Personal Finance in Your 20s & 30s For Dummies

Introduction 1 About This Book 1 Foolish Assumptions 2 Icons Used in This Book 3 Beyond the Book 3 Where to Go from Here 3 Part 1: Getting Started with Personal Finance 5 Chapter 1: Your Financial Checkup 7 Calculating Your Financial Worth 8 Defining net worth 8 Figuring what you own: Financial assets 8 Determining what you owe: Financial liabilities 9 Netting the difference 10 Grasping the Importance of Your Savings Rate 10 Calculating your income and outgo 11 Assessing the change in your net worth 11 Understanding and Improving Your Credit Score 13 Deciphering how lenders use credit reports and scores 13 Obtaining your credit reports and fixing errors 14 Getting your credit score 15 Improving your credit reports and score 15 Comprehending Your Investment Options 16 Examining Insurance Coverage 17 Identifying Common Financial Mistakes Young Adults Make 18 Chapter 2: Budgeting, Goal Setting, and Valuing Saving 21 Developing a Savings Mindset 22 What It’s Worth: Valuing Savings over Time 24 The power of continual savings 24 The rewards of earning a (slightly) higher annual return on your investment 25 Budgeting and Boosting Your Savings 26 Setting and Prioritizing Your Savings Goals 28 Identifying common goals of accomplished savers 28 Valuing retirement accounts and financial independence 29 Dealing with competing goals 30 Saving When You’re Strapped 31 Chapter 3: Using Loans and Paying Down Debts 33 Eyeing the Causes of Generational Debt 34 Making the Most of Loans 35 Dealing With Student-Loan Debt 36 Tracking your student loans and making timely payments 36 Prioritizing the payback of student loans 37 Using education tax breaks 38 Weighing the costs and benefits of education expenditures 39 Making the most of student loans, grants, and other financial aid 40 Benefits for military people 41 Paying Off Consumer Debt 41 Kicking the credit-card habit 42 Discovering debit cards: Convenience without credit temptation 42 Lowering the interest rate on consumer debt 44 Negotiating better rates from your current credit card 44 Tapping investments to reduce consumer debt 45 Paying down balances 45 Getting Help for Extreme Debt 46 Seeking counseling 46 Considering bankruptcy 47 Preventing Consumer Debt Relapses 50 Chapter 4: Everything Credit: Scores and Reports 51 A Primer on Credit Reports and Credit Scores 52 Differentiating between credit reports and credit scores 52 Understanding how credit scores are determined 53 Valuing of a good credit score 55 Jump-starting your credit score as a young adult 55 Getting Your Hands on Your Credit Reports and Scores 56 Recommended websites for free credit scores 57 Websites to avoid 57 Scrutinizing Your Credit Reports to Improve Them 58 Identifying errors and getting them fixed 58 Boosting your credit score 59 Preventing Identity Theft 60 Part 2: Saving and Earning More 65 Chapter 5: Proven Ways to Spend Less and Save More 67 Containing Housing Costs 68 Reducing rental costs 68 Slicing homeowner expenses 71 Cutting Your Taxes 72 Managing Food and Restaurant Spending 73 Trimming Transportation Expenses 75 Finessing Fashion Finances 76 Relaxing on a Budget 78 Taming Technology Spending 79 Keeping Down Insurance Costs 81 Getting Affordable and Quality Professional Advice 81 Handling Healthcare Expenses 82 Chapter 6: Taxes: Reduce Them When You Can! 83 Understanding Taxable Income 83 Comparing Marginal Taxes 84 Changes from the Tax Cut and Jobs Act Bill 86 Reducing Taxes on Work Income 87 Contributing to retirement plans 87 Using health savings accounts 89 Deducting self-employment expenses 90 Increasing Your Deductions 91 Lowering Investment Income Taxes 92 Investing in tax-free money market funds and bonds 92 Selecting other tax-friendly investments 92 Making your profits long term 93 Enlisting Education Tax Breaks 93 Preparing Your Tax Return and Minimizing Your Taxes 94 Chapter 7: Housing: Comparing Renting and Buying 97 The Ins and Outs of Renting 97 Seeing the benefits of renting 98 Considering the