Finance

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  • 1. 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
  • 2. 10 richest people in the World Forbes (2012) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Carlos Slim Helú $69 B Bill Gates Warren Buffett Bernard Arnault Amancio Ortega Larry Ellison 2, 3, 6 Eike Batista Stefan Persson Li Ka-shing Karl Albrecht 8 1 4 5 9 7 10
  • 3. Credit Cards • Loan from the bank • High interest rates • Keep control • Bankruptcy • Video clip
  • 4. Chances are…. Only 3% of the US earns over $250,000/year You will work You will have a limited supply of wealth You will need to think about your income and make good choices You need a budget You need to think about investing
  • 5. Do you want to be? • Rich & Retired Social Security
  • 6. Specifics about investing • Opportunity cost of investing? • Things to consider: – Liquidity – Risk – Diversify
  • 7. Liquidity • “How easy is it to turn this investment into cash”?
  • 8. Cash under mattress • • • • Bad idea, why? No return, risky 100% liquid Inflation, you will lose the inflation rate
  • 9. Savings Account • Low interest rate • No risk in USA • Today: 1%, yuck! Money Market Acct 3-3.5 %
  • 10. 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
  • 11. Bonds • Issued by government or large corporation • Low risk, low return • Must wait for maturity • Can be traded (liquidity!!) • WW1 & WW2 War Bonds
  • 12. Mutual Funds • Managed stocks • Lower risk, lower control • Some sort of theme • Saves you time
  • 13. 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!
  • 14. 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!
  • 15. 401 K Plan • Set up by employer • Payroll deduction • Invested into stock market • Lowers tax incidence • Tax break for employee • Employee match • Not liquid
  • 16. Investment calculator
  • 17. 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!!!
  • 18. International Markets • Invest in foreign markets • Invest in currency • Can be very risky • George Soros
  • 19. List by liquidity • • • • • • • • • Traditional IRA Roth IRA 401 K Real Estate Stocks Mutual Funds Int’l currency Pension plan bonds
  • 20. List by risk • • • • • • • • • Traditional IRA Roth IRA 401 K Real Estate Stocks Mutual Funds Int’l currency Pension plan bonds
  • 21. Finance Closure on your BR 401K plan 2 2 Trad. IRA 1 2 Roth IRA