Personal finance is an area of our lives over which we probably can exert the most control. You make a certain amount of money every month, and you can spend it (or save it) any way that you like. Spenders will find novel ways to spend it down to zero. Savers will think of ways of turning one dollar into three. It is truly your choice. Sometimes people let their emotions run wild, and this impacts their ability to make proper financial decisions.

The Handy Personal Finance Answer Book takes the reader through each of what we feel are major themes in personal finance. There are so many variables that affect our ability to manage our money; we decided to look at factors that may not be found in other personal finance reference books and present our information in a way that surprises, assists, and enables readers to change the way they feel about and view money. The questions and answers include broad statistical references that demonstrate how many people are affected by some aspect of finances, as well as broad macroeconomic data to support trends and allow the reader to draw his/her own conclusions. The line of questions also takes a subject and moves from broad to specific—but never too specific—answers that are never “over the heads” of the audience. Some answers are definitions, while others are explanations.

My journey into personal finance began when I was about eight or nine, after I responded to an ad in the back of my Superman comic book to sell vegetable seeds door to door. I had to buy a box of seeds and sell them to the neighboring houses. I ended up selling most of them, and I even planted the carrot seeds that I couldn’t sell near a stump at my house, but they didn’t grow. It was my first job, and I was so proud to begin earning money. My parents encouraged me to work, and soon I was painting the interiors of houses and managing a 150-house paper route at 4:00 in the morning in order to save for the future. I had already opened a bank account some years before, and I have been continuously employed ever since.

When interest rates were in the double digits in the late 1970s, I managed to open a money market account comprised of U.S. Government Treasury Bills and T Bills in order to take advantage of the returns while working and attending university. It was pretty rewarding to see how fast this money grew at the historically high rates, and so it was relatively easy for me to save even while in school.

If we value money and what financial security can bring to us, why are we so bad at managing it? It is most likely that we neglect a few key elements. We express little enthusiasm and interest in understanding personal finance until it is too late; we are late or errant in developing, over time, the discipline to use what we have learned; and we do not change the way that we view money.

You should know that you can change your views and behaviors, and over time you can make little changes that will contribute to your ability to permanently manage your finances.

Our mindset is key to our success in managing our money.

A friend of mine who was a currency trader in Tokyo noticed that his fellow traders would always reach a certain level of income in a day, and then somehow trade it down, so that they could never climb over their self-imposed wall. I thought about this and wondered how it is related to how we view money. People like predictability. If they are used to having a certain amount of money in savings—say $500—the idea of having $10,000 would be pretty stressful. They would have to decide what to do with it, how to spend it, what to pay off, who to give some to, etc. Eventually, and with sad predictability, the person would manage to spend his newfound cash right back down to the level of $500, the amount of money he or she was used to having.

If we just change what we feel is an acceptable amount to have, we begin to act a bit differently. Perhaps, if we are given $10,000, we might say to ourselves, “This is my new zero.” We will start with this amount and pretend we do not have it, and just keep our expenses where they have always been. We can now be comfortable that we can use this money to invest and, hopefully, grow it.

This is but one change in mindset that leads to the creation of wealth. If we just changed our view on what is an acceptable amount of money to have in our checking account, for example, we would then do those things that help us get to that goal. So, if you can convince yourself that you prefer the feeling of having $10,000 in the checking account, you will begin to do things that will get you to that goal.

We might want to think about expensive purchases a little differently, too. If you think about buying a new $1,000 television because the other two-year-old that you own is smaller than your neighbors’, imagine how much that money could have grown if you had not tried to compete with the Joneses and invested it instead? You have to have $10,000 earning ten percent per year in order to make enough interest to buy that television. In today’s banks, you would need about $100,000 earning one percent to make enough extra money in interest to buy it. You begin to appreciate what each purchase means when you look at the expense in terms of investment earnings or income.

We have to simplify our financial lives by living beneath our means and saving and investing the extra income that we might get from raises, commissions, bonuses, and job changes. This means staying focused on keeping expenses low. The difference between what we manage to make and what we save plants the seeds of future wealth.

Take just one expense that you may have and see if there is a way to lower it. Maybe you never use your home phone anymore, but you still keep it at a cost of $80 per month, which is nearly $1,000 a year. See if there is a way for you to control and cut one expense per month. You may find many thousands of dollars available to you to save by the end of the year. Practice with just a small item before taking on an entire year of expense budgeting.

The world of personal finance seems like a difficult subject to take on, but it actually is not. It is just like a tree, and in many ways, just as this book has been organized, it enables us to distill the general areas of the subject one branch at a time, going neither too shallow nor too deep in any one area. Our quest for information on the subject can begin by delving into popular magazines like Money and Kipplinger’s. We look at interesting news articles that relate to something that we have heard about and read the article to try to learn, and think, how it is related to our situation. Can we use this information in some way? Are the conclusions or suggestions useful or valuable? Have we heard or read reports from other people making the same claims or drawing the same conclusions? Are these people all reading from the same material, or are they drawing these conclusions from a variety of sources? This is what enables us to learn.

How do we know when to stop exploring a certain subject? It is probably good to stop when the subject gets too complex or too specific for your interests. Remember where you left off, and move on until you are ready for more in-depth reading.

The Internet provides a wealth of information on personal finance, so sifting through it can appear to be difficult, but it really is not. As you read an article that cites a U.S. Census Bureau study, you can easily click on the underlying research and see the exact report that the writer describes, deciding for yourself the material to explore. After a while, you can become well trained in surfing around to explore a subject. If you search Google news on a subject like income tax deductions, you may find many articles that describe ways of saving money on your taxes, spending only a few minutes doing so. Blog information is also valuable if you are interested in the articles that appear every day on the subject covered. But there is no one “good” source of information. In order to really understand personal finance, to learn about personal finance, and to develop a broad perspective on personal finance, you need to pull information from many different sources.

As we learn more about what is happening in the area of personal finance, choosing to focus our attention on this area of one’s personal life can help you learn to make better financial decisions. We can easily make the “right” decision about whether or not to buy a used car, a leased car, or a brand new car. The decision should not be emotional. It should be straight analysis informing us as to which option helps to improve our current financial state. If you believe that debt is bad in almost all cases, then the option of getting a car, and getting a loan to do so, does not even come up. The idea of leasing an expensive car also is not considered because you have to have a lot of money invested in order to pay for the lease. It seems that paying cash for a used car is probably the option that makes the best financial sense. This is in contrast to the emotional, feel good option that says: “My friends all drive new cars, so I want one too,” or “I should be driving a brand new car because everyone else does.” Sorry to tell you, but most millionaires, including one of the most famous and wealthiest men in the world, Warren Buffet, drive cars that are paid for, often purchased used, and that are anywhere from ten to twenty years old. The reason why they are so wealthy, aside from a good deal of luck, is that they are able to make these kinds of decisions, time and time again, without letting their egos or emotions enter into the equations.

The goal of The Handy Personal Finance Book is to help you get a better handle on your saving and spending attitudes so that you, too, can build a more financially secure future for yourself and your family. While you might not be the next Warren Buffet, there is no reason why you cannot save a tidy nest egg, retire comfortably, and have enough left over to help your family. All it takes is some planning and discipline. Good luck!

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