The New Rules of Personal Finance
In today’s economy, some of the old pieces of financial wisdom aren’t as helpful as they used to be
Some money rules — the most obvious, most important standbys — will never change. Save for retirement. Stick to a budget. Spend less than you earn to build wealth.
But other pieces of long-held financial wisdom just don’t make as much as sense as they used to. In today’s post-recession economy and rapidly changing job market, some may not make much sense at all.
“Save six months’ worth of living expenses for an emergency,” for example, is reasonable advice that has become slightly outdated. Don’t get me wrong — you definitely need an emergency fund—but with today’s rates, many people question the six-month rule. It’s worth pointing out that most people have trouble saving even $1,000 for an emergency. But your emergency fund can also be too big: If you have tens of thousands of dollars in a traditional savings account, you’re missing out on the potentially higher earnings you’d get by investing that money instead. With most banks now offering less than one percent interest, you’d be better off putting some of that money somewhere that will get you a better return.
Money is just one resource when it comes to investing, and…
