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Financial Education: Myths and Facts about Wealth Creation

Explore common misconceptions about wealth creation and learn essential financial concepts to build a strong financial foundation. Get insights on budgeting, credit management, savings, and investing.

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Financial Education: Myths and Facts about Wealth Creation

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  1. Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.

  2. True or False? • Most millionaires inherited their wealth. • Most millionaires earn more than $500,000 per year. • College graduates earn about twice what high school graduates earn over a 40-year work life. • People who are self-employed rarely become millionaires. • All millionaires wear expensive clothes. • Millionaires usually drive new cars. • Many millionaires drop out of college to start work. • It is impossible to save enough to be a millionaire.

  3. Wealth is…

  4. Assets Anything an individual or business owns that has commercial or exchange value • Liabilities Money an individual or organization owes; same as debt • Net Worth The difference between the total assets and total liabilities of an individual

  5. Sandra’s Balance Sheet

  6. Sandra’s Balance Sheet

  7. Using Credit Wisely • Think about your balance sheet… Debt increases your liabilities – does it increase your assets? • Think about your budget… How will the payments affect your budget? What other spending will you sacrifice to pay off the debt?

  8. Goals • You might have a goal to simply increase your net worth, but most people have a more specific goal in mind. • Once you set a goal, you have to evaluate the saving and the income required to achieve the goal.

  9. Goals • Buy a new car • Go to college • Buy a used car • Go to the senior prom • Rent an apartment • Take a trip • Buy a house • Buy a new HDTV

  10. Financial Personality Types

  11. Sam’s Two-Week Budget

  12. Sam’s Two-Week Budget

  13. Save and Invest • Build a strong financial foundation first. • How much risk are you willing to take? • Think about your time horizon and other factors. • The sooner you start, the better (and easier)!

  14. Applying for Credit • Read the fine print! Look for: • Finance charges the dollar amount you pay to use credit • Annual percentage rate (APR) the percentage cost of credit on a yearly basis • Fees can include loan fees, annual fees, late-payment fees, etc.

  15. Credit Reports • Credit reporting company • Credit report • Credit score

  16. Reviewing Your Credit Report • Three major credit reporting companies • Equifax • Experian • Trans Union • One website for free credit reports www.annualcreditreport.com

  17. Identity Theft • It's not too early to pull your credit report! • Carefully review the report and correct any inaccuracies. • Don't carry your Social Security card in your wallet! • Shred any papers that contain personal information before throwing them away.

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