Saving Tips on Budgets

It is often said that money troubles are a leading cause of marital tension and divorce. Since opposites attract, it is common for someone who spends lavishly to be married to someone who is frugal. Before long, mortgages, the costs of raising children, and other financial strains can spark conflict.
While having similar spending styles may eliminate one of marriage’s hot-button issues, it is not necessary for couples to yield to the habits of the other partner. What is more critical is that you set up your household to deal with the differences. In order to work together, it is important that you understand the source of the conflict and employ strategies that work for your household.
The Source of the Conflict
Money is an emotionally charged subject, and the taboos that continue to discourage us from discussing personal finance – especially while courting – do not help couples set themselves up for financial success. Thankfully, more and more engaged couples are encouraged to enroll in “marriage classes,” which discuss topics of common marital strain, including money management.
The cause of conflict in relationships is often rooted in the fact that money means different things to different people. Participants in my money management seminars describe money as a source of everything from pride to shame, status to failure, fear to security. When asked to describe money management (a.k.a. budgeting), they describe it as a measure of everything from power to weakness to freedom to control. With so many connotations, no wonder couples have trouble managing their different money management styles!
Without understanding your feelings about money – and those of your partner – it will be difficult for you to manage your finances together during good times, and it will be exceedingly difficult to do during bad times such as a job loss, prolonged illness, or other significant financial interruption. So take some time to talk about your money management "baggage” and what you want to achieve going forward. Taking this important first step will allow you to move forward together.
Ways to Cover Shared Costs
Couples use different techniques to cover shared expenses and personal spending. Some choose to use joint accounts while others prefer to keep things very separate.
If you have read any of my previous columns, you will have heard this before: you must have a household budget that includes all of your family’s needs and money left over with which to establish an emergency fund and plan for the future. With this established, you can then use excess funds for discretionary spending or “fun money” – the expenditures that define and enhance your quality of life. The level of discretionary spending will be dictated by what your budget can accommodate. But heed my advice: failure to allocate funds for personal discretionary spending will result in a financial power struggle between partners.
Here are a few strategies to help you to accommodate your budget and your discretionary spending. Choose the method that works best for you and your partner.
Joint Account Strategies
Deposit all sources of income into a joint chequing account to cover household expenses, savings, and personal allowances. The personal allowances represent money that each partner can spend freely each month without rationalization or the need for approval from the other partner. The spending limit should be based on what your household can reasonably afford without encroaching on savings or carrying credit balances. This method works optimally for those who want to feel in control of their money and are willing to acknowledge the need to limit spending for common needs and goals.
Another option: Deposit all sources of income into a joint chequing account to cover household expenses and savings and establish a pre-set amount (ex. $100) that can be spent by each partner on any single discretionary purchase as desired. For example, discretionary purchases can include clothing, grooming, entertainment, restaurants, or gifts. This method works optimally for couples who do not want to feel constrained or controlled by their partner. When using this method, it is important to watch the frequency of these purchases to make sure that they do not jeopardize the family’s budget and savings commitments.
Separate Account Strategies
Deposit all sources of income into a joint chequing account to cover household expenses and savings and divert a pre-set amount into a personal savings account for each partner to be spent as desired. The amounts can be equal or can reflect the actual costs of what you enjoy spending your money on. Avoid dividing funds in accordance with the earnings of each partner because it is difficult to quantify non-monetary contributions to the household – which in turn often dictate the type of income you can earn. This method works optimally when one partner wants to save for a larger purchase.
Deposit all sources of income into separate chequing accounts. Divert a pre-set amount into a joint chequing account used to cover household needs. Divert a second pre-set amount into a joint savings account to plan for the future. Each monthly transfer should be dictated by your budget. The balances left in each spouse’s account can be spent freely. This works optimally for couples who prefer to keep their earnings separate while encouraging them to see household expenses and savings goals as a couple.

How to get financial stability?

At some point in your life your income will stop but your expenses will not. Ideally this scenario would be the result of a well-planned and well-deserved retirement, but for the unlucky, it may happen through illness or injury.

Although government income support programs may help, few people can live on these payments alone.  As a result, it is imperative that you plan and save to support yourself and your family. Saving requires that you prioritize your financial safety net over more immediate spending temptations. In other words, you must live within your means and have something left over to invest for the future.

Saving Strategies

Recognize your true hourly wage

Spend a few moments determining what your actual take-home wage is. For example, if you earn $40,000 per year and you work a standard 40-hour work week, you would earn approximately $19.23 per hour before deductions ($40,000 / 40 hours per week / 52 weeks per year).

Want a reality check? Try adjusting this hourly rate for standardized payroll deductions in your jurisdiction such as taxes and health care premiums. There are many online tools that can help you determine what you make after taxes.

The rate that you decide on can then be used to help you decide if your purchase is worthwhile. Simply divide the purchase price by your true hourly wage to determine how many hours you will need to work to earn that money back. Some purchases will seem worthwhile while others will not.  

Look beyond the “latté effect”

Instead of depriving yourself of every last convenience and pleasure, consider cash management as an opportunity to be selective in your spending. As I have discussed in previous columns, you should buy things that you really want or things that will improve your quality of life rather than spending meaninglessly and unconsciously.  

Borrow only to purchase assets

Hardly anyone can afford all of life’s expenses out of their cash flow. Some expenses, such as home or car purchases, require that we borrow money to buy them, but borrowing on a regular basis to sustain your lifestyle, will lead you toward financial turmoil.

The most important lesson you may ever learn about debt is that you should only borrow only to purchase assets, not to sustain your lifestyle. Practically speaking this means never carrying a credit card balance or using loans and lines of credit to sustain your lifestyle. Any time you find yourself accumulating debt to sustain your lifestyle means that you should immediately reassess your budget and get back on track.

To thine own self be true

Know yourself. If you are prone to abusing credit cards, go back to a cash-only regimen. Using cash to purchase everything – especially large purchases – encourages discipline as you see a direct connection between your expenses and your bank balance. Furthermore, having to go to the bank to withdraw cash for a purchase helps you avoid “impulse purchases” and allows you time to think twice about your purchase.

I understand that many people are hesitant to carry large amounts of cash – if this is the case, use debit cards rather than credit cards because you cannot extend yourself beyond your available balance (or overdraft).  Debit cards withdraw funds directly from your bank account, which imposes limits on what you can spend.

Scrutinize your family budget

When you prepare a family budget you will come to notice the difference between necessities (shelter, food, clothing, transportation) and discretionary expenses (hobbies, entertainment, technology, etc.). When looking for savings opportunities, focus on your discretionary spending. It is also a good idea to look at your credit card statements and remind yourself of the monthly charges to which you have subscribed. Lastly, you may wish to evaluate your telecommunications packages (cell phone, cable, and internet) to make sure that you are getting the services that you need and to avoid paying for services that you are not using.

