Personal Finances

1. D R A F T Personal Finances

2. Why Study Personal Finance • To help prepare for your future • To help you make decisions – the decisions you make now can greatly affect the decisions you have to make in the future • Choices have consequences (both positive AND negative) • To have an advantage over others • More & more it will be up YOU to provide for personal needs • The amount that companies/government, etc. are providing for retirement & benefits is decreasing. D R A F T

3. Financial Planning • Follow it • Stick with it • Update it • Like your resume, your financial plan is a lifelong resource that changes as you change. D R A F T

4. Financial Plan • Write down what you spend for several weeks • Determine where your money goes • Develop goals (short-term & long-term) • Set a budget • Stay on track AND out of debt D R A F T

5. ACTIVITY: Setting Financial Goals • Set a short-term goal & a long-term goal • Write objectives (ways you will reach each goal) for each goal • Estimate the cost • Specify a date in which you want to achieve each goal • Post Your Plan! • Where you can see it daily • Personal Portfolio D R A F T

6. ACTIVITY: Tracking Your Spending • Keep track of your spending for a week by keeping receipts in an envelope (or write amounts on the envelope) • At the end of the week, list your expenses • Examine your spending & write a one-paragraph summary on how your spending aligns or does not align with your financial goals/plan • This information will be used to complete the Budget activity D R A F T

7. Income • Gross Pay – the amount of money paid to you before taxes & deductions are taken out • Net Pay – money you actually receive after taxes & deductions • Deductions • Federal & State Income Tax • Health Insurance • Social Security & Medicare (for future benefits) • Retirement • Investments • Other • Sample Paycheck • Have checks electronically deposited D R A F T

8. Income • When you receive a check, pay yourself first • Immediately put a set amount in a Savings Account • This will help you meet your goals • Electronic deposits will assist with this • YOUR financial goals are the most important expenses you have! D R A F T

9. Income • Form W-4 • A form completed when starting a job so that the employer can withhold the correct income tax from your pay • Employees should complete a new Form W-4 each year and/or when their personal financial situation changes • How to Fill Out a W-4: • http://taxes.about.com/od/preparingyourtaxes/ht/W4.htm • Form W-4: • http://taxes.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=taxes&cdn=money&tm=70&gps=361_279_1419_665&f=10&su=p284.9.336.ip_p504.1.336.ip_&tt=7&bt=1&bts=1&zu=http%3A//www.irs.gov/pub/irs-pdf/fw4.pdf D R A F T

10. D R A F T

11. Income • Form W-2 • Every employer engaged in a trade or business who pays remuneration for services performed by an employee must file a Form W-2 for each employee from whom income, social security or Medicare tax was withheld • W-2s must be sent to the employee by January 31 of each year • The W-2 received by the employee is used to file Federal Income Tax forms • http://taxes.about.com/od/formw2/a/IRSFormW2.htm D R A F T

12. 16,680.24 1,728.00 12-2222222 16,680.24 1034.16 Real World Business Chicago, IL 60640 16,680.24 241.92 000-00-000 D 2000.00 Irma Money 2301 South Jackson Chicago, IL 60640 IL 12-2222222 16,680.24 440.40 Sample W-2 Form • Contains your tax information for one job in one year • You’ll receive one for each job you worked at during the year D R A F T

13. Income • Federal Taxes • Helps pay for programs such as highways, law enforcement, etc. • Required to file every year • May get back most taxes paid • Form 1040-EZ • State Taxes • Helps pay for programs sponsored by the state • Required to file • May get back taxes paid D R A F T

14. ACTIVITY: Completing a Form W-4 • Complete Form W-4. • http://taxes.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=taxes&cdn=money&tm=70&gps=361_279_1419_665&f=10&su=p284.9.336.ip_p504.1.336.ip_&tt=7&bt=1&bts=1&zu=http%3A//www.irs.gov/pub/irs-pdf/fw4.pdf • Turn in for credit. D R A F T

