brag about your monetary assets, be modest about any wealth you have.

28.  Don’t marry just for money, but don’t be ashamed of your desire to fall in love with someone who makes money.

29.   After age 40, you should work diligently at diversifying your portfolio.  All of your investments and financial hopes should not be in one investment, or even one type of investment.  Divide your investments between cash (or cash equivalents), property, stock (which should be divided amongst different industries), bonds, art, and gold.  Put yourself in a position where disruptions in a part of the economy does not decimate your financial security.

30.     By age 40, you should have enough saved cash to support yourself and your family for six months.  Don’t spend money on pleasures and discretionary items until you have met this goal. 

31.    Don’t delegate your financial, investment, and business affairs to others.  Make your own decisions, do your own research, and take personal responsibility for your financial affairs.

32.     Many eastern religions and philosophies view nirvana as being achieved by wanting and needing less, i.e., transcending desire.  In contrast, western cultures often contend that satori is achieved by producing and having more, and satiating every desire.  Finding a balance between these two views is the central key to the good life.

33.     Generally, with few or no exceptions, the return on an investment in money is directly proportional to the risk of loss.  Accordingly, very safe investments, like U.S. Treasury Certificates, have very low but secure yeilds.  On the other hand, purchasing stock in a startup company, or some new technology that is not fully developed is very risky, with a real risk of loosing all of your money.  These risky investments, however, sometimes have very high returns.  If anyone tells you about a low-risk "sure thing" investment with a high return, do not make the investment.  If this person attempts to rush you into such an investment, assume that they are a con man.