2. What Is Financial Literacy?
Formal Definition: The ability to effectively evaluate and manage ones finances in order to make prudent decisions toward reaching lifes goals.
More simply: Knowing what you need to know to achieve your financial goals, or common sense with your dollars and cents.
What we will cover:
Money and savings
Budgeting (AKA cash flow)
Taxes/basic financial concepts
3. Americas financial literacy
The average American family spends $1.22 for every dollar it earns.
One in five American families with annual household income of less than $50,000 is spending 40% of after-tax income to service its debt.
In 2003, the average American household owed over $8,000 in credit cards, compared to $2,600 in 1989.
In 2005, over 2 million Americans filed for bankruptcy the highest amount in history.
4. Americas financial literacy
American families: (continued)
Only 26% of teens understand how card interest and fees work.(2007 Charles Schwab Teens & Money Survey)
The average college senior will graduate with $4,100 in credit card debt before they even have a job. (Sallie Maes 2009 National Study of Usage Rates and Trends)
Nearly 20% of bankruptcy filers are college students. (Sallie Maes 2009 National Study of Usage Rates and Trends)
5. Money and Savings
Time is money
Savings and the power of compounding interest
Make all you can, save all you can, give all you can.- John Wesley
6. Money and Savings
Time is money
How many hours do you need to work to pay for your rent/mortgage, car insurance, electricity bills, extras, etc?
Rent is $200
Food is $100
If I make $10 hr then I will need to work 35 hours in order to pay out $350 that is due for that week.
7. Money and Savings
The other side of the time equation
More knowledge/skills = greater pay
You will either learn to manage money, or the lack of it will always manage you!
"All days are not same. Save for a rainy day. When you don't work, savings will work for you." - M.K. Soni
8. Money and Savings
The power of compounding interest
Get Rich Quick never works. You will lose your money. Saving faithfully over time will always build wealth it just takes a little while (and patience)
The story of Ben and Arthur:
Both save $2,000 per year at 12%.
Ben starts at age 19 and stops at age 26, while Arthur starts at age 27 and stops at age 65.
At age 65, Ben has more than $2.2 million, while Arthur has only $1.5 million.
9. Savings and Investing 8 Simple Strategies
Contribute to your retirement plan
Save through payroll deduction plans
Round up your mortgage
Bank your raises
Keep paying off a loan
Pay off your credit cards
Keep track of where the money goes
"Money grows on the tree of patience." Proverb
10. Budgeting AKA Cash Flow Management
Life is like a coin you can spend it only once.Choosing onething over all the rest throughout life is a difficult thing to do.This is especially true when the choices are so many and the possibilities are so close. - Chuck Swindoll
You can only spend what you have if you want to reach your financial goals.
11. Creating a Budget
12. Track income and expenses 13. Unique to you 14. Budget necessities/priorities first 15. Communication (with family, spouse, roommate or partner)Today, there are three kinds of people: the have's, the have-not's, and the have-not-paid-for-what-they-have's. -Earl Wilson
Gross monthly income
Total it up
Increase your savings
A nickel ain't worth a dime anymore. -Yogi Berra
17. Where Does Your Money Go?
18. Debt Management
Pay Day Loans
19. Know the Enemy
- In 2003, 4 billion credit card offers were mailed
20. Capital One spends $280 million a year on credit cards offers 21. Citibank spends over $100 million a year on marketing to college students only 22. Debt Traps: Pay Day Loans, Title Loans, and Six month no interest credit card scamsIt is an unfortunate human failing that a full pocketbook often groans more loudly than an empty stomach. -Franklin Delano Roosevelt
23. Steps to Getting Out of Debt
Stop using credit cards and other types of credit
Have a cash flow plan
Save $500 - $1000 for emergencies
Sell something to pay off a debt
Use money from a part-time job or overtime to payoff debt
Develop a plan to pay off your debt
24. Plan for Paying off Debt
List your debts starting with the smallest first
Make the minimum payments each month on each debt except for the smallest one
Pay more than the minimum on the smallest debt until it is paid off
Once the smallest debt is paid off, add that payment amount to the next debt on the list so that you are paying more than the minimum payment
Continue until all debts are paid off
25. Danger of Credit Cards What You Dont Know Can Hurt You
26. Stick with one credit card 27. Pay in full every month 28. Stay within the limit 29. Review your statementsReport a lost or stolen card immediately
Protect personal information
Pay on time
Avoid cash advances
Protect your credit history
If you think nobody cares if you're alive, try missing a couple of car payments. -Earl Wilson
30. Pay Day Loans
- A Pay Day Loan is a small advance, usually $300 - $500
31. The borrower gives the lender a postdated check or other authorization to repay the loan on payday 32. On payday, the borrower must repay the loan, plus pay a fee, but is also given the option to renew the loan 33. The borrower is led to believe that he is receiving more money and the new fees applied are not explained until the debt amount is unmanageable and the borrower is trapped 34. Pay Day lenders target low-income workers living paycheck to paycheck 35. 91% of Pay Day loans are renewed 5 times or more 36. The average interest rate on a Pay Day loan is 400%