12 Key Elements of Personal Finance

This list is extracted from the wonderful book, “Common Sense Economics,” by James Gwartney, Richard Stroup, and Dwight Lee.

1. Discover your comparative advantage.
2. Be entrepreneurial. In a market economy, people get ahead by helping others and discovering better ways of doing things.
3. Spend less than you earn. Begin a regular savings program now.
4. Don’t finance anything for longer than it’s useful life.
5. Two ways to get more out of your money: Avoid credit-card debt and consider purchasing used items.
6. Begin paying into a “real-world” savings account every month.
7. Put the power of compound interest to work for you.
8. Diversify–don’t put all of your eggs in one basket.
9. Indexed equity funds can help you beat the experts without taking excessive risk.
10. Invest in stocks for long-run objective; as the need for money approaches, increase the proportion of bonds.
11. Beware of investment schemes promising high returns with little or no risk.
12. Teach your children how to earn money and spend wisely.