long-term costs of renting 98 Completing your rental application 99 Figuring the Costs of Owning and Making It Happen Financially 100 Deciding to buy 100 Comparing the costs of owning versus renting 101 Considering your overall financial health 103 Calculating how much you can borrow 104 Accumulating your down payment 104 Finding the Right Property 105 Working with Real-Estate Agents 108 Financing Your Home 109 Understanding your mortgage options 109 Deciding which mortgage type is best for you 109 Avoiding negative amortization and interest-only loans 110 Getting your mortgage approved 111 Putting Your Deal Together 112 Chapter 8: Relationships and Money 115 Handling Roommates 115 Living-Together Contracts 117 Getting Married 118 Understanding Your Money Beliefs and Practices 120 Examining your money history 121 Exploring your attitudes toward money 122 Understanding your friends and money 123 Making sense of your environment and money 124 Getting a Grip on Procrastination Where Money Is Concerned 124 Diagnosing procrastination 124 Coming to terms with why you may procrastinate with money issues 125 Overcoming money avoidance 127 Chapter 9: Making the Most of Your Career 131 Getting Your Career Going 131 Putting everything in order 132 Educating and training your way to career success 133 Seeking value for your education dollars 133 Investing in your career 138 Exploring Entrepreneurial Options 138 Starting a small business 138 Purchasing a small business 140 Investing in a small business 140 Changing Jobs or Careers 141 The Young and the Unemployed 142 Understanding how joblessness can hit younger adults harder 142 Accessing unemployment benefits 143 Taking action 143 Part 3: Investing for Your Future Goals 145 Chapter 10: Successful Investing Principles 147 Examining Bonds and Other Lending Investments 148 Investing in bonds 148 Considering the downsides to lending 149 Exploring Stocks, Real Estate, and Small-Business Investments 150 Socking your money away in stocks 150 Generating wealth with real estate 153 Going the small-business investment route 155 Considering Options, Cryptocurrencies, and Other Hot Vehicles 156 Opting for options 156 Calculating cryptocurrencies 157 Noting leveraged and inverse ETFs aren’t investments 158 Getting a Handle on Investment Risks 159 Establishing goals and risks 160 Comparing the risks of stocks and bonds 160 Spreading Your Investment Risks 161 Understanding why diversification is key 161 Allocating your assets 162 Holding onto your investments and shunning the herd 163 Selecting an Investment Firm 164 Evaluating Pundits and Experts 164 Chapter 11: Making the Best Use of Bank Accounts 167 Looking at Different Types of Banks 167 Brick-and-mortar banks 168 Online banks 168 Other choices 169 Understanding Your Bank Account Options 169 Transaction accounts 169 Options for getting cash 170 Savings accounts 171 Banking Online 171 Evaluating a bank: What to look for 171 Protecting yourself online 174 Considering Your Alternatives 175 Brokerage accounts with check writing 175 Money market funds 175 Chapter 12: Portfolios for a Purpose 177 Before You Begin Investing 177 Investing Nonretirement Account Money 178 Emergency money 178 Long-term money 179 Investing Retirement Account Money 182 Establishing and prioritizing retirement contributions 182 Allocating money in employer plans 183 Designating money in plans you design 185 Investing for Education 187 Understanding the importance of applying for financial aid 187 Paying for educational costs 190 Chapter 13: Real-Estate Investing 193 Understanding Real-Estate Investment Pros and Cons 193 Evaluating Simpler Real-Estate Investments 196 Assessing Residential Housing Investments 197 Investing in Commercial Real Estate 198 Shunning Sure-to-Lose Real-Estate Investments 199 Researching Where and What to Buy 201 Considering economic issues 201 Taking a look at the real-estate market 201 Examining property valuation and financial projections 203 Digging for a Good Deal 205 Part 4: Insurance: Protect Yourself, Your