AAEC 2104 Lecture Notes - Lecture 2: Personal Finance, Opportunity Cost, Uptodate
19 Jan 2018
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Document Summary
Principles of financial planning: the best protection is knowledge. Lots of sources of info (trustworthy sources like websites, magazines, news, financial advisors and planners) People spend money without thinking, and you can"t save any money without thinking and planning. Saving must be planned, start without a modest and uncomplicated plan. The earlier you start, the more tools you have: the time value of money. Money has time value: risk, inflation and opportunity cost. today is worth more than in the future. Compound interest is your friend: taxes affect personal finance decisions. Goal is to maximize your after-tax return. Compare investment alternatives on an after-tax basis. (cid:498)don"t let the tax tail wag the dog(cid:499: stuff happens/importance of liquidity. Without liquid funds: long term investments must be liquidated, results in lower price, tax consequences. With nothing to sell: pay higher interest to borrow money quickly: waste not, want not smart spending matters.
