Essential personal finance : a practical guide for students

Cover
Half Title
Title Page
Copyright Page
Table of Contents
List of Figures
List of Tables
List of Boxes
Acknowledgements
Introduction
Part I Have a vision and a plan
	Chapter 1 The necessity of private wealth
		Learning outcomes
		1.1 Defining wealth
			1.1.1 Global uneven distribution of wealth
		1.2 Reasons why it is necessary to create wealth
			1.2.1 Push: increasing life expectancy
			1.2.2 Push: gap between life expectancy and healthy life expectancy
			1.2.3 Push: falling birth rates and ageing population
			1.2.4 Push: diminishing role of the government in retirement provision
			1.2.5 Push: diminishing role of employer
			1.2.6 Push: diminishing role of the family
			1.2.7 Pull: relationship between health and wealth
			1.2.8 Pull: relationship between wealth and longevity
		1.3 How much money do you need in retirement?
		1.4 Examples of students who became millionaires
		1.5 Ways to create wealth
			1.5.1 Guiding principles
			1.5.2 Financial literacy
			1.5.3 Planning
		1.6 Conclusion
		Answers to Activity 1.2
		End of chapter test
		References
	Chapter 2 Defining and achieving your desired lifestyle and legacy
		Learning outcomes
		2.1 Human motivations and needs
			2.1.1 Classical and behavioural finance
			2.1.2 Hierarchy of needs and humanism
			2.1.3 Money beliefs and life planning
		2.2 Desired lifestyle and the role of money
			2.2.1 Defining and prioritising goals
			2.2.2 Converting human capital to financial capital
				Social capital
			2.2.3 Personal expenditure budgeting
			2.2.4 Self-efficacy – the key to achieving life goals
		2.3 Emotions and behavioural biases – impact on financial decision making
			2.3.1 The role of emotions
			2.3.2 Heuristics and biases
				Over-confidence
				Extrapolation
				Anchoring and adjustment
				Availability
				Hindsight bias
				Representativeness
				Gambler’s fallacy
				Self-attribution bias
				Prospect theory and loss aversion
				The disposition effect
				Regret avoidance
				Framing
				Mental accounting
		2.4 Conclusion
			Answers to Activity 2.5
		End of chapter test
		References
	Chapter 3 Money and happiness
		Learning outcomes
		3.1 The role of money in achieving and maintaining happiness
		3.2 The main factors affecting happiness
			3.2.1 Income
			3.2.2 Career and work
			3.2.3 Spending habits and behaviour
				Buy experiences, not things
				Invest in others
				Match your spending to your personality
		3.3 Health and longevity outcomes related to money
		3.4 Putting money in context
		3.5 Conclusion
		End of chapter test
		References
	Chapter 4 Plan your future
		Learning objectives
		4.1 Why a plan is essential to success
		4.2 Life stages, planning principles and practices
		4.3 Planning principles
			4.3.1 How you see money
			4.3.2 Compound interest
				The ‘Rule of 72’
			4.3.3 Inflation
		4.4 Planning practices
			Watch your spending
			Pay yourself first
			Good debt not bad debt
			Keep it simple stupid (KISS)
