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You and Your Money

You and Your Money. Briefing to Class of 2008 “No Mission Too Great!” 7 January 2007. Why We Are Here. Talk about your pay and your money Give some standard advice about savings Help you think about your Cow Loan plan Motivate you to start planning and saving today. Your Pay.

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You and Your Money

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  1. You and Your Money Briefing to Class of 2008 “No Mission Too Great!” 7 January 2007

  2. Why We Are Here • Talk about your pay and your money • Give some standard advice about savings • Help you think about your Cow Loan plan • Motivate you to start planning and saving today

  3. Your Pay Remainder AY07 AY08 ENTITLEMENTS: Cadet Pay 4317.30 10361.00 Pay Advance - - TOTAL ENTITLEMENTS 4317.30 10361.00 DEDUCTIONS: FITW 183.75 441.00 SITW 62.50 150.00 FICA 330.25 792.60 SGLI 135.00 324.00 Repayment of Advance 550.00 1320.00 TOTAL DEDUCTIONS 1261.50 3027.60 ENTITLEMENTS LESS DEDUCTIONS 3055.80 7333.92 CHECKING ACCOUNT ALLOWANCE 2000 6000 DEPOSIT TO CADET ACCOUNT 1055.80 1333.92 State Tax is variable This is your discretionary pay

  4. Your Pay Remainder AY07 AY08 ENTITLEMENTS: Cadet Pay 4317.30 10361.00 Pay Advance - - TOTAL ENTITLEMENTS 4317.30 10361.00 DEDUCTIONS: FITW 183.75 441.00 SITW 62.50 150.00 FICA 330.25 792.60 SGLI 135.00 324.00 Repayment of Advance 550.00 1320.00 TOTAL DEDUCTIONS 1261.50 3027.60 ENTITLEMENTS LESS DEDUCTIONS 3055.80 7333.92 CHECKING ACCOUNT ALLOWANCE 2000 6000 DEPOSIT TO CADET ACCOUNT 1055.80 1333.92 You still Owe $1870

  5. Your “Budget” Have you “topped-off”? Cadet Account AY 07 Jun 07-graduation Balance Forward xxxx.xx xxxx.xx DEPOSITS: Initial Deposit - - Deposit From Cadet Entitlements 1055.80 1333.92 Interest Earned 23.08 55.39 Rations Earned 178.75 429.00 TOTAL DEPOSITS 1290.63 1818.31 EXPENSES: Laundry/Dry Cleaning 159.75 383.40 Personal Services 121.70 292.08 DCA Fee/Eisenhower Hall Tickets 95.83 230.00 Class Activities 55.42 333.00 Cadet Publications 39.17 99.00 Athletic Fees 30.00 72.00 Uniforms & Equipment 59.17 142.00 Books & Supplies 834.00 1310.00 Computer & Supplies 157.08 177.00 Class Fund - - Information Tech Fee 82.06 196.94 Newspapers – NY Times 20.83 50.00 Miscellaneous - - Inflation Factor - - TOTAL EXPENSES 1655.01 3285.42 These are “set-asides” by the Treasurer Notice what’s not here….. RING 2LT Uniforms Car Insurance Credit Card Pmts etc. etc.

  6. Your “Budget” Minimum Account Balance is required Just for you to meet Expenses Cadet Account AY 07 Jun 07-graduation Balance Forward xxxx.xx xxxx.xx DEPOSITS: Initial Deposit - - Deposit From Cadet Entitlements 1055.80 1333.92 Interest Earned 23.08 55.39 Rations Earned 178.75 429.00 TOTAL DEPOSITS1290.63 1818.31 EXPENSES: Laundry/Dry Cleaning 159.75 383.40 Personal Services 121.70 292.08 DCA Fee/Eisenhower Hall Tickets 95.83 230.00 Class Activities 55.42 333.00 Cadet Publications 39.17 99.00 Athletic Fees 30.00 72.00 Uniforms & Equipment 59.17 142.00 Books & Supplies 834.00 1310.00 Computer & Supplies 157.08 177.00 Class Fund - - Information Tech Fee 82.06 196.94 Newspapers – NY Times 20.83 50.00 Miscellaneous - - Inflation Factor - - TOTAL EXPENSES1655.01 3285.42 1467.11 Total Expenses Exceed Total Deposits

  7. Should you “Top-Off”? Reasons to Top-Off Reasons not to Top-Off Save for your Class Ring $1200 Save for your Uniforms $2000 Money is in an interest bearing account Get out of Credit Card Debt Avoid Credit Card Debt

