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This ebook quickly explains important personal finance basics & essential skills that every adult needs to understand.
Copyright 2005 by Global Fundamentals, LLC. All rights reserved. Except as permitted under the Copyright Act of 1976, no part of these materials may be reproduced or distributed in any form or by any means without the prior written permission of Global Fundamentals, LLC. Email: MoneyManagement101@gmail.com www.MoneyManagement101.com
These materials are designed to provide accurate information in regard to the subject matter covered. It is sold with the understanding that Global Fundamentals, LLC is not engaged in rendering legal, accounting, tax, or investment advice or other professional services. Since each individual's situation is unique, please contact a qualified legal, accounting or financial professional before making any legal or financial decisions or investments.
Information has been obtained by Global Fundamentals, LLC from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, Global Fundamentals, LLC or others, Global Fundamentals, LLC does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or the results obtained from the use of such information.
Table of Contents Introduction Checking Account Overview How to Manage a Checking Account How to Write a Check Correctly Balancing Your Checking Account Bank Account Reconciliation Form Information Security & Identity Theft Tips to protect your personal information The following pages are available, in the full version of this ebook. Which is available at MoneyManagement101.com Personal Budgeting Creating a Monthly Budget & Living Within Your Means Personal Budget Planning Worksheet Expense Tracker Log Sheet Credit Basics Credit Reports & Your Credit Rating How to Establish a Credit Rating & How to Improve It Paying Your Bills & Maintaining Adequate Cash Flow Credit Card Basics Secured Credit Cards, Student/College Credit Cards How to Use Your Credit Card Responsibly Important Points and Tips on Using Your Credit Card Properly How to Evaluate Credit Cards & Reading the Fine Print Interest Rates & Finance Charges Calculating Finance Charges Making Payments Properly Income Taxes and Withholding Tax Rates Explained Tax Forms Explained Standard Deduction and Itemization Explained W4, Payroll Withholding, W2, 1099 31 Basic Financial Terms Every Adult Needs to Understand
4 5 9 12 15 19 21 22
25 28 29 30 31 32 35 36 38 41 42 43 44 45 47 49 51 53 55 57 58 60
The content in this course is provided for educational purposes only. Since each individual's situation is unique, please contact a qualified legal, accounting or financial professional before making any legal or financial decisions or investments.
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MoneyManagement101
Introduction The purpose of this ebook is to help explain personal finance basics and money management to young adults. A lack of understanding of basic money skills and not living within your means is a dangerous situation. Money mistakes can take many years to correct. This ebook will provide a basic overview of personal finance, so that young adults will be better prepared.
Few schools spend time teaching students about money. Money management skills are important for young people entering college; entering the workforce; whether they are living at home or on their own. It is not hard to find a personal finance book or personal finance course. However, most of them focus on offering advice on making financial decisions. This ebook does not provide advice, it simply explains some of the basics of personal finance.
This ebook provides a basic overview of personal finance, so that young adults will be better prepared.
The content in this ebook is provided for educational purposes only. The material provides an overview of the subjects presented. For more in-depth understanding of the topics presented, additional research is recommended. Since each individual's situation is unique, please contact a qualified legal, accounting or financial professional before making any legal or financial decisions or investments.
Checking Accounts
For most Americans, the checking account is the primary tool for dayto-day money management.
Checking account basics Proper way to write a check. Managing your account & avoiding overdrafts How to properly balance your checkbook
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Your checking account package will include a booklet that includes blank checks, deposit slips, and a ledger.
When you open your account, you will typically be given a small starter set of blank checks to use, however, you will also need to order and pay for your own checks which will be preprinted with information such as your name, address, account number, etc.
You can choose to order plain checks or colorful checks which feature various themes.
You may also elect to have carbon copy checks, which will leave a duplicate carbon copy of every check you have written.
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What else should you know about checking accounts? Checking account holders are typically issued an ATM (Automatic Teller Machine) card, which may be used to withdraw funds from your account at ATM machines. Usage fees will generally be charged if you use an ATM machine that is not owned by your financial institution. Some checking accounts come with a Debit Card. Debit Cards are essentially the same as ATM cards, however, they can also be used to pay stores or other merchants, with the funds subtracted directly from your account.
