Managing Your Personal Finances. Bonus Chapter D. Top Concerns of Americans. Source: USA TODAY Snapshots. Parts to a Personal Finance Plan. Cash and Income Monthly Expenses Budgeting Retirement Planning Emergency Funds Insurance Philosophy
Top Concerns of Americans Source: USA TODAY Snapshots
Parts to a Personal Finance Plan Cash and Income Monthly Expenses Budgeting Retirement Planning Emergency Funds Insurance Philosophy What is the point to having a personal finance plan?
Cash and Income The value of a college education College grads make double the money of high school grads (winds up equalling $1.6 million more over a lifetime) Often, upon graduating, you’ll find that your degree is merely a check in the box, but it’s an IMPORTANT check! Unless you start your own business, the most money is made by those with graduate degrees, over a lifetime
What People Would Do With An Extra $1,000 Source: USA TODAY Snapshots
Monthly Expenses With continual increases in standard of living to adjust to raises and promotions, you can work yourself into a continual feeling of “not having enough.” Realize what the difference is between having a lot and being happy. Cut back each month to save for large, cash purchases that give you more satisfaction than wasteful smaller purchases
Consumer Credit Cards Advantages Convenience Financial Emergencies Purchase Goods Immediately Track Purchases Safer Than Carrying Cash Disadvantages Temptation to Overspend Items Become More Expensive Danger of Excessive Debt Tie Up Future Income Missed Payments Lead to Poor Credit Ratings High Interest Rates & Annual Fees
Possible Cost-Saving Choices Alternate Choice Cost Per Month Quick Trip’s Cappuccino $.60 for 20 days = $12.00 Lunch brought from home $2.00 for 20 days = $40.00 Generic bottled water $.50 for 20 days = $10.00 Listen to your old CD’s = $0.00 Old Navy T-shirt = $10.00 Total savings per month Total savings through 4 years of college Savings Per Month $48.00 $40.00 $20.00 $15.00 $24.00 $147.00 X48 months $7,056.00 First Choice Cost Per Month Starbucks caffe latte $3.00 for 20 days = $60.00 Fast-food lunch of burger, fries, and soft drink $4.00 for 20 days = $80.00 Evian bottled water $1.50 for 20 days = $30.00 CD = $15.00 Banana Republic T-shirt = $34.00
A Monthly Budget for an Adult Income: $60,000 20% ($12,000) goes to Uncle Sam $12,000 goes to mortgage on $135,000 house. $5000 goes to payments on a $25,000 car $5000 goes to groceries for a family of four $4000 goes to utilities $3000 goes to insurance programs. That leaves you $16,000 to play with and save…
Your personal savings If you can save $10,000 a year, that equals $1.875 million over 40 years $903,000 over 30 years Employer-backed and matched plans help! You will save interest expenses by financing your car purchases and larger purchases by yourself!
How Much Well-Paid Employees Save Source: USA TODAY Snapshots
Types of Personal Savings Retirement Plans Can be through your employer OR through an institution like Fidelity or many others Look at the institution’s track record Use matched plans when available Roth IRA plan – Use after tax dollars, often earnings are not taxed!! Emergency Funds/ Slush Fund Use mutual funds, something a bit hard to get to Need to amass 3 months of expenses Try to achieve a $50,000 slush fund for car purchases
Income Sources For Retirees Source: Schwab On Investing
Insurance Life Term Whole Health/Disability Homeowner’s & Renter’s Other
Why Buy Term Insurance? Insurance needs in early years are high: Children are young and need money for education. Mortgage is high relative to income. Often there are auto payments and other bills to pay. Loss of income would be disastrous.
Why Buy Term Insurance? Insurance needs decline as you grow older: Children are grown. Mortgage is low or completely paid off. Debts are paid off. Insurance needs are few. Retirement income is needed.