More Depth for Financial Decisions
Read along
January is a month for resolutions around health and fitness, and today’s book announcement for subscribers.
Beginning next Tuesday, I will drop serialized, classroom-style content for your learning pleasure. Sorry, no teasers from week to week like, “Will Chuck find a way to disinherit his duplicitous daughter-in-law, Chloe? Stay tuned.”
The book is core economics-based financial planning I hope paid subscribers find valuable and informative.
The valuable: relatable content for subscribers I use in my life-cycle economics class at SMU. The informative: you will learn economics-based financial planning, then choose how to apply it to yourself.
As a financial advisor, you can add an additional layer of competence. If you have a financial advisor, you will be more knowledgeable. If you want to DIY your financial planning, you can do it. The ideas of Nobel prize winners will be floating around our space more formally via the Book tab on your desktop version of Substack, and an email will be sent each Tuesday to subscribers as new content is added. Once per week, posts are the plan.
While a book posted for Substack subscribers has been in the works for a few weeks, the project coincides with a LinkedIn post earlier this week by Billy Hensley, President and CEO of the National Endowment for Financial Education, citing the importance of Manisha Thakor’s Harvard Business Review article calling on firms to offer financial education as an employee benefit. There is much to untangle from the author’s assertion, including why most employers have chosen not to provide the benefit. But, if there is momentum for more structured learning, subscribers to Personal Finance Economics (PFE) will be in front of it.
From my side, while the content is classroom-level, different from the short story-telling of PFE, the purpose remains to help subscribers learn how to achieve their highest living standard. I will build the content for learning and discussion. Then, I will be an equal participant like others in our PFE community of inquisitive minds, commenting, asking questions, and seeking answers. This new tab will take the form of a classroom. I will post PDFs. You can learn by observing others’ comments and asking questions that are important to you.
Below is a sample of the table of contents and FAQs.
Table of Contents Highlights
Chapter 1 - Introduction
Money, Income, Consumption, and Savings
Evaluating Financial Health
Financial Advice
The Scientific Approach to Your Economic Life
Chapter 2 - The Life-Cycle Model
Measuring Economic Happiness
Setting the Household Living Standard by Incorporating Assets and Bequests
The Role of an Inheritance
Chapter 3 - Making the Life-Cycle Model Real
The Life-Cycle Model with a Software Solution
Case Study: Young Singles
Case Study: Married Couples with Children
Chapter 4 - Baseline Financial Planning Cases
The Economics of Human Capital
Case Study: Modeling Differences in Human Capital
Investments in Human Capital
Case Study: When Does More Education Make Sense
Where Should You Live?
Case Study: Living Standards and Geographic Locations
Planning for a Rainy Day: Emergency Funds
Case Study: How to Think About Rainy Day Funds
The Value of Shared Living
Case Study: Cohabitation Increases the Living Standard
Chapter 5 - Investments
Setting up an Account
Risk and Return
Real Investment Performance: Inflation and Purchasing Power
Inflation Indexed Bonds
The Mechanics of Stock Market Investments
Diversification Made Easy: Mutual Funds and Exchange-Traded Funds
Chapter 6 - Investing in Stocks and Living Standard Risk
Asset Allocation
Living Standard Risk
Chapter 7 - Risk, Risk Management and Insurance
Risk Management Techniques
Protecting Your Human Capital
Protecting Your Assets
Thoughts on How to Invest an Emergency Fund
Chapter 8 - Retirement
Longevity
Defined Benefit Plans
Defined Contribution Plans
Participating in 401(k) Plans
Case Study: When to Retire
Case Study: Retiring Younger v. Later
Case Study: Determining the Best IRA Choice
FAQ
“I know nothing about finance and I find it scary. Will the book be helpful and ease my fear?”
Yes, to both questions. We work hard to ease financial anxiety by presenting introductory financial knowledge and explaining financial terms. There are numbers and the occasional equation, but we take the educational job seriously. That said, education beyond high school is required.
“My husband and I are in the midst of careers with two teenagers who plan to attend college. We need some planning but have little time. Can the book help us?
Typical financial planning questions of mid-lifers via cases are addressed in the book. College students benefit from the content, especially if they are nearing graduation. A good argument for the book can be made for households in their 30s when baseline financial planning is really valuable. The goal of baseline financial planning is to establish a household’s highest living standard, then, when life changes, for example, “We’re moving!” or “How do we best fund the kids’ college education?” or “Is a Roth IRA or individual IRA better?” good financial choices can be made. The kicker for the busy household is subscribers get Q&A plus self-help through the book. We like that learning model.
I am retired. Need tax and investment guidance. Is the book the right fit for me?
Yes, to put you on the same financial knowledge basis as your other financial advisors.
