Giáo trình Personal finance 13e by garman

Copyright 2018 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Want to turn your C into an A? Obviously, right? But the right way to go about it isn’t always so obvious Go digital to get the grades MindTap’s customizable study tools and eTextbook give you everything you need all in one place Engage with your course content, enjoy the flexibility of studying anytime and anywhere, stay connected to assignment due dates and instructor notifications with the MindTap Mobile app and most of all…EARN BETTER GRADES TO GET STARTED VISIT WWW.CENGAGE.COM/STUDENTS/MINDTAP Personal Finance 13e E Thomas GarmanRaymond E Forgue Virginia Tech University University of Kentucky Australia • Brazil • Mexico • Singapore • United Kingdom • United States Personal Finance, Thirteenth Edition Garman/Forgue Vice President, General Manager, Social Science & Qualitative Business: Erin Joyner Senior Product Manager: Joe Sabatino Content Developer: Conor Allen and Tara Slagle, MPS North America, LLC Product Assistant: Denisse Zavala-Rosales Senior Marketing Manager: Nate Anderson Senior Marketing Coordinator: Eileen Corcoran 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www.cengage.com/permissions Further permissions questions can be emailed to permissionrequest@cengage.com Library of Congress Control Number: 2016960526 Student Edition: ISBN:978-1-337-09975-2 Loose-leaf Edition: ISBN: 978-1-337-28831-6 Cengage Learning 20 Channel Center Street Boston, MA 02210 USA Cengage Learning is a leading provider of customized learning solutions with employees residing in nearly 40 different countries and sales in more than 125 countries around the world Find your local representative at www.cengage.com Cengage Learning products are represented in Canada by Nelson ­Education, Ltd To learn more about Cengage Learning Solutions, visit www.cengage.com Purchase any of our products at your local college store or at our preferred ­online store www.cengagebrain.com Printed in the United States of America Print Number: 01 Print Year: 2017 Brief Contents PART FINANCIAL PLANNING CHAPTER Understanding Personal Finance CHAPTER Career Planning 38 CHAPTER Financial Statements, Tools, and Budgets 72 PART 2 MONEY MANAGEMENT 113 CHAPTER Managing Income Taxes 114 CHAPTER Managing Checking and Savings Accounts 150 CHAPTER Building and Maintaining Good Credit 180 CHAPTER Credit Cards and Consumer Loans 202 CHAPTER Vehicle and Other Major Purchases 228 CHAPTER Obtaining Affordable Housing 258 PART INCOME AND ASSET PROTECTION 297 CHAPTER 10 Managing Property and Liability Risk 298 CHAPTER 11 Planning for Health Care Expenses 332 CHAPTER 12 Life Insurance Planning 360 PART INVESTMENTS 389 CHAPTER 13 Investment Fundamentals 390 CHAPTER 14 Investing in Stocks and Bonds 422 CHAPTER 15 Mutual and Exchange Traded Funds 464 CHAPTER 16 Real Estate and High-Risk Investments 492 CHAPTER 17 Retirement and Estate Planning 518 Appendix A: Present and Future Value Tables Appendix B: Estimating Social Security Benefits A-2 A-11 Glossary G-1 Index I-1 iii Contents PART FINANCIAL PLANNING CHAPTER Understanding Personal Finance 1.1 Achieving Personal Financial Success 1.1a The Five Fundamental Steps in the Financial Planning Process 1.1b You Must Plan for Financial Success and Happiness 5 1.1c You Must Spend Less So You Can Save and Invest More 1.1d What You Will Accomplish Studying Personal Finance 1.1e Replace Your Obsolete Knowledge 1.2 The Economy Affects Your Personal Financial Success 7 1.2a How to Tell Where We Are in the Business Cycle 1.2b The Business Cycle 1.2c How to Tell the Future Direction of the Economy 1.2d The Future Direction of Inflation and Interest Rates 10 1.3 Think Like an Economist When Making Financial Decisions 14 1.3a Consider Opportunity Costs When Making Decisions 14 1.3b Identify Marginal Utility and Costs in Decision Making 15 1.3c Factor Your Marginal Income Tax Rate When Making Financial Decisions 15 1.3d Know that the Very Best Kind of Income Is Tax-Exempt Income 15 1.3e Realize that the Second Best Kind of Income Is Tax-Sheltered Income 16 1.4 Perform Time Value of Money Calculations 1.4a There Are Only Two Common Questions About Money 1.4b Calculating Future Values 1.4c Finding Present Values Is Called Discounting 1.5 Make Smart Money Decisions At Work 17 17 18 20 21 1.5a Open the New Employee Orientation Package 21 1.5b Choosing Tax-Free Cafeteria Plan Benefits 22 1.5c Decisions About Employer’s Flexible Spending Accounts 23 1.5d Decisions About Employer-Sponsored Health Care Plans 24 iv 1.5e Decisions About Participating in Employer Insurance Plans 1.5f Decisions About Participating in Your Employer’s Retirement Plan 1.6 Where to Seek Expert Financial Advice 1.6a Not Every Financial Advisor Has Your Best Interests in Mind 1.6b How Financial Planners Are Compensated 1.6c Questions to Ask a Financial Planner 24 25 28 28 30 31 DID YOU KNOW? The Peer-to-Peer Sharing Economy If No Employer’s 401(k) Plan?, Open a Roth IRA 14 26 Advice from a Seasoned pro Seven Money ­Mantras for a Richer Life A Baker’s Dozen of Good Financial Behaviors A Baker’s Dozen of Bad Financial Behaviors 10 22 29 common sense Be Optimistic About Your Future Employees Gain Cash from Flexible Spending Plans Help With College Debt 23 24 Bias Toward Thinking Things Will Continue as They Have 13 YOUR GRANDPARENTS SAY “Save 10 percent of Your Income” 16 Numbers on Understanding Personal Finance 19 Turn Bad HabIts Into Good Ones 23 Money Websites 20 NEVER EVER Leave Money on the Table! Make the Worst Blunders! 27 27 There is an App for That!28 CHAPTER Career Planning 38 2.1 Developing Your Career Plan 40 2.1a Clarify Your Values and Interests 40 2.1b Consider Your Current Interests and Possible Career Opportunities 41 2.1c Identify One or More Desired Career Fields 41 2.1d Review Your Abilities, Experiences, and Education 43 2.1e Know Your Preferred Work-Style Personality 43 2.1f Take Advantage of Professional and Social Networking 44 2.1g Prospective Employers Can Check Your Credit Report 46 Contents  v 2.1h Align Yourself with Tomorrow’s Employment Trends 46 2.1i Freelancing in the “Gig Economy” and Entrepreneurship 46 2.1j Finalize Your Career Plan 48 2.2 Financial and Legal Aspects of Employment 49 2.2a Is College Worth the Cost? 2.2b Place Dollar Values on Employee Benefits 2.2c Know Your Legal Employment Rights 49 50 51 2.3 Practice Effective Employment Search Strategies 53 2.3a Assemble an Attention-Getting Résumé 53 2.3b How to Search for and Target Preferred Employers 53 2.3c Identify Specific Job Opportunities 56 2.3d Write an Effective Cover Letter 58 2.3e Obtain Strong Reference Letters 59 2.3f Formally Apply for the Job 60 2.3g Interview for Success 60 2.3h How to Compare Salary Offers 64 2.3i Ask for the Job 65 2.3j Wait and Be Patient 65 2.3k Negotiate and Accept the Job 65 2.3l How to Move Up at Work 66 2.3m Getting Paid “Right” in Your Job 66 2.3n Periodically Update Your Career Plan 67 DID YOU KNOW? Generation Z Will Replace Millennials Coding May Be Your Career Change Do Not Give Up $160,000 When Changing Employers Value of Additional Education Top Skills Employers Want Most How to Interview Over a Meal How to Deal with Rejection 44 48 50 51 54 61 66 Advice from a Seasoned pro Career Advancement Tips Common Job Interview Mistakes What to Do When You Lose Your Job 56 60 67 DECISION MAKING WORKSHEET What Is Your Work-Style Personality? Keeping Track of Your Job Search 45 57 There is an App for That! 66 YOUR GRANDPARENTS SAY “Never Stop Learning” 50 Numbers on Careers 58 Turn Bad HabIts Into Good Ones 64 CHAPTER Financial Statements, Tools, and Budgets 72 3.1 Financial Values, Goals, and Strategies 3.1a Values Define Your Financial Success 3.1b Saving Is Your Single Most Important Financial Task 3.1c Examples of Financial Goals 3.1d Financial Goals Follow Your Values 3.1e Financial Strategies Help Guide Your Financial Success 3.1f Wealth-Building Principles for Life 3.2 Financial Statements Measure Your Financial Health and Progress 3.2a The Balance Sheet Is a Snapshot of Your Financial Status Right Now 3.2b How to Increase Your Net Worth 3.2c The Cash-Flow Statement Tracks Where Your Money Came From and Went 74 74 75 77 77 78 78 79 79 83 83 3.3 Collect and Organize Your Financial Records to Save Time and Money 87 3.4 Money Topics to Discuss With a Partner 90 3.5 Reaching Your Goals Through Budgeting: Your Spending/Savings Action Plan 91 3.5a Action Before: Set Financial Goals 92 3.5b Action Before: Make and Reconcile Budget Estimates 94 3.5c Action Before Budgeting Period: Plan Cash Flows 96 3.5d Action During the Budgeting Period: Control Spending 100 3.5e Action After: Evaluate Budgeting Progress to Make Needed Changes 103 DID YOU KNOW? Curiosity Gets You the Job Ninety Percent of Work Is Simply Showing Up You May Be a Trial Hire Incomes and Education 43 46 46 49 The Middle Class Shrinks 77 Money Websites 85 Ratios for Evaluating One’s Financial Progress 87 You Must “Think Single” in Money Matters 102 Hit These Financial Marks While You Are in Your Thirties 105 Bias Toward Underestimating Incomes 49 Advice from a Seasoned pro 52 Get-Tough Ways to Cut Spending  Secrets of Super Savers common sense RUN THE NUMBERS Assessing the Benefits of a Second Income 99 102 Money Websites 58 common sense NEVER EVER Go to a Job Interview Unprepared! Before You Buy, Ask Yourself These Questions 88 Bias Toward Thinking Negatively 83 60 NEVER EVER 62 vi Contents NEVER EVER Get Stressed About Money! 