Description
Book SynopsisTable of Contents1 Beginning Your Financial Journey: The Interior Finance Point of View 1-1
Your Starting Point 1-2
1.1 Your Journey to Financial Well-Being 1-4
Your Internal View of the Financial World 1-4
Launching Your Lifetime Financial Journey 1-5
The Journey to Financial Well-Being 1-7
1.2 Human Capital: An Essential Element of Financial Well-Being 1-11
Human Capital 1-11
Social Capital 1-14
The Impact of a Pandemic on Human and Social Capital 1-15
The College Payoff 1-16
1.3 Financial Risk Tolerance and Financial Goal Achievement 1-21
Financial Risk Tolerance 1-21
Financial Risk Tolerance and Wealth Accumulation 1-22
Risk Perception and Risk Preference 1-23
1.4 Financial Goals and Time Perspective 1-27
Setting SMART Financial Goals 1-27
Thinking About Time 1-29
Maintaining Commitment to Your Goals 1-31
1.5 Psychology and Financial Well-Being 1-35
Procrastination 1-35
Heuristics 1-37
Using Heuristics as a Decision-Making Tool 1-40
2 Tools for Your Financial Journey 2-1
What’s in Your Financial Toolbox? 2-2
2.1 The Power of Compound Growth 2-3
Overview of Interest 2-3
Compound Growth 2-4
APR and APY Formulas 2-6
Consider Interest Strategically 2-7
2.2 Overview of Time Value of Money 2-11
Understanding the Time Value of Money (TVM) 2-11
The Basic TVM Concepts 2-11
A TVM Shortcut: The Rule of 72 2-15
2.3 Time Value of Money Calculations 2-18
Methods for Solving TVM Problems 2-18
Solving TVM Problems 2-18
Other TVM Calculations 2-25
2.4 Your Starting Point: The Balance Sheet 2-29
Determining Your Net Worth 2-29
The Importance of Net Worth 2-33
Financial Ratios: Guideposts Along Your Financial Journey 2-33
2.5 The Personal Budget 2-37
The Five Steps of Resource Management 2-37
The Budget 2-38
Financial Ratios 2-41
The Value of Tracking Expenses 2-43
2.6 Your Financial Plan 2-46
Overview of a Financial Plan 2-46
Creating a Financial Plan: The Six Steps 2-47
Determining Your Financial Score 2-48
3 Earnings and Income: The Building Blocks of Your Financial Journey 3-1
The Real Cost of Summer Vacations 3-2
3.1 Income: Produce More Than You Spend 3-3
Creating Wealth 3-3
Saving Your Income Surplus 3-5
Escaping the Perils of Debt 3-7
3.2 Employment Earnings 3-11
Overview of Earnings 3-11
Who Makes More Money? 3-14
3.3 Self-Employment Income 3-18
Overview of Self-Employment 3-18
The Pros and Cons of Self-Employment 3-19
Business Structures 3-21
3.4 Investment Income 3-25
Earned Income Versus Unearned Income 3-25
Interest and Dividends 3-26
Wealth over the Life Span 3-30
3.5 Capital Gains Income 3-33
Overview of Capital Gains 3-33
How to Achieve Capital Gains 3-35
3.6 Government Benefits: The Safety Net for Income 3-39
Government Financial Assistance 3-39
Other Sources of Assistance 3-42
Social Security 3-43
4 Personal Taxation 4-1
The Inescapable Reality of Taxation 4-1
4.1 Understanding Your Taxes 4-3
Types of Taxes 4-3
Forms of Taxation 4-7
Taxes and the Government 4-8
4.2 Federal Income Tax Base 4-13
Overview of Federal Income Tax Returns 4-13
Entering Personal Information 4-16
Calculating Total Income 4-21
4.3 Federal Income Tax Rates 4-27
Federal Income Tax Brackets and Marginal Tax Rates 4-27
Capital Assets and Tax Rates 4-30
Effective Tax Rates 4-31
4.4 Federal Income Tax Credits 4-34
Understanding Tax Credits 4-34
Common Federal Income Tax Credits 4-35
Importance of Filing a Tax Return 4-40
4.5 Federal Self-Employment Taxes 4-43
Employee Versus Self-Employment Taxes 4-43
Calculating Self-Employment Taxes 4-46
