TABLE OF CONTENTS FOREWORD CHAPTER 1: Budgeting CHAPTER 2: Understanding Banking CHAPTER 3: Why Save and How CHAPTER 4: The Habit of Saving and Starting Early CHAPTER 5: Do You Need a Financial Advisor? CHAPTER 6: Insurance You May Need CHAPTER 7: Saving For Retirement CHAPTER 8: Establishing Credit CHAPTER 9: Avoiding Debt and Bankruptcy CHAPTER 10: Fixing Your Credit CHAPTER 11: Buying a Home CHAPTER 12: Investment Basics CHAPTER 13: Building Your Portfolio CHAPTER 14: Avoiding Investment Scams CHAPTER 15: Creating Fixed Income CHAPTER 16: Taxes—What You Should Know Appendix A: Budget & Saving Guess Your Expenditures Appendix B: Basic Banking Appendix C: Insurance Appendix D: Debt Appendix E: Retirement Appendix F: Buying A Home Appendix G: Advisor GLOSSARY FOREWORD By Juan Ciscomani As a trainer of financial counselors, I have witnessed the average consumer’s pitfalls first hand. I understand the mistakes that can be, and often are, made. I also know the steps to take to prevent a financial disaster and how to recover from one that has already occurred. So many consumers believe that financial management is about denying themselves life’s pleasures. They do not see that financial management is simply managing their money in a way that leaves them in control; it is about tempering wants with reality. Will you ever have debt? For most of us, the answer is yes. Debt is not a bad thing if you understand what you are doing before you get yourself caught up in the world of “big, fast, and beautiful.” Whipping out the credit card and then cringing over the bill and the interest charged is not control. The point of money management is to make conscious decisions and to control your money — not letting your money control you. If you already are in financial trouble, there is no one right way to fix the problem. It would be great if there were a quick fix, but it took time to get into trouble and it will take time to get out of it. You have to look at the root cause. Over-spending habits will require a different fix than late payment habits. Not only will changing poor habits take time, but cleaning up the credit mess reflected in your credit score will take time as well. Having said that, there is hope. If you are just starting out, reading this book will give you choices concerning your present and your future. If you are financially sound but do not know how to move toward savings and retirement, you will find the answers as you peruse these chapters. Finally, if you are in financial trouble, this book can help you find a way out and create a better financial path. Knowledge is key in all things. The Complete Personal Finance Handbook will give you the knowledge you need for a better financial future. Juan Ciscomani Senior Instructional Specialist Credit-Wise Cats Take Charge America Institute for Consumer Financial Education and Research John and Doris Norton School of Family and Consumer Sciences The University of Arizona Phone: 520-626-5376 Fax: 520-621-3209 http://tcainstitute.org/ Juan Ciscomani began to develop his expertise in personal finance throughout his academic career at The University of Arizona. Joining the Credit-Wise Cats (named after the University of Arizona’s Wildcats) allowed him to become a highly trained counselor and offer personal, financial education to University of Arizona students, faculty, and the greater Tucson community. In addition, Ciscomani developed a wide variety of Spanish language money management workshops to cater to the needs of the Hispanic population in Tucson. Moreover, through the Credit-Wise Cats and Students in Free Enterprise (SIFE), Ciscomani participated in regional and national case study competitions and other creative programs with the sole mission of teaching personal finance. In May of 2005, Ciscomani graduated Cum Laude with a Bachelor’s degree in political science from the University of Arizona. Upon graduation, he was one of twenty recently graduated Hispanic scholars in the United States selected to participate in the Congressional Hispanic Caucus Institute (CHCI) Public Policy Fellowship Program in Washington, DC. During his nine-month fellowship, Ciscomani worked as a Legislative Assistant in the House of Representatives for Rep. Loretta Sanchez of California. In this position, he researched, tracked, and developed legislative initiatives and appropriations requests in issue areas, including: financial literacy, education, housing, telecommunications, and environment. He also handled all small business, economic development, and banking issues for Representative Sanchez. After completing the CHCI Public Policy Fellowship Program, Ciscomani returned to Arizona and rejoined the Credit-Wise Cats and SIFE team at the University of Arizona. As Senior Instructional Specialist, he now trains the Credit-Wise Cats and assists them in developing personal finance knowledge in a broad spectrum of topics. Furthermore, Ciscomani researches and writes personal finance case studies with solutions that are used at college level personal finance case competitions and regional and national personal finance case study competitions. During the past year, Ciscomani played an integral role in launching and coordinating the Xtreme Xplorations program at a new local charter school, Wildcat Middle School. As program manager, he teaches personal finance to the students, in addition to training, supervising, and coordinating university students and volunteers on a weekly basis. Ciscomani’s decision to return to Tucson was primarily based on his interest in contributing to his community. Within the past year, he helped initiate the Pima Community College Alumni Association and currently holds a position on the new Alumni Board. As a result of his involvement with the Alumni Association, he also sits on the Pima Community College Foundation Board of Directors. Table of Contents CHAPTER 1: Budgeting What Is a Budget and Why the Need for One? Definition: A budget is simply a game plan for managing income to cover the cost of living over a set period of time. The best way to start taking control of personal finances is with a monthly budget. It can be complex: walking around with a notepad and pen itemizing every purchase down to a single pack of gum, or it can be a simple list of general categories: rent, utilities, transportation, and entertainment. Creating a budget provides knowledge of: • Monthly expenditures—the money going out. • Monthly income—the money coming in to cover expenditures. First Step to Financial Success Personal financial planning consists of three general activities: • Controlling day-to-day finances for freedom to do necessary and recreational activities. Controlling these finances promotes a sense of financial security.