assignment 18 test quizlet personal finance

Personal Finance

(19 reviews)

Rachel Siegel, Lyndon State University

Carol Yacht, University of South Florida Sarasota-Manatee

ISBN 13: 9780982361863

Publisher: Saylor Foundation

Language: English

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Reviewed by Christina Wooten, Business Technology Faculty, Rogue Community College on 11/15/23

The text is, in general, comprehensive. It is divided into six sections that cover basic (beginning) personal finance, purchasing, protection, wealth building, and career planning. There is no glossary or index with the text. There are also not... read more

Comprehensiveness rating: 4 see less

Content Accuracy rating: 4

I did not find any glaring errors in my review. Overall, the text is unbiased. There are some parts of the text that will quickly become outdated (for example, figure 1.1 Median Salary Comparison) seems to be out of date in 2023.

Relevance/Longevity rating: 2

I do not feel that this text is up-to-date. There are many references to the early 2000's in the text. The text could be supplemented with current examples. There are opportunities (with links) to access current information (example- the link under the tax bracket in chapter six takes students to a calculator). The images of the tax forms (chapter 6) do not include links for updated information.

Clarity rating: 4

The text is clearly written and does provide context for students. The level to which the text is written seems appropriate for beginning community college students.

Consistency rating: 4

The images and the terminology are consistent throughout the text. The chapters are easy to follow. Consistency is lacking with links to updated information, as mentioned previously.

Modularity rating: 3

The topics are easily divisible into smaller modules; however, there are some areas of this text where the blocks are lengthy. The text is not self-referential.

Organization/Structure/Flow rating: 4

The topics are presented in a manner that makes logical sense. If I were to make a change, I would move the final section, career planning, to earlier in the text.

Interface rating: 4

There are no interface issues. The links provided within the text are working links. The charts are small, but can be zoomed in on to read. The other images are mostly the same green chart which could be quite boring for students. There is not much variety in the visual images used. Navigation in this text (online) is fairly easy. The PDF version, however, requires the user to either search for a term, or scroll through the text.

Grammatical Errors rating: 5

I found no grammatical errors. This text is well written.

Cultural Relevance rating: 5

I did not find any culturally insensitive areas of this text. Nor did I find anything offensive in the text.

While this book is a good basis, I am not sure I would use it as a sole source of information for a Personal Finance class. There are too many examples that are almost twenty years old. Some of the topics can stand the test of time. GDP will always be GDP by definition; however, a current example or a link to find current information would be a good upgrade to this text. There is also a lack of images that show people in this text. There is a wide variety of user-friendly exercises and activities in this text.

Reviewed by Kevin Flint, Instructor, James Madison University on 10/17/23

The book does not provide a comprehensive index of glossary, a list of key terms at the beginning of each chapter, etc. In looking at the contents, the text most of the appropriate areas of personal finance. The depth into some of the topics was... read more

Comprehensiveness rating: 2 see less

Content Accuracy rating: 5

I did not find any major errors in my review of the text.

Relevance/Longevity rating: 3

In my opinion, the text will retain relevance for a longer-than-average period of time because there is very little incorporation of current events into the text. However, there is some material that does change annually (such as tax information) where the text could be updated.

Clarity rating: 3

Finance is a difficult topic to write about and teach. It is often aided by visuals and this text is very limited on visual aids and I think it would be helpful to include more in many of the chapters. There are a lot of tables but I’m thinking other visuals such as arrows, flow charts, maps, etc. would be helpful. Some readers, especially those who are unfamiliar with finance, may benefit from a more visual experience.

Consistency rating: 3

Many of the pages of the text feature an overwhelming amount of words. Given that this appears to be a “Principles” level text, I am assuming that the class would be intended for folks who may be taking finance for the first time and may be more susceptible to being lost on a page with so many words. As I mentioned in the last section, I would work to incorporate more non-spreadsheet visuals into the text.

Modularity rating: 4

The text is easily and readily divisible into smaller reading sections that can be assigned at different points within the course (i.e., enormous blocks of text without subheadings should be avoided).

Organization/Structure/Flow rating: 3

The information is presented in a sensible flow. However, I would consider in future editions moving up the “investments” chapter to earlier in the text.

The text is free of significant usability issues, including navigation problems, distortion of images/charts, and any other display features that may distract or confuse the reader. This was true in both the PDF and online versions I reviewed.

I did not find any material grammatical errors in the text.

The text is not culturally insensitive or offensive in any way.

Reviewed by Samira Hussein, Professor, Business Administration, Johnson County Community College on 5/30/22

Comprehensiveness rating: 5 see less

I did not see an index or glossary, but in terms of a comprehensive structure, the book is well structured. I liked the "themes" in each of the 5 sections of the book. Some of the chapters were very brief. Instead of the details provided in each section, the authors could have provided relevant content with the chapter. Additionally, in an introductory personal finance course it may not be necessary to give theoretical details. I teach this course from a practical, skill building approach. I appreciated the interconnectedness of the content through the "key takeaways" and "exercises" that were given after each sub topic within the chapter. However, the links within the chapter were broken and the references to the articles and other content was obsolete.

The content is accurate. I did not observe any errors.

The examples given are relevant but the references are woefully obsolete. The content needs to be updated to make it relevant.

Clarity rating: 5

The text is lucid, and is written in a reader friendly prose. However, given that my students prefer short content in each section, the pedagogy can be revised to have less content in each section, but more topical coverage in each chapter.

Consistency rating: 5

The text maintains the thematic consistency throughout. This was the best feature of this book.

Modularity rating: 5

This book gets a high grade on assigning an individual chapter like Taxes without having linkage/reference to other chapters. I could easily reassign the chapters. However, given that the chapters are grouped under a theme, this could pose a challenge for some.

Organization/Structure/Flow rating: 5

As mentioned earlier, I liked the thematic organization of the text. I am not sure in a 15 week semester, I would be able to cover the last section.

There were no interface issues observed. If anything, more of these features can be added.

No grammatical mistakes were observed.

The text is not culturally insensitive. When revising the text perhaps, names popular with certain minorities can be added to make the text relatable.

This is a well written book, but needs to be updated. The links and the references are outdated. I would have to do go through every link and reference to make sure that they are functional, and relevant. Also, not sure if there are any ancillary materials available with the text.

Reviewed by Lisa Parrott, Assistant Professor Business Administration, Johnson County Community College on 5/16/22

This book provides an extensive overview of personal finance topics. Chapters range from two to six segments and include learning objectives, key takeaways, and exercises for each segment. This makes some chapters feel rather long, but the writing style makes it easy to digest the material. The investment section is broken down across five chapters which includes interesting topics like market behavior which is interesting because it touches on the pattern of a financial crisis and just misses explaining The Great Recession from 2008/2009. There are a number of macro and micro economic factors discussed in the book in a manner that explains the relationship how they can impact personal finance decisions. I could not find an index or glossary and had difficulty navigating some of the links as they have broken over time or pose a risk for users to access.

No obvious bias or errors were observed.

The book includes a number of practical examples that are relatable and also timeless. The tax section is obsolete (2008) and needs to be updated. Links and sources are more than a decade old and needs to be updated. Sections like accounting software (3.3) are painfully obsolete due to the pace of change in technology and software.

The book is very easy to read. It is written using a lot of examples and situations that provide context for the terminology used.

The book has a consistent framework. Terms are bolded and commonly explained through examples as opposed to definitions. Definitions are missing from the book which can present challenges for difficult concepts.

This is the best feature of the book! Sections are broken down nicely into easy to read chunks that can be read in 5-30 minutes. These sections are subsets of the chapters and include learning objectives, key takeaways, and exercises. Many sections include exercises with external links make it easy for users to connect with content external to the book as well.

The introduction of the text starts off with a story of two people and the major life changes they are facing. It presents a number of financial considerations the couple needs to take as they graduate from college, start new careers, and plan for a life together. From there the book introduces concepts in a logical manner that makes it easy to follow and apply personal relevance to each section.

Interface rating: 1

Links referencing other chapters appear to be broken resulting in 404 (file not found) errors. Most websites referenced are more than a decade old and may not work. Could not enlarge the charts which made some impossible to read (e.g. Figure 5.5 and 5.8).

No obvious grammatical errors

The text did not appear to be culturally insensitive or offense. Examples appeared neutral and without bias.

Initially this books has great potential as an OER resource for personal finance. Links desperately need to be updated and sections refreshed to reflect technological changes and advancements. Teachers resources would be a great addition to the book as well as exercises and examples using Excel.

Reviewed by Ana Claudia Sant'Anna, Assistant Professor, West Virginia University on 4/25/22

Very comprehensive. Topics range from how economic factors affect financial decisions to financial statements and investment decisions to job search and career paths. If you plan on using this textbook for a more senior level undergraduate class,... read more

Instructors and readers should be weary that some parts of the book need to be updated. Apart from that, this book seems accurate.

Relevance/Longevity rating: 4

There are specific details related to personal finance which change over time. Instructors using this textbook should always check whether any updates have occurred. Nevertheless, the fundamental principles can be taught over the years. The chapter on taxes is not up-to-date. Median salaries will probably need updating.

The book is an easy read. It is easy to follow for any level.

The book has a consistent structure, each chapter has the learning outcomes and ends with main takeaways and a couple of exercises. Figures and tables are used to illustrate.

Authors suggest how to use the book in five sections. The book has short sections that can be quickly read by the student. Authors identify the learning outcomes for each section. However, at times they seem a little too small. For instance, it would have been interesting to have some statistics on the credit score section.

The book is nicely organized. Chapters build up on the knowledge given in past chapters while applying it to real life situations. For instructors wanting to use the chapters separately, that is also possible as long as the base knowledge is there.

Interface rating: 3

In the pdf version, font in tables could be bigger. Figures could be bigger. Some figures are blurred (e.g. Figure 3.7).

I did not find any grammatical errors.

Cultural Relevance rating: 4

I could not identify any issues. It would be interesting if the book discussed credit access to borrowers of different races and ethnicities.

It would be nice if the book had an instructor manual and maybe offered some labs in excel for students to practice.

Reviewed by Ben Cuellar, Instructor of Business, Dodge City Community College on 1/29/22

The text does provide a comprehensive and in-depth description of all the major topics relating to personal finance which are normally discussed in a typical textbook about the subject. The authors do a great job of providing definitions within... read more

The academic content as it relates to personal finance is all correct as far as I can tell. I did not come across any conceptual inaccuracies.

The authors acknowledge in the preface that the specific details of personal finance are subject to change as technologies, customs, and laws evolve over time. With that in mind they also point out that the underlying framework used to make financial decisions mostly remains the same. So, in regards to the fundamental principles which guide financial planning and decision making I think the concepts in this textbook are highly relevant. My only major criticism is that the authors did include a high quantity of links to various websites, and unfortunately, the majority of those links are now outdated and/or broken. Some of the links, originally from 2009, now lead to domains which aren't even registered anymore. Another possible suggestion would be updating some of the information related to software recommendations and taxes. For example, the 1040EZ form has been discontinued and several of the accounting software recommendations are out of date. Granted, changes in tax legislation and computer software are inevitable over the course of more than a decade.

The writing is clear and easy to understand. The authors do not assume that the reader has an in-depth understanding of financial concepts and because of this they thoroughly define and explain all concepts in a way which would be easy to comprehend even by readers completely new to the subject. This makes the text very accessible.

The writing is consistent from chapter to chapter. The same format /structure is used in each chapter and the writing style is consistent from one topic to the next. Each section begins with learning objectives, followed by the actual text of the chapter. Then, in conclusion the authors provide a summary of key takeaways in addition to a list of exercises to help the reader apply the topics from the chapter.