  8. Long Term Goals Retirement Kid’s College Medium Term Goals Wedding House Down Payment Spouse’s Tuition Review Budget Basics Short Term Goals Ring Uniforms Spring Break Car

  9. Should you “Top-Off”? Between now and graduation you will collect $8000 in discretionary pay Class Ring $1200 LT Uniforms $2000 Travel Home x 5 $1500 Spring Break x 2 $1600 Total $6300 $8000 - $6300 = $1700 There are 17 months until graduation You have about $100 per month for incidentals

  10. Should you “Top-Off”? Between now and graduation you will collect $8000 in discretionary pay Class Ring $1200 LT Uniforms $2000 Mom and Dad pay for travel and vacations Total $3200 $8000 - $3200 = $4800 There are 17 months until graduation You have about $282 per month for incidentals

  11. Avoiding Credit Card Debt Do not use your credit card for routine expenses if you are not currently paying it off every month Establish and maintain an Emergency Fund Emergencies are unscheduled trips home and car repairs Plan ahead for your known major expenses Avoid impulse purchases on credit Don’t try to keep up with the Joneses

  12. Myth: I’ll start saving after graduation Your financial planning will never be simpler than it is now If you haven’t learned to live within your budget now what makes you think you’ll do it when you’re paying for groceries and rent? If you’re not eating in the mess hall now, what makes you think you’ll stop eating fast food later The green zone in Baghdad has Subways AAFES is in Iraq, too If you have access to the internet you can spend money

  13. The Cow Loan Should I take the loan? What should I do with it?

  14. Background • Cadets sign for $30k loan with very favorable interest terms second semester Cow year • Repayment represents 25% of base 2LT pay (30% after tax) • We have seen an increase in financial vendors and interest from financial vendors in the last several years • We have many reports of vendors pressing cadets to purchase products that are not always in their best interest

  15. Concerns • Many cadets have no plan for the loan • Cadets are bombarded by vendors who are selling products they don’t need • Cadets are not planning ahead for major purchases and are taking on credit card debt in addition to the loan • Cadets believe USMA sanctions the vendors that are selling them inappropriate products

  16. Cow Loan Basics It’s a good deal -- take it!! BUT!!!! It’s a COW LOAN not a CASH COW! Know thyself!!

  17. Review Budget Basics Short Term Goals Ring Uniforms Spring Break Car MediumTerm Goals Wedding House Down Payment Spouse’s Tuition Long Term Goals Retirement Kid’s College

  18. Cow Loan Basics #1 Priority is to pay off credit card debt #2 Priority is to plan for known expenses without going into credit card debt Class ring and uniforms Any known travel

  19. Cow Loan Basics #3 Priority is to pay for your car Do not take on additional debt to buy a car You are already maxed out!

  20. Cow Loan Basics The ideal plan is to save and invest Max out your Roth IRA Invest the rest according to your medium and long term financial needs

  21. Financial Goals Short Term Goals Ring Uniforms Spring Break Car Medium Term Goals Wedding House Down Payment Spouse’s Tuition Long Term Goals Retirement Kid’s College

  22. Max Out Your Roth IRA Invest $4000 toward 2006 before filing your taxes Invest an additional $4000 against 2007

  23. Max Out Your IRA Where?

  24. Invest the Rest Okay, but where?

  25. Investing Do Your Homework!

  26. Resources Yahoo! Finance MSN Money About.com Investopedia.com Investment Company Websites

  27. Investing You can do it!

  28. Financial Planners Are guaranteed to make their commission on load funds and annuities You are not guaranteed a return Must disclose how they are compensated

  29. Financial Planners If you do not feel like you are in charge of YOUR MONEY you have the wrong financial planner

  30. Cow Loan Don'ts Do not invest in an instrument that you do not understand Do not transfer responsibility for your finances to your room mate Do not trust someone just because they have permission to sell products on post

  31. Cow Loan Don'ts Do not take on a car loan in addition to your cow loan Do not take on credit card debt in addition to your cow loan Do not invest in a financial instrument that you do not understand

  32. Recommendations Plan ahead starting today Get out of Credit Card debt ASAP Avoid Credit Card debt by planning ahead Max out your Roth IRA

  33. The Way Ahead • Company meeting with an Econ Instructor –M hour • More specifics on the Cow Loan • More specifics on products and plans • Opportunity to answer questions/dispel rumors

  34. Additional Resources • Economics Faculty • Investment Club holds a special seminar for the cow loan

  35. No Mission Too Great!

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