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    How Money Works: Secrets from the Other Side!
    How Money Works: Secrets from the Other Side!
    How Money Works: Secrets from the Other Side!
    Ebook27 pages1 hour

    How Money Works: Secrets from the Other Side!

    By W. Scott Blackmon CPA

    ()

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    About this ebook

    Ever thought to yourself, I wish I knew that when I was younger? Or, why didn't somebody tell me that before now?! Of course, you have, most everyone has. The information about how money works in this book is that kind of information. It can help people who are just starting off on their own and need to know the importance of money management and what having good or bad credit really means. It can also be used by others to see the long-term effects of certain monetary decisions. The format answers questions with a short version of an answer and a long version. This makes the book a good reference that you can continue to use in the future to guide you when making important financial decisions.

    LanguageEnglish
    PublisherCovenant Books, Inc.
    Release dateAug 8, 2019
    ISBN9781644714027
    How Money Works: Secrets from the Other Side!

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      Book preview

      How Money Works - W. Scott Blackmon CPA

      9781644714027_cover.jpg

      How Money Works

      Secrets from the Other Side!

      W. Scott Blackmon, CPA

      ISBN 978-1-64471-401-0 (Paperback)

      ISBN 978-1-64471-402-7 (Digital)

      Copyright © 2019 W. Scott Blackmon, CPA

      All rights reserved

      First Edition

      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. For permission requests, solicit the publisher via the address below.

      Covenant Books, Inc.

      11661 Hwy 707

      Murrells Inlet, SC 29576

      www.covenantbooks.com

      Table of Contents

      Introduction

      What is ACH and how does it work?

      Do I need a budget?

      What do I need to know about buying a car?

      Why are checks still around?

      Is cosigning for a loan a good idea?

      How do Credit Cards work?

      What are credit reports and credit scores?

      How do debit cards aka check cards work?

      How do I manage my debt?

      When should I buy a house?

      Do I really need life insurance?

      When should I start saving for retirement?

      How do I save money?

      What do I need to know about the employer side?

      Are there different kinds of banks?

      About the Author

      Introduction

      A secret is something that is not known by someone. Usually a real secret contains information that can be useful to the one who does not know it. The purpose of this book is to inform the reader of many things about money that they may find useful. The best way to learn secrets or anything else is to ask questions. This is why the chapters of this book all use questions as their titles. There are many types of questions and many types of answers. Answers can normally come in the short form or long form. Sometimes all you want is the short answer and sometimes you need more detail that is contained in the long answer. For this reason, and so it can be used as an ongoing reference guide, both the short answer and the long answer have been included in each chapter. This book is meant to help anyone with questions about the day-to-day aspect of personal finances. I believe it can especially help teenagers and young adults learn more about making decisions in the world of personal finance. I hope you find this book useful in improving your knowledge of money and how it works.

      What is ACH and how does it work?

      ACH stands for automated clearinghouse or automated clearinghouse. It is a system or an electronic network used in the United States to deposit or withdraw funds directly from your checking or savings account at a financial institution (normally a credit union or bank). This can also work with loan payments.

      There are two major types of ACH processors. They are ACH receivers and ACH originators. Almost all financial institutions are ACH receivers and will process an ACH file that they received by depositing funds or withdrawing funds from an account per the instructions of the ACH file. ACH originators are the financial institution or other financial processor that creates the ACH file.

      Then there is the middleman. In most cases, the middleman is the Federal Reserve Bank. When an ACH is created by the ACH originator, they send the file, normally with many other files, in a batch to the Federal Reserve Bank. Each individual file has information and instructions on it. Along with the information about the file itself, such as when it was created, who the ACH originator is, and the batch identification, the information would include the bank or the credit union that should receive the ACH file and the account number that will be affected by the ACH file. The Federal Reserve Bank sorts all the batch information it receives and then, using the nine-digit routing number of the bank or the credit union that should receive the file, creates a batch for that financial institution and sends the ACH batch with the individual ACH files. For research purposes and using a very secured method, the Federal Reserve Bank will allow banks and credit unions access to file data that affect their financial institution and provide a summary page of all the information related to each ACH file. This summary page is called the ACH detail.

      Many people have heard of direct deposit. This is where employees normally provide a voided check, or the information listed on the bottom of their check to their employer, so the employees’ pay can be deposited directly to their checking accounts. This type of transaction is called an ACH credit because the funds are credited to the account. Many employers require direct deposit because it reduces the costs to the employer of running the payroll process. Another type of ACH credit would be your tax refund from the federal government or your state government. The routing number of your bank or credit union and the account number you would like the funds deposited into is required, normally as part of your tax return, for this to work. One major thing to know about ACH, especially with ACH credits, is that your financial institution is sent the information in the ACH file for the deposit prior to receiving the funds for the deposit. This is why you may be able to see online how much your payroll deposit is on Thursday when you don’t get paid until Friday. The bank or credit union does not receive the funds earlier than you do even though it can appear that way.

      One of the most common uses of ACH in everyday life is with online bill payment systems. These are the most common types of ACH debits. They are called this because the funds are debited or withdrawn from your account. This can be through the online banking system at your bank or credit union or directly with the company you are paying. When using the online bill payment system provided by your financial institution, they already have half the information they need. This is the half that includes your account information or where the money is coming from. You still need to provide them the second half or where is the money going. When paying a single bill directly through the company online system, the opposite is true. They know where the money is going and you need to provide the information of where it is coming from. In other words, you have to give them the routing number of the bank or credit union and your individual account number that the funds are coming from.

      ACH debits are very popular among large retailers that take checks. For example, if you write a check at a large grocery store chain, they may give you the check back after processing it through a digital reader. This reader has collected the data on the check. This would include the routing number of the bank or credit union, your account number at that financial institution, and the check number. These items are preprinted on your checks with magnetic ink that make the information easier for the scanner to read. The amount most likely would be collected from the input from the cashier since the other information is not handwritten like the amount. This is why even with the ACH process, a check that has been converted to an ACH transaction can still clear for the incorrect amount. This information may be included on your receipt. It is a good idea to compare the receipt to the check that was given back to you. This process allows for the retailer to receive your payment into their account much faster than the check processing procedures allowed in the past.

      The conversion of a personal check to an ACH debit by a retailer is

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