92 NEVER EVER 104 Numbers on Financial Statements, Tools, and Budgets 104 Your Grandparents Say “Cut the Dollars AND the Pennies” Turn Bad HabIts Into Good Ones 94 105 There is an App for That! 93 PART 2 MONEY MANAGEMENT 113 CHAPTER Managing Income Taxes 4.1 Progressive Income Taxes and the Marginal Tax Rate 4.1a The Progressive Nature of the Federal Income Tax 4.1b The Marginal Tax Rate Is Applied to the Last Dollar Earned 4.1c Use Your Marginal Tax Rate to Help Make Financial Decisions 4.1d Your Effective Marginal Tax Rate Is Higher 114 116 116 4.3 Strategies to Reduce Your Income Taxes 4.3a Practice Legal Tax Avoidance, Not Tax Evasion 4.3b Strategy: Reduce Taxable Income via Your Employer 4.3c Strategy: Prune Taxable Investments 4.3d Strategy: Make Tax-Sheltered Investments 4.3e Strategy: Defer Income 4.3f Strategy: Accelerate Deductions 4.3g Strategy: Take All of Your Legal Tax Deductions DID YOU KNOW? How to Determine Your Federal Marginal Tax Rate Income Inequality, Incredibly, Gets Worse About the Alternative Minimum Tax Create Future Tax-Free Income with Your Refund How to Save for a Child’s College Education How to Compare Taxable and After-Tax Yields 118 122 132 138 139 140 Advice from a Seasoned pro Your Average Tax Rate Is Low How to Determine Household Income Under the Affordable Care Act A Sideline Business Can Reduce Your Income Taxes Deduct Work-Related Education as a Business Expense Buy a Home to Reduce Income Taxes 118 124 125 128 142 common sense The USA Is a Low-Tax Country 143 117 NEVER EVER 118 118 NEVER EVER 139 4.2 Eight Steps in Calculating Your Income Taxes 119 4.2a Determine Your Total Income 4.2b Determine and Report Your Gross Income After Subtracting Exclusions 4.2c Subtract Adjustments to Income 4.2d Subtract Either Your Itemized Deductions or the IRS’s Standard Deduction for Your Tax Status 4.2e Subtract the Value of Your Personal Exemptions 4.2f Determine Your Preliminary Tax Liability 4.2g Subtract Tax Credits for Which You Qualify 4.2h Calculate the Balance Due the IRS or the Amount of Your Refund 4.2i What Form Do You Use to File? 4.2j You Should File Your Return on Time 4.2k The Best Tax Guides and Other Help 4.2l File Your Income Taxes Electronically for Free and Get Your Refund Within Days 4.2m People Pay Their Income Tax Liability in One or Two Ways 4.3h Strategy: Shift Income to a Child 142 4.3i Strategy: Buy and Manage a Real Estate Investment 143 Let Someone Else Prepare Your Taxes Make Your Worst Blunders 130 139 There is an App for That! 130 Bias Toward Avoiding Risk 142 120 Numbers on Income Taxes 132 122 124 Money Websites 133 YOUR GRANDPARENTS SAY “Don’t Pay the IRS First” 137 Turn Bad HabIts Into Good Ones 143 124 129 129 130 130 132 132 133 133 133 136 136 136 137 137 140 141 141 CHAPTER Managing Checking and Savings Accounts 5.1 What Is Monetary Asset Management? 150 152 5.1a Who Provides Monetary Asset Management Services? 152 5.2 Open Checking and Money Market Accounts 155 5.2a 5.2b 5.2c 5.2d Checking Accounts Money Market Accounts Savings Accounts Certificates of Deposit 155 161 161 163 5.3 Establish Ownership of Assets Wisely 164 5.4 Electronic Money Management 165 5.4a Why Use Electronic Money Management? 5.4b Cards Used to Access Your Money 5.4c Liability Limits for Lost or Stolen Debit Cards 165 166 167 Contents  vii 5.4d EFT Error Resolution Process 5.4e Avoid Automatic Billing, Renewal and Subscription Services 5.4f Protect Your Privacy 5.4g Bitcoin Is a “Fad” Virtual Currency 167 5.5 The Psychology of Money Management 169 5.5a Managing Money and Making Financial Decisions Are Different 5.5b People Connect Strong Emotions to Money 5.5c How to Talk About Financial Matters 5.5d Complications Brought by Remarriage 5.5e Check Your Overall Financial Health Online 168 168 168 169 170 170 172 173 DID YOU KNOW? Chat Bots Are Everywhere ATM Fees Reach Record Highs How to Reconcile Your Checking Account Asset Management Accounts 154 158 159 164 Advice from a Seasoned pro When “Free Checking” Isn’t Free! Avoiding Overdraft Fees Do Not Pay for an Idle Bank Account Why Interest Rates Change Start Your Emergency Savings Fund Now Never Open an Electronic Communication from a Bank How to Develop Money Sense in Children Wisely Save Money for Children’s Education in a 529 Plan 155 156 157 161 162 163 171 173 common sense 6.2c Method 3: Debt-to-Income Method 6.2d Keep Student Loan Debt Under Control 185 185 6.3 Obtaining Credit and Building a Good Credit Reputation 187 The Credit Application and Credit Report 187 Prescreened, Invitation-to-Apply, or Preapproved 188 The Lender Decides on the Application 188 Lenders Decides on the Interest Rate 189 How to Build Your Foundation for a Good Credit History 189 6.3f Improving Your Credit History Improves Your 189 Credit Score 6.3g A Free Credit Report Is Yours Every Four Months 190 6.3h FICO Credit Scores 190 6.3i Credit Monitoring Is a Waste of Money 191 6.3j How to Fix Errors in Your Credit Report 191 6.3k Time Limits on Adverse Information in Credit Reports 192 6.3l Another Person’s Credit History 192 6.3m Effects of Divorce on Your Credit 192 6.3a 6.3b 6.3c 6.3d 6.3e 6.4 Dealing With Overindebtedness 6.4a 11 Signs of Overindebtedness 6.4b Federal Law Regulates Debt Collection Practices 6.4c Ways to Get Out from Under Excessive Debt 6.4d Bankruptcy as a Last Resort Are You Worried About Your Debts? 157 158 162 Bias Toward The Familiar 157 Numbers on Bank Fees 159 Turn Bad HabIts Into Good Ones 160 YOUR GRANDPARENTS SAY YOUR GRANDPARENTS SAY “Save Automatically” 163 “Debt Stops Your Financial Progress” Money Websites 154 RUN THE NUMBERS There is an App for That! 167 NEVER EVER 170 6.1 Advantages and Disadvantages of Using Credit 6.1a Advantages of Using Credit 6.1b Disadvantages of Using Credit 6.1c Identity Theft 6.2 Three Ways to Set Your Own Debt Limit 6.2a Method 1: Continuous-Debt Method 6.2b Method 2: Debt Payments-to-Disposable Income Method 180 182 182 183 183 184 185 185 193 194 194 196 DID YOU KNOW? Pay Bills Online Manage Your Checking Account Correctly People Don’t Save Because They Fear Change CHAPTER Building and Maintaining Good Credit 192 185 Advice from a Seasoned pro Debt Crowds Out the Future Freedom from Discrimination Is the Law 183 190 common sense What to Do Before You Apply for Credit 188 183 Make Spending Reductions to Pay for Increasing Credit Usage 186 Bias Toward Overconfidence  187 Numbers on Average Debt 188 There is an App for That! 192 NEVER EVER Reaffirm a Debt 193 NEVER EVER 195 Turn Bad HabIts Into Good Ones 195 CHAPTER Credit Cards and Consumer Loans 7.1 Credit Cards and Other Types of Open-End Credit 7.1a Open-End Credit 202 204 204 viii Contents 7.1b Two Types of Organizations Issue Open-End Credit 7.1c Revolving Lines of Credit 7.2 Managing Credit Cards Wisely 7.2a 7.2b 7.2c 7.2d 8.1c Fit Your Budget to the Purchase 205 206 207 Credit Statements 208 Computation of Finance Charges 210 Liability for Lost or Stolen Cards 210 Correcting Errors on Your Credit Card Statement 212 7.3 Sources of Consumer Loans 214 7.4 Installment Loans 214 7.4a 7.4b 7.4c 7.4d The Loan Contract Unsecured and Secured Loans Variable-Rate or Fixed-Rate Loans Alternative Lenders Offer High-Priced Loans 7.5 Calculating Interest on Consumer Loans 7.5a Calculating an Installment Loan Payment 7.5b Calculation of the Finance Charges and APR for Installment Loans 215 215 217 217 218 218 220 DID YOU KNOW? Card Blocking Exists Paying Cash Instead of Using a Credit Card Might Save You Money 206 206 Advice from a Seasoned pro Smart Cards Do Just About Everything Which Rewards Credit Card Is Best Teaser Rates on Credit Cards Card Registration Services Are Unnecessary Credit Card Insurance Is Overpriced Credit Cards Cause Stress Avoid the 30-Year Minimum Payment Trap 207 210 211 211 212 216 219 8.2 Comparison Shop to Find the Best Buy 8.2a Comparison Shop for a Vehicle and Think Carefully 8.2b Comparison Shop for a Safe Vehicle 8.2c Comparison Shop by Window Shopping 8.2d Comparison Shop for Financing 8.2e Comparison Shop Between Financing and Leasing 8.2f Comparison Shop for Warranties 8.3 Negotiate Successfully 233 235 235 237 237 238 241 244 246 8.3a Successful Negotiators Are Armed with Information 246 8.3b Make the Decision at Home Using a Decision-Making Matrix 248 8.3c Finalizing a Car Deal 249 8.3d Evaluate Your Decision 250 8.4 Complain When Appropriate 8.4a Cancel a Contract Using the Cooling-Off Rule, If It Applies 8.4b Mediation and Arbitration 8.4c Lemon Laws and Small-Claims Courts 8.4d Small-Claims Court 250 250 250 251 251 DID YOU KNOW? Subprime Lending Is Rising It’s Possible to Get Out of a Lease Early The Buyer’s Remorse “Legal Right” on Vehicles Is False 239 243 249 Advice from a Seasoned pro Insurance and Maintenance Costs on Vehicles How Many Hours of Work Will This Cost? Make a List for Every Important Decision Avoid Balloon Loans Buy a Used Car and Save for a Home or Retirement 234 235 236 239 246 209 216 YOUR GRANDPARENTS SAY “Buy a Used Vehicle” 236 “Don’t Use Credit Cards” 209 Dealer Financing or Rebate? Finance or Lease? 