The text is divided into sections of appropriate length. Each area is short enough that a reader could absorb the information without losing interest but it is simultaneously long enough to include all of the pertinent information about the topic.

The chapters are organized in a logical sequence beginning with basic financial concepts. After the foundational information is covered the authors move on to the "meat and potatoes" of personal finance; accumulating assets, risk management, and investment planning. Then, they conclude the textbook with an interesting chapter on career planning. I appreciate that the authors include the chapter on career planning because it is sometimes an overlooked aspect of the personal financial planning process despite earned income being such an integral part of wealth creation for so many individuals. While the topics are organized in a way which naturally transitions from one topic to the next, the chapters could very easily be read independently from one another. That is to say, each chapter can function as a stand alone reading without relying on information from prior chapters.

Interface rating: 5

The table of contents made navigation quite easy. I will mention again that there are several broken hyperlinks to external websites, but the actual navigation inside the textbook itself is intuitive and convenient. There are some charts and tables with relatively small text, but I was able to read all of the information clearly by zooming in.

I did not come across any grammatical or spelling errors.

I felt the authors did a good job of making the text inclusive. The examples and analogies used throughout appeal to readers from several different financial stages in life and help make the content relatable.

After reviewing this text I am strongly considering using it in my personal finance course next semester. While it is not quite as lengthy as textbooks published by Cengage, Pearson, or McGraw Hill, Personal Finance by Siegel and Yacht adequately explores the basic concepts in personal financial planning. My only concern is the quantity of broken links and outdated concepts from 2009. With that being said, I feel the core concepts covered are actually explained more effectively and would provide a better value for students than materials from traditional publishers, especially when considering cost!

Reviewed by Fang Lin, Associate Professor of Finance, Pittsburg State University on 12/15/21

The book covers a wide range of topics related to personal finance. read more

The book covers a wide range of topics related to personal finance.

Some information in the book is outdated. This is one of the issues with writing a textbook - the authors will have to keep up the content.

Once again, content needs to be updated.

jargons/terms are defined in the text.

the framework and the terms used in the text seem to be consistent throughout.

The text is divided into chapters based on topics.

each chapter follows a similar structure. they all begin with an introduction and learning objectives, and end with key takeaways and exercise problems.

some figures are too small to read (at least the online version) and it doesn't offer easy ways to magnify the font.

I don't see any grammatical issues.

I don't see any cultural issues.

Reviewed by Barbara Bliss, Associate Professor of Finance, University of San Diego on 3/17/21

The book could be updated to reflect new changes in the tax law. Some of the descriptions are very short, like the section on closing costs of a home, or how to calculate your monthly payment. read more

Comprehensiveness rating: 3 see less

The book could be updated to reflect new changes in the tax law. Some of the descriptions are very short, like the section on closing costs of a home, or how to calculate your monthly payment.

Some information is outdated now

Chapters almost seem too short. Some content could be updated due to changes in the tax code, etc.

The calculations could be clarified for some students who have no background knowledge.

Seems consistent.

Sections almost seem too small.

Structured well.

Pdf makes it easy to read all at once and skim.

Seems good.

Could be useful to describe how certain methods are used to create generational wealth.

Reviewed by Dr. Renee Dyer, Assistant Professor of Business Finance, Limestone University on 8/18/20

The text covers all necessary components of personal finance. The text flows in a cohesive manner that should make the student experience more fulfilling. read more

The text covers all necessary components of personal finance. The text flows in a cohesive manner that should make the student experience more fulfilling.

I did not view any errors in the text.

Relevance/Longevity rating: 5

The textbook is relevant to personal finance at this time. The text provides a good foundation to aid students in making sound financial decisions.

Any technical terminology used was defined and explained in the text.

This text is very comparable to the text I have used from Cengage. The chapters are in a different order, but I understand why it is written this way. The chapters build on themselves in a comprehendible order.

The text is broken into sections that aid in reading and assignments.

The textbook is presented in a fashion that builds on financial information to provide a thorough knowledge of personal finance for the student.

I printed the textbook. Everything is legible and flows well.

Grammatical Errors rating: 4

I did not find any of the text, problems, or examples to be insensitive or offensive.

This is a wonderful open access textbook for personal finance professors to solely use or use along with their current textbook for additional information, examples, problems, etc.

Reviewed by Kim Vierra, Instructor, Oregon State University on 8/4/20

This book covers everything that I cover in my personal finance and financial planning courses, with one additional chapter related to careers, which is an interesting addition. I would have liked to see a section dedicated to paying for college. The topic of investing in education is sprinkled throughout the text but is not in its own section. Financing education is as important as buying a house or car, which each have their own sections, so it would have been good to see that as a stand-alone section. I don't see an index or a glossary for the full text.

Also, I'd like to see a section on FinTech and the use of online tools. Most of my students use apps like Acorns, Robin Hood, Square, and Venmo, etc. They want to better understand these offerings and the pros and cons associated with the various savings, money transferring and investment apps available today.

I didn't find any errors in the book in terms of calculations, etc.

Relevance/Longevity rating: 1

The basics of sound financial management don't change much over time, however, tools, tax tables, interest rates, and the stock market change rapidly. For example, this book does not address the fintech apps that students are using for investing, transferring money to friends and family, and saving money. This omission makes the book less applicable to certain populations, such as my college-aged students.

Also, the majority of the hyperlinks are broken.

The writing could be cleaned up to improve conciseness. It is wordy.

Definitions are given for technical concepts, which is a plus. A glossary of these terms would have been nice to have.

I like the layout, with learning objectives, key takeaways, and homework exercises provided for each chapter.

Yes, I can see how I could easily reorder this book to match up with my syllabi, and use separate sections of the book for each of my classes. Each section can stand on its own.

The order is fine. It makes sense to start with learning the basics of budgeting and financial planning (Chapters 1-6), followed by the chapters on getting what you want (Chapters 7-9). protecting what you have (Chapters 10-11) and building wealth (Chapters 12-17). The last chapter on career planning is an interesting addition to this book. It is the only chapter that I wouldn't typically cover in my personal finance classes.

In general, the interface is fine. Some of the text on the included graphics is so small that it is unreadable, and when you click on the image, the image/text doesn't expand. It would be nice to have the ability to click on the figures in order to see them better. I can use the browser zoom, but it isn't as user friendly as I'd like it to be.

There are some commas missing, several tautologies that could be removed, and noun/verb agreement needs to be fixed in some sentences.

I didn't note any issues with the choice of scenarios or names of characters potentially making students feel uneasy. However, a wider variety of character names could make more students feel more included. For example, could Alice become Tanisha, and Mark become Jose for the next iteration of the book?

While this is a great book for understanding the fundamental concepts of personal finance, a reboot is necessary to clean up the broken links and to update the content to include advances in FinTech and recent updates in legislation.

Reviewed by Aaron Henrichsen, Assistant Professor of Finance, University of Northern Colorado on 12/13/19

The important areas of personal finance are covered, though in some cases they are covered more extensively than a beginning personal finance book maybe ought to. I saw no glossary or index. read more

The important areas of personal finance are covered, though in some cases they are covered more extensively than a beginning personal finance book maybe ought to. I saw no glossary or index.

Content Accuracy rating: 3

Accurate information but a large fraction of the hyperlinks are broken

Most of the content is based on tried and true personal financial principles that will last. However, personal income tax is an area that needs updating rather frequently because of legislative changes to the tax code. This text has not been updated in almost a decade, and so will fall short in this area.

Clarity rating: 2

As an introductory finance text targeted to an undergraduate without any background in economics, the text is full of economic jargon with little or no definitions or examples. Though the terms are accurately used, they will most likely confuse the target audience. Examples of this include micro, macro, capital, assets, inflation, deflation (all with no definitions, index, or glossary). This is bad enough that if I choose to use the text in the futures, I may have to put out a short “Defining Terms” video for each chapter.

The text was consistent

Information is broken up into digestible segments. It is readily divisible into smaller reading sections that can be assigned at different points within the course

I feel Chapter 5 Budgeting should have been Chapter 3, but the order of topics covered is acceptable.

Images and organization were fine, but many (1/3 to 1/2) of the hyperlinks were broken.

I found no problems here.

No problems found.

This book does an okay job at presenting personal finance…and does it for free. I would rate it below all Personal Finance texts that I have reviewed from the major publishers such as Wiley, Pearson, McGraw Hill, and Cengage. However, it is not so much worse that it isn’t a good option for a minimal-cost Personal Finance course. Though I can’t give it a fully positive review, I am still considering switching to this text in the next school year.

Reviewed by Darren Kraemer, Adjunct Instructor, Fletcher Technical Community College on 4/24/19

This text is the most comprehensive on this subject matter as any text I've seen to date. It contains more than enough of what is needed to cover a comprehensive course on personal finance. In this case, more is always better as any teacher would prefer to remove sections rather than look for supplemental information. With this text you will have more than you need to teach a comprehensive course on this subject matter.

This book is sufficiently accurate in its text but has some failings in its links, references and homework assignments. Some links don't work any longer and need to be removed or updated. However, that is not a hindrance to the validity and use of this text for a complete and comprehensive course on personal finance.

This book is mostly relevant but as stated in the accuracy section above, there are links and references that are no longer valid. The information in the text will stand the test of time but the links, references and homework assignments need to be updated and improved.

The clarity of this text is superb. The language is easy to read and the chapters and section breaks are well placed.

The consistency of the chapters are perfect. Every chapter has learning objectives followed by the lesson lecture and finishes with key takeaways and home exercises. This format is easy to follow and flows comfortably.

As mentioned in the consistency section, the format flow is excellent and easy to parse. This is an easy read and the suggested module groupings are logical.

The organization of this book is logical and flows with ease. The table of contents and preface are helpful and practical. The suggestions are a nice enhancement to the natural construction of a course on personal finance using the text of this book.

The interface is sufficient other than the web links that do not work.

I found no grammatical errors.

I found nothing offensive even in the most subtle ways of possible interpretation. Many various examples are used and contain no apparent prejudices.

Again I want to mention that this text is the most comprehensive on this subject matter as any text I've seen to date. I would highly recommend it to be used by any instructor teaching a course on personal finance. It is comprehensive and flows well.

Reviewed by Christina Glenn, Adjunct Instructor, Fort Hays State University on 11/22/18

This is by far the most comprehensive personal finance text I have evaluated! While it does not have an index or glossary, definitions are clearly defined within chapters, and the table of contents is detailed enough to find the topic you are looking for in the book. This text does an excellent job combining economic, business, finance, and consumer topics to thoroughly explain personal finance topics. The only topics I felt that needed more detailed explanations were auto, home, and disability insurance. I was very impressed with the author's work, as it also includes discussion of behavioral and emotional aspects of personal finance.

Overall, I did not find any errors in the text. It does need some updating for the tax, retirement, and estate laws, as it was last updated with 2008 laws. But very little effort is needed to make the information current.

This text has staying power. While some personal finance topics, such as tax, retirement, and estate need to be brought up to date with current numbers, it would take very little effort on the part of the instructor to update that content. I was impressed that the authors clearly thought these updates through, as it would only require updating images to current data.

The book is clearly written, except for some concepts that may be more difficult for non-business students to understand. I feel the text is geared more toward business students who would be familiar with some of the terminology in the text from other courses.

The text is consistent throughout as far as depth of coverage for each topic and appropriate ordering of chapters. I would suggest moving the last chapter, on careers to the beginning. I would also suggest a little more coverage of the insurance topics, but the graphics are excellent in the text, and the content is superior to those of "revenue generating" textbooks.

The text has clearly defined sections, with excellent learning objectives, takeaways, and exercises for EACH section within the chapter. Very impressed with the organization of the text and application of material in exercises.

