Personal Finance
     Student Version!
Pop Quiz
 The median net worth of American families is $93,000 and
  the mean amount is $448,000. (Those with high net wo...
Answer
 A) $17,000 median and $88,000 mean. Median net
  worth goes up with age.

 It’s all about saving money and build...
Financial Planning
 Identify your financial values, goals, and strategies so you can
   always keep a balance between spe...
financial values, goals, and
             strategies
 Values: education, spiritual life, health, employment,
  family lif...
Balance sheet
 Assets (what you own), liabilities (what you owe), and
  net worth on a specific date
Cash-flow

 Lists and summarizes income and expense
  transactions over a period of time
Financial Goals
Budget
Top 3 Financial Misteps in Budget Planning
 Fail to plan for occasional, nonmonthly expenditures

 Underestimate how muc...
Pop Quiz
Patti Patterson realized 2 weeks ago that she had
  misplaced her ATM card. At first she reasoned that it
  had t...
Answer
 C) $500
 Because Patti waited more than 2 days after realizing
  the card was lost to report it to her financial...
Checking and Savings Accounts
 Use a free, interest-earning checking account for your day-to-day
   spending needs
 Use ...
Privacy for Online Banking
 Never check bank account online via wireless systems away from
   home
    Easily hacked
   ...
Pop Quiz
 People with no prior credit history (you?) or one that shows
  poor repayment patterns in the past often wonder...
Answer
 D) Charging a high rate makes lenders willing to grant
  credit to high-risk applicants
Credit
 ~12% of people who apply for credit (loans) are denied
   No credit history
   Bad credit history
 Lower credi...
Credit Score
 Payment history
    Late payments? On how many accounts?

 Amounts owed
    Maxed out?
    How many acc...
Building Good Credit
 Have a checking and savings account
 Telephone and other utilities billed in your name
 Get and u...
Credit Reports
 3 major credit-reporting bureaus
     Equifax
     TransUnion
     Experian
 One free credit report e...
Student Loans
 Standard repayment plan is equal monthly installments paid
  over ten years
   To pay debt off faster: gr...
Continued…
 Consolidate student loans
   Pay off all existing loans and create one new loan
   More convenient repaymen...
The End!
 Sort of…
Personal Finance
Personal Finance
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Personal Finance

