MISSION OF MISS PORTER'S. PREPARATION FOR LIFEPREPARATION FOR LEADERSHIPPREPARATION FOR COLLEGEBECOME INFORMEDBECOME RESOURCEFULBE ETHICAL. NET WORTH. WHAT IS IT?ASSETS MINUE LIABILITIES=NET WORTHEXAMPLES OF ASSETS:CASHSAVINGS INVESTMENTS(STOCKS,BONDS, MUTUAL FUNDS)REAL ESTATECOLLECTIBLES.
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1. FINANCIAL LITERACY OVERVIEW
2. MISSION OF MISS PORTER’S PREPARATION FOR LIFE
PREPARATION FOR LEADERSHIP
PREPARATION FOR COLLEGE
BE ETHICAL FINANCIAL LITERACY HAS THE SAME MISSION-IT IS ONE PART OF PREPARATION FOR LIFE. YOU MUST BECOME INFORMED, BE RESOURCEFUL AND OF COURSE ETHICAL.FINANCIAL LITERACY HAS THE SAME MISSION-IT IS ONE PART OF PREPARATION FOR LIFE. YOU MUST BECOME INFORMED, BE RESOURCEFUL AND OF COURSE ETHICAL.
3. NET WORTH WHAT IS IT?
ASSETS MINUE LIABILITIES=NET WORTH
EXAMPLES OF ASSETS:
INVESTMENTS(STOCKS,BONDS, MUTUAL FUNDS)
4. NET WORTH EXAMPLES OF LIABILITIES:
CREDIT CARD DEBT
TO HAVE A POSITIVE NET WORTH
5. NET WORTH FINANCIALLY SPEAKING, YOU WANT A POSITIVE NET WORTH.
AND HUMANELY SPEAKING, YOU WANT A POSITIVE NET WORTH AS WELL.
DON CLIFTON-GRANDFATHER OF POSITIVE PSYCHOLOGY COWROTE HOW FULL IS YOUR BUCKET
CHECK OUT WEBSITE WWW.BUCKETBOOK.COM
IDEA IS THAT YOU WANT TO FILL SOMEONE ELSE’S BUCKET WITH POSITIVE INTERACTION BEFORE FILLING YOUR OWN BUCKET.
6. A FEW REVIEWS: “THE GRANDFATHER OF POSITIVE, DON CLIFTON, AND HIS GRANDSON, TOM RATH, OFFER ILLUMINATING WISDOM FOR FULFILLING WORK AND FOR A MEANINGFUL LIFE.”
-MARTIN P. SELIGMAN, PH.D.
FORMER PRESIDENT OF THE AMERICAN PSYCHOLOGICAL
“SHOULD BE REQUIRED READING FOR EVERY COMPANY, EVERY
SCHOOL’S CURRICULUM, AND EVERY COUPLE’S PREMARITAL
-GARY f. RUSSELL, ED.D.
CEO, MAJOR LEAGUE SOCCER CAMPS
7. REVIEWS CONTINUED “POWERFUL, CAPTIVATING, AND EASY TO READ. THIS BOOK’S HEARTWARMING MESSAGE HAS A SPIRITUAL QUALITY, YET IT IS GROUNDED IN DECADES OF RESEARCH.”
-LEA E. WILLIAMS, ED.D.
EXECUTIVE DIRECTOR NATIONAL AFRICAN-AMERICAN WOMEN’S LEADERSHIP INSITITUE INC.
8. CREDIT CARDS Advantages:
Ability to purchase items now
Don’t have to carry cash
Creates a record of purchases
Consolidates bills into one payment
9. CREDIT CARDS DISADVANTAGES:
May require additional fees
Interest charged if bills not paid in full
Increased impulse buying may occur
Financial difficulties may arise if one loses track of how much has been spent each month
10. CREDIT CARDS Experts suggest spending no more than 15-20% of your after-tax income on credit purchases.
Example: If you earn $400 per month after taxes, then your net income is
$400 X 12 = $4800
Your safe debt load is:
15% X $4800 = $720
This amount excludes mortgage payments.
11. CREDIT CARD MYTH Paying the minimum balance each month is ok.
Paying only the minimum balance extends your balance and payments for months, even years, adding to the interest to be paid.
Chad Foster states in his book Financial Literacy for Teens:
12. WARNING SIGNS OF TROUBLE You don’t know how much you owe
You often pay bills late
You get a new loan to pay old loans
You pay only the minimum balance due
You spend more than 15% of your net income
You’re spending more than you earn, using your savingsd to pay for day-to-day expenses
13. FACTS ABOUT CREDIT CARD USE Among the American population, it is estimated that :
20% have maxed-out their credit cards
The average credit card balance per household is $8400
78% of college students have a credit card; 32% have 3 or more; the average credit card balance is $2748
13% of college students have a credit card debt between $3000-$7000; 9% have credit card debt greater than $7000.
14. ADDITIONAL FACTS ABOUT CREDIT CARD USE The average APR(annual percentage rate) is 18.9%
The average household pays $83.33 in credit card interest per month.
15. GUIDELINE FOR NON-HOUSING DEBT TO INCOME RATIOS 10% OR LESS EXCELLENT
16. DETERMINE YOUR RATIO Example: You earn $3000 each month in gross income, and a yearly bonus nets you $250 per month. Your total monthly income is $3250.
You pay $350 a month in student loans, $300 on a car payment, and $220 on your credit cards. Your total month debt payments are $870.
