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To learn more about Cengage Learning Solutions, visit www.com Purchase any of our products at your local college store or at our preferred online store www.com Printed in the United States of America Print Number: 01 Print Year: 2017 Brief Contents PART 1 FINANCIAL PLANNING 1 CHAPTER 1 Understanding Personal Finance 2 CHAPTER 2 Career Planning 38 CHAPTER 3 Financial Statements, Tools, and Budgets 72 PART 2 MONEY MANAGEMENT 113 CHAPTER 4 Managing Income Taxes 114 CHAPTER 5 Managing Checking and Savings Accounts 150 CHAPTER 6 Building and Maintaining Good Credit 180 CHAPTER 7 Credit Cards and Consumer Loans 202 CHAPTER 8 Vehicle and Other Major Purchases 228 CHAPTER 9 Obtaining Affordable Housing 258 PART 3 INCOME AND ASSET PROTECTION 297 CHAPTER 10 Managing Property and Liability Risk 298 CHAPTER 11 Planning for Health Care Expenses 332 CHAPTER 12 Life Insurance Planning 360 PART 4 INVESTMENTS 389 CHAPTER 13 Investment Fundamentals 390 CHAPTER 14 Investing in Stocks and Bonds 422 CHAPTER 15 Mutual and Exchange Traded Funds 464 CHAPTER 16 Real Estate and High-Risk Investments 492 CHAPTER 17 Retirement and Estate Planning 518 Appendix A: Present and Future Value Tables A-2 Appendix B: Estimating Social Security Benefits A-11 Glossary G-1 Index I-1 iii Contents PART 1 FINANCIAL PLANNING 1 1.5e Decisions About Participating in Employer Insurance Plans 24 CHAPTER 1 1.5f Decisions About Participating in Your Employer’s Retirement Plan 25 Understanding Personal Finance 2 1.6 Where to Seek Expert Financial Advice 28 1.1 Achieving Personal Financial Success 4 1.6a Not Every Financial Advisor Has Your Best 1.1a The Five Fundamental Steps in the Financial Interests in Mind 28 Planning Process 5 1.6b How Financial Planners Are Compensated 30 1.1b You Must Plan for Financial Success and 1.6c Questions to Ask a Financial Planner 31 Happiness 5 DID YOU KNOW? 1.1c You Must Spend Less So You Can Save and The Peer-to-Peer Sharing Economy 14 Invest More 5 If No Employer’s 401(k) Plan?, Open a Roth IRA 26 1.1d What You Will Accomplish Studying Personal Finance 6 Advice from a Seasoned pro.1e Replace Your Obsolete Knowledge 6 Seven Money Mantras for a Richer Life 10 A Baker’s Dozen of Good Financial Behaviors 22 1.2 The Economy Affects Your Personal Financial A Baker’s Dozen of Bad Financial Behaviors 29 Success 7 common sense 1.2a How to Tell Where We Are in the Business Cycle 7 Be Optimistic About Your Future 9 1.2b The Business Cycle 8 Employees Gain Cash from Flexible Spending Plans 23 1.2c How to Tell the Future Direction of the Economy 9 Help With College Debt 24 1.2d The Future Direction of Inflation and Bias Toward Interest Rates 10 Thinking Things Will Continue as They Have 13 1.3 Think Like an Economist When Making YOUR GRANDPARENTS SAY Financial Decisions 14 “Save 10 percent of Your Income” 16 1.3a Consider Opportunity Costs When Numbers on Understanding Personal Finance 19 Making Decisions 14 Turn Bad HabIts Into Good Ones 23 1.3b Identify Marginal Utility and Costs in Decision Making 15 Money Websites 20 1.3c Factor Your Marginal Income Tax Rate When NEVER EVER Making Financial Decisions 15 Leave Money on the Table! 27 1.3d Know that the Very Best Kind of Income Is Make the Worst Blunders! 27 Tax-Exempt Income 15 There is an App for That!28 1.3e Realize that the Second Best Kind of Income Is Tax-Sheltered Income 16 CHAPTER 2 1.4 Perform Time Value of Money Calculations 17 Career Planning 38 1.4a There Are Only Two Common Questions About Money 17 2.1 Developing Your Career Plan 40 1.4b Calculating Future Values 18 2.1a Clarify Your Values and Interests 40 1.4c Finding Present Values Is Called Discounting 20 2.1b Consider Your Current Interests and Possible Career Opportunities 41 1.5 Make Smart Money Decisions At Work 21 2.1c Identify One or More Desired Career Fields 41 1.5a Open the New Employee Orientation Package 21 2.1d Review Your Abilities, Experiences, and Education 43 1.5b Choosing Tax-Free Cafeteria Plan Benefits 22 2.1e Know Your Preferred Work-Style Personality 43 1.5c Decisions About Employer’s Flexible Spending 2.1f Take Advantage of Professional and Social Accounts 23 Networking 44 1.5d Decisions About Employer-Sponsored Health 2.1g Prospective Employers Can Check Your Credit Care Plans 24 Report 46 iv Contents v 2.1h Align Yourself with Tomorrow’s Employment There is an App for That! 66 Trends 46 YOUR GRANDPARENTS SAY “Never Stop Learning” 50 2.1i Freelancing in the “Gig Economy” and Entrepreneurship 46 Numbers on Careers 58 2.1j Finalize Your Career Plan 48 Turn Bad HabIts Into Good Ones 64 2.2 Financial and Legal Aspects of Employment 49 CHAPTER 3 2.2a Is College Worth the Cost? 49 2.2b Place Dollar Values on Employee Benefits 50 Financial Statements, Tools, and Budgets 72 2.2c Know Your Legal Employment