Financial Tips for a Secure Future from Prof. Boliari
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Professor Natalia Boliari has spent years unraveling the complexities of economic policy and the role of institutions in shaping global markets. Currently, she’s a professor in the Economics and Finance Department at Manhattan College with a PhD from Carleton University and a unique professional background that includes her time at Johnson & Johnson, Professor Boliari brings practical advice on a wide range of financial topics that can help individuals secure their financial future.
In this article
Financial planning during uncertain times
Joy Wallet: How can individuals optimize their financial planning in times of economic uncertainty?
Prof. Boliari: I think it’s essential to:
- Track and understand your cash flow well (given your income, how much you spend on housing, utilities, car, etc. vs. on less important things such as dining out, shopping, or traveling for leisure). This will give you an idea of which and how many expenses you can cut when hard times hit. It is, basically, thinking of having an emergency budget, i.e., the situation where you are able to pay for necessities and sacrifice spending on things that aren’t essential to your well-being.
- Definitely have some sort of emergency fund — some amount of money you put in a savings account or CD account that is separate from all your other checking and savings accounts. Deposit the money and just forget that you have it; do not touch it unless you really need to, like in the case when you lose your job.
- If you have debt, eliminate or reduce it ASAP. The burden of debt feels so much heavier in tough times.
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Common pitfalls in retirement budgeting
Joy Wallet: What are common mistakes people make when budgeting for retirement?
Prof. Boliari: It seems to me that the common mistake is related to the question above — not knowing or not realizing exactly what type of cash flow you will have during retirement. It is definitely not the cash flow you have when you are still working. This is not easy to figure out, and there is no standard answer that will fit all. An individual or a couple will have to decide what kind of life they will have after retiring and figure out the cash flow that will finance that life. Then, you can budget accordingly.
Managing student loan debt
Joy Wallet: Can you share practical tips on managing student loan debt efficiently?
Prof. Boliari: I think the answer will depend on the amount of the loan and perhaps the type of person you are. I did have a student loan, and the question I asked myself was, “How much can you pay back on a monthly basis without significantly reducing your quality of life?” The answer was an amount three times higher than what the bank was asking for, so I went ahead and set up my own monthly amount and paid the loan back in about five years as opposed to nine. This gave me peace of mind, and remember, again, the first question of this interview — you do want to keep your overall debt low.
Inflation and personal savings
Prof. Boliari: Unfortunately, inflation will reduce the value of personal savings. Think about inflation as extra taxation. If you are a borrower, you benefit from inflation, but if you are a lender (as a saver, you are effectively a lender), you lose. Essentially, higher inflation reduces the cost of borrowing but decreases the rate of return for the lender. I don’t think that, as a saver, one can mitigate the effects. The only way to mitigate the effects will be to spend all of your income, have no savings, and be a borrower. But that’s obviously very risky because inflation fluctuates, which is the exact problem with inflation — it redistributes income in a very haphazard manner.
Investment strategies for economic downturns
Joy Wallet: Are there specific investment strategies that tend to perform well during economic downturns?
Prof. Boliari: Yes! Economic downturns are the times when you can buy as many stocks as possible. That’s the time most of them are selling at lower prices or are undervalued. You will do well if you have the patience to wait through the recession and see your portfolio grow afterwards.
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Essential financial habits for young professionals
Joy Wallet: What financial habits should young professionals adopt early in their careers?
Prof. Boliari: The three points I listed in the first question are valid for young professionals as well. Like anyone else, they need to understand their cash flow, have an emergency budget, and try to reduce their debt. Additionally, I strongly recommend that they be involved in the stock market. The younger you are, the more you will benefit from the virtues of the stock market, provided you follow the strategy of buy and hold. No matter how small the amount they invest in the stock market, the long-term returns are typically high. When you are young, you can wait to get those benefits in the future.
The importance of financial literacy in debt prevention
Joy Wallet: How important is financial literacy in preventing debt accumulation?
Prof. Boliari: Absolutely critical! I believe financial literacy should be taught starting in middle school or perhaps even earlier. Understanding the interest rates and the compounding effect, among other features of the loanable funds market, is absolutely essential, I think, in discouraging or preventing people from accumulating debt.
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Emergency funds
Joy Wallet: What role do emergency funds play, and how should people calculate the amount they need?
Prof. Boliari: The main role of an emergency fund is to provide funds at times when you don’t have income. I don’t think there’s a standard way of calculating the amount that’s right for a given individual. In the past, it was suggested that the fund is at least as big as your six-month salary (this was mostly based on the fact that unemployment benefits were provided for max 26 weeks). I think the equivalent of your current net six-month salary is quite reasonable because six months is a good amount of time to provide for adjustment to a new reality — losing a job and therefore income, having to move to a different city or state, having to go on medical leave or change jobs, having to deal with other life situations, etc. In economics, six months is considered a long enough period to allow for people’s adjustment. So, a six-month salary set aside will be of much help when a person is transitioning from one reality to another.
Automation in personal finance
Joy Wallet: How does automation in personal finance, like budgeting apps, affect financial behavior?
Prof. Boliari: I am not sure at all; I have never used any of those. Personally, I would not rely on any app to do my budgeting job for me, but I imagine they may be providing some ease in entering data and doing calculations. Similar to food calorie or macro tracking apps, budgeting apps may reveal a reality you were not aware of, which may indeed be awakening and have a positive impact on your financial behavior.
The FIRE movement
Joy Wallet: What is your opinion on the FIRE (Financial Independence, Retire Early) movement?
Prof. Boliari: The answer will definitely depend on the type of job you have (whether you like it or not), your aspirations for the future, and, of course, your ability to afford to retire early. If you like your job and you are happy with it, you are healthy and get satisfaction from doing that job, you can work for as long as you can and be just absolutely fine. There are people who retire from their career jobs but start a new type of professional engagement which still brings some sort of income. I believe a lot of the FIRE movement is composed of that kind of people. They are also, usually, the ones that can afford to retire early from their career jobs. I think most people will simply be unable to afford to retire early.
Building and maintaining a strong credit score
Prof. Boliari: Get your first credit card as early as possible in order to have a long history of using credit cards. Never accumulate credit card debt, ever. If possible, pay the full monthly balance on your credit card; if not, make sure to set an automatic payment of the minimum amount.
Diversifying your investment portfolio
Joy Wallet: How should someone approach diversifying their investment portfolio?
Prof. Boliari: Diversification lowers the risk of your portfolio, so picking a lot of different stocks limits your exposure to things that may go wrong in any particular company, sector, or industry. It would be wise to diversify across different countries and asset classes. The least risky assets for you are the assets that are negatively correlated with your portfolio.
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Finding joy
Joy Wallet: What brings you the most joy in life?
Prof. Boliari: My routine — running outdoors and/or doing Pilates, being productive and efficient at work, reading a book, or spending time with my family or closest friends, feeling grateful.
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