Easy Money: How to Simplify Your Finances and Get What You Want out of Life

219 Pages·2007·12.26 MB·English

by  Liz Pulliam Weston

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From the Library of Melissa Wong
Easy
Money
ptg
From the Library of Melissa Wong
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From the Library of Melissa Wong
Easy
Money
HOW TO SIMPLIFY
YOUR FINANCES
AND GET WHAT YOU
WANT OUT OF LIFE ptg
Liz Pulliam Weston
From the Library of Melissa Wong
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©2008 by Pearson Education,Inc.
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All rights reserved. No part of this book may be reproduced,in any form or by any ptg
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Printed in the United States of America
First Printing,November 2007
ISBN-10:0-13-238383-7
ISBN-13:978-0-13-238383-7
Pearson Education LTD.
Pearson Education Australia PTY,Limited.
Pearson Education Singapore,Pte. Ltd.
Pearson Education North Asia,Ltd.
Pearson Education Canada,Ltd.
Pearson Educatión de Mexico,S.A. de C.V.
Pearson Education—Japan
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Library of Congress Cataloging-in-Publication Data
Weston,Liz Pulliam.
Easy money:how to simplify your finances and get what you want out of life / Liz
Pulliam Weston.
p. cm.
ISBN 978-0-13-238383-7 (pbk. :alk. paper) 1. Finance,Personal. 2. Retirement
income—Planning. 3.
Investments. I. Title.
HG179.W4753 2007
332.024—dc22
2007017412
From the Library of Melissa Wong
To Will, again and always.
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From the Library of Melissa Wong
This page intentionally left blank
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From the Library of Melissa Wong
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1 Setting Up Your Financial Life . . . . . . . . . . . . . . . . . . . . . . . . . 3
Your Financial Toolkit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Sign Up for Online Access . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Link Your Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Allow Your Paycheck to Be Deposited Automatically . . . . . . 4
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Set Up Overdraft Protection . . . . . . . . . . . . . . . . . . . . . . . . . 4
Open at Least One High-Yield Savings Account That’s
Electronically Linked to Your Checking Account . . . . . . . 6
Consolidate Your Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Consider Two Checking Accounts . . . . . . . . . . . . . . . . . . . . . . . . 8
The Right Ways to Pay Your Bills . . . . . . . . . . . . . . . . . . . . . . . . 8
Know What You Owe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Set Up a Bill Calendar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Set Up Alerts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Consider Switching to E-Bills and E-Statements . . . . . . . . 12
Pay Your Bills Electronically . . . . . . . . . . . . . . . . . . . . . . . 12
Build Your Control Panel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Account Aggregation 1.0 . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Account Aggregation 2.0 . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Account Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Excel Spreadsheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Set Up Your Command Center . . . . . . . . . . . . . . . . . . . . . . . . . 20
From the Library of Melissa Wong
viii CONTENTS
Staying Up-to-Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Your Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2 Take Charge of Your Spending . . . . . . . . . . . . . . . . . . . . . . . . 27
The 60 Percent Solution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
The 50/30/20 Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
How Do I Prioritize My Goals? . . . . . . . . . . . . . . . . . . . . . . . . 39
Couples and Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Your Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
3 Get the Most Out of Your Credit Cards . . . . . . . . . . . . . . . . 47
If You Carry a Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Zero Percent Jockeys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
If You Pay Off Your Balance in Full Every Month . . . . . . . 54
How to Find the Best Card(s) . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Your Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 ptg
4 The No-Sweat Guide to Retirement (and other)
Investing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
How to Manage Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Why Beating the Market Is So Tough . . . . . . . . . . . . . . . . . . . . 65
The Three Keys to Successful Investing . . . . . . . . . . . . . . . . . . 66
Use Low-Cost, Broad-Market Index Funds
Wherever Possible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Include Bonds and Cash in the Mix . . . . . . . . . . . . . . . . . . 67
Add a Dab of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . 68
Rebalance Annually, but Otherwise Leave Your
Investments Alone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Why Life-Cycle and Target Maturity Funds May Be
the Answer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Which Account Do I Use? . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Coordinating Your Approach . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Getting Help . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
How Much Should I Save for Retirement? . . . . . . . . . . . . . . . . 77
From the Library of Melissa Wong
CONTENTS ix
Ballpark E$timate® . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
As You Approach Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Your Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
5 The Easy Way to Save for College . . . . . . . . . . . . . . . . . . . . . 87
Why 529 College Savings Plans Rock . . . . . . . . . . . . . . . . . . . 90
Picking the Right College Savings Plan . . . . . . . . . . . . . . . . . . 92
Prepaid Tuition Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Your High School Game Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 95
What to Do If You’re Starting Late . . . . . . . . . . . . . . . . . . . . . . 95
Your Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
6 Insurance: Protecting What You Have—And Will Have . . . . 99
Auto Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Renters Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
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Condo Owners Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Homeowners Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Umbrella Liability Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Health Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Disability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Life Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Your Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
7 Buying Homes and Cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117
When You’re Ready to Buy a Home . . . . . . . . . . . . . . . . . . . . 117
The Home-Buying Timeline . . . . . . . . . . . . . . . . . . . . . . . . . . 119
One Year Before You Want to Buy: Get Your Credit
Reports and FICO Credit Scores, Pay Down Toxic
Debt, and Build Up Savings . . . . . . . . . . . . . . . . . . . . . 120
Six Months Out: Review Your Mortgage Options,
Start Calculating What You Can Afford, and Create
Your New Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
From the Library of Melissa Wong