Rights 51 3.1 Financial Values, Goals, and Strategies 74 2.3 Practice Effective Employment Search 3.1a Values Define Your Financial Success 74 Strategies 53 3.1b Saving Is Your Single Most Important 2.3a Assemble an Attention-Getting Résumé 53 Financial Task 75 2.3b How to Search for and Target Preferred 3.1c Examples of Financial Goals 77 Employers 53 3.1d Financial Goals Follow Your Values 77 2.3c Identify Specific Job Opportunities 56 3.1e Financial Strategies Help Guide Your 2.3d Write an Effective Cover Letter 58 Financial Success 78 2.3e Obtain Strong Reference Letters 59 3.1f Wealth-Building Principles for Life 78 2.3f Formally Apply for the Job 60 2.3g Interview for Success 60 3.2 Financial Statements Measure Your Financial 2.3h How to Compare Salary Offers 64 Health and Progress 79 2.3i Ask for the Job 65 3.2a The Balance Sheet Is a Snapshot of Your Financial 2.3j Wait and Be Patient 65 Status Right Now 79 2.3k Negotiate and Accept the Job 65 3.2b How to Increase Your Net Worth 83 2.3l How to Move Up at Work 66 3.2c The Cash-Flow Statement Tracks Where Your 2.3m Getting Paid “Right” in Your Job 66 Money Came From and Went 83 2.3n Periodically Update Your Career Plan 67 3.3 Collect and Organize Your Financial Records DID YOU KNOW? to Save Time and Money 87 Generation Z Will Replace Millennials 44 Coding May Be Your Career Change 48 3.4 Money Topics to Discuss With a Partner 90 Do Not Give Up $160,000 When Changing Employers 50 Value of Additional Education 51 3.5 Reaching Your Goals Through Budgeting: Top Skills Employers Want Most 54 Your Spending/Savings Action Plan 91 How to Interview Over a Meal 61 3.5a Action Before: Set Financial Goals 92 How to Deal with Rejection 66 3.5b Action Before: Make and Reconcile Budget Advice from a Seasoned pro. Estimates 94 Career Advancement Tips 56 3.5c Action Before Budgeting Period: Plan Cash Flows 96 Common Job Interview Mistakes 60 3.5d Action During the Budgeting Period: Control What to Do When You Lose Your Job 67 Spending 100 3.5e Action After: Evaluate Budgeting Progress DECISION MAKING WORKSHEET to Make Needed Changes 103 What Is Your Work-Style Personality? 45 Keeping Track of Your Job Search 57 DID YOU KNOW? The Middle Class Shrinks 77 common sense Money Websites 85 Curiosity Gets You the Job 43 Ratios for Evaluating One’s Financial Progress 87 Ninety Percent of Work Is Simply Showing Up 46 You Must “Think Single” in Money Matters 102 You May Be a Trial Hire 46 Hit These Financial Marks While You Are in Your Incomes and Education 49 Thirties 105 Bias Toward Underestimating Incomes 49 Advice from a Seasoned pro. RUN THE NUMBERS Get-Tough Ways to Cut Spending 99 Assessing the Benefits of a Second Income 52 Secrets of Super Savers 102 Money Websites 58 common sense NEVER EVER Go to a Job Interview Unprepared! 60 Before You Buy, Ask Yourself These Questions 88 NEVER EVER 62 Bias Toward Thinking Negatively 83 vi Contents NEVER EVER Get Stressed About Money! 92 4.3h Strategy: Shift Income to a Child 142 4.3i Strategy: Buy and Manage a Real Estate NEVER EVER 104 Investment 143 Numbers on Financial Statements, Tools, and Budgets 104 DID YOU KNOW? Your Grandparents Say How to Determine Your Federal Marginal Tax Rate 118 “Cut the Dollars AND the Pennies” 94 Income Inequality, Incredibly, Gets Worse 122 Turn Bad HabIts Into Good Ones 105 About the Alternative Minimum Tax 132 Create Future Tax-Free Income with Your Refund 138 There is an App for That! 93 How to Save for a Child’s College Education 139 How to Compare Taxable and After-Tax Yields 140 PART 2 MONEY MANAGEMENT 113 Advice from a Seasoned pro. Your Average Tax Rate Is Low 118 CHAPTER 4 How to Determine Household Income Under the Managing Income Taxes 114 Affordable Care Act 124 A Sideline Business Can Reduce Your Income Taxes 125 4.1 P rogressive Income Taxes and the Marginal Deduct Work-Related Education as a Business Expense 128 Tax Rate 116 Buy a Home to Reduce Income Taxes 142 4.1a The Progressive Nature of the Federal common sense Income Tax 116 The USA Is a Low-Tax Country 143 4.1b The Marginal Tax Rate Is Applied to the Last Dollar Earned 117 NEVER EVER 4.1c Use Your Marginal Tax Rate to Help Let Someone Else Prepare Your Taxes 130 Make Financial Decisions 118 Make Your Worst Blunders 139 4.1d Your Effective Marginal Tax Rate Is Higher 118 NEVER EVER 139 4.2 Eight Steps in Calculating Your Income There is an App for That! 130 Taxes 119 Bias Toward Avoiding Risk 142 4.2a Determine Your Total Income 120 Numbers on Income Taxes 132 4.2b Determine and Report Your Gross Income After Subtracting Exclusions 122 Money Websites 133 4.2c Subtract Adjustments to Income 124 YOUR GRANDPARENTS SAY 4.2d Subtract Either Your Itemized Deductions or “Don’t Pay the IRS First” 137 the IRS’s Standard Deduction for Your Turn Bad HabIts Into Good Ones 143 Tax Status 124 4.
