March’s Theme: Money!

In the month of March, we will be discussing a fascinating and difficult subject . . . money!

While we might not like to admit it, money is as essential to life as air, water and food. Money can’t buy health, happiness or love but one thing money does is give you options.

I have never been too concerned with how much money I have and I don’t think anyone really should be. In our young marriage, my husband and I decided that our goal for money was always to have enough money not to have to worry about basic things like paying the rent, buying groceries and paying the electric bill. Any more than that was a delightful bonus. As we have grown and added children, “basic things” keeps expanding to include more and more things like retirement savings, preschool tuition, and insurance, but our basic philosophy is still pretty much the same.

I can’t tell you how to make a million dollars, how to pick stocks or how to make your credit card debt disappear but I can help you get your finances organized so that you know how much money you have, where it is going and how to gather the information needed to evaluate various financial decisions. You will then feel more confident when you evaluate the advice from your accountant, attorney, broker or other financial advisor.

Stock-picking guru Jim Cramer has a classic quote:

“[Y]ou have to learn to be either a better investor or a better client; there is no other choice.”

–Jim Cramer, Jim Cramer’s Real Money: Sane Investing in an Insane World

What I like about this quote is that it lets us know clearly and plainly that you can’t just choose to throw your hands up and say, “This is too complicated. I can’t understand my 401(k).” or “I don’t know anything about taxes.” There is too much at stake to be uninformed.

If there is one thing we have learned from the current financial crisis, it is that we have to be educated enough to make financial decisions based on facts, not feelings. It is not enough to make a complex financial choice, like taking out a mortgage, just because your neighbors and friends are all doing it. You need to be able to evaluate if it is the appropriate choice for you.

If you aren’t willing to learn yourself, then you need to learn how to pick a qualified person to make these decisions for you. Note that money confusion is not just a problem for the poor and middle class. Just ask any of the wealthy victims of the Bernie Madoff scandal about the consequences of being too trusting and not doing the difficult homework of evaluating a financial decision.

Yes, this month you will have to do a little math, but don’t be anxious about it. Many financial decisions can be evaluated with basic adding and subtracting. Spreadsheets are great when things get more complex. I will walk you through some of the tools I use to stay on top of my own finances.

When delving into a new topic, it is nice to get an overview from a recognized expert. Fortunately and amazingly for us, Professor Niall Fergusson has taken on the incredible challenge of providing a history of the world from the perspective of money and finance. You can view his excellent 4-hour documentary, The Ascent of Money online at pbs.org. He takes on such questions as “What is money?” and how the stock and bond markets work. For a one minute preview of the series, click below.

The world is complex and the the world of finance is complex but it is not too complex to understand with a little effort. Don’t give up and join me this month to explore how to bring some order to your finances!

Do you have a burning question about money you want to see answered this month? Please share in the comments.