240 242 Numbers on Credit 217 There is an App for That! 247 Bias Toward An Easy Solution 218 NEVER EVER Lease Just to Drive a Better Vehicle 243 There is an App for That! 212 NEVER EVER 250 NEVER EVER 213 Numbers on 238 NEVER EVER 222 Bias Toward Overconfidence244 Money Websites 215 Money Websites  246 Turn Bad HabIts Into Good Ones 251 common sense Avoid Credit Card Offers by Opting Out Good and Bad Debt YOUR GRANDPARENTS SAY Turn Bad HabIts Into Good Ones222 CHAPTER Vehicle and Other Major Purchases 228 8.1 Before You Buy Do Your Homework 230 8.1a Prioritize Your Wants 8.1b Conduct Preshopping Research 230 231 RUN THE NUMBERS CHAPTER Obtaining Affordable Housing 9.1 Should You Rent or Buy Your Home? 9.1a Renting Housing Is Less Expensive in the Short Term 258 260 260 G-22 Glossary universal life insurance  Provides the pure protection of term insurance and the cash-value buildup of whole life insurance, along with face variability in amount, rate of cash-value accumulation, premiums, and rate of return unsecured loan  A loan issued and supported only by the b ­ orrower’s creditworthiness, rather than by a type of collateral, because it is ­obtained without the use of property as collateral for the loan made with the cash value accumulated by the policy Also called flexible-premium variable life insurance vesting  Ensures that a retirement plan participant has the right to take full possession of all employer contributions and earnings wage earner plan  Known as Chapter 13 this is a bankruptcy protection scheme that allows income earners to satisfy outstanding debts in whole or in part within a specific time frame upside down  A situation where the owner of a financed asset owes more than it is worth, thus creating negative equity waiting period (elimination period)  The time period between the onset of a disability and the date that disability benefits begin use-it-or-lose-it rule  An IRS regulation requiring that unspent dollars in a flexible spending account at the end of a calendar year be forfeited, unless the employer allows a 1/2-month grace period for spending the funds waiver of premium  A clause in an insurance policy that waives the policyholder’s obligation to pay any further premiums should he or she become seriously ill or disabled usual, customary, and reasonable (UCR) rate  The amount paid for a medical service in a geographic area based on what ­providers in the area usually charge for the same or similar medical service utilization review  A feature of managed care health plans where representatives of the insurer review the records of treatments provided to verify that they are appropriate for the condition being treated value funds  Funds specializing in stocks that are fundamentally sound whose prices appear to be low (low P/E ratios) based on the logic that such stocks are currently out of favor and undervalued by the market value stock  A stock that tends to trade at a low price relative to its company fundamentals (dividends, earnings, sales, and so on) and thus is considered undervalued by a value investor values  Fundamental beliefs about what is important, desirable, and worthwhile variable annuity  Annuity whose value rises and falls like mutual funds and pays a limited death benefit via an insurance contract variable expenses (or flexible expenses)  Expenses over which you have substantial control variable-rate (adjustable-rate) certificates of deposit Certificates of deposit that pay an interest rate that is adjusted (up or down) periodically variable-rate loan  A loan where an interest rate on a loan fluctuates over time because it is tied to an underlying benchmark interest rate that changes periodically variable-universal life insurance  Form of universal life insurance that gives the policyholder some choice in the investments want  Item not necessary but desired warranty of fitness for a particular purpose  Here the seller (or provider or manufacturer) knows the buyer’s particular use and the buyer relies on the seller’s expertise or judgment in choosing the product warranty  A type of guarantee that a manufacturer or similar party makes regarding the condition of its product whole life insurance  Form of cash-value life insurance that provides lifetime life insurance protection and expects the insured to pay premiums for life Also called straight life insurance will  Written document in which a person tells how his or her remaining assets should be given away after death; without a will, the property will be distributed according to state probate law withdrawal options (systematic withdrawal plans) Arrangements with a mutual fund company for shareholders who want to receive income on a regular basis from their mutual fund investments work-style personality  Your own ways of working with and responding to job requirements, surroundings, and associates yield to maturity (YTM)  Total annual effective rate of return earned by a bondholder on a bond if the security is held to ­ maturity—takes into consideration both the price at which the bond sold and the coupon interest rate to arrive at effective rate of return zero-coupon bonds (zeros or deep discount bonds) Municipal, corporate, and Treasury bonds that are issued at a sharp discount from face value and pay no annual interest but are redeemed at full face value upon maturity zero-sum game  An investment in which the wealth of all buyers remains the same as the trading simply redistributes the wealth among those traders Index Note: Boldface type indicates key terms defined in text A Abilities, professional, 43 Above-the-line deductions, 124 Accelerated death benefits rider, 376 Accelerating deductions, 141 Acceleration clause, 216 Account executive/stockbroker, 443 Account reconciliation, 159 Acquisition fee, 243 Active investor, 398, 407 Activities of daily living (ADLs), 349 Actual cash value (personal property), 303 Additional child tax credit, 131 Add-on interest method, 220–222 prepayment penalty, 221–222 Adjustable life insurance, 371 Adjustable-rate mortgage (ARM), 286 Adjusted capitalized cost (adjusted cap cost), 242 Adjusted gross income (AGI), 124 Adjustments to income, 124 Adoption tax credit, 131 Advance directives, 353 Advance medical directives, 353 Affinity cards, 206 Affordable Care Act (ACA), 334–341, 335 benefits/rights/protections, 336, 337 determining household income under, 124 paying for the cost of, 338–339 and people with insurance, 335 and people without insurance, 335–336 subsidy tax credits under, 339–340 Affordable health insurance, 339 After-tax dollars, 137 After-tax money, 447, 529 After-tax profit, 426 After-tax yield, 140 Agency bonds, 452 Aggressive growth funds, 472 Aggressive investment philosophy (risk seeker), 397 All-risk (open-perils) policies, 307 Alternative minimum tax (AMT), 132 American Opportunity Tax Credit, 131 Amortization, 220 Amortization schedule, 283 Annualcreditreport.com, 190 Annual deductible, 347 Annual exclusion amount, 558 Annual fees, 210 Annual percentage rate (APR), 182 Annual percentage yield (APY), 162 Annual report, 438 Annuity, 20, 21, 549 Any-occupation policy, 352 Appraisal fee, 267 Approximate compound yield (ACY), 434 Aptitudes, 43 Arbitration, 250–251 Asset allocation, 412–415 Asset allocation funds, 474 Asset management accounts (AMA, or central asset account), 164 Assets, 79 Assumable mortgage, 287 ATM cards, 166 ATM machine, 166 ATM transaction fee, 158 Attorney fees, home buyers, 267 Automatic funds transfer agreement, 156 Automatic overdraft loan agreement, 156 Automatic premium loan, 376 Automatic reinvestment, 468, 469 Automatic stay, 196 Automobile insurance, 314–321, 315 bodily injury liability, 315 collision, 318 comprehensive, 320 family policy (FAP), 315–316 medical payments, 316–317 physical damage, 317–320 property damage liability, 315 rental reimbursement coverage, 320–321 single liability limits, 316 split liability limits, 315 uninsured and underinsured motorist insurance, 317 Automobiles dealer’s code on price, 231–232 expected price, 231 Auto-renewal billing, 168 Average-balance account, 158 Average daily balance, credit card, 210 Average share cost, 411 Average share price, 411 B Back-end ratio, 275 Bad check, 156, 157 Balanced/hybrid funds, 474 Balance sheet (net worth statement), 79 Balance transfer, 209, 211 Balloon automobile loan, 239 Balloon payment, 288 Bank credit card account, 208 Bank credit cards, 205 Bankruptcy, 196–197 Bankruptcy trustee, 196 Basic retirement benefit, 522 Bear market, 403 Below-average costs, 409 Benchmark premium, 339 Beneficiary, 363, 552 contingent, 373 designation, 468, 530 Beneficiary designation form, 530 Benefit amount, 349 Benefit period, disability insurance, 349, 352 Best buy, 235 Beta value/beta coefficient, 429, 433 “Big Board,” 440 Billing cycle, 208 Billing date, credit card, 209 Binder, 305 Bitcoin, 168–169 Biweekly mortgage, 287 Blank endorsement, 157 Blend funds, 474 Blue-chip stocks, 428 Board of directors, 425 Bond funds, 471–472 Bond premium, 453 Bond rating, 450 summary of, 450 Bonds, 393, 409, 424–428 characteristics of, 449 corporate, 450 discount, 139, 448 government savings, 138–139 investing in, 448–456 investment-grade, 448 ratings summary, 450 registered, 449 secured, 449 selling price, 453 serial, 449 Series EE savings, 139 sinking, 449 speculative-grade, 449 tax-exempt municipal, 139 unsecured, 449 I-1 I-2 index Book-entry form, 449 Book value, 432 Book value per