My Money and Me
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About this ebook
This book is a basic primer for young people on what they need to know to act responsibly with their finances. In this book, you'll get the bare basics of financial education, including basic financial terms, how to make a budget, getting your own place, things to consider when getting a loan, and even how income taxes work.
Each one of these chapters can be fleshed out into its own book. What I wanted to focus on was just the essentials you need to know to avoid getting burned by your financial decisions. Unfortunately, many people never get a good grounding in financial basics and end up having to spend their young adulthood fixing problems they made just after moving out.
Take your time and study this material thoroughly. Your wallet will thank you.
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Book preview
My Money and Me - Balwinder Marwaha
Introduction
This book is a basic primer for young people on what they need to know to act responsibly with their finances. In this book, you’ll get the bare basics of financial education, including basic financial terms, how to make a budget, getting your own place, things to consider when getting a loan, and even how to do your income taxes.
Each one of these chapters can be fleshed out into its own book. What I wanted to focus on was just the essentials you need to know to avoid getting burned by your financial decisions. Unfortunately, many people never get a good grounding in financial basics and end up having to spend their young adulthood fixing problems they made just after moving out.
Take your time and study this material thoroughly. Your wallet will thank you.
Chapter 1 – How much am I worth?
Money isn’t as difficult of a topic as you might think. Maybe that’s why they don’t teach much about it in school. Financial health is seen as a positive indicator that you’ve become an adult. My aim in this book is to give you the information you need to take the steps to achieve it.
To be skilled in money, you need to learn a set of skills and the language necessary to talk with other people about it. The first step is figuring out how much you’re worth. This is more than just how much is in your bank account, your balance, at any time. You need to know your assets, your liabilities, and your credit score:
Assets
An asset is anything you have that is of economic value. Your cash is definitely one form of an asset, but so are your car, your investments, your house, and your childhood stamp collection. Assets are usually items that can be converted to cash.
A related term to assets is income. Income is how much cash money you’re earning every year. Think of it as incoming
cash. Certain other things can be considered income as well, such as large gifts and lottery winnings, but to keep it simple, think of it as the amount of cash you get from your job.
Take a moment and go through all your belongings. If you had to sell everything you owned, how much cash do you think you would make?
Liabilities
These are things you owe to others; some examples are credit cards, car loans, student loans, mortgages, your phone, and any other bills. Liabilities can include other things, such as depreciated items and other goods and services you owe other people.
For someone just starting out, think of your liabilities as the total of all your debt. Debt is simply the amount of money that you owe other people.
Subtracting your liabilities from your assets will give you your most basic bit of financial data: your net worth.
Net worth = Assets – Liabilities
If your net worth is positive, congratulations! You are heading in the right direction. However, it’s much more likely that you’re negative. That’s because you just haven’t been earning money long enough to overcome all your initial debts. Don’t stress about it. I’m going to show you how to turn that number positive with good financial habits.
Credit Score
As a minor, this is something you don’t