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Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.
True or False?
• Most millionaires inherited their wealth.• Most millionaires earn more than $500,000 per year.• College graduates earn about twice what high
school graduates earn over a 40-year work life.• People who are self-employed rarely become
millionaires.• All millionaires wear expensive clothes.• Millionaires usually drive new cars.• Many millionaires drop out of college to start work.• It is impossible to save enough to be a millionaire.
Wealth is…
• Assets
Anything an individual or business owns that has commercial or exchange value
• Liabilities
Money an individual or organization owes; same as debt• Net Worth
The difference between the total assets and total liabilities of an individual
Sandra’s Balance Sheet
Description Amount
Owed to her mother for extra cell phone charges $250
Present value of a savings bond that her uncle gave her
$150
Balance on a car loan $1,500
Savings account from summer job $750
DVD collection $200
1999 car $3,500
Balance due on prom dress $200
Sandra’s Balance SheetAssets Liabilities
Present value of a savings bond that her uncle gave her
$150Owed to her mother for
extra cell phone charges
$250
Savings account from summer job
$750 Balance on a car loan $1500
DVD collection$200
Balance due on prom dress
$200
1999 car $3500
Total assets $4600 Total liabilities $1950
Sandra’s net worth = $2650
Using Credit Wisely
• Think about your balance sheet…Debt increases your liabilities –
does it increase your assets? • Think about your budget…
How will the payments affect your budget? What other spending will you sacrifice to pay off the debt?
Goals
• You might have a goal to simply increase your net worth, but most people have a more specific goal in mind.
• Once you set a goal, you have to evaluate the saving and the income required to achieve the goal.
Goals
• Buy a new car • Go to college • Buy a used car • Go to the senior prom • Rent an apartment • Take a trip • Buy a house • Buy a new HDTV
Financial Personality Types
Sam’s Two-Week Budget
Spending Categories Expenses Changes New
Eating out at lunch 60
Movie night with friends 40
Dinner with friends 20
Football game and snacks 10
New CD 20
New item of clothing 50
Gas 70
Soft drink from vending machine 10
Total Expenses $280
Sam’s Two-Week Budget
Spending Categories Expenses Changes New
Eating out at lunch 60 Take his lunch 24
Movie night with friends 40Every other
week 20
Dinner with friends 20 Eat out once 10
Football game and snacks 10 10
Music downloads 20 Reduce 10
New item of clothing 50 Only one 25
Gas 70 70
Soft drink from vending machine 10 Only one 1
Total Expenses $280 $170
Save and Invest
• Build a strong financial foundation first.• How much risk are you willing to take?• Think about your time horizon and other
factors.• The sooner you start, the better (and
easier)!
Applying for Credit
• Read the fine print! Look for:– Finance charges
the dollar amount you pay to use credit– Annual percentage rate (APR)
the percentage cost of credit on a yearly basis– Fees
can include loan fees, annual fees, late-payment fees, etc.
Credit Reports
• Credit reporting company• Credit report• Credit score
Reviewing Your Credit Report
• Three major credit reporting companies– Equifax– Experian– Trans Union
• One website for free credit reports
www.annualcreditreport.com
Identity Theft
• It's not too early to pull your credit report!• Carefully review the report and correct any
inaccuracies.• Don't carry your Social Security card in
your wallet! • Shred any papers that contain personal
information before throwing them away.