Impose an automatic savings strategy

Pay-yourself-first strategies, popularized by David Chilton’s book The Wealthy Barber, help to promote saving because they are painless. These strategies involve setting a pre-determined automatic transfer from the account into which your pay is deposited to a savings vehicle like a high-interest savings account. The amount can be a set amount (such as $100 per month) or a percentage of your income (10 percent).

The automatic nature of the transfer means that the funds are set aside for goals and emergencies before you have an opportunity to spend them. Many clients have reported to me that these savings programs have made a significant difference in their attitudes towards money. Having committed to a pre-determined and automatic savings strategy, they are practically free to spend what is left without regret. Of course, the success of this strategy will depend on your ability to stretch your remaining funds to accommodate your expenses.

Use checking and savings accounts correctly

Checking accounts are designed for transactions, so they pay very little interest. Savings accounts promote accumulation by paying more interest. To optimize these accounts, you should leave only enough money in your checking account to cover monthly expenses (as determined by your budget) plus a minimum to avoid banking fees, and a reasonable slush fund. By transferring the rest to a savings account, your money will earn more interest and you will make saving a priority.

Having a comprehensive understanding of what your money is doing for you, and how it’s being saved will ultimately ensure your financial stability and preparedness for retirement, or any unforeseen circumstances. Be prepared!

Best Interest Rates On-Line

Investing today is anything but straightforward. While having options is a wonderful thing, there comes a point where they can become overwhelming. Finding out ways to get the best interest rate savings possible can feel like a very daunting task. It doesn't have to be. Knowing exactly what sort of investment product to look for is half the work. Once you've decided on what product to use, you can start comparing on-line interest rates.

On-Line Banking Savings

No matter if the product is a savings account or money market account, the goal is to get the most interest income possible from the money deposited. There are currently many banks that offer their services entirely on-line. The interest rates that they offer are generally slightly better than what is offered by brick and mortar banks. There are also many banks that offer incentives to customers to conduct all of their business on-line. If that doesn't make sense immediately, think about how that offer is made in the first place. When a person opens a savings account by walking into a bank and taking care of the transaction face-to-face with another person, there are significant costs involved. That bank employee must be paid, and there are also the operating costs of the building to consider. All that adds to the cost of the transaction. Banks will naturally recoup those costs in the interest rate savings that they offer. With on-line transactions, the amount of overhead incurred is minimal, therefore the earnings potential from something such as an on-line money market account is greater than it would be by walking into a bank or credit union.

Often times, the most common mistake made is that people will look no further than their primary banking center. In the event that the institution is a credit union, they may not be too far off the mark. Traditionally, credit unions are known to offer better rates than banks. This is because each account holder is a shareholder, so to speak, and so any profits come right back to the members. A bank, by contrast, exists to make profit from those that hold accounts with them. The rates found in many credit unions are on par with what can be found with on-line banking.

If you want to stick with a single banking institution, be sure to shop around first and ask to see if your current bank is willing to match other rates or offers that are found elsewhere. It is possible that with an established business relationship they may be willing to match offers in order to retain a customer. Check also to see if it's possible to conduct business on-line in order to get the better rates and around the clock service options.

Looking for interest rate savings does not have to be an all-consuming, overwhelming job. Just by narrowing down the options by way of knowing exactly what product to look for can be very helpful. After that, do some searching to find the best interest rates possible. If sticking with a single banking institution or credit union is preferred, then see first if they are willing to match the best rates that are found. Interest income from savings is very important. Do not take just what the bank manager offers; do some homework first.

Dreaming to buy a house or buying a dreamy house

It may seem like the real estate market is stabilizing, and it may feel like everywhere you look someone is buying a home for a steal. There are "for sale" signs in almost every neighborhood across America, making it seem like a perfect buyer's market. But how do you know if this is theright time to buy a home? Buying a home is the biggest purchase most of us will ever make. How do you know if it is time to buy or if it would be better to put off buying a house?

When is a Good Time to Purchase a Home?

There is so much to consider when it comes to deciding the perfect time to buy a home. Here are three questions to ask yourself to help you decide if it is a good time for you to purchase a home or if you should put off buying a house for a while.

Do You Have a Stable Job?

In determining if you are ready to buy a house, a stable job is important for the obvious reason of having steady and reliable income. Clearly, if you are in an unstable situation in terms of your income, then you may need to put off buying a house. Getting a mortgage isn't the same as signing a six month or a year long lease. If your job or income were to change and you could no longer afford rent, you may have to pay a penalty and hurt your credit, but it would not be nearly as bad as the hit your credit would take if you were to default on a mortgage. Just as important as income is knowing that you are going to be sticking around for a while. Do you have the possibility of being transferred any time soon? Are you unhappy in your job and think you may start looking for a new position? Is your company in the midst of a round of layoffs? If you purchase a home based on your current income and job location, you may end up in a tough situation if you find yourself in a new job that pays less or that would make your commute brutal or impossible. When deciding if it's the right time for you to buy a house, it is important to know you are committed to living in it for a while.

How Much Money Do You Have Saved?

Many first-time home buyers finance their home purchase with a low down payment (as low as 3-5% in some cases) and an FHA loan. 100% loans are no longer available and even if they were, it probably wouldn't be the best option. You need more than your down payment saved up in order to responsibly enter into a new mortgage. Most significantly, closing costs (miscellaneous sale and loan processing fees) which typically run between 2% and 3% of the cost of home are due at closing. While closing costs may sometimes be taken care of in part or whole by the seller, hidden costs may still come up. There are also the costs of inspections and moving to be considered. If your down payment is going to wipe out your savings and take away any cushion you have for unexpected events, then you may want to put of buying a home.

How Is Your Credit?

If your credit is not in good shape, it will be difficult to be approved for a mortgage even if you have a substantial down payment. Mortgage lenders are just not willing to take a risk and approve a loan to someone with less than desirable credit. Generally speaking, if your credit score is below 620, the chances of your getting a mortgage are not very good. Even if you are approved for a home loan with less than good credit, it may not be at a very desirable interest rate.

Purchasing a home is a big decision and each situation is different. These three questions are a good starting point for you to consider whether it's the right time to buy a home.

How to know your financial progress?

Personal financial Statements for Financial Progress
Every journey starts somewhere. You need to know where you are before you can go somewhere else. Personal finan­cial statements tell you the starting point of your financial journey.
Most of the financial documents come from financial institu­tions. other business organizations. or the government. Two documents that you create yourself, the personal balance sheet and the cash flow statement. are called personal financial statements. These reports provide information about your current financial position and present a summary of your income and spending. The main purposes of personal financial statements are to

• Report your current financial position in relation to the value of the items you own and the amounts you owe. 
• Measure your progress toward your financial goals. 
• Maintain information about your financial activities. 
• Provide data you can use when preparing tax forms or applying for credit. 

