Most financial advisors will probably tell you to establish an emergency savings account. I personally am a fan of the emergency fund strategy, but it is different for every person, depending on what kinds of risks they have in their lives. I talk with my finance classes about different types of risk we are exposed to:
- Concentration risk
- Income risk
- Inflation risk
- Interest rate risk
- Liquidity risk
- Personal risk
Emergency savings can help with some of these risks, like a medical emergency or job loss, but they lose buying power to inflation, and they have an opportunity cost. The question is which of the risk factors above carries the most weight for you. If you work in a highly volatile industry, income risk may be a major concern. If you are a contracted teacher like me, maybe not so much. This is why it is important to “play devil’s advocate” and make arguments against conventional wisdom in finance. Let’s examine the argument against establishing the infamous emergency savings account. Continue reading “The Case Against Emergency Funds”
While it seems a little early to write a “history of the 21st century,” The World Is Flat is full of amazing insights that reshape the way we look at our world. What do the fall of the Berlin Wall, the Netscape IPO, and 9/11 all have in common? Thomas L. Friedman shows how these and other events are both causes and effects of the flattening of the world that has been on a fast track from 1989 to today.
This book introduces the reader to the letters that Warren Buffett writes to his shareholders in the Berkshire Hathaway Annual Report. Buffett also includes a “Shareholder’s Manual” in the report, which Rittenhouse uses material from as well. This is a great introduction to fundamental concepts of value investing, the strategy which Buffett has used to build a personal net worth of over $70 billion.