Your Money: Buy Anything You Want, Guilt-Free

Your Money
Buy Anything You Want, Guilt-Free
Brendan Quinn
Patrick Johnson
Tuesday, November 16, 2010

What We’ll Talk About
Why is this important?
Credit cards and credit
Accounts you need
Building a system
Investing

How We Know This Stuff
I Will Teach You To
Be Rich by Ramit Sethi
Most of what we’re
going to talk about
comes from this
Personal ﬁnance blogs

Three Rules of Personal Finance
1. Spend less than you earn
2. Make the money you have work for you
3. Prepare for the unexpected

Why Is This Important?
Compound interest yields HUGE results long-term if you start
even a year or two earlier
Takes only a few hours to get your money working for you
instead of against you
Money is stressful, and it shouldn’t be

Credit Cards

Why You Want One
Build credit rating - save money
Convenience
Easy to track your spending
Rewards

What To Look For
No annual fee
Rewards
Cash Back
Airline Miles
Points
Low APR

6 Rules of Credit Cards
1. Pay off your bill IN FULL each month
2. Get all fees waived
3. Negotiate a lower APR
4. Keep your cards for a long time, and use them
5. Ask for more credit (be careful with this, though)
6. Use your rewards
Source: I Will Teach You To Be Rich

PAY OFF YOUR
BILL IN FULL
EVERY MONTH

Credit Score
35% payment history (late payments are bad)
30% amounts owed (credit utilization rate)
15% length of history (how long you’ve had credit)
10% new credit (older accounts are better)
10% types of credit (student loans, mortgages, credit cards)

On a $200,000 30-year mortgage...
If your FICO score is... Your APR will be... You’ll pay a total of...
760 - 850 4.384% $359,867
700 - 759 4.606% $369,364
680 - 699 4.783% $377,021
660 - 679 4.997% $386,381
640 - 659 5.427% $405,515
620 - 639 5.973% $430,427

Accounts

Accounts You Need Right Now
Checking
Savings
Roth IRA

Checking Accounts
No monthly fees, ever
Find one that gives interest, if you can
Use any ATM in the country without paying fees
Schwab Investor Checking

Savings Accounts
High interest rates
Lets you create sub-accounts for goal-setting
Long-term money
Online-only banks generally have better offerings
ING Direct, Ally Bank

Saving For The Future

START NOW!
Even if it’s just
$20/month

Saving for Goals
Everyone has huge expenses during their lifetime (down
payments on a house, car, wedding costs, travel)
Think ahead and they become more manageable
Set aside money ahead of time

The average wedding costs $28,000...
Your Age Months Until Wedding
Monthly Amount
Needed to Save
20 84 $333
21 72 $389
22 60 $467
23 48 $583
24 36 $778
25 24 $1,167
26 12 $2,333
27 1 $28,000 Source: I Will Teach
You To Be Rich

Saving for Retirement
Compound interest yields HUGE returns over time
Start immediately, even if it’s not very much - it will be in
40 years
401(k), Roth IRA

Compound Interest
Britney deposits $5,000 into a Roth IRA
and then leaves it alone
Britney deposits $5,000 into a Roth IRA
and then leaves it alone
Age at deposit Value at retirement
20 $160,000
39 $40,000
Source: www.GetRichSlowly.org

To have $1,932,528 at retirement...
Starting Age Annual Contribution Monthly Contribution
19 $4,618 $384.83
20 $5,000 $416.67
21 $5,414 $451.17
22 $5,863 $488.58
25 $7,459 $621.58
30 $11,214 $934.50
35 $17,059 $1,421.58
40 $26,434 $2,202.83
Source: www.GetRichSlowly.org

Start Now
Monthly
Investment
If you start
sophomore year...
If you start
senior year...
Difference
$20 $1,832,252 $1,816,160 $16,092
$30 $1,843,609 $1,819,691 $23,918
$10/month
difference:
$11,357 $3,531
*assumes you make the
maximum contribution
after graduation

How To Stop Worrying

Building a System That Works
If you can automate your ﬁnances, you don’t have to worry
about them
Automated saving is easier mentally and emotionally
Keep track of things with Mint.com & email alerts

Salary 401(K)
Checking Roth IRASavings
Wedding...............................2%
House...................................1%
New iPhone...........................1%
Emergency Fund....................1%
Credit Card
Regular bills that can be paid
electronically
Guilt-free spending money
Other Bills
Stuff that can’t be paid using a credit
card
5%
5%5%
100%
95%

Parting Words
85% Rule
These are just tips, you should research on your own
Check out the book
Money is a means, not an end

Thanks for coming!

Your Money: Buy Anything You Want, Guilt-Free

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