The Personal Balance Sheet: Where Are You Now? 
The cunent financial position of an indi\'idual or a family is a common starting point for fmancial planning. A balance sheet, also called a net Worth statement or statement of financial position. reports what you own and what you owe. You prepare a personal balance sheet to determine your current financial position using the following process:
Step 1: Listing Items of Value Available cash and money in bank accounts combined with other items of value are the foundation of your current financial posi­tion. Assets are cash and other tangible property with a monetary value. The balance sheet for Rose and Edgar Gomez lists their assets under four categories:
Liquid assets are cash and items of value that can easily be converted to cash.
Money in checking and savings accounts is liquid and is available to the Gomez family for current spending. The cash value of their life insurance may be borrowed if needed. While assets other than liquid assets can also be converted into cash. the process is not quite as easy.
Real estate includes a home. a condominium. vacation property, or other land that a person or famjly owns.
Personal possessions are a major portion of assets for most people.
Included in this category are automobiles and other personal belongings. While these items have value. they may be difficult to convert to cash. You may decide to list your possessions on the balance sheet at their original cost. However. these values probably need to be revised over time. since a five-year-old television set, for example, is worthless now than when it was new. Thus, you may wish to list your possessions at their current value (also refen'ed to as market value). This method takes into account the fact that such things as a home or rare jewelry may increase in value over time.
You can estimate current value by looking at ads for the selling price of comparable automobiles. homes. or other possessions. Or you may use the services of an appraiser.
Investment assets are funds set aside for long-term financial needs.
The Gomez family will use their im'estments for such things as financing their children's education, purchasing a vacation home, and planning for retirement. Since investment assets usually fluctuate in value. the amounts listed should reflect their value at the time the balance sheet is prepared.
Step 2: Determining Amounts Owed Looking at the total assets of the Gomez family, you might conclude that they have a strong financial position. However, their debts must also be considered. Liabilities are amounts owed to others but do not include items not yet due, such as next month's rent. A liability is a debt you owe now, not something you may owe in the future. Liabilities fall into two categories:
Current liabilities are debts you must pay within a short time. usually less than a year. These liabilities include such things as medical bills, tax payments, insurance premiums, cash loans, and charge accounts.
Long-term liabilities are debts you do not have to pay in full until more than
a year from now. Common long-term liabilities include auto loans. educational loans, and mortgages. A mortgage is an amount borrowed to buy a house or other real estate that will be repaid over a period of IS. 20. or 30 years. Similarly, a home improvement loan may be repaid to the lender over the next 5 to 10 years.
The debts listed in the liability section of a balance sheet represent the amount owe at the moment; they do not include future interest payments. However. each de payment is likely to include a portion of interest
Step 3. Computing Net Worth Your net worth is the difference between
your total assets and your total liabilities. This relationship can be stated as
Assets - Liabilities = Net worth
Net worth is the amount you would have if all assets were sold for the listed values and all debts were paid in full. Also, total assets equal total liabilities plus net worth. The balance sheet of a business is commonly expressed as
Assets = Liabilities + Net worth
  Since very few people, if any, liquidate all assets. the amount of net worth has a more practi­cal purpose: It provides a measurement of your current financial position.
A person may have a high net worth but still have financial difficulties. Having many assets with low liquidity means not haying the cash available to pay current expenses. Insolvency is the inability to pay debts when they are due; it occurs when a person's liabilities far exceed available assets. Bankruptcy may be an alternative for a person in this position.
You can increase your net worth in various ways. including
Increasing your savings.
Reducing spending.
Increasing the value of investments and other possessions. Reducing the amounts you owe.
Remember. your net worth is not money available for use but an indication of your financial position on a given date.
Evaluating Your Financial Position 
A personal balance sheet helps you measure progress toward financial goals. Your financial situation improves if your net worth increases each time you prepare a bal­ance sheet. It will improve more rapidly if you are able to set aside money each month for savings and investments.
As with net worth, the relationship among various balance sheet items can give an indication of your financial position. The Financial Planning Calculations box on the next page explains several commonly used financial ratios.
The Cash Flow Statement:
Where Did Your Money Go? 
Each day, financial events can affect your net worth. When you receive a paycheck or pay living expenses, your total assets and liabilities change. Cash flow is the actual inflow and outflow of cash during a given time period. Income from employment will probably represent your most important cash inflow; however, other income, such as interest earned on a savings account, should also be considered. In contrast, payments for items such as rent, food. and loans are cash outflows.
A cash flow statement, also called a personal income and expenditure statement,  is a summary of cash receipts and payments for a given period, uch as a month or a year. This report provides data on your income and spending patterns, which will be helpful when preparing a budget. A checking account can pro­vide information for your cash flow statement. Deposits to the account are your inflows; checks written are your outflows. Of course, in using this system, when you do not deposit the entire amounts received. you must also note the spending of undeposited amounts in your cash flow statement.
The process for preparing a cash flow statement is
Total cash received during the time period
Cash outflows during the time period
Cash surplus or deficit
Step 1: Record Income Creating a cash flow statement starts with identify­ing the cash received during the time peliod involved. Income is the inflows of cash for an individual or a household. For most people, the main source of income is money received from a job. Other common income sources include

• Wages, salaries, and commissions. Self-employment business income. 
• Saving and investment income (interest, dividends, rent} 
• Gifts, grants, scholarships, and educational loans. 
• Government payments, such as Social Security, public assistance, and unemployment benefits. 
• Amounts received from pension and retirement programs. 
• Alimony and child support payments. 

Take-home pay, also called net pay is a person's earnings after deductions for taxes and other items. Lin's deductions for federal, state, and Social Security taxes are $1,250. Her take-home pay is $3,196. This amount, plus earnings from savings an investments, is the income she has available for use during the current month.
Take-home pay is also called disposable income, the amount a person or househo.~ has available to spend. Discretionary income is money left over after paying for hous­ing, food, and other necessities. Studies report that discretionary income ranges fro less than 5 percent for people under age 25 to more than 40 percent for older people.
Step 2: Record Cash Outflows Cash payments for living expenses another items make up the second component of a cash flow statement. Lin Ye divides h cash outflows into two major categories: fixed expenses and variable expenses. While every individual and household has different cash outflows, these main categories along with the subgroupings Lin uses, can be adapted to most situations.
1. Fixed expenses are payments that do not vary from month to month. Rent or mon­gage payments, installment loan payments, cable television service fees, and a month]. train ticket for commuting to work are examples of constant or fixed cash outflows.
For Lin, another type of fixed expense is the amount she sets aside each month f, payments due once or twice a year. For example, Lin pays $384 every March for lit insurance. Each month, she records a fixed outflow of $32 for deposit in a special sa\­ings account so that the money will be available when her insurance payment is due.
2. Variable expenses are flexible payments that change from month to month. Com­mon examples of variable cash outflows are food, clothing, utilities (such as electricity and telephone), recreation, medical expenses, gifts, and donations. The use of a check­book or some other recordkeeping system is necessary for an accurate total of cast outflows.
Step 3: Determine Net Cash Flow The difference betweer: income and outflows can be either a positive (surplus) or a negative (deficit) cash flow. A deficit exists if more cash goes out than comes in during a giver: month. This amount must be made up by withdrawals from savings or by bor­rowing.
When you have a cash surplus, as Lin did, this amount is available for saving, investing, or paying off debts. Each month, Lin sets aside money for her emergency fund in a savings account that she would use for unexpected expenses or to pay living costs if she did not receive her salary. She deposits the rest of the surplus in savings and investment plans that have two purposes. The first is the achievement of short-term and intermediate financial goals, such as a new car, a vacation, or reenrollment in school; the second is long-term financial security-her retirement.

