Earning and spending
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Earning and Spending. 2/3 of GDP is made up of consumer spending What are some things that you buy on a daily/weekly/monthly/yearly basis?. Wealth Accumulation. Four Factors Income : more $$ = more saving/investing Expectations : confidence in the market = more spending, fear = more saving

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Earning and Spending

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Earning and spending

Earning and Spending

2/3 of GDP is made up of consumer spending

What are some things that you buy on a daily/weekly/monthly/yearly basis?


Wealth accumulation

Wealth Accumulation

Four Factors

Income: more $$ = more saving/investing

Expectations: confidence in the market = more spending, fear = more saving

Interest Rates: higher rate = incentive to save/invest

Taxes: higher taxes on investment = disincentive


How do we earn money

How do we earn money?

  • Work

    • wage: hourly, by unit of production

    - more blue collar

    • salary: weekly/monthly/yearly

    - more white collar

  • Wealth

    • rent: selling use of your property

    • interest: selling use of your money


Preparing a budget

Preparing a Budget

  • Set Financial Goals

    • Be REALISTIC!!!!

    • Be future oriented

  • Estimate Your Income

    • Only include guaranteed income

  • Plan Expenditures

    • Needs then Wants

    • Prioritize


Jobs research

Jobs Research

What types of jobs seem to pay the most?

The least?

Is a college education as necessary/worth the cost as it used to be?


Earning and spending

For the initial investment, the report adds up tuition, fees and the opportunity cost of not working. For return, the authors use the average lifetime wage difference between college grads and those with only a high-school degree.

The associates degree has a higher rate of return than the bachelor's because of the lower cost (of course).


What is the value of a college education

What is the Value of a College Education??


What is the value of a college education1

What is the Value of a College Education??


What is the value of a college education2

What is the Value of a College Education??


What is the value of a college education3

What is the Value of a College Education??

It really depends on what you plan to do…

Barriers to Entry

Does correlation imply causation?


Considerations for saving and investing

Considerations for Saving and Investing

  • Safety

    • all options carry different levels of risk

    • Usually: high return = high risk, low return = low risk

  • Rate of Return

    • APR = Annual Percentage Rate of interest on principal

    • Set rate vs. Variable rate

    • Inflation protected?

    • Compound Interest – RULE OF 72

  • Liquidity

    • Ease of conversion to cash

    • Usually: high return = low liquidity, low return = high liquidity

    • Paper Millionaires


Rule of 72

RULE OF 72

  • 72 /APR = Time it takes for principal to double

  • Einstein referred to compound interest as the 8th wonder of the world

  • How to get the most benefit:

    • Invest early, invest often

    • Commit to your goals

    • Try to follow 70-20-10 (PAY YOURSELF FIRST!)

    • Don’t Touch It!!!!


Comparison

Comparison

Yrs

9

18

27

36

45

54

Get $1000 Every Year

$9,000

$18,000

$27,000

$36,000

$45,000

$54,000

Invest $1000 at 8%

$2,000

$4,000

$8,000

$16,000

$32,000

$64,000


Types of credit

Types of Credit

  • Loans

    • College, business, car, consumer

  • Mortgage

    • Home loan

  • Charge Accounts

    • Macy’s, Kohls

  • Credit Cards

    • Get ready for some mail…


Approval for credit

Approval for Credit

  • Character

    • Past history – timely and honest

  • Capacity

    • Salary, wages

  • Capital

    • Assets

    They want paid back!!


Credit cards

Credit Cards

Disadvantages

Higher Cost

Impulse Buying

Overspending

Advantages

  • Immediacy

  • Emergency

  • Flexibility

  • Safety

  • Character Reference


2 000 @ 24 apr

$2,000 @ 24% APR

**Min. payment = $25

Balance at Balance at

Beginning End of

of PeriodPaymentInterestPeriod

$ 2,000$ 25$ 40$ 2,015

2,01525402,030

2,03025402,045

2,04525402,060

2,06025412,076

**Spent $125 for $-76 worth of progress


2 000 @ 24 apr1

$2,000 @ 24% APR

+ $1,000 @ 5%

  • Balance at Balance at

  • Beginning End of

  • of PeriodPaymentInterestPeriod

  • $ 2,076$ ----$ 42$ 2,118

  • + 1,000$ 50$ 4$ 954

  • $ 3,076$ 3,072

  • $ 2,118$ ----$ 43$ 2,161

  • $ 954$ 50$ 4$ 908

  • $ 3,072$ 3,069

  • **Spent $100 for $7 worth of progress


Credit perks and risks

Credit – Perks and Risks

Example…

Me – 25 yrs. old.


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