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It’s Your Money


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Personal Financial Money Management in a Nutshell. Condensed from the book: "MONEY: Make, Manage, & Multiply It!" available at . If you like the slides, you will love the book! Priced very affordably, it gives you a terrific return on your investment.

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It’s Your Money

  1. 1. It’s Your Money! Make, Manage, and Multiply It! Don Barkman The Business Center Oak Ridge, TN
  2. 2. Introduction <ul><li>What we do with money: </li></ul><ul><ul><li>Earn </li></ul></ul><ul><ul><li>Spend </li></ul></ul><ul><ul><li>Save </li></ul></ul><ul><ul><li>Invest </li></ul></ul><ul><ul><li>Enjoy </li></ul></ul>
  3. 3. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>Yo, Dudes
  4. 4. Don Barkman <ul><li>Consultant / trainer. </li></ul><ul><li>Conducting business literacy training for company employees for 20 yrs. </li></ul><ul><li>Used my MBA to help manage my own money for 40 yrs. </li></ul><ul><li>Dad with a daughter who has no sense of money management. </li></ul>
  5. 5. Disclaimer <ul><li>I am not a financial planner or advisor. </li></ul><ul><li>This session barely scratches the surface. </li></ul><ul><li>You should read more books and get professional advice, especially for “Investing.” </li></ul>
  6. 6. Are You a Millionaire? <ul><li>You will make at least $25,000/yr. </li></ul><ul><li>You will work for 40 years. </li></ul><ul><li>What will you do with all that money? </li></ul>$25,000 x 40 yrs. = $1,000,000
  7. 7. Pop Quiz <ul><li>What percentage of the US households surveyed by Parade magazine in 2007 said they were saving NOTHING for retirement? </li></ul><ul><li>15% </li></ul><ul><li>30% </li></ul><ul><li>40% </li></ul><ul><li>65% </li></ul>
  8. 8. Managing Money <ul><li>Why don’t people manage their money better? Pick your 2 favorites. </li></ul><ul><ul><li>A. Don’t know how – never taught. </li></ul></ul><ul><ul><li>B. Makes them feel restricted. </li></ul></ul><ul><ul><li>C. Can’t defer gratification. </li></ul></ul><ul><ul><li>D. The truth is scary. </li></ul></ul><ul><ul><li>E. Have no goals. </li></ul></ul><ul><ul><li>F. Lazy. </li></ul></ul>
  9. 9. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>
  10. 10. Financial Goals <ul><li>No goals, no score. </li></ul><ul><li>A few simple goals are better than none at all. </li></ul>
  11. 11. Goal Examples <ul><li>Create and use a spending budget. </li></ul><ul><li>Keep spending less than income. </li></ul><ul><li>Do not carry a credit card balance. </li></ul><ul><li>Save X $ or Y % each month. </li></ul><ul><li>Enroll in the company savings plan. </li></ul><ul><li>Read a book on money management. </li></ul>
  12. 12. Goal Examples <ul><li>Set up a tax-deferred investment account for retirement. </li></ul><ul><li>Set up savings funds for: </li></ul><ul><ul><ul><li>Unusual yearly expenses. </li></ul></ul></ul><ul><ul><ul><li>Major purchases: appliances, home. </li></ul></ul></ul><ul><ul><ul><li>Special vacation. </li></ul></ul></ul><ul><ul><ul><li>Kids’ college. </li></ul></ul></ul><ul><li>Become debt free. </li></ul><ul><li>Construct a personal balance sheet. </li></ul>
  13. 13. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>
  14. 14. Pop Quiz <ul><li>In 2007, the poverty level for a family of four was approximately: </li></ul><ul><li>$16,400 </li></ul><ul><li>$21,300 </li></ul><ul><li>$24,000 </li></ul><ul><li>$30,800 </li></ul>
