Personal Finance Workbook For Dummies book cover

Personal Finance Workbook For Dummies

By: Sheryl Garrett Published: 02-01-2012

Hands-on tools and strategies to boost your financial fitness

From analyzing assets to planning for retirement, this new edition of Personal Finance Workbook For Dummies gives you the information and resources you need to get your finances under control.

Personal Finance Workbook For Dummies walks you through a private financial counseling session, using worksheets, checklists, and formulas for assessing financial health, providing for day-to-day financial management, making wise financial decisions, and investing for financial growth.

  • Addresses the latest changes in tax and credit laws and regulations
  • Strong focus on behavioral finance and how these issues impact decision-making with regard to personal money management
  • Tips to plan for big-ticket purchases
  • Expanded coverage on building and managing wealth
  • Information on how effective asset allocation can help reduce volatility and/or increase opportunity
  • Websites and ideas on how to get the most bang for your buck in everyday household expenditures

From budgeting and cutting expenses to getting out of debt and planning for retirement, Personal Finance Workbook For Dummies is a solution for those looking to avoid bankruptcy as well as those looking for something to help them plan for a successful financial future.

Articles From Personal Finance Workbook For Dummies

8 results
8 results
Personal Finance Workbook For Dummies Cheat Sheet

Cheat Sheet / Updated 03-08-2022

Getting a handle on your personal finances can be tough. We’re constantly being urged to spend, spend, spend, while others encourage us to save, save, save! The good news is that you can create a healthy balance between the two. When you understand your personal financial situation, you can make smart decisions about what to do with your money.

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Creating Files to Organize Tax Records

Article / Updated 10-20-2021

Throughout the year, you probably receive a lot of paperwork, some of which you should keep to prepare your tax return. And, you may need to keep other documents to substantiate prior-year tax reporting. Maintaining your documents in an organized fashion will not only help you avoid missing valuable deductions, it will help ensure that your income tax return is complete and accurate. If not, you can be out a lot of money in penalties and interest when errors are discovered. Worksheet outlines files and contents Use this worksheet, which outlines ten main file folders you can create to keep your tax information organized and accessible, whether you keep digital or hard copies. The folders are: bank accounts; brokerage accounts; canceled checks; credit card statements; income; investments; receipts; retirement plans; tax return 20__; and tax info. The worksheet also explains the types of materials to keep in each folder, and how long you should keep them. These files should be incorporated into your general household filing or record-keeping system. When tax time rolls around, all you have to do is pull out or look at these files, and you’re ready to prepare your tax return. If you pay bills online, print a confirmation statement and retain it in lieu of a canceled check. Maintaining efficiently organized and complete personal finance records helps you in so many ways. Not only can you avoid wasting time or stressing out when you can’t find important documents, but you can also avoid wasting money in late payment fees and additional interest charges, not to mention how much better you will feel should you get one of those wonderful audit notices in the mail from the IRS.

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Establishing Automatic Investment Programs for Retirement

Article / Updated 05-15-2019

You may want to consider establishing automatic investment programs to save for your retirement. Several automatic savings programs may be available to you. You need to determine how much you can direct to each of these automatic plans. Here’s how you do it: Make sure that you’re taking full advantage of any employer matching contribution for which you may be eligible with your company’s retirement plan. Contribute the maximum amount that the employer will match. If eligible, make the maximum contributions to your and your spouse’s (if applicable) Roth IRA accounts each year; take your contributions automatically out of your checking account each month. A Roth IRA is the best retirement funding vehicle — from a tax standpoint — ever! Although you don’t get a deduction when you contribute to a Roth IRA, all the earnings and withdrawals on the account are tax-free forever. You can establish a Roth IRA account at most banks, through investment advisors, or directly with a low-cost, no-load mutual fund company like Vanguard or a deep discount broker like Scottrade or ShareBuilder. Making monthly contributions is much easier than coming up with the whole year’s contribution at once. You can set up direct automatic investments from your checking account into your Roth IRA account. Build your personal portfolio with low-cost, tax-advantaged-passive investment vehicles, such as exchange-traded funds (ETFs) and index funds. You need to have investments that you can tap into if needed prior to retirement. Also, when you retire and pull money out of your retirement account, 100 percent of that withdrawal is taxable to you as ordinary income. Capital gains tax rates are much lower. You may be much better off from a tax standpoint to pay minimal capital gains now rather than the tax for ordinary income in the future. Index funds are a way individual investors can own the stock market that you hear about on the news, such as the Standard and Poor 500 Composite Index (S&P 500, for short). Index funds have been available through no-load mutual fund powerhouses like Vanguard for decades. However, the range of options now available has exploded in the last few years. You can now buy an exchange-traded fund (ETF) that invests exclusively in United States Treasury Inflation Protection Securities. Rather than buying one bond for $10,000, you can literally buy one share of an ETF, which trades like stocks, incurring a transaction fee to buy or sell shares. And with the advent of deep-discount online brokerage firms, you now can afford to make monthly purchases of exchange-traded funds. Which automatic savings programs are available to you, and how much can you direct to each of these automatic plans? Use the Making Your Investments Automatic Worksheet to put these steps in action. Click here to download and print the Making Your Investments Automatic worksheet.

