The Personal Finance Calculator: How to Calculate the Most Important Financial Decisions in Your

306 Pages·2003·2.43 MB·English

by  Faerber E. E.

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Copyright © 2003 by Esme Faerber. All rights reserved. Manufactured in the United States of America.
Except as permitted under the United States Copyright Act of 1976, no part of this publication may be
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Contents
ACKNOWLEDGMENTS vii
INTRODUCTION ix
P A R T O N E
Assessing Your Current Wealth
FINANCIAL CALCULATOR:
#1 How to Determine Your Net Worth 3
#2 How to Determine a Cash Inflows and
Outflows Statement 8
#3 How to Formulate a Budget 12
#4 Time Value of Money and What It Can Do for You 20
#5 Simple Interest and How to Calculate It 22
#6 Compound Interest and How to Determine Future Value 23
#7 What You Need to Know About Nominal Versus Effective
Interest Rates and How to Calculate the Effective Rate 30
#8 Present Value and How to Calculate It 33
#9 Annuities and How to Calculate Them 37
#10 How to Determine the Amounts
Needed to Fund Your Objectives 52
#11 How to Reconcile Your Checking Account 61
#12 How to Prepare Your Records for Your Tax Accountant 68
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iv Contents
P A R T T W O
Managing Your Personal Wealth—Debt
FINANCIAL CALCULATOR:
#13 Determine Your Debt Capacity 75
#14 How to Determine the Best Source of Credit 77
#15 How to Determine the Annual
Percentage Rate Costs of Using Credit Loans 81
#16 How to Determine the Rate of
Interest on Your Credit Cards 90
#17 How to Manage Your Debt 94
#18 How Much of a Mortgage Can You Afford? 99
#19 How to Calculate Your Monthly Mortgage Payment 103
#20 How to Determine Your Mortgage Balance 107
#21 Determine Your Mortgage Balance
When Additional Principal Payments Are Made 111
#22 Adjustable Rate Mortgages and How They Work 114
#23 Which Type of Mortgage Should You Choose? 121
#24 When Should You Refinance Your Mortgage? 125
#25 Should You Rent or Buy a House? 127
#26 What You Should Know
About Leasing a Car and How a Lease Works 131
#27 Should You Buy, Lease, or Finance Your Car? 136
#28 How to Create a Simple Interest Loan Schedule 142
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Contents v
P A R T T H R E E
Managing Your Personal Wealth—Investments
FINANCIAL CALCULATOR:
#29 Determine Your Investment Objectives 149
#30 Determine Your Risk Tolerance 152
#31 How to Allocate Your Investments 158
#32 How to Determine Your Equity Style in
the Selection of Individual Stocks 165
#33 How to Determine Which Types of
Bonds to Buy for a Portfolio 171
#34 How to Rebalance Your Portfolio 175
#35 The Rule of 72 and How to Use It to Determine
How Long It Will Take to Double Your Money 179
#36 How to Assess and Balance Risk and
Return in the Choice of Different Investments 180
#37 How to Calculate a Simple Rate of Return for
Stocks and Bonds 186
#38 How to Determine a Rate of Return for a Mutual Fund 190
#39 How to Determine the Yield on Treasury Bills 193
#40 How to Determine the Purchase and
Selling Price of Treasury Bills 197
#41 How to Buy and Sell Treasury Securities
Directly from the Federal Reserve 201
#42 How to Convert Municipal Bond Yields to
Before-Tax Yields 207
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vi Contents
#43 Duration and How It Can Help You in
the Choice of Bonds for Your Portfolio 211
#44 How to Value Bonds 217
#45 How to Value Common Stock 220
#46 How to Determine the Growth Rate of a Stock 226
#47 How to Analyze and Evaluate Your Common Stocks 229
#48 How to Choose a Mutual Fund 246
#49 How to Determine the Tax Consequences of
Buying and Selling Shares in a Mutual Fund 254
#50 How to Determine the Average Cost in
Dollar Cost Averaging 259
P A R T F O U R
Planning for Your Future
FINANCIAL CALCULATOR:
#51 How to Determine Your Future
Financial Needs and How to Fund Them 265
#52 How to Determine How Long Your Money
Will Last in Retirement and the Amount of the
Payment in a Systematic Withdrawal Plan 272
APPENDICES 277
INDEX 287
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Acknowledgments
he preparation of this book was greatly facilitated by many people at
Tthe McGraw-Hill Publishing Company. Most notably, I am grateful for the
support of Stephen Isaacs and Kelli Christiansen. Rena J. Copperman and Linda
Gorman provided superb editorial assistance and were a pleasure to work with.
I am especially appreciative of their help.
My husband Eric and our children Jennifer and Michael were patient and
supportive, for which I am especially grateful.
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