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Personal Finance

  1. 1. Personal Finance Student Version!
  2. 2. Pop Quiz  The median net worth of American families is $93,000 and the mean amount is $448,000. (Those with high net worth pull the mean above the median.) What are the median and mean figures for families headed by a person less than 35 years of age?  A) $17,000 and $88,000  B) $30,000 and $128,000  C)$47,000 and $178,000  D) $60,000 and $198,000
  3. 3. Answer  A) $17,000 median and $88,000 mean. Median net worth goes up with age.  It’s all about saving money and building wealth over time!
  4. 4. Financial Planning  Identify your financial values, goals, and strategies so you can always keep a balance between spending and saving and stay committed to your financial plans  Develop your own balance sheet and update it annually  Develop your own cash-flow statements monthly or quarterly and compile them into an annual statement each year  Calculate your financial ratios annually to assess your financial progress  Develop a list of your financial goals. Start with shorter-term goals and expand to longer-range goals. Update and revise annually.  Start an uncomplicated personal financial record-keeping system that meets your needs.
  5. 5. financial values, goals, and strategies  Values: education, spiritual life, health, employment, family life, credit use, etc.  Goals: purchase vehicle, purchase home, child’s education, vacation home, retirement expenses  Must be stated explicitly in terms of purpose, dollar amounts, and projected dates  Strategies: automatic deposits in savings account taken from paycheck, ½ of every raise go into savings, etc.
  6. 6. Balance sheet  Assets (what you own), liabilities (what you owe), and net worth on a specific date
  7. 7. Cash-flow  Lists and summarizes income and expense transactions over a period of time
  8. 8. Financial Goals
  9. 9. Budget
  10. 10. Top 3 Financial Misteps in Budget Planning  Fail to plan for occasional, nonmonthly expenditures  Underestimate how much they spend each month  Use credit cards to “balance” their budget Rules for Successful Budgeting  Keep it simple  Make it personal  Keep it flexible  Be positive
  11. 11. Pop Quiz Patti Patterson realized 2 weeks ago that she had misplaced her ATM card. At first she reasoned that it had to be somewhere in the house. Last week she received her savings account statement. She looked at her statement today and found that $200 had been illegally withdrawn from her account on 5 different occasions ($1000 total). She immediately called her bank to report the fraudulent withdrawals. How much of this money will Patti lose because of the unauthorized withdrawals? A) $0 B) $50C) $500 D) $1000
  12. 12. Answer  C) $500  Because Patti waited more than 2 days after realizing the card was lost to report it to her financial institution, federal law states that she is liable for the first $500 in unauthorized uses. If she had notified the bank within 2 days, her loss would have been only $50. If she failed to notify her bank within 60 days, she would lose all the money. Immediately report a lost debit card!
  13. 13. Checking and Savings Accounts  Use a free, interest-earning checking account for your day-to-day spending needs  Use high-interest savings accounts for funds you will not need for 6 months to about 5 years in the future  Use investments for needs that will not occur until 5 or more years in the future  Over long period of time, you can triple or quadruple your $  Buy certificates of deposit when saved funds will not be needed until a specific future date  Move excess funds into a money market account  Accounts that pay relatively high interest rates and offer limited check-writing privileges  Reconcile your account statements monthly
  14. 14. Privacy for Online Banking  Never check bank account online via wireless systems away from home  Easily hacked  Home wireless systems still at risk  Avoid using someone else’s computer to manage your account (if you do shut down completely afterwards)  Do not provide any account information from an unsolicited e-mail (scam)  Always log off instead of just closing browser  Regularly change your password and keep it to yourself  Study your statements (ask about anything unusual)  Make and save paper copies of all online transactions until you can verify their accuracy on your next account statement
  15. 15. Pop Quiz  People with no prior credit history (you?) or one that shows poor repayment patterns in the past often wonder if they will ever be able to get credit. Why would any lender want to trust them? Which of the following is true today about the availability of credit for people in such situations?  A) No one will ever grant them credit  B) If they wait a few years, their situation could change  C) If they keep searching, they will find a lender that will treat them like everyone else  D) Credit is relatively easy to obtain
  16. 16. Answer  D) Charging a high rate makes lenders willing to grant credit to high-risk applicants
  17. 17. Credit  ~12% of people who apply for credit (loans) are denied  No credit history  Bad credit history  Lower credit score = higher interest rates on loans
  18. 18. Credit Score  Payment history  Late payments? On how many accounts?  Amounts owed  Maxed out?  How many accounts have balances? Bad if you owe >30% credit limit  Length of credit history  How long have you had each account? How long since you used your accounts?  Taking on more debt  How many new accounts?  How long have you been in good standing (if you had poor credit usage in past)  Types of credit used  Good mix of credit usage with multiple types depending on purpose (e.g. don’t use credit card to buy a boat)
  19. 19. Building Good Credit  Have a checking and savings account  Telephone and other utilities billed in your name  Get and use an oil-company credit card  Easy to get (if one company refuses, apply to another!)  Use credit sparingly and repay promptly  Apply for bank credit card  Ask bank for small, short-term cash loan  Put borrowed funds in savings account at the bank (you will meet the 3/4 monthly payments & the interest earned on savings will partially offset interest on loan)  Pay off student loans
  20. 20. Credit Reports  3 major credit-reporting bureaus  Equifax  TransUnion  Experian  One free credit report each year from each national credit report  = a free credit report every 4 months!  Notify credit report bureau if you find an error 
  21. 21. Student Loans  Standard repayment plan is equal monthly installments paid over ten years  To pay debt off faster: graduated repayment plan (payments lower in early years, increase in later years)  Pay electronically  Arrange for monthly payments transferred electronically out of checking account, you can receive a reduction in the interest rate  Make repayments on time, every time  Some programs give 2% interest rate reduction if you make first 48 payments on time  Failing to repay in timely manner can have dire consequences (forfeiture of federal and state income tax refunds)
  22. 22. Continued…  Consolidate student loans  Pay off all existing loans and create one new loan  More convenient repayment schedule  Monthly payment usually lower  Amount of time for repayment may be longer  Interest rate may be lower  Consolidate through private bank or 1 of 3 government programs (Collegiate Funding Services, Sallie Mae, Federal Direct Consolidation Loans)
  23. 23. The End!  Sort of…

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