Usage fees will generally be charged if you use an ATM machine that is not owned by your financial institution
Every month, you will receive a bank statement which will show your beginning and ending account balances, along with all account activity including deposits, cleared checks, fees, etc. (Cleared checks are checks that have been written and cleared through the banking system and subtracted from your account balance). Depending on the format of your account, you may also receive the actual cleared checks. Note: Procedures for opening a checking account vary by financial institution. For specifics on how to open a checking account or bank account, please consult your preferred bank or credit union.
Checking Account Statement Sample ABC Bank Account Holder: Joe Smith 123 Main Street Anytown, USA Account # 000123456 Beginning Balance as of June 15 Checks Paid $427.45 Other withdrawals $241.45 Deposits $815.44 New Balance as of July 15 $798.33
$944.87
Account Activity Details Checks Paid Number Amount Date Paid 236 40.99 6-19 241* 122.00 6-22 244* 29.00 6-26 245 31.44 6-30 246 55.00 7-01 247 139.02 7-05 249* 10.00 7-06 Total: $427.45 *out of sequence. Checks not listed were shown on a previous statement or had not cleared as of 7-15. Other Withdrawals including Charges and Fees Date Description Amount 6-13 ATM Withdrawal $ 40.00 6-16 Withdrawal $100.00 6-22 NonBank ATM Withdrawal $ 60.00 6-22 NonBank ATM Fee $ 1.50 7-1 PreAuthorized Debit $ 29.95 7-9 Account Maintenance Fee $ 10.00 Total $241.45 Deposits and other additions Date Description 6-16 XYZ Employer Direct Deposit 6-29 Deposit Total: Amount $490.44 $325.00 $815.44
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If you write a check but you dont have enough funds in your account to cover it, when the payee cashes it, the check will be denied by your bank. In addition, your bank will charge you a Not Sufficient Funds (NSF) fee this is typically $20 or more. The bank may also charge an additional fee for every day your account remains overdrawn. Most banks offer a service called Overdraft Protection, where the bank will cover you up to a predetermined limit if you overdraw your account. There is sometimes a small fee for this service.
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Pictured above is an example page of a checkbook register (ledger). Note that you insert check numbers in the left column followed by the corresponding date of the check. You also record deposits or ATM and Debit Card activity. Fill in the transaction description along with the amount.
Keep an updated running balance by adding deposits & subtracting payment/withdrawal activity.
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Dont hold on to checks from others too long before depositing them. Many banks will may not honor them if they are over 90 days old (they are considered stale checks ).
Make sure you keep all your ATM withdrawal and deposit receipts in your wallet/purse or place them in a large envelope in your home. You may need these receipts when you balance your checkbook at month end.
...checks deposited into your account: there is typically a delay of a few days before the money is available to you.
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Writing Checks
How to Write a Check Correctly
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Never sign a blank check; if someone finds or steals it, they could write in their name as payee and any dollar amount.
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Banks make mistakes too; occasionally the bank may input a wrong amount. You need to make sure your bank has not made such errors. Another part of balancing your checking account is recording any fees that the bank may have charged you.
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The other common difference is deposits you have made, that have not yet been reflected on the bank statement you received in the mail.
Remember, your bank statement was probably printed and mailed several days earlier, so it will not be completely up to date.
Common errors are: Forgetting to write in an ATM withdrawal; a math error, or accidentally writing in a wrong amount. Also, other common missed items are ATM fees that were charged by your bank for using another banks ATM, or additional fees for using ATMs in gas stations or convenience stores that charge their own separate fees.
.. common error is forgetting to record direct debits or automatic debits from your account
Another common error is forgetting to record direct debits or automatic debits from your account, an example would be a monthly health club membership fee.
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1) If your bank sends cleared checks with your bank statement, sort them in numerical order. If you receive only a bank statement without cleared checks; your statement will have a sorted listing of all of the checks that have cleared including the check numbers and amounts.
2) Next, compare the cleared checks to the entries in you checkbook ledger. Compare both the check numbers and the dollar amounts. Sometimes the dollar amounts may not match. This could be due to an error on your part, or a bank error. Youll need to resolve this discrepancy to balance your account. For each matching entry, place a checkmark next to the item in your checkbook ledger. This indicates that the item has cleared. Also, put a check mark next to each ATM withdrawal in your ledger if it agrees with your bank statement. Also, make sure your deposits agree with the deposits recorded on the bank statement.