The topics are presented in a logical order, with the exception of Career Planning. However, most personal finance texts do place Career Planning at the end. To me, discussion of career planning makes more sense earlier in the semester, as the student's career choice is going to impact their overall financial plan.

The textbook is easy to navigate, with buttons at the top to skip back to the previous section, go to the Table of Contents, or skip ahead to the next section. The graphs and images were all clear and concise. It was easy to read, with no interface issues.

The text was very well written, with no grammatical errors found.

Examples provided in the text did not mention race or ethnicity and were not offensive in any way. A variety of financial situations were presented in case examples, and did not overly simplify the financial conditions a person might experience. As students come from diverse economic backgrounds, I did not find the examples to favor lower socioeconomic status or higher socioeconomic status individuals.

Reviewed by Jennifer Lehman, PhD student and associate instructor, Texas Tech University on 3/27/18

The text covers all relevant subject areas and has a good table of contents, with links provided to subsections within each chapter. If anything, the text is too much for some courses to cover in one semester - but as an instructor I would rather decide what to skip rather than not have enough content. I like that behavioral finance is included, and career information is included.

For the most part, the book is accurate. However, I found a bad web link - P 13 Q 3 - here's the error message - The requested URL /od/moneybyageorlifestage/Money_and_Personal_Finance_by_Age_Life_Stage.htm was not found on this server. Also, federal estate tax numbers are still from 2009, and has significantly changed since then. I would either leave that part out or make sure someone updates it every year.

Some of the comments here overlap with the one above. I found a web link that is no longer good, and estate tax numbers are out of date. Also, wills and trusts are talked about, but there's no mention of living wills or powers of attorney for financial and health care matters. Those things are relevant for everyone, and do not include numbers that would need updating. I like that there's a whole chapter on consumer strategies, including common scams and how to avoid them. Buying a car gets a section, and buying a home gets very thorough, well thought out coverage. I wish I would have had this resource when buying my first home.

The text is written in plain English in a matter that is easy to understand. Terms are defined and examples are provided. There are nice charts to organize some of the information. This aspect of the book is very well done.

Learning objectives are listed at the start of each section, then content, and finally key takeaways and exercises at the end of every section. The format is predictable and easy to follow. Also, as mentioned above, there's a table of contents. I don't see an index or glossary but I think needed information could be pinned down in this easy to follow format.

Each section within a chapter is fairly short. There are not enormous blocks of text. The flow is nice and modules could be easily assigned in different orders and without having to assign the entire chapter. This aspect of the text is very nicely done.

The topics in the text are presented in a logical, clear fashion which is explained in the preface.

Other than the one bad web link (I did not try every single one), I did not notice any interface issues. A few images were small and could be enlarged.

The text contains no grammatical errors.

I did not notice anything offensive in the text. A variety of examples are provided.

Overall, this book is well written and easy to follow. Thanks for making it available.

Reviewed by Vaughan Briggs, Associate Professor of Finance, Central Oregon Community College on 8/15/17

This text covers all the requisite material that you would find in other texts sold by the major publishers. As mentioned in other reviews, the .pdf version of the text does not have a table of contents, but the online version does. You can get... read more

A couple comments on the content: I do wish that the formula for present value was made more obvious - that it would stand out from the rest of the text in the same way future value is presented. Also, while there is a considerable amount of information on risk, it is spread out through the text. Additionally, I would like to see a better discussion of how the deductibility of mortgage interest reduces the cost of housing. For instance, paying rent of $1,500/month is actually more expensive than paying a mortgage payment of $1,500/month because of the tax treatment of mortgage interest. Finally, my course outcomes require that I talk about common financial scams and common personal financial mistakes, which are not really discussed in the text. However, in all fairness, not many texts cover this topic.

I did find a couple of typo type errors such as percentages presented in decimal form when the tables clearly labeled them as percentages. However, those were minor and infrequent.

The basics of personal finance, such as risk/return, and time value of money are timeless. The text presents the material as such. The areas that will bear monitoring are those dealing with tax laws and the evolving nature of health care and its benefits. I do like that the authors have placed URLs below tables that may change in the future, such as tax rates.

I found the book easy to read and clear in its examples. I found the language of the text to be at the appropriate level for community college students.

I did not notice any inconsistencies in presentation.

In the online version, students can access different sections of the text very easily. However, the .pdf version does not allow for the student to easily jump from one section of the text to the other. As mentioned above, you can work through this by using "CNTRL f" but its very clunky and may not be an option for the student that is used to using a hard copy text.

The topics are presented in a logical and clear way that makes sense. However, I almost never use a text in sequential order as I usually have a different way of presenting the material based upon my strengths and weaknesses as an instructor. In the case of personal finance, I really like to lay a solid foundation with the concepts of time value of money and risk vs. return, then move on to application of those concepts. This text presents a substantial amount of information on risk, its just spread out through many chapters.

Again, the online version is much easier to use and navigate than the .pdf version.

No issues found.

This book is not culturally insensitive or offensive in any way. However, I would not be considered a minority so I may not be as aware of those issues as others of a different race or cultural background.

While I'm happy that the authors have posted a .pdf version of the text so that a professor may organize the material in a way that fits their teaching style, its not very user friendly for students. The online version is much easier to use and navigate. Having said that, there is a ton of great material here to use in a personal finance class.

Reviewed by Amber Lamadrid, Instructor, Portland Community College on 6/20/17

The text is extremely comprehensive, including topics that would be relevant to both younger students just starting out with Personal Finance, as well as topics relevant to the older student who has some Personal Finance experience. in this regard it would be easy to customize a course based on the student population in the section. With 18 chapters included, the range of topics is broad enough that the instructor can pick and choose which topics to include and not run out of content.

I spot-checked random topics for accuracy in mathematical equations (PV, YTM, etc.) and found no errors. Graphical flowcharts make sense and are easy to follow.

This text would be relevant for the foreseeable future, since the text is based on fundamental principles of Personal Finance that don't often materially change.

The text presents concepts in an easy to read way, without too much advanced terminology that an average student would struggle to understand. Concepts are presented using an unbiased tone, presenting pros and cons when applicable.

Each chapter and chapter subsection are organized in the same way, maximizing the book's overall consistency. Students would easily get into a "rhythm" with the text, regardless of which chapters are assigned.

As I mentioned above, there are 18 chapters included... so the text is very modular. No section is too long, which minimizes the risk that students lose interest. Additionally, each chapter sub-section is broken up with graphs, charts, Key Takeaways and Exercises, all in color and with lots of white-space to draw attention.

The topics are presented in logical order. Instructors could easily structure a course starting with Chapter 1 and move through the chapters in order, and the course would make logical sense to the student.

No interface issues encountered. I downloaded the book to my tablet and had no issues opening the book, hyperlinking to chapters, etc.

no grammatical errors noted, however I did not scour the book with this in mind.

As mentioned, the book adopts a neutral tone of voice, free of bias that might be offensive to any racial or cultural group.

I appreciate the prompts in the Exercises sections to the student to reflect on the topic in their Personal Finance journals. In my course, I use the PFJ as an assessment tool, and students love having a comprehensive examination of their personal finance situation at the end of the term as a takeaway.

Reviewed by Chengping Zhang, Associate Professor of Finance, George Fox University on 2/15/17

This book covers a decent spectrum of topics in personal finance and financial planning, such as time value of money, risk, budgeting, tax planning, retirement planning, estate planning, insurance, investing, career planning, etc. The topics are appropriate for an undergraduate personal finance or financial planning course, it also serves as a good reference book for anyone who wants to plan his/her personal finance serious.

Two very important topics in finance, time value of money and risk, need to be covered in more depth. I suggest to split chapter 4 into two chapters – a chapter to cover time value of money and another to cover measuring and evaluating risk. Chapter 9 “buying a home” should discuss the advantages and disadvantages of renting versus buying and covers refinancing in more detail. These will help people make better decisions when it comes to buying a home and refinancing a mortgage.

Excel is widely used in Business and Finance including in financial planning and analysis. Including some Excel examples and exercises will help readers understand how personal finance can be managed and how financial planning can be done in Excel.

There are some errors or typos in the text. For example, the mathematical formula of the present value (PV) and future value (FV) relationship on pages 85, 86 and 87 is not correctly presented. The t should be in the exponential position. Maybe the “^” is missing somehow. The definition of “present value” is not accurate (page 83). Present value is not necessarily what is worth today. In time value of money calculations, we define present value as “an early money on a timeline”. For example, if you invested $1000 dollars in the stock market three years ago and your stock account balance is $1300 today, we want to find the implied investment return. In this case, the initial investment $1000 three years ago is the present value. Your current stock account balance is the future value.

The content of this book is relevant and current. The key principles of personal finance and financial planning will not change much over time. Income tax rates and interest rates may change over time but these can be updated easily.

The text is not very clear and even confusing in some places. For example, on page 82, it reads “It also involves understanding and measuring the risks or uncertainties that time presents and the opportunities—and opportunity costs—that time creates”. How do we interpret “time presents risks and uncertainties” and “time creates opportunities and opportunity costs”? I think there are a lot of other factors involved than just time when discussing risks and uncertainties, opportunities and opportunity costs.

The text is consistent in terms of terminology and framework. The terms use in each chapter are consistent across the chapter. There are some inconsistencies in table headings and the actual values. For example, the second column in the table on page 91 is meant to show rates (r) in percentage, then 2% should be displayed as 2 in the table instead of 0.02.

The fact that each chapter in this book is about 20-40 pages long is a good sign of modularity. The authors use a lot of tables and figures to make the text more appealing to read. The learning objectives at the beginning and the key takeaways at the end of each section remind the readers the key concepts in that section.

The book starts with a long case in chapter 1. I think using a case to start a chapter is a good idea but this case is too complicated and overwhelming for students who just start a course. Splitting this big case into several small ones and put them at the beginning of relevant chapters will make the book more friendly. As mentioned earlier, I suggest to split chapter 4 into two chapters. Including a chapter directory and an index is also highly recommended.

The PDF version does not have a table of contents. There is no index at the back of the file either. The images and charts are clear, but centering them will make the text look nicer.

There is no major grammatical issue. But the clarity can be improved in some places.

Overall, this book covers most topics that need to be covered in a personal finance or financial planning text. Some areas, such as time value of money, risk, financing a mortgage and refinancing need to be covered in more depth. Including some Excel examples and exercises will definitely make the book more appealing.

Reviewed by Ronalld Shapiro, Assistant Professor , Rutgers Business School on 2/8/17

The book covers a wide range of topics in the analysis and theory of personal finance. The book consists of 18 chapters and covers all relevant topics including financial statements, budgeting, risk management, investing in stocks, bonds and real estate, and taxes among others. The chapters include good examples of basic principles that can be further explained by the classroom instructor. There is no table of contents, index or glossary which weakens the effective use of this textbook. In addition, all of the examples used in this textbook are from 2008 which makes this text currently obsolete. Changes in tax laws and consumer strategies need to be updated to make this a usable text today.

The text content appears accurate. I found very few errors. However, as noted above, the examples and references to tax laws in particular are not accurate as the laws have changed since 2009.

This is a very good introductory and easy to understand course book to introduce the student to the world of personal finance. While all textbooks must be reviewed periodically to maintain accuracy and relevance, this text will require more constant updating as our laws and principles change.

There is good use of tables and charts to explain the concepts and calculations. The writing style makes the topics easy to understand

There is good continuity throughout the book. Terms and definitions are consistently applied. A glossary at the end of the book would enable the student to quickly find a term or definition used in a previous section of the book.