How to evaluate your current financial position?

Evaluating Your Financial Position 

A personal balance sheet helps you measure progress toward financial goals. Your financial situation improves if your net worth increases each time you prepare a bal­ance sheet. It will improve more rapidly if you are able to set aside money each month for savings and investments. 

As with net worth, the relationship among various balance sheet items can give an indication of your financial position. The Financial Planning Calculations box on the next page explains several commonly used financial ratios. 

The Cash Flow Statement: 

Where Did Your Money Go? 

Each day, financial events can affect your net worth. When you receive a paycheck or pay living expenses, your total assets and liabilities change. Cash flow is the actual inflow and outflow of cash during a given time period. Income from employment will probably represent your most important cash inflow; however, other income, such as interest earned on a savings account, should also be considered. In contrast, payments for items such as rent, food. and loans are cash outflows. 

A cash flow statement, also called a personal income and expenditure statement,  is a summary of cash receipts and payments for a given period, such as a month or a year. This report provides data on your income and spending patterns, which will be helpful when preparing a budget. A checking account can pro­vide information for your cash flow statement. Deposits to the account are your inflows; checks written are your outflows. Of course, in using this system, when you do not deposit the entire amounts received. you must also note the spending of undeposited amounts in your cash flow statement. 

The process for preparing a cash flow statement is 

Total cash received during the time period - Cash outflows during the time period = Cash surplus or deficit 

Step 1: Record Income Creating a cash flow statement starts with identify­ing the cash received during the time peliod involved. Income is the inflows of cash for an individual or a household. For most people, the main source of income is money received from a job. Other common income sources include 

• Wages, salaries, and commissions. Self-employment business income. 
• Saving and investment income (interest, dividends, rent} 
• Gifts, grants, scholarships, and educational loans. 
• Government payments, such as Social Security, public assistance, and unemployment benefits. 
• Amounts received from pension and retirement programs. 
• Alimony and child support payments. 

Take-home pay, also called net pay is a person's earnings after deductions for taxes and other items. Lin's deductions for federal, state, and Social Security taxes are $1,250. Her take-home pay is $3,196. This amount, plus earnings from savings an investments, is the income she has available for use during the current month. 

Take-home pay is also called disposable income, the amount a person or househo.~ has available to spend. Discretionary income is money left over after paying for hous­ing, food, and other necessities. Studies report that discretionary income ranges fro less than 5 percent for people under age 25 to more than 40 percent for older people. 

Step 2: Record Cash Outflows Cash payments for living expenses another items make up the second component of a cash flow statement. Lin Ye divides h cash outflows into two major categories: fixed expenses and variable expenses. While every individual and household has different cash outflows, these main categories along with the subgroupings Lin uses, can be adapted to most situations. 

1. Fixed expenses are payments that do not vary from month to month. Rent or mon­gage payments, installment loan payments, cable television service fees, and a month]. train ticket for commuting to work are examples of constant or fixed cash outflows. 

For Lin, another type of fixed expense is the amount she sets aside each month f, payments due once or twice a year. For example, Lin pays $384 every March for lit insurance. Each month, she records a fixed outflow of $32 for deposit in a special sa\­ings account so that the money will be available when her insurance payment is due. 

2. Variable expenses are flexible payments that change from month to month. Com­mon examples of variable cash outflows are food, clothing, utilities (such as electricity and telephone), recreation, medical expenses, gifts, and donations. The use of a check­book or some other recordkeeping system is necessary for an accurate total of cast outflows. 

Step 3: Determine Net Cash Flow The difference betweer: income and outflows can be either a positive (surplus) or a negative (deficit) cash flow. A deficit exists if more cash goes out than comes in during a giver: month. This amount must be made up by withdrawals from savings or by bor­rowing. 

When you have a cash surplus, as Lin did, this amount is available for saving, investing, or paying off debts. Each month, Lin sets aside money for her emergency fund in a savings account that she would use for unexpected expenses or to pay living costs if she did not receive her salary. She deposits the rest of the surplus in savings and investment plans that have two purposes. The first is the achievement of short-term and intermediate financial goals, such as a new car, a vacation, or reenrollment in school; the second is long-term financial security-her retirement. 

How to set a system for personal financial records?

SYSTEM FOR PERSONAL FINANCIAL RECORDS

Experts once predicted that computers would result in fewer paper documents. How wrong they were' Today computers are generating more paperwork than ever. Much of that paperwork relates to financial matters. Invoices. credit card statements. insurance policies, and tax records are the basis of financial recordkeeping and personal economic choices. 

An organized system of financial records provides a basis for 

• Handling daily business affairs. including payment of bills on time . 
• Planning and measuring financial progress. 
• Completing required tax reports. 
• Making effective investment decisions. 
• Deterrillning available resources for current and future buying. 

Most financial records are kept in one of three places: a home file. a safe deposit box, or a home computer. A home file should be used to keep records for current needs and documents with limited value. Your home file may be a series of folders. a cabinet with several drawers, or even a cardboard box. Whatever method you use, it is most important that your home file be organized to allow quick access to required documents and information. 

Important financial records and valuable articles should be kept in a location that provides better security than a home file, A safe deposit box is a private storage area at financial institution with maximum security for valuables and difficult-to-replace uments, Access to the contents of a safe deposit box requires two keys. One key is ued to you; the other is kept by the financial institution where the safe deposit box is ated. Items conml0nly kept in a safe deposit box include stock certificates, con­o a list of insurance policies, and valuables such as rare coins and stamps. 

The number of financial records and documents may seem over­whelming; however, they can easily be organized into 10 categorie. These groups correspond to the major topics co\'­ered in this book. You may not need to use all of these records and documents at present. As your financial situation changes. you wil add others. 

