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Personal Finance in Your 20s and 30s For Dummies

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Personal Finance in Your 20s and 30s For Dummies

Eric Tyson

ISBN: 978-1-119-43137-4 October 2017 336 Pages

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Description

Create a solid pathway for financial success

Millennials often confront greater difficulties—including economic uncertainty and student debt—than those who came before them. This new financial responsibility can be intimidating, and many people are unsure where to begin. Personal Finance in Your 20s & 30s For Dummies will help Millennials to be confident about managing their finances and get on a clear path toward financial security.

Inside, trusted financial advisor Eric Tyson shows students and recent grads how to make smart financial decisions in order to pay off student loans, avoid any additional debt, and create a solid plan to ensure their financial success. From avoiding common money mistakes to making informed investment choices, Personal Finance in Your 20s & 30s For Dummies covers it all!

  • Build a foundation through smart spending and saving
  • Rent, buy, or sell a house
  • File taxes the right way
  • Protect your finances and identity in the digital world

Get ready to forge your own path to financial security!

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 Savings 10

Netting your income and spending 10

Assessing the change in your net worth 11

Understanding and Improving Your Credit Score 12

Deciphering how lenders use credit reports and scores 12

Obtaining your credit reports and fixing errors 13

Getting your credit score 14

Improving your credit reports and score 15

Comprehending Your Investment Options 15

Examining Insurance Coverage 17

Identifying Common Financial Mistakes Young Adults Make 17

Chapter 2: Budgeting, Goal Setting, and Valuing Saving 21

Developing a Savings Mind-Set 22

What It’s Worth: Valuing Savings over Time 24

The difference of continual savings 24

The difference a few percentage points on your return makes to your investment 25