share, 432 Book value/shareholder’s equity, 432 Bounced-check fees, 156 Brokerage firms, 444, 447 types of, 444 Brokered certificates of deposit, 163 Broker’s commission, 290, 444–445 Budget, 91 controls, 100 creation, 94, 96 estimates, 94 exceptions, 100 fitting vehicle payment into, 233–235 housing costs in, 273 subordinate, 100 variance, 103 Bullion, 508 Bull market, 403 Bump-up certificates of deposit, 163 Business cycle, 8–10 phases, Business-cycle risk, 402 Business failure risk, 401 Business risk, 393, 503 Buy and hold/buy to hold, 409 Buyer’s agent, 275 Buyer’s order, 249 Buyer’s remorse, 249 Buying long, 447 C Cafeteria plan (flexible benefits plan), 22 Calendar cash flow, 96 Callable bonds, 449 Call option, 449, 511–512 Canceled check, 158 Capital appreciation funds, 472 Capital gain, 121, 393–395, 499 distributions, 467–469 on housing, 139 Capital improvements, 497 Capital loss, 121–122, 395 Capitalism, Card registration service, 211 Career, defined, 40 Career fairs, 57–58 Career goal, 42 Career plan, 40 developing, 40–49 finalize, 48–49 periodic updating, 67 Career planning, 40 employment search strategies, 53–67 financial and legal aspects of employment, 49–52 money websites for, 58 steps in, 40–49 Cash account, 443 Cash advance, 193, 205 Cash-balance plan, 539 Cash basis, 83 Cash deficit, 85 Cash dividends, 374, 424, 431 Cash equivalents, 80 Cash flow, 496 calendar, 96 planning, 96–99 renters and, 263–264 Cash-flow statement (income and expense statement), 79, 83, 85–87 Cashier’s check, 160 Cash management, 154 Cash surplus, 85 Cash surrender value, 376 Cash-value life insurance, 368, 369–371, 375–377 Casualty and theft losses, as deductions, 127 Central asset accounts, 164 Certificate of deposit (CD), 163 brokered, 163 bump-up, 163 variable, 163 Certificate of insurance, 346 Certified checks, 158–160 Certified financial planner (CFP), 28, 382 Certified Financial Planner Board of Standards, 29 Chapter of the Bankruptcy Act (straight bankruptcy), 196–197 Chapter 13 of the Bankruptcy Act (wage earner or regular income plan), 196 Chargeback, 212 Charitable contributions, as deductions, 127 Chartered financial consultant (ChFC), 382 Chartered life underwriter (CLU), 382 Check card, 166 Checking account, 155–160 average balance, 158 costs and penalties, 157 for credits, 189 minimum balance, 158 student, 157 Check register, 155, 158 Child and dependent care credit, 131 Children, money sense in, 171 Child tax credit (CTC), 131 Chronological format, résumé, 53 Claims adjuster, 324 Classes of insureds, 305 Classified advertisements, job search, 58 Cliff vesting, 530 Closed-end lease/walkaway lease, 243 Closed-end mutual funds, 470 Closing, mortgage loan, 280 Closing costs, 266 Closing date, credit card, 209 Co-branded credit cards, 206 COBRA rights, 345 Codicil, 554 Coinsurance, 304 Coinsurance clause, 347 Collectibles, 507 College-expense needs, 363 College savings plan, 138, 139 Collision insurance, 318 Commercial banks, 153 Commissions, 402–403 sales, 382 stated, 476 trailing, 476 Common stock, 424–425 evaluation of, 428–435 Community property laws, 556 Community property states, 556 Comparison shopping, 235–236 Complaint procedures, 250–251 Compound interest (compounding), 17 Comprehensive automobile insurance, 320 Comprehensive form (HO-5), 307 Comprehensive insurance, 320 Conditions, 374 Condominium (condo), 262 Condominium form (HO-6), 310 Congressional Budget Office (CBO), 339 Conservative investment philosophy (risk aversion), 397 Consumer finance company, 214, 220 Consumer loans, 214–218 calculating interest, 218–223 sources of, 214 Consumer Price Index (CPI), 11, 452 Consumer Reports, 231 Consumer statement, 191 Consumption, inflation affect on, 12 Contents replacement-cost protection, 313 Contingency clauses, 279 Contingent (or secondary) beneficiary, 373, 552 Contingent deferred sales charge/ back-end load, 476 Continuous debt method, 185 Contributory plan, 531 Convenience checks, credit account, 205 Conventional mortgage, 286 Convertible preferred stock, 425 Convertible term insurance, 369 Cooling-off rule, 250 Cooperative (co-op), 262 Copayment, 347 Copays, 341, 348 Corporate bonds, 450 Corporate earnings, 430 Corporation, 424 privately held, 424 public, 424 index  I-3 Cosigner, 216 Cost averaging, 409 Cost of living clause, disability insurance, 353 Costs and benefits, 42 Countercyclical (or defensive) stock, 428 Countercyclic indicator, 10 Counteroffer, 278 Coupon rate/coupon/coupon yield/stated interest rate, 448 Coverdell education savings account, 138 Cover letter, 58–59 Credit, 182 advantages of, 182 agreement, 189 application, 187–188 approval, 188 consumer loans, 214–218 consumer statement, 191 denied, 190 disadvantages of, 183 effects of divorce on, 192 discrimination, 190 history, 188–189, 271–272 home-equity line, 288 installment (closed-end), 214 investigation, 188 limit, 204 open-ended (revolving), 204, 206–207 preapproval, 188 prescreened, 188 promissory note, 189 report, 183, 318 reputation, 187–192 score, 189, 271–272 service, 204–205 unemployment insurance, 218 Credit bureau, 188, 180 Credit card agreement (contract), 189 Credit card blocking, 206 Credit cards, 166, 182 affinity, 206 annual fees, 210 average daily balance, 210 bank, 206 chargeback, 212 cobranded, 206 common aspects, 204–207 convenience checks, 205 credit for returns and errors, 209 due date, 209 grace period, 204 insurance, 212 invitation-to-apply, 188 liability, 210 minimum payment, 209 negative impact, 216 opt-out, 209 prepaid, 209 prestige card, 205–206 registration services, 211 retail, 205 rewards, 210 secured, 218 statements, 208–210 teaser rates on, 211 transaction and posting dates, 209 transaction fees, 204, 209 types of accounts, 205–206 unpaid balance, 209 Credit freeze, 183 Credit-monitoring service, 191 Credit receipt, 209 Credit report freeze, 183 Credit risk/default risk, 450 Credits, Social Security, 521 Credit statement, 208–210 Credit term life insurance, 369 Credit union (CU), 154 Credit utilization ratio, 191 Crowd funding, 427 Crude annual rate of return, 505 Cumulative preferred stock, 425 Current income, 394 Currently insured status, 521 Current rate, 375 Current yield, 454 Custodial care, 349 Cyclical stock, 428 D Damage deposit, 260, 261 Day trading, 445 Dealer holdback (rebate), 246–247 Dealer invoice price (or base invoice price), 232–233, 246–247 Death benefit, 374 Debit cards, 166 FSA, 136 liability limits for lost or stolen, 167 preloaded, 166 Debt collection agency, 194 Debt-consolidation loan, 195 Debt limit, 184 Debt management plan (DMP), 195 Debt payments-to-disposable income ratio, 185 Debt-repayment needs, 363 Debts, 399 Debt settlement, 195 Debt-to-income method, 185 Decision-making matrix, 248–249 Decision-making worksheet, 44, 56 Declarations, 374 Declining-balance method, 220 Decreasing term insurance, 368–369 Deductible amount, 24, 304, 343, 347 Deductible clause, 301 Deed, 267 Deeded timesharing, 502 Default rate, 209, 449 Default risk/credit risk, 450 Defect disclosure form, 290 Deficiency amount, 281 Deficiency balance, 193 Deficit (or net loss), 83 Defined-benefit retirement plan, 537 Defined contribution health care, 344 Defined-contribution retirement plan, 137, 530–536, 531 Deflation, 12 Deflation risk, 401 Deleveraging, Denied credit, 190 Dental expense insurance, 347 Dental insurance and expenses, 126–127 Department of Veterans Affairs (VA), 268 Dependent, 129 Depository institutions, 152 Depreciation, 497 Derivative/derivative security, 511 Differential, 445 Direct sellers, insurance, 306 Disability, income during, 350–353 Disability benefits, 538 Social Security, A–11–A–12 Disability income insurance, 350–353 Discharged debts, 196–197 Discount brokers, 444 Discounted cash-flow method, 500 Discount method of interest calculation, 222–223 Discretionary expenses, 94 Disposable income, 94, 185 Disposition fee, 243 Distribution fee, 476 Diversification, 400 Dividend, 122, 393–395, 394 cash, 374, 424, 431 insurance, 374 Dividend payout ratio, 431–432 Dividend-reinvestment plan (DRIP), 412 Dividends per share, 431 Dividend yield, 432 Divorce, effect on credit, 192 Dollar-cost averaging, 409–412 Double dip recession, Dow Jones Industrial Average (DJIA), 440 Dow Jones Wilshire 5,000 index, 440 Down payment, 266–267 Due date, credit card, 209 Due-on-sale clause, mortgage, 287 Dunning letters, credit cards, 212 Durable power of attorney for health care, 354 Duration risk (reinvestment risk), 402 I-4 index E Early termination charge, 243 Early withdrawal penalty, 546 Earned income, 120 Earned income credit (EIC), 131 Earned income tax credit (EITC), 131 Earnest money, 278 Earnings per share (EPS), 430 Earnings yield, 431 Economic cycle, expansion phase, Economic growth, Economic indicator, Economy, personal financial success and, 7–13 Education, professional training and, 43 Education savings account, 138 Effective marginal tax rate, 118 Elderly or disabled tax credit, 131 Electronic benefit transfer (EBT) cards, 167 Electronic funds transfers (EFT), 165 Electronic money management, 165–169 auto-renewal billing, 168 Bitcoin, 168–169 cards used, 166–167 EFT error resolution process, 167–168 liability limits for lost or stolen debit cards, 167 privacy protection, 168 using, 165 Emerging market funds, 473 Employee benefits, 22, 50–51 future value, 51 Employee