My article, What Charles Dickens Can Teach Us About Personal Finance was recently featured on Yahoo Finance. Another title I considered for this article was The Micawber Principle: The Cornerstone of Financial Security.
So now, after encouraging you to save 10% for emergencies, 15% for financial independence (often called “retirement”), and 10% for long-term savings, we’ve whittled down your income to about 65%. This 65% is for day-to-day living.
I opened my freezer and found, to my horror, my ice cream had turned to mush. Why? My refrigerator and freezer were broken. The expense for a new refrigerator was around $700. How could I have seen that expense coming?
Franco Modigliani won the Nobel Prize for a simple technique that squirrels know intuitively from birth. You have to squirrel away some nuts during times of plenty so you can survive during times of scarcity.
Q: I recently landed a job that will allow me to begin saving. My company offers a 401(k) and a 3% match, but I also have college debts of $15,000 and a credit card balance of $650. How do you recommend I proceed?
Although sock drawers might be able to protect wealth from physical thieves, inflation is the dastardly villain who will raid it. As a child, I did not know of such economic forces let alone that they had an influence on my humble stash.
One reason that many people buy things that they could have done without is “functional fixedness.” Teach children to prevent unnecessary purchases by making efforts to help them see other possible uses of owned objects.