Who will win the NCAA Tournament? 1.North Carolina 2.Kansas 3.Memphis 4.UCLA 5.I don’t care.

Who will win the NCAA Tournament?

North

Carolin

a

Kansas

Memphis

UCLA

I don’t

care

63%

0%

13%13%13%

1. North Carolina2. Kansas3. Memphis4. UCLA5. I don’t care

Why People Fail Financially

Three primary enemies to becoming financially successful are

Inflation, T

axes,

Alcohol

Insu

rance

, Cars,

Houses

Inflation, T

axes,

Procra

st...

Insu

rance

, Esta

te Planni...

25% 25%25%25%1. Inflation, Taxes, Alcohol

2. Insurance, Cars, Houses

3. Inflation, Taxes, Procrastination

4. Insurance, Estate Planning, Procrastination

Batman: Age 22, Invests $5,000 per year, 8 years to and including age 29Robin: Age 22, starts investing $5,000 per year, age 30 for 43 years to age 7210% annual return RESULTS BATMAN: $3,788,943 ROBIN: $3,258,204 The lesson is

Procra

stinatio...

Disc

ipline is

...

Insta

nt gratif...

It is

importa

n...

25% 25%25%25%1. Procrastination is Expensive

2. Discipline is profitable3. Instant gratification is

expensive4. It is important to invest

early in your life

Your reaction to the prior problem

WOW

!

I’m go

ing to E...

I’m not g

oing ...

Unbelie

vable!

Awesome!

Batman is

my f..

.

17% 17% 17%17%17%17%1. WOW!2. I’m going to EXECUTE

early!3. I’m not going to

procrastinate4. Unbelievable!5. Awesome!6. Batman is my financial

idol

Inflation: The Good, The Bad, and The Ugly

Currently, your annual salary is $80,000. If inflation is expected to be 3% annually, what salary do you need in 10 years to maintain

the same salary in real (i.e., inflation adjusted) terms?

104513 $105,513 $106,513 $107,513 $108,513

20% 20% 20%20%20%1. 104,5132. $105,5133. $106,5134. $107,513 5. $108,513

20% 20% 20% 20% 20%

From a personal perspective, a 4% raise in an environment where inflation is 5% is

Good, b

ecause

...

Good, b

ecause

...

Bad, b

ecause

y...

Bad, b

ecause

i...

25% 25%25%25%

20% 20% 20% 20% 20%

1. Good, because you will be able to buy more with the raise

2. Good, because 4% is less than 5%

3. Bad, because you will not be able to buy more with the raise

4. Bad, because inflation is bad for everyone

Inflation can benefit some people, especially

Those w

ho have a lot o

f...

Those w

ho have little debt.

Those th

at hav

e a high ...

Those th

at hav

e a low n..

25% 25%25%25%

20% 20% 20% 20% 20%

1. Those who have a lot of debt.

2. Those who have little debt.3. Those that have a high net

worth4. Those that have a low net

worth

Your salary equals $10,000 per month. Your mortgage payment equals $1,000 per month. If you receive a 20% raise, the percentage of your salary allocated to the mortgage payment goes from 10% to

1.33%5.33%

6.33%7.33%

8.33%

20% 20% 20%20%20%1. 1.33%2. 5.33%3. 6.33%4. 7.33%5. 8.33%

Times are tough and your boss gives you a 1 percent raise telling you that you will only be able to live a little bit better next year. Inflation is 2%. Which is the most accurate statement.

You will

be be...

You will

be be...

Your “re

al” (i..

.

Your “re

al” (i..

.

25% 25%25%25%1. You will be better off next year because you received a raise.

2. You will be better off next year because inflation is only 2%

3. Your “real” (inflation adjusted) wages are declining

4. Your “real” (inflation adjusted) wages will be increasing

Time Value of Money

Assuming an 8% annual return, a 25 year old would have to save $_____ a year (end of year) to have a net worth of $10,000,000

by age 75.

$20,000 $200,000 $17,428.58

$27,428.58

$37,428.58

None ofthe ab...

17% 17% 17%17%17%17%1. $20,0002. $200,0003. $17,428.584. $27,428.585. $37,428.586. None of the above

A 25 year old who saves $10,000 per year for 50 years will have $_________ by age 75. Assume an annual return of 9%.

$5,150,835.56

$6,150,835.56

$7,150,835.56

$8,150,835.56

$9,150,835.56

None ofthe ab...