How long should you keep personal finance records? The answer to this question differs for various documents. Records such as birth certificates. wills. and Social Security data should be kept perma­nently. Records on property and investments should be kept as long as you own these items. Federal tax laws dictate the length of time you should keep tax-related information. Copies of tax returns and supponing data should be saved for six years. Normally. an audit will go back only three years: however. under certain circumstances, the Internal Revenue Service may request information from six year back. Financial experts recommend keeping documents related to the purchase and sale of real estate indefinitely. 

How to plan for succussful money management

Succussful Money Management
"Each month I have too much month and not enough money. If the month were only 20 days long. budgeting would be easy'" Most of us haye heard a comment like this when it comes to budgeting and money management.
Your daily spending and saying decision, arc at the center of financial planning. You must coordinate these decisions with your need". goals. and personal situation. When people watch a baseball or football game. the) u"ually know the score. In financial planning. knowing the score is also important. Maintaining financial records and plan­ning your spending are essential to successful personal financial management. The time and effort you devote to these recordkeeping activities will yield benefits. Money management refers to the day-to-day financial acti\ ities necessary to manage current personal economic resources while working toward long-term financial security.
Opportunity Cost and Money Management 
Consumers can choose from more than 25.000 itcms in a supermarket. from more than 11,000 periodicals. and from as many as 500 cable television stations. Daily decision making is a fact of life. and trade-offs are as"ociated with each choice made. Selecting an alternative means you give up something else. In terms of money management deci­sions, examples of trade-off situations. or opportunity costs, include the following:
Spending money on current living expenses reduces the amount you can use for saving and investing for long-term financial security.
Saving and investing for the future reduce the amount you can spend now. Buying on credit results in payments later and a reduction in the amount of future income available for spending.
Using savings for purchases results in lost interest earnings and an inability to use savings for other purposes.
Comparison shopping can save you monel and improve the quality of your purchases but uses up something of valuc you cannot replace: your time.
As you develop and implement various mone) management activities, you need to assess financial and personal costs and benefits associated with financial decisions.
Components of Money Management 
Per­sonal financial records and documents are the foundation of systematic resource use. They provide written evidence of business transactions. ownershjp of property, and legal matters. Personal financial statements enable you to measure and assess your financial position and progress. Your spending plan. or budget. is the basis for effective money management.

What employment search strategies you should care about?

Employment search strategies
We have all heard about job applicants who send out hundreds of resumes with very little success, while others get several offers. What are the differences between these two groups? The answer usually im'olves an ability to expand one' s experiences and use job search techniques effectively.
Obtaining Employment Experience
A common concern among people seeking employment is a lack of work experience. Many oppOltunities are available to obtain work-related training.
Part-time Employment
Summer and part-time work can provide expeli­ence along with the chance to see if you enjoy a particular career field. The increased use of temporary employees has opened up opportunities to obtain experience in many career areas. Part-time work may also be of value for people who are changing careers and need experience in a different career field.
More and more workers are taking advantage of temporary job assignments as a channel to a full-time position. The number of temporary employment services and "interim" workers continues to increase. Working as a "temp" can give you valuable experience as well as contacts in various fields of employment.
Volunteer Work
Involvement in community organizations and government agencies can provide excellent opp0l1unities to acquire skills. establish good work habits. and make contacts. Volunteeling to work at the gift shop of a museum, for exam­ple. gives you experience in retailing. You may participate in a recycling project, assist at a senior citizens' center. or help supervise youth activities at a park district. These activities will help you develop skills applicable to other types of work situations.
Internships 
In very competitive fields. an internship will give you the experi­ence you need to obtain employment. During an internship, you can make contacts about available jobs. Applying for an intemship is similar to applying for a job. Most colleges and universities offer cooperative education and internships as part of their academic programs.
Campus Projects Class assignments and campus activities are frequently overlooked as work-related experience. You can obtain valuable career skills on cam­pus from experience in

• Managing, organizing, and coordinating people and activities as an officer or a committee chairperson of a campus organization. 
• Public speaking in class, campus, and community presentations. 
• Goal setting. planning. supervising. and delegating responsibility in community service and class projects. 
• Financial planning and budgeting gained from organizing fund-raising projects, managing personal finances. and handling funds for campus organizations.
• Conducting research for class projects. community organizations, and campus activities. 

Using Career Information Sources 
Career planning and advancement, like other financial decisions, are enhanced by the use of cunent and relevant information.
Library Materials Most school and community libraries have extensive career information sources. The Occupational Outlook Handbook covers all aspects of career planillng and job search and provides detailed information on jobs in various career clus­ters. Other helpful govemment resources related to careers are the Dictional} of Occu­pational Titles and the Occupational Outlook Quarterly.
Mass Media Career Information Most newspapers offer articles and columns about job searches and career trends. Newspapers, television reports, and radio reports also provide useful information about economic and social influences on careers. Changes in interest rates. consumer demand. and foreign trade are good indi­cators of job availability in various career areas.
World Wide Web The Internet offers a variety of information sources related to job opportunities. preparing a resume. interviewing. and other career planning top­ics.
Campus Placement Office Your school probably has a career planning and placement service. This office is likely to have materials on various career planning topics and can assist you in creating a resume and preparing for an interview.
Community Orgaizations Every community has business and civic groups you can use in your career search. Public meetings featuring industry leaders and busi­ness owners provide opportunities to become acquainted with local businesspeople.
Professional Associations 
Various professions have organizations to pro­mote their career areas. These organizations include the American Marketing Associa­tion, the Independent Insurance Agents of America. the American Society of Women Accountants, and the National Association of Real Estate Brokers. The Enevclopedia of A.ssociations can help you identify organizations representing careers that interest you.
Business Contacts 
Professional contacts can advise you about career prepa­ration and job oPP0l1unities. Friends. relatives. people you meet through community and professional organizations. and people you meet through school. work. church, or other activities are all potential business contacts. Networking is the process of mak­g and using contacts to obtain and update career information. Campus programs such - organizations, sports. and lectures can provide yaluable contacts. Every person you talk to is a potential career contact who may provide career information or assistance. Although the contacts you make may not be able to hire you. if jobs are available .hey can refer you to the right person. They can also help you get an informational terview, a meeting at which you gather information about a career or an organizan. When planning and using informational interviews. consider the following:

• Prepare a list of industries and organizations for which you would like to work. Talk to family. friends. coworkers. and others for names of people you might contact. 
• Prepare a list of open-ended questions that will help you obtain information about current trends in the industry and potential employment opportunities. Make an appointment for a 20-minute meeting; emphasize to the person that the meeting is for information only. 
• Try to interact with the person at his or her place of work to gain better awareness of the work environment. 
• Follow up with a thank-you note. and. if possible. send some information (such as an article) that might be of interest to your contact. 