Loved Ones, and Your Assets 209 Chapter 14: Taking Care with Health Insurance 211 Making Sure You’re Covered 212 Transitioning your coverage 212 Seeing how Obamacare changed your coverage 213 Recent developments and likely future changes 214 Finding Your Best Health Plan 215 Selection of doctors and hospitals 216 Plan benefits and features 216 Shopping for Health Insurance 217 Uncovering the best policies 217 Dealing with Obamacare’s high health insurance prices 218 Handling insurance rejection 220 Health Savings Accounts: Tax Reduction for Healthcare Costs 221 Chapter 15: Safeguarding Your Income 223 Protecting Your Income for You and Yours: Disability Insurance 224 Understanding disability coverage you may already have 224 Determining how much disability insurance you need 225 Identifying useful disability policy features 226 Shopping for coverage 227 Protecting Your Income for Dependents: Life Insurance 227 Assessing your current life insurance coverage 228 Determining how much life insurance to buy 228 Deciding what type of life insurance to buy 229 Shopping for life insurance 231 Caring for Your Loved Ones: “Peace of Mind” Insurance 231 Chapter 16: Home, Auto, Renter’s, and Other Insurance Policies 233 Protecting Your Home and Possessions: Homeowner’s and Renter’s Insurance 234 Dwelling coverage 234 Personal property protection 235 Liability insurance 235 Renter’s insurance 236 Natural disaster protection 236 Shopping for homeowner’s insurance 237 Insuring Your Car 238 Liability protection 240 Collision and comprehensive 241 Riders you should bypass 241 Getting a good buy 242 Avoiding Policies That Cover Small Possible Losses 243 Extended warranty and repair plans 244 Home warranty plans 244 Dental insurance 244 Credit life and credit disability policies 245 Daily hospitalization insurance 245 Cell-phone insurance 245 Little stuff riders 246 Part 5: Your Information Diet 247 Chapter 17: Using Media Resources 249 Going Online: The Wild West of Advice and Predictions 250 Eyeing the real cost of “free” 250 Being aware online 252 Using the web for gathering information 252 Getting Financial Perspectives and Advice from the Media 254 Being a smart news consumer 255 Separating the best from the rest 256 Trusting unnamed “sources” is a bad idea 256 Understanding that political partisans are hazardous to your wealth 258 Chapter 18: Professionals You Hire 261 Seeing the Value of Professional Advice 261 Considering Financial Advisors 262 Preparing to hire a financial advisor 263 Finding good financial advisors 264 Interviewing advisors 264 Taming Your Taxes with Help 266 Working with Real-Estate Agents 267 Using Online Resources to Find Service Providers 269 Angi 270 HomeAdvisor 270 Other resources 271 Part 6: The Part of Tens 273 Chapter 19: Ten Ways to Save on a Car 275 Don’t Buy a Car in the First Place 276 Pay Cash: Shun Leasing and Borrowing 276 Consider Total Costs 277 Compare New with Used 277 Understand a Car’s Real Value Before Negotiating 277 Take Care of Your Car 278 Explore Your Servicing Options 278 Drive Safely 279 Take a Lean and Mean Insurance Policy 279 Track Tax-Deductible Auto Expenses 279 Chapter 20: Ten Things to Value More than Your Money 281 Investing in Your Health 281 Staying active and at a healthy weight 282 Using fitness trackers to monitor your activity level 282 Making and Keeping Friends 283 Appreciating What You Have 284 Minding Your Reputation 284 Continuing Education 285 Having Fun 285 Putting Your Family First 285 Knowing Your Neighbors 286 Volunteering and Donating 286 Caring for Kids 286 Chapter 21: Nearly Ten Things to Know about Apps 287 You May Well Get What You Paid for with “Free” Apps 288 Conduct and Manage Financial Tasks 288 Use Apps Only from Legitimate Companies with Lengthy Track Records 289 Consider the Alternatives to an App 289 Keep Focused on Your Spending 289 Settle up with Friends But Beware Fees 290 Save Money on Commonly Purchased Items 290 Tap into the Latest Economic and Financial Data 291 Invest with Confidence 292 Index 293