For most people, an understand of economics isn’t necessary. You’ve got your checking account under control – you’ve got your own online billpay, you don’t send checks to Nigerian princes, and you don’t link any accounts to deduct from your account, you’ve got your savings accounts under control (speaking of which, I have ING referrals available! Make free cash by having a deposit!), you contribute to your 401k, have a financial planner, you’ve got everything going for you. But maybe you’d like to understand it a little more.
This leads us into Economics!
Understanding economics is important in personal finance – not just because of investments (like your 401k) – but because you should understand the current economic environment so you can forecast the state of the economy, inflation, and interest rates for the future. Essentially, you’re keeping your eyes open for any changes in the market that could be detrimental to your financial situation – whether you consider yourself successful, or on your way. The state of the economy can turn your life upside down if you aren’t preparing for it.
If you lose your job, suddenly your steady income is gone. Did you prepare an emergency fund? Are your financial affairs in order? If there’s a recession, is your job secure enough to not worry about lay-offs? Can your hours be cut but it won’t affect you detrimentally in your finances? Many factors can come into play – but the amount of information involved, between inflation, recessions and expansions, can take volumes to fully understand! I’m going to work additional articles in covering these certain angles this week so we can benefit and further our Personal Finance knowledge.