Introduction to Personal Finance

Personal Finance Basics | Financial Education

Learn the basics of personal finance from income to credit to frugality.

Personal Finance Taking Charge of Your Life: Understanding Money and Credit

10 Financial Warning Signs

• You associate savings with purchases and not with a savings account.

• You don’t know how much total debt you owe.

• You have credit cards that are near or above the limit.

• You make late payments on bills, paid a checking or debit card overdraft fee.

• You carry a revolving balance on your credit cards.

• You use credit card checks or cash advances to pay bills.

• You were turned down for a loan.

• You borrow money from your 401K to pay for monthly expenses.

• You believe the lottery is your path to retirement.

• You hide your financial situation from your partner or spouse.

Living in the land of the unknown.

—— Ignorance is bliss. ——

The less I know the easier to deny responsibility for bad financial decisions.


The plan is to introduce basic personal finance concepts and terminology. The goal is to understand personal finance topics and the important role it plays in living richer lives. The takeaway is to know important concepts, identify financial warning signs and create a plan and take action.

What is Personal Finance?

Personal finance is the use of financial management principles with respect to individual or family unit finances to manage money, budget, save and spend while taking into account various future risks and life events.

Personal Finance 101

1. Income

2. Savings

3. Retirement

4. Investments

5. Credit

6. Debt Management

7. Real Estate

8. Insurance

9. Identity Theft

10. Budgeting

11. Frugality

It’s not the size of the paycheck that matters.


Income Sources

– Employer paycheck, interest income, investment income, dividend payments, freelance income and side hustle income.

Prioritize Savings


Reasons to save money include:

– For an emergency

– For holidays and presents

– For experiences

– For the future

How much should you save?

Depends on your financial goals and lifestyle choices.

Where should you save?

Savings accounts, certificates of deposits, investment and retirement accounts or peer-to-peer lending.

Emergency Fund

Not a matter of if but a matter of when.

Savings Principles

There are many options to save money so which option is right for you?

1. Determine you’re saving for.

2. Decide on how much access to savings is needed called liquidity.

3. Figure out how much money needs to be deposit.

4. Choose an account with the best interest rates, lowest fees and best liquidity.

How Much to Save?

Save at least six months of expenses in an emergency account.

– Start by saving $1000 in 90 days. That’s roughly $11 a day.

What’s the magic retirement savings number? Is it 3%, 5%, 10% or more?

– Depends on your lifestyle choices and spending habits.

– The more you save today the sooner you can retire and the more secure you’ll be when you’re unable to work.


• Through planning and sound financial management retirement can be achieved sooner.

• The amount needed to retire differs from one person to another.

• Start saving and investing earlier to achieve retirement sooner.

• Understand and use retirement savings vehicles:

– 401(k), 403(b) or other Defined Contribution Plans

– Individual Retirement Accounts (IRA), Roth or Traditional IRAs

– Investments and Brokerage Accounts

– Pensions

– Company Stock Options

– Social Security

Investment Vehicles

Bonds – A debt security, similar to an IOU. When you buy a bond, you are lending money to the issuer. In return for the loan, the issuer promises to pay you a specified rate of interest during the life of the bond and to repay the principal when it “matures,” or comes due.

• Lower risk than many investment options, although risk varies depending on issuer and other factors.

• Tend to provide greater stability than stocks and higher interest rates than savings accounts.

Stocks – An instrument that signifies an ownership position (called equity) in a corporation, and a claim on its proportional share in the corporation’s assets and profits. Most stocks also provide voting rights, which give shareholders a proportional vote in certain corporate decisions, such as the election of corporate directors.

• Stock market can go up and down in a single day so stocks are seen as a riskier investment than bonds or mutual funds but also offer potential higher returns.

• Investing in stock market is no guarantee you’ll make money and there is always a risk of losing all the money invested.