			If it looks too good
			Tax isn’t everything
			The media is not your friend
			Keep costs low and diversify
			Build a cash reserve
			Protect your income
			Invest in yourself
			Join a pension plan
			Don’t rush to buy property
			Repay debt
			Invest most of your long-term money in equities and property
		4.5 Key components of a financial plan
			4.5.1 Values and goals
			4.5.2 Current position
			4.5.3 Gap analysis and ‘what if?’ scenarios
				Calculating savings required to provide an income
				Calculating regular savings to produce a future lump
			4.5.4 Financial planning policies
			4.5.5 Strategy and action plan
		4.6 Conclusion
			Answers to Activity 4.2
		End of chapter test
		References
Part II Build a secure foundation
	Chapter 5 The pillars of wealth: Budgeting and saving
		Learning outcomes
		5.1 Living within your means
			5.1.1 Debt and saving in the UK
			5.1.2 Good debt – bad debt
			5.1.3 Types of borrowing
			5.1.4 Credit referencing and scoring
			5.1.5 Why people borrow
		5.2 Budgeting
			5.2.1 Check your income
			5.2.2 Control your expenses
			5.2.3 Increasing your income
		5.3 Importance of saving
		5.4 Compound interest
		5.5 Importance of investing
		5.6 Conclusion
		End of chapter test
		Note
		References
	Chapter 6 Insuring risks
		Learning outcomes
		6.1 The importance of protection
			6.1.1 Human capital versus financial capital
			6.1.2 Importance of human capital
		6.2 Risk of premature death
		6.3 Risk of poor health
		6.4 Risk of unemployment
		6.5 Other types of insurance
		6.6 Risk of inadequate retirement income
		6.7 Behavioural issues in the protection gap
		6.8 Conclusion
		End of chapter test
		References
Part III Multiply your wealth
	Chapter 7 Residual income
		Learning outcomes
		7.1 Earned versus residual income
			7.1.2 Importance of assets
			7.1.3 Risks
		7.2 Sources of residual income
			7.2.1 Property
			7.2.2 Business
			7.2.3 Investments
			7.2.4 Internet
		7.3 Leverage
		7.4 Conclusion
		End of chapter test
		References
	Chapter 8 A place to live
		Learning outcomes
		8.1 Rent or buy?
			8.1.1 Tenure around the world
			8.1.2 Pros and cons of renting or buying
		8.2 Home as an investment
			8.2.1 Leverage
			8.2.2 Housing and the stock market compared
			8.2.3 Taxation of property
		8.3 Buying a home
			8.3.1 Costs of buying
			8.3.2 Mortgages
			8.3.3 Housing affordability
			8.3.4 How much can you borrow?
		8.4 The economics and politics of housing markets
			8.4.1 The economics of the market
			8.4.2 The politics of the market
		8.5 Conclusion
		End of chapter test
		References
	Chapter 9 Make wise investments
		Learning outcomes
		9.1 Goals: the long and the short of it
			9.1.1 Save or invest?
		9.2 Risk and return
			9.2.1 Attitude towards risk
			9.2.2 Capacity for loss
		9.3 Asset classes
			9.3.1 Cash
			9.3.2 Fixed-interest (bonds)
			9.3.3 Property
			9.3.4 Equities
			9.3.5 The risk-return spectrum
		9.4 Building a portfolio
			9.4.1 Theory 1: Markowitz-efficient diversification
			9.4.2 Theory 2: Capital Asset Pricing Model
			9.4.3 Theory 3: Efficient Markets Hypothesis
			9.4.4 Theory 4: Behavioural finance
		9.5 Investment strategies
			9.5.1 Rules of thumb
			9.5.2 Rebalancing
			9.5.3 Active versus passive investing
			9.5.4 Pound-cost averaging
		9.6 Tax and charges
			9.6.1 Tax
				Tax wrappers
			9.6.2 Charges
		9.7 To be advised or not advised
		9.8 Conclusion
		Answers to Activity 9.5
		Answers to Activity 9.6
		Answers to Activity 9.7
		End of chapter test
		References
	Chapter 10 Saving for later life
		Learning outcomes
		10.1 Live long and prosper
			10.1.1 Increasing life expectancy
			10.1.2 Life expectancy on reaching retirement
			10.1.3 ‘Baby Boomers’ and the support ratio
		10.2 Systems of retirement provision
			10.2.1 Mandatory state pensions
			10.2.2 Private pensions
			10.2.3 Converting savings to income
		10.3 How much is enough?
		10.4 Behavioural traits – going with the grain
		10.5 Conclusion
		End of chapter test
		References
	Chapter 11 Help from your family
		Learning outcomes
		11.1 Teaching you to fish!
			11.1.1 The cash flow game
			11.1.2 The saving habit
			11.1.3 Budding entrepreneurs
		11.2 Investments for children in the UK
			11.2.1 Tax when you are young
			11.2.2 Junior Individual Savings Account and Child Trust Fund
			11.2.3 Other savings and investments for children
		11.3 Buying your first home
			11.3.1 Help with the deposit
			11.3.2 Help with the mortgage
			11.3.3 Joint ownership
		11.4 Gifts and bequests
			11.4.1 Capital Gains Tax and gifts to children
			11.4.2 Inheritance Tax on gifts and bequests
		11.5 Using trusts
		11.6 Conclusion
		Answers to Activity 11.1
		Answers to Activity 11.4
		Answers to Activity 11.5
		End of chapter test
		References
Part IV The next steps
	Chapter 12 Take action
		References
Appendix UK tax and tax planning
	A.1 Why tax planning matters
		A.1.1 Tax avoidance vs tax evasion
	A.2 Direct taxation
		A.2.1 Income Tax
		A.2.2 National Insurance
		A.2.3 Capital Gains Tax (CGT)
		A.2.4 Inheritance Tax (IHT)
	A.3 Indirect taxes
	References
Glossary
Index