Finance Facts U.S. is the largest capitalist country Secret to capital (money) is SUCCESS!
Financial Planning Secret to a good job is a good education Typical full time worker in U.S. with a 4 year college degree earns about $50,000. (62% more than one with high school diploma) Finish college. Government will be more likely to help with tax breaks like free education accounts. Make money, then work on saving, investing, and spending.
6 steps to controlling assets 1. take an inventory of your financial assets Develop balance sheet. (Assets=liabilities +owners equity) List tangible assets List liabilities Create income statement List revenues and expenses Subtract expenses from revenues Get you profit
6 steps to controlling assets 2. Keep track of all expenses List everything you spend money on Make spending categories
6 steps to controlling assets 3. Prepare a budget Make budget for food, spending, payments
6 steps to controlling assets 4. Pay off debts 5. Start a savings plan Save money each month and put in separate account for bigger purchases
6 steps to controlling assets 6. Borrow only to buy assets that increase in value or generate income. Car repairs, health care costs
Building Financial Base Best way to a capitalist system is to have capital to invest Planning Sacrifice
Real Estate A home is an investment you can live in Once you buy a home, mortgage payments are fixed. As income goes up, mortgage is easier to pay. A home is a good asset to use when applying for a business loan. Buying older homes and fixing them up to sell is a good way for financial security.
Tax Deductions and Homeownership Buying a home is the biggest investment Government is willing to help Interest on a home is tax deductible Location is best way to get optimal return on a home.
What to do with savings? Worst place for young people is a savings bank Best to have 6 months of money made saved up for emergencies or other payments Best places to invest is stock market. Greater the risk, greater the return When stock is low, it is the best time to buy
Learning to manage credit Credit cards are very useful Most places require credit cards to ensure payment. Keeps track of purchases More convenient to carry Sometimes gives you 5% back. Danger with credit cards=debt!
Protecting your financial base: buying insurance Life insurance Least expensive form Whole life insurance Pure insurance and savings Variable life insurance whole life insurance that invests the cash value of the policy in stocks Annuities Contract to make regular payments to a person for life or a fixed period
Protecting your financial base: buying insurance Health insurance Blue Cross Blue Shield Disabilities insurance insurance that pays part of the cost of a long-term sickness or an accident
Protecting your financial base: buying insurance Homeowners or renters insurance Can have guaranteed replacement Other insurance Most states require automobile insurance Liability insurance Protect against getting sued Umbrella policy Broad insurance policy that saves you money
Planning Retirement Social Security Continuous flow of money coming in and being paid out Old age, survivors, disability insurance program established by social security act of 1935
Planning Retirement Individual retirement accounts (IRAs) tax deferred investment plan that enables you to save part of income for retirement. Tax-defered contributions Those for which you pay no current taxes but the earnings gained from IRA are taxed as income when they are withdrawn from IRA after retirement. Roth IRA No up from deductions from taxes but the earnings grow tax-free when they are withdrawn
Planning Retirement Advantage of IRAs Cant take money from any type of IRA until 59 ½ years old without paying 10% penalty
Planning Retirement 401k plans Allows you to deposit a set amount of pretax dollars and collect compounded earnings tax free until withdrawal, when the money is taxed at ordinary income tax rates. Has 3 benefits Your contributions reduce your present taxable income Tax is defered on the earnings More than 80% of employers will match your contributions.
Planning Retirement Koegh plans IRA for entrepreneurs Can invest up to $40,000 per year Not taxed till withdrawn
Planning Retirement Estate planning Ensuring everything that you own has a place to go (inheriting) Will Document that names the guardian for children and stated how you want your assets distributed, and names the executor for estate Executor- person who assembles and values your estate and other taxes and distributes assets. Prepare a durable power of attorney Document that gives an individual you name the power to take over your finances if you become incapacitated.
END Get a financial planner to help if needed.