Identifying Job Opportunities 
Before you apply for employment. you need to identify job openings that match your interests and abilities.
Job Advertisements 
Advertisements in newspapers and professional period­icals can be valuable sources of available positions. Newspapers such as The Wall Street Journal, the New York Times. the Chicago Tribune, and the Los Angeles Times have job listings coveIing a wide geographic area. You should also check local and regional newspapers. For opportunities in a specific career field, refer to specialized publications. such as Advertising Age, Marketing News, the Journal of Accoun­tancy and American Banke!: Since 80 to 90 percent of available jobs are not advertised to the general public. other job search techniques are critical.
Career Fairs 
Career fairs. commonly held on campuses and at convention centers. offer an opponunity to make contact with several firms in a short time span. Be prepared to quickly communicate your potential contributions to an orga­nization. By making yourself memorable to the recruiter, you are likely to be called for a follow-up interview.
Employment Agencies 
Another possible source of job leads is employ­ment agencies. These for-profit organizations match job hunters with prospective employers. Often the hiring company pays the fee charged by the employment agency; however, be careful when you are asked to pay a fee and have no guaran­tee of a job. Be sure you understand any contracts before signing them.
Government-supported employment serices are also avai.lable. Contact your state employment service or your state depanment of labor for further information.
Job Creation 
After researching a particular company or industry, present how your abilities would contribute to that organization. Job creation involves developing an employment position that matches your skills with the needs of an organization.
As you develop skills in areas you enjoy. you may be able to create a demand for your services. For example, a person who enjoyed researching business and economic trends was hired by a major corporation to make presentations for its managers at var­ious company offices. Other people with an ability to design promotions and advertis­ing might be hired by a nonprofit organization that needs to expand its public visibility.
Other Job Search Methods 
Your ability to locate existing and potential employment positions is limited only by your imagination and initiative. Commonly overlooked sources of jobs include the following:

• Visit companies where you would like to work. and make face-to-face contacts. Create an impression that you are someone who can contribute. Calling or visiting before 8 a.m. or after 4 p.m. increases your chance of talking to someone who is not busy. 
• Successful organizations continually look for quality employees. Telephone and business directories can provide names of organizations that employ people with your qualifications. 
• Search the World Wide Web for information about potential jobs and organizations that may be in search of someone with your abilities and skills. 
• Talk with alumni who work in your field. Graduates who are familiar with your school and major can help you focus your career search. 

To improve your job search efforts. work as many hours a week getting a job as you expect to work each week on the job. Maintaining an ongoing rela­tionship with contacts can be a valuable source of information about future career opportunities.

What are the financial and other factors of an employment? -

Financial and Other Aspects of Employment
"We would like you to work for us:' When offered an employ­ment position. you should examine a range of factors. Care­fully assess the organization. the specific job. and the salary and other benefits.
Accepting an Employment Position
Before accepting a position. do additional research about the job and the company. Request information about your specific duties and job expectations. If someone cur­rently has a similar position, ask to talk to that person. If you are replacing a person who is no longer with the company, obtain information about the circumstances of that person's departure.
The Work Environment 
Investigate the work environment. The term corporate culture refers to management styles. work intensity. dress codes. and social interac­tions witrun an organization. For example. some companies have rigid lines of commu­nication. while others have an open-door atmosphere. Are the values. goals, and lifestyles of cun'ent employees similar to yours? If not. you may find yourself in an uncomf0l1able situation that doesn't allow you to perform according to your capabilities.
Consider company policies and procedures for salary increases. evalua­tions of employees. and promotions. Talk with current workers to obtain this information.
Factors Affecting Salary 
Your initial salary will be influenced by your education and training. company size. and salaries for comparable posi­tions. To ensure a fair starting salary. talk to people in similar positions and check business journals for information about salary levels. In addition, make sure you clearly understand company procedures and policies for raises. In recent years. increased emphasis has been placed on team results for salary increases and on rewards for expanded learning.
Performance quality and work responsibilities are the main influences on salary advances. Meet regularly with your supervisor to obtain performance evaluations and suggestions for professional growth. Communicate your desire for increased work responsibilities and greater financial rewards. Meeting and exceeding organizational expectations should enhance your monetary position. If not, you may wish to consider other employment opportunities.
Evaluating Employee Benefits
Escalating health care costs. changing family situations. and concerns about retirement have increased the attention given to supplementary compensation benefits.
Meeting Employee Needs
In recent years. nonsalary employee benefits have expanded to meet the needs of different life situations. The increasi.ng numbeI of two-income and single-parent households has resulted in a greater need for child care benefits and leaves of absence to care for newborn children. newly adopted children, and other dependents. The need for elder care benefits for employees with dependent parents or grandparents also increases. Child care benefits are offered in a variety of forms. ranging from direct payments for child care to facilities on company premises.
Other employee benefits designed to meet employees' needs include flexible work schedules: work-at-home arrangements: legal assistance: counseling for health, emo­tional. and financial needs: and exercise and fitness programs. Such benefits not only enhance the quality of employees' lives but are profitable for organizations because happier. healthier employees miss fewer workdays and have a higher level of produc­tivity.
Cafeteria-style employee benefits are programs that allow workers to base their job benefits on a credit system and personal needs. Flexible selection of employee ben­efits has become common. A man'ied employee with children may opt for increased life and health insurance. while a single parent may use benefit credits for child care services. The Financial Planning for Life's Situations box on page 52 suggests benefits for different life situations. Like any financial decision. employee benefits involve a trade-off. or opportunity cost. that you must assess.
Many organizations offer flexible spending plans. also called expense reimburse­ment accounts. This anangement allows you to set aside part of your salary for paying medical or dependent care expenses. These funds are not subject to income or Social Security taxes. However. money not used for the specified purpose is forfeited. There­fore, you must carefully plan the amount to be designated for a flexible spending plan.
In a similar manner. a medical-spending account (MSA) allows people who are self­employed or work for a company with 50 or fewer employees the oppOlwnity to pay health care costs with pretax dollars. The MSA has two components: (1) health insurance coverage with a high deductible and (2) a tax-defened savings account for paying medical expenses. Money in this account may be taken out for other uses: however. the funds are then taxed, along with an additionall5 percent tax penalty. While MSAs haye tax-saving implications. the high deductible may not be affordable for many households.
When matching dependent health care needs and medical insurance plans. consider
the following:

• Types of services ayailable and location of health care providers. 
• Direct costs (insurance premiums) to you. 
• Anticipated out-of-pocket costs (deductibles and coinsurance amounts). 