15. Employee Benefits & Perks BENEFITS - Non-wage compensations provided to employees in addition to their wages or salary • Insurance – health, dental, life • Retirement • Paid vacation • Sick leave • Tuition • Daycare • Housing • Transportation/parking • Disability income protection • Profit sharing • Others PERKS – benefits of a discretionary nature • Transportation/parking • Meals • Other Source: http://en.wikipedia.org/wiki/Employee_benefit D R A F T

16. Personal Budget • Fixed Expenses – Needs • Car – loan/payment, upkeep, gas • Rent or mortgage • Utilities – Electricity, Gas, Water & Sewerage, Phone • Insurance – car, health, rental or homeowner • Food • Clothing & Grooming • School – loans, tuition & books • Savings – short term goals & long-term goals • Unexpected expenses • Donations (community, charity) & Tithing • Flexible Expenses - Wants • Additional Clothing • Dining out • Social activities D R A F T

17. Renting • Monthly rental fee • Utilities • Electricity • Gas • Phone • Water & Sewerage • Renter’s Insurance • Can be as low as $15/month D R A F T

18. Owning • A good investment • Must save for a down payment • Usually goes up in value • May borrow against the equity built up over the years • Able to deduct mortgage interest & property taxes from income taxes • http://financialplan.about.com/od/realestatemortgages/a/BuyingaHome.htm D R A F T

19. Transportation • Car • Insurance • Gas • Maintenance • Problems • Bus • Pay each time you ride D R A F T

20. Insurance • A way to protect things you own • Car – in case of accident or injury • Health – medical expenses • Renter’s – for the items you own even though you are renting D R A F T

21. ACTIVITY: Create a Budget • Prepare a budget using your current financial status • Turn in • http://financialplan.about.com/od/moneyandcollegestudents/l/blcollbudget.htm • Use the budget calculator to develop a budget • http://www.bankrate.com/calculators/smart-spending/college-student-budget-calculator.aspx D R A F T

22. Financial Institutions • Bank • Credit Union • Federally insured – FDIC (Federal Deposit Insurance Corporation) • Check policies on: • Fees • Balance requirements • Overdraft protection • Hours of business D R A F T

23. Bank Accounts • Savings • Checking • Write checks • Use a Debit Card • May be a monthly fee • ATM (Automated Teller Machine) • Access funds anytime • ATM card required (keep your PIN safe & secretive) • Must pay a fee which is automatically taken out of your account at the time of withdrawal D R A F T

24. Saving & Investing • Savings Account – earn simple or compound interest • Certificates of Deposit (CDs) • need a large amount to begin (~$500) • investing more may provide a higher interest rate • must leave money in CDs for a specified amount of time • Money Market Account • can write checks • earns interest • U.S. Savings Bonds • good way to save for higher education • Must be held for a specified period of time or penalties may be charged for cashing in early D R A F T

25. Investing • Save early • Even a small amount invested while you are young makes a tremendous difference later in life • Compounding Interest • Money invested makes interest • The interest then earns interest • Money accumulates faster than you might think • It’s better to invest a little when you are young rather than waiting to invest more when you are older D R A F T

26. Chart Your Course • Calculate saving/investing $100 per month starting at age 18 for 13 years at an 8% annual rate (compounding interest) • Calculate the amount you will have at the age of 65 without investing any other additional amount. • http://www.moneychimp.com/calculator/compound_interest_calculator.htm D R A F T

27. Investing • Stocks – ownership in a company • Bonds – loan money • Mutual Funds – money is invested in various ways • There is some risk but may make more money (reward) • The higher the reward, the higher the risk D R A F T

28. Investing & Money Making Ideas • http://teenmoneycentral.com/2009/07/15/investing-for-teens/ • http://teenmoneycentral.com/2009/07/15/ways-for-kids-to-make-money/ D R A F T

29. ACTIVITY: Committing to Saving • Make a commitment to invest a portion of your income each month, not matter how little or how much. • Write the commitment down. • Post it where you can see it every day. • Include it in your personal portfolio. D R A F T

30. Loans • Interest is charged • If you pay more than the required monthly payment, you will pay the loan off early AND pay less interest D R A F T

