Monday, March 16, 2009

The Don't Sweat Guide To Your Finances

The Don't Sweat Guide To Your Finances - Planning, Saving, and Spending Stress-Free (2004)

This is an introductory level book on finances.
It's principaly a list of simple difinitions and well known/obvious tips.
I disagree with several of them, or rather judge them not worth of being given.

The author is too much trying to convince people, that if they have debts, it's not their fault, it happens, and it's almost normal.
He's also full of saving money tips that starts by buying more.

Also several of his points sounds already outdated.

Still for people with little knowledge about finance, the book covers a wide range of aspects with a 1-2 minutes description of it.

Few notes:

Before investing look for some market indictors such as:
- the Labor department unemployment report (released 1st friday of each month)
- the Department of Commerce consumer activity report
- Inflation rate

You can take a credit line out of your home equity, you should get a loan with low rate. In case you need money for something else this could help you pay for it at a low rate, also interests are tax deductible.
It is sometimes interesting to get the paperwork done but not take the money out, if an emergency situation occurs, the loan is already approved and the money is available.

Dow Jones Industrial Average (30 largest stocks of NYSE) (Blue Chips company)

Growth stock/fund => no/low dividend, its value is expected to raise.
Value stock/fund => for dividends
Stocks are taxed at a lower rate than traditional income, and typically are protected from inflation (value grows with inflation)

Define your goals with deadlines and let people know what they are and update them on how far you are to reach them.

Corporate bonds are usually less interesting than stocks.
=> if a company gives you 10% over 10 years for your money, it means they believe they will make better than that.
So if they are right, you'd better buy their stocks and get that better return (on dividends or value).

Can be purchased via Treasury Direct website.
You get interests every 6 months, at the end you get your principal adjusted to inflation, interests are calculated on bond value adjusted to inflation.
Deflation doesn't change the value of the bond.

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