Managing Your Personal Finances

1. Managing Your Personal Finances Bonus Chapter D

2. Top Concerns of Americans Source: USA TODAY Snapshots

3. Parts to a Personal Finance Plan • Cash and Income • Monthly Expenses • Budgeting • Retirement Planning • Emergency Funds • Insurance • Philosophy • What is the point to having a personal finance plan?

4. Cash and Income • The value of a college education • College grads make double the money of high school grads (winds up equalling $1.6 million more over a lifetime) • Often, upon graduating, you’ll find that your degree is merely a check in the box, but it’s an IMPORTANT check! • Unless you start your own business, the most money is made by those with graduate degrees, over a lifetime

5. What People Would Do With An Extra $1,000 Source: USA TODAY Snapshots

6. Monthly Expenses • With continual increases in standard of living to adjust to raises and promotions, you can work yourself into a continual feeling of “not having enough.” • Realize what the difference is between having a lot and being happy. • Cut back each month to save for large, cash purchases that give you more satisfaction than wasteful smaller purchases

7. Consumer Credit Cards Advantages • Convenience • Financial Emergencies • Purchase Goods Immediately • Track Purchases • Safer Than Carrying Cash Disadvantages • Temptation to Overspend • Items Become More Expensive • Danger of Excessive Debt • Tie Up Future Income • Missed Payments Lead to Poor Credit Ratings • High Interest Rates & Annual Fees

8. Possible Cost-Saving Choices Alternate Choice Cost Per Month Quick Trip’s Cappuccino $.60 for 20 days = $12.00 Lunch brought from home $2.00 for 20 days = $40.00 Generic bottled water $.50 for 20 days = $10.00 Listen to your old CD’s = $0.00 Old Navy T-shirt = $10.00 Total savings per month Total savings through 4 years of college Savings Per Month $48.00 $40.00 $20.00 $15.00 $24.00 $147.00 X48 months $7,056.00 First Choice Cost Per Month Starbucks caffe latte $3.00 for 20 days = $60.00 Fast-food lunch of burger, fries, and soft drink $4.00 for 20 days = $80.00 Evian bottled water $1.50 for 20 days = $30.00 CD = $15.00 Banana Republic T-shirt = $34.00

9. A Monthly Budget for an Adult • Income: $60,000 • 20% ($12,000) goes to Uncle Sam • $12,000 goes to mortgage on $135,000 house. • $5000 goes to payments on a $25,000 car • $5000 goes to groceries for a family of four • $4000 goes to utilities • $3000 goes to insurance programs. • That leaves you $16,000 to play with and save…

10. Your personal savings • If you can save $10,000 a year, that equals • $1.875 million over 40 years • $903,000 over 30 years • Employer-backed and matched plans help! • You will save interest expenses by financing your car purchases and larger purchases by yourself!

11. How Much Well-Paid Employees Save Source: USA TODAY Snapshots

12. Types of Personal Savings • Retirement Plans • Can be through your employer OR through an institution like Fidelity or many others • Look at the institution’s track record • Use matched plans when available • Roth IRA plan – Use after tax dollars, often earnings are not taxed!! • Emergency Funds/ Slush Fund • Use mutual funds, something a bit hard to get to • Need to amass 3 months of expenses • Try to achieve a $50,000 slush fund for car purchases

13. Income Sources For Retirees Source: Schwab On Investing

14. Insurance • Life • Term • Whole • Health/Disability • Homeowner’s & Renter’s • Other

15. Why Buy Term Insurance? Insurance needs in early years are high: • Children are young and need money for education. • Mortgage is high relative to income. • Often there are auto payments and other bills to pay. • Loss of income would be disastrous.

16. Why Buy Term Insurance? Insurance needs decline as you grow older: • Children are grown. • Mortgage is low or completely paid off. • Debts are paid off. • Insurance needs are few. • Retirement income is needed.