It’s time for a personal finance “chemistry” experiment. This is “Experiments in Finance,” after all. No matter how much we know about personal finance, it is sometimes helpful to go back to the basics and think about the core values and systems that will provide the overarching framework for personal finance and career success. Using the elements of the actual periodic table as a blueprint (yes, we’re going slightly gimmicky today), here are some of the basic “elements” at work in having a healthy financial life, as well as some books that provide great overviews of each topic.
Element 1: (H) – Housing – Should you rent or buy? What is the future of the housing market? 15 year or 30 year mortgage? How much should you borrow/how much house can you afford? Commercial properties v. renting commercial space v. a home based office. The list goes on and on. To get a firm grasp of your finances, you’ll have to understand the average person’s number one expense: housing.
Book to Read: The Wall Street Journal’s Complete Homeowner’s Guidebook, by Wall Street Journal Editor David Crook. Bonus: When you leave Experiglot, read my interview with the book’s author, David Crook.
Element 2: (He) – Health – That’s right, personal finance begins (like just about everything) with health. Without your health, it’s much harder to do or accomplish anything. And if you have health issues, then that can really destroy your chances at saving money. Health issues are one of the major reasons for bankruptcies. Having proper medical, disability, and life insurance is also important. It’s been said that we spend the first part of our lives trading our health for money and the second part of our lives trading money for health. It’s a trap that we all need to consider when creating our financial plans. Our health affects everything from our quality of life to our target retirement.
Book to Read: Your Money or Your Life, by Vicki Robin and Joe Dominguez
Element 3. (Li) – Lifestyle – What are your goals? What kind of life do you wish to lead and how much money will it take to get there? What sort of lifestyle are you shooting for and how close are you to attaining it?
Book to Read: How Much is Enough? By: Arun Abey and Andrew Ford.
Element 4: (Be) – Beliefs – What are the core values of how you will generate and save money? Do you want to be socially conscious? Do you want to be entrepreneurial or a W-2 income earner, or (like me) both? How much freedom do you wish to have in your schedule? Do you hope to be a job-hopper or a “work for one company” type?
Book to Read: The Problem with Money. By Jane Honeck.
Element 5: (B) – Banking – What kind of investor do you want to be? What are your investment beliefs? Buy and hold or aggressive? To what extent should you diversify? How risk adverse are you and your spouse/significant other?
Book to Read: The Bogglehead’s Guide to Investing, by Taylor Larimore.
Element 6: (C) – Credit – How much debt are you going to allow into your life? Is student loan debt going to pay off? Can you get rid of your credit card debt once and for all? Can you negotiate a lower interest rate with your credit card companies?
Book to Read: Debt Free for Life, by David Bach.
Element 7: (N) – Networking – Your job is the most important income generator in your life (for most people). Networking is one of the most important aspects of furthering your career–in your present job and also in future positions as well. Keep yourself in the minds of the “head hunters” and learn all you can about networking.
Book to Read: Never Eat Alone, by Keith Ferrazi
Element 8: (O) – Occupation – Going hand in hand with networking is the larger picture: your occupation. Where will you work–both in terms of employer and industry? What are your goals for the present and future? How can you optimize your degree and skills? How can you actively manage your career?
Book to Read: Do What You Are, by Barbara Barron
Element 9: (F) – Finance – Investments, ETF’s, and investing in everything from real estate to precious metals; “shorting”, dividend investing, bonds v. stocks, mutual funds, and on and on and on. But here’s the good thing–you don’t need a MBA or a Ph.D in economics to figure these things out–just go after them one at a time, starting with the basics such as mutual funds.
Book to Read: The Wall Street MBA: Your Crash Course in Finance, by Reuben Advani
Element 10: (Ne) – Need. As in determine the difference between your wants and needs. Make a budget and stick to it. Save and reinvest everything you can. Make your money work for you rather than the other way around.
Book to Read: The Millionaire Next Door, by Thomas Stanley and William Danko
Sure, the real periodic table goes on for 180-some elements whereas we’re stopping at ten, but this should be more than enough for you to consider as you begin learning more about personal finance or go about refining your current plan.
Best of luck as you apply the “Personal Finance Period Table” to your own life.
Any questions? Where did I stretch? What elements would you do differently?