Basic Finances for Students

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This slideshow should help you understand the importance of your parent's money.

Published in: Economy & Finance, Business

Basic Finances for Students

  1. 1. Personal Financial Management and Investing <ul><ul><li>You are responsible for your future. </li></ul></ul>
  2. 2. Disclaimer (Read Aloud) <ul><li>This club is for educational info and exchange of trading ideas. Nothing mentioned by voice, charts or in text chat is to be taken as trading advice. Trades taken are strictly at your own risk. You should consult your broker or financial advisor before placing any trade ! </li></ul>
  3. 3. Questions Before We Begin <ul><li>What do you want to know... </li></ul>
  4. 4. Money Matters <ul><li>Why be concerned about your finances? </li></ul><ul><ul><li>Keep money in your pocket, by developing good spending and saving habits. </li></ul></ul><ul><ul><li>Stay financially afloat </li></ul></ul><ul><ul><li>Lower stress </li></ul></ul><ul><ul><li>Stronger relationships </li></ul></ul>
  5. 5. OVERVIEW <ul><li>Budgets </li></ul><ul><ul><li>Credit Cards </li></ul></ul><ul><ul><li>Debt </li></ul></ul><ul><ul><li>Loans </li></ul></ul><ul><ul><li>Insurance </li></ul></ul><ul><li>Identify Values and Goals </li></ul><ul><ul><li>Investing </li></ul></ul>
  6. 6. Personal Balance Sheet/ Budget <ul><li>Assets Value </li></ul><ul><li>Liabilities Values </li></ul><ul><ul><li>Debt / loan </li></ul></ul><ul><li>Difference between assets and liabilities </li></ul><ul><li>Spending </li></ul><ul><li>Income </li></ul><ul><li>A single point in time... </li></ul>
  7. 7. Create a Budget and Use It <ul><li>Where does your money go... </li></ul><ul><li>Keep it simple or you won't keep it... </li></ul>
  8. 8. Cash Flow Statement <ul><li>Where does the money go...? </li></ul><ul><li>Sources of cash </li></ul><ul><ul><li>Income </li></ul></ul><ul><li>Uses </li></ul><ul><ul><li>Expenses </li></ul></ul><ul><ul><li>Food </li></ul></ul><ul><ul><li>Clothing </li></ul></ul><ul><ul><li>etc </li></ul></ul>
  9. 9. SPENDING PLANS <ul><li>Live within your income </li></ul><ul><li>Realize personal goals </li></ul><ul><li>Maintain a good credit history </li></ul><ul><li>Get more for your money </li></ul><ul><li>Reduce financial stress and arguments </li></ul><ul><li>Achieve competence and confidence </li></ul>
  10. 10. ELEMENTS OF FINANCIAL PLANNING <ul><li>Net Income - Pay and allowances minus deductions = net income </li></ul><ul><li>Expenses (Fixed and variable) </li></ul><ul><li>Indebtedness - Amount owed to creditors </li></ul><ul><li>Savings / Investments - Pay Yourself First </li></ul><ul><li>Reserve fund / Emergency fund </li></ul><ul><li>Budget </li></ul>
  11. 11. CREDIT CARD FACTS <ul><li>Cards cause a 32% increase in spending </li></ul><ul><li>Average family has nine credit cards </li></ul><ul><li>Average total balance is $8000 (18%) </li></ul><ul><li>43% make only minimum monthly payments </li></ul><ul><li>Debt payments consume 19% of income </li></ul>
  12. 12. CREDIT EXAMPLE <ul><li>Amount Charged: $ 500 </li></ul><ul><li>Interest Rate 24% </li></ul><ul><li>Monthly Payments: $ 10 (2%) </li></ul><ul><li>Time To Pay Off Debt: 30 YEARS!!! </li></ul><ul><li>Total Interest $3,610.00 </li></ul>
  13. 13. APPROPRIATE USES OF CREDIT <ul><li>To purchase assets </li></ul><ul><li>For convenience </li></ul><ul><li>“ Big Ticket” items </li></ul>
  14. 14. INAPPROPRIATE USES OF CREDIT <ul><li>Furniture </li></ul><ul><li>Clothing </li></ul><ul><li>Sports Equipment </li></ul><ul><li>Entertainment </li></ul><ul><li>Daily Living Expenses </li></ul>
  15. 15. MOTIVATIONS TO ABUSE CREDIT <ul><li>Impulse Buying </li></ul><ul><li>Spending for Status </li></ul><ul><li>Retaliatory Spending </li></ul><ul><li>Spending to Feel Good </li></ul>
  16. 16. DEBT WARNING SIGNS <ul><li>Carrying credit card debt </li></ul><ul><li>Increasing income committed to debt </li></ul><ul><li>Falling behind on payments </li></ul><ul><li>Needing cash advance for essentials </li></ul><ul><li>Using credit for basic needs </li></ul><ul><li>Lack of savings </li></ul><ul><li>Being at or near card limits </li></ul><ul><li>Needing income from a second job </li></ul>
  17. 17. INDICATIONS OF SERIOUS PROBLEMS <ul><li>Skipping or rotating bill payments </li></ul><ul><li>Using credit to pay credit </li></ul><ul><li>Debt consolidation loans </li></ul><ul><li>Being denied credit </li></ul><ul><li>Dishonesty with family </li></ul>