4.6 Income Tax-Planning Strategies 4-51
Lowering Your Tax Base 4-51
Tax-Exempt Income 4-53
Importance of Tax Knowledge and Organization 4-54
5 Checking Accounts, Credit Scores, and Credit Cards 5-1
Credit Cards: Tools or Trouble? 5-1
5.1 Checking Accounts: The Basics 5-3
Overview of Checks 5-3
Opening and Using a Checking Account 5-4
Know Before You Spend 5-6
5.2 Debit and Prepaid Cards and Electronic Transfers 5-12
Purchases and Transactions 5-12
Electronic Payment Methods 5-13
Hybrid Payment Methods 5-14
Choosing the Best Payment Method 5-16
5.3 Costs of Borrowing 5-19
Overview of Loans 5-19
Loans and Collateral 5-19
Choosing the Right Loan 5-22
Calculating Interest 5-23
5.4 Credit Reports 5-28
What Is a Credit Report? 5-28
Contents and Accessibility of a Credit Report 5-30
Analyzing Your Credit Report 5-31
5.5 Credit Scores 5-35
The Purpose of Credit Scores 5-35
Developing Credit Scores 5-36
How Credit Scores Are Used and Updated 5-39
5.6 Credit Cards 5-43
Characteristics of Credit Cards 5-43
Credit Card Payments 5-46
Qualifying for a Credit Card 5-47
6 Loans and Housing Decisions 6-1
Paying for College: The Facts 6-2
6.1 High-Cost Consumer Loans 6-3
Alternative Financial System Loans 6-3
Pros and Cons of Alternative Loans 6-5
How to Avoid Expensive Loans 6-7
6.2 Personal Loans 6-10
Importance of Personal Loans 6-10
Types of Personal Loans 6-11
6.3 Financial Aid and Student Loans 6-17
The Process of Obtaining Federal Financial Aid 6-17
Federal Student Loans 6-18
Financial Aid in Practice 6-19
6.4 Approaches to College Education Funding 6-25
Calculating the Costs and Benefits of a College Education 6-25
Saving for College 6-28
Other Ways to Help Pay for College Expenses 6-32
6.5 Auto Loans 6-36
The Value of an Automobile 6-36
Steps in Purchasing an Automobile 6-37
Buying Versus Leasing 6-40
6.6 Housing: The Basics of Renting 6-44
Renting Versus Buying 6-44
Finding a Rental 6-45
The Rental Lease 6-47
Tenant Rights 6-49
6.7 Buying a Home 6-53
Owning a Home 6-53
Shopping for a Mortgage 6-56
Maximizing Housing Wealth 6-59
7 The Foundation of Savings 7-1
What’s in Your Account? 7-1
7.1 Risks, Returns, and the Investment Pyramid 7-3
Risk Defined 7-3
Saving and Investing: An Introduction 7-6
The Investment Pyramid 7-7
7.2 Building and Maintaining an Emergency Fund 7-12
Overview of Emergency Funds 7-12
Creating Your Own Emergency Fund 7-13
The Risks of Going Without an Emergency Fund 7-15
7.3 Savings Accounts 7-19
Overview of Savings 7-19
Motivating Yourself to Save 7-19
Where to Save Your Money 7-21
Safe Assets for an Emergency Fund and Short-Term Savings 7-21
7.4 Using Roth IRAs Effectively 7-28
Overview of Roth IRAs 7-28
Roth IRA Withdrawals 7-29
Opening, Funding, and Using Your Roth IRA 7-31
7.5 U.S. Savings Bonds 7-36
Overview of U.S. Savings Bonds 7-36
Types of U.S. Savings Bonds 7-37
Purchasing and Redeeming U.S. Savings Bonds 7-38
The Long-Term Value of U.S. Savings Bonds 7-39
7.6 Custodial Accounts and Asset Ownership for Minors 7-43
Property Ownership as a Minor 7-43
Financial Benefits of Transferring Assets to Minors 7-45
Other Beneficiary Accounts 7-46
7.7 Financial Frauds and Identity Theft 7-49
Financial Frauds 7-49
Protecting Yourself from Financial Fraud 7-51
Identity Theft 7-52
8 Investments 8-1
Investment Highs and Lows 8-1
8.1 Stocks: An Introduction 8-4
Overview of Stock 8-4
Why Buy Stock? 8-6
Using Stocks to Create Wealth 8-7
8.2 Stocks: Valuation and Ownership 8-12
Stock Ownership 8-12
