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Ten Sound Money Management Principles for Students

Ten Sound Money Management Principles for Students. PPT Developed by Barbara O’Neill, Ph.D., CFP Revised & presented by Jean Lown, Ph.D., Family, Consumer & Human Development, USU Jean.lown@usu.edu. What are Your $ Questions?.

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Ten Sound Money Management Principles for Students

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  1. Ten Sound Money Management Principles for Students PPT Developed by Barbara O’Neill, Ph.D., CFP Revised & presented by Jean Lown, Ph.D., Family, Consumer & Human Development, USU Jean.lown@usu.edu

  2. What are Your $ Questions? • I can’t promise to answer all of them but by knowing your questions before we start I can adjust my presentation • How many parents? • Single parents? • Utah Savers? • Sign up for drawing • PPT on FPW website

  3. Money Management Principles • Are timeless and time-tested • Apply to everyone • Work well in up & down economies • Help people grow wealthy over time • Need to be taught in school

  4. 1. Go For The Goal • Goals provide a “why” for saving • Use goals to develop action plans • Break goals into benchmarks • Make your goals SMART • Specific • Measurable • Attainable • Realistic • Time-Related

  5. Invest in your Human Capital • Get a solid education • For career satisfaction • For better health • For higher lifetime earnings • It’s OK to borrow for education • There is an opportunity cost to taking too long to earn degree • Student loans are better than credit cards

  6. 2. Time Is Your Friend • Time: a young person’s biggest asset • Compound interest is awesome • For every decade that savings is delayed, the required investment triples • Example: $500,000 at 65; 10% yield • Age 25: $ 79 per month • Age 35: $ 219 per month • Age 45: $ 653 per month • Age 55: $ 2,141 per month

  7. More About Time • Time diversification reduces investment volatility • The Rule of 72 • 72/interest rate = doubling period • 72/doubling period = interest rate • Advantage calulators

  8. 3. Live Below Your Means • Spend less than you earn • Create a spending plan • Income = Fixed Exp (including savings) + Flexible Exp + 1/12 of Occasional Expense • Distinguish needs from wants • “Step-down principle” • Automate savings so money isn’t spent

  9. 4. Establish Emergency Fund • Aka contingency fund • Online savings accounts • No minimum • FDIC insured • 4.5% (varies) • Linked to checking account • HSBC • Emigrant • ING & many others

  10. Pay Yourself First: Automate Your Savings • Tax-deferred employer plans • Get full 401(k) match from employer • Employer credit unions • Savings bond purchase plans • Mutual fund Automatic Investment Plan • Direct stock purchase plans

  11. Utah Saves • http://www.utahsaves.org/ • Build wealth, not debt • Saver Strategies • Get out of debt • Earned income tax credit • Free income tax preparation • Individual Development Accounts

  12. 5. Buy Insurance According to “The Large Loss Principle” • Magnitude- not frequency- of losses • Increase deductible to save $ • Spend premium dollars on large potential losses: • Liability • Disability • Destruction of home • Large medical expenses • Loss of household earner’s income

  13. 6. Low Income Saver’s Credit • Refundable tax credit up to $1,000/person • Contribution to retirement account: IRA, 401(k), 403(b), or SEP • Couple filing jointly AGI: $50k or less • Single with AGI: $25,000 or less • Sliding scale: 10-50% of contribution

  14. 7. Repay Debt Quickly and Borrow For Less • Consumer debt ratio < 15% of net pay • Consumer debt + housing < 50% of net • High debt makes other problems worse • Negotiate lower interest rates • Always pay more than the minimum • Avoid “perma-debt” • Pay promptly to avoid late fees • Family Life Center PowerPay analysis

  15. 8. Earned Income Tax Credit • Refundable tax credit for workers

  16. 9. Vita tax prep • Provided by USU accounting students in Business building- starts Feb. • AVOID instant tax refunds • High cost loans (similar to payday loans) • Auto deposit • Split your refund • Save a portion, pay debt, spend

  17. 9. Buying House/Vehicle • Don’t buy more house than you can afford (Subprime mortgage meltdown) • Don’t’ trust mortgage broker • Don’t buy before you are really ready for the financial commitment • Buy new cars every 8-10 years or buy “new used”

  18. Check Your Financial Health • Take the Financial Fitness Quiz • http://njaes.rutgers.edu/money/ffquiz/ • Least common practices • Not having a will • No written financial goals • No written budget • No net worth calculation

  19. Financial Education Resources • Investing For Your Future • Home study course • http://www.investing.rutgers.edu/ • Money 2000 & Beyond • http://www.rce.rutgers.edu/money2000 • RU-FIT financial independence training • http://www.rce.rutgers.edu/ru-fit/ • USU Extension • http://extension.usu.edu/

  20. Spend Less, Enjoy the Holidays More • http://extension.usu.edu/htm/news/articleID=2361 • Start a UESP account for your kids • Spend time with important people • Avoid gift cards • High fees, money can’t be saved • Pay cash! Avoid debt.

  21. Small Steps to Health & Wealth • http://njaes.rutgers.edu/sshw/ • “This program is designed to motivate consumers to implement behavior change strategies that simultaneously improve their health and personal finances.”

  22. Personal Finance Magazines • Kiplinger’s Personal Finance Magazine • Kiplingers.com • Money Magazine • Money.com • Money 101 on-line financial mgmt course • http://money.cnn.com/pf/101/ • 23 lessons

  23. FCHD 3350 Family Finance • Personal Financial Management • DSS general education • Fall & Spring semesters • Live and on-line • Don’t leave campus without this class!

  24. The Financial Checkup by Alena Johnson

  25. USU Family Life Center • Very low cost financial & housing counseling • PowerPay Debt reduction computer analysis https://powerpay.org/ • First time homebuyer workshops • 797-7224; 495 North 700 East, Logan

  26. Financial Planning for Womenhttp://www.usu.edu/fpw • For women of all ages & knowledge • Second Wednesday (except December) • 12:30-1:30 in Family Life room 318 • 7-8:30 pm in Family Life Center • Email list: jean.lown@usu.edu • Monthly e-news & program info • Sign up sheet for FPW • PPT will be posted on the website

  27. Avoid Common Mistakes of Young Adults • Buying a house before you are ready • Buying too much house • Putting too much $ into vehicles • Keeping a balance on your credit cards • Waiting to invest for retirement until… • Not considering the cost of kids • Spending too much on eating out

  28. Closing Thought “If it is to be, it is up to me” Comments? Questions? Experiences?

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