The arrangement of the chapters are generally in proper sequence. While the book makes extensive use of sub topics with Key Takeaways and Exercise sections within each chapter, limiting these breaks within each chapter might be advisable. The learning objectives in the beginning of each chapter are useful and provide students with advance notice of what they will be learning.

The text is properly organized and gradually takes the student into the core of this subject. Financial examples and charts provide a good balance for learning.

The book is written in easy to understand language with clear charts and graphs.

There were no issues found with grammar and I found very few spelling errors.

This text is not offensive in any way. Its content pertains to US laws and practices only.

In addition to the book requiring updating to reflect current tax laws and practices, there are other aspects that can be employed to strengthen this textbook and make it more current. Examples would be: (a) demonstrating the use of a financial calculator to solve financial problems; (b) use of accounting software such as Excel; (c) use mini cases to further explain and define principles learned and (d) add more end of chapter problems for student learning and instruction.

Reviewed by Walter Lambert, Adjunct, Metropolitan State University on 8/21/16

The book introduces and explains essentially all of the topical material found in most commercial texts or trade books dealing with a first overview of personal finance. The implied audience is anyone needing a professional introduction to the subject, but it is clear from the book's content that the major intended audience is college students at any level in their academic programs. The online nature and licensing style of the book apparently allow the front pieces and index to be deleted but makes the book easily searchable and flexible as an educational resource. A few consistent typos throughout the text indicate a possible software translation hiccup that does not detract from the text's readability or usefulness. An opportunity for the instructor is provided by the book's design. Support activities such as assignments and assessments can be supplemented or developed by the instructor to fit a class at hand rather than a general student population.

The book's introduction and treatment of subject material is accurate and presents current information in line with professional practice in the personal finance advisory and educational fields as of the date of this review. There is no apparent bias in chapters dealing with subjects of otherwise intense commercial rivalry. Some charts containing data as of the time of publication will need updating in a few years like any other text in the fields of finance and economics.

The book is most relevant to readers and learners with thin financial life experience whether college student or older person. The general focus of the book is on readers or learners currently living through the transition from a financially protected environment to living on their own. Some of the book's content should be immediately relevant especially to the college student, and most of the book's content should become immediately relevant over the decade following graduation. This allows the book to be a primary source for any learner to know what direction to take for more in-depth information over an extended period.

Material introduced and discussed in the book is clear and devoid of confusing complications sometimes found in textbooks on personal finance. This is a benefit from the authors carefully avoiding the attempt to make the book an encyclopedia on the subject.

Individual chapters are stand-alone in the sense that there do not appear to be prerequisite linkages between them. This contributes to the book's flexibility in course design. There also does not appear to be some type of underlying theory or ideology that might create inconsistencies either between topics within the book or between the book and reality. Terminology and the pedagogical framework are consistent throughout the text.

Having each chapter as a stand-alone unit contributes to the book's modularity in terms of course design and subject matter sequencing. That includes the flexibility for instructors to not use some chapters if the need arises.

Organization of subject matter within the text follows a more or less standard pattern easily followed by a learner with chapters grouped by a main focus such as asset protection or wealth building. The instructor has the option of either using the text from front to back or of altering the subject matter sequencing to satisfy an alternative program of presentation.

The on-screen appearance and layout of the book are clear, easily readable, and searchable. One exception might be an occasional typo apparently caused by an electronic hiccup when moving from one electronic platform to another.

Grammar within the text is accurate and simple. A learner using English as a second or third language should have few grammatical challenges when reading this book.

The book is written within the context of the personal financial environment of the United States. It is inclusive within that environment. The peculiarities of personal finance within the US probably do not lend themselves to relevancies outside the US. A few of the topics introduced and explained in the text such as personal debt, life insurance or earned interest might not be relevant to some cultural or ethnic groups within the US. Those situations can be addressed by the instructor as the situation dictates.

The text is a fairly comprehensive overview of personal financial common practice within the United States. It addresses all of the major topics confronted by the average American family at sometime in its life, and provides a starting point for more in-depth learning on particular topics as they become more immediately relevant. The pedagogical perspective is similar in that the book is like both sides of a sandwich. It gets instructor and learner started, but it is up to both to provide the makings, which provides the creative instructor a wide degree of flexibility and the serious learner an even broader opportunity.

Chapter 1: Personal Financial Planning
Chapter 2: Basic Ideas of Finance
Chapter 3: Financial Statements
Chapter 4: Evaluating Choices: Time, Risk, and Value
Chapter 5: Financial Plans: Budgets
Chapter 6: Taxes and Tax Planning
Chapter 7: Financial Management
Chapter 8: Consumer Strategies
Chapter 9: Buying a Home
Chapter 10: Personal Risk Management: Insurance
Chapter 11: Personal Risk Management: Retirement and Estate Planning
Chapter 12: Investing
Chapter 13: Behavioral Finance and Market Behavior
Chapter 14: The Practice of Investment
Chapter 15: Owning Stocks
Chapter 16: Owning Bonds
Chapter 17: Investing in Mutual Funds, Commodities, Real Estate, and Collectibles
Chapter 18: Career Planning

Ancillary Material

About the book.

Personal Finance by Rachel Siegel and Carol Yacht is a comprehensive Personal Finance text which includes a wide range of pedagogical aids to keep students engaged and instructors on track.

This book is arranged by learning objectives. The headings, summaries, reviews, and problems all link together via the learning objectives. This helps instructors to teach what they want, and to assign the problems that correspond to the learning objectives covered in class.

Personal Finance includes personal finance planning problems with links to solutions, and personal application exercises, with links to their associated worksheet(s) or spreadsheet(s). In addition, the text boasts a large number of links to videos, podcasts, experts' tips or blogs, and magazine articles to illustrate the practical applications for concepts covered in the text.

Rachel would love to hear from you. If you have questions about teaching with her book, comments about teaching Personal Finance, or just feedback, feel free to email her at [email protected].

This textbook has been used in classes at: Miami University.

About the Contributors

Rachel S. Siegel , chartered financial analyst (CFA), has been a professor of finance, economics, and accounting at Lyndon State College since 1990. She has also taught as an adjunct faculty member at Trinity College (Vermont), Granite State College (New Hampshire), Springfield College (Massachusetts), the University of Vermont, and in Tel Aviv, Israel, for Champlain College.

Siegel is a member of the Vermont CFA Society, the CFA Institute, and the Board of Scholars of the Ethan Allen Institute, as well as a voting member of the National Academy of Recording Arts and Sciences. She has served as a consultant on investment strategy to the Vermont Land Trust and to other private clients. Siegel’s column “Follow the Money” has been a regular feature of the Northstar Monthly since 2001. Originally from Providence, Rhode Island, Siegel earned a BA in English literature (1980) and an MBA (1989) from Yale University. She lives in Barnet, Vermont.

Carol Yacht is a business educator and textbook author. Yacht’s best-selling textbook, Computer Accounting with Peachtree (McGraw-Hill/Irwin), is in its fourteenth edition. She has also written textbooks for QuickBooks, Microsoft Dynamics GP, Microsoft Office Accounting, Excel, and Carol Yacht’s General Ledger. Yacht’s writing career started in the classroom. To help her students learn new business and technology concepts, Yacht created instructional material. Her first book was published in 1979. Yacht is committed to teaching, learning, sharing, and writing. She is a frequent presenter at conferences.

Yacht teaches Accounting Information Systems at the University of South Florida Sarasota-Manatee, College of Business, Executive and Professional Education Center. She has also taught on the faculties of California State University–Los Angeles, West Los Angeles College, Yavapai College, and Beverly Hills High School. She is also the Accounting Section Editor for the Business Education Forum, a publication of the National Business Education Association; serves on the AAA Commons Editorial Board; and is a member of the Microsoft Dynamics Academic Advisory Council.

In 2005, Yacht received the Lifetime Achievement Award from the American Accounting Association Two-Year College Section. She is also a recipient of the Business Education Leadership Award from the State of California. Yacht received her MA from California State University–Los Angeles, BS from the University of New Mexico, and AS from Temple University.

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What Is Personal Finance?

The importance of personal finance, areas of personal finance, personal finance services, personal finance strategies, personal finance skills, personal finance education.

What Classes Can't Teach

Breaking Personal Finance Rules

Frequently asked questions, the bottom line.

Personal Finance

What Is Personal Finance, and Why Is It Important?

assignment 18 test quizlet personal finance

Investopedia / Sydney Saporito

Personal finance is a term that covers managing your money as well as saving and investing. It encompasses budgeting, banking, insurance, mortgages, investments, and retirement, tax, and estate planning. The term often refers to the entire industry that provides financial services to individuals and households and advises them about financial and investment opportunities.

Individual goals and desires—and a plan to fulfill those needs within your financial constraints—also impact how you approach the above items. To make the most of your income and savings, it’s essential to become financially savvy—it will help you distinguish between good and bad advice and make intelligent financial decisions.

Key Takeaways

Few schools have courses on managing your money, so it is important to learn how through free online articles, courses, blogs, podcasts, or books.
The core areas of managing personal finance include income, spending, savings, investments, and protection.
Smart personal finance involves developing strategies that include budgeting, creating an emergency fund, paying off debt, using credit cards wisely, saving for retirement, and much more.
Being disciplined is important, but it’s also good to know when you shouldn't adhere to the guidelines.

Personal finance is about meeting your personal financial goals. These goals could be anything—having enough for short-term financial needs, planning for retirement, or saving for your child’s college education. It depends on your income, spending, saving, investing, and personal protection (insurance and estate planning).

Not understanding how to manage finances or be financially disciplined has led Americans to accumulate enormous debt. In February 2024, the Federal Reserve Bank reported household debt had increased by $3.4 trillion since December 2019, prior to the recession. In addition, the following balances increased from the third quarter of 2023 to the fourth:

Credit card balances : Up by $50 billion
Auto loans : Up by $12 billion
Consumer loans and store cards : Up by $25 billion
Total non-housing : Up by $89 billion
Mortgages : Up by $112 billion

Student loans remained unchanged, at about $1.6 trillion.

Americans are taking on an ever-increasing amount of debt to finance purchases, making managing personal finances more critical than ever, especially when inflation is eating away at purchasing power and prices are rising.

The five areas of personal finance are income, saving, spending, investing, and protection.

Income is the starting point of personal finance. It is the entire amount of cash inflow that you receive and can allocate to expenses, savings, investments, and protection. Income is all the money you bring in. This includes salaries, wages, dividends, and other sources of cash inflow.

Spending is an outflow of cash and typically where the bulk of income goes. Spending is whatever an individual uses their income to buy. This includes rent, mortgage, groceries, hobbies, eating out, home furnishings, home repairs, travel, and entertainment.

Being able to manage spending is a critical aspect of personal finance. Individuals must ensure their spending is less than their income; otherwise, they won't have enough money to cover their expenses or will fall into debt. Debt can be devastating financially, particularly with the high-interest rates credit cards charge.

Savings is the income left over after spending. Everyone should aim to have savings to cover large expenses or emergencies. However, this means not using all your income, which can be difficult. Regardless of the difficulty, everyone should strive to have at least a portion of savings to meet any fluctuations in income and spending—somewhere between three and 12 months of expenses.

Beyond that, cash idling in a savings account becomes wasteful because it loses purchasing power to inflation over time. Instead, cash not tied up in an emergency or spending account should be placed in something that will help it maintain its value or grow, such as investments.

Investing involves purchasing assets, usually stocks and bonds, to earn a return on the money invested. Investing aims to increase an individual's wealth beyond the amount they invested. Investing does come with risks, as not all assets appreciate and can incur a loss.

Investing can be difficult for those unfamiliar with it—it helps to dedicate some time to gain an understanding through readings and studying. If you don't have time, you might benefit from hiring a professional to help you invest your money.