  18. 18. INVESTING
  19. 19. Identifying Goals <ul><li>At minimum: </li></ul><ul><ul><li>Organized financial records </li></ul></ul><ul><ul><li>Insurance </li></ul></ul><ul><ul><li>Estate plan /written will </li></ul></ul><ul><li>Sample </li></ul><ul><ul><li>Buy a home in five years </li></ul></ul><ul><ul><li>Go on luxury cruise next year </li></ul></ul>
  20. 20. Detailed Plans for Goals <ul><li>Target date for goal </li></ul><ul><li>Amount needed </li></ul><ul><li>Funding plan </li></ul><ul><li>Short term <1 year </li></ul><ul><li>Long term >1 year </li></ul><ul><ul><li>Allocate funds </li></ul></ul>
  21. 21. INVESTING BASICS <ul><li>Make investing a habit </li></ul><ul><li>Set exciting goals </li></ul><ul><li>Don’t take unnecessary risks </li></ul><ul><li>Keep time on your side </li></ul><ul><li>Diversify </li></ul>
  22. 22. KEEP TIME ON YOUR SIDE <ul><li>Since 1926 the stocks have produced an average annual return of 10% </li></ul><ul><li>$5,000 starting and $279 a month at 10% APR will give you $250,000 in 20 years </li></ul><ul><li>$0 starting and $50 a month at 11% will give you $43,700 in 20 years and $141,500 in 30 years </li></ul>
  23. 23. BANK ACCOUNTS <ul><li>Checking </li></ul><ul><li>Savings </li></ul>
  24. 24. Vehicles <ul><li>Stocks </li></ul><ul><li>Mutual Funds </li></ul><ul><li>ETF </li></ul><ul><li>Options </li></ul><ul><li>Futures </li></ul><ul><li>Bonds </li></ul>
  25. 25. STOCKS <ul><li>Partial ownership of a company </li></ul><ul><li>Can make or lose money based on amount of risk when investing </li></ul><ul><li>Can go through an investing firm i.e. Edward Jones, Charles Schwab, or invest by yourself </li></ul><ul><li>Over the long term, an investment in stocks has historically had an average return of around 10-12%. </li></ul><ul><li>It takes a lot of time and effort to make money </li></ul>
  26. 26. Mutual Funds <ul><li>Invest in a collection of stocks </li></ul><ul><li>More stable in a changing market </li></ul><ul><li>Can invest in Mutual Funds with different risks </li></ul><ul><li>Can “invest and forget” about the funds </li></ul><ul><li>Gives immediate diversification </li></ul><ul><li>Can take cash out with little to no penalty </li></ul>
  27. 27. ETFs <ul><li>Exchange-traded funds are built like a mutual fund, typically an index fund, but trade moment by moment like a stock. </li></ul><ul><li>Brazilian ETF for example </li></ul>
  28. 28. Options <ul><li>An option is a contract to buy or sell a specific financial product at a specific price within a preset period of time. Options belong to a category of financial instruments known as derivatives, because their prices reflect the value of the item underlying the contract — called the underlying investment, underlying interest, underlying instrument, or sometimes simply the underlying. You can buy or sell options on individual stocks, stock indexes, futures contracts, currencies, and Treasury security interest rates. </li></ul>
  29. 29. Futures <ul><li>Futures contracts, which trade on regulated futures exchanges, obligate you to buy or sell a specified quantity of the underlying commodity, stock index, security, or currency for a specific price at a specific date in the future. Because all the terms are structured by the exchange, you can offset your contract and get out of your obligation by buying or selling an opposing contract before the settlement date. </li></ul>
  30. 30. Bonds <ul><li>A bond is a debt investment. When you buy a bond, you invest by lending money to a corporation, government, or government agency that issues, or sells, the bond. The issuer has the use of the money for a specific term, or period of time, and promises to repay the loan, or principal, when the bond matures at the end of the term. The issuer also promises to pay interest, figured as a percentage of the par value, or face value, of the bond for the term. </li></ul>
  31. 31. SOUND ADVICE <ul><li>Sleep on your decision </li></ul><ul><li>Don’t buy under pressure </li></ul><ul><li>Have your contract reviewed by Legal Services </li></ul><ul><li>Shop wisely! </li></ul>
  32. 32. Questions <ul><li>? </li></ul>
  33. 33. How to find the right vehicle? <ul><li>Look for momentum </li></ul><ul><ul><li>Going up or down </li></ul></ul><ul><ul><li>Long (up) or Short (down) </li></ul></ul>

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