Secretary of State Connie Lawson

Improving Financial Literacy

Did you know?

• 40% of Americans say they live beyond their means

• 50% say they live paycheck to paycheck• Fewer than 50% of Americans have calculated

how much they need for retirement• The average American spends 20 years in

retirement.

Are you ready?

What is Financial Literacy?

It is the ability to use knowledge and skills to manage financial resources effectively

for a lifetime of financial well-being.

What knowledge and skills can help you to be financially

literate?• Budgeting

• Balancing a checkbook

• Credit

• Compound Interest

• Investing

• Investment Fraud

Budgeting

• What is budgeting?– Spending less than you’re bringing in – Planning for the long and short term

Why can budgeting fail?

•Failure to prioritize expenses

•Failure to budget practically for normal out-of-pocket expenses such as groceries and gas

•Failure to plan for unexpected events

•Spending more money than you have

How to budget

• List Expenses– The Unexpected

– Annual/Semi-annual/quarterly

– Monthly

– Weekly

– Discretionary

• Prioritize Expenses– Necessities

– Essentials

– Car loan/car licensing fees/fuel

– Insurance fees

– Unsecured debt

– Discretionary expenses

List total amount of each expense & date its due

Make your budget work for you!

• Priorities first!

• Evaluate discretionary expenses

• Cut down on grocery or personal items

• Carpool or use public transportation

Balancing a checkbook• Verifies your records match the bank’s;

• Monitors for bank mistakes;

• Prevents you from running low or out of funds;

• Recognizes issues right away; and

• Evaluates your expenditures.

How to balance your checkbook

1. Reconcile your checks/deposits.

2. Reconcile your ATM withdrawals & debit card purchases.

3. Record interest earned & bank fees.

4. List outstanding checks/deposits.

5. Record your bank’s ending balance.

6. Calculate your balance.

Credit

• Powerful tool– Gives access to student loans, mortgages,

credit cards, auto loans, etc.

• Why is good credit important?– Shows trustworthiness– Saves you money/best interest rates

Credit

• Five Cs– Character– Capacity– Capital/Collateral– Conditions– Credit History

Credit Card Management• Limit the number of credit cards• For debt, look into 0% transfer programs• Be aware:

– Maintenance fees– Service Charges– Late Fees– Annual Membership fees– Interest

• Pay at least minimum every month• Pay extra on the card with highest interest rate (if

possible)

Monitor Your Credit

• Go to www.AnnualCreditReport.com;

• Call 1-877-322-8228; or

• Write to:

Annual Credit Report Request Service

PO Box 105281

Atlanta, GA 30348-5281

Compound Interest

Would you rather have a million dollars right now or a penny doubled every day for 30 days?

Answer

Take the Pennies!

Let’s do the math

Day 1 = 1 cent

Day 7 = 64 cents

Day 14 = $81.92

Day 21 = $10,485.76

Day 30 = $5,368,709.12

What is compound interest?

Interest is paid on original amount of deposit plus any interest earned.

(Original $ Amount + Earned Interest) x Interest Rate x Length of Time = Amount Earned

Compound Interest

Mike Laura

Age Contributions Made Early

Contributions Made Late

22-30 (9

years)

$2,000 annually $0.00

Age Contributions Made Early

Contributions Made Late

31-65 (35

years)

$0.00 $2,000 annually

Savings

Who Without compound

interest

With compound interest (at age

65)

Mike $18,000 $579,471

Laura $70,000 $470,249

302 West Washington Street, Room E – 111

Indianapolis, IN 46204

Phone: (317) 232 – 6681

Toll Free: (800) 223 – 8791

Fax: (317) 233 – 3675

www.IndianaInvestmentWatch.com

Indiana Investment Watch Connie Lawson

@SecretaryLawson@INInvestWatch

Questions?