Personal Finance, 9th Edition

Front Cover......Page 1
Title Page......Page 2
Copyright......Page 3
Contents......Page 6
PART 1 Financial Planning......Page 24
1 Understanding Personal Finance......Page 25
GOOD MONEY HABITS IN PERSONAL FINANCE......Page 27
DID YOU KNOW?…: The Top 3 Financial Missteps in Personal Finance......Page 29
Think Like an Economist When Making Financial Decisions......Page 34
The Time Value of Money: Setting Dollar Values on Financial Goals......Page 37
Make Smart Money Decisions at Work......Page 42
DID YOU KNOW?…: Examples of Poor Financial Behaviors......Page 47
Do the Numbers......Page 50
Financial Planning Cases......Page 51
On the 'Net......Page 52
DID YOU KNOW?…: How to Be Financially Literate......Page 30
DID YOU KNOW?…: State Lotteries Use Time Value of Money Calculations......Page 38
DID YOU KNOW?…: Examples of Good Financial Behaviors......Page 44
ADVICE FROM A PRO…: Seven Money Mantras for a Richer Life......Page 33
ADVICE FROM A PRO…: Choosing a Financial Planner......Page 48
2 Career Planning......Page 53
Key Steps in Successful Career Planning......Page 55
Know Your Preferred Work-Style Personality......Page 62
DID YOU KNOW?…: How to Work at Home Online......Page 64
DID YOU KNOW?…: Résumé Buzzwords for Skills, Traits, and Technical Expertise......Page 69
Financial Planning Cases......Page 78
On the 'Net......Page 79
GOOD MONEY HABITS IN UNDERSTANDING CAREER PLANNING......Page 56
DID YOU KNOW?…: The Top 3 Financial Missteps in Career Planning......Page 57
DID YOU KNOW?…: Value of Additional Education......Page 65
ADVICE FROM FROM A PRO…: Career Advancement Tips......Page 68
DID YOU KNOW?…: Prospective Employers Can Check Your Credit Report......Page 72
DID YOU KNOW?…: How to Interview over a Meal......Page 76
DID YOU KNOW?…: How to Get a Raise......Page 77
ADVICE FROM A PRO…: Competencies of Successful People......Page 60
DECISION-MAKING WORKSHEET: What Is Your Work-Style Personality?......Page 63
DECISION-MAKING WORKSHEET: Assessing the Benefits of a Second Income......Page 67
DECISION-MAKING WORKSHEET: Keeping Track of Your Job Search Progress......Page 70
3 Financial Statements, Tools, and Budgets......Page 81
DID YOU KNOW?…: The Financial Planning Process......Page 83
DID YOU KNOW?…: Life Planning Issues When You Find the Right Partner......Page 87
Financial Ratios Assess Your Financial Strength and Progress......Page 95
Financial Record Keeping Saves Time and Makes You Money......Page 99
Reaching Your Goals Through Budgeting: Your Spending/Savings Action Plan......Page 101
Big Picture Summary of Learning Objectives......Page 113
Do the Numbers......Page 114
Financial Planning Cases......Page 115
On the 'Net......Page 117
GOOD MONEY HABITS IN FINANCIAL STATEMENTS, TOOLS, AND BUDGETS......Page 84
DID YOU KNOW?…: Wealth-Building Principles......Page 102
DID YOU KNOW?…: The Top 3 Financial Missteps in Budget Planning......Page 108
ADVICE FROM A PRO: Crisis Steps to Take If Budget Deficits Occur Repeatedly......Page 111
PART 2 Money Management......Page 118
4 Managing Income Taxes......Page 119
GOOD MONEY HABITS IN MANAGING INCOME TAXES......Page 121
DID YOU KNOW?…: How to Determine Your Marginal Tax Rate......Page 123
Avoid Taxes Through Proper Planning......Page 139
DID YOU KNOW?…: Top 3 Financial Missteps in Managing Income Taxes......Page 149
Financial Planning Cases......Page 150
On the 'Net......Page 151
DID YOU KNOW?…: Determine Whether You Should File an Income Tax Return......Page 124
DID YOU KNOW?…: Ways to Pay Income Taxes......Page 125
DID YOU KNOW?…: Keep Your Tax Records a Long Time......Page 132
DID YOU KNOW?…: Income Tax Preparation Guidance......Page 133
DID YOU KNOW?…: Cafeteria Plans Offer Tax-Free Employee Benefits......Page 140
DID YOU KNOW?…: Consider the Tax Consequences of Managing Income Taxes......Page 143
DID YOU KNOW?…: How to Compare Taxable and After-Tax Yields......Page 145
DID YOU KNOW?…: Overwithholding......Page 147