Protection refers to the methods people take to protect themselves from unexpected events, such as illnesses or accidents, and as a means to preserve wealth. Protection includes life and health insurance and estate and retirement planning.

Several financial planning services fall under one or more of the five areas. You're likely to find many businesses that provide these services to clients to help them plan and manage their finances. These services include:

Wealth Management
Loans and Debt
Risk Management
Estate Planning
Investments
Credit Cards
Home and Mortgage

The sooner you start financial planning , the better, but it’s never too late to create financial goals to give yourself and your family financial security and freedom. Here are the best practices and tips for personal finance.

The 2022 Investopedia Financial Literacy Survey surveyed 4,000 adults and found that most Americans are concerned about personal finance basics, retirement funding, and investing in crypto.

1. Know Your income

It's all for nothing if you don't know how much you bring home after taxes and withholding. So before deciding anything, ensure you know exactly how much take-home pay you receive.

2. Devise a Budget

A budget is essential to living within your means and saving enough to meet your long-term goals. The 50/30/20 budgeting method offers a great framework. It breaks down like this:

Fifty percent of your take-home pay or net income (after taxes) goes toward living essentials, such as rent, utilities , groceries, and transport.
Thirty percent is allocated to discretionary expenses, such as dining out and shopping for clothes. Giving to charity can go here as well.
Twenty percent goes toward the future—paying down debt and saving for retirement and emergencies.

It’s never been easier to manage money, thanks to a growing number of smartphone personal budgeting apps that put day-to-day finances in the palm of your hand. Here are just two examples:

YNAB (an acronym for You Need a Budget) helps you track and adjust your spending to control every dollar you spend.
Mint streamlines cash flow, budgets, credit cards, bills, and investment tracking from one place. It automatically updates and categorizes your financial data as information comes in, so you always know where you stand financially. The app will even dish out custom tips and advice.

3. Pay Yourself First

It’s important to “pay yourself first” to ensure money is set aside for unexpected expenses, such as medical bills, a significant car repair, day-to-day expenses if you get laid off, and more. The ideal safety net is three to 12 months of living expenses.

Financial experts generally recommend putting away 20% of each paycheck every month. Once you’ve filled up your emergency fund , don’t stop. Continue funneling the monthly 20% toward other financial goals, such as a retirement fund or a down payment on a home .

4. Limit and Reduce Debt

It sounds simple enough: Don't spend more than you earn to keep debt from getting out of hand. But, of course, most people have to borrow from time to time, and sometimes going into debt can be advantageous—for example, if it leads to acquiring an asset . Taking out a mortgage to buy a house might be one such case. Still, leasing sometimes can be more economical than buying outright, whether renting a property, leasing a car, or even getting a subscription to computer software.

On the other hand, minimizing repayments (to interest only, for instance) can free up income to invest elsewhere or put into retirement savings while you’re young when your nest egg gets the maximum benefit from compounding interest . Some private and federal student loans are even eligible for a rate reduction if the borrower enrolls in auto pay.

Student loans account for $1.59 trillion of consumer debt—if you have an outstanding student loan, you should prioritize it. There are myriad loan repayment plans and payment reduction strategies available. If you’re stuck with a high interest rate, paying off the principal faster can make sense.

Flexible federal repayment programs worth checking out include:

Graduated repayment—progressively increases the monthly payment over 10 years
Extended repayment—stretches out the loan over a period that can be as long as 25 years
Income-driven repayment—limits payments to 10% to 15% of your income (based on your income and family size)

5. Only Borrow What You Can Repay

Credit cards can be major debt traps, but it’s unrealistic not to own any in the contemporary world. Furthermore, they have applications beyond buying things. They are crucial to establishing your credit rating and a great way to track spending, which can be a considerable budgeting aid.

Credit needs to be managed correctly , meaning you should pay off your entire balance every month or keep your credit utilization ratio at a minimum (that is, keep your account balances below 30% of your total available credit).

Given the extraordinary reward and incentives offered these days (such as cashback), it makes sense to charge as many purchases as possible—if you can pay your bills in full.

Avoid maxing out credit cards at all costs, and always pay bills on time. One of the fastest ways to ruin your credit score is to constantly pay bills late—or even worse, miss payments.

Using a debit card , which takes money directly from your bank account, is another way to ensure that you will not be paying for accumulated small purchases over an extended period with interest.

6. Monitor Your Credit Score

Credit cards are the primary vehicle through which your credit score is built and maintained, so watching credit spending goes hand in hand with monitoring your credit score. If you ever want to obtain a lease, mortgage, or any other type of financing, then you’ll need a solid credit report . There are a variety of credit scores available, but the most popular one is the FICO score .

Factors that determine your FICO score include:

Payment history (35%)
Amounts owed (30%)
Length of credit history (15%)
Credit mix (10%)
New credit (10%)

FICO scores are calculated from 300 to 850. Here’s how your credit is rated:

Exceptional: 800 to 850
Very good: 740 to 799
Good: 670 to 739
Fair: 580 to 669
Poor: 579 and below

To pay bills, set up direct debiting where possible (so you never miss a payment) and subscribe to reporting agencies that provide regular credit score updates. In addition, you can detect and address mistakes or fraudulent activity by monitoring your credit report. Federal law allows you to obtain free credit reports once a year from the “Big Three” major credit bureaus : Equifax, Experian, and TransUnion.

Reports can be obtained directly from each agency, or you can sign up at AnnualCreditReport.com, a federally authorized site sponsored by the Big Three.

Some credit card providers, such as Capital One, will provide customers with complimentary, regular credit score updates, but it may not be your FICO score. Instead, Capital One's CreditWise program offers your VantageScore .

Due to the COVID-19 pandemic, the three major credit bureaus are providing free credit reports weekly. The program was extended twice in 2022 and it is now permanent.

7. Plan for Your Future

To protect the assets in your estate and ensure that your wishes are followed when you die, be sure you make a will and—depending on your needs—possibly set up one or more trusts . You also should look into insurance and find ways to reduce your premiums, if possible: auto , home , life , disability , and long-term care (LTC) . Periodically review your policy to ensure it meets your family’s needs through life’s major milestones.

Other critical documents include a living will and a healthcare power of attorney . While not all of these documents directly affect you, all of them can save your next of kin considerable time and expense when you fall ill or become otherwise incapacitated.

Retirement may seem like a lifetime away, but it arrives much sooner than expected. Experts suggest that most people will need about 80% of their current salary in retirement. The younger you start, the more you benefit from what advisors call the magic of compounding interest—how small amounts grow over time.

Setting aside money now for your retirement not only allows it to grow over the long term but also can reduce your current income taxes if funds are placed in a tax-advantaged plan, such as an individual retirement account (IRA) , a 401(k) , or a 403(b) .

While your children are young, take the time to teach them about the value of money and how to save, invest, and spend wisely.

If your employer offers a 401(k) or 403(b) plan , start paying into it immediately, especially if your employer matches your contribution. By not doing so, you’re giving up free money. Take time to learn the difference between a Roth 401(k) and a traditional 401(k) if your company offers both.

Investing is only one part of planning for retirement. Other strategies include waiting as long as possible before opting to receive Social Security benefits (which is smart for most people) and converting a term life insurance policy to permanent life .

8. Buy Insurance

As you age, it's natural for you to accumulate many of the same things your parents did—a family, home or apartment, belongings, and health issues. Insurance can be expensive if you wait too long to get it. Health care, long-term care insurance, life insurance; it all increases in cost the older you get. Additionally, you never know what life will send your way. If you're the sole breadwinner for the family, or you and your partner both work to make ends meet, a lot depends on your ability to work.

Insurance can cover most of the hospital bills as you age, leaving your hard-earned savings in your family's hands; medical expenses are one of the leading reasons for debt. If something happens to you, life insurance can give those you leave behind a buffer zone to deal with the loss and get back on their feet financially.

9. Maximize Tax Breaks

Due to an overly complex tax code , many people leave hundreds or even thousands of dollars sitting on the table every year. By maximizing your tax savings, you’ll free up money that can be invested in your reduction of past debts, enjoyment of the present, and plans for the future.

You should start saving receipts and tracking expenditures for all possible tax deductions and tax credits . Many office supply stores sell helpful “tax organizers” that have the main categories already labeled.

After you’re organized, you’ll want to focus on taking advantage of every tax deduction and credit available, as well as deciding between the two when necessary. In short, a tax deduction reduces the amount of income on which you are taxed, whereas a tax credit reduces the amount of tax that you owe. This means that a $1,000 tax credit will save you much more than a $1,000 deduction.

10. Give Yourself a Break

Budgeting and planning can seem full of deprivations. Make sure you reward yourself now and then. Whether it’s a vacation, a purchase, or an occasional night on the town, you need to enjoy the fruits of your labor. Doing so gives you a taste of the financial independence you’re working so hard for.

Last but not least, don’t forget to delegate when needed. Even though you might be competent enough to do your own taxes or manage a portfolio of individual stocks, it doesn’t mean you should. Setting up an account at a brokerage and spending a few hundred dollars on a certified public accountant (CPA) or a financial planner —at least once—might be a good way to jump-start your planning.

The key to getting your finances on the right track is using skills you likely already have. It’s also about understanding that the principles that contribute to success in business and your career work just as well in personal money management. Three key skills are finance prioritization, assessing the costs and benefits, and restraining your spending.

Finance Prioritization : This means that you can look at your finances, discern what keeps the money flowing in, and make sure that you stay focused on those efforts.
Assessing the Costs and Benefits : This key skill keeps professionals from spreading themselves too thin. Ambitious individuals always have a list of ideas about other ways that they can hit it big, whether it is a side business or an investment idea. While there is a place and time for taking a flier, running your finances like a business means stepping back and honestly assessing the potential costs and benefits of any new venture.
Restraining Your Spending : This is the final big-picture skill of successful business management that must be applied to personal finances. Time and again, financial planners sit down with successful people who still manage to spend more than they make. Earning $250,000 a year won’t do you much good if you spend $275,000 annually. Learning to restrain spending on non-wealth-building assets until after you’ve met your monthly savings or debt reduction goals is crucial in building net worth .

Personal money management isn't one of the most popular topics in educational systems. Many college degrees require some financial education, but it isn't geared toward individuals, which means that most of us will need to get our personal finance education from our parents (if we’re lucky) or learn it ourselves.

Fortunately, you don’t have to spend much money to find out how to manage it better. You can learn everything you need to know for free online and in library books. Almost all media publications regularly dole out personal finance advice, too.

Online Blogs

Reading personal finance blogs is a great way to start learning about personal finance. Instead of the general advice you’ll get in personal finance articles, you’ll learn exactly which challenges real people face and how they address them.

Mr. Money Mustache has hundreds of posts full of insights on escaping the rat race and retiring early by making unconventional lifestyle choices. CentSai helps you navigate myriad financial decisions via first-person accounts. Million Mile Secrets and The Points Guy each teach you how to travel for a fraction of the retail price using credit card rewards. These sites often link to other blogs, so you’ll discover more sites as you read.

Of course, we can’t help tooting our own horn in this category. Investopedia offers a wealth of free personal finance education. You might start with our special sections on budgeting , buying a home , and planning for retirement —or the thousands of other articles in our personal finance section.

At the Library

You may need to visit your library in person to get a library card if you don’t already have one, but after that, you can check out personal finance audiobooks and e-books online without leaving home. Some of the following best sellers may be available from your local library: I Will Teach You to Be Rich , The Millionaire Next Door, Your Money or Your Life , and Rich Dad Poor Dad . Personal finance classics such as Personal Finance for Dummies , The Total Money Makeover , The Little Book of Common Sense Investing , and Think and Grow Rich are also available as audiobooks.

