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What I Wish I Knew about Personal Finance in College R.J. Weiss CERTIFIED FINANCIAL PLANNER® www.GenYwealth.com
" The most powerful force in the universe is  compound interest" - Albert Einstein Photo via Flickr:  Mansionwb
The Magic of Compound Interest <ul><ul><li>Invest $5,000 a year into 401K or IRA </li></ul></ul><ul><ul><li>From the ages ...
Northwestern Nick  vs. Fighting Illini Fred <ul><li>Northwestern Nick </li></ul><ul><ul><li>Invests $5,000 a year from the...
The Downside of Compound Interest <ul><li>Q: What will $3,729,328 be worth in 48 years? </li></ul>
The Downside of Compound Interest <ul><li>A: $715,309 in 48 years </li></ul><ul><ul><li>4% Withdrawal Rate = $28,612 a yea...
&quot;Focusing on the things that matter and the things we can control will go a long way to avoiding investor overconfide...
<ul><li>Controllable </li></ul><ul><ul><li>How much you spend, save, and invest </li></ul></ul><ul><ul><li>Career (how muc...
Credit Score 101 <ul><li>Applying for Mortgage with Excellent Credit </li></ul><ul><ul><li>Mortgage Amount = $250,000 </li...
The 5 Credit Score Factors
How Much Does That TV Really Cost? The Downside of Compound Interest <ul><li>Q: How much does it cost to buy a TV on your ...
How Much Does That TV Really Cost? The Downside of Compound Interest <ul><li>Q: How much does it cost to buy a TV on your ...
The Three Minute Guide to Getting Out of Debt <ul><li># 1 - Build emergency fund of $1,000 </li></ul><ul><li># 2 - Pick on...
The 2nd Best Investment You'll Ever Make - Paying Off High-Interest Debt <ul><ul><li>Guaranteed rate of return - Pay off 1...
The 3rd Best Investment You'll Ever Make - 401(k) Match <ul><ul><li>$50,000 annual salary </li></ul></ul><ul><ul><li>Your ...
The 4th Best Investment You'll Ever Make - Roth IRA <ul><li>“ For all long-term investors, there is only one objective — m...
The Best Investment You'll Ever Make - Investing in Yourself <ul><li>Books </li></ul><ul><ul><li>Read These First: </li></...
Any Questions? Get slides at www.genywealth.com/nu-slides
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What I Wish I Knew about Personal Finance in College

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What I Wish I Knew about Personal Finance in College

