Understanding Personal Finances and Investments

Understanding Personal Finances and Investments

I Inside business
Raymond James: Professional Investing with the Personal Touch
Expert financial advice, personalized service, and access to a wide range of investments—that’s 
how Raymond James has built its reputation as a brokerage firm and investment bank. Since 1964, 
when Edward Raymond and Robert A. James merged their companies, Raymond James has been 
offering investment advice from its headquarters in St. Petersburg, Florida, as well as from its 2,300 
offices worldwide.
Raymond James’s 5,300 financial advisors help its two million customers choose just the right 
mix of investments to build a sizable nest egg for retirement, save for major outlays such as paying 
for a child’s education, or put money aside for the next generation. Taking individual needs and 
concerns into consideration, an advisor examines each customer’s assets, expenses, investments, 
and overall financial situation. Then he or she prepares a detailed financial plan for meeting the 
customer’s short- and long-term investment goals, with the flexibility to make changes as require-

ments change and markets move up or down.
So that its advisors can make informed recommendations about buying and selling stocks, 
bonds, and other investments, Raymond James’s economists monitor the global financial system 
and its securities analysts follow the fortunes of more than 1,000 public corporations. In addition, 
Raymond James works closely with companies to set up and manage retirement plans and pro-

vide a menu of investment choices for business owners, managers, and employees. On the invest-

ment banking side, it helps corporations obtain either debt or equity financing from sources such 
as an initial public offering, private placement, issuance of corporate bonds, and other sources.
Thanks to its reputation for providing professional, quality service with the personal touch, 
Raymond James is able to compete effectively against larger brokerage rivals such as Charles 
Schwab and Fidelity Investments. In fact, Raymond James now rings up $2.6 billion in annual 
revenue and has been attracting new customers and expanding its investment offerings for indi-

vidual investors. The company is ready to help customers make the most of their investments and 
make sound financial decisions for today and tomorrow.

As the saying goes, “I’ve been rich and I’ve been poor, but believe me, rich is 
 better.” Yet, just dreaming of being rich does not make it happen. Although being 
rich does not guarantee happiness, managing your personal finances and beginning 
an investment program are both worthy goals. Firms such as Raymond James—the 
company profiled in the Inside Business feature for this chapter—offer an array of 
services to help people manage their personal finances, research investments, and buy 
and sell stocks, bonds, mutual funds, and other securities. Nevertheless, you must be 
willing to invest the time and effort required to manage your personal finances and 
become a good investor. Furthermore, do not underestimate how important you are 
when it comes to managing your money. No one is going to make you manage your 
money. No one is going to make you save the money you need to fund an investment 
program. These are your decisions—important decisions that literally can change 
your life.
Many people ask the question: Why begin an investment program now? At the 
time of publication, this is a very important question given the recent economic crisis. 
Although it is true that many investors have lost a great deal of money as a result of 
the crisis, the experts agree that the best investment program is one that stresses long-

term growth over a 20- to 40-year period. Although the dollar value of your invest-

ments may decrease over a short time period, historically the value of securities has 
always increased over a long time period. To illustrate this point, it may help to think

of the financial markets as a roller coaster ride with ups (periods of increasing val-

ues) and downs (periods of declining values). The recent crisis is a very real example 
of how worldwide economic problems can cause the value of stocks, bonds, mutual 
funds, real estate, and other investments to decline. Faced with large dollar losses, 
many investors make a decision to sell their investments at the bottom of the roller 
coaster ride. The investors who decide to hold their investments will eventually see 
them recover and increase in value over time. In fact, many experts recommend 
buying quality stocks, mutual funds, and real estate during an economic downturn.
A second compelling reason to start an investment program is that the sooner 
you start an investment program, the more time your investments have to work for 
you. So why do people wait to begin investing? In most cases, there are two reasons. 
First, they do not have the money needed to fund an investment program. However, 
once you begin managing your personal finances and get your spending under con-

trol, you will be able to save the money needed to fund an investment program. The 
second reason people do not begin investing is because they do not know anything 
about investing. Again, this chapter provides the basics to get you started.
We begin this chapter by examining everyday money management activities and 
outlining the reasons for developing a personal investment plan. Next, we examine 
the process of buying and selling securities. Then we discuss both traditional and 
high-risk (or speculative) investments. Finally, we explain how to use information 
to evaluate potential investments. It is time! Take the first step, and begin managing 
your personal finances.

Managing Your Personal Finances

Although it would be nice if you could accumulate wealth magically, it is not magic. 
Most people begin by making sure that their “financial house” is in order. In this 
section, we examine several steps for effective money management that will help you 
to prepare for an investment program.
Step 1: Tracking Your Income, Expenses, Assets, and Liabilities
Many personal finance experts recommend that you begin the process of managing 
your money by determining your current financial condition. Often the first step is to 
construct a personal income statement and balance sheet. (Note: Both personal income 
statements and balance sheets were examined in more detail 
in Chapter 17.) A personal income statement lists your 
income and your expenses for a specific period of time—
usually a month. By subtracting expenses from income, you 
can determine if you have a surplus or a deficit at the end 
of the time period. Surplus funds can be used for savings, 
investing, or for any purpose that you feel is important. Sim-

ply put: It is your choice how you spend the surplus. On 
the other hand, if you have a deficit, you must take actions 
to reduce spending and pay down any debts you may have 
that will keep you from starting an investment program.
To get another picture of your current financial con-

dition, you should construct a personal balance sheet. A 
personal balance sheet lists your assets and liabilities on 
a specific date. By subtracting your total liabilities from 
your total assets, you can determine your net worth. For an 
individual, net worth is the difference between the value 
of your total assets and your total liabilities. Over time, 
the goal is to increase the value of your assets (items of 
value that you own) and decrease liabilities (your debts).
Based on the information contained in these two 
statements, you can determine your current financial 

Understanding Personal Finances and Investments