Personal Finance Fundamentals

Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.

3 M’s

• Moving On and Moving Out– Mindset

– Money

– Management

Would you like to be a millionaire?

• I know the secret….– High School Graduate $1,486,000– College Graduate $2,557,000

– Spend less than you make!

– Income is not the key…saving is.

Wealth

• Most of us define wealth as the dollar value of the assets that we own. To determine our wealth we add up all that we own and subtract all that we owe – that equals our net worth.

• Simply put:– Own – Owe = Wealth

Budgeting

• Budgeting (controlling your spending) will allow you to increase your wealth.

• 3 M’s of budgeting

Mindset (First M)

• A budget will not tell you what to do, you choose what to do.

• Stop saying “ I can’t afford” , say “I choose to.”

• Be creative with alternatives.

What type of spender are you ?

• Everyone stand.• Sit down when I call out something you can’t

give up:– Candy – Cookie– Soda– Bottled water

Sit down when you can’t give it up

• Starbucks• Going out with your friends once a week• Buying lunch vs. bringing lunch• Seeing the latest movies• Getting your nails done• Getting your hair done once a week

Sit down when you can’t give it up.

• Cable television• Latest video games• Cell phone

Why is it hard to discipline our spending?

• Just do it! (Mentality)• Advertising• Keeping up appearances• It isn’t fun!

Money (2nd M)

• Do the math: How much is coming in and how much is going out.

• Don’t forget those monthly or annual expenses – holidays, special events, prom.

• Include money for savings.

• Remember – Life happens!

Management (3rd M)

• Set aside time each week to go over your plan.• Make adjustments.• You won’t be perfect, don’t give up.• Find a partner to work with you.

• Fail to plan, plan to fail.

Budgeting tips

• Pay yourself first.

• Be honest with yourself.

• Don’t give up.

• Other people don’t budget and they are fine. Really?

Savings

• Difficult to do.• Allows us to set money aside for emergencies.• Allows you to have the freedom to make

choices.

Money Credit Cards

Credit cards represent a loan. The card (or the number) is simply a way to access a line of credit.

On the other hand, a debit card is a way to spend checkable deposits, just like a paper check.

Credit Cards

Advantages

• Pre-approved loan• Widely accepted• Some consumer

protection• Can establish credit

history

Disadvantages

• Requires discipline from borrower

• Can have high fees and interest

• Identity theft

Credit Cards

• Credit card is a pre-approved loan• You will pay interest each month if you don’t pay it

off in full• Credit card companies are highly regulated about

marketing to those under 21 • If you spent $1500 when you were 18 on a credit

card with 18% interest rate and paid the minimum amount it would take until you were 26 to pay off the balance.

Debit Cards

Advantages

• Widely accepted• Some consumer

protection• Ease of use

Disadvantages

• Requires recordkeeping

• Can have fees and penalties

• Identity theft• May lead to higher

spending

Debit cards

• A debit card gives you electronic access to your account.

• If you are overdrawn you will be charged a fee.

• Consumers who shop with debit cards tend to spend about 30% more than those shopping with cash.

Using credit wisely

• Credit can allow an individual to have the use of a product or service now rather than waiting for the future. When might this be a good decision?– Education– Housing– Transportation– Necessities

Identity theft

• Don’t give out information unless you contacted them.

• Protect your information at school• Don’t text your information to others –you

don’t know where there phone may be• Never carry your social security card• Order a credit report each year and check it

annualcreditreport.com

Your financial future

• Think about your goals and dreams• Determine wants vs. needs• Make a plan• Implement your plan• Evaluate – weekly, monthly, yearly• Make adjustments• Stay informed about your options• A great financial future awaits you !

Questions ?