ADVICE FROM A PRO: A Sideline Business Can Reduce Your Income Taxes......Page 130
ADVICE FROM A PRO: Buy a Home to Reduce Taxes......Page 146
5 Managing Checking and Savings Accounts......Page 153
GOOD MONEY HABITS IN MANAGING CHECKING AND SAVINGS ACCOUNTS......Page 155
Tool #1—Interest-Earning Checking Accounts......Page 158
Tool #2—Savings Accounts......Page 161
Tool #3—Money Market Accounts......Page 168
Electronic Money Management......Page 170
The Psychology of Money Management......Page 173
Big Picture Summary of Learning Objectives......Page 177
Financial Planning Cases......Page 178
On the 'Net......Page 180
DID YOU KNOW?…: Top 3 Financial Missteps in Managing Checking and Savings Accounts......Page 157
DID YOU KNOW?…: Payment Instruments for Special Needs......Page 160
DID YOU KNOW?…: How to Ladder Your CDs......Page 164
DID YOU KNOW?…: How to Reconcile Your Bank Accounts......Page 165
DID YOU KNOW?…: The Tax Consequences of Saving for Children’s College......Page 167
DID YOU KNOW?…: How Ownership of Accounts (and Other Assets) Is Established......Page 169
DID YOU KNOW?…: Using Plastic in Monetary Asset Management......Page 171
DID YOU KNOW?…: How to Protect Your Privacy When Banking Online......Page 172
DID YOU KNOW?…: How to Develop Money Sense in Children......Page 175
ADVICE FROM A PRO: Protect Yourself from Bad Check Fees......Page 163
6 Building and Maintaining Good Credit......Page 181
GOOD MONEY HABITS IN BUILDING AND MAINTAINING GOOD CREDIT......Page 183
You Should Set Your Own Debt Limit......Page 186
DID YOU KNOW?…: The Top 3 Financial Missteps with Credit......Page 190
DID YOU KNOW?…: The Effects of Divorce on Your Credit......Page 195
Dealing with Overindebtedness......Page 198
Big Picture Summary of Learning Objectives......Page 202
Financial Planning Cases......Page 203
On the 'Net......Page 204
DID YOU KNOW?…: How to Manage Student Loan Debt......Page 189
DID YOU KNOW?…: Unfair Credit Discrimination Is Unlawful......Page 191
DID YOU KNOW?…: How to Make Sense of FICO Credit Scores......Page 192
DID YOU KNOW?…: About Alternative Lenders......Page 197
DID YOU KNOW?…: The Effect of Using Voluntary Repossession to Get Out of Debt......Page 199
ADVICE FROM A PRO: Guard Your Privacy......Page 185
7 Credit Cards and Consumer Loans......Page 205
GOOD MONEY HABITS IN CREDIT CARDS AND CONSUMER LOANS......Page 207
Credit Card Accounts......Page 211
Managing Credit Cards Wisely......Page 214
Understanding Consumer Installment Loans......Page 220
Calculating Interest on Consumer Loans......Page 221
Do the Numbers......Page 226
Financial Planning Cases......Page 227
On the 'Net......Page 228
DID YOU KNOW?…: Top 3 Financial Missteps with Credit Cards and Consumer Loans......Page 208
DID YOU KNOW?…: How to Close a Credit Card Account......Page 210
DID YOU KNOW?…: About Secured Credit Cards......Page 213
DID YOU KNOW?…: How Credit Card Balances Are Calculated......Page 218
ADVICE FROM A PRO…: Control and Reduce Your Credit Card Debt......Page 215
ADVICE FROM A PRO…: Avoid the Minimum Payment Trap......Page 217
8 Vehicle and Other Major Purchases......Page 229
Do Your Homework......Page 231
Use Comparison Shopping to Find the Best Buy......Page 238
Negotiate Effectively and Decide at Home......Page 243
Evaluate Your Decision......Page 248
Do the Numbers......Page 250
Financial Planning Cases......Page 251
On the 'Net......Page 252
GOOD MONEY HABITS IN VEHICLE AND OTHER MAJOR PURCHASES......Page 233
DID YOU KNOW?…: How to Buy Smart......Page 232
DID YOU KNOW?…: Top 3 Financial Missteps in Big-Ticket Purchases......Page 234
DID YOU KNOW?…: About “Gap” Insurance......Page 236
DID YOU KNOW?…: The Keys to a Safe Car......Page 239
ADVICE FROM A PRO…: Tips for Buying Online......Page 237
ADVICE FROM A PRO…: How to Buy a Used Vehicle......Page 246
DECISION-MAKING WORKSHEET: Choosing Between Low-Interest-Rate Dealer Financing and a Rebate......Page 235
