Your Personal Finances – Thomasina Tafur

Thomasina Tafur

Recently I took a finance course at Wharton (the business school at the University of Pennsylvania). It’s been nine years since I’ve calculated TVM, ROE, and EVA Thomasina’s Bio. What amazed me the most was learning how some corporations are creative (legally) when making their financial statements as attractive as possible to potential shareholders. Legally, their formulas are following the accounting principals established and followed by the general accounting guidelines. But are some of them moral? Are they fair to the common investor who would like to invest in their corporation? Some capitalist would argue “buyer beware.” I’m not. I love capitalism and hate the bad name it’s been given by Bernie Madoff and Michael Moore. Investing in corporations should be just that, investing, and not feel like a crap shoot at a casino. So this got me thinking about the common investor and personal finances. Keep in mind, I am not a stock broker, CPA, or Financial Planner. I am a woman with a sound financial portfolio who has learned from academia and the school of hard knocks! Below are some suggestions you might want to consdier when planning your individual financial strategies:

Invest in only what you know:

Stocks: I find it funny that people will take a stock tip from either a complete stranger or someone they know from work (who isn’t in the financial industry) and sink thousands of dollars in a stock they know virtually nothing about. Why is that? Purchasing stocks should not be treated the same as purchasing a lottery ticket where you depend solely on luck! A great rule of thumb is to only invest in companies whose product you would buy, Thomasina’s Books to Read who you would be willing work for, or you know something about their industry. Outside of those parameters, be very careful!

Real Estate: I learned early on that although a house can make a great long term investment, they are a lot of work, and still some risk. If you’re interested in buying investment real estate for the purpose of renting, keep in mind tenants can be fickle and could leave you responsible (even temporarily until you sue them) for a financial mess. Make sure you have enough funds put aside in case it takes months to rent your property or if something stops working (like the air conditioner, garbage disposal, etc…). You are ultimately reposnsible for all that happens to your property. The days of “flipping” property are not only more difficult due to the recession, but the government has added some legal restriction you should be aware (each state is different, so research this before you buy.)

How do you handle your finances day to day?:

Cash is King: If you haven’t learned by now that buying on credit is not the best idea, I feel sorry for you. The greatest lesson taken from this recession has been the realization how important it is to have either cash or liquid funds (something you can turn into cash fairly easily with limited penalties) on hand. Many people were caught off guard by the recent financial crisis. No one is immune to financial difficulties. Just ask any wealthy person who invested in Bernie Madoff

Do you pay your bills on time? If not, start trying. Not only are the penalities becoming more financially costly, the damage it can do to your credit may take a long time to repair. People are being evaluated by their credit score in a variety of ways, and not just to determine if you can obtain another credit card. Potential employers are reviewing them too. Do you really want to miss out on a great job opportunity because your credit score was poor? Don’t start a vicious cycle that is hard to escape.

Credit Cards: can’t live with them, can’t live without them! Refer to my notes above about cash being king. Although this is the best method to pay for things, it’s not always possible. Keep no more than 2 credit cards (Unless you already have several, pay them off and keep them for a little while. Each time you cancel one, you lower your available line of credit and therefore hurt your credit score) and use them only for non-perishable, business transactions when possible. Don’t use them for groceries, gas, and things that later have no value and are not tangible, unless you pay off your bill immediately. The rules with credit cards are changing and they are not particularly fond of people paying off their bill at once (of course not, how will they make money!!). When this happens they might lower your credit line or cancel you all together. To prevent this, take one transaction during the year and pay it off over two months. Two can play their silly little game.

Savings and Retirement: If your 401K took a beating recently, re-evaluate and determine what is best to do. But usually the market does turn around, so investigate wisely.  Thomasina’s Interview with Fidelity Continue to save for retirement, no matter how far back you have to push it. Remember, you will no be able to live comfortabley on social security alone (if it even exists when you reach the age!)

Try living on $20 a day. I do! That’s right! I take out $620/mo (regardless of the month) and make do. This money is for gas, groceries, and any other little thing I want. It forces me to see how fast my cash goes out, and to sacrifice for upcoming events and things I want. Keep in mind I live in a low cost city, so you might need $40/day. Study your spending habits for two months and see what you can realistically live on. And remember the definition and difference between “need” and “want”.

Again, my disclaimer is that I hold an MBA and no other certificate or degree with regards to financial matters Thomasina’s Bio. But I hate seeing good people (especially women) lose their money or snookered into investments that do not make any sense. If you are not comfortable making investments on your own, please see me for a free one hour consultation before you consult the advise from anyone who only has an interest in “what’s in it for them” (aka anyone making a commission on your purchases/investments.) Money can still be made in this economy, but you need to do your research and only work with people you trust.

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