  15. 15. Pop Quiz <ul><li>What was the median* household income in the USA in 2006? * (50% above and 50% below). </li></ul><ul><li>$35,900 </li></ul><ul><li>$48,200 </li></ul><ul><li>$62,500 </li></ul><ul><li>$87,644 </li></ul>
  16. 16. Pop Quiz <ul><li>To be in the top 5% of wage earners in 2007, you needed to make . . . </li></ul><ul><li>$83,000 </li></ul><ul><li>$105,000 </li></ul><ul><li>$130,000 </li></ul><ul><li>$260,000 </li></ul>
  17. 17. Earning <ul><li>Brainstorm ways to make money. </li></ul>
  18. 18. Earning <ul><li>9 Ways to increase income: </li></ul><ul><ul><li>Work more. </li></ul></ul><ul><ul><li>Do a good job. </li></ul></ul><ul><ul><li>Increase your education and training. </li></ul></ul><ul><ul><li>Gain useful experience. </li></ul></ul><ul><ul><li>Develop positive personal qualities. </li></ul></ul><ul><ul><li>Shop the labor market. </li></ul></ul><ul><ul><li>Run your own business. </li></ul></ul><ul><ul><li>Invent something and sell it. </li></ul></ul><ul><ul><li>Invest your savings to create earnings. </li></ul></ul>
  19. 19. Earning <ul><li>Get “free” money! </li></ul><ul><ul><li>Employer plan matching funds. </li></ul></ul><ul><ul><li>Company health & other benefits. </li></ul></ul><ul><ul><li>Scholarships. </li></ul></ul><ul><ul><li>Clip coupons and shop sales. </li></ul></ul><ul><ul><li>Bargain! </li></ul></ul><ul><ul><li>Earned Income Credit on income tax filing (poverty level). </li></ul></ul>
  20. 20. Earning <ul><li>More Free Money – Avoid Taxes! </li></ul><ul><ul><li>Tax-deferred saving & investing plans. </li></ul></ul><ul><ul><ul><li>IRA (defer both investment & gains taxes) </li></ul></ul></ul><ul><ul><ul><li>Roth IRA (defer gains taxes only) </li></ul></ul></ul><ul><ul><ul><li>401K / 403b (defer both investment & gains taxes) </li></ul></ul></ul><ul><ul><ul><li>529 (college education - defer gain taxes only) </li></ul></ul></ul><ul><ul><li>Cluster income tax deductions in alternate years vs. standard deduction. </li></ul></ul>
  21. 21. Pop Quiz <ul><li>In 2005, the top 5% of taxpayers accounted for what percentage of all the income taxes paid? </li></ul><ul><li>5% </li></ul><ul><li>25% </li></ul><ul><li>45% </li></ul><ul><li>60% </li></ul>To be in the top 5% required an “Adjusted Gross Income” of $145,283.
  22. 22. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>
  23. 23. Spending <ul><li>Brainstorm: </li></ul><ul><ul><li>What you spend money for. </li></ul></ul><ul><ul><li>Ways to spend less. </li></ul></ul>
  24. 24. Spending <ul><li>Core Monthly Expenses: </li></ul><ul><ul><li>‘ Same’ each month. </li></ul></ul><ul><ul><ul><li>Mortgage / Rent. </li></ul></ul></ul><ul><ul><ul><li>Groceries. </li></ul></ul></ul><ul><ul><ul><li>Utilities. </li></ul></ul></ul><ul><ul><ul><li>Gasoline. </li></ul></ul></ul><ul><li>Periodic and Annual Expenses: </li></ul><ul><ul><li>Occur once a year, a quarter, etc. </li></ul></ul><ul><ul><ul><li>Property taxes. </li></ul></ul></ul><ul><ul><ul><li>Insurance: home, life, auto. </li></ul></ul></ul><ul><ul><ul><li>Vacation / Holiday. </li></ul></ul></ul>$1,500 $0 -2,500
  25. 25. Spending <ul><li>Budget Core Monthly Expenses. </li></ul><ul><li>Plot Periodic and Annual Expenses. </li></ul><ul><li>Add together for each month. </li></ul>4,000 2,200 2,500 1,500 2,700 2,350 Total 2,500 Beach 700 Life Ins. 1,000 IRS 1,200 Prop. Tx. 850 Xmas Periodic & Annual 1,500 1,500 1,500 1,500 1,500 1,500 Core June May Apr. Mar. Feb. Jan.