Retirement Income Security Act (ERISA), 530, 538 Employee stock option, 432 Employee stock-ownership plan (ESOP), 539 Employers, preferred, 53, 56 Employer’s matching contributions, 26 Employer-sponsored retirement plans, 529–530 Employment financial and legal aspects, 49–52 rights, 51–52 search strategies, 53–67 Employment agencies, 58 Employment trends, 46 End-of-life medical treatments, 353 Endorsement, 157, 322 Endorsements (rider), 374 Entrepreneur, 48 Envelope system, 103 Environmental impact, 233 Episode limits, 348 Equal Credit Opportunity Act (ECOA), 190 Equities, 399 Equity-income funds, 474 Equity risk premium, 396 Escrow account, 270 Essential health benefits, 338 Estate and gift tax exemption, 558 Estate planning, 551 for unmarried couples, 554 retirement and, 549 tax consequences in retirement and, 551 Estimated taxes, 133 Excess mileage charge, 243 Exchange privilege, 468 Exchange-traded funds (ETF), 466, 469–470, 478–479, 509, 550 smart-beta, 478 Exclusion amount, 558 Exclusions, 122–123, 347, 374 Executor/personal representative, 553 Exemptions, 129 Exit fee, 476 Expense ratio, 475 Expenses, 83 discretionary or controllable, 94 fixed, 83 irregular, 96–98 variable(flexible), 86 Experiences, professional, 43 Expiration date, 511 Express warranty, 244 Extended warranty (service contract), 244–245 F Face amount, 368 Face value/par value, 448, 453 Fair Credit Billing Act (FCBA), 211, 212 Fair Credit Reporting Act (FCRA), 191 Fair Debt Collection Practices Act (FDCPA), 194 Fair market value, 80, 270 Family auto policy (FAB), 315 Fed (Federal Reserve Board), 13, 451 Federal deposit insurance, 154 Federal Deposit Insurance Corporation (FDIC), 154 Federal estate tax, 558 Federal funds rate, 13 Federal Housing Administration (FHA) mortgage insurance, 268 Federal Trade Commission (FTC), 250 Fee-for-service health plan, 342 FICA taxes, 521 FICO score, 189 factors used in, 190–191 improving, 271–272 Fiduciary standard, 29, 400 Filing status, 126 Fill-or-kill order, 446 Final expenses, 362 Finance charge, 182, 204 computation of, 210 Financial decisions, think like an economist, 14–16 Financial goals, 77–78 Financial happiness, Financial Industry Regulatory Authority (FINRA), 29 Financial literacy, Financial loss, 303 Financial matters, discussions, 170–172 Financial needs, 362–363 ways to meet, 363 Financial objectives, 5–6 Financial planner, 28 compensation, 30–31 questions to ask, 31 Financial planning, 76 defined, 74 effective, 75 life insurance, 378–379 process, Financial ratios, 87 Financial records, 87–89 Financial responsibility laws, 314 Financial risk, 393, 401 Financial security, Financial services industry, 152 Financial Services Oversight Council (FSOC), 444 Financial statements, 79 Financial strategies, 78 Financial success, economy and, 7–14 personal, 4–7 Financing compare options, 238–241 home, 282–289 leasing and, 241–244 First-to-die life insurance policy, 373 529 plans, 138, 173 Fixed annuity, 549–550 Fixed expenses, 83 Fixed income, 399 Fixed-income funds, 471 Fixed interest rate, 217 variable-rate, 217 Fixed maturity, 399 Fixed-rate loan, 217 Fixed-rate policies, 371 Fixed yield, 453 Flat-fee brokers, 275 Flexcard, 136 Flexible-premium variable life insurance, 372 Flexible spending account (FSA), 23, 136–137 Flexible spending arrangement, 23, 136 Floater policies, 323 Floating-rate notes (FRNs), 452 Flood and earthquake insurance, 321–322 index  I-5 Foreclosure, 193, 281, 503 Foreclosure auction, 281 Foreign stock exchanges, 473 Forex, 510 Fortuitous losses, 303 401(k) retirement plan, 25, 137, 533–534, 536, 545 Front-end load, 476 Front-end ratio, 275 FSA debit card, 136 FSBO (for sale by owner), 290 Full-benefit retirement age, 522 Full warranty, 244 Fully insured social security status, 521 Functional format résumé, 53 Fundamental analysis, 429 Fund screener/fund-screening tool, 485 Fun money, 474 Futures contract, 512 Future value (FV), 18 benefits, 51 series of equal amounts, A-7–A-8 of single amount, A-2–A-4 single lump sum, 18–19 stream of payments, 20 G Gap insurance, 241 Garnishment, 193 General (full-service) brokerage firms, 444 Gift card, 166 Global funds, 473 Gold, 473, 508–509 Gold bullion, 508 coins, 508 Gold funds, 473 Gold standard, 348 Good-faith estimate, 278 Goods and services dispute, 212 Good-til-cancelled (GTC), 446 Government savings bonds, 138–139 Government securities money market funds, 471 Grace period, 162, 204, 375 credit card, 204 Graduated vesting, 530 Grantor, 557 Great Recession, 9, 401 Gross capitalized cost (gross cap cost), 242 Gross domestic product (GDP), 9–10 Gross income, 122–123 Group health plan, 342 Group term life insurance, 369 Growing-equity mortgage (GEM), 287 Growth and income funds, 473 Growth and income objective, 474–475 Growth funds, 472 Growth objective, 472–473 Growth stocks, 428 Guaranteed insurability, 377 Guaranteed investment contracts (GICs), 535 Guaranteed minimum rate of return, 375 Guaranteed renewable term insurance, 368 Guardian, 554 H Habitability, 261 Haggling, 246 Hazard, 303 Hazard reduction, 304 Health care costs, 334, 336, 338 Health care plan, 24, 336, 341 ACA approved, 338 benefits and limits, 346–348 defined, 344 employer-provided group, 342–344 essential health benefits, 336–338 on government exchange, 340–341 quality, 336 types of, 341–346 websites for, 351 Health care proxy, 353–354 Health insurance exchanges (HIX)/ health insurance marketplace, 338–339 Health Insurance Premium Tax Credit, 131 Health maintenance organizations (HMOs), 343 Health savings account (HSA), 24, 344 Hedge funds, 513 Heir, 554 Herd behavior, 407 Hidden fees, 476 High-balling, 248 High-deductible health care plan (HDHP), 24, 343 High-deductible plan, 343–344 High-risk investments, and real estate, 494–513 High-yield bonds, 449 Home buying process, 271–281 Home equity conversion mortgage (HECM), 288 Home-equity installment loan, 288 Home-equity line of credit, 288 Home inspection, 267 Homeowners association, 262 Homeowners association fee, 262 Homeowner’s equity, 284 Homeowner’s general liability protection, 307 Homeowner’s insurance, 270, 306–314 basic form (HO-1), 307 broad form (HO-2), 307 buying, 310–314 comprehensive form (HO-5), 307 coverages, 306–607 older home form (HO-8), 309 renter’s contents broad form (HO-4), 309 special form (HO-3), 307 types of, 307–310 Homeowner’s no-fault medical payments protection, 307 Homeowner’s no-fault property damage protection, 307 Home selling process, 290–291 Home warranty insurance, 269 Housing bubble, 494 Housing costs budget and, 273 monthly, 272–273 I I bonds, 452 Identity theft, 183 Immediate annuity, 549 Implied warranty, 244 Implied warranty for fitness for a particular purpose, 244 Impulse purchase, 236 Income adjustments, 124 on cash-flow statement, 79 deferral strategy, 138 during disability, 350–353 disposable, 94 earned, 120 fixed, 399 gross, 122 nominal, 11 real, 11 shifting to child, 142–143 taxable, 116 tax-deferred, 16 tax-exempt, 15 tax-sheltered, 16 total, 120 unearned, 142 Income for life, 377 Income for fixed period, 377 Income inequality, 122 Income payments of fixed amount, 377 Income-replacement needs, 363 Income stock, 428 Incontestability clause, 373 Indemnity plan, 342 Indenture, 449 Index fund, 471, 475, 478 Index mutual funds, 471 Indexing, 117 Index of leading economic indicators (LEI), 10 Individual account, 164 I-6 index Individual mandate, 336 Individual retirement account (IRA), 138, 545 Individual shared responsibility fee, 336 Inflation, 10 affect on income, 11–12 affect on consumption, 12 borrowing, saving, and investing, 12–13 impact of, 10–13 measurement of, 11 Inflation protection, 349–350 Inflation risk, 401 In-force illustration, 375 Inheritance tax, 558–559 Insolvent, 81 Installment credit (closed-end credit), 214 Installment loan calculating payment, 218–219 finance charges and APR, 220–223 Insurance, 302 applicant selection, 305–306 automobile, 315 (see also Automobile insurance) claim, 324 coinsurance, 304 for college students, 313 collision, 318 comprehensive automobile, 320 convertible term, 369 credit card, 212 credit term, 369 decreasing, 368–369 deductible, 304 disability income, 350–353 extended-replacement coverage, 310 floater policies, 323 flood and earthquake insurance, 321–322 gap, 241 group life term, 369 guaranteed renewable term, 368 homeowner’s, 270, 306–314 (see also Homeowner’s insurance) home warranty, 269–270 large-loss principle, 302 level-premium term, 368 liability, 301 limited-pay whole life, 370–371 medical payments, 316–317 mortgage, 268, 269, 369 policy, 303 premium, 303 private mortgage, 268 professional liability/malpractice, 322 property, 301 rates, 305 renter’s, 311 subsidized health, 338–339 title, 267 umbrella liability, 321 underinsured motorist, 317 uninsured motorist, 317 whole life, 370 Insurance agent, 306, 381 captive, 306 direct sellers, 306 exclusive, 306 independent, 306 signs of unethical agent, 382–383 Insurance companies, 154 health of, 348 loss-control efforts, 301 Insurance dividends, 374 Insured, 303, 305, 373 Insuring agreements, 374 Interest, 12, 182 add-on interest method, 221–222 amortization, 220 compound, 17 declining-balance method, 220 discount method, 222–223 fixed rate, 217 forecast of rates, 13 monthly mortgage payment and, 268 negotiation of rate, 248 penalty APR, 209–210 point, 267 