Real World Money Education

1. Real World Money Education TarekDabbagh Steven Carlson http://economicsfordummies.org/

2. Pop Quiz • If you bought a TV for $3500 on credit and just made the minimum payments, how long would it take you to pay it off? • Less than a year? • 1-5 years? • 5-10 years?

3. Objectives • To attain financial independence • Setting and achieving goals • Basic Financial Institutions and accounts • Determine your financial health • Figure out where your money is going • Control your spending habits • What is credit? • Managing and understanding your debt • Planning and achieving your retirement

4. How to Attain Financial Independence • Open a Checking AND Savings account • Do not touch your savings account • Don’t let your bills exceed your checking balance • Spend LESS than you make • Budget your daily and monthly expenses • Make plans for big expenses (Car, House, etc.) • Be prepared for emergencies • Plan your work and work your plan!

5. Setting & Achieving Goals • Write down your goals for the future • Are you setting aside money each month for these goals? • How will you afford a car? House? Medical bills? • Financing and loans are beneficial if used correctly • Shop around for the best rates • How long does it take to pay off debt? • Remember the opening example? Do not carry a balance on your credit card • Pay off your debts before you start investing • How much do you need at retirement? • The average American looking to retire at 60 and live until 90 will need more than $1,000,000 in order to live comfortably

6. Basic Financial Institutions and accounts • Options: Banks & Credit Unions • Bank- for profit company owned by “shareholders” who have voting rights to elect board of directors to manage overall operations of the bank. Open to all. • Credit Union- those who have accounts in the credit union are its members and owners. Mission to be "community-oriented" and "serve people, not profit. Only a member of a credit union may deposit or borrow money. • Savings accounts – deposit money you don’t intend to spend but can withdraw without penalties. Aligns well with short to medium term goals. • Checking accounts- easy access to your cash via checks or ATM cards, allows one to manage their daily finances with bank statements and apps.

7. Budgeting • An approach to manage a spending plan for a specific period of time • Basic Formula : Income – Expenses = Surplus of Cash • Income: money that comes to you. It could be other than wages such as from investments or the sale of ones belongings to even simple interest earned from a savings account • Expenses: where your money goes, 3 types of expenses • 1. Fixed = consistently fixed such as rent and insurance • 2. Variable = vary in amount such as utilities in seasons • 3. Periodic = not paid constantly such as charity

8. Spending Habits • Before you buy, is it a WANT or a NEED? • Can you REALLY afford it? • Is it following your budget guidelines • If Credit is used, you should be able to pay off your credit card bill in FULL each month • Are you being smart about your money? • Track your spending • Set limits (Fast food, entertainment, dining out, etc.) • Where can you save? • Walking, public transportation, discounts, coupons, etc *If a budget is followed with discipline many financial issues never arise

9. Stretching Your Dollar • Where are you spending too much? • Buy only the essential groceries • Are you driving too much? • Does your bank charge fees? • What new changes can you make to save? • Are you conscious of your purchases? • Do you have friends that pressure you to overspend? • Can you do anything to earn a second (or primary) income?

10. Building and earning credit • Why do we need credit? • Good credit will allow you to get car loans, mortgages, and even jobs • How to build credit • Pay off your bill in full each month and on time • Use less than 20% of your available limit • No late payments • When should we use credit? • Use credit on expenses that you have the cash in your account to pay for • Do not purchase anything on credit that you cannot afford • Common mistakes • Purchasing more than you can afford • Only paying the minimum each month • Using one card to pay off another

11. Managing Debt • Pay off your highest interest debts first • Credit cards have the highest rates, pay off these bills first • Short term and student loans can be paid off next, don’t take loans with early payment penalties • Mortgages • Don’t add unnecessarily to your debts

12. Compound Interest • Joey invested $20,000 at age 40 and $100 a month after • Sarah invested $10,000 at age 25 and $50 a month after • When they both retire at 60, who will have more assuming they both earn 5% a year • Joey will have $92,745.10 • Sarah will have $109,352.34

13. Conclusion • Take the self initiative and plan for you own destiny • With short, medium and long term goals you will be available to monitor your progress properly with accountability. • Lastly, try to make more and spend less!