17% 17% 17%17%17%17%1. $5,150,835.562. $6,150,835.563. $7,150,835.564. $8,150,835.565. $9,150,835.566. None of the above

Obtaining an extra 1 percent annual return over your lifetime is

Nice

, but n

ot ...

Nice

and very ...

Gre

edy, but n

o...

Gre

edy and ver...

25% 25%25%25%1. Nice, but not that significant

2. Nice and very significant

3. Greedy, but not that significant

4. Greedy and very significant

Budgeting

“Pay Yourself First” mentality is

Good, in

stills

...

Bad, it

is se

l...

Good, h

elps ba...

Bad, p

rohibits

...

25% 25%25%25%1. Good, instills a savings discipline

2. Bad, it is selfish3. Good, helps balance

your budget4. Bad, prohibits living

well long term

If you cannot pay all your bills this month because your 1970 Dodge Challenger repair bill was $600, in general this is

Accepta

ble, it...

Unacce

ptable, ...

Accepta

ble, “s..

.

Unacce

ptable, ...

25% 25%25%25%1. Acceptable, it is an old car2. Unacceptable, you should

be saving monthly for “surprise” expenses

3. Acceptable, “surprise” repair bills will challenge the budget

4. Unacceptable, you should own a newer car

Measuring Your Financial SuccessWhat is Financially Wealthy?

The main measure of your financial success is your

Inco

me

Assets

Revenue

Net W

orth D

ebts

20% 20% 20%20%20%1. Income2. Assets3. Revenue4. Net Worth5. Debts

Net Worth is

Assets

– Debts

Cash +

Assets

Cash –

Debts

Assets

+ Debts

Assets

only

20% 20% 20%20%20%1. Assets – Debts2. Cash + Assets3. Cash – Debts4. Assets + Debts5. Assets only

Net Worth is

Assets

– Debts

Cash +

Assets

Cash –

Debts

Assets

+ Debts

Assets

only

20% 20% 20%20%20%1. Assets – Debts2. Cash + Assets3. Cash – Debts4. Assets + Debts5. Assets only

Financial Goal: To live off of your investment income and have enough funds to live forever. Annual Expenses this year = $60,000; After Tax Annual Investment Return = 5%, Inflation = 3%-- What new worth (assets assuming no debt)

do you need today?

3001044

3044677

3144677

3150000

3244677

20% 20% 20%20%20%1. 3,001,0442. 3,044,6773. 3,144,6774. 3,150,0005. 3,244,677

Investing: Ownership vs. Lending

If you buy a corporate (e.g., IBM) bond,

You own a port.

..

You own the st

...

You are loan

in...

None of t

he ab...

25% 25%25%25%1. You own a portion of IBM

2. You own the stock of IBM

3. You are loaning money to IBM

4. None of the above

As interest rates go up, the value of a bond goes

Down U

p

Depends

Not e

nough in

f...

25% 25%25%25%1. Down2. Up3. Depends4. Not enough

information

As interest rates go down, the value of a bond goes

Down U

p

Depends

Not e

nough in

f...

25% 25%25%25%1. Down2. Up3. Depends4. Not enough

information

If a bond is increasing in value, interest rates are likely going

Down U

p

Depends

Not e

nough in

f...

25% 25%25%25%1. Down2. Up3. Depends4. Not enough

information

Your Values and Spending Money

How you spend money

Communicate

s w...

Is a fo

rm of v

...

Says a

lot a

bo...

Is im

portant, .

..

25% 25%25%25%1. Communicates what you value

2. Is a form of voting for what you believe is good for our society

3. Says a lot about who you are as an individual

4. Is important, similar to voting during an election

Which expenditure of money is best for society?

Buying Doritos..

.

Taking a

trip ...

Putting ga

s in...

Donating m

oney...

25% 25%25%25%1. Buying Doritos and ice cream

2. Taking a trip to Europe3. Putting gas in a gas guzzling

truck4. Donating money to an

organization that feeds the poor

HOME OWNERSHIP

The first $250,000 gain for singles ($500,000 for married couples) on the sale of a house is tax free if

As long as it

...

As long as y

ou...

You lived in

y...

None of t

he ab...

