FIN-2860 Chapter Notes - Chapter 1: Sunk Costs, Mental Accounting, Mind Games
13 Dec 2020
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Flexibility: plan for life changes and the unexpected. Liquidity: immediate use of cash by quickly and easily converting an asset. Minimization of taxes: keep more of what you earn. Short term goals are less than a year (examples: insurance, vacation, credit card) Intermediate goals are from 1 to 10 years (example: pay off a major debt) Long term goals are over 10 years (example: retirement fund) Stage 1: prior to age 54, develop regular savings pattern and cost of raising children. Stage 2: ages 55-64, think about retirement, insurance protection, and estate planning. Estate planning: planning for your death and passing your wealth to your heirs planning. Stage 3: after age 65, live off of savings (retirement), less risky investment strategy, consider extended nursing home protection, estate planning is critical. The crisis of 2008 led to high rates of unemployment and a disruption of financial markets.
