Upload
dwain-hodge
View
214
Download
0
Tags:
Embed Size (px)
Citation preview
1
Money Management Principles
Are timeless and time-tested
Apply to everyone
Work well in up & down economies
Help people grow wealthy over time
Need to be taught in school
Personal Finance Southwest High
2
1. Go For The Goal Goals provide a “why” for saving Use goals to develop action plans Break goals into benchmarks Make your goals SMART
– Specific
– Measurable
– Attainable
– Realistic
– Time-RelatedPersonal Finance Southwest High
3
Invest in your Human Capital
Get a solid education
– For career satisfaction
– For better health
– For higher lifetime earnings
It’s OK to borrow for education
– There is an opportunity cost to taking too long to earn degree
– Student loans are better than credit cards
Personal Finance Southwest High
4
2. Time Is Your Friend Time: a young person’s biggest asset Compound interest is awesome For every decade that savings is
delayed, the required investment triples Example: $500,000 at 65; 10% yield
– Age 25: $ 79 per month– Age 35: $ 219 per month– Age 45: $ 653 per month– Age 55: $ 2,141 per month
Personal Finance Southwest High
5
More About Time
Time diversification reduces investment volatility
The Rule of 72
– 72/interest rate = doubling period
– 72/doubling period = interest rate
Advantage calulators
Personal Finance Southwest High
6
3. Live Below Your Means
Spend less than you earn
Create a spending plan
– Income = Fixed Exp (including savings) + Flexible Exp + 1/12 of Occasional Expense
Distinguish needs from wants
“Step-down principle”
Automate savings so money isn’t spentPersonal Finance Southwest High
4. Establish Emergency Fund Aka contingency fund
– Online savings accounts• No minimum• FDIC insured• 4.5% (varies)• Linked to checking account
– HSBC– Emigrant– ING & many others
7Personal Finance Southwest High
8
Pay Yourself First: Automate Your Savings Tax-deferred employer plans
– Get full 401(k) match from employer
Employer credit unions Savings bond purchase plans Mutual fund Automatic Investment Plan Direct stock purchase plans
Personal Finance Southwest High
Minnesota Saves
Build wealth, not debt Saver Strategies Get out of debt Earned income tax credit Free income tax preparation Individual Development Accounts
9Personal Finance Southwest High
10
5. Buy Insurance According to “The Large Loss Principle” Magnitude- not frequency- of losses Increase deductible to save $ Spend premium dollars on large potential
losses:– Liability
– Disability
– Destruction of home
– Large medical expenses
– Loss of household earner’s incomePersonal Finance Southwest High
11
6. Repay Debt Quickly and Borrow For Less Consumer debt ratio < 15% of net pay Consumer debt + housing < 50% of net High debt makes other problems worse Negotiate lower interest rates Always pay more than the minimum Avoid “perma-debt” Pay promptly to avoid late fees Family Life Center PowerPay analysisPersonal Finance Southwest High
7. Earned Income Tax Credit
Refundable tax credit for workers
12Personal Finance Southwest High
8. Vita tax prep
Provided by USU accounting students in Business building- starts Feb.
AVOID instant tax refunds– High cost loans (similar to payday loans)
Auto deposit Split your refund
– Save a portion, pay debt, spend
13Personal Finance Southwest High
14
9. Buying House/Vehicle Don’t buy more house than you can
afford (Subprime mortgage meltdown)
– Don’t’ trust mortgage broker
Don’t buy before you are really ready for the financial commitment
Buy new cars every 8-10 years or buy “new used”
Personal Finance Southwest High
15
Check Your Financial Health
Take the Financial Fitness Quiz Least common practices
– Not having a will – No written financial goals – No written budget – No net worth calculation
Personal Finance Southwest High
16
Financial Education Resources Investing For Your Future
– Home study course – http://www.investing.rutgers.edu/
Money 2000 & Beyond– http://www.rce.rutgers.edu/money2000
RU-FIT financial independence training– http://www.rce.rutgers.edu/ru-fit/
USU Extension – http://extension.usu.edu/
Personal Finance Southwest High
Spend Less, Enjoy the Holidays More
http://extension.usu.edu/htm/news/articleID=2361
Start a UESP account for your kids Spend time with important people Avoid gift cards
– High fees, money can’t be saved Pay cash! Avoid debt.
17Personal Finance Southwest High
18
Personal Finance Magazines
Kiplinger’s Personal Finance Magazine– Kiplingers.com
Money Magazine – Money.com– Money 101 on-line financial mgmt course
• http://money.cnn.com/pf/101/• 23 lessons
Personal Finance Southwest High
19
The Financial Checkup by Alena Johnson
Personal Finance Southwest High
20
Financial Planning for Womenhttp://www.usu.edu/fpw
For women of all ages & knowledge
Personal Finance Southwest High
21
Avoid Common Mistakes of Young Adults
Buying a house before you are ready Buying too much house Putting too much $ into vehicles Keeping a balance on your credit cards Waiting to invest for retirement until… Not considering the cost of kids Spending too much on eating outPersonal Finance Southwest High
22
Closing Thought
“If it is to be, it is up to me”
Comments? Questions? Experiences?
Personal Finance Southwest High