Choices that Affect Income

1. Choices that Affect Income Costs of education and training Paying for education and training Training and skills for job success Career choices and income

2. What significantly affects your potential earning power? EDUCATION!!

3. Education pays in higher earnings and lower unemployment rates

4. Education Choices • Formal education – classes, programs • Informal education – on the job training, learn as you go • Amount and type of education can affect the amount of money you earn • If pay is high compared to education required, there is a reason • Think about how for you want to go • Think about how it will prepare you professionally

5. Costs of Education & Training • Tuition – investment in your education • Room/board, books, supplies, fees are additional • Most likely, your earning potential will be rewarding for the cost of higher education • Bachelor’s, Master’s Degrees • A BA/BS can pay up to 1 million $ more over a lifetime over a HS diploma (potential earning power)

6. Your Options • Community College • Trade School • Career and Technical Schools • Apprenticeships • Public over Private college education • Graduate programs & post baccalaureate certs.

7. Paying for All of This • Loans & Grants • Financial Aid – money you receive from outside source to help you pay for education • Loan: assistance from a bank that must be repaid with interest (awarded to almost anyone) • Grant: government money that is not repaid (must qualify) • 23 years old and under – parent must file w/ student income • 24 years and older – independent; student files

8. Paying for All of This cont’d • Interest: the cost of your loan • Subsidized student loan: interest is not charged until you graduate • Unsubsidized student loan: interest is charged starting the day loan is issued • You do not have to begin paying either until after graduation • You may pay as you go • FAFSA

9. Paying for All of This cont’d • Private student loans: issued by a bank or credit union • Higher interest rates because they are not from the government • Usually unsubsidized • Option if your income is too high to qualify for federal financial aid • Application process, show tax returns and paystubs • Scholarships!!!!

10. What seems to be your last option?? WORK AND SAVE!!!!

11. So now you’ve made the right choices for you and are ready to take on “the real world…”

12. The Changing Job Market • Job Market – the wide variety of job and career choices that are available • Local vs. National job market • What causes major changes in the job market? • Consider future demand for the job you are thinking about pursuing • Why do some jobs pay more than others? • Do your research on job trends and career profiles

13. Planning Your Career • Job Skills – the specific things you can do, and can do well • Hard Skills: Physical human capital, tangible skills • Soft Skills: Mental human capital, intangible skills • Aptitudes: natural skills, talents, abilities • Interest inventories: tests that help you identify what you enjoy doing the most • What other “skills” might employers be looking?

14. Types of Employment Experience • Volunteer • Cooperative Education • Internships • Per diem • Part time • Full time

15. Job Opportunities • What is the FIRST thing YOU should do when started the job search? • Career information sources • Career libraries ONET, Occupational Outlook Handbook • Mass media • Internet • School counselor • Professional Organizations • Networking contacts

16. Job Opportunities cont’d • What sources hand help you find employment opportunities? • Job fairs • Employment agencies • Visit • Newspapers • Online job search engines • Networking contacts • You are looking for job descriptions

17. Good to Know…. • Update your resume – have it reviewed • Create a cover letter • Research interview questions • Research the company • Drive to your interview site beforehand • Plan a conservative outfit • Be 15 minutes early! • Leave the cell phone, huge purse and gum behind • Implement good communication skills • Follow-up “thank you” email

19. Earned Income • Wages – getting paid for every hour worked • Minimum wage – lowest pay rate allowed by law for each hour worked • Set by Congress • States can increase • Overtime pay – pay for any hour worked over the set number of regular hours • At least 1 ½ • 40 hour week/holidays • Salary – set pay per month/year

20. Earned Income • Tips – money given to a person for performing a service • Subject to income taxes • Based on quality and/or percentage of bill • Commission – a set fee or percentage of a sale paid to a person instead of or in addition to a salary • Inconsistent pay • Subject to income taxes • Does not come without a sale • Real estate agents, financial planners, salesperson, travel agent

21. Earned Income • Entrepreneur – owner of a business • Self employment • Responsible for your own income taxes • Long hours • If the business fails, all of your assets are lost • What is left over after all expenses are paid is your profit • Don’t forget about start-up loans to repay • You typically do not earn a “paycheck” • Most of your personal expenses are included in your business expenses

22. What Do You Take Home? • Gross pay – total amount earned before deductions are subtracted • Pay rate x Hours worked = gross pay • Yearly salary = gross pay • Don’t forget about your overtime pay! • Net pay– your “take home” pay. The amount received after all deductions have been made • Deductions – state tax, federal tax, SS tax, Medicare tax, state disability tax, unemployment tax (required) health/life/disability insurance, retirement, your bills, other savings accounts (optional)

23. Taxes 101 • Tax deduction:an amount subtracted from Adjusted Gross Income to lower the amount of tax owed. Home mortgage interest, local property tax payments, contributions to charity, and health or business expenses are the most common. • Tax credit: a direct reduction from the amount of taxes owed (not a deduction from income); tax credits are usually targeted to a policy or objective such as green energy to your home • Taxable income: the amount of income that is taxed after all deductions but before tax credits. • Personal exemption: a dollar amount provided by the federal government (e.g. $3,700 in 2011) that is deducted from income for yourself and each “dependent” such as a child.

24. Taxes 101 • Flat tax:a percentage tax rate that is the same across all levels of income. • Progressive tax:tax rates that increase as income rises. • Marginal tax rate:the rate at which the last (highest) dollar of income is taxed. • Marginal tax bracket: the dollar range in income that corresponds to a marginal tax rate.

25. Taxes 101 • Average tax rate:the amount of total taxes paid/owed divided by total income; this gives a sense of what the average income tax burden for an individual. • Exclusions:dollar amounts of income that are tax-exempt, or not subject to federal income tax. An example would be interest on most U.S. state and municipal bonds. • Tax-deferred income: income to be taxed at a later date, such as interest/earnings from a traditional Individual Retirement Account (IRA).

26. Sample Pay Stub

27. Employee Benefits • Benefits: forms of pay other than salary/wages • Cafeteria plan: benefit plan that allows workers to choose form a number of options • Social Security: publicfunds that provide a degree of financial security to the public • Pension plan: retirement plan funded in part by your employer • Three types • Fixed income at retirement • Annual contribution by employer that builds up until you are ready to retire • 401K – your employer matches up to a certain % of your contributions

28. Employee Benefits • Paid holidays: paid for the day, do not work. If you work, you may earn time and a half • Sick leave: covers days the worker is paid if he/she is too ill to go to work • Personal leave: paid time away from work for personal reasons • Maternity leave: paid or unpaid time away from work to take care of a new child • Sabbatical: unpaid leave • No work no pay scenarios

29. Other Perks • Educational reimbursement • Health/disability/life insurance • Health flexible spending arrangements • Expense account • Travel • Company car/cell • Company gym • Bonuses – year-end, holiday, projects • Profit-sharing programs – when company does well, employees are paid part of that profit • Stock option plans – buying company stock at a reduced price

30. Unearned Income • Unearned income: money received from sources other than working a job • Dividend: money earned as a stockholder • Pension payments • SS benefits • Interest • Gambling winnings • Lottery • Prizes • Alimony • All taxable, but at a lower rate