Personal Finance

Units

1. 1

   Financial planning foundations

   4 lessons

   1. The personal financial planning processBuild a six-step savings plan, check it against a budget, and revise it using actual results.
   2. Compound growth and the Rule of 72Calculate a balance with annual compounding, compare it with simple interest, and estimate doubling time with the Rule of 72.
   3. Present value and annuities in personal decisionsCompare a monthly payout with cash today and calculate the monthly saving needed for a dated goal.
   4. Net worth and cash flow statementsBuild a dated personal balance sheet and a monthly cash flow statement, then calculate and interpret liquidity, debt and savings ratios.
2. 2

   Budgeting and saving

   4 lessons

   1. Building a budgetBuild a monthly budget from take-home pay, separate fixed from variable expenses, and compare the 50/30/20 rule, zero-based budgeting and the envelope method.
   2. Tracking spending and budget variancesCompare budgeted with actual spending in a table, compute dollar and percent variances with a clear sign rule, and adjust categories using what tracking shows.
   3. Emergency funds and saving goalsSize an emergency fund as months of essential expenses, choose where to keep it, and use paying yourself first and sinking funds to reach it and to pay planned costs.
   4. Opportunity cost and money decisionsApply opportunity cost, marginal thinking and the time value of money to everyday choices, such as a daily purchase against investing the same amount.
3. 3

   Banking and payment services

   4 lessons

   1. Banks, credit unions and online banksCompare commercial banks, credit unions, online banks and fintech apps by who owns them, who insures them and what they pay, and work out how much of a balance FDIC and NCUA deposit insurance protects.
   2. Savings options and APYCompare savings accounts, money market accounts and certificates of deposit, convert an APR to an APY with APY = (1 + APR/m)^m − 1, and judge a savings rate against inflation.
   3. Checking accounts and paymentsUse a checking account well: see how debit cards and overdraft fees work, compare ways of paying (debit card, ACH, check, payment app), and reconcile a checking account against the bank statement.
   4. Consumer protection in bankingName what the CFPB does, use the Truth in Savings disclosures to compare accounts, and apply the Electronic Fund Transfer Act and Regulation E to errors, lost cards and unauthorized transfers, including the 50, 500 and unlimited liability tiers.
4. 4

   Taxes

   4 lessons

   1. Federal income tax bracketsCompute income tax with progressive brackets, tell the marginal rate (the rate on the next dollar) from the average rate (total tax over income), and add the flat FICA payroll taxes to see what a paycheck really loses.
   2. Deductions, exemptions and creditsMove from gross income to adjusted gross income to taxable income, choose between the standard and itemized deductions, and show why a credit is worth more than a deduction of the same size, telling refundable from nonrefundable credits.
   3. Filing returns and withholdingFollow a year of federal income tax from the W-4 through withholding and the W-2 to the Form 1040, compute a refund or a balance due, choose a filing status, and know the deadlines and what filing or paying late costs.
   4. Tax planning strategiesLower lifetime tax legally: use tax-advantaged accounts, hold investments long enough for the long-term capital gains rate, harvest losses to offset gains, and time income and deductions between years.
5. 5

   Credit and debt

   4 lessons

   1. Credit reports and credit scoresExplain what the credit bureaus collect and what a credit report contains, use the Fair Credit Reporting Act to get and correct a report, name the five FICO score factors and their weights, and compute credit utilization to see how balances and closed cards move a score.
   2. Credit cardsUse a credit card without paying interest by keeping the grace period, compute interest from the APR with the average daily balance method, see how long paying only the minimum takes, and know the main fees and what the CARD Act requires.
   3. Consumer loansCompute the payment, total of payments and finance charge of an installment loan, compare federal and private student loans and see what unpaid interest does to a balance, and show why a payday loan's fee is a triple-digit APR.
   4. Managing and repaying debtOrder debts for repayment with the avalanche and snowball methods and compare their results, compute the debt to income ratio, judge when consolidation helps, and tell credit counseling, Chapter 7 and Chapter 13 bankruptcy apart.
6. 6

   Housing and major purchases

   4 lessons

   1. Buying or leasing a carCompare buying a car with a loan and leasing it on total cost, built from depreciation, interest or the lease's rent charge, insurance and fees, after computing an auto loan payment and a lease payment.
   2. Renting versus buying a homeCompare the full yearly cost of renting and owning, counting mortgage interest, property tax, insurance, maintenance and the opportunity cost of the down payment against rent, see how equity builds, and test affordability with the 28/36 rule.
   3. Mortgages and amortizationCompute the monthly payment on a fixed-rate mortgage, read an amortization schedule row by row, compare 15 and 30 year terms, and weigh an adjustable rate, discount points and PMI with numbers.
   4. Closing costs and refinancingExplains the home buying process, closing costs and escrow, and when refinancing pays off using a break-even months calculation.
7. 7

   Insurance and risk management

   4 lessons

   1. Risk management and insurance basicsExplains risk avoidance, reduction, retention and transfer, pooling and the law of large numbers, and the premium, deductible and coverage limit tradeoff.
   2. Health insuranceExplains premiums, deductibles, copays, coinsurance and out of pocket maximums with a cost example, and compares HMO, PPO and high deductible plans with HSAs.
   3. Life and disability insuranceCompares term and whole life insurance, estimates coverage needs with the income replacement method, and explains disability insurance waiting periods and benefits.
   4. Home and auto insuranceExplains homeowners and renters coverage, replacement cost versus actual cash value, auto liability limits such as 100/300/100, collision, comprehensive and umbrella policies.
8. 8

   Investing basics

   4 lessons

   1. Risk, return and investment choicesCompares returns and volatility of cash, bonds and stocks historically, explains inflation risk and the risk return tradeoff drawn as a scatter.
   2. Stocks, bonds and fundsExplains how stocks and bonds earn returns, and how mutual funds, index funds and ETFs pool money, with expense ratios compared over 30 years.
   3. Diversification and asset allocationExplains diversification, asset allocation by age and risk tolerance, target date funds and rebalancing, drawn as allocation pie charts.
   4. Opening accounts and investor behaviorExplains brokerage accounts, order types, dollar-cost averaging, and behavioral mistakes such as market timing, chasing performance and panic selling.
9. 9

   Retirement planning

   4 lessons

   1. Estimating retirement needsEstimates retirement income needs with a replacement ratio, adjusts for inflation and computes the nest egg using the 4 percent rule.
   2. 401(k) plans and IRAsCompares employer 401(k) and 403(b) plans with employer match, traditional and Roth IRAs, contribution limits, vesting and early withdrawal penalties.
   3. Traditional versus Roth accountsCompares pre-tax and after-tax contributions with worked numbers at different current and future tax rates to show when each wins.
   4. Social Security and retirement incomeExplains Social Security eligibility, full retirement age, claiming early or late, annuities, required minimum distributions and sustainable withdrawal strategies.
10. 10

    Estate planning and financial protection

    4 lessons

    1. Wills, trusts and estate planningExplains wills, probate, revocable and irrevocable trusts, beneficiary designations, powers of attorney and the federal estate and gift tax.
    2. Identity theft and financial fraudExplains identity theft, phishing, Ponzi schemes and investment scams, credit freezes and fraud alerts, and steps to recover.
    3. Behavioral finance in everyday lifeApplies present bias, loss aversion, anchoring and mental accounting to personal choices, with commitment devices and automatic saving as remedies.
    4. Putting together a lifetime planCombines budgeting, debt, insurance, investing, retirement and estate decisions into one written plan by life stage, and when to use a fiduciary financial planner.