DECISION-MAKING WORKSHEET: Comparing Automobile Financing and Leasing......Page 241
9 Buying Your Home......Page 253
GOOD MONEY HABITS IN BUYING YOUR HOME......Page 255
DECISION-MAKING WORKSHEET: Should You Buy or Rent?......Page 259
DID YOU KNOW?…: The Top 3 Financial Missteps When Buying Housing......Page 265
Financing a Home......Page 272
Selling a Home......Page 281
Let's Talk About It......Page 283
Do the Numbers......Page 284
Decision Making Cases......Page 285
On the 'Net......Page 286
DID YOU KNOW?…: How to Make Sure Your Security Deposit Is Returned......Page 256
DID YOU KNOW?…: The Tax Consequences of Buying Your Home......Page 260
ADVICE FROM A PRO…: Cancel Private Mortgage Insurance as Soon as Possible......Page 264
DID YOU KNOW?…: The Income Needed to Qualify for a Mortgage......Page 267
DID YOU KNOW?…: How to Search for a Home......Page 269
DID YOU KNOW?…: The Role of Real Estate Agents......Page 270
DID YOU KNOW?…: Your Credit Score Affects the Mortgage Rate You Pay......Page 271
DID YOU KNOW?…: About Second Mortgage Loans......Page 279
DECISION-MAKING WORKSHEET: Should You Refinance Your Mortgage?......Page 280
PART 3 Income and Asset Protection......Page 288
10 Managing Property and Liability Risk......Page 289
GOOD MONEY HABITS IN MANAGING PROPERTY AND LIABILITY RISK......Page 291
Understanding How Insurance Works......Page 295
Homeowner's Insurance......Page 299
Automobile Insurance......Page 305
Protection for Other Property and Liability Loss Exposures......Page 312
ADVICE FROM A PRO…: Applying the Large-Loss Principle to Property and Liability Insurance......Page 315
Big Picture Summary of Learning Objectives......Page 317
Do the Numbers......Page 318
Decision Making Cases......Page 319
On the 'Net......Page 320
DID YOU KNOW?…: Top 3 Financial Missteps in Managing Property and Liability Risk......Page 293
DID YOU KNOW?…: How to Read an Insurance Policy......Page 297
DID YOU KNOW?…: How Companies Select Among Insurance Applicants......Page 298
DID YOU KNOW?…: The Best Way to Own Vehicles......Page 309
DID YOU KNOW?…: How Automobile Insurance Would Apply to an Accident......Page 310
DID YOU KNOW?…: How to Save Money on Insurance......Page 313
DID YOU KNOW?…: What’s Covered While You Are Away at College......Page 314
DECISION-MAKING WORKSHEET: Buying Automobile Insurance......Page 311
11 Managing Health Expenses......Page 321
Addressing the Financial Burdens of Illness or Injury......Page 323
DID YOU KNOW?…: Top 3 Financial Missteps in Managing Health Expenses......Page 324
ADVICE FROM A PRO…: Be Smart When Shopping for an Individual Plan......Page 328
ADVICE FROM A PRO…: Maintain Your Medical Care Plan Between Jobs......Page 333
Protecting Your Income During Disability......Page 335
Let's Talk About......Page 339
Financial Planning Cases......Page 340
On the 'Net......Page 341
DID YOU KNOW?…: How Medicare Differs from Medicaid......Page 327
DID YOU KNOW?…: It Is a Bad Idea to Be Young and Uninsured......Page 329
DID YOU KNOW?…: About Supplemental Health Plans......Page 330
DID YOU KNOW?…: Workers’ Comp Pays If You Are Hurt on the Job......Page 334
DID YOU KNOW?…: How to Affordably Manage Health-Related Risk......Page 338
DECISION-MAKING WORKSHEET: Determining Disability Income Insurance Needs......Page 336
12 Life Insurance Planning......Page 343
GOOD MONEY HABITS IN LIFE INSURANCE PLANNING......Page 345
There Are But Two Basic Types of Life Insurance......Page 351
Understandig Your Life Insurance Policy......Page 357
DID YOU KNOW?…: About Life Insurance After Divorce......Page 363
Big Picture Summary of Learning Objectives......Page 370
Financial Planning Cases......Page 371
On the 'Net......Page 373
DID YOU KNOW?…: Top 3 Financial Missteps When Protecting Loved Ones Through Life Insurance......Page 348
DID YOU KNOW?…: How Insurance Policies Are Organized......Page 358
DID YOU KNOW?…: The Tax Consequences of Protecting Loved Ones Through Life Insurance......Page 364