31. Credit Cards • Use for emergencies only • Will help you establish credit • Check the interest rate & yearly fee • Pay the full amount owed EVERY month • Stay away from spending up to your credit limit • Do not skip payments or make late payments – you will be charged extra fees • You will pay interest on what you owe AND interest on the interest you previously paid D R A F T

32. Receipts • Keep all receipts • Use checking account, savings account & Debit Card receipts to balance account • Use credit card receipts to check monthly statements • Using receipts & checking/balancing accounts helps prevent theft or errors made by the institution • Identity Theft – Example: Sears credit card; over $800 charged on the card over the Internet; checking the receipts against the statement identified this problem; the credit card owner was not held liable • Can cause a person’s credit to be ruined D R A F T

33. Credit Score • Everyone has one • The higher the score, the better your rating • The better the score, the easier it is to borrow money at a lower rate if/when necessary • House • Car • 3 Major Credit Bureaus • Equifax • Trans Union • Experian D R A F T

34. Debt • Limit your debt • Purchase needs • Save for wants • Have a plan • Avoid late fees, high interest rates D R A F T

35. Retirement • Start saving early • 401(k) plan • Invest a portion of your income • Sometimes companies match your contribution • IRA (Individual Retirement Account) • Regular – you do not pay taxes until retirement • Roth – pay taxes while contributing to it D R A F T

36. EVERFI: Online Financial Literacy Program • www.everfi.net • 10 modules (introduction & 9 lessons) • Obtain your Site Code • Register • Create Class Code(s) & description of the code • Examples: 2nd Hour EFC, 5th Hour EFC • Students will use code when they register (they MUST use the correct code) • Student logins • REQUIRE them to use their school login (User ID & Password) D R A F T

37. EVERFI: Online Financial Literacy Program Grading: • 10 points for each module = 90 total points • Must make a 70 or above to be certified • Can give them points for completing the introductory lesson • Set class goal • Provide incentives • Print & post certificates • 100% Percenters: • Signs for each module • Students write name on cutout & post under sign when score 100% by due date D R A F T

38. Student Resources Web sites: • http://personalfinancetipsforyoungpeople.com/ • http://www.mlive.com/business/ann-arbor/index.ssf/2009/04/josh_levine_six_principles_of.html • Banks & Credit Unions • Parents • Realtors • Finance Planners D R A F T

39. Sources • http://taxes.about.com/od/preparingyourtaxes/ht/W4.htm • http://www.irs.gov/pub/irs-pdf/iw2w3.pdf • http://taxes.about.com/od/formw2/a/IRSFormW2.htm • www.kellyhs.org/.../Hicks/Information%20Technology/documents//Sample_W-2_Form%5B2% • http://EzineArticles.com/?expert=Cynthia_B._Carlton • http://EzineArticles.com/2614052 • http://taxes.about.com/od/1040ez/Form_1040_EZ_Instructions.htm • http://financialplan.about.com/od/realestatemortgages/a/BuyingaHome.htm • http://financialplan.about.com/od/moneyandcollegestudents/l/blcollbudget.htm • http://www.bankrate.com/calculators/smart-spending/college-student-budget-calculator.aspx • http://www.moneychimp.com/calculator/compound_interest_calculator.htm • GoVenture Education IdeaBook. www.goventure.net D R A F T

40. Teacher Resources • Request free materials from to access resources such as the “What Do You Think?” activities & steps to financial planning • NEFE High School Financial Planning Program. Greenwood Village, SC: National Endowment for Financial Education, 2006. • Free • Hsfpp.nefe.org • Click on Instructors D R A F T

41. Additional Teacher Resources • InVEST – tools for personal finance & insurance; fun, interactive lessons for students • Teacher & Student Workbooks • Lesson plans • Games • Rating software • Guest speakers • Etc. • www.investprogram.org D R A F T

42. Additional Teacher Resources Financial Literacy: Spend, Save and Track Your Money. Learning ZoneXpress (www.learningzoneexpress.com) Financial Literacy: Manage and Multiply Your Money. Learning ZoneXpress (www.learningzoneexpress.com) D R A F T