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April 20, 2009
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Being able to buy
Making choices based on what you wantversus what you have to do
Mind is used to what we call nexting
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Personal Finance is an umbrella term thatcovers
Spending
Saving Investing
Protecting your financial resources
Lifelong process
Start asearly as possible!
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Saving $20.00 a week = 52*20 = $1040 a year
At theend of 4 years of college you have inyour savings account about $4250
Making smart decisions
Informed choices
Not getting into debt
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Goals are based on
Values (Principles that guide behavior)
Attitudes (Likes anddislikes)
Resources (Source of wealth) Decision Making (Process of making a choice
between two or more alternatives)
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Short term (less than 2 months)
Example: Save money for a mothersday gift
Intermediate
Example: Save money for a trip to theBahamas
Long term
Example: Save money to buy house
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Setting Financial Goals and Creating Plans
Activating Plans
Evaluating and Revising Plans:Going Forward
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Emergency Fund: 3-6 months of salary setaside in a liquid interest bearing account
Money market fund
Short Term Certificate of Deposit Savings Account
Cushion for bad times
How much do Americanssave on average of
their disposable income per year?
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Did my plan fail?
Did it succeed?
Where can I improve?
A profit and lossstatement every birthday.
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Is a financial plan based on income andexpenditure in a month.
Organized paperwork
Fixed Expenses
Variable Expenses
Net worth = Assets Liabilities
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A savings account is money kept in a bank orsavings and loan association for safekeeping.Savings accountsearn interest on all money
kept in the account.
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Secure
Stable
High Liquidity
Better than a checking account because youget interest on your money
Very low interest rate
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A money market fund is a type of mutualfund that is required by law to invest in low-risk securities.
Relatively low risks Pay dividends that generally reflect short-
term interest rates.
Money market funds typically invest in
government securities, certificates ofdeposit, commercial paper of companies, orother highly liquid and low-risk securities.
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Security
Stability
Diversification
Liquidity
Tax Advantage
NOT INSURED WITH FDIC
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A savings certificateentitling the bearer toreceive interest.
Time Deposit / Maturity Date.
Specific Interest rate
CDs are generally issued by commercialbanks and are insured by the FDIC.
Restricts holders from withdrawing funds on
demand. Although it isstill possible towithdraw the money, this action willoften incur a penalty.
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Federal Deposit Insurance Corporation is agovernment insurance of bank or saving andloan accounts (up to $100,000 per account).
Credit Unions are insured by theNationalCredit Union Administration.
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Comparison between:
Money Market Fund,
CD,
Savings account
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Buy now Pay later
Student Loans
The cost of using money is called interest.
Interest rates areexpressed as a percentageper year.
Annual percentage rate (APR) is thesimplified counterpart to theeffective
interest rate that the borrower will pay on aloan.
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You cant bedenied a credit card becauseyoure a woman
You can limit your risk if a credit card is lost
or stolen You can resolveerrors in your monthly bill
without damage to your credit rating
You cant have your credit shut just because
youve reached the age of 62
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FICO (Fair Isaac and Company)
720 and over
Payment History
Amounts Owed
Length of Credit History
New Credit
Types of credit used
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Pay your bills on time
Keep balances low
Dont close unused credit cards
Dont open a bunch of new credit cards ifyou dont need them
Dont open too many accounts rapidly
CHECKYOUR OWN CREDIT REPORT
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A financial planner looks at a persons or afamilys total financial picture, helps thatperson or family define and prioritize goals
and then works out a plan to achieve thesegoals.
Tax returns
Investments
Insurance
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Unregulated industry
Makesure to look for certification
Certified Financial Planner (CFP)
CertifiedPublic Accountant (CPA) Chartered Financial Consultant (ChFC)
Personal Financial Specialist (PFS)
Certified DivorcePlanner
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Beware of freeseminars/ offers
Beware of free ANYTHING
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Loans are a sum of money lent at interest
Car Loans
Mortgage
Education Loans UnsecuredLoans
SecuredLoans
Co-signer is the one agrees to repay the loan
if the borrower defaults on it
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Collateral is property or any asset that isused to secure a loan
Starting a business collateral
Car House
Merchandise
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Taxes
Fines
Freezing your assets
Jail time Loans
Higher interest
Hurts your credit score
Hurts your co-signer Social Security
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Consumer Reporting Agencies
FCRA (Fair Credit Reporting Act)
ECOA (Equal Credit Opportunity Act)
FCBA (Fair Credit Billing Act)
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Freshmen, 36
Sophomores,55
Juniors, 51
Seniors, 64
CreditCards
Freshmen
Sophomores
Juniors
Seniors
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Federal student loans have 6.8% interest rate the highest ever.
Averagestudent debt in 2006 was $19,000
Graduate Students: $40,000 - $100,000Cant take modest paying jobs
Will thedream remain a dream
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The average American household:
Mortgagedebt of $84,911,
Car and tuition loans of $14,414,
Homeequity loans of $10,062 Credit carddebt of $8,565
Totaling: $117,952.
According to Federal Reservestatistics, the
average householdsavings this year will beonly $392.
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0
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40000
50000
60000
70000
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90000
Debt and Savings