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Bellringer
You don’t have to write this down:
1.How old will you be in 2061?
2.Do you think $13/hour is a lot of
money?
3.Get out your notes
10 richest people in the WorldForbes (2012)
1. Carlos Slim Helú $69 B
2. Bill Gates
3. Warren Buffett
4. Bernard Arnault
5. Amancio Ortega
6. Larry Ellison
7. Eike Batista
8. Stefan Persson
9. Li Ka-shing
10. Karl Albrecht
2, 3, 6
1
8 10
4
5 7
9
Credit Cards• Loan from the
bank
• High interest rates
• Keep control
• Bankruptcy
• Video clip
Chances are….Only 3% of the US earns
over $250,000/year You will workYou will have a limited
supply of wealthYou will need to think
about your income and make good choices
You need a budgetYou need to think about
investing
Do you want to be?• Rich & Retired
Social Security
Specifics about investing
• Opportunity cost of investing?
• Things to consider:– Liquidity– Risk
– Diversify
Liquidity
• “How easy is it to turn this investment into cash”?
Cash under mattress
• Bad idea, why?
• No return, risky
• 100% liquid
• Inflation, you will lose the inflation rate
Savings Account• Low interest rate
• No risk in USA
• Today: 1%, yuck! Money Market Acct 3-3.5 %
Pension Plan
• Employee plan
• Usually union or large firm
• For example: 10% from State employees, 80% of salary when you retire, after 30+ years
• Not liquid at all
• Low risk, long term
Bonds• Issued by
government or large corporation
• Low risk, low return
• Must wait for maturity
• Can be traded (liquidity!!)
• WW1 & WW2 War Bonds
Mutual Funds
• Managed stocks
• Lower risk, lower control
• Some sort of theme
• Saves you time
Traditional IRA• Individual
Retirement Account
• You have to set it up
• You can deposit up to $5000 per year
• (into mutual funds, stocks or bonds)
• Tax loopholes (breaks)
• Can’t touch until 60
• Not liquid
At 10% interest, a $5000 IRA becomes $226,000 over 40 years! $10,000 is over $400,000!
Roth IRA• Individual
Retirement Account
• You have to set it up
• You can deposit up to $5000 per year
• (into mutual funds, stocks or bonds)
• No tax break, but tax free when you retire
• Can’t touch until 60
• Not liquid
At 10% interest, a $5000 IRA becomes $226,000 over 40 years! $10,000 is over $400,000!
401 K Plan• Set up by employer
• Payroll deduction
• Invested into stock market
• Lowers tax incidence
• Tax break for employee
• Employee match
• Not liquid
Investment calculator
Real Estate• Risky, high capital
• Relatively liquid
• Speculation
• Average real estate in Tucson in 1970 $23,000
• Average real estate in Tucson in 2008 $161,000!!!
International Markets• Invest in
foreign markets
• Invest in currency
• Can be very risky
• George Soros
List by liquidity• Traditional IRA
• Roth IRA
• 401 K
• Real Estate
• Stocks
• Mutual Funds
• Int’l currency
• Pension plan
• bonds
List by risk
• Traditional IRA
• Roth IRA
• 401 K
• Real Estate
• Stocks
• Mutual Funds
• Int’l currency
• Pension plan
• bonds
Finance Closure on your BR
401K plan
Trad. IRA
Roth IRA
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