Personal Finance Chapter 2

Personal Finance Chapter 2 - baj01275_c02_022-041.qxd...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
2 MONEY MANAGEMENT STRATEGIES AND SKILLS Putting Your Financial House in Order Starting Point Go to www.wiley.com/college/bajtelsmit to assess your knowledge of money management strategies and skills. Determine where you need to concentrate your effort. What You’ll Learn in This Chapter Document organization, storage, and safekeeping How to use personal balance sheets How to calculate personal financial ratios After Studying This Chapter, You’ll Be Able To Develop a system for organizing and maintaining your financial records Calculate your net worth by using a personal balance sheet Summarize your current inflows and outflows of cash by using a personal cash flow statement Use personal financial ratios to evaluate your current financial position baj01275_c02_022-041.qxd 2/09/07 02:23am Page 22
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2.1 COLLECTING AND ORGANIZING YOUR FINANCIAL INFORMATION 23 INTRODUCTION The skills taught in this chapter provide the foundation for successful money management. You’ll learn to organize and maintain your financial records and how to use personal financial statements to see how you’re doing financially. You’ll also learn how to calculate the financial ratios that determine your cred- itworthiness and how much you are saving. These tools will help you on your road to financial success. 2.1 Collecting and Organizing Your Financial Information Although some people love to file and organize, most people do not. The older you get, the more stuff you accumulate, and it doesn’t take long for a small pile of paperwork to grow to fill several file cabinets. The earlier you develop a sys- tem for organizing your financial records, the easier it is to maintain order as your life becomes more complex. The Personal Financial Planner that can be found in the Appendix and online includes a worksheet to help you get started organizing your records. 2.1.1 Why You Need to Save Bills and Documents The first rule of organization is that there should be a particular purpose for everything you save and file. Although this list is not exhaustive, some possible reasons for keeping particular documents are Paying bills. Tracking your budget. Preparing for tax reports. Making investment decisions. Making insurance or warranty claims. Ensuring prompt access to essential records. 2.1.2 How Long You Should Save Documents Of course, you need not keep all your documents forever. How long you should save each item depends on what you will use it for. Documents necessary for bill paying and budgeting have only short-term usefulness. Thus you need to save receipts for ATM withdrawals and deposits and for cash or credit purchases only until you receive a statement verifying that your account was correctly charged. You should keep bills for utilities, car expenses, and other irregular expenses that are not tax deductible for a full year so that you can accurately report the costs in your budget and personal cash flow statements.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 20

Personal Finance Chapter 2 - baj01275_c02_022-041.qxd...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online