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How to Wipe Out Credit Card Debt

Article / Updated 03-26-2016

When you’re ready to eliminate your credit card debt, you can take one of two approaches: pay off the card with the highest balance first, which allows you to save on interest in the long-run, or pay off the smallest balance first, which makes you feel good about your progress. Choose your preferred method and then follow these steps to wipe out your credit card debt: List all your credit card debtors in order of the highest-interest-rate first or the smallest balance first, whichever you feel may be most effective. List the current balances on each of these accounts. List the minimum required monthly payment for each account. Total the minimum required monthly payments. Apply any surplus funds toward your highest-interest-rate debt or the debts with the smallest balances.

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Considering Your Financial Future

Article / Updated 03-26-2016

Managing your personal finances requires a balance between what you need and want today and what you’ll need and want in the future. Always going for instant gratification leads to constant dissatisfaction! Instead, plan ahead by using the following tips: Write down your goals. Be specific and revisit them annually. Save at least the first 10 percent of your income. Set up your savings and investing to occur automatically. Don’t miss out on free money from the matching contribution in your employer’s retirement plan or the phenomenal benefits of the Roth IRA. Don’t use credit if you can’t pay cash. Credit cards are convenience tools, not loans. If you can’t afford it today, you can’t afford to pay twice as much over time. Going into debt gives others control of your financial freedom. Before spending money, always ask yourself, “How will this affect my net worth?” Remember: Nobody will watch out for your money better than you, and everybody wants a piece of what you have!

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Questions to Ask when Hiring a Financial Advisor

Article / Updated 03-26-2016

You, the client, have the right to ask any questions you feel are appropriate to help you select the right advisor. If you’re trying to figure out whether an advisor is worth your hard-earned dollars, be sure to ask the following questions: How and how much are you paid? Advisors are required to tell you how they’re paid but not how much. If an advisor quotes her compensation as a percentage, ask her to convert that compensation into dollars and get it in writing. Don’t settle for the common brush-off response, “I’m paid by the company.” The advisor doesn’t get paid by the company if she doesn’t sell you some sort of an insurance or investment product. And if the advisor can’t or won’t tell you how much she’ll be compensated if you work with her, she’s definitely getting paid commissions and likely doesn’t want to tell you how much. Are you a fiduciary? A fiduciary has a legal responsibility to put her client’s interest above all others. If you’re seeking professional, objective financial advice, don’t settle for anything less than a fiduciary. Starting with these questions saves you a lot of time because asking them eliminates the overwhelming majority of advisors. Now you can concentrate your search for an advisor based on her qualifications, experience, and expertise.

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Teaching Children about Money

Article / Updated 03-26-2016

As an adult, you need to model good money-management behaviors for children and involve them as much as possible in your decisions about money. Here are some ways you can interact with your children to help instill healthy money-management behavior: Give children specific roles with regard to daily, weekly, and monthly money-management activities. This can include clipping coupons from the Sunday paper, making selections when grocery shopping, and going to the bank and interacting with the teller. Help children discover that compromises are normal. Involve your children in a conversation about compromises regarding money-management decisions. Share the issues and your thoughts with your children and ask for their ideas. Allow your children the opportunity to earn their own money and make their own decisions about what to do with it, with minimal influence on your part. If what they do with their money isn’t dangerous or illegal — regardless of how practical you think it is — allow them to proceed. Having responsibility and autonomy leaves them open to making bad decisions, but they’ll learn invaluable lessons about money management while you’re nearby to provide guidance when necessary.

