Where Does The Money Go?

1. Where Does The Money Go? This is an overview of this presentation: • Ways to earn money • How to think about expenses • How to track spending • How to set up a budget • When to use credit – when not to! • Thinking about the importance of savings / retirement / investing • Money Tips

2. Where Does The Money Go? Ways to earn money : - Jobs for Parents (Allowance Based Income) - Get a job working for a company (McDonald’s, Newspaper Delivery) - Birthday Money or Holiday Money (Gifts) - Working for Other Adults in the neighborhood -Mowing grass -Shoveling -Raking leaves -Cleaning houses - Having more than one job

3. Where Does The Money Go? Expenses: Decide:Cash or Credit Decide: What type of bills or expenses you want or have Decide:Will any of this income earned be used towards a future purchase (savings?) Decide:When will you get more money? Can you make it on the money you have until that time? Will you have enough left over to pay for: --- gas in the car --- going out to eat --- necessities or wants ? ? ?

4. Where Does The Money Go? Track your spending: -Do you currently have a checking account? -Can you list your bills that you have – amounts ?? -Where does your money go? – to get real figures look at a checking account or save your receipts. -Record your daily expenses in a notebook or on paper -Keep track of your entire debt not just monthly debt -How do spend chunks of money? Do you make a plan? -Do you like to buy things for other? Think about why! Homemade gifts usually mean more. (Friends and Relatives)

5. Where Does The Money Go? Budget Time: How to set up a budget? Who has ever done a budget? 1. List the amount of money coming in (all income) 2. List the expenses you have on one sheet of paper 3. List the money you have left over (Discretionary $) 4. List your goals – Things you can’t purchase yet but might want to buy in the future Time to do a practice budget…

6. Where Does The Money Go? List all of your income: Include any income that is regularly has been received for over 3 months. (Some might have to include child support to live) List all of your expenses: CHOICES Even expenses only paid periodically (once every other month, or once a year) Think about your financial goals (include savings as an expense –to help save)

7. Where Does The Money Go? Write down any income you receive/will use: • Birthday Party Money • Money from a job (earnings) • Money from a second job • Investment money you receive • Savings you are going to apply towards bills • Gift of money from relatives including parents

8. List all of your Expenses:Bills each month and don’t forget the bills that are due every 3 months, 6 months or every year. Total Bill Payments (Add all payments together):_________ Total Debt (Add all bills) ___________________________

9. What did I forget to include on my bills? • Other bills paid every few months only? • Car Repairs or Car Insurance? • Savings? • Retirement? • Health Insurance Premiums? • Dental Bills? • Saving for a New Car? • Saving for a Boat or a House?

10. Where Does The Money Go? Look at your expenses: Do you have enough income to pay all your bills? (Subtract your income from your total bills amount) If you do have extra income (discretionary income) what will you do with it? Will you start another savings category? Invest the income? – Retirement Account (IRA)?

11. Where Does The Money Go? Budgets have to be flexible. Unexpected things happen: -Cars break down -Medical Expenses (Cold/Ear Infection) -Emergency Dental Expenses Try to have extra income. It can be helpful to plan for the unexpected emergencies. It can reduce financial stress!

12. There are several ways to do a budget. The only wrong way is not to do a budget! These are a few ways: Written method – where you record everything on a sheet of paper or on a computer program (as we just did) Envelope method – allows you to really visually see how many bills you have and the categories you spend your money on. Handout – explaining this method Wrap up for first class

13. Where Does The Money Go? Now… think about these answers. • How much money do you have access to? • Do you have cash in your pocket/purse? • Do you have a credit card in your pocket/purse? • Do you even have credit cards? • Do you know much about credit cards? • Did you know that a credit card is a loan that is paid back with interest?

14. Where Does The Money Go? http://www.myfico.com/ Valuable Website: http://www.myfico.com/ has great information about credit and credit scores

15. Where Does The Money Go? Teens and Money Credit When to use it: * When you need to establish credit history - use responsibly (key) * Interested in purchasing a larger item (car) * If you know you can pay the entire bill off * Emergencies (car breaks down) * Reservations or protect purchases When not to use it: * If you cannot afford to purchase that item with cash * If you are already behind on your bill payments * If you earn less than you are spending! * To purchase food or gas and still cannot pay it off when you receive your bill * Just because something is on sale! IT IS NOT A SALE IF INTERESTIS ADDED TO IT!

