Viewpoint: Thoughts on Personal Finance

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After reading about the collapse in the highly ambiguous industry of digital currency, I thought I would share my two cents on personal finance that comes from the middle-class lay-person’s point of view:

Rule for Risky or Experimental investment:

Do not invest more than what you can afford to lose.

This means after paying for monthly expenses, paying off your credit card, loan repayments, mortgage etc., after setting aside savings for retirement and for a rainy day, whatever remains is the money for risky ventures.

If that amount is a thousand dollars, then that is the amount you can afford to lose without affecting your present or future financial security. If what remains is zero dollars then that is the amount available for risky ventures.

The Celebrity Rule :

If your favorite celebrity is peddling investment ideas on the mass media, the first question that should come to mind is how much is this person getting paid for becoming a mouthpiece of the organization they are promoting?

The second, albeit unrelated question should be, whether these celebrities are paying their fair share in taxes or are they hiding it in tax havens all around the world?

For details on how the wealthy of the world hide their money in tax shelters, try these keywords for web-search – Panama Papers, Paradise Papers.

The Rule of Greed :

Years ago, a friend who worked at an investment firm gave a sound advice when it came to trading in the share-market. She said, if greed could be reined in, a decent profit can be made in day trading – not an obscene amount, but a decent amount.

So, if your investor promises a ridiculously high returns on investment without offering a reasonable explanation, it is time to rein in the greed because there is a very strong possibility that they are appealing to the unmitigated greed in us, which brings us to the next rule.

The Rule of Unmitigated Greed :

If you want to follow the desire of unmitigated greed, then you should be one of the top leaders in the investment banks that almost tanked our economy in the unforgettable summer of 2008. These financial geniuses who were reckless and irresponsible enough to wreck the average person’s financial security, walked away shamelessly with their golden parachutes, without any accountability, without even so much as a “Thank you” to the ordinary tax payers who were left holding the bag.

So, until you are born into wealthy and well connected families, who can get away with anything and everything, don’t even dream about getting rich through unmitigated greed.

On the other hand, you can focus your energies in voting for those politicians who are eager to impose sensible financial regulations on these financial behemoths to rein in their unmitigated greed and impose accountability for their destructive actions.

Because, if these institutions are well regulated, they could be beneficial to the larger society, rather than just help enrich themselves and their wealthy clientele.

One last thought…

Lastly, it’s good to look into age old wisdom that applies even in this sophisticated digital era. Here is a nugget when it comes to personal finance – “A fool and his money are soon parted”.