Wednesday, December 01, 2004

Personal Finance and variable annuities

One thing I wish we had at St. Bonaventure was a personal finance class. Maybe even not for credit, but I do think it would help many people after graduation. However, often there seems to be little demand for such a class and to offer it for credit is almost too much like training and not enough like "education".

My biggest advice with respect to personal can be summarized into a series of rules

FinanceProfessor's Top Ten Personal Finance Rules

  1. Invest as much as you can-Do it now!
  2. Invest on a regular basis! Set up automatic investments in your funds.
  3. Realize there are no "free lunches"
  4. Diversify! The basket is generally more important than the eggs!
  5. Think long-term and do not try to time the market
  6. Consider tax consequences and take advantage of tax-advantaged accounts
  7. Look for low transaction costs
  8. Save more than you think you need (a penny saved is a penny earned!)
  9. Compounding matters! Save early, save hard!
  10. Live within your means. Do not run up large credit card bills.

But this is far from a "do this, don't do this" prescription. I really do not (and probably will never) want to give that specific of advice. However, that often does not stop people from asking however. But I always do my best to refrain from answering. LOL.

That said, a good friend recently asked about variable annuities for his mother and for him I broke my silence and agreed that it made no sense (especially since it was already in a retirement account!)

Fortunately, she did not do it. Many people do not know much about variable annuities and hence fall prey to salespeople who have a vested interes in selling the high cost products. So I was really excited when I saw/heard this week's Kim Snider radio show. It had a very good discussion on variable annuities and the problems they can cause. You can listen to it here. Short version: you probably do not want a variable annuity!

As I said before when I mentioned her blog/show: "good stuff." :)

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