870(debt) divided by 3250(income)=26.7%
17. CHAD FOSTER SPEAKS “Don’t ever sign up for a credit card unless you are prepared to and are capable of paying off the total balance at the end of every month—not most of the balance, but every dime of the balance, and not most of the months, but every month….most important, when you do use a credit card and then pay your bill on time (every time!), you will be establishing a good credit record which will help you later on when you want to rent an apartment or buy a car. “
18. CHAD FOSTER SPEAKS AGAIN “Don’t spend money that you don’t have on credit card purchases, even if all your friends are doing it, and , yes, even if your parents are doing it. Just because they are your parents does not mean that you have to make the same stupid mistakes that they make!”
23. LATTE FACTOR WHAT IS IT?
ASK YOURSELF: “WHAT IS MY LATTE FACTOR?”
MY LATTE FACTOR IS…..
SIR JOHN TEMPLETON, DAVID BACH SAVINGS RATE
IF THOSE DOLLARS WERE INVESTED IN AN IRA, HERE IS THE OUTCOME.
$1,575,118 CONTRIBUTIONS OF $2750 FROM AGE 22-65.
24. INDIVIDUAL RETIREMENT ACCOUNTS WHAT ARE THEY?
A TRADITIONAL IRA DEFERS THE EARNINGS ON THE INVESTMENT UNTIL YOU WITHDRAW THE MONEY, WHICH IS REQUIRED AT AGE 70.5 YEARS. ALL WITHDRAWALS ARE TAXABLE.
YOU ALSO GET A TAX DEDUCTION DEPENDING UPON YOUR INCOME
THERE ARE MINIMUM DISTRIBUTION RULES.
A ROTH IRA IS ONE WHERE YOU BUILD UP EARNINGS TAX FREE. NO TAX DEDUCTION UPFRONT-BUT THERE ARE NO TAXES UPON WITHDRAWAL. THERE ARE INCOME LIMITS. BEST BET FOR A FIRST-TIME EMPLOYEE IS A ROTH IRA.
THE DESIGNEE MUST KEEP THE CONTRIBUTIONS IN THE ROTH IRA FOR A MINIMUM OF 5 YEARS BEFORE WITHDRAWAL.
THERE ARE NO MINIMUM DISTRIBUTION RULES.
25. 401K PLANS/403B PLANS EMPLOYER SPONSORED PLANS
USUALLY CONTRIBUTION MATCHING BY EMPLOYER
NEW THIS YEAR-ROTH 401K PLANS
THE DIFFERENCE WITH TRADITIONAL ROTH AND THE 401K ROTH IS THAT THERE ARE MINIMUM DISTRIBUTION REQUIREMENTS WITH THE 401K ROTH.
26. QUICK SUMMARY ON DEFERRED INCOME PLANS T TRADITIONAL PLANS
-TAXED UPON WITHDRAWAL
-MINIMUM DISTRIBUTION RULES
-10% PENALTY IF WITHDRAWAL BEFORE
27. SUMMARY CONTINUED ROTH IRA
-NO TAX DEDUCTION
-NO TAX UPON WITHDRAWAL
-NO MINIMUM DISTRIBUTION RULES
MUST BE KEPT IN ACCOUNT FOR MINIMUM OF 5 YEARS
INCOME LIMITS TO PARTICIPATE
28. SUMMARY CONTINUED 401K/403B PLANS
DOLLARS TAKEN OUT OF YOUR PAY(FORCED SAVINGS!)
TAXED UPON WITHDRAWAL
CONTRIBUTIONS EXCLUDED FROM GROSS INCOME
ROTH 401K/403B NEW THIS YEAR-
ONLY DIFFERENCE FROM REGULAR ROTH IRA IS REQUIREMENT OF DISTRIBUTIONS BY AGE 70.5
29. INVESTMENT OPTIONS BEFORE INVESTING IN A TAXABLE ACCOUNT
-SET ASIDE ABOUT 6MONTHS-1 YEAR OF YOUR SALARY FOR EMERGENCIES
USE UP ALL THE OPPORTUNITIES FOR DEFERRED INVESTING-I.E. 401K’S/ IRA’S
AND BEFORE WE TALK ABOUT INVESTING, ESTIMATE THE INCOME YOU THINK THAT YOU WILL EARN OVER YOUR CAREER.
30. ASSET ALLOCATION In general, this means how you allocate your assets depending on age, risk tolerance, and valuation.
Conventional thinking states that a larger percentage of assets should be in stocks the younger we are and that by age 50 we should be reducing our exposure to the asset class of stocks.
31. SEDUCTIVE MARKETING WHICH RETURN WOULD YOU PREFER?
32. ANSWER: IT DEPENDS 20% RETURN ON $10 STOCK $12.00
10% RETURN ON $11 STOCK $12.10
5% RETURN ON A $12 STOCK $12.60
WHICH INVESTMENT RETURN INCREASES YOUR NET WORTH MORE THAN THE OTHERS?
33. CONCLUSION WATCH OUT FOR ADVERTISING TOUTING SPECULAR RETURNS.
IS THE BASIS OF THE STOCK/FUND
SMALL SO THAT A SMALL RETURN WOULD RESULT IN A LARGE GAIN?
34. SAMPLE ACCOUNT
35. CUMULATIVE DIVIDEND RETURNS YIELD ON INVESTMENT VS. MONEY MARKET RATES
DRIP-DIVIDEND REINVESTMENT PLANS
- LOW COSTS