I’ve written before about what I think is wrong with our financial system. David Stockman’s piece takes aim at Mitt Romney and in the process provides one of the best summaries of Wall Street I’ve ever read:
That is the modus operandi of the leveraged-buyout business, and in an honest free-market economy, there wouldn’t be much scope for it because it creates little of economic value. But we have a rigged system—a regime of crony capitalism—where the tax code heavily favors debt and capital gains, and the central bank purposefully enables rampant speculation by propping up the price of financial assets and battering down the cost of leveraged finance.
Check out the whole article.
Since the financial crisis and resulting hysteria have transpired, I’ve been attempting to wrap my head around what happened — in relatively simple terms — and what we can do (or not do) to avoid something like this in the future. While the financial instruments Wall Street employed in the recent decade were far from simple, I remain hopeful that there are more basic forces at work and thus solutions that don’t involve thousands of pages of legislation, bailouts and government control. Continue reading
Paul B. Farrel, in a recent article published on MarketWatch.com, posits that everything you need to know about personal finance is contained in nine simple steps. In a Dilbert book. He goes so far as to praise the ideas as worthy of a Nobel Prize in economics.
Paul, you may be onto something. I won’t get into too much blabber, but I certainly agree that these simple bullet points are essential and bear repeating. For the lazy readers (and because I think this is so important), I’ll quote them here:
- Make a will
- Pay off your credit cards
- Get term life insurance if you have a family to support
- Fund your 401k to the maximum
- Fund your IRA to the maximum
- Buy a house if you want to live in a house and can afford it
- Put six months worth of expenses in a money-market account
- Take whatever money is left over and invest 70% in a stock index fund and 30% in a bond fund through any discount broker and never touch it until retirement
- If any of this confuses you, or you have something special going on (retirement, college planning, tax issues), hire a fee-based financial planner, not one who charges a percentage of your portfolio
There you go. That’s it. Do these things and you will retire worry-free. Furthermore, you’ll live the rest of your life not having to worry about losing your job or being able to pay the bills.
I realize these things aren’t easy, but work towards them. Most of the people reading this post can go 9 for 9 if only they prioritize a little. If you’re not making much money, you can always save a small percentage somewhere you can’t touch it so easily. Do you smoke? Quit — and put away the $4 a pack. You’ll kill 2 birds with one stone that way (and maybe even save yourself).