As people live longer, profit-sharing plans and retirement programs are increasing in importance. In addition to Social Security benefits. some employers contribute to a pen­-ion plan. Vesting is the point at which retirement payments made by the organization on your behalf belong to you even if you no longer work for the organization. Vesting schedules vary, but all qualified plans (those for which an employer may deduct con­tributions to the plan for tax purposes) must (1) be 100 percent vested on completion of five years of service or (2) have 20 percent Vesting after three years and full vesting, in stages, after seven years. Vesting refers only to the employer's pension contributions; employee conttibutions belong to the employees regardless of the length of their ser­vice with the organization.
Workers are commonly allowed to make personal contributions to company-sponsored retirement programs. These plans usually involve a variety of investments, making it easy for employees to create a diversified portfolio for their retirement funds.
Comparing Benefits 
Two methods used to assess the monetary value of employee benefits are market value calculations and future value calculations.
Market value calculations determine the specific monetary value of employee benefits-the cost of the benefits if you had to pay for them. For example, you may view the value of one week's vacation as 1/52 of your annual salary, or you may view the value of a life insurance benefit as what it would cost you to obtain the same coverage. You can use this method to determine the difference between two job offers with different salaries and employee benefits.
Future value calculations enable you to assess the long­term worth of employee benefits such as pension programs and retirement plans. For example, you can compare the future value of payments contributed to a company retirement fund to that of other saving and inyestment options.
You should also take tax considerations into account when you assess employment benefits. A tax-exempt benefit is one on which you won't have to pay income tax, but a tax-deferred benefit requires the payment of income tax at some future time, such as at retirement. In recent years. the federal government has required that taxes be paid on certain types of nonfinancial benefits. For example. the value of a company car used for personal travel is considered taxable income.
To be exempt from federal income tax. a benefit plan must be "nondis­criminatory": that is. lower-paid coworkers must receive benefits comparable to those given to highly paid executies, If executives are given life insur­ance coverage in which the premium constitutes a higher proportion of their salaries. the excess value of the insurance premium is taxable. When assess­ing employment compensation and benefits. consider their taxability, since an untaxed benefit of lower value may be worth more than a benefit of higher value that is subject to taxation.
Your Employment rights
Employees have legal rights both during the hiring process and on the job. For example. an employer cannot refuse to hire a woman or terminate her employment because of pregnancy. nor can it force her to go on leave at an arbitrary point during her pregnancy. In addition, a woman who stops work­ing due to pregnancy must get full credit for previous service. accrued retirement ben­efits, and accumulated seniority. Other employment rights include the following:

• A person may not be discriminated against in the employment selection process on the basis of age, race. color. religion. sex. marital status. national origin, or mental or physical disabilities. 
• Minimum-wage and overtime pay legislation apply to individuals in certain work settings. 
• Workers' compensation (for work-related injury or illness). Social Security, and unemployment insurance are required benefits. 

Career and Long-Term development

Career Development
A job is for today. but a cm'eer can be for a life­time. Will you always enjoy the work you do today? Will you be successful in the cm'eer you select? These questions cmmot be answered light away: however, certain skills and ani tudes can lead to a fulfilling work life.
Everyday you can peIform duties that contribute to your career success, Communicating and working well with others will enhance your chances for financial advancement and promotion. Flexibility and openness to new ideas will expand your abilities, knowledge. and career potential.
Develop efficient work habits. Use lists. goal setting. note cards, and other time management techniques. Combine increased productivity with quality. All of your work activities should reflect your best performance. This extra effort will be recog­nized and rewarded.
Finally. learn to anticipate problems and areas for action, Creativity and a willing­ness to assist others can help the entire organization and contribute to your work enjoy­ment and career growth.
Training Opportunities 
Many technology-work situations did not exist a few years ago. Many of the job skills you will need in the future have yet to be created. Your desire for increased education is a primary determinant of your career success and financial advancement. Continue to learn about new technology and the global economy.
Various methods for updating and expanding your knowledge are available. Formal methods include company programs. seminars offered by professional organizations, and graduate and advanced college courses. Many companies encourage and pay for continuing education.
Informal methods for updating and expanding your knowledge include reading and discussion with colleagues, Newspapers. news magazines. business periodicals, and professional journals offer a wealth of information on business. economic. and social trends. Informal meetings with coworkers and associates from other companies are a valuable source of current career information.
Career Paths and Advancement 
As with other financial decisions. career choices must be reevaluated in light of chang­ing values. goals. economic conditions. and social trends. A successful technique for coping with the anxieties associated with career development is to gain the support of an established person in your field. A mentor is an experi­enced employee who serves as a teacher and counselor for a less experienced person in a career field. A relationship with a mentor can provide such benefits as personalized training. access to influential people. and emotional support during difficult times.
Your efforts to attract a mentor start with excellent pelformance. Show initiative. be creative. and be alert to meeting the needs of others. Maintain visibility and display a desire to learn and grow by asking questions and volunteering for new assignments.
A prospective mentor should be receptiye to assisting others and to helping them grow in both the technical and social areas of a career. Many organizations have formal mentor programs with an experienced employee assigned to oversee the career devel­opment of a new employee. Some mentor relationships involve retired individuals who desire to share their knowledge and experience.
Changing Careers
At some time in their lives. most workers change jobs. About 10 million career moves occur each year. People change jobs to obtain a better or different position within the same career field or to move into a new career field. Changing jobs may be more diffi­cult than selecting the first job. Unless their present situation is causing mental stress or physical illness. most people are unwilling to exchange the security of an existing position for the uncenainty of an unfamiliar one.
The following may be indications that it is time to move on:

• Low motivation toward your current work. Physical or emotional distress caused by your job. Consistently poor performance ealuations. 
• A lack of social interactions with coworkers. 
• Limited opportunity for salary or position advancement. 
• A poor relationship with your superior. 

A decision to change careers may require minor alterations in your life (such as going from retail sales to industrial sales). or it may mean extensive retraining and starting at an entry level in a new field. As with every other financial decision, no exact formula exists for deciding whether you should make a career change. However, follow these guidelines. First, carefully assess the financial and personal costs and benefits of changing careers in relation to your needs and goals and those of your household. Giv­ing up benefits such as health insurance may be costly to a family, but the expanded career opportunities in a new field may be worth the trade-off. Then determine whether a career change will serve your needs and goals and those of other household members.
In many industries, job security is a thing of the past. Company mergers, downsiz­ing, and economic conditions may result in forced career changes. Layoffs cause emo­tional and financial stress for individuals and families. To cope with job termination while seeking new employment. counselors recommend that you

• Maintain appropriate eating, sleep. and exercise habits. 
• Get involved in family and community activities; new career contacts are possible anywhere. 
• Improve your career skills through personal study, formal classes, or volunteer work. 
• Target your job search to high-growth industries or small businesses. 
• Consider opportunities with nonprofit organizations, government agencies, temporary employment, or consultant work. 
• Target your skills and experience to the needs of an organization. 