  26. 26. Pop Quiz <ul><li>The average number of credit cards per card holder is: </li></ul><ul><li>3 </li></ul><ul><li>6 </li></ul><ul><li>9 </li></ul><ul><li>12 </li></ul>
  27. 27. Pop Quiz <ul><li>In 2006, the amount that banks collected from customers as “penalties” was: </li></ul><ul><li>$600 million </li></ul><ul><li>$2 billion </li></ul><ul><li>$8 billion </li></ul><ul><li>$17 billion </li></ul>
  28. 28. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>
  29. 29. Personal Profit <ul><li>Maximize Your Earnings </li></ul><ul><li>Minimize Your Spending </li></ul><ul><li>Optimize Your Personal Profit </li></ul>Earnings (Paycheck) - Spending = Personal Profit
  30. 30. Personal Profit <ul><li>Calculate your </li></ul><ul><li>annual profit position. </li></ul>Total Income 31,200 - Total Expenses 28,700 = Annual Profit 2,500 Calculate your monthly profit position. (1,400) 400 100 900 (100) 250 Profit 4,000 2,200 2,500 1,500 2,700 2,350 Total Mo. Expenses 2,600 2,600 2,600 2,600 2,600 2,600 Income June May Apr. Mar. Feb. Jan.
  31. 31. Personal Profit <ul><li>Track your rolling profit position. </li></ul><ul><li>Save monthly surpluses to cover monthly shortfalls. </li></ul>Add & Subtract from left to right for running total. June May Apr. Mar. Feb. Jan. (1,400) 400 100 900 (100) 250 Profit +150 +1,550 +1,150 +1,050 +150 +250 Rolling Profit Position
  32. 32. Personal Profit <ul><li>Use your profit to . . . </li></ul><ul><ul><li>Take a “pleasure dividend.” </li></ul></ul><ul><ul><li>Save for upcoming expenses. </li></ul></ul><ul><ul><li>Invest for long-term growth. </li></ul></ul>
  33. 33. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>
  34. 34. Saving <ul><li>Save for three time frames: </li></ul><ul><ul><li>Short-term: pay upcoming bills. </li></ul></ul><ul><ul><li>Intermediate: future purchases. </li></ul></ul><ul><ul><li>Long-term: education & retirement. </li></ul></ul>
  35. 35. Saving <ul><li>Use variety of accounts: </li></ul><ul><ul><li>Basic savings. </li></ul></ul><ul><ul><li>Money market. </li></ul></ul><ul><ul><li>Certificate of deposit. </li></ul></ul><ul><ul><li>Brokerage / investment. </li></ul></ul><ul><ul><li>Employer savings & investing plan. </li></ul></ul>
  36. 36. Saving <ul><li>Not every bank or account is insured. </li></ul><ul><ul><li>FDIC insured banks: </li></ul></ul><ul><ul><ul><li>Amounts up to $100,000 per depositor </li></ul></ul></ul><ul><ul><ul><li>Checking </li></ul></ul></ul><ul><ul><ul><li>Savings </li></ul></ul></ul><ul><ul><ul><li>Money market </li></ul></ul></ul><ul><ul><ul><li>CDs </li></ul></ul></ul><ul><ul><ul><li>Not stocks, bonds </li></ul></ul></ul><ul><ul><li>Credit Unions have own private insurer groups. </li></ul></ul><ul><ul><ul><li>Coverages vary – check. </li></ul></ul></ul><ul><ul><li>Brokerage accounts are not insured. </li></ul></ul>
  37. 37. Savings & Wealth <ul><li>Savings </li></ul><ul><li>Wealth </li></ul>
  38. 38. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>
  39. 39. Personal Wealth <ul><li>All wealth is not material. </li></ul><ul><ul><li>Good health. </li></ul></ul><ul><ul><li>Family and friends. </li></ul></ul><ul><ul><li>Self respect. </li></ul></ul><ul><ul><li>Achievement. </li></ul></ul>
  40. 40. Personal Wealth <ul><li>Own </li></ul><ul><li>- Owe </li></ul><ul><li>= Ours </li></ul>
  41. 41. Personal Wealth <ul><li>Own = Assets </li></ul><ul><ul><li>House, Car, Furniture, Investments </li></ul></ul><ul><li>Owe = Liabilities </li></ul><ul><ul><li>Mortgage, Auto Loan, Credit Cards </li></ul></ul><ul><li>Ours = Net Worth </li></ul><ul><ul><li>a.k.a. “Equity” </li></ul></ul><ul><li>Assets </li></ul><ul><li>Liabilities </li></ul><ul><li>= Net Worth </li></ul>
