ten sound money management principles for students ppt developed by barbara oneill, ph.d., cfp...
TRANSCRIPT
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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]
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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
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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
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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
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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
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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/
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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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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?