Personal finance statements

The first step requires that one assess one s current situation regarding income, savings, living expenses, and debts. This step requires that one prepare a list of current asset and debt balances, along with present expenditures. Personal finance statements (discussed later in this chapter) can be a useful tool for this step. 

This chapter describes a six-step process that has been proven to be useful in beginning to manage one s personal finances. Personal financial statements, the use of credit, investment strategies, and retirement planning also are discussed. The chapter concludes with seven principles of effective personal finance. 

The job statement is used to describe a JTBD. Key components of a job statement are an action verb, the object of the action, and claribcation of the context in which the job is performed. Manage personal finances at home is a job statement. So is clean clothes at home, as shown in Exhibit i.2. Listen to music while jogging is also an example of a job statement. 

Charge it Put it on my account Add it to my student loan As these statements indicate, buying on credit is a way of life in the United States. Simply stated, credit is an arrangement to receive cash, goods, or services now and pay for them in the future (Rejda and McNamara, 1998). Consumer credit is differentiated from other types of credit (i.e., business credit) in that it is credit for personal and family needs (except a home mortgage). According the 2004 Survey of Consumer Finance, the median value of credit-card balances and installment loans for a typical family in 2004 was 13,700 (Bucks et al., 2006). Installment loans describe consumer loans that require fixed payments and a fixed term (e.g., an automobile loan). 

The business and accounting literature contain a wealth of information on how to read and analyze corporate financial statements. Most engineers work for or with corporations and have a direct personal interest in understanding financial performance however, a detailed treatment of the subject is beyond the scope of this book. Excellent introductions to finance and accounting are given in the books by Spiro (1996) and Shim and Henteleff (1995). 

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