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![Page 1: 1 Money Management Principles n Are timeless and time-tested n Apply to everyone n Work well in up & down economies n Help people grow wealthy over time.](https://reader035.fdocuments.in/reader035/viewer/2022062519/5697bfbb1a28abf838ca0fc3/html5/thumbnails/1.jpg)
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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
Personal Finance Southwest High
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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-RelatedPersonal Finance Southwest High
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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
Personal Finance Southwest High
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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
Personal Finance Southwest High
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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
Personal Finance Southwest High
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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 spentPersonal Finance Southwest High
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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
7Personal Finance Southwest High
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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
Personal Finance Southwest High
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Minnesota Saves
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 incomePersonal Finance Southwest High
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6. 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 analysisPersonal Finance Southwest High
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7. Earned Income Tax Credit
Refundable tax credit for workers
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8. 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”
Personal Finance Southwest High
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Check Your Financial Health
Take the Financial Fitness Quiz Least common practices
– Not having a will – No written financial goals – No written budget – No net worth calculation
Personal Finance Southwest High
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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/
Personal Finance Southwest High
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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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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
Personal Finance Southwest High
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The Financial Checkup by Alena Johnson
Personal Finance Southwest High
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Financial Planning for Womenhttp://www.usu.edu/fpw
For women of all ages & knowledge
Personal Finance Southwest High
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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 outPersonal Finance Southwest High
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Closing Thought
“If it is to be, it is up to me”
Comments? Questions? Experiences?
Personal Finance Southwest High