Wiley Pathways Personal Finance, First Edition: Managing Your Money and Building Wealth

529 Pages·2007·4.315 MB·English

by  Vickie L. Bajtelsmit

This page intentionally left blank
Personal Finance
Vickie Bajtelsmit
Colorado State University
with Linda Rastelli
Credits
PUBLISHER PRODUCTION ASSISTANT
Anne Smith Courtney Leshko
PROJECT EDITOR PROJECTMANAGER
Beth Tripmacher Shana Meyer
MARKETING MANAGER CREATIVE DIRECTOR
Jennifer Slomack Harry Nolan
SENIOR EDITORIAL ASSISTANT COVER DESIGNER
Tiara Kelly Hope Miller
PRODUCTION MANAGER COVER PHOTO
Kelly Tavares © George Doyle/Getty Images
Wiley 200th Anniversary Logo designed by:Richard J. Pacifico
This book was set in Times New Roman by Techbooks and printed and bound by R.R. Donnelley. The cover was printed by
R.R. Donnelley.
This book is printed on acid free paper. (cid:2)
Copyright © 2008 John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or
otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written
permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center,
Inc. 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com. Requests to the Publisher for permission should be
addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, [phone],
fax [phone], website http://www.wiley.com/go/permissions.
To order books or for customer service please, call 1-800-CALL WILEY (225-5945).
ISBN-13 978-0-470-11123-9
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
This page intentionally left blank
VI APPENDIX—PERSONAL FINANCE WORKSHEETS
PREFACE
College classrooms bring together learners from many backgrounds
with a variety of aspirations. Although the students are in the same
course, they are not necessarily on the same path. This diversity, cou-
pled with the reality that these learners often have jobs, families, and
other commitments, requires a flexibility that our nation’s higher edu-
cation system is addressing. Distance learning, shorter course terms,
chunked curriculum, new disciplines, evening courses, and certifica-
tion programs are some of the approaches that colleges employ to
reach as many students as possible and help them clarify and achieve
their goals.
Wiley Pathways books, a new line of texts from John Wiley &
Sons, Inc., are designed to help you address this diversity and the
need for flexibility. These books focus on the fundamentals, identify
core competencies and skills, and promote independent learning. The
focus on the fundamentals helps students grasp the subject, bringing
them all to the same basic understanding. These books use clear,
everyday language, presented in an uncluttered format, making the
content more accessible and the reading experience more pleasurable.
The core competencies and practical skills focus help students suc-
ceed in the classroom and beyond, whether in another course or in a
professional setting. A variety of built-in learning resources promote
independent learning and help instructors and students gauge stu-
dents’ understanding of the content. These resources enable students
to think critically about their new knowledge, and apply their skills
in any situation.
Our goal with Wiley Pathways books—with its brief, inviting for-
mat, clear language, and core competencies and skills focus—is to cel-
ebrate the many students in your courses, respect their needs, and
help you guide them on their way.
Wiley Pathways Pedagogy
To meet the needs of working college students, all Wiley Pathways
texts explicitly use an outcomes and assessment-based pedagogy for
the books: students will review what they have learned, acquire new
information and skills, and apply their new knowledge and skills to
real-life situations. Based on the recently updated categories of Bloom’s
Taxonomy of Learning, Wiley Pathways Personal Finance presents key
PREFACE vii
topics in personal finance (the content) in easy-to-follow chapters.
The text then prompts analysis, synthesis, and evaluation with a
variety of learning aids and assessment tools. Students move efficiently
from reviewing what they have learned, to acquiring new information
and skills, to applying their new knowledge and skills to real-life
scenarios.
With Wiley Pathways, students not only achieve academic mastery
of personal finance topics, but they master real-world skills related to
that content. The books help students become independent learners,
giving them a distinct advantage in the field, whether they are starting
out or seek to advance in their careers.
Organization, Depth and Breadth of the Text
▲ Modular format. Research on college students shows that
they access information from textbooks in a non-linear way.
Instructors also often wish to reorder textbook content to suit
the needs of a particular class. Therefore, although Wiley
Pathways Personal Finance proceeds logically from the basics to
increasingly more challenging material, chapters are further
organized into sections that are self-contained for maximum
teaching and learning flexibility.
▲ Numeric system of headings. Wiley Pathways Personal Finance
uses a numeric system for headings (for example, 2.3.4 identi-
fies the fourth sub-section of section 3 of chapter 2). With this
system, students and teachers can quickly and easily pinpoint
topics in the table of contents and the text, keeping class time
and study sessions focused.
▲ Core content. Topics in the text are organized into fifteen
chapters.
Part I: The Personal Financial Planning Process
Chapter 1, Personal Financial Planning in Action, provides an
overview of the five steps in the personal financial planning process
and the elements of a comprehensive financial plan that are developed
throughout the text. How to make effective financial decisions is also
explained.
Chapter 2, Money Management Strategies and Skills, looks at
ways to collect and organize your financial information. Students learn
how to compile and use personal financial statements to evaluate their
financial conditions. Simple financial ratios are presented to determine
where you need to save or to better allocate money.
viii PREFACE
Chapter 3, Managing Your Taxes, examines the United States tax
system. Students are helped to understand their federal tax returns,
including tax brackets, tax credits and exemptions, and calculating
taxable income. How to file a return and avoid common filing errors
is presented. Finally, effective tax planning strategies are offered.
Part II: Managing Your Personal Finances
Chapter 4, Managing Your Cash and Savings, explains the objectives
and rules of cash management. Students are helped to understand the
basic differences between financial institutions, and given guidance in
choosing a financial provider. Cash management products and services
are detailed. Tips are provided on how to resolve cash management
problems, including bounced checks, fraudulent activity, and obtain-
ing emergency cash.
Chapter 5, Consumer Credit, helps students make wise credit
card and consumer loan decisions. It examines the benefits and costs
of consumer credit, including credit cards. How to apply for con-
sumer credit and correcting credit mistakes are presented. How to
avoid identify theft is explained, as well as other pitfalls of credit card
usage.
Chapter 6, Using Consumer Loans, outlines the characteristics
and types of consumer loans. Student loans are covered in detail, as
well as how interest is calculated on consumer loans and the role of
credit reporting agencies. How to improve your creditworthiness is
studied, including the five C’s of credit. Managing your debt is
explained, including how to reduce it, and as a last resort, filing for
bankruptcy.
Chapter 7, Making Automobile and Housing Decisions, examines
how to purchase and finance autos and homes. From determining
how much you can afford to spend, to negotiating, to obtaining a
mortgage or auto loan, all aspects of these important transactions are
covered. Whether to lease or buy a car, mortgage financing, choosing
a reputable real estate broker, and closing the real estate transaction
are also part of this chapter.
Part III: Protecting Yourself with Insurance
Chapter 8, Insuring Your Home and Automobile, shows how to pro-
tect your car and home after you have purchased them. It explains
how insurance works, including risk pooling, indemnity, liability,
exclusions and deductibles. Which risks are covered is discussed, as
well as which types of homeowner’s and automobile coverages are
available. Next, how to buy insurance, from finding agents to getting