Thursday, August 18, 2011

Life's Ups and Downs

Each day I read the financial news as if my portfolio consisted of something more than the $14 in change I have parked in a jar on top of my dresser.  I just get swept up in the drama surrounding the volatility of the stock market.    When it’s up, I have a hop in my step and I’m eager to embrace my and America’s bright new futures. When it’s down, I spend the day in a funk, fretting about whether I will have to pack my whole family into a jalopy and go West to handpick crops.

Obviously, this isn’t how the stock market works.  Daily fluctuations rarely indicate lasting trends.  But knowing that to be true doesn’t exactly quell the queasiness one feels from being on this financial rollercoaster (or in my case, observing the rollercoaster from one of those coin-operated, grocery store merry-go-rounds).  I’m not the only one having these issues, check out this enlightening NPR story about the psychological impact of financial news.  

If you are more the rational sort, and all this financial bipolarity has only piqued your interest in practical money management, let me recommend - All Your Worth: The Ultimate Lifetime Money Plan by Elizabeth Warren and Amelia Warren Tyagi (her daughter).  You may have heard of Elizabeth Warren – she is the Harvard Law professor who President Obama appointed to oversee the bailout of the banking industry and has since become a political lightening rod for her outspoken support of the Consumer Financial Protection Bureau (and is now rumored to be a Senate candidate in Massachusetts).  And while all of that would make for a fascinating read, none of it is in this particular book (written years prior).   Instead, the authors present a straight-forward, easy-to-understand approach to your personal finances.  The basic premise is to split your income into three broad categories: 50% must-haves (rent, car payment, electricity), 30% wants (new shoes, haircuts, vacations), 20% savings.  Their assertion is that if you can achieve this balance, you can proceed through life never worrying about money - and if you find that you miss worrying about money, you can always roll those savings into some stocks.

Ransom - Reference

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