Financial Planning for the Totally Innumerate (Part 1: Savings)

Think of finance and management expert Zvi Bodie as the benevolent, numerate uncle you never had.

 

Financial Planning for the Totally Innumerate (Part 1: Savings)

The Scenario:


You’re a 21 year old aspiring novelist living on restaurant tips in one of the most expensive cities on earth.  Multisyllabic words fly forth from your typing fingertips like shimmering butterflies, but you can’t balance a checkbook to save your life. Holiday meals with your investment banker father and lawyer mother are like an extended sermon from the Book of Isaiah - according to these sober-minded folks, you’re basically doomed – a hopeless romantic who’d be better off teaching high school, which would at least give you health insurance. 

Are Mom and Dad Right about You?

They’re right in some respects. Your situation is risky. After paying the rent on the cockroach-infested garret you share with three aspiring musicians and stocking up on Ramen you’ve got maybe $40 a month left over to play with. You’re young, you’re healthy, and your personal needs are few – a stack of good books on the bedside table, time to write, and the occasional beer with friends. Still, if disaster strikes, you’re looking at a humiliating bailout from the First Bank of I-Told-You-So. 

Meanwhile, that $40/month is literally piling up in a shoebox, haunting you from the back of your closet. You’re not about to start playing the stock market, but you know there’s got to be a better way to save toward that ominous Future you keep hearing about. 

Think of Zvi Bodie as the benevolent, numerate uncle you never had. A professor of management at Boston University and the co-author, with Rachelle Taqqu, of Risk Less and Prosper: Your Guide to Safer Investing, uncle Zvi doesn’t want to kill your dreams. You’re young, he says, now is the time to take the risks and absorb the experiences that may pay off down the road in the form of authorial greatness. But while you’re at it, he’s happy to offer a bit of free financial advice without treating you like a total moron. 


Personal Finance Tips for the Innumerate, from Zvi Bodie:

 

  • See how little you can live on: You’re already doing well in that department, but every little thing adds up. Buy deli coffee instead of Starbucks, or make your own at home and carry it in a Thermos. Buy clothes at thrift stores (real ones – not the trendy kind where the clothes cost more than they would new). 
  •  

  • Pay down your debts, if you have them: As an aspiring novelist, your future earning potential is – well – a bit shaky. If you’ve got student loan or credit card debt, paying off the interest would be a good use of that $40/month. 
  •  

  • If you’re debt-free, consider investing in US treasury bonds. Around the world, and in spite of the recession, US Treasury bonds are considered a dependable investment. They’re insured against inflation and you can buy and sell them online at any time. The stock market, says Bodie, is a risky investment even if you know what you’re doing, and not to be trifled with – especially with money you can’t afford to lose. 
  •  

  • Don’t try to become an expert in finance, but don’t outsource your decisions, either. You’re a novelist. You don’t have time to read textbooks on investment strategy. But neither, says Bodie, can you afford to ignore financial matters or outsource them to professional advisors who are trying to sell you insurance or a mutual fund. Take your finances as seriously as you take major health decisions – you don’t have to be a doctor to do some research, ask the right questions, and get a second opinion. 
  • Follow Jason Gots (@jgots) on Twitter 

    Image credit: Shutterstock.com

    Weird science shows unseemly way beetles escape after being eaten

    Certain water beetles can escape from frogs after being consumed.

    R. attenuata escaping from a black-spotted pond frog.

    Surprising Science
    • A Japanese scientist shows that some beetles can wiggle out of frog's butts after being eaten whole.
    • The research suggests the beetle can get out in as little as 7 minutes.
    • Most of the beetles swallowed in the experiment survived with no complications after being excreted.
    Keep reading Show less

    The cost of world peace? It's much less than the price of war

    The world's 10 most affected countries are spending up to 59% of their GDP on the effects of violence.

    Mario Tama/Getty Images
    Politics & Current Affairs
    • Conflict and violence cost the world more than $14 trillion a year.
    • That's the equivalent of $5 a day for every person on the planet.
    • Research shows that peace brings prosperity, lower inflation and more jobs.
    • Just a 2% reduction in conflict would free up as much money as the global aid budget.
    • Report urges governments to improve peacefulness, especially amid COVID-19.
    Keep reading Show less

    The evolution of modern rainforests began with the dinosaur-killing asteroid

    The lush biodiversity of South America's rainforests is rooted in one of the most cataclysmic events that ever struck Earth.

    Velociraptor Dinosaur in the Rainforest

    meen_na via Adobe Stock
    Surprising Science
    • One especially mysterious thing about the asteroid impact, which killed the dinosaurs, is how it transformed Earth's tropical rainforests.
    • A recent study analyzed ancient fossils collected in modern-day Colombia to determine how tropical rainforests changed after the bolide impact.
    • The results highlight how nature is able to recover from cataclysmic events, though it may take millions of years.
    Keep reading Show less
    Quantcast