Financial Certainties in an Uncertain World

Money 2000 and Beyond      "Financial certainties" are information that you can always know to be true, no matter what is happening in the financial markets. Below is a description of nine basic principles:
  1. Saving Early and Saving Regularly Will Get You to Your Goals--Savings has a cumulative effect. Compound interest over several decades is awesome. Start by contributing something to an employer tax-deferred retirement savings plan, even if it is not the maximum amount, and increase the percentage when you can. "Pay yourself first" at the beginning of the month rather than waiting to see what, if anything, is left later.

  2. Debt Can Hinder You From Reaching Your Goals--Consider having no more than two credit cards and don't treat shopping as a form of recreation. There are two types of debt. "Good debt" is for investments for the future (e.g., college education and home improvements) while "bad debt" is for "disposable" expenses, such as meals and vacations, that are purchased with credit cards.

  3. Diversification is the Best Way to Protect Against Investment Fluctuation--A common error is to have too much riding on one's employer: a job, a pension, stock options, etc. It is wise to investing in all asset classes (stocks, bonds, real estate, and cash) and place money in different types of each asset class (e.g., small, medium, and large companies).

  4. If Something Sounds Too Good to Be True, It Is--Don't let the prospects of personal gain cloud your judgement. Just say no to deals that promise high returns and no risk. In a recent case, fraudsters promoted an investment that promised to pay a 300% return in 12 days. Many so-called "sophisticated" investors were taken in by this and lost money.

  5. Your 401(k)- or Other Tax-Deferred Plan--is a Gift Not To Be Overlooked- Don't ignore the opportunity to invest tax-deferred through an employer plan, especially if there is a match, which is "free money." Personal savings can be a major source of retirement income. Most people do not want to lower their living standard in retirement.

  6. You Should Have a Will--If you don't have a will, the state has one for you. A big roadblock for many people is naming key positions such as guardian and executor. It is important, however, to make an appointment to see an attorney and get it done. You can always change different sections of your will later if you want.

  7. Sometimes Enough is Enough--It is not necessary to "beat the market" but, rather, to simply to earn a return (e.g., 8%) sufficient to reach your own personal financial goals. Americans are very competitive by nature, however, and are always trying to earn better than average returns.

  8. Women Will be Responsible For Their Financial Lives at Some Point--Age 56 is the average age of widows and women live longer than men on average. It is not wise for either spouse in a married couple to be an inactive participant in family finances or for anyone to abdicate total control to a spouse or other financial advisor.

  9. It Pays To Get a Regular Financial Check-Up--Like former New York City mayor, Ed Koch, it is wise to periodically ask "How am I doing?" Financial advice is not just for the affluent. Components of a financial check-up include a cash flow analysis, a review of investment performance, including portfolio rebalancing, and a review of estate planning documents. For the names of fee-only financial planners, call 888-FEE-ONLY. Another source of names of local financial advisors is the Financial Planning Association (800-282-PLAN).

  1. Rutgers
  2. Executive Dean of Agriculture and Natural Resources
  3. School of Environmental and Biological Sciences