Mutual Funds – A mutual fund is a company that pools money from many investors and invests the money in securities such as stocks, bonds, and short-term debt. The combined holdings of the mutual fund are known as its portfolio. Investors buy shares in mutual funds. Each share represents an investor’s part ownership in the fund and the income it generates.

• Although you can choose the specific level of risk based on the type of fund you choose, returns are not guaranteed.

• Mutual funds can be subject to management fees.

Time can work for you or work against you.

The Power of Time – Savings

Long term savings = more in savings through compounding of interest.

How long will it take for your money to double?

The Rule of 72 is a simple way to figure out how long it will take for your money to double with compound interest.

72 divided by the interest rate = the number of years needed to double your money

Example: 10% interest rate and want to know how long it will take to double your money would be: 72 divided by 10 = 7.2 years

The Power of Time – Credit

Long term debt = more interest payments

Available Credit Turns to Debt

•  Having credit is okay but using credit can easily lead to debt.

•  Don’t incur debt in the first place.

• Paying off debt will give you the highest return.

• Save for emergencies to prevent you from using credit and taking on debt.

Debt Management

•  Credit Counseling is a helpful resource but not the same as debt management programs.

•  3 debt reducing tools: Debt-consolidation, debt-management plans and debt-settlement.

•  Debt management agencies cannot negotiate lower payments. Agency fees may be different.

•  Reach out to your creditors first and negotiate a repayment plan or settlement.

•  Debt-management plans are reported to credit bureaus but are not factored into credit scores.

•  Debt settlement plans are reported to credit bureaus and do impact credit scores.

•  You can get out of debt yourself. Create your own plan, stop spending and prioritize debt repayment.

•  Debt consolidation doesn’t always save you money.

•  Do not avoid debt collection calls or letters. Answer Them!

• Bankruptcy may be an option.

Real Estate

1. Buying a Home – Importance of Income, Credit and Down Payment.

2. Mortgages – Fixed Rate and Adjustable Rate Mortgages (ARM) • FHA and VA Home Loans

3. Find a Lender and Shop Around – Inquire with banks and credit unions for best rates and lower fees.

4. Analyze your budget and know how much you can afford not what mortgage lenders will approve.

5. Read all the documents received and ask questions.

6. Understand homeowner’s insurance.

7. Know the tax advantages of home ownership.

8. Make biweekly payments or additional principal payments.


1. Insurance is the equitable transfer of the risk of a loss, from one entity to another in exchange for payments also known as a premium.

2. Insurance is an important part of a healthy financial plan to protect loved ones; preserve wealth and financial stability.

3. Types of insurance includes: Medical, Auto, Life, Property, Disability or Accidental

4. Know insurance products, components and terms.

Identity Theft

Identity Theft is the fraudulent acquisition and use of a person’s private identifying information, usually for financial gain.

– Your identity can be stolen through phishing (online) or vishing (telephone) as well as dumpster diving.

– Incredible impact on your financial well being and can cause significant amount of stress.

Protect Your Identity

– Know who you share information with.

– Store and dispose of your personal information securely, especially your Social Security number.

– Ask questions before deciding to share your personal information.

– Maintain appropriate security on your computers and other electronic devices.

Steps to resolve ID Theft

Step 1: Notify account issuers.

Step 2: Place a credit freeze with credit bureaus.

Step 3: File a theft report with the police.


Pull and review your credit report:

Register with Do Not Call Registry:

Opt-out of prescreened marketing offers:

Resources: Identity Theft Resource

Student Loans

Also known as education loans comes in 3 types: student loans (Stafford and Perkins loans), parent loans (PLUS loans) and private student loans.

Student Loan Prepayment

– Make payments on student loans while in college.

– Make prepayments by applying directly to principal amount not future payment date.

– Repayment Terms: standard, extended, graduated and income base (IBR).

Student Loan Consolidation

– Consolidate student loans (w/ cuStudentLoans)

– Consolidate during grace period or repayment.

– Consolidation could lower monthly payment but increase total interest paid.

