FINE 4050 Lecture Notes - Lecture 13: Late Show Top Ten List, Financial Capital, Human Capital
9 May 2016
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Fine 4050 review: top ten list: money happiness, human capital is the discounted value of net (expected) wages until retirement and is the most valuable asset class when you are young. Recognize and optimize it: human capital decreases with age, financial capital increases with age. Individual financial decisions should be based on your entire (holistic) personal balance sheet including the value of all assets and liabilities. To give any financial advice, do not speculate about the future, look at the different assets and liabilities they have and try to integrate any investments into threat. Justifies buying insurance, taking risks: might provide information about wages and preferred consumption rate, calculate savings rate and/or consumption c. Smooth consumption doesn"t necessarily mean constant consumption, means changing at a constant rate (increase steadily, decreasing steadily, or remaining constant: buying a home with a (very) large mortgage is not necessarily the road to riches. Understand how to compute the long-term cost and risks.