prime rate, 217 as a real-estate tax deduction, 498, 499 simple, 17 teaser rate, 287 variable rate, 286 Interest-earning checking account, 156 Interest income, 399, 451 Interest inventories, 41 Interest-rate cap, 217, 287 Interest rate risk, 163, 453 Intermediate care, 349 Intermediate corporate bond funds, 472 Intermediate government bond funds, 472 Intermediate-term goals, 92 International funds, 473 Internet job search, 53 stock selection, 435–442 Interview mistakes, 60 Interview questions, 62 Intestate, 555 Introductory interest rate, 211 Investing, 393 active, 398 mistakes, 403–408 passive, 398 Investment (capital) assets, 80 Investment companies types of, 470 Investment fraud, regulations to protect, 444 Investment-grade bonds, 448 Investment plan, 416–417 Investment policy statement, 28 Investment risks types of, 401–402 Investments, active, 398 alternative, 494 blogs, 435 goals, 392–393 high-risk, 494 Internet and, 435–442 investment fraud, regulations to protect, 444 investment losses, minimization of, 495 investments in stocks and bonds, websites for, 406, 437 kinds of, 398–400 lending, 399 long-term strategy, 399, 408–415 ownership, 399 passive, 398 philosophy, 396–398 phone Apps for, 436 pre-tax income, 122 in real estates, 143, 494–497 returns, 393 risk, 395–396, 400–403 saving and, 393 short-term, 399 tax consequences of, 404, 447 tax-sheltered, 137–138 wealth creation and, 395 websites for investment fundamental, 406 Investor’s portfolio, market risk in, 401 Irrevocable charitable remainder trust (CRT ), 557 Irrevocable living trust, 557 Itemized deductions, 124 J Job acceptance and negotiation, 65–66 Job application, 60 Job boards, 56–57 Job expenses, as deductions, 128–129 Job interview, 60 Job opportunities, 56–58 Job-referral, 45 Joint account, 165 Joint-and-survivor annuity, 539 Joint and survivor’s benefits/survivor’s benefits, 539 Joint tenancy with right of survivorship/joint tenancy, 165, 553 Junk bond funds, 472 Junk bonds, 449, 472 K Keogh, 544, 552 Kiddie tax, 139, 143 index  I-7 L Laddering, 164 Lapsed policy, 375 Large-cap funds, 473 Large-cap stocks, 428 Large-loss principle, 302, 310 Law of large numbers, 304 Leading economic indicators, 10 Lease, 241 written contract, 249 Leasing, 230 caution regarding, 244 fees, 243 pitfalls to avoid, 241–242 terminology, 242 Legally liable, 301 Lemon laws, 251 Lending investments, 399 Letter of last instructions, 557–558 Level-premium term insurance, 368 Leverage, 403 Liabilities, 79 long-term (or noncurrent), 80–81 short-term (or current), 80 Liability insurance, 301 applying the large-loss principle to, 310 automobile, 315–316 professional, 322 umbrella, 321 Lien, 215, 282 Life cycle, using life insurance and investments over, 379 Life-cycle funds, 474 Life insurance, 362 accelerated death benefits clause, 376 adjustable, 371 after divorce, 364 agent, 381–382 application, 373 automatic premium loan, 376 beneficiary, 363, 367 buying strategies, 378–383 cash surrender value, 376 cash-value, 368, 369–372 college-expense needs, 363 comparison of different methods, 363–364 convertible term, 369 credit term, 369 current rate, 375 death benefit, 374 debt-elimination needs, 364 debt-repayment needs, 363 decreasing term, 368–369 dependents’ college-expense needs, 364 dividends, 374 face amount, 368 fair price, 379, 381 final expenses, 362–363 and financial planning, 378–379 first-to-die policies, 373 flexible-premium variable life insurance, 372 grace period, 375 group term, 369 guaranteed insurability, 377 guaranteed minimum rate of return, 375 guaranteed renewable term, 368 income-replacement needs, 363 incontestability clause, 373 insured, 373 lapsed, 375 level-premium term insurance, 368 life insurance needs, calculation, 364–367 limited-pay whole life, 370–371 living benefit clause, 376 low-load life insurance, 382 modified, 371 mortgage term, 369 multiple indemnity, 374 multiple-of-earnings approach, 364 need for, 362–367 needs-based approach, 364 net cost, 383 nonforfeiture values, 376 online, 381 owner/policyholder, 373 paid up, 370 participating and nonparticipating, 374 policy, 373 policy illustration, 375 policy loans, 376 premium quote service, 381 readjustment-period needs, 363, 364 return-of-premium, 369 sales commissions, 382 settlement options, 377 single-premium life insurance, 371 spouse income-replacement needs, 364 straight, 370 suicide clause, 373–374 survivorship joint life policy, 373 tax consequences, 369 term, 368, 368–369 universal, 371–372 variable, 372 variable-universal, 372 waiver of premium, 376 whole, 370 Lifeline banking account, 157 Lifestyle trade-offs, 42 Lifetime learning credit, 131 Limited liability, 425 Limited managed account, 401, 472 Limited-pay whole life insurance, 370–371 Limited (or special) power of attorney, 354 Limited warranty, 244 Liquid assets, 80 Liquidity, 152, 402 Liquidity risk, 402 Listed housing, 275 Listing agent, 275 Listing agreement, 290 Living benefit clause, 376 Living trust, 557 irrevocable, 557 revocable, 557 Living will (advance medical directive), 353 Load funds, 475 Loan, 182 automatic premium, 376 balloon automobile, 239 consolidation, 187 debt-consolidation, 193, 195 fixed-rate, 217 installment, 214 mortgage, 260, 279–280 signature, 215 single-payment, 214 student, 215 unsecured, 215 unsecured personal, 206 variable-rate, 217 Loan commitment/loan preapproval, 280 Loan origination fee, 267 Loan preapproval, 238 Loan-to-value (LTV) ratio, 268, 498 Lock confirmation, 280 Lock extension, 280 Long-term care insurance, 348 Long-term corporate bond funds, 472 Long-term disability income insurance plan, 350 Long-term gain/loss, 121 Long-term goals, 92 Long-term investments, 399 Long-term investors, 403–405 investment strategies, 408–415 market volatility and, 404–405 market timing and, 405 trading mistakes and, 405–406 Long-term (noncurrent) liability, 80 Long-term U.S government bond funds, 472 Loss control, 301 Loss frequency, 301 Loss reduction, 304 Loss severity, 301 Low-balling, 249 Low-load funds, 476 Low-load life insurance, 382 Lump sum, 377 future value of, 18–19 present value of a single, 20–21 Lump-sum distribution, 545 I-8 index M Maintenance agreement, 242 Malpractice insurance, 322 Managed care, 341 Managed funds, 470, 471 Management, 425 Manufactured housing, 262–262 Manufacturer’s suggested retail price (MSRP), 232 Margin account, 446–447 Marginal cost, 15 Marginal tax bracket (MTB), 117 Marginal tax rate, 15, 117 Marginal utility, 15 Margin buying, 446 Margin call, 447 Margin rate, 446 Market, bull vs bear, 403–404 Marketability risk, 402 Market correction, 404 Market efficiency, 406 Market interest rates, 451 Market price, 424 Market risk, 401, 433 causes of, 401 estimating, 433 in an Investor’s Portfolio, 401 Market timers, 405 Market-to-book ratio, 432 Market volatility, 402, 404 Market-volatility risk, 402 Matching contributions, 26, 137, 531 Maturity date, 426 Maximum taxable yearly earnings (MTYE), 521 Mediation, 250­–251 Medicaid, 346 Medical payments insurance, 316–317 Medicare, 344–346 Medicare Advantage plans, 345–346 Medicare Part A, 345 Medicare Part B, 345 Medicare Part D, 345 Medicare tax, 521 Mentor, 56 Microcap funds, 473 Midcap funds, 473 Mid-cap stocks, 428 Minimum-balance account, 158 Minimum payment amount, credit card, 209 Minimum payment trap, avoiding, 219 Mistakes at interviews, 60 Mobile homes, 263 Moderate investment philosophy, 397 Modified adjusted gross income (MAGI), 338 Modified life insurance, 371 Monetary asset (cash) management, 152­–155 Monetary asset management, providers of, 152–155 Monetary assets, 80, 152 Money factor, 242 Money management, psychology of, 169–173 Money market accounts, 161 Money market deposit accounts (MMDA), 162 Money market funds (MMFs), 161, 471 Money market mutual fund (MMMF), 161 Money orders, 160 Money Websites, 20 affordable housing, 281 for career planning, 56–57 for credit card and consumer loans, 215 for income and asset protection, 324 for managing income taxes, 123 for money management, 154, 286 Monte Carlo analysis, 540 simulations, 541 Morale hazard, 303 Moral hazard, 303 Mortgage adjustable rate, 286 application for, 280 assumable, 287 biweekly, 287 conventional, 286–287 due-on-sale clause, 287 insurance, 268 mathematics of loan, 282–284 monthly payment, 282–283 prequalification, 273–274 principal and interest, 268–270 refinancing, 289 second, 288 seller financing, 287–288 Mortgage-backed funds, 472 Mortgage broker, 272 commission, 290 Mortgagee, 282 Mortgage finance companies, 282 Mortgage insurance, 268 Mortgage interest tax credit, 131 Mortgage loan, 260 Mortgage lock-in, 280 Mortgage term life insurance, 369 Mortgagor, 282 Multiple indemnity, 374 Multiple indemnity clause, 374 Multiple listing, 290 Multiple-of-earnings approach, 364 Municipal bond/tax-exempt funds, 139, 472 Municipal government bonds (munis), 451, 452 Mutual fund dividend, 467 Mutual fund family, 469 Mutual fund funds, 475 Mutual funds, 154, 466 ask (or offer) price, 486 bid price, 486 investing fees and charges, 475–479 objectives, 470–475 open-end, 467 performance, 480 selection, 479–486 services, 469 tax consequences, 484 volatility, 484 Mutual savings bank (MSB), 153 N Named-peril policies, 307 NASDAQ Composite index, 440 National Association of Insurance Commissioners, 30 National Association of Personal Financial