Student Loan Deferment and Forbearance Options

Student Loan Forgiveness Programs

– Public Service Loan Forgiveness Programs

Intro to Credit Reports & Scores

– Creditworthiness – Better credit the more likelihood of being approved for loans or credit cards with better interest rates and favorable terms.

– May qualify for lower auto insurance rates.

– Able to open utility accounts or wireless contract without security deposit requirement.

– Get a job offer that factors information from your credit report.

Credit Report and Credit Scores

Phroogal Credit Scores and Ranges

Impacts not only future ability to obtain credit but impacts insurance premiums, down payment requirements with cellular and utility companies as well as home rental agreements. Information contained in your credit report may also impact your ability to get a job.

The good news is…

• You have the power to create an excellent score

• You have the power to fix your credit report

• You don’t always have to worry about credit scores

What Impacts Your Credit Score Access Your Free Credit Report

Access to each of the 3 credit bureau reports once every 12 months through

Free credit scores using Quizzle or Credit Karma (no credit cards required).

Auto Financing Sample

Phroogal Auto Financing


Frugal doesn’t mean cheap. It means understanding your resources and allocating to the right areas for maximum impact. It’s focus is limiting waste and unnecessary expenses and usage.

Frugal living is all about living better for less, and since your definition of better may be different from everyone else’s, your definition of frugal living is also going to be a bit different.

Frugal living can be seen as:

• A way to get by on a tight budget
• An opportunity to live more simply and minimally
• An effort to consume less
• A way to afford the life that you want

You can live a frugal life that focuses your attention on specific aspects of your life that are more important to you.

Budgets and Spending Plans

Budgets are defined as a financial or spending plan.

• Help achieve quantifiable financial goals.

• Tool to measure performance and cope with potential adverse situations.

Reasons for budgeting.

• Creates a framework to reach milestones and achieve quantifiable goals.

•  Help you buy things you need and want through prioritization.

•  Allocates resources and reduce waste.

•  Supports reaching your dream lifestyle.

Create a Budget

1. Calculate your income and expenses.

2. Make a list of all income sources and calculate total monthly income.

3. Keep a record of one month’s fixed expenses and discretionary spending.

4. Organize based on categories and total expenses such as housing, transportation, food, utilities, credit card payments, etc.

5. Using paper or a spreadsheet, calculate your income compared to your expenses.

6. Analyze the results and calculate how much you can save and how much more you can pay towards debt.

7. Determine where you can decrease fixed expenses and cut spending to free up money to prioritize debt repayment and grow savings.

8. Adjust your budget accordingly as financial goals are met.

Download Budgeting Worksheet.

Build a Habit of Savings

At work: Opt-in for direct deposit

At work: Contribute to 401K (start with 10% and increase yearly)

At work: Take advantage of employee stock programs, wellness programs, cellular plan discounts, auto programs, and discount offers.

At home: Find cheaper banking alternatives (i.e. credit unions)

At home: Use electronic transfer options

At home: Pay yourself first. Pay into your savings account.

At home: Establish different savings accounts (emergency fund with 6 months), housing, taxes, vacations, holidays, etc. • At home: Open a Traditional or Roth IRA

Live in know-land.

Take Control Manage Your Money Effectively

• Opt-in for direct deposit

• Get your statements online and use online bill pay services

• Use your debit card and monitor ATM usage

• Use online financial management and budgeting tools

• Read the fine print between you and all your financial relationships

• Ask questions until you understand

• Don’t be afraid to change or switch financial services

Manage Your Credit Health

• Pull your free credit report online (

• Get access to your free credit score (CreditKarma, Quizzle)

• Know what’s in credit reports and what impacts credit scores

• Know when to worry about credit scores

Action Plan

1. Ask yourself what can you do today/in 3 months/this year?

2. Increase your financial knowledge any which way you can.

3. Acknowledge your true financial standing (income and debt) and set goals.

4. Create the habit of savings. A budget is a springboard to financial independence.

5. Take control of your financial future. Be proactive and communicate with lenders, creditors, employers and peers.