16. Where Does The Money Go? Think about this: Justin budgeted his bills for the month. He only has a few dollars left until the end of the month (a week away). Justin’s friends invites him to go out with them to dinner and a movie. Justin knew that he would not have enough money to go with but then remembered he had a credit card with cash advance available. - Would this be a good idea? - What are his other options? - Should he skip going out this time? - Could he suggest something more affordable?

17. What does Justin need to think about before he makes that decision? -Additional interest charge because cash advance is at a higher interest rate -Can Justin afford to pay this additional amount off with his next check? Is Justin using his credit card as income? -It is notuncommon for people to use credit cards as an extra source of income – be careful! -This can lead to Justin relying on credit cards as income at other times. -This can lead to other negative financial decisions (not having the income to pay charges back)

18. Where Does The Money Go? • Credit Cards can be tempting to use • They allow you to purchase items that you financially might not be able to afford otherwise. • They are a quick loan without the approval process each time when making purchases – easy to use. • It is important to be a smart consumer with credit cards because of all the variables – interest rates, credit limits, penalties, late fees and other fees that might not be disclosed in large print. • Handout on Being Credit Wise

19. Where Does The Money Go? Where can you turn - to get more money? - Borrow from relatives or friends - Pay Day Loans – 300% a year (most) - Take out money through cash advanced (checking or credit card- high % and last to repay on a credit card) - Sell something quick – pawn shop or to friends (low value – low price) - Have a savings account to fall back on – easy access - Have an IRA to borrow from or cash in an investment - Get another job for more income

20. Investments can be in various forms: • Stocks & Bonds – be willing to loose what you invest • Money Market Account – interest paid for having funds in this account yearly • Savings Account & Certificates of Deposits (CD’s)– interest paid yearly • IRA’s – Some you can borrow against at a low interest rate • Cash under the pillow– or freezer –allows money to accumulate (down side – no added interest) • Investment in real estate (Usually required to be 18 yrs old) • Education is one of the largest debts for young people but is seen as a positive debt to bankers. This is not a debt that will hold you back unless you forget to repay it. • Credit cards are a loan! – Not an investment!

21. Future Be money smart: -Have goals with your finances - Don’t spend what you don’t have - Find a way to increase your income when you find your bills increase (second job is ok!) - Track your spending – do a budget - Have a strategy on how to reduce your entire debt - Think about your choices (bills) – are they really what you want to spend money on? - Are you working all the time without any time for life? - Is this what you want? - Learn more about money! Great books, videos, and more are available-get educated!

22. Books: • Kiplinger’s Money Smart Kids (and parents, too) by Janet Bodnar (1993) • Investing for Dummies 3rd Edition by Eric Tyson, MBA (2003) • Money skills – 101 ways to teach your child about money by Bonnie Drew (1992) • The complete idiot’s guide to Money for Teens by Susan Shelly (2001) • Are you normal about Money? (Do you behave like everyone else?) by Bernice Kanner (2001) • Family Money: Leave the Things You Own to the People You love by Silver Lake Publishing (2002) • Savings on a shoestring: How to cut expenses, reduce debt, and stash more cash by Barbara O’Neill, CFP, Ph.D. (1999)

23. Website Resources: • Ready, Set, Credit for Young People www.ftc.gov/bcp/conline/pubs/young/readycrdt.pdf • Cost of Paying Minimum Balance Calculator www.bankrate.com/brm/calc/minPayment.asp • Knee Deep in Debt www.ftc.gov/bcp/conline/pubs/credit/kneedeep.pdf • Building a Better Credit Record ww.ftc.gov/bcp/conline/pubs/credit/bbcr.pdf

24. Money Tips: • Save a small amount each week for a large expense – set a goal • Look for sale items – almost everything goes on sale at one time or another • Create a two week spending plan – budget • Look at the value, not just the cost, of products – items that last longer but cost a little bit more might be a better bargain. • Be aware of how peer pressure affects your spending • Keep a money diary – expense report for budget • Trends change - can you afford that? Choices

25. MONEY TIPS continued… • Uses envelopes to separate into categories to match your budget breakdown. – Evaluate each envelope. • Compare prices when shopping-use coupons when you can. • Look for ways to earn extra money for special goals • Recognize advertisement is targeting you – the consumer (a cool commercial for something doesn’t mean – you need it now or that it is even a purchase you need to make) • Remember you choose your bills: – The amounts you spend-what you buy – Spending your money is a choice made by you! – How do you make that choice?

26. Where Does The Money Go? Presented by: Brenda Jacobson This is an area where education can be very profitable! Make Cents?