Budgeting and Boosting Your Savings 25

Setting and Prioritizing Your Savings Goals 27

Identifying common goals of accomplished savers 27

Valuing retirement accounts 28

Dealing with competing goals 30

Saving When You’re Strapped 30

Chapter 3: Using Loans and Paying Down Debts 31

Eyeing the Causes of Generational Debt 31

Making the Most of Loans 32

Dealing With Student-Loan Debt 33

Tracking your student loans and making timely payments 33

Prioritizing the payback of student loans 34

Using education tax breaks 35

Weighing the costs and benefits of education expenditures 36

Making the most of student loans, grants, and other financial aid 37

Benefits for military people 38

Working Off Consumer Debt 38

Kicking the credit-card habit 39

Discovering debit cards: Convenience without credit temptation 39

Lowering the interest rate on consumer debt 40

Negotiating better rates from your current credit card 41

Tapping investments to reduce consumer debt 41

Paying down balances 42

Getting Help for Extreme Debt 43

Seeking counseling 43

Considering bankruptcy 44

Preventing Consumer Debt Relapses 47

Chapter 4: Everything Credit: Scores and Reports 49

A Primer on Credit Reports and Credit Scores 49

Differentiating between credit reports and credit scores 50

Understanding how credit scores are determined 51

Knowing the value of a good credit score 52

Jump-starting your credit score as a young adult 52

Getting Your Hands on Your Credit Reports and Scores 53

Recommended websites for free credit scores 54

Websites to avoid 54

Scrutinizing Your Credit Reports to Improve Them 55

Identifying errors and getting them fixed 55

Boosting your credit score 56

Preventing Identity Theft 57

Part 2: Saving and Earning More 61

Chapter 5: Proven Ways to Spend Less and Save More 63

Containing Housing Costs 63

Reducing rental costs 64

Slicing homeowner expenses 66

Cutting Your Taxes 67

Managing Food Costs 68

Trimming Transportation Expenses 69

Finessing Fashion Finances 71

Relaxing on a Budget 72

Taming Technology Spending 74

Keeping Down Insurance Costs 76

Getting Professional Advice 76

Handling Healthcare Expenses 77

Chapter 6: Taxes: Reduce Them or Else! 79

Understanding Taxable Income 79

Comparing Marginal Taxes 80

Reducing Taxes on Work Income 83

Contributing to retirement plans 83

Using health savings accounts 85

Deducting self-employment expenses 86

Increasing Your Deductions 87

Lowering Investment Income Taxes 88

Investing in tax-free money market funds and bonds 89

Selecting other tax-friendly investments 89

Making your profits long term 90

Enlisting Education Tax Breaks 90

Preparing Your Tax Return and Minimizing Your Taxes 91

Chapter 7: Housing: Comparing Renting and Buying 93

The Ins and Outs of Renting 93

Seeing the benefits of renting 94

Considering the long-term costs of renting 94

Completing your rental application 95

Figuring the Costs of Owning and Making It Happen Financially 96

Deciding to buy 96

Comparing the costs of owning versus renting 96

Considering your overall financial health 99

Calculating how much you can borrow 99

Accumulating your down payment 100

Finding the Right Property 100

Points to research 101

Working with Real-Estate Agents 103

Financing Your Home 104

Understanding your mortgage options 104

Deciding which mortgage type is best for you 105

Avoiding negative amortization and interest-only loans 106

Getting your mortgage approved 107

Putting Your Deal Together 108

Chapter 8: Relationships and Money 109

Handling Roommates 109

Living-Together Contracts 111

Getting Married 112

Understanding Your Money Beliefs and Practices 114

Examining your money history 115

Exploring your attitudes toward money 116

Understanding your friends and money 117

Making sense of your environment and money 117

Getting a Grip on Procrastination Where Money is Concerned 118

Diagnosing procrastination 118

Coming to terms with why you may procrastinate with money issues 119

Overcoming money avoidance 120

Chapter 9: Making the Most of Your Career 125

Getting Your Career Going 125

Putting everything in order 125

Educating and training your way to career success 126

Seeking value for your education dollars 127

Investing in your career 130

Exploring Entrepreneurial Options 131

Starting a small business 131

Purchasing a small business 132

Investing in a small business 132

Changing Jobs or Careers 133

The Young and the Unemployed 134

Understanding how joblessness can hit younger adults harder 134

Accessing unemployment benefits 135

Taking action 135

Part 3: Investing for Your Future Goals 137

Chapter 10: Successful Investing Principles 139

Understanding Investments 139

Examining bonds and other lending investments 139

Exploring stocks, real estate, and small-business investments 141

Getting a Handle on Investment Risks 148

Establishing goals and risks 149

Comparing the risks of stocks and bonds 149

Spreading Your Investment Risks 151

Understanding why diversification is key 152

Allocating your assets 152

Holding onto your investments and shunning the herd 153

Selecting an Investment Firm 154

Evaluating Pundits and Experts 155

Chapter 11: Making the Best Use of Bank Accounts 157

Identifying Your Options 157

Brick-and-mortar banks 158

Online banks 158

Other choices 159

Understanding Your Bank Account Options 159

Transaction accounts 159

Options for getting cash 160

Savings accounts 161

Banking Online 161

Evaluating a bank: What to look for 161

Protecting yourself online 163

Considering Your Alternatives 164

Brokerage accounts with check writing 165

Money market funds 165

