How Money Works

How Money Works
Most people are concerned about money matters, but few truly understand how money works.

Taking Control of Your Debt What You Can Do…
Pay yourself first.
Adjust your priorities and establish a budget.
Earn additional income.
Avoid the credit trap.
Re-align your assets.

The Rule of 72
A simple concept called “The Rule of 72” shows the dramatic effect of time and compounding. The Rule of 72 says that your money will approximately DOUBLE at a point in time determined by dividing 72 by the interest rate you earn. The Rule of 72 illustrates the amazing way money can compound if you just give it enough time.
36 years 12 years 6 years 72 ÷ 2% 72 ÷ 6% 72 ÷ 12% 18 years 72 ÷ 4% 9 years 72 ÷ 8% With 2% interest, your money will double in approximately 36 years. With 12% interest, your money will double in approximately 6 years! Your Money Will Double In… Hypothetical percentage rates and values. Subject to applicable taxes.

The Power of Compound Interest
Mary started with a $500 balance on her credit card at a 19.8% interest rate. Each year, she made two additional charges of $75 each and made only the minimum payment of 3.5% of $20 over 5, 10, 15, 20 and 25 years. After 25 years, Mary’s interest charges on her credit card balance amounted to $3,130!
Look what happens when compound interest works against you: $580 $1,840 $3,130 5 years $1,200 $2,480 10 years 15 years 20 years 25 years

Most People Don’t Plan to Fail, They Fail to Plan Today 1. Young children 2. High debt 3. House mortgage Loss of income would be devastating At Retirement 1. Grown children 2. Lower debt 3. Mortgage paid Retirement income needed The Theory of Decreasing Responsibility Over the Years, Your Needs Change. In the early years, you don’t have money... In the later years, you better have money. In the early years, you may need a lot of coverage... In the later years, you may not.

Counting on Social Security? If you’re counting on Social Security to fund your retirement, you could be in for a big surprise. The monthly Social Security benefit for the typical retired worker in 2009 is $1,062. – ssa.gov, September 2009 Could you live on $1,062 per month?

Reaching Your Goals Reaching your goal of achieving financial freedom can become a reality. Start taking action to make your dreams come true. Take these six steps toward reaching your goals:
Set a specific goal.
Have a specific time to achieve it.
Write your goals down.
Develop a plan to reach them.
Decide what price you are willing to pay to reach your goals.
Focus on reaching your goals every day.

How Money Works

by EMogensen on Jan 27, 2010

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How Money Works — Presentation Transcript