Free Online Classes

If you enjoy the structure of lessons and quizzes, try one of these free digital personal finance courses:

Morningstar Investing Classroom offers a place for beginning and experienced investors alike to learn about stocks, funds, bonds, and portfolios. Some of the courses you’ll find include “Stocks Versus Other Investments,” “Methods for Investing in Mutual Funds,” “Determining Your Asset Mix,” and “Introduction to Government Bonds.” Each course takes about 10 minutes and is followed by a quiz to help you make sure that you understood the lesson.
EdX is an online learning platform created by Harvard University and the Massachusetts Institute of Technology. It offers at least three courses that cover personal finance: 'Personal Finance, Part 1: Investing in Yourself" from Wellesley College, “Personal Finance” from Purdue University, and “Finance for Everyone: Smart Tools for Decision-Making” from the University of Michigan. These courses will teach you how credit works, which types of insurance you might want to carry, how to maximize your retirement savings, how to read your credit report, and what the time value of money is.
“Planning for a Secure Retirement” is an online course from Purdue University. It’s broken up into 10 main modules, and each has four to six sub-modules on topics such as Social Security, 401(k) and 403(b) plans, and IRAs. You’ll learn about your risk tolerance , think about what kind of retirement lifestyle you want, and estimate your retirement expenses.

Personal finance podcasts are a great way to learn how to manage your money if you’re short on free time. While you’re getting ready in the morning, exercising, driving to work, running errands, or preparing for bed, you can listen to expert advice on becoming more financially secure. In addition to “The Investopedia Express with Caleb Silver,” you may find these valuable:

Freakonomics Radio and NPR’s Planet Money both make economics enjoyable by using it to explain real-world phenomena such as “how we got from mealy, nasty apples to apples that actually taste delicious,” the Wells Fargo fake-accounts scandal, and whether we should still be using cash.
American Public Media’s Marketplace helps make sense of what’s happening in the business world and the economy.
So Money with Farnoosh Torabi combines interviews with successful business people, expert advice, and listeners’ personal finance questions.

The most important thing is to find resources that work for your learning style and that you find interesting and engaging. If one blog, book, course, or podcast is dull or difficult to understand, keep trying until you find something that clicks.

Education shouldn’t stop once you learn the basics. The economy changes, and new financial tools like the budgeting apps mentioned earlier are always being developed. Find resources you enjoy and trust, and keep refining your money skills through retirement and beyond.

What Personal Finance Classes Can’t Teach You

Personal finance education is a great idea for consumers, especially people starting out who want to learn investing basics or about credit management; however, understanding the basic concepts is not a guaranteed path to financial sense. Human nature can often derail the best intentions to achieve a perfect credit score or build a substantial retirement nest egg. These three key character traits can help you stay on track:

One of the most important tenets of personal finance is systematic saving. For example, say your net earnings are $60,000 per year, and your monthly living expenses—housing, food, transportation, and the like—amount to $3,200 per month.

There are choices to make surrounding your remaining $1,800 in monthly salary. Ideally, the first step is to establish an emergency fund or perhaps a tax-advantaged health savings account (HSA) .

To be eligible for a health savings account, your health insurance must be a high-deductible health plan (HDHP) .

Establishing an emergency fund takes financial discipline—without it, giving in to the temptation to spend rather than save can have dire consequences. In the event of an emergency, you may not have the money to pay the expenses—leading you to finance them through debt.

Once you have your emergency stash, you'll need to develop investing discipline—it’s not just for institutional money managers who make their living buying and selling stocks. Average retail investors tend to do better by setting an investment target and abiding by it rather than buying and selling stocks trying to time the market.

A Sense of Timing

Timing can be crucial. For instance, imagine you're three years out of college, have established your emergency fund, and want to reward yourself. A Jet Ski costs $3,000, but you want to start investing also. "Investing in growth stocks can wait another year," you say. "I have plenty of time to launch an investment portfolio."

However, putting off investing for one year can have significant consequences. The opportunity cost of buying a personal watercraft can be illustrated through the time value of money.

The $3,000 used to buy the Jet Ski would have amounted to nearly $49,000 in 40 years at 7% interest, a reasonable average annual return for a growth mutual fund over the long haul. Thus, delaying the decision to invest wisely may likewise delay the ability to reach your goal of retiring at age 65.

Doing tomorrow what you could do today also extends to debt payment. If you were to put the Jet Ski on your credit card, the $3,000 credit card balance would take 222 months (18.5 years) to pay off if you only made minimum payments of $75 each month. And don’t forget the interest you’re paying: at an 18% annual percentage rate (APR) , it comes to $3,923 over those months. So, if you were to plunk down the $3,000 to pay the balance rather than let it compound, you'd see substantial savings—nearly $1,000.

Emotional Detachment

Personal finance matters are business, and business should not be personal. A difficult but necessary facet of sound financial decision-making involves removing emotions from a transaction.

Making impulsive purchases feels good but can significantly impact long-term investment goals. So can making unwise loans to family members. Your cousin Fred, who has already burned your brother and sister, will likely not pay you back, either. The smart thing to do is decline his requests for help—you're trying to make ends meet also.

The key to prudent personal financial management is to separate feelings from reason. However, when loved ones are experiencing real trouble, it pays to help if you can—just try not to take it out of your investments and retirement.

Many people have loved ones who always seem to need financial help—it is difficult to refuse to help them. If you include planning to assist them in real emergencies using your emergency fund, it can make the burden easier.

The personal finance realm may have more guidelines and tips to follow than any other. Although these rules are good to know, everyone has their own circumstances. Here are some rules prudent people, especially young adults, are never supposed to break—but can break if necessary.

Saving or Investing a Set Portion of Your Income

An ideal budget includes saving a portion of your paycheck every month for retirement—usually around 10% to 20%. However, while being fiscally responsible is important and thinking about your future is crucial, the general rule of saving a given amount for retirement may not always be the best choice, especially for young people just getting started.

For one thing, many young adults and students need to consider paying for their biggest expenses, such as a new car, home, or postsecondary education. Taking away 10% to 20% of available funds would be a definite setback in making those purchases.

Additionally, saving for retirement doesn’t make much sense if you have credit cards or interest-bearing loans to pay off. The 19% interest rate on your Visa card probably would negate the returns you get from your balanced mutual fund retirement portfolio five times over.

Finally, saving money to travel and experience new places and cultures can be especially rewarding for a young person who’s still unsure about their life path.

Long-term Investing/Investing in Riskier Assets

The rule of thumb for young investors is that they should have a long-term outlook and stick to a buy-and-hold philosophy. This rule is one of the easier ones to justify breaking. Adapting to changing markets can be the difference between making money or limiting your losses and sitting idly by and watching your hard-earned savings shrink. Short-term investing has its advantages at any age.

Common investing logic suggests that because young investors have such a long investment time horizon, they should be investing in higher-risk ventures; after all, they have the rest of their lives to recover from any losses that they may suffer; however, you don’t have to take on undue risk in your short- to medium-term investments if you don’t want to.

The idea of diversification is an important part of creating a strong investment portfolio; this includes both the riskiness of individual stocks and their intended investment horizon .

At the other end of the age spectrum, investors near and at retirement are encouraged to cut back to the safest investments—even though these may yield less than inflation —to preserve capital . Taking fewer risks is important as the number of years you have to earn money and recover from bad financial times dwindles, but at age 60 or 65, you could have 20, 30, or even more years to go. Some growth investments could still make sense for you .

Personal finance is the knowledge, instruments, and techniques used to manage your finances. When you understand the principles and concepts behind personal finance, you can manage debt, savings, living expenses, and retirement savings.

What Are the 5 Main Components of Personal Finance?

The five main components are income, spending, savings, investing, and protection.

What Is an Example of Personal Finance?

One of the key ideas behind personal finance is not to spend more than you make. For instance, if you make $50,000 a year but spend $65,000, you'll end up with debt that continues to compound because you'll be spending more than you make to pay for past expenses.

Why Is Personal Finance So Important?

The concepts behind managing your personal finances can guide you in making intelligent financial decisions. In addition, the decisions you make throughout your life on what to buy, sell, hold, or own can affect how you live when you can no longer work.

Personal finance is managing your money to cover expenses and save for the future. It is a topic that covers a broad array of areas, including managing expenses and debt, how to save and invest, and how to plan for retirement. In addition, it can include ways to protect yourself with insurance, build wealth , and ensure wealth is passed on to the people you want it to pass to.

Understanding how to manage your finances is an important life-planning tool that can help set you up for a life without debt; you gain control of financial stresses and have a way to manage the expensive surprises that life can throw at you.

Federal Reserve Bank of New York. " Quarterly Report on Household Debt and Credit; 2023: Q4 (Released February 2024) ." Summary Page.

YNAB. “ Gain Total Control of Your Money .”

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Discover. " Private Student Loans: Automatic Payments & Auto Debit Reward Terms and Conditions ."

Federal Student Aid. " Repaying Student Loans 101 ."

Federal Student Aid. " Repayment Plans ."

myFICO. " What Should My Credit Utilization Ratio Be? "

myFICO. “ What’s the Difference Between FICO Scores and Non-FICO Credit Scores? ”

myFICO. " What's In My FICO Scores? "

myFICO. " What is a FICO Score? "

Federal Trade Commission. “ Understanding Your Credit .”

Capital One. " CreditWise: Get Your Free Credit Report ."

Federal Trade Commission. " You Now Have Permanent Access to Free Weekly Credit Reports ."

Fidelity. " How Much Will You Spend in Retirement? "

Consumer Financial Protection Bureau. " Medical Debt Burden in the United States ."

Internal Revenue Service. " Credits and Deductions for Individuals ."

Mr. Money Mustache. “ Mr. Money Mustache: Financial Freedom Through Badassity .”

CentSai. “ Take the Fear Out of Finance .”

Million Mile Secrets. “ Beginner’s Guide to Credit Cards, Miles, and Points .”

The Points Guy. “ TPG Beginner’s Guide: Everything You Need to Know About Points, Miles, Airlines, and Credit Cards .”

Morningstar. “ Morningstar Investing Classroom .”

EdX. " About EdX ."

EdX. " Catalog ."

Purdue University, College of Agriculture. “ Planning for a Secure Retirement .”

Freakonomics. “ Freakonomics Radio .”

NPR. “ Planet Money: The Economy Explained .”

Apple Podcasts. “ Marketplace: American Public Media .”

So Money Podcast — Farnoosh. “ So Money with Farnoosh Torabi: Candid Conversations for a Richer, Happier Life .”

Internal Revenue Service. " Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans ." Pages 3-4.

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Personal Finance 101: The complete guide to managing your money

Introduction.

Creating a financially secure life can feel like a daunting task that requires the skills of expert mapmaker and GPS programmer. You need to figure out where you are today and where you want to get to. As if that's not a big enough lift, you're then in charge of finding the best route to get from here to there without veering off into costly detours.

Take a deep breath. Relax your shoulders.

It's just seven steps, and that's doable.

Some goals will take years — if not decades — to reach. That's part of the plan! But you also get an immediate payoff: a whole lot less stress starting the minute you dive into taking control of all the money stuff that's gnawing at you.

According to a 2019 survey, 9 in 10 adults say nothing makes them happier or more confident than having their finances in order. This guide is your ticket to joining in.

This guide lays out the seven key steps to focus on to get you working toward long-term financial security. Follow along from start to finish, or jump to the section(s) you want to learn more about.

Set short-term and long-term goals

Building financial security is an ongoing juggling act. Some of the money balls you have in the air are going to be goals you want to reach ASAP. Other goals might have an end date that is a decade, or decades, off but require starting sooner than later.