Career opportunities now and in the future

Carreer Choices
Social Influences 
Your job search should start with various demographic and geographic trends influence employment opportunities. Demographic trends affecting the job market include the following:

• An increase in the number of working parents expands the demand for food service and child care. 
• An increase in leisure time among some segments of the population results in an increased interest in personal health, physical fitness, and recreational products and services. 
• An increase in the number of older people raises the demand for travel services, health care, and retirement facilities. 
• An increased demand for additional employment training increases career opportunities for teachers and trainers within business organizations. 

Economic Conditions 
High interest rates. price increases. or decreased demand for goods and services can reduce career opportunities. While you cannot eliminate the effects of economic fac­tors on employment trends. these factors affect some businesses more than others. For example, high interest rates reduce employment in housing-related industries, since people are less likely to buy homes when interest rates are high.
Trends in lndustries and Technology 
Two factors have caused a decline in manufacturing employment in our econ­omy. First. increased competition from companies in Asia, Europe, and other regions has reduced demand for American-made products. Second. automated production methods have decreased the need for manual workers and other entry-level employees in factories.
Employment stability has a strong influence on a person's financial situation for both the shon and long term, For example. workers in various technology fields. where scientific advances can quickly make products (and jobs) obso­lete. must be ready to cope with personal financial uncertainty.
While career opportunities have dwindled in some sectors of our economy, opportunities in other sectors have grown. Service industries that are expected to have the greatest employment potential for the 21 st century include
Computer technology-systems analysts. computer operators. website developers. network operations managers. and repair personnel and service technicians for data processing equipment.
Health care-medical assistants, physical therapists, home health workers, biotech analysts. laboratory technicians. registered nurses. and health care administrators.
Business services-web consultants. foreign language translators. employee benefit managers. operations consultants. and research data analysts.
Social services-child care workers, elder care coordinators, family counselors, and social service agency administrators.
Sales and retailing-web promotion producers. marketing representatives. and sales managers with technical knowledge in the areas of electronics. medical products. and financial services.
Hospitality and food services-travel agents. resort and hotel administrators, food service managers, online customer sen'ice representatives. and meeting planners.
Management and human resources-clerical supervisors. recruiters. interviewers. employee benefit administrators. and employment service workers.
Education-corporate trainers. special education teachers. adult education instructors, educational administrators. and teachers for elementary, secondary, and postsecondary schools,
Financial services-risk assessment managers. actuaries. e-commerce accountants, investment brokers. and others with a knowledge of accounting and taxes.
Business demands in the 21st century will include expanded reading and communi­cation skills, More and more employees are being called on to read scientific and tech­nical journals and financial reports and to write speeches and journal articles. Your career success is likely to be dependent on communication skills. computer skills, and the ability to communicate in a second language.

What are the personal factors of career choice?

Career Choice
"Boring!" "Oh no!" "Excellent!" These are some common responses to "It's time to get up for work."
Have you ever wondered why some people find great satisfaction in their work while others want only to put in their time? As with other personal financial decisions, career selection and professional growth require planning. The average person changes jobs about seven times during a lifetime. Most likely, therefore, you will reevaluate your choice of a job on a regular basis.
The lifework you select is a key to your financial well-being and personal satisfaction.
You may select a job, an employment position obtained mainly to earn money. Many people work in one or more jobs during their lives without considering their interests or opportunities for advancement. Or you may select a career, a committment to a profes­sion that requires continued training and offers a clear path for occupational growth.
Trade-Offs of career decisions
While many factors affect daily living habits and financial choices. your employment situation probably affects them the most. Your income le\el. business associates, and available leisure time are a direct result of the work you do.
Like other decisions, career choice and professional development alternatives have risks and opp0l1unity costs. In recent years. many people in our society have placed family values and personal fulfillment above monetary reward and professional recog­nition. Career choices require periodic evaluation of trade-offs related to personal, social, and economic factors. For example:

• Some people select employment that is challenging and offers strong personal satisfaction rather than employment in which they can make the most money. 
• Some people refuse a transfer or a promotion that would require moving their families to a new area or reducing leisure time. 
• Many parents opt for part-time employment or flexible hours to allow more time for their children. 
• Many people give up secure job situations because they prefer to operate their own businesses. 

Career Training and Skill Development 
Your level of formal training affects your financial success. The statistics in this exhibit do nN mean you will automatically earn a certain amount because you have a college degree. They imply that more education increases your potential earning power. Other factors, such as field of smdy. also influence future income.
In addition to formal career training. successful managers, employers, and career counselors stress the importance of traits adaptable to most work situations. While some of these traits can be acquired in school. others require experiences in other situ­ations. The traits that successful people usually possess include
An ability to work well with others in a variety of settings. A desire to do tasks better than they have to be done.

• An interest in reading a wide variety of materials. 
• A willingness to cope with conflict and adapt to change. 
• An awareness of accounting. finance. and marketing fundamentals. 
• A knowledge of technology and computer software such as word processing, spreadsheet. database. web search. and graphics programs. 
• An ability to solve problems creatively in team settings. 
• A knowledge of research techniques and library resources. Well-developed written and oral communication skills. 
• An understanding of both their own motivations and the motivations of others. 
• These competencies give people flexibility. making it easy to move from one organiz­ation to another and to successfully change career fields. How are you working to develop these traits. 

Personal Factors 
You might be able to identify a satisfying career using guidance tests that mea­sure your abilities. interests. and personal qualities. Aptitude tests, interest inventories. and other types of career assessment tests are available at school career counseling offices. You can use a book that allows you to take these tests at home. For a fee. testing services will mail you the results of your com­pleted test. or tests may be taken online.
Aptitudes are natural abilities that people possess. The ability to work well with numbers. problem-solving skills. and physical dexterity are examples of aptitudes.
Interest inventories determine the activities that give you satisfaction.
These instruments measure qualities related to various types of work. People with strong social tendencies may be best suited for careers that involve deal­ing with people. while people with investigative interests may be best suited for careers in research areas.
Test results will not tell you which career to pursue. They will only give you an indi­cation of your aptitudes and interests. Another important dimension of career selection is your personality. Do you pelform best in structured or high-pressure situations, or do you prefer unstructured or creative work environments? The financial aspects of the career are also likely to be a concern.
Many people are able to obtain employment based on various interests and experi­ences. A person with volunteer experience might be hired as executive director of a community organization. Or a person who enjoys planning parties and other events may work as a meeting planner.
Career decision making
Changing personal and social factors will require you to continually assess your work situation. As you can see. the different entry points depend on your personal situ­ation. Your career goals will also affect how you use this process. If you desire more responsibility on the job. for example. you may obtain advanced training or change career fields. This process is a suggested framework for planning, changing, or advanc­ing in a career.