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Individual-Finance.Pdf Individual Finance v. 1.0 This is the book Individual Finance (v. 1.0). This book is licensed under a Creative Commons by-nc-sa 3.0 (http://creativecommons.org/licenses/by-nc-sa/ 3.0/) license. See the license for more details, but that basically means you can share this book as long as you credit the author (but see below), don't make money from it, and do make it available to everyone else under the same terms. This book was accessible as of December 29, 2012, and it was downloaded then by Andy Schmitz (http://lardbucket.org) in an effort to preserve the availability of this book. Normally, the author and publisher would be credited here. However, the publisher has asked for the customary Creative Commons attribution to the original publisher, authors, title, and book URI to be removed. Additionally, per the publisher's request, their name has been removed in some passages. More information is available on this project's attribution page (http://2012books.lardbucket.org/attribution.html?utm_source=header). For more information on the source of this book, or why it is available for free, please see the project's home page (http://2012books.lardbucket.org/). You can browse or download additional books there. ii Table of Contents About the Authors................................................................................................................. 1 Acknowledgments................................................................................................................. 3 Dedications............................................................................................................................. 4 Preface..................................................................................................................................... 5 Chapter 1: Personal Financial Planning......................................................................... 10 Individual or “Micro” Factors That Affect Financial Thinking...............................................................14 Systemic or “Macro” Factors That Affect Financial Thinking ................................................................20 The Planning Process................................................................................................................................... 29 Financial Planning Professionals ............................................................................................................... 39 Chapter 2: Basic Ideas of Finance .................................................................................... 43 Income and Expenses................................................................................................................................... 44 Assets............................................................................................................................................................. 52 Debt and Equity............................................................................................................................................ 57 Income and Risk ........................................................................................................................................... 63 Chapter 3: Financial Statements...................................................................................... 65 Accounting and Financial Statements ....................................................................................................... 66 Comparing and Analyzing Financial Statements ..................................................................................... 79 Accounting Software: An Overview ........................................................................................................... 98 Chapter 4: Evaluating Choices: Time, Risk, and Value ............................................. 104 The Time Value of Money ......................................................................................................................... 105 Calculating the Relationship of Time and Value .................................................................................... 108 Valuing a Series of Cash Flows.................................................................................................................. 115 Using Financial Statements to Evaluate Financial Choices ...................................................................126 Evaluating Risk........................................................................................................................................... 132 Chapter 5: Financial Plans: Budgets ............................................................................. 138 The Budget Process.................................................................................................................................... 139 Creating the Comprehensive Budget ....................................................................................................... 143 The Cash Budget and Other Specialized Budgets ................................................................................... 155 Budget Variances ....................................................................................................................................... 160 Budgets, Financial Statements, and Financial Decisions ....................................................................... 167 iii Chapter 6: Taxes and Tax Planning............................................................................... 171 Sources of Taxation and Kinds of Taxes .................................................................................................. 172 The U.S. Federal Income Tax Process ...................................................................................................... 179 Record Keeping, Preparation, and Filing................................................................................................. 191 Taxes and Financial Planning ................................................................................................................... 199 Chapter 7: Financial Management ................................................................................ 204 Your Own Money: Cash.............................................................................................................................. 206 Your Own Money: Savings ........................................................................................................................ 208 Other People’s Money: Credit ................................................................................................................... 217 Other People’s Money: An Introduction to Debt .................................................................................... 231 Chapter 8: Consumer Strategies .................................................................................... 237 Consumer Purchases.................................................................................................................................. 238 A Major Purchase: Buying a Car ............................................................................................................... 254 Chapter 9: Buying a Home............................................................................................... 266 Identify the Product and the Market....................................................................................................... 267 Identify the Financing ............................................................................................................................... 280 Purchasing and Owning Your Home ........................................................................................................ 291 Chapter 10: Personal Risk Management: Insurance.................................................. 298 Insuring Your Property ............................................................................................................................. 300 Insuring Your Health................................................................................................................................. 311 Insuring Your Income................................................................................................................................ 323 Chapter 11: Personal Risk Management: Retirement and Estate Planning ......... 333 Retirement Planning: Projecting Needs .................................................................................................. 334 Retirement Planning: Ways to Save ......................................................................................................... 342 Estate Planning........................................................................................................................................... 352 Chapter 12: Investing ....................................................................................................... 359 Investments and Markets: A Brief Overview........................................................................................... 360 Investment Planning ................................................................................................................................. 371 Measuring Return and Risk....................................................................................................................... 380 Diversification: Return with Less Risk ....................................................................................................
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