Creating a master list of all your goals is a smart first step. It's always easier to plot a course of action when you are clear on what you're looking to achieve.

It's up to you whether your list of short- and long-term goals is on a spreadsheet or pencil to paper. Just be sure to give yourself some quiet time to think it through. Here's a simple prompt: Money-wise, what would make you feel great? At its heart, that's what a financial plan delivers: the means to help you feel safe and secure, so you can focus on living, not worrying.

Possibilities to consider:

Short-term goals to reach in the next year or so: Build an emergency fund that can cover at least three months of living expenses. Keep new credit card charges limited to what you can pay off, in full, each month. Hint: Create and follow a budget. Pay off existing credit card balances.
Longer-term goals: Start saving at least 10% of gross salary every year for your retirement. Save for a home down payment . Save for a child's (or grandchild's) education in a tax-advantaged 529 Plan .

Create a budget

Not exactly a sexy topic. Agreed. But creating a budget happens to be the one step that makes every other financial goal reachable.

A budget is a line-item accounting of all your income — salary, maybe a side gig, perhaps income from an investment — and all your expenses. The whole purpose of a budget is to lay everything out in front of you so you can see where everything is going and make some tweaks if you're not currently on course to meet your goals.

One way to analyze your current cash flow is to run it through the popular 50/30/20 budgeting framework.

With this approach, the goal is to spend 50% of your after-tax income on essential costs (e.g., rent/mortgage, food, car payments) and 30% on other needed expenses (say, phone and streaming plans) or "nice to haves" such as dining out. The final 20% is for savings: building your emergency reserves, socking away money for retirement and saving up enough funds for a down payment on a house or your next car.

Another framework is the 60% Solution , which divvies up spending and saving targets a bit differently — but with the same focus on making sure you don't shortchange saving for long-term goals.

If your own pie charts look wildly different than either approach, that's your cue to spend some time considering how to adjust your spending or increase your income. (Hello, side gig! Or push for that promotion or raise already.) That will get you on a solid path that helps you meet short-term and long-term goals.

You can fire up an Excel or Google Docs spreadsheet to help you create a budget and track your progress. There are also budgeting apps you can sync with bank accounts that can make it easier to track spending in real time.

Build an emergency fund

Okay, you likely need no convincing that having some money tucked away for life's endless stream of financial curveballs — pandemic layoff, the deductible for an MRI on the knee you wrenched, replacing whatever the mechanic tells you is the reason your car is acting up — is perhaps the ultimate money stress reducer.

But how to create your safety cushion? You've got plenty of stressed-out company. A survey by Bankrate.com found that 60% of people say they don't have enough money saved to cover a $1,000 emergency bill. And just one grand isn't likely even enough. Bankrate said that, among survey participants who had an emergency in 2019, the average tab was $3,500.

Building an emergency fund starts with setting a goal for how much protection you want to build. At a minimum, it's smart to have at least three months' worth of living expenses saved in an emergency account; six is even better.

Can't even imagine pulling that off? Stop focusing on the big end-goal. The trick with this is to create an automated system that adds money to your emergency fund each month.

The best way to achieve this is to open a separate bank or credit union savings account that you designate as your emergency fund. (Keeping this money in your regular checking account introduces the temptation to use the money for non-emergencies.)

Online savings banks typically pay the highest yields. You can open a high-yield online savings account and set up an automatic transfer from your checking account into it. For even less temptation to spend, decline the debit card the online bank might offer you.

Pay off costly credit card debt

The unofficial term for the interest rate charged on unpaid credit card balances is "insane." While it's common for banks to pay savers less than 1% interest these days on savings accounts, the average interest rate they charge credit card users with an unpaid balance is pushing 17%.

Paying off high-rate debt is one of the best investment moves, and the average 17% interest rate charged on unpaid credit card balances is a big roadblock to building financial security

If you have a solid credit score, you might consider checking if you can qualify for a balance transfer deal to a new card that will waive interest payments for an initial period. Not having to pay any interest for a year, or more, gives you a chunk of time to make a big dent in repayment without interest continuing to pile up.

If a balance transfer isn't in the cards for you, there are two popular get-out-of-debt strategies you might consider.

From a financial standpoint, the "avalanche" method makes the most sense. You pay the minimum due each month on all your credit cards, and then add more money to the card charging the highest interest rate. When the balance on your highest-rate card is paid off, you start shoveling the extra payments to the card with the next-highest interest rate. Rinse and repeat.

Stymied as to where you can find the extra money to add to the highest-rate card? Time to scour that budget you've got running in the background. Maybe an expense gets totally chopped, or maybe you do some strategic nipping and tucking to reduce monthly outlays for some of your expenses.

With the "snowball" strategy, on the other hand, you send your extra monthly payments to the card with the smallest unpaid balance. The allure of this pay-back method is that it provides a nice bit of psychological mojo: By focusing on the card with the smallest balance, you'll get it paid off faster. Seeing a card balance hit zero can be valuable motivation … if you need it. Otherwise, the avalanche system actually will save you more money.

Save for retirement

Even if you have decades to go until retirement, the time to get started saving was yesterday. The longer you wait to get serious about this big honking goal, the more you will need to contribute to land in retirement in good shape.

There's no one rule for how much you'll want (read: need) to save for retirement, but a solid guideline is to have a multiple of your salary set aside at different ages. As you can see below, having retirement account balances equal to two times your salary by age 35 sets you up for success. When you're 50, the aim is to have six times your salary in retirement account, and by your late 60s, having 10 times your salary saved up is recommended.

Here's how to know how much you should have saved at every age, says David Bach

The best way to save for retirement is to use special accounts that give you valuable tax breaks. Many workplaces offer retirement accounts that you contribute to, such as 401(k) and 403(b) plans — the former by private employers, the latter by nonprofits and the government. And everyone with earned income can contribute to their own individual retirement account — or IRA, for short. Many brokerages offer IRAs.

With both 401(k)/403(b) plans and IRAs, you may be able to choose between a "traditional" account or a "Roth" account. The difference is when you grab your tax break.

With traditional 401(k) and 403(b) accounts, you get an upfront tax break: Your contribution reduces your taxable income for the year. Traditional IRA accounts may also qualify for this upfront tax break, depending on your income. When you eventually make withdrawals from traditional retirement accounts, you owe income tax on every dollar you withdraw.

Roth 401(k) plans and IRAs deliver the tax break in retirement. The money you contribute today doesn't reduce your current income and your contribution is made with after-tax dollars. But when you make withdrawals in retirement, there will be no tax owed.

There are lots of moving pieces to nailing saving for retirement. Here are some key steps to take at different life stages.

Start saving at least 10% of your gross salary ASAP. Saving 15% is even better . If you wait until your 30s to get serious about this, you'll likely need to save 20% or more of your salary to reach your retirement target. If you can't get to 10% right out of the gate, commit to a plan to boost your contribution rate at least one percentage point a year.
Don't pass up a workplace retirement saving bonus . If you have a workplace plan, chances are you were "auto-enrolled." So far, so good. But there's a trap, too: Lots of plans automatically set your initial contribution rate at a level that is too low to qualify for the maximum matching contribution they offer to all employees. Grrr! Check with human resources that you are contributing at least enough to get the maximum match.
No workplace plan? Check out IRAs. If you are an independent contractor/perma-gig worker, you qualify for a SEP IRA, which allows savers to contribute more each year than regular IRAs. That said, SEP IRAs only come in the traditional format; there is no Roth version of a SEP IRA. By the way, officially, SEP IRA is a Simplified Employee Pension Individual Retirement Arrangement.
Consider saving in a Roth. Chances are you've yet to hit peak earnings, right? That means you've also probably not hit your peak income-tax rate, either. When you are in a lower tax bracket, a Roth 401(k) or a Roth IRA can make a lot of sense, given there's not a big value in getting the upfront tax break from a traditional account. Anyone can contribute to a Roth 401(k) or 403(b) if the plan offers it, but there is an income cutoff (it's pretty high) to be eligible to save in Roth IRA.
Just getting started? Aim to contribute 15% of your gross salary.
Don't cash out when you job-hop. If you have a workplace retirement plan, you are allowed to move the money when you leave the job. One option is to take the money as cash. This is a seriously bad move. Not only will you trigger a 10% IRS penalty, but you may also owe income tax. And most important: You've just stolen from your future self, who is going to need that money in retirement. Leave the money where it is, or consider a 401(k) rollover.
Fire up an online retirement calculator . Now's the time to see if you're in the ballpark of where you want to be in 20 or so years. If you're coming up short, start picking apart your budget (and lifestyle) to find ways to save more. By your 40s, most financial advisors recommend having two to three times your annual salary saved in retirement funds.
Prioritize retirement over paying for college . Cold-hearted? Ruthless? Not if you work with your kid to focus on schools that are a good financial fit. Hint: It's all about the net price— that doesn't require you to raid your retirement account or slow down on your savings. That reduces the odds the kids will need to support you in retirement.
Steer clear of lifestyle creep . Yep, you're making more now than in your 20s but, um, are you spending it all?
Here are some numbers to consider. By age 50, experts say to have six times your salary saved. By age 55, have seven times your salary saved.
Get an estimate of your retirement income. There are online calculators that can help you hammer out a sense of how much monthly income you may be able to safely generate from your retirement savings, Social Security check and pension benefit — if you have one.
Consider bringing in a pro to strategize. You may enjoy being a DIY retirement saver. But given all the moving parts in hatching a successful retirement income plan, you might consider consulting with a certified financial planner to work through your retirement income plan. There are many planners who charge a flat or hourly fee for a specific assignment. Or you might want to consider hiring a pro on an ongoing basis to help you manage your finances throughout your retirement.
Take advantage of catch-up contributions. Once you cross the retirement savings Rubicon that is the half-century mark, the annual contribution limits for IRAs and 401(k)/403(b) plans rise. If a spin through an online retirement income calculator didn't deliver the numbers you'd like, stuff more money into your accounts now.
Build tax diversification. If you've done most of your workplace retirement savings in traditional accounts, you might want to consider spending a few years saving in a Roth equivalent, if your plan offers one. Retirement planning experts recommend adding some Roth retirement savings as a way to create "tax diversification" that can help keep your IRS tab down once you retire.
Check if these numbers add up. By age 60, have eight times your salary saved. By age 67, have 10 times your salary saved.
Consider waiting to claim Social Security. You can start collecting your retirement benefit at age 62. Every month you delay past 62 earns you a higher eventual payout. Wait until age 70 and your payout will be 76% higher than what you'd get if you claim eight years earlier.
Earn just enough to avoid starting retirement account withdrawals. If you want (and can) continue to work full-time at a fast-paced job, that's great. But if you're ready to downshift or you were pushed out of your career, a practical strategy may be to work at a job that brings in enough to cover your living expenses, even if you can't afford to continue to add to your retirement savings. At this point, giving what you have already saved more time to compound before starting withdrawals is a smart move.

Invest for retirement with a long-term focus

What you manage to save for retirement is the biggest factor in how comfy you're going to be when it's time to step off the work treadmill. But how you invest the money in your retirement accounts plays a large role, too.

Saving for retirement breaks down into how much you want to invest in stocks and how much in bonds. As if this needed pointing out now, stocks can be volatile at times, though over long periods (10 years or more) they have historically delivered higher returns than bonds.

Bonds are more chill. They don't fall like stocks in rough times — in fact, they typically rise when stocks are cratering. However, they don't gain as much as stocks, either.

A hidden risk to consider when you are deciding on your mix of stocks and bonds is inflation. That's the annoying fact that, over time, stuff costs more. Even at a benign 2% inflation rate, what costs $1,000 today will cost more than $1,600 in 25 years. Stocks over long stretches have produced the best inflation-beating gains.