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Borrowing Money for Your Child's College Education

Article / Updated 03-26-2016

After you've tapped out all other options, borrowing money to pay for college is your last resort. Your student should exhaust her borrowing options before you consider taking on any debt to pay for her college education. Putting yourself into debt to pay for your child's college education may have disastrous effects on your financial future — after all, there is no such thing as financial aid for your retirement. The best way to fund college costs, if borrowing is necessary, is to have your child borrow the money herself. Through federal student loan programs and financing programs available through various institutions, students have a number of attractive options available to them to finance college costs. Help your student apply for financial aid and exhaust all other resources and options prior to going into debt to pay for her college education. Your child can participate in work-study programs; do part-time work; acquire student loans, grants, and scholarships; attend college part-time while working full-time; or join AmeriCorps, the Peace Corps, or the military, all of which offer financial benefits for education. Tuition borrowing options If you borrow money for your child's college education, consider the list of primary resources: Federal PLUS loan: This loan is the best of all these options. The Parent Loan for Undergraduate Students (PLUS) is a popular, accessible, and reasonably priced loan where parents (with decent credit) can borrow up to the full cost of a dependent student's education minus any other financial aid for which the student qualifies. Repayment must begin within 60 days of receipt, and you may have up to ten years to repay the loan plus interest. For additional information visit the College Board online or call toll-free at 800-891-1253. Home equity line of credit: The interest rate on the loan will be high, and borrowing against your home equity can put your home at risk of foreclosure. 401(k) plan loan: If your 401(k) plan has a loan feature, the maximum amount you can borrow is the lesser of $50,000 or 50 percent of your vested account balance. Contact your 401(k) administrator for details. When you borrow money from your 401(k), that money is no longer invested. Even if you repay interest on this loan, you aren't getting the full benefit of your 401(k) plan investments. Also, the money you pull out of the 401(k) plan as a loan is pre-tax dollars, but the money you repay the loan with is after-tax. Wham! If you change employers while the loan is still outstanding and don't pay the loan in full, it's subject to a 10% early withdrawal penalty and taxation. Double wham! Unsecured loan from your bank: Also known as a signature loan, this loan is often the most expensive. The bank charges a much higher interest rate because no asset, such as a house, is securing this loan. These loans are often difficult to qualify for unless you have impeccable credit. Use the following table to organize possible financial-aid resources. Make a check in the left column if a particular source may be an option to pay for your child's college education, and if so, list the available funds in the column on the right. Tuition Borrowing Options for Parents Potential Option? Source Available Funds Federal PLUS Loan $ Home equity line of credit $ 401(k) plan loan $ Unsecured loan from bank $ Federal student aid programs Federal financial aid programs are intended to make up the difference between what your family can afford to pay and what college costs — and this aid is available to everyone. Although you may feel that your income level is too high and your child isn't eligible for financial aid, most Americans do qualify for aid in some way. With all loans, one of the primary issues to consider is the loan's cost — that is, the interest and any loan acquisition fees. The least expensive loan is general the one with the lowest interest rate. Here's a look at the cheapest federal student aid programs: Perkins loans have the strictest needs-based requirements. A student may borrow up to $5,500 per year, not to exceed $27,500. The current interest rate is 5 percent, and payments don't commence until the student graduates. Subsidized Stafford loans are also needs-based loans. A student may borrow up to $3,500 in the first year of undergraduate studies. This limit increases through college. As of this writing, the interest rate is 6.8 percent per year. The federal government, however, actually pays the interest due on the loan until the student is required to begin making payments six months after graduation. The loan must be paid over ten years. Unsubsidized Stafford loans are not needs based loans. The amount that you may borrow is identical to the Subsidized Stafford loan program if the student is your dependent. If the student is independent, however, he may borrow up to $5,500 initially with the limit increasing through the years of college. The interest rate on this type of loan is 6.8 percent annually, as of this writing. But, the federal government doesn't pay any of the interest on behalf of the student. Repayment begins six months after graduation, and the loan must be repaid over ten years. To get the most recent rates on student loans and detailed instructions on how to obtain these loans, visit the College Board. Setting payment expectations for your college student If you borrow money for your child's college education, communicate the expectations you have regarding paying for college and help your student set reasonable expectations. You may feel very strongly that your child participate in the financial responsibilities involved in obtaining this education. One strategy is to create a collaborative agreement between parent and child: Example of a promissory note for your student's college education. Benefits of the kind of collaborative arrangement include the following: Your child must apply himself and show a good faith effort, or you won't pay anything toward his college education. If your student drops out of school, he's on his own. If your child applies himself and achieves a B average or better, you will repay 80 to 100 percent of the college costs. You don't have to start repaying these loans until six months after your student graduates, which allows you additional time to accumulate funds to repay the debt or to adjust your monthly cash flow in order to be able to more comfortably pay the debts.

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