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Review your bank statement Write down your balance as reported on the bank statement ADD any deposits you made that do not yet appear on your bank statement SUBTRACT any uncleared checks or withdrawals that you have made but do not yet appear on your bank statement. Add and subtract the above items, and the net result is your Adjusted Bank Statement Balance.
Next,
In your checkbook ledger, subtract any service charges or other fees on your bank statement from your current checkbook ledger balance. Examples are ATM usage fees, NSF fees, check research fees. The result of this calculation should equal the amount of your Adjusted Bank Statement Balance calculated above. If they do not match, recheck your math and/or make any necessary adjustments.
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Bank Account Reconciliation Form Here is a bank account reconciliation worksheet to aid you in balancing your checkbook, so that your checkbook register agrees with the bank statement.
$____________________
Step 2. Enter & total any recent deposits made, that do not yet appear on your bank statement Date _______ _______ _______ _______ Amount $_______ $_______ $_______ $_______ Subtotal: $__________
Step 3. Enter & total checks written or withdrawals made, that do not yet appear on your bank statement: Check # Amount _______ _______ _______ _______ _______ _______ _______ $_______ $_______ $_______ $_______ $_______ $_______ $_______ Subotal: $___________
Step 4. Calculate the following: Step One plus Step Two Subtotal minus Step Three Subtotal Equals Adjusted Bank Statement Balance: $________________
$________________
Step 6. Enter & total any bank service charges and other fees on the bank statement: $_______ $_______ $_______ $_______ $_______ Subtotal: $___________
Step 7. Calculate the following: Step five minus Step Six Subtotal Equals Adjusted Checkbook Balance: $______________
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Finally update your checkbook register by inputting any service charges/fees listed in Step 6. Also, input any adjustments or corrections that you may have identified.
Identity Theft
When you watch or read the news, there are often stories about thefts of personal information or identity theft. Identity theft is a situation where someone uses your personal information for illegal activities such as purchasing items under your identity.
Special points of interest: What is identity theft You are a target Protecting personal information Simple steps to reduce your risk of being victimized
If an identity thief gets hold of your social security number, they might be able to open credit cards in your name and make purchases, or they might even gain access to your savings, checking and other personal accounts.
They might get your information through an internet or telephone scam, or by stealing your mail, or even by dumpster diving by going through your trash.
Your Social Security # Your Banking Activities Your Statements & Documents
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Your social security number is a valuable piece of information, and you need to protect it.
If at all possible avoid giving out your social security number. Unless its absolutely necessary, dont carry your Social Security Card or birth certificate
with you.
Do not print your drivers license number, birth date, or social security number on your
checks.
(continued)
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If you lose your ATM card or your credit card, alert your bank immediately. Be aware of your surroundings when you visit the ATM, dont let anyone observe your PIN
(Personal Identification Number). Also, be wary of robbers who might be waiting nearby. that might be easy for a thief to figure out (i.e. avoid birth dates, common names, etc.)
tended. Also, keep blank checks and canceled checks in a safe place. allow them to confirm your check by writing in your credit card number on the check.
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You need to pay close attention to your financial statements or other documents which contain personal information.
Shred any financial documents or anything containing sensitive information before putting them in the trash.
Check your credit card statement for charges you did not make. Carefully examine your phone and utility bills for unauthorized activity. Order a copy of your credit report at least once per year. Look out for creditors on your
If your credit card bills, new cards, bank statements or other important documents dont
arrive in the mail, there is a possibility that your mail might have been stolen by an identity thief. Be sure to inquire if these important financial statements fail to arrive. directly to a US postal mailbox.
Dont put outbound mail in your mailbox for your postal carrier to pickup. Take your mail
www.MoneyManagement101.com
Examples of Some Additional Topics Covered:
Setting up and living within a budget Paying your bills and maintaining adequate cash flow Credit Ratings - understanding, establishing, improving Credit Cards - types, responsible usage, risks of abuse Important Points and Tips on Using Your Credit Card Properly Income Taxes & Payroll withholding - all the basics Explanation of 31 basic financial terms that all adults need to understand
We believe if young adults understand the basics of personal finance, they will be much less likely to make costly financial mistakes that often take years to overcome. Feel free to forward this Abridged ebook to other parents of young adults, community organizations, websites, etc. that might be interested.