DID YOU KNOW?…: How to Layer Your Term Insurance Policies for $60 per Month......Page 367
DID YOU KNOW?…: About Life Insurance Sales Commissions......Page 368
ADVICE FROM A PRO…: Don’t Be Fooled by Vanishing-Premium or Return-of- Premium Policies......Page 356
ADVICE FROM A PRO…: Buy Term and Invest the Rest......Page 365
DECISION-MAKING WORKSHEET: The Needs-Based Approach to Life Insurance......Page 349
PART 4 Investments......Page 374
13 Investment Fundamentals......Page 375
Starting Your Investment Program......Page 377
Discover Your Investment Philosophy......Page 380
Identify the Kinds of Investments You Want to Make......Page 384
Risks and Other Factors Affect the Investor's Return......Page 386
Establishing Your Long-Term Investment Strategy......Page 390
ADVICE FROM A PRO…: When to Sell an Investment......Page 399
Let's Talk About It......Page 403
Financial Planning Cases......Page 404
On the 'Net......Page 405
GOOD MONEY HABITS IN INVESTING FUNDAMENTALS......Page 378
DID YOU KNOW?…: Americans Are Lousy at Investing Their Money......Page 382
DID YOU KNOW?…: The Tax Consequences in Investment Fundamentals......Page 389
DID YOU KNOW?…: Calculate the Real Rate of Return (After Taxes and Inflation) on Investments......Page 391
DID YOU KNOW?…: Employers Offer Automatic Portfolio Rebalancing......Page 396
DID YOU KNOW?…: Top 3 Financial Missteps in Investing......Page 398
ADVICE FROM A PRO…: Buy Shares of Stock Directly Using a Dividend- Reinvestment Plan......Page 394
14 Investing in Stocks and Bonds......Page 407
GOOD MONEY HABITS IN INVESTING IN STOCKS AND BONDS......Page 409
The Major Characteristics of Common Stocks......Page 413
How to Evaluate Stock Values......Page 417
Calculating a Stock's Potential Rate of Return......Page 420
How to Use the Internet to Evaluate and Select Stocks......Page 423
Buying and Selling Stocks......Page 430
Investing in Bonds......Page 440
Big Picture Summary of Learning Objectives......Page 450
Do the Numbers......Page 451
Financial Planning Cases......Page 452
On the 'Net......Page 454
DID YOU KNOW?…: How Stock Dividends and Stock Splits Work......Page 412
DID YOU KNOW?…: Most Stocks Are Cyclical and Some Are Countercyclical......Page 416
DID YOU KNOW?…: About Employee Stock Options......Page 419
DID YOU KNOW?…: How to Use Online Stock Calculators......Page 424
DID YOU KNOW?…: Initial Public Offerings of Securities......Page 431
DID YOU KNOW?…: Regulations Protect Against Investment Fraud......Page 432
DID YOU KNOW?…: The Tax Consequences of Investing in Stocks and Bonds......Page 436
DID YOU KNOW?…: How to Determine a Margin Call Stock Price......Page 438
DID YOU KNOW?…: Top 3 Financial Missteps of Investing in Stocks and Bonds......Page 439
DID YOU KNOW?…: How Far Bond Prices Will Move When Interest Rates Change......Page 447
DID YOU KNOW?…: How to Estimate the Selling Price of a Bond After Interest Rates Have Changed......Page 448
ADVICE FROM A PRO…: Check Your Stockbroker’s Background......Page 433
ADVICE FROM A PRO…: Zero-Coupon Bonds Pay Phantom Interest......Page 445
15 Investing Through Mutual Funds......Page 455
Why Invest in Mutual Funds?......Page 457
Fund Objectives, Types, and Characteristics......Page 463
DID YOU KNOW?…: Top 3 Financial Missteps in Mutual Fund Investing......Page 467
DID YOU KNOW?…: The Total Long-Term Returns for Stock Mutual Funds Are Roughly the Same......Page 471
Big Picture Summary of Learning Objectives......Page 479
Financial Planning Cases......Page 480
On the 'Net......Page 482
GOOD MONEY HABITS IN MUTUAL FUNDS......Page 458
DID YOU KNOW?…: Mutual Fund Disadvantages......Page 460
DID YOU KNOW?…: Other Investment Companies......Page 462
DID YOU KNOW?…: Stable-Value Funds Available in Employer-Sponsored Retirement Plans......Page 464
DID YOU KNOW?…: Quant Funds......Page 466
DID YOU KNOW?…: How to Learn About Mutual Funds......Page 474
DID YOU KNOW?…: About Mutual Fund Volatility......Page 476
DID YOU KNOW?…: The Tax Consequences of Mutual Fund Investing......Page 477