  42. 42. Personal Wealth <ul><li>List the current values of your Assets and Liabilities and figure your Net Worth on a personal “Balance Sheet.” </li></ul>Assets House $200,000 Cars $ 20,000 Invest. $75,000 Furn. & Appl. $5,000 Total $300,000 Liabilities Mortgage $90,000 Car Loans $5,000 Credit Cards $5,000 Etc. $X0,000 Total $100,000 Net Worth = $200,000
  43. 43. Personal Wealth <ul><li>Personal Wealth increases by: </li></ul><ul><ul><li>Spending less than income to create a Personal Profit. </li></ul></ul><ul><ul><li>Saving and investing the profit. </li></ul></ul><ul><ul><ul><li>Increasing Assets (investments, property). </li></ul></ul></ul><ul><ul><ul><li>Paying off Liabilities. </li></ul></ul></ul>Income - Expenses = Personal Profit Assets - Liabilities = Net Worth Pleasure Dividend Today Save Invest Security & Fun Tomorrow
  44. 44. Personal Wealth <ul><li>Why you need to build Net Worth. </li></ul><ul><ul><li>Retirement or disability. </li></ul></ul><ul><ul><li>Kids’ education. </li></ul></ul><ul><ul><li>Temporary job loss. </li></ul></ul><ul><ul><ul><li>Rule of thumb: 6 months living expenses in an accessible fund. </li></ul></ul></ul><ul><li>All wealth is not equal. </li></ul><ul><ul><li>You live on what is “liquid.” </li></ul></ul>
  45. 45. Pop Quiz <ul><li>How much yearly Social Security benefit will you receive if you are: </li></ul><ul><ul><li>65 </li></ul></ul><ul><ul><li>earn $50,000/yr. </li></ul></ul><ul><ul><li>retire today? </li></ul></ul><ul><li>According to Social Security’s benefits estimator. </li></ul><ul><li>$8,655 </li></ul><ul><li>$14,244 </li></ul><ul><li>$20,913 </li></ul><ul><li>$25,000 </li></ul>
  46. 46. Pop Quiz <ul><li>According to the commissioner of Social Security, in what year will Social Security begin paying out more in benefits than it collects in taxes? </li></ul><ul><li>2017 </li></ul><ul><li>2025 </li></ul><ul><li>2033 </li></ul><ul><li>2041 </li></ul>In 2041, the “Trust Fund” is 0.
  47. 47. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>
  48. 48. Investing <ul><li>Brainstorm ways you have invested money. </li></ul>
  49. 49. Pop Quiz <ul><li>$1.00 today will be worth how much after 40 years? (Assume inflation averages 3% per year.) </li></ul><ul><li>$0.31 </li></ul><ul><li>$0.42 </li></ul><ul><li>$0.55 </li></ul><ul><li>$0.69 </li></ul>
  50. 50. Pop Quiz <ul><li>How much do you need to save each year to have $1,000,000 in today’s dollars? Assume: </li></ul><ul><ul><ul><li>You save for 35 years. </li></ul></ul></ul><ul><ul><ul><li>The funds are in a tax-deferred plan. </li></ul></ul></ul><ul><ul><ul><li>The funds grow at 9% per year. </li></ul></ul></ul><ul><ul><ul><li>Inflation averages 3% per year. </li></ul></ul></ul><ul><li>$3,000 </li></ul><ul><li>$6,000 </li></ul><ul><li>$9,000 </li></ul><ul><li>$15,000 </li></ul>
  51. 51. Investing <ul><li>Risk versus Return </li></ul><ul><ul><li>Lower risks yield lower returns. </li></ul></ul><ul><ul><li>Higher returns require higher risks. </li></ul></ul><ul><ul><li>Low risk and high returns are a con. </li></ul></ul>
  52. 52. Investing <ul><li>Investing options: </li></ul><ul><ul><li>Mattress & Sock, Inc. </li></ul></ul><ul><ul><li>Savings acct., Money Mkt., CD. </li></ul></ul><ul><ul><li>Bonds: U.S. Savings, corp., municipal, funds. </li></ul></ul><ul><ul><li>Stocks – mutual funds. </li></ul></ul><ul><ul><li>Stocks – individual firms. </li></ul></ul><ul><ul><li>Real Estate: land or buildings. </li></ul></ul><ul><ul><li>Annuities: promise to pay regularly. </li></ul></ul><ul><ul><li>Collectibles & Coins </li></ul></ul><ul><ul><li>Your own business. </li></ul></ul><ul><ul><li>Sophisticated stuff. </li></ul></ul>
