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Personal Finance deals with your own financial decisions. These decisions are important to all of us. They range from how much to put aside each paycheck to save for your retirement to how to buy a house. These financial decisions are decisions that everyone (even the non-finance major) makes. Unfortunately, many of us are making these decisions without the sound financial background that is needed. Rather we tend to take the advice of friends, family, or a financial professional who may have vastly different incentives than we do.
This site is aimed at helping you make informed personal finance decisions. It does not guarantee you success, but does provide sound financial information with which you can make your own decisions.
My biggest advice can be summarized into a series of rules
FinanceProfessor's Top Ten Personal Finance Rules
- Invest as much as you can-Do it now!
- Invest on a regular basis!
- Realize there are no "free lunches"
- Diversify
- Think long-term
- Consider tax consequences
- Look for low transaction costs
- Save more than you think you need (a penny saved is a penny earned!)
- Compounding matters! Save early, save hard!
- Live within your means. Do not run up large credit card bills.
Retirement Planning
FinanceProfessor's notes on Retirement page
FinanceProfessor's notes on tax savings plans.For those of you looking for investment advice that fits quite well into a world of efficient markets, I would recommend you consider indexing. It has done very well and index funds have much lower costs. Vanguard is most famous for their index funds and as such they may be slightly biased, but none-the-less they have a great site on teaching about index funds and other investments.
Investor Education
Vanguard is taking the approach from the old Syms ads that "an educated consumer is our best customer." They have launched a "university" or "learning center" to train investors. It is pretty good! Especially the "library" section.The American Association Of Individual Investors has an excellent site they call Investor Basics. It is a good place to start and to make sure you invest enough for retirement or other purposes.
Want to know what the Dow Jones Industrial average is? How it differs from the S&P? These indicies are explained here.
Efficient Markets
Although often not popular with people who make their money on your transaction costs, it is widely believed that ot is extremely difficult to consistently "beat the market." This is the starting point for the Efficient Market Hypothesis (EMH). For those of you who still think you can out perform the market and want to pick your own stocks, consider the investment strategies and theories of none other than Eugene Fama. Eugene Fama click here. The article is very interesting and relevant on a whole series of issues, from market efficiency, to CAPM, to even biking and wind-surfing! The basic point is that beating the market is incredibly difficult.Useful Links:
A list of companies and mutual funds that have good investment links.Additionally for more retirement planning check out the Quicken retirement site. It is excellent!TIAA_CREF has an excellent site. It is http://www.tiaa-cref.org:80/set-curr.html.
www.Ibbotson.com has many good articles on a wide range of topics centering around investments.
Smart Money is a very useful financial magazine. It has a section on retirement planning as well. It also has a great graph that depicts the amount of money you will have under various plans.
For those of you who have little experience in bond investing, consider The Bond Marketing Association's page. It is quite informative and can help you understand how bonds are traded as well as how to price them.
A fairly good, albeit commercial, site for tax information is the Edward Jones site. I especially like their FAQ section covering taxes.
Home ownership is one of the largest decisions we will make. Financially, the more we know, the better situated we will be when we enter negotiations. Here is a good link to calculate how much you can AFFORD (note you do not need to buy this much!) For a good article explaining the tax-advantages of home ownership is on CNNfn.
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