Personal Finance
- Page ID
- 111154
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)This updated edition of the Personal Finance textbook modernizes a well-established open educational resource first created by Rachel S. Siegel, CFA, and Carol Yacht. While maintaining the core structure and foundational topics of the original, this new version reflects over a decade of economic, technological, and social change. The revised content incorporates up-to-date information on topics such as gig work, digital banking, student loan policy, and how to do your own financial planning research. It also emphasizes accessibility, clear language, and real-life applications to support a wide range of learners.
Designed for today’s college online and in-person classrooms, the text continues to empower students to make informed and ethical financial decisions throughout their lives. Updates were made with equity and inclusion in mind, ensuring that students from diverse socioeconomic backgrounds can see themselves reflected in the material. Instructors will find the modular structure and open license ideal for customization.
The original authors laid a strong foundation, and we gratefully acknowledge their contribution. Our goal was to preserve the strength of that work while bringing the content into the 2020s. This text is ready to meet the needs of today’s students and tomorrow’s financial challenges.
- 1: Personal Financial Planning
- This chapter introduces four major themes. Financial decisions are 1) individual-specific, 2) economic decisions, made in a 3) continuous process often with the 4) assistance of professional advisors. These themes emphasize the idiosyncratic, systemic, and continuous nature of personal finance, putting decisions within the larger contexts of an entire lifetime and an economy.
- 2: Basic Ideas of Finance
- This chapter introduces the basic financial and accounting categories of revenues, expenses, assets, liabilities, and net worth as tools to understand the relationships between them as a way, in turn, of organizing financial thinking. It also introduces the concepts of opportunity costs and sunk costs as implicit but critical considerations in financial thinking.
- 3: Financial Statements
- This chapter continues with the discussion of organizing financial data to help in decision making and introduces basic analytical tools that can be used to clarify the situation portrayed in financial statements.
- 4: Time Value of Money
- This chapter introduces the cornerstone concept that a dollar today is not the same as a dollar tomorrow. It demonstrates how interest, compounding, and discounting underpin every major financial decision, from loans to retirement planning. More than just formulas, the article presents TVM as a way of evaluating value across time and enabling informed tradeoffs.
- 4.1: Introduction
- 4.2: Liquidity - A Bridge Between Wealth and Choice
- 4.3: Time and Money - Why Waiting Changes Everything
- 4.4: Simple Interest - Today’s Dollar vs. Tomorrow’s Dollar
- 4.5: Compounding - When Your Interest Starts Earning Interest
- 4.6: Annuities - A Stream of Payments Over Time
- 4.7: Amortization - Breaking Down Big Payments Over Time
- 4.8: Putting It All Together
- 5: Financial Plans - Budgets
- This chapter demonstrates how organized financial data can be used to create a plan, monitor progress, and adjust goals.
- 6: Taxes and Tax Planning
- This chapter discusses the role of taxation in personal finance and its effects on earnings and accumulating wealth. The chapter emphasizes the types, purposes, and impacts of taxes; the organization of resources for information; and the areas of controversy that lead to changes in the tax rules.
- 7: Financial Management
- This chapter offers a comprehensive framework for understanding and managing personal finances, grounded in six interrelated components. Beginning with the core functions of money, it traces how funds move through institutions and accounts, then examines how individuals interact with financial systems through credit, savings, and debt. The final section emphasizes forward-looking strategies that align financial behavior with long-term goals.
- 8: Consumer Strategies
- This chapter examines the overlooked yet consequential moments that precede and follow a purchasing decision. We explore how consumer behavior is shaped by psychological, environmental, and design factors, often outside conscious awareness. By tracing the arc from impulse to intention, this chapter provides critical tools to analyze, interrupt, and reshape spending patterns toward greater agency and alignment.
- 9: Buying a Home
- This chapter applies the ideas developed in the previous chapter to what, for most people, will be the major purchase: a home. The chapter discusses its role both as a living expense and an investment, as well as the financing and financial consequences of the purchase.
- 10: Personal Risk Management- Insurance
- This chapter introduces the idea of incorporating risk management into financial planning. An awareness of the need for risk management often comes with age and experience. This chapter focuses on planning for the unexpected. It progresses from the more obvious risks to property to the less obvious risks, such as the possible inability to earn due to temporary ill health, permanent disability, or death.
- 11: Retirement and Estate Planning
- This chapter focuses on planning for the expected: retirement, loss of income from wages, and the subsequent distribution of assets after death. Retirement planning discusses ways to develop alternative sources of income from capital that can eventually substitute for wages. Estate planning also touches on the considerations and mechanics of distributing accumulated wealth.
- 12: Behavioral Finance and Market Behavior
- This chapter introduces the complex forces that drive markets, contrasting rational models like efficient market theory with real-world behavioral tendencies. By examining psychological biases, social influence, and historical anomalies, it reframes the market not as a perfect machine, but as a dynamic human system.
- 13: Introduction to Investing
- This chapter answers the essential question: Why invest at all? It explores the tension between saving and investing, the relationship between risk and return, and how personal goals shape financial strategies.
- 14: Investment Options and Opportunities
- Building on foundational concepts, this chapter surveys the major instruments available to investors, especially stocks, bonds, mutual funds, real estate, and collectibles. The focus is not just on definitions but on matching tools to objectives, risk profiles, and time horizons.