ADVICE FROM A PRO…: Invest Only “Fun Money” Aggressively......Page 465
16 Real Estate and High-Risk Investments......Page 483
GOOD MONEY HABITS IN REAL ESTATE AND HIGH-RISK INVESTMENTS......Page 485
DID YOU KNOW?…: About Real Estate Seminars......Page 490
Disadvantages of Real Estate Investing......Page 492
Investing in Collectibles, Precious Metals, and Gems......Page 494
Investing in Options and Futures Contracts......Page 499
Let's Talk About It......Page 505
Financial Planning Cases......Page 506
On the 'Net......Page 507
DID YOU KNOW?…: What to Do Before Investing in Real Estate......Page 487
DID YOU KNOW?…: Top 3 Financial Missteps in Real Estate and High-Risk Investment Investing......Page 488
DID YOU KNOW?…: Timesharing Is Not an Investment......Page 493
DID YOU KNOW?…: The Tax Consequences of an Income-Producing Real Estate Investment......Page 495
DID YOU KNOW?…: Scams Abound in Collectibles, Precious Metals, and Gems......Page 498
DID YOU KNOW?…: How to Make Sense of Option Contracts......Page 500
DID YOU KNOW?…: About Hedge Funds......Page 503
DID YOU KNOW?…: Sure Ways to Lose Money in Investing......Page 504
ADVICE FROM A PRO…: How to Calculate Breakeven Prices for Option Contracts......Page 502
PART 5 Retirement and Estate Planning......Page 508
17 Retirement Planning......Page 509
GOOD MONEY HABITS IN RETIREMENT PLANNING......Page 511
Understanding Your Social Security Retirement Income Benefits......Page 512
How to Calculate Your Estimated Retirement Needs in Today's Dollars......Page 517
Why Invest in Tax-Sheltered Retirement Accounts?......Page 521
Employer-Sponsored Retirement Plans......Page 523
You Can Also Contribute to Personal Retirement Accounts......Page 529
Use Financial Advice and Monte Carlo Simulations......Page 532
Living in Retirement Without Running Out of Money......Page 536
Big Picture Summary of Learning Objectives......Page 539
Do the Numbers......Page 540
Financial Planning Cases......Page 541
On the 'Net......Page 542
DID YOU KNOW?…: About Women and Retirement Planning......Page 513
DID YOU KNOW?…: How to Avoid Rollover Penalties When Changing Employers or Retiring......Page 526
DID YOU KNOW?…: Retirement Plan Insurance......Page 528
DID YOU KNOW?…: Tax-Sheltered Retirement Accounts Offer Flexibility......Page 530
DID YOU KNOW?…: Retirement Withdrawals That May Avoid the 10% IRS Penalty......Page 531
DID YOU KNOW?…: If You Choose “Low-Cost” Over “High-Cost” Funds......Page 533
DID YOU KNOW?…: How to Invest 401(k) or IRA Money......Page 534
DID YOU KNOW?…: Tax Consequences in Retirement Planning......Page 537
ADVICE FROM A PRO…: How to Collect Retirement Benefits and Social Security from a Divorced Spouse......Page 516
ADVICE FROM A PRO…: Buy Your Retirement on the Layaway Plan......Page 520
DECISION-MAKING WORKSHEET: Estimating Your Retirement Savings Goal in Today’s Dollars......Page 518
18 Estate Planning......Page 543
GOOD MONEY HABITS IN ESTATE PLANNING......Page 545
Use of Trust to Transfer Assets and Reduce Estate Taxes......Page 550
Prepare Advance Directive Documents in Case You Become Incapacitated......Page 553
Checklist to Settle and Transfer Your Estate......Page 555
DID YOU KNOW?…: Top 3 Financial Missteps in Estate Planning......Page 556
Let’s Talk About It......Page 558
Financial Planning Cases......Page 559
On the 'Net......Page 560
DID YOU KNOW?…: How to Transfer Retirement Assets......Page 547
DID YOU KNOW?…: Last Will and Testament of Harry Johnson......Page 548
DID YOU KNOW?…: Spouses Have Legal Rights to Each Other’s Estates......Page 551
DID YOU KNOW?…: Use of a Charitable Remainder Trust to Boost Current Income......Page 552
ADVICE FROM A PRO…: Ten Things Every Spouse Must Know......Page 557
Appendixes......Page 562
Appendix A: Present and Future Value Tables......Page 563
Appendix B: Estimating Social Security Benefits......Page 573
Appendix C: Glossary......Page 576
Index......Page 594