Adulting 101: A Guide to Personal Finance Things Young Adults Should Know About Finances As They Enter Adulthood
Stephen D. Mayer
~ Table of Contents ~ Introduction to Adulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Part One: What You Should Know About Personal Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Opening a Bank Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Understanding Your Paycheck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Creating a Personal Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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What Is Credit and What Building Credit Means For Your Future . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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The Importance of Saving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Using Student Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Getting a Car Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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The Basics of Doing Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Stock Market Basics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Various Kinds of Insurance and How to Get Them . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Retirement Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Reading a Financial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Making a Good Impression. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
How To Talk To My Parents About Finances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Part Two: Something for Everyone . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Introducing the Buckets, Shovels, Beach and Map . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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The Shovels Working Together . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Part Three: Building Your Own Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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Copyright © 2019 by Stephen D. Mayer All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Permissions Coordinator,” at the address below. SD Mayer & Associates LLP 235 Montgomery Street, 30th Floor San Francisco, CA 94104 (415) 691-4040 www.sdmayer.com Ordering Information: Quantity sales. Special discounts are available on quantity purchases by corporations, associations, and others. For details, contact the publisher at the address above. Orders by U.S. trade bookstores and wholesalers. Please contact the publisher at the address above. Printed in the United States of America DISCLAIMER: All calculations and data presented within SD Mayer & Associates LLP publications and digital marketing and media including but not limited to websites, brochures, presentations and return models are deemed to be accurate, but accuracy is not guaranteed. The projected pro forma returns on investment are intended for the purpose of illustrative projections to facilitate analysis and are not guaranteed by SD Mayer & Associates LLP or its affiliates and subsidiaries. Past performance is not an indicator of future results. The information provided herein is not intended to replace or serve as a substitute for any legal, real estate, tax, or other professional advice, consultation or service. INVESTMENT RISKS: All investments, including real estate, is speculative in nature and involves substantial risk of loss. We encourage our investors to invest carefully. We also encourage investors to get personal advice from your professional investment advisor and to make independent investigations before acting on information that we publish. Much of our information is derived directly from information published by companies or submitted to governmental agencies on which we believe are reliable, but are without our independent verification. Therefore, we cannot assure you that the information is accurate or complete. We do not in any way warrant or guarantee the success of any action you take in reliance on our statements or recommendations. Past performance is not necessarily indicative of future results. All investments carry risk and all investment decisions of an individual remain the responsibility of that individual. There is no guarantee that systems, indicators, or signals will result in profits or that they will not result in losses. All investors are advised to fully understand all risks associated with any kind of investing they choose to do. Hypothetical or simulated performance is not indicative of future results. Unless specifically noted otherwise, all return examples provided in our websites and publications are based on hypothetical or simulated investing. We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because hypothetical or simulated performance is not necessarily indicative of future results. Don’t enter any investment without fully understanding the worst-case scenarios of that investment.
~ Introduction to Adulting ~ After writing the book, 5 Buckets, 4 Shovels, a Beach and a Map, and giving it to clients and friends, I found something interesting happened—they shared it with their kids. That book uses pictures and easy-to-understand con-
cepts to explain financial planning. Five buckets represent asset categories for allocating personal wealth, and four shovels represent the four typical financial advisors needed to make wise spending and saving decisions. I had
been using analogies like buckets and shovels for more than 40 years with my own clients to help them develop
their financial plans. So when we published the book, it was both fascinating and exciting to discover its value to a younger audience.
With that in mind, I began thinking about all of the basic personal finance topics that young adults should know as they enter adulthood—topics that aren’t being taught in school. These are concepts that my parents taught me as a teenager but that a lot of kids don’t know about today. For example, how do you open a bank account? When I was five-years-old, my dad drove me down to the
local Police Credit Union, walked me through the process of opening my first bank account, and explained how it would
help me. Today, instead of driving down to the local bank, you can use a mobile device to research whatever you need to
know about opening an account—and then apply online. At
the end of the day, regardless of how you do it, you’ll still end up with a bank account.
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In this book, we try to focus on the concepts, why it’s important to know this stuff, and how to make it work for you. We understand that there are a variety of ways to put the concepts into practice, whether you speak to a
human being or do everything on your mobile device; but the important part is understanding the back story—the reason why financial planning is so important.
Each chapter is broken down into five components: Why Do I Need To Know This?, How Do I Get Started?, Quick Tips, Personal Finance Stories, and Exercises. The idea is to give you a few ways to digest the information, pro-
vide some quick tips to get you started, describe a real-life scenario putting the topic into action, and give you a practice exercise using your own information to be sure you understand the concept in each chapter.
I hope this book will be useful and that someday you’ll be able to sit down with your children and explain these
concepts to them, regardless of the tools they are using—like a chip embedded in their brains instead of the minicomputer you once carried in your pocket.
On a personal note, I want to thank all those involved with the creation of this second book. The marketing team at my firm, SD Mayer & Associates, helped write and produce this book, including Greg Barber, Yasi Agah, and a
team of marketing interns. Thank you to Amy Sparkman for editing our book and for her invaluable input. I also got plenty of feedback and support from my kids, who are young adults themselves—Dylan, Kenzie and Nicola, and
from my wife, Patty Mayer. Finally, Rich Sigberman drew all of the illustrations, which helped bring the concepts to life.
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e This book has been donated through the tremendous support of our friends and corporate sponsors, whose financial contributions to our 5 Buckets, 4 Shovels Foundation made this all possible. The mission of the
foundation is to use the proceeds from the sale of our other books, “5 Buckets, 4 Shovels, a Beach and a Map” and “The Toughest Guy I Ever Knew and Other Short Stories,” to be used to support financial literacy for young adults in high school and college. The proceeds are used to purchase these books, and the goal is to reach one million young adults within five years.
All of my books are available for purchase on amazon.com or through our local San Francisco Bay Area chain of bookstores, Books, Inc. or through our website, 5buckets4shovels.com.
Source: UrbanDictionary.com
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~ Part One: What You Should Know About Personal Finance ~ So, what are the financial topics that you should know about? As a young adult, you should have a general understanding of bank accounts, your paycheck, budgeting, credit, and debt, savings, loans, taxes, the stock market,
and retirement. There are a couple of extra chapters about financial statements, which is a more advanced topic, and some tips on how to make a good lasting impression, which is a definite key to success.
There is a lot to know! Our goal is to give you enough information for you to be able to put the concepts of personal
finance to use in your own life. Some people spend their whole careers specializing in just one of these topics—it’s hard to become an expert in any of them! If they seem confusing, don’t worry. This book will explain the basics,
and the basics will give you a good foundation to build on as you grow in experience and financial independence. Now, let’s get started.
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