personal+finance+for+dummies

Personal Finance for Dummies Paul Gyori “ Education is an ornament in prosperity and a refuge in adversity,” these are the famed words of Aristotle. Eric Tyson’s book, Personal Finance for dummies, fits these words perfectly as it provides excellent insight into finance with an easy to read and slightly humorous style, good organization and deep knowledge, to help people financially in both good times and bad. Tyson begins by saying that finance is one of the most important aspects of anyone’s life. The book is divided into six basic sections, which cover setting goals and attaining them, saving money, investing, insurance, financial aid and the ten greatest financial challenges in a person’s life. All of the sections receive an in-depth look into their corresponding subjects, and are broken down further to help the reader. Another thing of beauty about Tyson’s book is its overall accessibility, which allows quick glimpses into needed information, or a long nights read into more complex financial issues. The first section helps the reader assess their financial position and make goals according to it. Tyson begins by pointing out financial literacy of the average American which, unsurprisingly, is terrible. 80 percent of Americans don’t even know how the grace period on a credit card works! He later moves on to how to gauge the reader’s financial situation. This chapter provides an easy step by step guide to determining one’s net worth, then continues on how to improve it. For the next chapter, Tyson writes about guidelines on how to understand, observe and eventually correct your spending. The last chapter in this section covers the all too important factors of goals and goal setting. Tyson yet again provides excellent advice on how to make goals, focus on them and achieve them. The next section is about saving; something modern society just can’t seem to get around to. But with Tyson’s help we can. He basically outlines three basic steps to saving more and spending lees. The first step is to deal with debt and get rid of it as soon as possible (e.g. filing bankruptcy, credit counseling). The second step is to reduce overall spending by only buying things that are really necessary and cutting from your “stealth” bills, such as energy, food costs and phone bills. The last and most complex step, is to reduce tax spending. Tyson describes tax cutting, “Instead of focusing on whether you’re going to get a refund when you complete your annual tax return, you should concentrate on the total taxes you pay…”. The total taxes include annual income tax, alternative minimum tax and investment income tax. However, Tyson comprehensively shows techniques to increase deductibles (i.e. purchasing real estate), and trim employment taxes (i.e. shifting income). One of the most important aspects of finance is investing. Investing well can lead you to steadily increasing wealth, while investing badly can lead to a downward spiral of debt. Tyson illustrates how to invest in a confident and successful way. Tyson starts off by referring to his earlier chapters on goal setting. He explains that in order to invest well, it is necessary to make an educated goal and pursue it. Tyson then moves on to talk about investment choices in detail, mutual funds, retirement accounts, taxable accounts and real estate. For mutual funds, Tyson walks through all the fund types such as bond funds and stock funds. He later gives basic guidelines for good mutual fund investing. Some of these guidelines include rating the tax friendliness of the funds, researching the history of the desired funds and making sure that the costs of the funds are reasonable. Concerning retirement accounts, Tyson repeats his tried and true step by step explanation and subsequent advice. He overviews the four types of retirement accounts: employer-sponsored plans, self-employed plans, individual retirement accounts and annuities. Tyson then gives guidance on allocating money to these same accounts by demonstrating ways to prioritize retirement contributions and setting up a retirement account. As for taxable accounts, Tyson basically recommends getting rid of all high-interest debt and investing in taxable accounts. Taxable accounts are usually the most rewarding form of investment. Last but not least, real-estate is profoundly explored by Tyson. Tyson explains the niches and useful tips on real estate, and later the ever so important aspects of negotiating for a good price for the desired land or house and making sure that is a thoughtful investment. Section 4 of Tyson’s book covers insurance. Tyson first goes through the three basic laws of insurance. First, insure for the most important things and not to invest in less important things. Second, get broad coverage, and lastly, be sure to do in-depth research and to buy direct (308-315). After going through the essential three laws, Tyson explores life insurance. He provides a table to help decide what kind of life-insurance is best to purchase. Subsequently, Tyson covers insuring assets. In this chapter Tyson explains that it is most important to insure based on specific risks in one’s location and to reduce any excess spending on irrelevant insurance. He also mentions car insurance is very important, however, there are certain aspects like medical payments coverage that may be superfluous. Financial aid is an often over-looked or under researched aspect of personal finance. His three options are to either do nothing, do self-research, or to hire a financial consultant. Tyson’s opinion of financial consultants is that most people don’t really need them. However, for those who cannot focus or do not have the time to truly analyze and plan their finances, a financial consultant is necessary. Tyson then offers basic issues that any competent financial advisor should address. Money management software is then touched on by Tyson. He concludes that software programs help to make money management much more efficient and simpler. Tyson also warns of scam programs that can steal your money. As for mass media, Tyson provides the insight that the media usually dramatizes economics and often can be misleading. According to Tyson, books, credible websites and newspaper articles are far more enlightening than television finance shows. The final section of Personal Finance for Dummies provides a quick synopsis of the ten greatest financial changes in any person’s life. These are your first job, a change of jobs or career path, getting married, buying a home, having children, starting a small business, caring for aging parents, divorcing, receiving a windfall, and retiring. For all ten of these life-changing moments Tyson provides a few priceless tidbits of advice to make that moment have less of a financial impact. For example for marriage he suggests a reassessment of your financial situation as well as a mutual agreement with your partner to share similar financial goals. All in all this is a must read for any graduating high-school student. If you follow just 50 percent of Tyson’s advice you are almost guaranteed to have a more financially successful life than most Americans. Reading 50 percent of the book is not difficult either, as Tyson provides an easy to read and excellent work that is hard to put down despite its seemingly boring appearance. After reading this book myself I have gained a great amount of financial literacy and confidence. Hopefully any reader will enjoy the same enlightenment that I have. (1252)   