  1. 1. What I Wish I Knew about Personal Finance in College R.J. Weiss CERTIFIED FINANCIAL PLANNER® www.GenYwealth.com
  2. 2. &quot; The most powerful force in the universe is  compound interest&quot; - Albert Einstein Photo via Flickr: Mansionwb
  3. 3. The Magic of Compound Interest <ul><ul><li>Invest $5,000 a year into 401K or IRA </li></ul></ul><ul><ul><li>From the ages of 22-70 </li></ul></ul><ul><ul><li>Earn 9% </li></ul></ul><ul><ul><li>At 70, you’ll have $3,729,328 </li></ul></ul>
  4. 4. Northwestern Nick  vs. Fighting Illini Fred <ul><li>Northwestern Nick </li></ul><ul><ul><li>Invests $5,000 a year from the ages of 22-35 </li></ul></ul><ul><ul><li>Total Investment of $65,000 </li></ul></ul><ul><ul><li>Does nothing for 35 years </li></ul></ul><ul><ul><li>Continues to earn 9% </li></ul></ul><ul><ul><li>At 70, he has $2,553,706 </li></ul></ul><ul><li>Fighting Illini Fred </li></ul><ul><ul><li>Invests $5,000 a year from the ages of 35-70 </li></ul></ul><ul><ul><li>Total Investment of $175,000 </li></ul></ul><ul><ul><li>Earns 9% </li></ul></ul><ul><ul><li>At 70, he has $1,175,624 </li></ul></ul>
  5. 5. The Downside of Compound Interest <ul><li>Q: What will $3,729,328 be worth in 48 years? </li></ul>
  6. 6. The Downside of Compound Interest <ul><li>A: $715,309 in 48 years </li></ul><ul><ul><li>4% Withdrawal Rate = $28,612 a year or $2,384 a month </li></ul></ul><ul><ul><li>NOT MUCH!!! </li></ul></ul>
  7. 7. &quot;Focusing on the things that matter and the things we can control will go a long way to avoiding investor overconfidence.&quot; - Carl Richards CFP®, Founder of BehaviorGap.com
  8. 8. <ul><li>Controllable </li></ul><ul><ul><li>How much you spend, save, and invest </li></ul></ul><ul><ul><li>Career (how much you make) </li></ul></ul><ul><ul><li>Education </li></ul></ul><ul><ul><li>Debt </li></ul></ul><ul><ul><li>Asset Allocation, Asset Location, and Investment Expenses </li></ul></ul><ul><li>Uncontrollable </li></ul><ul><ul><li>Stock market returns </li></ul></ul><ul><ul><li>Inflation </li></ul></ul><ul><ul><li>Real estate prices </li></ul></ul><ul><ul><li>What others say </li></ul></ul><ul><ul><li>Financial upbringing </li></ul></ul><ul><ul><li>Previous mistakes </li></ul></ul><ul><ul><li>Tax hikes </li></ul></ul>
  9. 9. Credit Score 101 <ul><li>Applying for Mortgage with Excellent Credit </li></ul><ul><ul><li>Mortgage Amount = $250,000 </li></ul></ul><ul><ul><li>Mortgage Term = 30 years </li></ul></ul><ul><ul><li>Interest Rate = 5% </li></ul></ul><ul><ul><li>Monthly Payment = $1,342 </li></ul></ul><ul><ul><li>Total payments over 30 years = $483,138 </li></ul></ul><ul><li>Applying for Mortgage with Average Credit </li></ul><ul><ul><li>Mortgage Amount = $250,000 </li></ul></ul><ul><ul><li>Mortgage Term = 30 years </li></ul></ul><ul><ul><li>Interest Rate = 6% </li></ul></ul><ul><ul><li>Monthly Payment = $1,499 </li></ul></ul><ul><ul><li>Total payments over 30 years = $539,597 </li></ul></ul><ul><ul><li>Difference of $56,459 </li></ul></ul>
  10. 10. The 5 Credit Score Factors
  11. 11. How Much Does That TV Really Cost? The Downside of Compound Interest <ul><li>Q: How much does it cost to buy a TV on your credit card, if you make minimum payments? </li></ul><ul><ul><li>$1,200 </li></ul></ul><ul><ul><li>Interest Rate of 18% </li></ul></ul><ul><ul><li>Minimum payment = Interest + 1% of balance OR $30 </li></ul></ul>Photo via Flickr from ebmorse
  12. 12. How Much Does That TV Really Cost? The Downside of Compound Interest <ul><li>Q: How much does it cost to buy a TV on your credit card, if you make minimum payments? </li></ul><ul><ul><li>$1,200 </li></ul></ul><ul><ul><li>Interest Rate of 18% </li></ul></ul><ul><ul><li>Minimum payment = Interest + 1% of balance OR $30 </li></ul></ul>Photo via Flickr from ebmorse A: $2,423
  13. 13. The Three Minute Guide to Getting Out of Debt <ul><li># 1 - Build emergency fund of $1,000 </li></ul><ul><li># 2 - Pick one expense category each month to reduce </li></ul><ul><li># 3 - Set goal to cut expenses in that category by X amount </li></ul><ul><li># 4 - List all debts in order of highest to lowest interest rate </li></ul><ul><li># 5 - Apply the amount saved in step # 2 to pay extra principal on debt with   highest interest rate </li></ul><ul><li># 6 - Maintain minimum payments on all other debt </li></ul><ul><li># 7 - Once you pay off the debt with the highest interest rate, move on to the   next listed debt </li></ul>
  14. 14. The 2nd Best Investment You'll Ever Make - Paying Off High-Interest Debt <ul><ul><li>Guaranteed rate of return - Pay off 18% credit card, return 18% after-tax return </li></ul></ul><ul><ul><li>Stock Market only returns 8-9% on average, not guaranteed </li></ul></ul><ul><ul><li>Break Even Point = 6% </li></ul></ul><ul><ul><ul><li>Pay off all debts above 6% </li></ul></ul></ul><ul><ul><ul><li>Start investing before paying off debts with interest rate below 6% </li></ul></ul></ul>
  15. 15. The 3rd Best Investment You'll Ever Make - 401(k) Match <ul><ul><li>$50,000 annual salary </li></ul></ul><ul><ul><li>Your contribution = 10% of your income </li></ul></ul><ul><ul><li>Employer matches 50% of contribution </li></ul></ul><ul><ul><li>Annual increase in salary of 5% </li></ul></ul><ul><ul><li>Annual rate of return of 9% </li></ul></ul><ul><ul><li>In 40 years, you'll have $5,226,366 </li></ul></ul>
  16. 16. The 4th Best Investment You'll Ever Make - Roth IRA <ul><li>“ For all long-term investors, there is only one objective — maximum total return after taxes.” – Sir John Templeton </li></ul><ul><li>  </li></ul><ul><li>  </li></ul><ul><li>Roth IRA </li></ul><ul><ul><li>Invest $5,000 a year from 22 to 70 </li></ul></ul><ul><ul><li>Earn 9% </li></ul></ul><ul><ul><li>Accumulate $3,729,328 </li></ul></ul><ul><li>Taxable Account </li></ul><ul><ul><li>Invest $5,000 a year from 22 to 70 </li></ul></ul><ul><ul><li>Earn 9% </li></ul></ul><ul><ul><li>Marginal tax rate of 15% </li></ul></ul><ul><ul><li>Accumulate $2,350,649 </li></ul></ul>
  17. 17. The Best Investment You'll Ever Make - Investing in Yourself <ul><li>Books </li></ul><ul><ul><li>Read These First: </li></ul></ul><ul><ul><ul><li>The Richest Man in Babylon </li></ul></ul></ul><ul><ul><ul><li>Get a Financial Life </li></ul></ul></ul><ul><ul><ul><li>I Will Teach You To Be Rich </li></ul></ul></ul><ul><ul><ul><li>The Millionaire Next Door </li></ul></ul></ul><ul><ul><li>Read These Second: </li></ul></ul><ul><ul><ul><li>The Boglehead's Guide to Investing </li></ul></ul></ul><ul><ul><ul><li>Your Money or Your Life </li></ul></ul></ul><ul><ul><ul><li>Random Walk Down Wall St. </li></ul></ul></ul><ul><li>Blogs </li></ul><ul><ul><li>Gen Y Wealth </li></ul></ul><ul><ul><li>The Simple Dollar </li></ul></ul><ul><ul><li>The Finance Buff </li></ul></ul><ul><ul><li>Get Rich Slowly </li></ul></ul><ul><ul><li>I Will Teach You To Be Rich </li></ul></ul><ul><ul><li>The Oblivious Investor </li></ul></ul>
  18. 18. Any Questions? Get slides at www.genywealth.com/nu-slides

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