It’s a new year, a new beginning, and I’m pleased to introduce a new regular column focused on the importance of personal finance and the latest tools and techniques to make your money work as hard as you do.
I’ll use this space to address finance issues impact your daily lives. Don’t expect to find stock tips here—the only tip I ever provide is to align investment vehicles to your life’s great goals and your ability to weather volatility, and then get invested, keep investing, and stay invested.
What you will find is practical guidance for your journey towards life’s great destinations: enjoying a worry-free retirement, educating the next generation, and even enjoying a luxury or two in the process.
I’ll address the best way to hedge your bets—that is, manage life’s risks so that when bad things happen, you and your loved ones aren’t wiped out financially.
This column will not worship money, acclaim accumulation for accumulation’s sake, or celebrate conspicuous consumption. I will use this space to assist you in addressing the unavoidable reality of today’s world: If we want to prosper, it is up to us to make smart choices and put programs in place to ensure success.
The government will not do it.
Our employers will not do it.
We must do it for ourselves.
A great trend of recent decades is the shift of financial responsibility from governments and employers back to individuals. We’ve seen it in education—the day of the free public University is long gone. We’ve seen it in retirement—the traditional monthly pension check is being replaced by 401(k)-style accumulation accounts. We’re seeing it in health care—first dollar coverage for all things medical is giving way to increased cost sharing and IRA-style accumulation accounts.
This shift is scary at times—but it’s not all bad. The shift in responsibility has come with new tools, tools that were not available to our parents and grandparents.
The pension has given way to 401(k)s and now Roth 401(k)s.
The IRA menu is long and growing: Traditional, Roth, Non-deductible, Simple and SEP.
We can finance junior’s education with bonds, Education Savings Accounts, and Section 529 plans, to name just three choices.
The passbook savings account has been joined by money market bank accounts, money market mutual funds, and short term CDs.
Tools must be used properly for the proper job. This column will help turn you from an apprentice to a journeyman.
Our ability to finance our dreams and consumption has grown as well. Many can remember the day when getting a credit card was an achievement. Today, our credit options not only include the plastic in our wallet, but the equity in our homes, a portion of the balance in our retirement plans, and, of course, the finance department at the store or dealership where we are making our latest purchase.
Which finance tool to use for what job? We’ll address that too.