Valuing Stocks 8-13
Applying Knowledge and Intuition 8-16
8.3 Bonds: An Introduction 8-20
Overview of Bonds 8-20
Types of Bonds 8-23
Investing in Bonds 8-24
8.4 Mutual Funds 8-31
Overview of Mutual Funds 8-31
Mutual Fund Management 8-32
Purchasing Mutual Funds 8-35
8.5 Exchange-Traded Funds 8-41
Limitations of Mutual Funds 8-41
Overview of Exchange-Traded Funds 8-42
Why Use an ETF? 8-43
8.6 Domestic Versus Foreign Investments 8-48
Overview of Foreign Investments 8-48
Why Foreign Investments? 8-49
Buying Foreign Investments 8-50
8.7 Risks, Returns, and Investment Portfolios 8-54
The Three Rules of Risks 8-54
Risk Tolerance and Your Portfolio 8-56
Risks and Returns Revisited: Volatility and Inflation 8-59
8.8 Brokerage Accounts 8-63
Overview of Brokerage Accounts 8-63
Placing Orders 8-65
Reading a Brokerage Statement 8-67
8.9 Investing in Real Estate 8-70
Overview of Real Estate 8-70
Real Estate Investment Trusts 8-72
Real Estate Risks 8-73
8.10 Investing Alternatives: Collectibles, Auctions, and Other Techniques 8-78
Overview of Collectibles 8-78
Collectible Dealers 8-79
Market Equilibrium 8-81
8.11 Protecting Your Investments 8-86
Protecting Yourself as an Investor 8-86
A Cautionary Tale 8-87
Working with a Financial Advisor 8-89
9 Risk Management: The Role of Insurance 9-1
Risky Behavior? 9-2
9.1 Insurance: What It Is and Why You Need It 9-4
Human Capital and Health 9-4
The Risk Matrix and Health 9-4
Protecting Your Health 9-5
Overview of Insurance Companies 9-7
9.2 Health Insurance 9-11
Overview of Health Care 9-11
Health Insurance Costs 9-12
Types of Health Insurance Policies 9-15
Obtaining Health Insurance 9-17
9.3 Disability Insurance: Protecting Your Income from Life’s Unexpected Events 9-22
Overview of Disability 9-22
Disability Insurance 9-24
Disability Insurance Costs 9-25
9.4 Life Insurance: Do You Really Need It? 9-29
The Basics of Life Insurance 9-29
Types of Life Insurance 9-29
Do You Need Life Insurance? 9-32
9.5 Automobile Insurance 9-37
Overview of Automobile Insurance 9-37
Liability Coverage 9-41
Car Accidents: What to Do and Not Do 9-44
9.6 Homeowner’s and Renter’s Insurance: Protecting Your Personal Belongings 9-47
Insurance and Risks 9-47
Homeowner’s Insurance 9-49
Renter’s Insurance 9-51
9.7 Long-Term Care Insurance 9-56
Overview of Long-Term Care Insurance 9-56
Who Needs Long-Term Care Insurance? 9-58
Medicare and Medicaid 9-59
Becoming a Help Provider 9-60
10 Planning for the Future: Retirement and Estate Planning 10-1
Taking Charge of Your Long-Term Future 10-2
10.1 Planning for Your Retirement 10-4
Overview of Retirement Planning 10-4
Estimating Your Financial Retirement Needs 10-5
Saving for Retirement 10-7
Getting Your Employer’s Help: Matching Contributions 10-8
10.2 Individual Retirement Accounts (IRAs) 10-14
Overview of IRAs 10-14
IRA Contributions 10-18
IRAs and Your Overall Retirement Plan 10-20
10.3 Property Ownership and Trusts 10-25
Titles and Transfers of Property 10-25
Trusts 10-27
Gifts and Inheritances 10-28
10.4 Wills: A Fundamental Estate Planning Tool 10-32
Transferring Property After Death 10-32
Wills 10-33
Creating a Will 10-35
10.5 Living Wills and Powers of Attorney 10-40
Overview of Living Wills 10-40
Other Medical Documents 10-42
Power of Attorney 10-43
10.6 Obtaining Help from Financial Professionals 10-47
Overview of the Financial Professional Marketplace 10-47
Financial Help: Two Approaches 10-48
Navigating the Financial Advice Marketplace 10-49
Glossary G-1
Index I-1
