S: Personal Finance
FC: Personal Finance
1: This book made possible by the awesomeness that is Mrs. Creel. | Dedication:
2: Goal setting is an essential part of not only finances, but life in general. Good goals can help motivate you to work have to achieve them, while a bad goal will leave you frustrated and confused. Goals should always be: S: Specific M: Measurable A: Attainable R: Realistic T: Timebound | "If you don't know where you're going, any road will get you there." -Cheshire Cat
3: An example of a SMART goal might look something like this; Save $100 a month for 6 months to pay for a new set of tires. | Specific: What exactly are you trying to achieve? How long will it take you? Measurable: What steps will you take and how will you know when you've done it? Attainable: Can it be done? Can your circumstances achieve this goal? Realistic: Is it reasonable? Is it likely to happen if you follow your steps? Timebound: How much time/how many steps will this goal require?
4: If you have not yet chosen a career, college may help you do so. As you take some of the required core classes, you may discover you have particular preferences towards some of them. Also, taking into account your personal strengths, weaknesses, beliefs, and desires is important as you begin deciding what you will aim for as a career. | Education | College education and a degree that relates to the job you are pursuing will greatly improve your chances of being hired, making a higher salary, and earn you respect in your field. In a society where nearly everyone attends college, the lack of a degree can act as a major deterrent in your job search. It will also likely result in lower wages and a lesser position.
5: Setting a budget that fits your level of income and reflects roughly where your money will be going is an important factor of financial awareness. Knowing what kind of lifestyle you intend to have as far as your budget goes may also help you determine what kind of job may support your desired lifestyle. In your budget, be sure to include mortgage/rent, insurances, food expenses, clothing, utility, and entertainment fees and anything else you may feel the need to include. Once you have created a budget, note that it will have to be updated as significant life events change your financial situation. Also, you must follow you budget roughly for it to have any impact.
6: Life is full of unanticipated events, some good, some not so good. Often, there isn't much room in a financial budget to account for things like a car accident, marriage, a new baby, or a medical issue. Insurance is designed as a safeguard to remove some of the stress and financial burden that comes along unexpectedly. There are many different types of insurance that cover a wide variety of possible financial strains. Some basic types of insurance include health/medical, auto, home, life, disability, and liability. Many employers offer certain types of insurance to their employees and share the overall cost of the insurance. Perhaps the most common example of this would be health/medical insurance. Different types of insurance have different conditions, rates, etc. It's important to review the terms of an insurance agreement before fully committing to anything. | Insurance
8: Health | Unexpected medical bills can put a big hole in the middle of even the most balanced budget. Health/medical insurance is designed to minimize the financial damage caused by medical issues. Depending on your current health habits and your life style, a monthly payment will be established that will cover a certain amount of your medical bills., based on the amount of risk the company believes they will bear by covering you. Before an insurance company will pay anything, a deductible, or minimum payment must be paid by you, the patient. After the deductible, your insurance will likely cover a high percentage of the remaining bill.
9: Auto | Auto accidents, damage, etc. can happen to even the most cautious drivers on the road. Auto insurance will pay a portion of your costs, can potentially help pay for damages to another car that you are liable for, allow you to legally drive on the road, and insure that the money spent on your car is not all gone in one quick, unanticipated moment. Like any other insurance, the company you choose will impact your deductible and rates.
10: Home | Home insurance is designed to help cover damages to your home and property. Depending on the coverage you choose, a wide range of coverage is available. Deductibles and rates will vary based on the company and the amount of risk associated with your home and its location.
11: Life | Life insurance is less for you, and more for the family you leave behind. It is designed to close any loose ends you leave behind financially. The money can help support your family after they loose you income, balance your estate/mortgage, etc. Different terms of life insurance also exist, some which gain value over time and others that are a fixed amount. The time at which the insurance can be collected also varies.
12: Disability | In the case that you are suddenly unable to work, where will your income come from? Disability insurance is designed to pay a portion of your previous income after some sort of work related accident renders you unable to work. This may also be supplemented by workmen's compensation and certain government programs.
13: Liability | In the event that something bad happens to someone else because of some negligence on your part, you are liable and may be held financially responsible for their damages. Liability insurance will a pay a portion of the money you are held responsible for from their medical bills, auto bills, etc.
14: Risk and Reward | Investments | Investments are a great way to potentially increase your wealth by temporarily putting your money into another form and waiting for growth. Some investments are very unlikely to lose value, but aren't likely to gain much either. Others are very risky and vary in their value, but could potentially make a large profit for the investor. | When it comes down to it, the amount of risk you are willing to take for the possibility of a return will determine if, how much, and/or where you will invest your money. Note that it is wiser to invest in a few different mediums than to risk all of your money with one medium. Having a few higher risk, higher return and more low risk investments is also wise.
15: One of the safest investments for money is a savings account in a bank. The annual interest rate is very low; you won't be making much extra money, but the money you do have will not be lost because it is secured by the government and the Fed. | Bonds can also be a fairly safe investment. If you are willing to put money away for a set number of years, you will earn higher interest than at a bank when you eventually get the return. Depending on what the bond is for, it can be low to medium risk. | Stocks are very variable in risk and return and in comparison to other investments, the most risky. A stock represents a portion of a company that you can buy. If the company is successful, the stock will gain value. If the company for some reason goes downhill, the stock will devalue. Some stocks also have dividends, a system where extra income the company makes is given to the stockholders in small amounts periodically. One way to slightly reduce the risk of stock trading is to use a mutual fund. Mutual funds are a group of people whose job it is to trade and invest for you. While they charge a fee, the risk is less on your hands and the potential for return may be higher in the hands of professionals than if you managed them yourself.
16: Paychecks | If you've ever had a paycheck, you may have noticed that the amount of money you made was not actually what you received. Why is this, you ask? Well, the government on both national and local levels takes out some money as an income tax and social security, which will support people who are no longer able to work for various reasons, namely age, and your employer may take out some money for insurances or other benefit related expenses.
17: A paycheck will also display the amount of money you've made this pay period, and how much you've made so far in the year (year to date). Your net pay is the amount made before deductions.
18: A Plan for the Future | If you don't intend to work all of your life, it's important to have a plan in place that will eventually leave you able to stop working financially. While social security will make small payments after retirement, you will need supplement income. Investing in a diverse range of stocks, bonds, mutual funds, banking accounts, etc. will help insure that you will have the money you need to retire.
19: A | A great way to prepare for retirement is to start an annuity as soon as possible. An annuity is an account that you pay a set amount into every month that you can withdraw from in a set amount of time. Note that inflation, or the devaluing of money caused by added money flow may devalue investments, so it's important to have more than one form of investment to be prepared.
20: So now it's up to you. Be aware of you finances and make goals and plans to follow. Know what types of insurance you may need to protect what's important to you. All in all, you have to decide for yourself how much risk you are willing to take in your investments, financial planning, and all areas of life. Good luck to you! :)