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Personal Finance Is About the Big Picture

By: Steve Johnson

2/17/2009 - 50 Comments

Last week J.D. from the popular personal financial blog, Get Rich Slowly, wrote an interesting article which was somewhat of a follow up article that he wrote a week ago.

He talks about how he is ready to take the next step in his personal financial journey now that he is out of debt and looking for better investment opportunities. 

I have read J.D.'s blog for years and watched him dig his way out of debt and improve his personal finances. Yet, I don’t think he realizes how important understanding the global economy is to understanding how to manage personal finances.  I wish I could say that personal financial planning can be done without respect to what is going on in the nation and globally, but that is just not the case.

Here is the article, The National Economy Versus Your Personal Economy. J.D. starts this article talking about how bad it was during the Great Depression and how paying too much attention to national or international economic news leads to decisions that don’t make sense for your personal economy.

J.D. says,

“When you pay too much attention to national or international economic news, you can find yourself making decisions that don’t make sense for your personal economy.”

“It’s my by belief that a strong personal economy is still built on fundamentals such as these:
• Clear financial goals
• An adequate emergency fund
• Limited use of debt
• The practice of thrift
• Smart investing for the future

I don't think we can use the Great Depression as a measure today because the entire world financial system is much different than it was during the Great Depression. We live in a global economy, which means that national economies and world events do affect our personal finances.

The truth is that fundamental personal finance strategies have been under attack from the government’s policies to manipulate interest rates and the currency supply for decades, whether you realize it or not. Your money is not as safe as you think it is.

Then J.D. said,

“The foundation of a strong personal economy is education. To become a wise investor, you must be an educated investor. ”

Which is very true, but the primary education that an investor needs today is not just about a local business, but with respect to the global economy and the actions of the overextended government. Therefore, the education that an investor needs today is a global investment outlook to protect the wealth of your personal finances.

This is why I talk about the big picture, the global economy and the government’s intervention and central planning in the economy.  These things are directly impacting my investments and my personal finances.  You cannot put your head in the sand with respect to these things if you expect to preserve your wealth in the world we live in today.  My education in the big picture led me to increase my 401k investments last year, while the average investor lost 45% of their money.  Personal finance is about the big picture, no question about it.

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