
# 5: Finance


Most adults have to deal with the financial topics in this chapter regardless of their job or income. Understanding these topics helps us to make wise decisions in our private lives as well as in any business situations.

• 5.1: Basic Budgeting
Budgeting is an important step in managing your money and spending habits. To create a budget you need to identify how much money you are spending. Some expenses to keep in mind when creating a budget are rent, car payment, fuel, auto insurance, utilities, groceries, cell phone, personal, gym membership, entertainment, gifts, dining out, medical expenses, etc.
• 5.2: Simple Interest
• 5.3: Compound Interest
Most banks, loans, credit cards, etc. charge you compound interest, not simple interest. Compound interest is interest paid both on the original principal and on all interest that has been added to the original principal. Interest on a mortgage or auto loan is compounded monthly. Interest on a savings account can be compounded quarterly (four times a year). Interest on a credit card can be compounded weekly or daily!
• 5.4: Savings Plans
Sometimes it makes better financial sense to put small amounts of money away over time to purchase a large item instead of taking out a loan with a high interest rate. When looking at depositing money into a savings account on a periodic basis we need to use the savings plan formula.
• 5.5: Loans
It is a good idea to try to save up money to buy large items or find 0% interest deals so you are not paying interest. However, this is not always possible, especially when buying a house or car. That is when it is important to understand how much interest you will be charged on your loan.
• 5.6: Exercises

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5: Finance is shared under a CC BY-SA 4.0 license and was authored, remixed, and/or curated by Maxie Inigo, Jennifer Jameson, Kathryn Kozak, Maya Lanzetta, & Kim Sonier via source content that was edited to conform to the style and standards of the LibreTexts platform; a detailed edit history is available upon request.