Money Management Skills

Begin with an examination of the brain to explore the tension between conscious decision-making and the automatic emotional response of our limbic systems. This tension affects many of our approaches to financial management, including our innate aversion to loss, our tolerance of risk, and our investment confidence.

Reconsider your entire approach to your finances. Life cycle theory is a framework for making financial decisions at different stages in your life, and it offers sound guidance for saving, borrowing, and investing across time. In other words, it's about making sure you get the most out of your money from young adulthood through retirement.

You don't have to be a financial guru to make wise investment choices. In fact, as you will learn, a few basic rules of thumb are all most of us need to make solid financial choices. Review the basics of investment and risk, the importance of diversification, and a simple theory for building a profitable investment portfolio.

Tour the range of investment options, from liquid assets such as cash and checking accounts to long-term assets such as mutual funds, stocks, and bonds. See what fees and returns you can expect from each type of instrument - and what tax obligations you may incur. Then build a strategy of investment for the long haul.

Debt can be intimidating, but when used appropriately, it is a powerful tool. Psychology plays a key role when we take on debt, so it is important to recognize bad habits such as impulsiveness. After getting an overview of credit and credit history, you'll survey the variety of loans available, from credit cards to auto loans to mortgages.

Most economists would agree that education offers one of the highest returns of any investment; however, paying for college often involves taking on student loans. Whether you're a high school student or a parent preparing to pay for your child's tuition, learn the key risks of student loans, and see what tax advantages you might apply toward a college education.

After education, home ownership might be the most important financial decision we make in our lifetimes. Is home ownership really a great investment? When should you buy a house versus renting? Examine these questions as well as the basics of obtaining a mortgage. Key considerations include types of loan, mortgage insurance, points, and taxes.

Insurance is really about "risk management." The world abounds with perils, and insurance is about estimating the probability of a loss and weighing the cost of insurance versus potential out-of-pocket expenses. Fortunately, some elementary principles help guide you toward critical coverage and help you avoid less beneficial policies.

No discussion of finances can evade the topic of taxes. Professor Finke provides a clear and concise overview of the U.S. income tax system: how our income is taxed, as well as the myriad credits and deductions that are available. His discussion also includes payroll and state taxes, as well as other taxes the average American pays.

When should you retire? And how do you save enough to ensure that you're financially covered for the future? Demystify the retirement savings process with continuing guidance from the life cycle theory of managing money. Explore the different investment options at your disposal - including 401(k)s, IRAs, and annuities - and build a strategy for retirement.

The goal of estate planning is to prepare your financial affairs to save your relatives from a confusing mess of assets, liabilities, and property transfers after you've passed. Here you'll discover a roadmap for sorting out your affairs, setting up trusts for your assets, and creating a plan for your end-of-life care options.

Wrap up by building a solid and realistic financial plan. You'll learn how to set up a cash-flow statement, prepare a budget for future expenditures, and make a balance sheet for your estate planning process. Then, apply the fundamentals to achieving your financial goals.