4 Key Concepts and Strategies From a Finance Professor

Wealth Management 101: 4 Key Concepts and Strategies From a Finance Professor

Cindy Lamothe   Tue, August 27, 2024   GOBankingRates

For most people, managing finances is not the funnest thing in the world. Maybe that’s why you’ve likely postponed it up until now.  And maybe you’re truly interested in making a change but all of the financial jargon out there makes your head swim. How do you get started? What are the basics?

Thankfully, experts understand the challenge and are ready to break it down for you. Below, Robert R. Johnson, Ph.D., CFA and professor of finance at Creighton University‘s Heider College of Business, outlines some of the key concepts and strategies to know when it comes to wealth management.

Start With Limiting Debt

According to Johnson, people would be well served to realize that debt extinguishment should be a priority.

“To quote Albert Einstein, ‘Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.’

Johnson added, “People can put their financial house in order by reducing debt and acquiring assets that grow in value over time.”

He said the fastest way to improve your net worth is to obtain more assets that compound in value (e.g., stocks and CDs) and reduce your debts and interest payments.

“Typically, one should pay down the highest interest rate debt first,” he said. “And that is generally high interest rate credit card debt.”

Understand Not All Debt Is Bad

“Not all debt is bad,” Johnson said. “Some experts would contend that student loans are bad debt, but I disagree. I would categorize modest student loan debt as being good debt.”

In his opinion, student loans get a bad rap.

“There is no doubt that the system has been abused and that some students have accumulated a mountain of debt and have earned degrees that simply won’t provide the earning power to pay that debt back.”

But, used judiciously — and to earn degrees that truly build your human capital and earning power — Johnson said student loans can be essential bridges to career success.

Mortgage debt also can be considered good debt. Johnson cautioned against comparing mortgage interest against investment interest, because mortgage interest is tax deductible.

TO READ MORE:  https://www.yahoo.com/finance/news/wealth-management-101-4-key-170229585.html