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How to Handle Money Properly: 21 Tips from a Harvard Professor

Everyone wants to make more money - but many are afraid of atypical ways. Fortunately, there are simple and effective ways to get rich without risking your hard-earned savings. An economist who was educated at Harvard told about them in more detail. CNBC.

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Many of these will change over time as taxes and benefits are reformed and as new and better financial products emerge. However, having guidelines in place can help you manage your money and keep you financially secure.

1. Don't borrow to college. It is too risky and expensive.

“You can get a great education without pawning your future and potentially ruining your career plans,” says the economist.

It simply means getting a scholarship and applying to less expensive, albeit less prestigious, institutions.

2. If your parents borrow to pay for your tuition, discuss who will return the money. And consider whether they are spoiling your inheritance or sacrificing their well-being by “helping” you to attend an inaccessible college.

3. Strive to own your home, rather than renting it - and try to buy with cash. This is especially true if your earnings range from medium to high.

4. Mortgage Is a tax and financial vampire. Pay her as soon as possible. Think about it: if you have $ 100 to invest in a 000% bond right now, you will have $ 1,5 in interest income for a year. But if you had $ 1 in debt at 500% per annum that you could pay off right now, you would save $ 100 over the year in interest payments.

5. Owning a home will help in the long run. Here's another reason it's better to own than rent. Let's say you're 70 years old and you've found the place you've dreamed of. Renting for the rest of your life carries the risk of higher rent without the possibility of increasing your fixed income.

On the contrary, if you have a home, prices can skyrocket or fall, but you will be isolated. Since you don't buy or sell your home, who cares what the housing market does? Accommodation is guaranteed until the end of your days.

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6. Your ideal home can be much cheaper in multiple time zones. Or it could be a place that has no state income tax, property tax, and inheritance tax.

Yes, the situation is more complicated. Land prices in New Hampshire may be higher in light of state tax breaks. And the school system in Massachusetts could be better. But who knows? You can be childless and live happily in a tall, five-story building.

7. Choose a job that everyone hates but you. All things being equal - skills, education, and experience - people in unpleasant, nervous, unsafe, anxious, or financially risky jobs earn more than people with the same skills in jobs without all of these disadvantages.

Economists call the surcharge "compensation difference." The key is to take advantage of this.

8. Don't worry about careers and job changes. By far the fastest way to get promoted is to get another job offer.

9. Consider working for yourself. Starting your business the right way will increase your future earnings and provide unmatched operational reliability.

If that sounds too risky, figure out how to turn your hobbies and interests into a side job.

10 Keep thinking about tomorrow. Will you be able to achieve your best results on the remaining work days? Should I switch to another task? Is your current job in danger? Set a date every few months to do a career review with your spouse, partner, or friend.

11 Your standard of living is your bottom line. Model potential pathways based on alternative investment and spending strategies to see where these strategies might take you.

12 Marriage is better than a long-term partnership. This could mean slightly higher taxes, but it comes with a number of valuable implicit agreements that help ensure that marriage is formal and legal.

13 If you do get married, do not forget about the divorce. Protect yourself and your partner with a prenuptial agreement.

14 All lifestyle decisions - changing careers, moving from home, getting married, having children, divorce - come at a price. Measure these prices in terms of your sustainable living standard.

15 Use contributions to your retirement account, conversion and withdrawals to reduce taxes. And make sure you deposit enough money to meet your employer's requirements.

16 Wait until you reach the age of 70, to receive social security retirement benefits. Seniors who wait to start receiving benefits can receive hundreds of dollars more each month than those who receive benefits ahead of schedule.

Of course, not everyone can do this. Before taking any steps, identify a strategy that will maximize your benefits.

17 If you do not formally claim Social Security benefits, you will not receive it.

“I have had a lot of people in their 70s ask me when they would start getting their checks. That's when I tell them that they need to apply for benefits immediately, ”says the economist.

Social Security doesn't let you know it's time to pay.

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18 The Social Security Administration Program Guide System Contains Thousands of Rulesin which employees can be mistaken in part or in whole. Talk to multiple offices and do your own research.

19 Early retirement is financial suicide... Yes, there are situations when it makes sense to retire early. But very few people think of early retirement as what it really is: the decision to take the longest and most expensive vacation that most cannot afford.

Put it this way, it’s clear that the wonderful benefits — extra time with grandchildren, freedom to pursue a hobby, reduced stress — all come at a high cost: the loss of years, if not decades, of earnings.

20 Most conventional investment advice is of dubious value. They are based on the fact that you make four major economic mistakes: save the wrong amount when you are young, put your pre-retirement savings on auto-pay, spend the wrong amount as you get older, and never adjust to market conditions.

21 If you are concerned about the risk of losses, play on the stock exchangelike in a casino. Think of investing in stocks as money that you bring to the casino: don't spend a cent of your winnings if you've earned them until you leave the building. Or, in other words, don't invest more money in the stock market until your original bets are protected from losses.

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