  53. 53. Investing <ul><li>Requires reasonable knowledge. </li></ul><ul><ul><li>Newspapers, magazines, newsletters. </li></ul></ul><ul><ul><li>Books. </li></ul></ul><ul><ul><li>Seminars (beware) </li></ul></ul><ul><ul><li>Brokerage firm advisors. </li></ul></ul><ul><ul><li>Private advisors – fee based. </li></ul></ul>
  54. 54. Investing <ul><li>Know your: </li></ul><ul><ul><li>Time horizon. </li></ul></ul><ul><ul><li>Goals for growth vs. security. </li></ul></ul><ul><ul><li>Risk tolerance. </li></ul></ul>
  55. 55. Investing <ul><li>Diversify: </li></ul><ul><ul><li>Short-term needs vs. long-term. </li></ul></ul><ul><ul><li>Secure principal vs. at-risk principal. </li></ul></ul><ul><ul><ul><li>Savings, U.S. bonds, property, company bonds, stocks. </li></ul></ul></ul><ul><ul><li>Stocks: </li></ul></ul><ul><ul><ul><li>Small, medium, large firms. </li></ul></ul></ul><ul><ul><ul><li>Domestic and international firms. </li></ul></ul></ul><ul><ul><ul><li>Growth vs. value vs. blended firms. </li></ul></ul></ul><ul><ul><li>Multiple institutions. </li></ul></ul>
  56. 56. Agenda <ul><li>Introduction </li></ul><ul><li>Goals </li></ul><ul><li>Earning </li></ul><ul><li>Spending </li></ul><ul><li>Personal Profit </li></ul><ul><li>Saving </li></ul><ul><li>Personal Wealth </li></ul><ul><li>Investing </li></ul><ul><li>Strategies </li></ul>
  57. 57. Strategies <ul><li>Have goals. </li></ul><ul><li>Create a system. </li></ul><ul><ul><li>Budget. </li></ul></ul><ul><ul><li>Organized records. </li></ul></ul><ul><li>Invest in yourself. </li></ul><ul><li>Get free money. </li></ul><ul><li>Defer and avoid taxes. </li></ul><ul><li>Know all your expenses. </li></ul><ul><li>Defer gratification – save, then buy. </li></ul>
  58. 58. Strategies <ul><li>Borrow for long-term assets, not pleasure. </li></ul><ul><li>Balance spending and saving – “pay yourself first.” </li></ul><ul><li>Shop for cheapest credit. </li></ul><ul><li>Be insured. </li></ul><ul><li>Educate yourself. </li></ul><ul><li>Diversify investments. </li></ul>
  59. 59. Strategies <ul><li>Have the following: </li></ul><ul><ul><li>Last will and testament. </li></ul></ul><ul><ul><li>Durable power of attorney. </li></ul></ul><ul><ul><li>Living will </li></ul></ul><ul><ul><li>Medical power of attorney. </li></ul></ul><ul><ul><li>Safety deposit box. </li></ul></ul><ul><ul><li>List of accounts and passwords. </li></ul></ul>
  60. 60. Pop Quiz <ul><li>5 Things we do with money: </li></ul><ul><ul><li>E </li></ul></ul><ul><ul><li>S </li></ul></ul><ul><ul><li>S </li></ul></ul><ul><ul><li>I </li></ul></ul><ul><ul><li>E </li></ul></ul><ul><li>The 3 M’s of Money: </li></ul><ul><ul><li>M </li></ul></ul><ul><ul><li>M </li></ul></ul><ul><ul><li>M </li></ul></ul>
  61. 61. Summary <ul><li>Keys to success: </li></ul><ul><ul><li>Self discipline. </li></ul></ul><ul><ul><ul><li>Goals and a system. </li></ul></ul></ul><ul><ul><ul><li>Defer gratification. </li></ul></ul></ul><ul><ul><li>“ Pay yourself first.” </li></ul></ul><ul><ul><li>Take time to get educated and helped. </li></ul></ul><ul><ul><li>Make, manage, and multiply! </li></ul></ul>
  62. 62. Summary <ul><li>Earn more. </li></ul><ul><li>Spend less. </li></ul><ul><li>Save always. </li></ul><ul><li>Invest wisely. </li></ul><ul><li>Enjoy good fortune today tomorrow! </li></ul><ul><li>Thank you for your participation! </li></ul>
  63. 63. Copyright Notice <ul><li>This material is copyrighted by The Business Center which retains all rights for its reproduction in all media forms. </li></ul><ul><li>Copyright © 2008 </li></ul><ul><li>The Business Center </li></ul><ul><li>120 Westview Lane </li></ul><ul><li>Oak Ridge, TN 37830 </li></ul><ul><li>All Rights Reserved </li></ul><ul><li> </li></ul>