Ten Sound Money Management Principles for Students PPT Developed by Barbara ONeill, Ph.D., CFP Revised & presented by Jean Lown, Ph.D., Family, Consumer.

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, [email protected]

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 website2

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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

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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

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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

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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

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More About Time

Time diversification reduces investment volatility

The Rule of 72

– 72/interest rate = doubling period

– 72/doubling period = interest rate

Advantage calulators

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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

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

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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

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

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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

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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

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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

8. Earned Income Tax Credit

Refundable tax credit for workers

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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

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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”

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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

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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/

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.

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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.”

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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

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FCHD 3350 Family Finance

Personal Financial Management DSS general education Fall & Spring semesters

– Live and on-line Don’t leave campus without this class!

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The Financial Checkup by Alena Johnson

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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

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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: [email protected]– Monthly e-news & program info

Sign up sheet for FPW PPT will be posted on the website

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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

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Closing Thought

“If it is to be, it is up to me”

Comments? Questions? Experiences?