Advisors, 29 National Credit Union Share Insurance Fund (NCUSIF), 154 Need, 230 Needs-based approach, 364 Negative option plans, for credit reporting, 191 Negotiable order of withdrawal (NOW) account, 156 Negotiating (haggling), 246–248 interest rate, 248 price, 247–248 trade-in, 248 Nest egg (retirement savings), 524 Net asset value (NAV), 467 Net cost, 371 Net surplus, 105 Networking, professional, 44–46 Net worth, 79 strategies for increase, 83 New-vehicle buying service, 247 No-load funds, 476 Nominal income, 11 Noncumulative preferred stock, 425 Nondeeded timesharing, 502 Nonforfeiture values, 376 Nonparticipating policies, 374 Nonprobate property, 551–552 Nonrecourse loans, 255 Nonrefundable tax credit, 130 Non-sufficient funds (NSF), 157 Not insured, 522 O Occupations, high-growth, 47 Odd lots, 445 Off-exchange trading, 441 Offer to purchase, 277 Office of the Comptroller of the Currency, 141 Online discount brokerage, 444 index  I-9 Online discount brokers, 444 Online stock calculators, 436 Open-ended (revolving) credit, 204 Open-end mutual fund, 467 Open-enrollment period, 348 Open-listing service, 279 Opportunity cost, 14–15 Opt-in overdraft/bounce protection, 156 Option, 511 Option holder, 511–512 Option writer, 512 Ordinary income dividend distributions, 467 Out-of-pocket expenses, 328 Overdraft, 156 Overdraft protection, 207 Overindebted, 192 Overindebtedness, 192–197 signs of, 193 Over-the-counter (OTC) trading, 441 Owner, life insurance policy, 373 Owner financing, 503 Ownership cost, 497 Ownership investments, 399 Own-occupation policy, 352 P Palladium, 509 Participating policies, 374 Participating provider organization/ preferred provider option, 343 Partnership theory of marriage rights, 555 Par value/face value, 448, 455 Passive investor, 398 Patient Protection and Affordable Care Act (PPACA), 335 Pawnshop, 218 Payable at death (POD) accounts, 164 Payable-on-death designation, 164–165, 553 Payday lenders, 217 Payroll withholding, 133 Pay yourself first, 150 PEG ratio (price-earnings growth), 431 Pension Benefit Guaranty Corporation (PBGC), 538 Perils, 300 Periodic interest rate, 220 Periodic rate, 210 Periodic statement, 155 Periodic tenancy, 261 Permanent life insurance, 370 Personal exemptions, 129 Personal finance, Personal identification number (PIN), 166 Personal injury protection (PIP), 317 Personality tests, 63 Personal line of credit, 199 Personal property inventory, 312 Personal stories, 62–63 Physical hazard, 303 PIN (personal identification number), 166 PITI (a mortgage payment that includes principal, interest, real estate taxes, and homeowner’s insurance), 268 Planned buying, 230 Platinum, 509 Points/interest point, 267 Policyholder, 373 Policy illustration, 375 Policy limits, 303 Portability, 536 Portfolio, 393, 466 analysis, 540 mutual fund, 485–486 setting online, 436 Portfolio diversification, 409 Portfolio rebalancing, 413 Portfolio tracking, 442 Potential rate of return, 432–435 Potential return, 433 Preapproved credit, 188 Preapproved lender, 273 Precious metals and gold funds, 473 investment in, 508 Pre-emptive rights, 427 Pre-existing conditions, 336, 337 Preferred provider organization (PPO), 343 Preferred stock, 425 Preforeclosure, 281 Preloaded debit cards, 166 Premium, 303, 318, 335 benchmark, 339 waiver of, 376 Premium-only plan (POP), 136 Premium quote service, 381 Prepaid cards, 209 Prepaid educational service plan, 138 Prepaid tuition plan, 138 Prepayment penalty, 221–222, 291 Prequalification for mortgage, 272 Present value, 20 series of equal amounts, A-9–A-10 of single amount, A-5–A-6 single lump sum, 20–21 Preservation of capital, 397 Preshopping research, 231–233 Prestige card, 205 Pretax dollars, 23 Pretax income, 138 Pretax money, 529 Price-earnings growth (PEG) ratio, 431 Price/earnings (P/E) ratio (or multiple), 430–431 Price/sales ratio (P/S ratio), 431 Price-to-book ratio, 432 Price-to-rent ratio, 263, 495­–496 Primary-care physician, 343 Primary insurance amount, 522 Prime rate, 217 Principal, 17, 268, 426 Principle of indemnity, 303 Privately held corporation, 424 Private mortgage insurance (PMI), 268 Probate, 551 Probate court, 551 Probate property, 553 Procyclic indicator, Professional abilities, 43 Professional interests, 41 Professional liability insurance, 322 Professional networking, 44–45 Professional shoppers, 247 Professional training, education and, 43 Profile prospectus/fund profile, 485 Profit, 426 Profit-sharing plan, 539 Progressive tax, 116 Projected P/E ratio, 431 Promissory note, 189, 215 Property insurance, 301 Prospectus, 438 Provider-sponsored network (PSN), 343 Proxy, 425 Public corporation, 424 Purchase contract, 249, 278 Purchase offer, 277 Purchasing power, 12 Purchasing power risk, 401 Pure risk, 300 Put option, 512 Q Qualified plans, 529 Qualified residential mortgage (QRM), 279 Qualified tuition programs, 138 Quality healthcare plan, 336 Questions for interviewer, 63 R Random risk, 400–401 Rate of return/yield, 395 Readjustment-period needs, 363, 364 Reaffirmation agreement, 197 Real estate, 494 beneficial tax treatments, 497–500 disadvantages of investing, 503–504 investments, 494–497 pricing and financing of investments, 500–503 tax consequences, 505–506 websites for, 512 Real estate broker (agent), 275 Real estate (or housing) bubble, 494 I-10 index Real estate investment beneficial tax treatments, 497–500 buy and manage, 143 disadvantages of, 503–504 pricing and financing, 500–503 Real estate investment trusts (REITs), 470 Real estate property taxes, 270 Real estate transfer taxes, 291 Real income, 11 Real rate of return, 399, 433 Realtor®, 275 Rebate, 239–241 Recessions, 8, 402 Reciprocal amount, 12 Record date, 484 Record keeping, 93 formats, 101 Redeems, 468 Redemption charge/exit fee, 476 Redress, 251 Reference letters, 59 Refundable tax credit, 130 Regional funds, 473 Regional stock exchanges, 440 Registered bonds, 449 Registered investment advisor (RIA), 29 Regular income plan, 196 Reinstatement, of life insurance policy, 375 Reinvestment risk, 402 Release, 324 Reloadable cards, 166 Remarriage, financial complications, 172–173 Rent, 260, 394 versus buying, 260–265 Rental yield, 496 Renter’s contents broad form (HO-4), 309 Rent-to-own program, 217 Repairs, 497 Replacement-cost protection, 313 Replacement-cost requirement, 310 Replacement-cost-requirement formula, 311 Repossession/foreclosure, 193 Required rate of return on an investment, estimate of, 433 Residual claim, 425 Residual clause, disability insurance, 352–353 Residual value, 242–243 Restrictive endorsement, 157 Résumé, 53 attention-getting, 53 chronological format, 54 functional format, 55 skills format, 55 Retail credit cards, 205 Retail transaction fees, 154 Retained earnings, 426 Retirement, 520 employer-sponsored plans, 535 tax consequences in planning, 551 Retirement plans employer-sponsored retirement plans, 529–539 529 plans, 138 457 plans, 534 403(b) plans, 534 Retirement savings contribution credit, 131 Retirement savings goal/nest egg, 524 Return-of-premium life insurance, 369 Return-of-premium (ROP) claim, 369 Reverse mortgage, 288 Revocable living trust, 557 Revolving savings fund, 96, 98 Rhodium, 509 Rider, 309 Right of escheat, 555 Risk, 300 aversion, 397 avoidance, 301 business-cycle, 402 business failure, 401 default/credit, 450 deflation, 401 estimation, 301 exposures, 300–301 financial, 401 global investment, 402 inflation, 401 investment, 395, 401–402 liquidity, 402 management, 300–302 market, 401 marketability, 402 market-volatility, 402 nondiversifiable, 401 political, 402 potential losses and, 301 premium, 396 purchasing power, 401 pure, 300 random, 400–401 reduction, 301 regulatory, 402 reinvestment, 402 retention, 301 speculative, 300, 395 systematic, 401 time horizon, 401–402 tolerance, 396 transfer, 301 undiversifiable, 401 unsystematic, 400–401 Risk premium, 396 Risk tolerance, 396, 413 Rollover, 545 Rollover IRA, 546 Roth IRA, 26, 138, 542–543 Round lots, 445 Rule of 78s method, 222 Russell 2,000 Index, 440 S Safe deposit box, 88 Salary offers, comparing, 64–65 Salary-reduction plans, 530 Salary Reduction Simplified Employee Pension Plan (SARSEP), 534 Sales contract, 278 Sales finance company, 214 Savings, 5, 393 Savings accounts, 161–162 establishing, 189 Savings banks (savings and loan associations-S&Ls), 153 Savings Incentive Match Plan for Employees IRA (SIMPLE IRA), 534 Savings institutions, 153 Second mortgage loans, 288 Sector funds, 473 Secured bond, 449 Secured credit card (collateralized), 218 Secured loan, 215 Securities, 382, 412 Securities and Exchange Commission (SEC), 28–29, 436, 437, 444–445, 510 Securities exchange (stock market), 440 Securities Investor Protection Corporation (SIPC), 154, 444 Securities market index, 438–440 Securities markets, 403 Security deposit, 260 Security’s street name, 443 Self-directed plans, 532 Self-regulatory agencies, 444 Seller financing/owner financing, 287, 503 Selling agent, 275 Selling short, 447–448 SEP-IRA (simplified employee pension/ individual retirement account), 545 Serial bonds, 449 Series EE savings bonds, 139, 452 Service credit, 204 Settlement options, life insurance, 377 Share draft account, 156 Shareholder, 424 Shareholder’s equity, 432 Short sale lender, 281 private, 281 Short-term corporate bond funds, 471 Short-term disability income insurance plan, 