Chapter 12: Portfolios for a Purpose 167

Before You Begin Investing 167

Investing Nonretirement Account Money 168

Emergency money 168

Long-term money 169

Investing Retirement Account Money 172

Establishing and prioritizing retirement contributions 173

Allocating money in employer plans 173

Designating money in plans you design 175

Investing for Education 177

Understanding the importance of applying for financial aid 177

Paying for educational costs 180

Chapter 13: Real-Estate Investing 183

Understanding Real-Estate Investment Pros and Cons 183

Evaluating Simpler Real-Estate Investments 186

Assessing Residential Housing Investments 187

Investing in Commercial Real Estate 188

Shunning Sure-to-Lose Real-Estate Investments 189

Researching Where and What to Buy 191

Considering economic issues 191

Taking a look at the real-estate market 192

Examining property valuation and financial projections 193

Digging for a Good Deal 195

Part 4: Insurance: Protect Yourself, Your Loved Ones, and Your Assets 199

Chapter 14: The Lowdown on Health Insurance 201

Making Sure You’re Covered 202

Transitioning your coverage 202

Seeing how the 2010 healthcare laws (Obamacare) changed your coverage 203

Trumpcare? 204

Finding Your Best Health Plan 205

Selection of doctors and hospitals 205

Plan benefits and features 205

Shopping for Health Insurance 206

Uncovering the best policies 206

Handling insurance rejection 207

Health Savings Accounts: Tax Reduction for Healthcare Costs 209

Chapter 15: Safeguarding Your Income 211

Protecting Your Income for You and Yours: Disability Insurance 211

Understanding disability coverage you may already have 212

Determining how much disability insurance you need 213

Identifying useful disability policy features 213

Shopping for coverage 214

Protecting Your Income for Dependents: Life Insurance 215

Assessing your current life insurance coverage 215

Determining how much life insurance to buy 216

Deciding what type of life insurance to buy 216

Shopping for life insurance 217

Caring for Your Loved Ones: “Peace of Mind” Insurance 219

Chapter 16: Home, Auto, Renters, and Other Insurance Policies 221

Protecting Your Home and Possessions: Homeowners and Renters Insurance 222

Dwelling coverage 222

Personal property protection 223

Liability insurance 223

Natural disaster protection 223

Shopping for homeowners insurance 224

Insuring Your Car 227

Liability protection 227

Collision and comprehensive 228

Riders you should bypass 229

Getting a good buy 229

Part 5: Your Information Diet 231

Chapter 17: Using Media Resources 233

Going Online: The Wild West of Advice and Predictions 234

Eyeing the real cost of “free” 234

Being aware online 235

Using the web for gathering information 236

Getting Financial Perspectives and Advice from the Media 238

Being a smart news consumer 238

Separating the best from the rest 239

Trusting unnamed “sources” is a bad idea 240

Understanding that political partisans are hazardous to your wealth 242

Chapter 18: Professionals You Hire 243

Seeing the Value of Professional Advice 243

Considering Financial Advisors 244

Preparing to hire a financial advisor 244

Finding good financial advisors 245

Interviewing advisors 246

Taming Your Taxes with Help 248

Working with Real-Estate Agents 249

Using Online Resources to Find Service Providers 251

Angie’s List 251

HomeAdvisor 252

Other resources 253

Part 6: The Part of Tens 255

Chapter 19: Ten Ways to Save on a Car 257

Don’t Buy a Car in the First Place 257

Pay Cash: Shun Leasing and Borrowing 258

Consider Total Costs 259

Compare New with Used 259

Understand a Car’s Real Value Before Negotiating 259

Take Care of Your Car 260

Explore Your Servicing Options 260

Drive Safely 261

Take a Lean and Mean Insurance Policy 261

Track Tax-Deductible Auto Expenses 261

Chapter 20: Ten Things to Value More Than Your Money 263

Investing in Your Health 263

Staying active and at a healthy weight 264

Using fitness trackers to monitor your activity level 264

Making and Keeping Friends 265

Appreciating What You Have 266

Minding Your Reputation 266

Continuing Education 266

Having Fun 266

Putting Your Family First 267

Knowing Your Neighbors 267

Volunteering and Donating 268

Caring for Kids 268

Chapter 21: Nearly Ten Things to Know About Apps 269

You May Well Get What You Paid for with “Free” Apps 270

Conduct and Manage Financial Tasks 270

Use Apps Only from Legitimate Companies with Lengthy Track Records 271

Consider the Alternatives to an App 271

Keep Focused on Your Spending 271

Settle up with Friends but Beware Fees 272

Save Money on Commonly Purchased Items 272

Tap Into the Latest Economic and Financial Data 273

Invest With Confidence 274

Investing in Your 20s & 30s For Dummies 275

Bonus: Investing in Funds: Mutual Funds and Exchange-Traded Funds 277

Understanding the Advantages of Funds 278

Maximizing Your Chances for Fund Investing Success 280

Understanding the importance of performance and risk 280

Examining fund management experience 281

Keeping costs down 281

Understanding and using index funds 282

Understanding exchange-traded funds: Index funds that trade 283

Creating and Managing a Fund Portfolio 284

Identifying the Best Mutual Funds and ETFs 286

Investing in the best ETFs 286

Picking the best stock funds 288

Balancing your act: Funds that combine stocks and bonds 290

Finding the best bond funds 291

Considering Alternatives to Investing in Funds 296

Your own online fund 296

Unit investment trusts 297

Brokerage managed accounts 297

Hedge funds for the wealthier 298

Index 299