Introduction

This book presents financial literacy in a real-world context. Therefore, I admit that some of the information is biased, based on my own experience. My experience includes thirty years as an executive in business, of which fifteen were spent running my own company in commercial real estate development. I bring that on-the-job, real-world bias to the information presented in this book. I have also distilled many years of experience in teaching economics and financial literacy into the opinions I express. For example, I have found that college students want to know the best way to finance the purchase of a house or automobile and not just a discussion of the various types of mortgages you can use to buy a house.

This textbook is primarily written for a course in financial literacy for college undergraduates. However, they do not have to be business or economics majors. In my most recent class, using this book, there were Art History majors and Engineering majors who were quite comfortable with this textbook. The only math prerequisite is an understanding of high school algebra and ability to read graphs. Any formulae in the book are not complicated beyond elementary algebra.

Admittedly, some of the information in this book may be already out-of-date by the time you read it. This includes time-sensitive material such as current prices on the stock market, current interest rates, the fiscal and monetary responses of the federal government, and the status of the Pandemic Recession. In each case of time-sensitive data, I have provided you with website links to view current data. For example, you can watch real time activity of the stock market and of individual stocks on yahoofinance.com.

The economy’s performance in the Pandemic Recession, however, is a special case. As of the publication of this text, the Pandemic Recession is officially over, lasting only from February 2020 until April 2020. Thus, I have been able to discuss it from beginning to end and examine in detail the partial recovery of the 22 million lost jobs.

Overall, the advice in this book is based on sound economic theory, which has certainly stood the test of time. While there are some disagreements among economists, they are generally not about the fundamental principles of economics. The major disagreement among economists is between those that are Keynesian economists and those that are Free Market economists. This division is roughly the same as the split between “Demand Side” economists and “Supply Side (trickle-down)” economists. Demand side economists (Keynesians) believe that in a recession, the government needs to get money to the middle class to stimulate demand and to increase government spending to save jobs. Supply side economists believe the government should cut taxes on corporations and the rich who will invest in business and create jobs. As an economist, I am firmly in the Keynesian camp, as I have seen in economic history very little job creation or economic trickle down from Supply Side policy. After thirty years of deregulation by the U.S. government, beginning with the presidency of Ronald Regan in 1981, the income and wealth distribution in this country have dramatically worsened. Further, while the poverty rate has been slowly decreasing over the last decade, it still remains stubbornly high for a nation that is the wealthiest in the world: Therefore, my policy discussions in this book are Keynesian.

The first two chapters will upend most of what you have been told about how to find a job. My thanks especially to Dr. Eric Shlesinger, retired Director of Human Resources for The World Bank (and a Temple alumnus), for guiding me in the discussion on how to find a job. According to Ben Bernanke, former Chair of the Federal Reserve Bank, the “why” of economics is to increase wellbeing for people. Therefore, Chapter 2, which discusses well-being in the workplace and in your life, speaks to the heart of the purpose of economics.

According to current psychological research, money is both a tool and an addictive drug. It is a tool in that we see money as the ability to fulfill our needs, wants and fantasies. It is a drug in that we are addicted to money. So, in Chapters 3 and 4, we discuss what money is, and we use Behavioral Economics to discuss our attitudes toward money and how we make economic decisions.

Chapters 5 and 6 will help you understand where you stand financially and how to become and stay financially healthy. Unfortunately, many people—either through necessity or bad habits—deposit their paycheck in their bank account and spend it until they run out of money in the account. These chapters will help with simple actions that will enable you to save money for future needs, such as emergencies, home ownership, college tuition, or retirement.

Consider these statistics about personal debt in America. More than 191 million Americans have credit cards. The average credit card holder has at least 2.7 cards. The average household credit card debt is $5,315. Total U.S. consumer debt is at $14.9 trillion. That includes mortgages, auto loans, credit cards and student loans. We need to reduce credit card and student loan debt, and we examine this in chapters 7 and 8.

In order to make good decisions about money, we need to understand it and learn how to deal with it rationally. We need to think like an economist. Very few people have been taught that, even by their parents. Chapters 9 and 10 will teach you to think like an economist.

Owning a home is the American Dream. However, a home is both a nest and an investment. Chapters 11 and 12 will examine how to buy a home, how to finance a home, and how to insure a home (and your other physical assets).

Almost everyone dreams about becoming a millionaire in the stock market. This is actually a very easy thing to do. Chapters 13, 14, and 15 will teach you how to invest and how to avoid all the traps of the stock market and other investment markets. Finally, chapter 16 explains the range of government policy that can be used (and has been used) to stimulate the economy when we are in a recession.