Chris Cannard, Van Trinh, Jommel Esteybar,
Edward Sy, Cricket Williams, Trey Vogel
San Jose State University
Many people assume that handling personal finances is straightforward and can be done with little to no preparation. This paper delves into the many different aspects of personal finance. It discusses the tools that we are learning in class and explains how these tools that can be used to save for retirement. It offers tips to improve your financial standing both now and in the future. And finally, it compares these tips with advice offered by an expert, Suze Orman. Everyone needs to learn how to properly prepare their finances to reach their goals. While doing so can be easy and rewarding, neglecting to do so can have a substantial negative impact on your future well-being.
The financial decisions that you make today will either assist or haunt you for many years to come. You need to treat your financial decisions as if you are running a business and remove your personal feelings from the decisions so that you can make clear, concise, and rational financial decisions. By using the tools that you have learned in your textbook thus far, you should be able to leverage the proper financial institution in meeting your investment goals. You should be able to construct a simplified Income Statement for proper financial analysis. You can use this information to create an Income to Debt ratio, which significantly impacts your credit score. You can calculate a true interest rate prior to making any long-term purchases. You should understand how long–term debts are amortized and how your payments effect the principal owed on these debts. And finally, you should understand the Time Value of Money so that you can properly assess the opportunities that you are confronted with (Brigham, 2007). Critical to making any financial decision is separating the emotional side of a decision from the factual segment of the decision. Many times we find ourselves in a situation where an item that we want to purchase is available to us through financing but not through a cash purchase. In other cases, we find ourselves wanting to spend the cash that we have saved on non-essential items such as a night out with friends instead of paying for essential items such as food or rent. When we remove the emotions tied to the decision and strictly look at the financial facts, we are able to make decisions that will not negatively impact our future. In the example above, this would allow us to calculate whether we can pay our rent and go out with our friends or whether we can only afford one of them. Once we begin to look at our financial decisions without emotional bias, we then find ourselves looking towards the future and leveraging the proper financial institutions. Saving for Retirement
There are many financial institutions to assist us in reaching our financial goals. Large corporate banks offer both savings and checking accounts with low interest rates, which are good for short-term storage of our cash. These banks also offer personal loans with reasonable interest rates. Credit Unions are cooperative associations in which you generally need to buy a membership. Credit Unions typically offer more competitive interest rates on their checking and savings accounts along with lower interest rates on their personal loans. Pension Funds are long-term retirement investments that are paid for and administered by your employer. Life Insurance companies allow you to purchase insurance against death or dismemberment. While this does not positively affect your personal wealth, it does offer financial aid to your loved ones during their time of morning. Mutual Funds are businesses that take private savings and invest them in stocks, bonds, and other short-term investments. Individuals who are highly trained in the aspects of managing such investments typically run these funds. And finally, you can choose...