350 Short-term goals, 92 Short-term investments, 540 Short-term (current) liability, 80 index  I-11 Short-term U.S government bond funds, 471 Signature loan, 215 Silver, 509 Simple interest, formula, 17 Single-family dwelling, 262 Single liability limits, 316 Single-payer health system, 334 Single-premium life insurance, 371 Single-state municipal bond funds, 472 Sinking fund, 449 Skilled nursing care, 349 Skills format résumé, 53, 55 Small-cap funds, 473 Small-cap stocks, 428 Small-claims court, 251 Small-loan company, 214 Small loan laws, 184 Smart-beta EFTs, 478 Smartphone Apps, 154 Socially responsible funds, 474 Social Security blackout period, 364 Social Security Disability Income Insurance, 350 Social Security Estimate, 522 Social Security rider, 340 Social Security survivor’s benefits, 363, 537 Special endorsement, 157 Speculative-grade bonds, 449 Speculative risk, 300, 395 Speculative stocks, 428 Speculator, 506 Split liability limits, 315 Sponsor, 56 Spousal consent requirement, 539 Spousal IRA, 544 Stable-value funds, 535 Stagflation, 11 Standard deduction, 126 Standard deviation, 484 Standardized expense table, 477 Standard of living, Standard & Poor’s 500 Index, 10, 440 Start-up capital, 424 Stated commission, 476 State estate tax, 558–559 Statement date, credit card, 209 Statement savings account, 161 STEM majors, 49 Stockbroker/account executive, 443 Stock brokerage firms, 154 Stockbrokers, 443 background of, 445–446 lending by, 185 Stockholder, 424 Stock market bubble (bubble), 408 Stock market (securities exchange), 440 Stock option, 511 Stocks, 393, 424 blue-chip, 428 bonds and, 442 buying and selling, 394, 443–448 characteristics of, 428 common, 424–425 convertible preferred, 425 counter cyclical (or defensive), 428 cumulative preferred, 425 evaluation of, 428–435 growth, 428 history of, 437 income, 428 Internet and, 435–442 investing in, 422–456 large-cap, 428 mid-cap, 428 noncumulative preferred, 425 preferred, 425 small-cap, 428 speculative, 428 tech, 428 using beta to compare, 429 value, 428 Stock-screening tools, 436–437 Stop-payment order, 158 Stored-value cards, 166 Straight bankruptcy, 196–197 Straight life insurance, 370 Strategic beta ETFs, 478 Student checking account, 157 Student loan debt, 185–187 Subleasing, 261 Subordinate budget, 100 Subprime lending, 239 Subprime loans, 239 Subrogation rights, 317 Substitute check, 158 Suicide clause, 373–374 Suitability standard, 29, 400 Sum of the digits method, 222 Super NOW accounts, 157 Surplus (or net gain or net income), 83 Surplus (deficit), 85 Surplus/deficit formula, 85 Survivorship joint life policy, 373 Sweat equity property, 503 Systematic risk, 400, 401, 433 Systematic withdrawal plans, 468 T Take-home pay/disposable income, 94 Tangible (use or lifestyle) assets, 80 Target-date retirement funds/life-cycle funds, 474 Taxable income, 116 Tax avoidance, 136 Tax balance due, 132 Tax credit, 130 child, 131 elderly or disabled, 131 nonrefundable, 130 refundable, 130 subsidy, 339–340 Tax-deductible contributions, 25 Tax-deferred growth, 27 Tax-deferred income, 16 Taxes, 116 as deductions, 126 preliminary liability, 129–130 Tax evasion, 136 Tax-exempt income, 15–16, 404 Tax-exempt money market funds, 471 Tax-exempt municipal bonds, 139 Tax forms, 126 Tax-free bonds/tax-exempt bonds, 442 Tax-free exchange/1031 exchange, 499 Tax-free withdrawals, 529, 542–543 Tax guides, 133 Tax losses, 143 Tax planning, 116 Tax rate schedules, 118 Tax reform proposals, 148 Tax refund, 130 Tax-sheltered income, 16 Tax-sheltered investments, 137–140, 138 Tax-sheltered retirement accounts, 529 Tax-sheltered retirement plan, 25 Teaser rate, 211, 287 Technical analysis, 429 Tech stocks, 428 Telephone interviews, 63 10-Q report, 437 Tenancy in common, 165 by the entirety, 165 joint, with right of survivorship, 165, 553 rights, 165, 553 for a specific time, 261 Term life insurance, 368 credit, 369 fair prices for, 379–381 group, 369 and investment, 379 mortgage, 369 as pure protection, 368–369 Testamentary trust, 557 Testator, 553 Tiered interest, 156 Tiered pricing, 189 Time deposits, 161 Time horizon risk, 401 Timesharing, 502 Time value of money (TVM), 17–21 Title, 257 insurance, 257–258 search, 257–258 Total income, 120–122 I-12 index Total return, 394 Trade-in vehicles, 232 Trade-off, 14 Trading mistakes, long-term investors and, 405–406 Traditional health insurance, 342 Traditional (regular) IRA, 544 Trailing commissions, 476 Trailing P/E ratio, 431 Transaction and posting dates, 209 Transaction fees, 209 credit cards, 218 Transitionally insured status, 522 Transit spending account, 136 Transportation reimbursement plan, 136 Travel and entertainment (T&E) cards, 205 Treasury bill (T-bill), 396, 433, 452 Treasury Inflation-Protected Securities (TIPS), 452 Treasury note/treasury bond, 451, 452 Treasury securities/treasuries, 451 Trust, 556–557 living, 557 setting up, 556–557 testamentary, 557 using to transfer assets, 556–557 Trustee, 530, 556–557 Trustee-to-trustee rollover, 546 Truth in Lending Act (TIL), 218 12b-1 fees/distribution fees, 476–477, 478 U Umbrella liability insurance, 321 Under water, 238, 494 Underwriting, 305, 367 Undiversifiable risk, 401 Unfair discrimination, credit, 190 Uniform settlement statement, 281 Uninsured and underinsured motorist insurance, 317 Unit investment trusts (UIT), 470 Universal life insurance, 371–372 Unmanaged funds, 471 Unsecured bonds (debenture), 449 Unsecured loan, 215 Unsecured personal loan, 206 Unsystematic risk, 400 Upside down, 238, 241 Used vehicle purchasing, 236 recalls on, 237 Use-it-or-lose-it rule, 137 U.S government savings bonds, 138 V Vacation homes, 499–500 Value funds, 473, 535 Value of bond/bond selling price, 453 Values, 41, 74 Value stock, 428 VA mortgage insurance, 268–269 Variable annuity, 550 Variable expenses, 84 Variable interest rates, 217 Variable life insurance, 372 Variable-rate certificates of deposit, 163 Variable-rate loans, 217 Variable-rate mortgage, 286 Variable-universal life insurance, 372 Variable value, 451, 453 Vesting, 530 cliff, 530 graduated, 530 Viatical companies, 376 Volatility, 484 market, 404–405 portfolio, 409 Voluntary expanded Medicaid program, 346 Voting rights, 425 W Wage earner bankruptcy, 196 Wage earner plan, 196 Waiting period, disability insurance, 349, 352 Waiver of premium, 376 Want, 230 Warranty, 244 comparison shop for, 244–245 express, 244 extended, 244 for fitness for a particular purpose, 244 full, 244 implied, 244 limited, 244 Warranty deed, 267 Warranty of fitness, 244 Warranty of merchantability, 244 Whole life insurance, 370, 371 Will, 553 appointing a guardian in case of minor children, 554 topics to include in, 554 transferring estate via, 553–555 valid, 554 Withdrawal options/systematic withdrawal plans, 468 Withdrawal penalties, early, 540 Workers’ compensation plans, 344 Work-style personality, 43–44 World bond funds, 472 Y Yield to maturity (YTM), 454–455 Z Zero-coupon bonds (zeros or deep discount bonds), 448 Zero-sum game, 513 TOP 20 QUESTIONS IN PERSONAL FINANCE How can I manage my employer’s benefits program to reduce my income taxes? Pages 136–137 What are some good get-tough ways to cut spending? Page 99 How can I deduct education expenses on my income taxes? Pages 128 and 138 What are easy ways to start an emergency savings fund? Page 75 What are some common job interviewing mistakes to avoid? Page 60 What can I to build and maintain a good credit reputation? Pages 187–193 If I buy a new vehicle, should I take the dealer’s low-rate financing or a rebate? Pages 239–241 If I buy a used vehicle (instead of new), can I save for a home or retirement? Pages 239–241 Can singles really afford to buy a home? Page 274 10 How I maintain health care coverage when I’m between jobs? Page 345 11 Do I need life insurance and, if so, how much coverage is appropriate? Pages 362–367 12 What are some key protections and benefits of the Affordable Care Act? Page 337 13 What are five ways to get the money to start an investment program? Page 392 14 Why should I deal only with a financial advisor who is a fiduciary? Page 400 15 What five trading investment mistakes should be avoided because people them and lose money? Pages 405–406 16 How I open a brokerage account and check the history of a financial advisor? Pages 443 and 445 17 How can I invest in mutual and exchange traded funds and avoid losing 30 percent of my money paying high fees? Page 478 18 If timeshares are such a lousy “investment,” why people buy them? Page 502 19 Are the reasons for investing in gold logical and valid for me? Pages 508–509 20 What are some ways to surpass $1 million in savings and investments? 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WWW.CENGAGE.COM/STUDENTS/MINDTAP Personal Finance 13e E Thomas Garman Raymond E Forgue Virginia Tech University University of Kentucky Australia • Brazil • Mexico • Singapore • United Kingdom • United States Personal Finance, ... is new, accurate, and reliable The Right Things to Do in Personal Finance? ?? Personal Finance emphasizes the “right things” to in personal finance, and why, and then how to them Why such an emphasis?... shoulders While personal finance is not rocket science, it sometimes feels like it In fact, personal finance actually is not very complicated But there are a lot of topics in personal finance, so