25% 25%25%25%1. As long as it is your first house

2. As long as you are 59 ½ or older

3. You lived in your home for two of the last five years

4. None of the above

Dollar Cost Averaging

You buy $10,000 of IBM at $100 per shareA month later, you buy $10,000 of IBM at $110 per share

Your average price equals

$105 Greaterthan $105

Less than$105

$100 Greaterthan $110

20% 20% 20%20%20%1. $105 2. Greater than $1053. Less than $1054. $1005. Greater than $110

Vehicle Lease or Purchase

From a financial perspective, a vehicle consists of

Materia

ls, in

s...

Inte

rest,

prin...

Insu

rance

, dep...

Equity

, deprec..

.

25% 25%25%25%1. Materials, insurance, car payments

2. Interest, principal, depreciation

3. Insurance, depreciation, lease

4. Equity, depreciation, interest expense

You are considering leasing a $40,000 car with a residual value of $18,000 in four years. Your total lease payment would be

$22,000 <$22,000 >22,000 Notenough

inf...

None ofthe ab...

20% 20% 20%20%20%1. $22,0002. <$22,0003. >22,0004. Not enough info.5. None of the above

End of Lease: Residual Value = $17,000 Actual Value= $13,000

You total the car on the last day of the lease, you would owe

Nothingwith g...

$4,000without...

Nothing,with ...

1 and 2 None ofthe ab...

20% 20% 20%20%20%1. Nothing with gap insurance

2. $4,000 without gap insurance

3. Nothing, with collision auto insurance

4. 1 and 25. None of the above

Paying for College

The benefits of 529 Plans for saving for college are

Earn

ings gro

w ...

With

drawals ar..

.

Money w

ithdraw...

Can redire

ct t..

.

None of t

he ab...

All of t

he abo...

17% 17% 17%17%17%17%

1. Earnings grow tax free2. Withdrawals are tax free3. Money withdrawn can be

used for college expenses including room and board

4. Can redirect to another child (even child of a child)

5. None of the above6. All of the above

The benefits of 529 Plans for saving for college are

Once

an accoun...

The owner is t..

.

With

drawals no...

1 and 2

1 and 3

All of t

he abo...

17% 17% 17%17%17%17%

1. Once an account is open, anyone can contribute

2. The owner is the person who establishes the account

3. Withdrawals not used for college qualifying expenses are tax free

4. 1 and 25. 1 and 36. All of the above

Love and MoneyIncluding Marriage

The benefits of 529 Plans for saving for college are

Once

an accoun...

The owner is t..

.

With

drawals no...

1 and 2

1 and 3

All of t

he abo...

17% 17% 17%17%17%17%

1. Once an account is open, anyone can contribute

2. The owner is the person who establishes the account

3. Withdrawals not used for college qualifying expenses are tax free

4. 1 and 25. 1 and 36. All of the above

Credit

Good vs. Bad Credit

With multiple credit card bills, after making the minimum payments, you should pay off the credit card with the

High

est balanc..

.

Lowest

balance

High

est inte

re...

Lowest

interes..

.

None of t

he ab...

20% 20% 20%20%20%1. Highest balance2. Lowest balance3. Highest interest rate4. Lowest interest rate5. None of the above

Home Ownership

List the three loans from likely highest to lowest interest rate

Credit

card

, c...

Car loan, m

ort...

Mortg

age, cre

d...

Car loan, c

red...

None of t

he ab...

20% 20% 20%20%20%1. Credit card, car loan, mortgage

2. Car loan, mortgage, credit card

3. Mortgage, credit card, car loan

4. Car loan, credit card, mortgage

5. None of the above

Getting pre-approved for a mortgage is

Not in

your se...

Use

ful, esp

eci...

Use

ful, esp

eci...

Helpfu

l for n

e...

25% 25%25%25%1. Not in your self-interest 2. Useful, especially if you

have a car loan3. Useful, especially if you

have credit card debt4. Helpful for negotiating the

purchase of a house

A 30 Year Mortgage is Better than

Not in

your se...

Use

ful, esp

eci...

Use

ful, esp

eci...

Helpfu

l for n

e...

25% 25%25%25%1. Not in your self-interest 2. Useful, especially if you

have a car loan3. Useful, especially if you

have credit card debt4. Helpful for negotiating the

purchase of a house

Insurance

The purpose of insurance is to protect you against

Likely, s

ignif..

.

Likely, in

sign...

Unlik

ely, but ..

.

Unlik

ely, but ..

.

25% 25%25%25%1. Likely, significant financial loss

2. Likely, insignificant financial losses

3. Unlikely, but possible, significant loss

4. Unlikely, but possible, insignificant loss