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Personal Financial Statements

Personal Financial Statements. Chapter 16-1. How Much Money Will You Earn in Your Lifetime?. From the  U.S. Census Bureau, Current Population Survey, Educational Attainment 2009 data , in a sample of 100 Americans : 55 would have some college: 1 Professional degree 1 Doctoral degree

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Personal Financial Statements

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  1. Personal Financial Statements Chapter 16-1

  2. How Much Money Will You Earn in Your Lifetime? • From the U.S. Census Bureau, Current Population Survey, Educational Attainment 2009 data, in a sample of 100 Americans: • 55 would have some college: • 1 Professional degree • 1 Doctoral degree • 7 Master's degree • 18 Bachelor's degrees • 9 Associate's degrees • 19 some college, no degree • 45 would have no college: • 31 would have a high school diploma, no college • 14 would have no high school diploma • Combining Work-Life Earnings for Full-Time Employees* with the data above: • Professional Degree: $4.4 million x 1 = $4.4 million • Doctoral Degree: $3.4 million  x 1 = $3.4 million • Master's Degree: $2.5 million  x 7 = $17.5 million • Bachelor's Degree: $2.1 million x 18 = $37.8 million • Associate's Degree: $1.6 million x 9 = $14.4 million • Some College: $1.5 million x 19 = $28.5 million • High School Diploma: $1.2 million x 31 = $37.2 million • Some High School: $1.0 million x 14 = $14.0 million • Total = $157.2 ÷ 100 = $1.572 million or about $1.6 million average life-time earnings

  3. Money Management Basics • Money management refers to the day-to-day financial activities associated with using limited income to satisfy your unlimited needs and wants. • It involves getting the most for your money through careful planning, saving, and spending. • It involves making and using a plan for spending.

  4. Money Management • It doesn’t mean • Never spending • Doing without • Not having any fun

  5. Successful Money Manager • Set goals • Make wise decisions • Buy wisely • Live within your income

  6. Personal Balance Sheet • Balance sheet is a record of assets and liabilities at a point in time. • Reports what a person owns as well as what he or she owes.

  7. Balance Sheet • Assets: • Items of value: money in bank, home, investments, furniture, clothing, automobiles, jewelry, … • Liabilities: • Amounts owned to others: credit card balance, automobile loans, home mortgage, personal loans,.. • Net worth: • Difference between a person’s assets and liabilities.

  8. Personal Cash Flow Statement • Examines the change in a person’s net worth. • Reports net wages and other income along with spending for a period.

  9. Personal Cash Flow Statements • Personal Cash Flow Statement examines the changes in a person’s net worth. • Cash Inflows is the money you have available to spend as a result of working or from other income • Cash Outflows is amounts spent on food, clothing, transportation, other living cost.

  10. Why Positive Cash Flow is Important • One of the fundamental building blocks of becoming wealthy is spending less than you earn. It is one of the core concepts of achieving wealth. • Your cash flow statement won’t tell you if you will become a millionaire or not, but it can tell you if you are on the right path – hint: you can’t build wealth if you are running on a deficit.

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