The right stock-bond mix depends on your personal goals, stomach for risk and time horizon — or number of years you expect to hold your investments. Jack Bogle, renowned founder of Vanguard and tireless advocate for individual investors, suggested this simple rule of thumb: Subtract your age from 110. That's how much, percentage-wise, you might want to keep in stocks.

Jack Bogle: A 'hero' to American investors

Borrow smart

Big-ticket purchases typically involve taking out a loan. The house you want to buy. The cars you drive. Helping your kids pay for college.

The key to building financial security is to only borrow what you truly need. And that can get tricky because right when you are looking to buy a house/car/college education, the lenders are focused on telling you the maximum you are allowed to borrow. No one is going to look you in the eye and suggest you borrow less. Lenders have no clue, or interest, in how the loan they are dangling in front of you impacts your ability to meet all your other goals.

That's on you. Your goal should always be to borrow as little as possible to meet your goal. The less you borrow, the more money you have for other goals. You need a car? Okay, but do you need a new car tricked out with every premium package? Might your financial life benefit from considering a less expensive model? Buying a used car that has been on the road for three or so years means you're letting someone else pay for the 40% to 50% depreciation that is common in the early years after buying a new car.

Same goes with the house. A recent study found that the median price of a four-bedroom home was $100,000 more than a three-bedroom. Or consider a slightly longer commute, which can also be a big money saver.

Borrowing as little as possible is how you free up hundreds of dollars in your budget to put toward other goals.

Once you determine your maximum borrowing budget, doing some advance prep work to get your credit score as high as possible can help you qualify for the best deal.

Personal Finance 101

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Quiz: Personal Finance 101

A quiz sheet with the bubbles filled in to form a dollar sign

Test your knowledge by taking our 10-question quiz.

By Synchrony Bank Staff

PUBLISHED October 02
5 MINUTE READ

No matter what money goals and ambitions you’re planning for, building your financial confidence is an important first step.

Are you ready to pass Level 101? Test your knowledge by taking our 10-question quiz.

1 High yield savings accounts tend to offer significantly higher interest rates than traditional savings accounts. How much higher are rates typically?

A. 2 times as high
B. 5 times as high
C. 10 times as high
D. 20 times as high

As of June 2019, the average annual percentage yield (APY) for traditional savings accounts at large banks was 0.1 %. Many high yield savings accounts, however, were offering APYs that exceeded 2.0%, or 20 times as high. To refresh your knowledge, read Personal Finance 101: High Yield Savings Accounts .

2 Your bank just notified you that your 12-month Certificate of Deposit (CD) is maturing. What factors are important to consider before you decide to let it automatically renew?

A. There is a good chance you might need the funds in a shorter time frame.
B. Interest rates have gone up since you opened the CD.
C. You want to do a comparison check of competitive offerings—looking for better rates, lower fees or lower minimum deposits.
D. All of the above

CDs have a lot to offer safety- and yield-conscious savers. As you know, they’re good for people looking for maximum yields, but who won’t need their cash unexpectedly. The longer you commit your money—and, in some cases, the more money you commit—the more you earn. Renewing may be a good option if you realize that you likely won’t need the funds sooner. But if interest rates rose since you first invested, you may want to shop for better rates and terms. To refresh your knowledge, read Personal Finance 101: Certificates of Deposit .

3 It’s a fact: 60% of today’s households face a financial emergency each year, but 40% say they don’t have enough savings to cover a $400 unexpected expense. How much money should you aim to set aside in an emergency fund to handle unanticipated expenses?

A. One months’ salary
B. Three to six months’ worth of essential living expenses
C. Enough to pay the rent/mortgage

Many financial experts recommend saving as much as you typically spend during three to six months. But your own circumstances may impact that goal. For example, dual-income households may be able to get by with less because their household income is persified, while those in single-income households may want to earmark even more. And if you have children or other dependents who rely on you financially, you’ll want to make sure you factor those costs into your savings plan as well. To refresh your knowledge, read Personal Finance 101: Emergency Funds .

4 Which savings strategy will get you to $1 million in the bank by age 65, assuming 8% annualized returns?

A. Save $200 a month, starting at age 20
B. Save $400 a month, starting at age 30
C. Save $800 a month, starting at age 40
D. Save $1,500 a month, starting at age 50

Behold the magic of compounding! A 20-year-old who saves $200 a month until retirement would have around $1,055,000 at age 65. That's not bad for less than the monthly cost of several takeout meals. If you wait until age 30 and kick in $400 a month, that number drops to about $918,000. A 50-year-old contributing $1,500 a month would accumulate only $519,000 by retirement. Compounding is a powerful incentive to save early and often. Each year, your money can earn interest on both the original amount and the interest earned from the year before. More years equals more interest, and more interest means faster asset growth—and an easier route to reaching $1 million. To refresh your knowledge, read Personal Finance 101: Compound Interest .

5 Which statement about fixed vs. variable interest loans is false?

A. Interest on fixed-rate loans stays the same for the life of the loan.
B. Interest on variable-rate loans can fluctuate, which could affect the payments you must make.
C. Interest rates on fixed-rate loans are usually lower than starting rates on variable-rate loans.

Interest rates on fixed-rate loans are typically higher than the beginning rates for variable loans. A variable-rate loan may charge lower interest in the near term, but that could rise down the road. With a fixed-rate loan, on the other hand, the appeal of stability comes at a price. To refresh your knowledge, read Personal Finance 101: Loans .

6 You have a joint account with your spouse. You also have an individual account at the same bank, but your spouse does not. How much insurance do you have as a couple?

A. $100,000
B. $250,000
C. $750,000
D. $1 million

Your joint account is insured for $500,000. That includes $250,000 worth of coverage for you and $250,000 worth of coverage for your spouse. Your inpidual account is also insured up to an additional $250,000. To refresh your knowledge, read Personal Finance 101: FDIC Insurance .

7 What types of things could make it necessary to revise your budget and monthly forecasts?

A. Your property tax bill increased.
B. You decided to splurge on a new coffeemaker.
C. You want to boost your contributions to a retirement account.
D. A and C.

When prices for fixed expenses (such as your taxes) change or priorities shift a bit (such as your plan to add more to retirement savings), it’s a good idea to revisit your budget and adjust accordingly. To refresh your knowledge, read Personal Finance 101: Budgeting Basics .

8 Are contributions to a traditional 401(k) plan deducted from your salary before or after taxes?

Before. Your traditional 401(k) contributions are made before taxes, reducing the amount of income Uncle Sam can take. Because 401(k)s are tax-deferred investment plans, you don't pay taxes on contributions or earnings now, but you will have to pay when you withdraw your money in retirement. If your employer offers a Roth 401(k) and you contribute, you put in after-tax dollars, but all earnings come out tax-free in retirement, as long as you are at least 59½. To refresh your knowledge, read Personal Finance 101: Employer Retirement Plans .

9 True or false? There is no age limit for contributing to a Roth IRA, as long as you have earned income that doesn’t exceed the annual limit set by the IRS each year.

True. Any taxpayer can do it—even teenagers with earned income. What's more, there's no maximum age limit for contributing to a Roth IRA. As long as you have earned income that’s within the current year’s IRS limits (or a spouse who earns income), you can put money into a Roth. To refresh your knowledge, read Personal Finance 101: IRAs .

10 How high must your FICO credit score be for you to qualify for the best interest rates?

A credit score in the mid-700s usually will allow you to qualify for better rates ( 20% of adults have scores from 750 to 799). This numerical summary of how much you owe and how promptly you pay your bills affects not only your ability to get a loan — and at what interest rate—but also can play a role in how much you'll pay for insurance. To refresh your knowledge, read Personal Finance 101: Credit Scores .

https://www.synchronybank.com/blog/tag/personal-finance-101/
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National Personal Finance Challenge Practice Test

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In this personal finance activity, students will use ReadyAssessments to take a practice test for NPFC.

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Take this practice test to prepare for the National Personal Finance Challenge , a nationwide competition for high school students.

Related Resources

Grades K-2, 3-5, 6-8, 9-12

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Financial Fitness for Life - High School Test Examiner's Manual

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Financial Fitness for Life - Upper Elementary Test Examiner's Manual

Personal Finance Quiz

Test your financial literacy with this multiple-choice quiz! Read each question carefully and select the one correct answer below it. Once you’ve answered each question, click the “Submit” button at the bottom of the screen to see how you did.

If you are a teacher, please visit CEE’s educational tool, ReadyAssessments , to access ready-made economics and personal finance tests and quizzes for K-12 learning. It’s simple to use and it’s FREE!

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No student devices needed. Know more

The Internal Revenue Service (IRS) is the federal government agency responsible for:

Tax collecting and law enforcement

writing tax laws

keeping the unemployment rate low

Filling out your tax forms

What is the difference between gross pay and net pay?

Net pay describes your pay after deductions, gross pay is before

Gross pay describes your pay after deductions; net pay is before

Gross and net pay are the same

none of the above

Sales tax and excise tax are both taxes on:

Consumption

Which of the following should not be a major consideration when it comes to selecting your correct path?

What you are naturally good at

What your parents think you should do

What you are passionate about

What your interests are

Which of the following are characteristics of an effective goal?

It should be vague

It should be easy to accomplish

It should be determined by your your friends or parents

It should be measured and specific

Which of the following statements about goal setting is false?

You should make your goals challenging yet attainable.

You should share your goals with the people closest to you

Once you've written your goals down, you should put the list away and check it in a year to see if you've achieved them

Your goals should have time limits.

When it comes to mentoring, you should not:

Continue the mentoring cycle by one day becoming a mentor yourself

Choose wisely

Find and keep a single mentor

Follow through and act on what you learned

When applying for a job, you should:

Provide a resume and cover letter

Follow up with the employer

Present yourself well

All of the above

During your first interview with a company, you should not:

Show interest and be enthusiastic

Ask about salary

Be personable and try to connect with the interviewer

Bring extra copies of your resume

The government relies on taxes to:

Remind citizens of the government's power

Burden the public with an extra expense

Pay for services such as roads, education, and social services

The day that income tax filings are due in the United States:

When a company hires you, you fill out a ____ form. The information on this form is the basis for determining how much income tax should be withheld from your paycheck

This tax pays for benefits that workers and families receive for either Social Security or Medicare

State income tax

Federal Insurance Contributions Act (FICA)

Income generated by selling an investment at higher price than you paid for it.

Portfolio Income

Passive Income

Earned Income

Secondary Income

Which of the following statements about taxes is false?

The primary taxes on consumption are sales and excise taxes

Three taxes are deducted from your paycheck: federal income tax, state income tax, and FICA

Not all types of income are taxed; while earned income and passive income are taxed, portfolio income is not taxed

Taxes on wealth and property include property taxes, taxes on inheritance, estate taxes, and gift taxes

The amount of money a profession brings should be your first priority in selecting you career.

Since the job market constantly changes, odds are that you will work in more than one career field in your lifetime.

People who fall under the stabilizing characteristics in the DISC profile are likely to be calm and dislike conflict.

Even though your knowledge and work experience will change throughout your life, you'll never outgrow who you are.

You should only make and focus on one goal at a time

It is expected that young adults will achieve the same standard of living as their parents shortly after graduating from college.

Early work experiences prior to your career job really have no benefit other than providing a small income.

As you acquire more education and experience, your income and choice of jobs should rise as well.

Without contentment, your whole life will be jumping from one thing to another, always hoping that the next thing will be the thing that makes you happy.

After an interview, you should be patient and wait for the employer to contact you so that you don't appear overly eager for the position.

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