Aaron Stevens: Personal Finance

Off Topic Lecture Notes

My notes from the lecture I gave on April 27, 2009
An overview of the wealthy in America, compound interest, debt, and savings.

HealthCare in America
(lecture notes)

My notes from the off-topic lecture I gave on December 9, 2008.
An overview of the the healthcare crisis, entitlement programs, costs, and solutions.

Should You Go To College?
CollegeCostCalculator [spread sheet]
(discussion notes)

My notes from the experimental lecture I gave on June 23, 2009.
A discussion of careers and earnings, college costs and school loans, and comparing these choices by measuring the standard of living achieved by various paths.

Good Reading

The only investment guide you'll ever need, by Andrew Tobias.
The title only begins to describe this excellent book. More than just discussing investing, Tobias explains with examples the ways to organize one's income and savings; how to control expenses; and how not to get taken for a ride by unscrupulous salespeople peddling ill-advised investments.

The millionaire next door : the surprising secrets of America's wealthy, by Thomas J. Stanley, and William D. Danko.
This landmark book provides an in-depth analysis of who the wealthy are in the United States - you'll be surprised by most of the common traits these wealthy individuals share, and which habits they avoid. Also covers why most high-income earners are not wealthy.

On My Own Two Feet: a Modern Girl's Guide to Personal Finance, by Manisha Thakor and Sharon Kedar Don't let the title fool you, this is a book for the guys too. Covers the basics of personal finance as a how-to guide, with rules of thumb for most common situations (savings, credit, housing, taxes, etc.).

I disagree with their savings recommendations -- they suggest 15% of income, and being more conservative/wanting quicker results, I recommend savings 25% of income. Otherwise, this book is well worth the time it takes to read it, and I heartily recommend it as a first/only book in personal finance.

Spend 'til the end: The Revolutionary Guide to Raising Your Living Standard -- Now and When you Retire, by Lawrence Kotlikoff and Scott Burns
Unlike other personal finance books I've read, this one takes a "Consumption Smoothing" approach. All income, transfers (e.g. taxes and social security benefits) and "off the top" expenses are used to create a present value all future income/expenses. -- determining the effect on overall standard of living (as measured in today's dollars of consumption) -- for virtually all major personal finance decisions. Then this present value is consumed over your maximum expected lifetime (e.g. 100) to produce a level standard of living through time and across times.

Check out the companion software: Economic Security Planner.

This material is the core of what we will cover in EC 171: Personal Life Cycle Economics.

A random walk down Wall Street: the time-tested strategy for successful investing, by Burton Malkiel.
Malkiel reviews historical investment returns, theories of investment, and some of the greatest speculative bubbles of all time. The core of the text is an approachable discussion of the random walk (e.g. efficient markets) theory, risk and return. Finally, Malkiel covers matching investments to one's goals in his lifetime guide to investing.

John Bogle on investing : the first 50 years., by John C. Bogle
If ever there were an 'elder statesman' of investing, it is John Bogle. Bogle founded the Vanguard Group, the only mutually-owned mutual fund company. This book is a collection of speeches Bogle, with topics including how to obtain better investment returns than mutual fund managers; how to minimize investment costs and taxes; and corporate governance in the mutual fund industry.

Terrible Reading

Rich Dad, Poor Dad, by Robert Kiyosaki.
I found this book to be written at a 2nd grade reading level, which perhaps explains its best-seller popularity. The most important point about it, though, is that it is a fraud -- the author has no real-estate or business success.
You should read John T. Reed's detailed analysis of the book. Do not confuse motivational speakers with finance experts.

Updated 4/27/2009
Aaron Stevens
Email: azs@bu.edu