Personal Finance!

1. Personal Finance! Unit 5 Economics

2. Money in exchange for work or from assets “working” for you • 70% of Americans income comes from work • There are other sources such as savings, stocks, land and rental property Qa

3. Demand for Jobs! • Dental hygienists will be in huge demand increasing their salary • Flip side: need for TV & radio announcers going down, which salary for it also goes down! • Other factors: Natural abilities, work hard, get along with others & self-disciplined! Qb

4. Human capital = set of intangibles such as knowledge, skills, talent all also related to income differences! Qc

5. Relationship between education & income from work: • Higher education  generally leads to higher income! • Individuals must invest in own human capital by getting more education! Qd

6. 2008: • High school graduate: $27,963 • Vs. • HS drop out: $20,246 • Difference = $7,717 • Over a 40 year career = $308,680 • Heck yes, it pays to stay and finish = lot more income, which means more needs & wants met! Qe,f,g

7. Now lets take a bit higher • College graduate: $48,097 • HS graduate: $27,963 • Difference = $20,134 • Over a 4 year career = $805,360 • Education is a great but costly investment! Qh,I,j

8. Insurance! http://www.youtube.com/watch?v=zV5D8f49ZUY Personal FinanceEconomics!

9. Various ways to deal with potential personal or financial loss, hence the need for Insurance! Risk Management!

10. The payment you make to an insurance company in exchange for its promise of protection and help. Insurance Premium

11. The amount of the loss you must pay out of your own pocket before the insurance company begins to reimburse you! • As low as $100 to $1,000 Deductible

12. Mandatory for those who drive a car! Georgia law: “all drivers must have some level of coverage for altercations on the road!” Auto Insurance

13. Liability Insurance: It pays for bodily injury to other people and damage to property • Pays for other people’s law suit against you & car repairs and hospitalization for those you hit! NOT YOU! Auto Insurance

14. Medical Payments: coverage that protects you, your family members and anyone riding with you in your car! Auto Insurance

15. Uninsured motorist: • one without insurance • if one hits you, your own insurance has to pay for it Auto Insurance

16. Underinsured: a policy on yourself that protects you in case another motorist does not have enough coverage Auto Insurance

17. Collision: Coverage that pays to repair your car if it’s damaged in an accident by colliding with another vehicle or object! • Deductible does apply here! Auto Insurance

18. Protects you from everything except a collision, such as damage caused by theft, hail, flood, vandalism, etc. Auto Insurance

19. Pays for medical bills in case of illness or injury! Usually as part of employee benefit package (group policy) • You can be a dependent now on parents policy until 26, after that must get own policy (individual policy) • Policies will cover you through college as long as full time student! Health Insurance

20. Protects your material possessions (clothes, TV, appliances, furniture, bike, computer etc.) against fire, theft, flood! • Homeowners ins. Also protects property against damages listed above • Renters ins.: protects your stuff & not building when you rent! • Deductibles do apply here! Property Insurance

21. Protects people who depend on you in case of your untimely death. • Not recommended for single people • Married but wife works, maybe you need it! • Married with children, stay home mom, definitely need it! • 2 types: • Term: pure protection • Whole life: offers protection, and a savings account Life Insurance

22. AFLAC! • Pays your income from a job if you are sick or physically unable to work for long periods of time • (mainly for food, gas, utilities & rent) • Pays 60% to 70% of your full time wage • Short term: good for up to two years • Long term: from one year up to retirement • For many, even more important than life ins. Disability Insurance

23. Protection against Lawsuits! • Protects from costly legal fees & multi-thousand dollar settlements • Usually part of homeowner “umbrella” policy • Protects all areas of life! Liability Insurance

24. Credit! • http://www.youtube.com/watch?v=cjrG1QznxLY Personal Finance!

25. The Rise/Fall of American Economy

26. It allows you to obtain the use of money you do not have: • Not free, or magic money, comes @ at a fee Why Use credit?

27. 1. Helps people acquire assets (good/services that retain or increase value ex. House, jewelry etc.) • 2. Happier life by allowing one to acquire a want now and pay during use or later, no waiting! Advantages of credit

28. 1. Irresponsible use leads to large fees over long periods of time • 2. using too much credit in relation to income Disadvantages of Credit

29. Financial Institutions: • Commercial Banks (Wells Fargo, Bank of Am. Etc.) • Saving & Loans institutions (one depositors savings there becomes another's loan) • Credit Unions (by Professional Org. for members) ex. Fulton Teacher’s Credit Union • Consumer Finance Companies: • Companies like BestBuy & Kohl’s etc… offer financing for their products for Sources of Credit

30. The fee that the financial institutions charge customers seeking a loan • Or • A fee a financial institution pays a customer for letting it store and loan out its money What is interest?

31. Both sides: • The customer using credit: gets something of value that he/she values • The Lender: gets full money back plus the interest fee • However, who bares all the risk? Winners of credit trans.

32. The Higher the risk: the probability of you paying back the loan, plus interest in a set time, the higher the interest, or no loan! • The lower the risk: have assets of value or a good long history of borrowing & paying back, the lower the interest! Risk & Interest

33. Secured loan: • A loan that is backed by assets of value are secured loans because in case of default the asset can be sold to pay it off = lower interest rate! • Unsecured loan: • A loan that is not backed by anything, making it much more risky = higher interest rate! Secured vs. Unsecured Loan

34. Those assets of value such house, car, expensive jewelry, antiques, art work etc… that are used to back up secured loans! • Its 6th period, you lie to Mr. Pak and say you need to use the bathroom so you can get out of parking lot earlier, Mr. Pak calls you out on it and says you can only go if you leave your phone here with me, your phone becomes collateral as you are a high risk loan! Get it? Suddenly the urgency of bathroom use, GONE! What is collateral?

35. Savings & Investments! Personal Finance!

36. A place for people to deposit their paycheck or enough money for monthly access to take care of everyday needs • Extremely low to no interest • No/Low risk • FDIC Checking Account

37. A place to store a short term rainy day fund for emergencies and such, also to serve as draft protection in linkage to checking account • Very small interest rate • Low risk/no risk • FDIC Savings Account

38. A larger version of savings/checking account, with limited accessibility, and plan to keep in place for longer period • Low interest rate • Low risk • FDIC Money Market Account

39. A loan to a bank for a fixed period of time at a fixed interest rate, it can be set at different increments, and time periods, can be rolled over • Low interest rate of 0.5% to 1.5% • Low risk • FDIC Certificate of Deposit (CD)

40. Long term investments by anyone as a one time deal for retirement purposes, usually for those without a plan offered by their employer, or as a supplemental to those with an employer plan (401 K) • Annual maximum contribution of $3500 • Medium to high potential for growth • Risky depending on content of investment Individual Retirement Account (IRA, ROTH)

41. Ownership in public companies, buy shares of company in hope that they appreciate in value, potential for very large growth over a long period of time • Very high risk, high reward • Probably the best investment option and most popular Stocks!

42. IOUs by companies and government as a way of borrowing money, paid back with interest, over a set time period, at varying increments • The longer the time, higher the interest • Low risk for government, medium to high for corporate Government/Corporate Bonds

43. Pooling of money by a few investors to purchase a basket of different investments, some to produce income, some for long term growth & retirement • Ran by a fund manager • does all buying/selling • Allows for diversification in a variety of investments Mutual Funds

44. Buying of property (land or buildings) in hope of generating a profit; the idea is also appreciation of value of land and building! • Imagine if in 1985 you had bought 1000 acre of land in city of Milton for less than $300,000, how much today? • MILLIONS!!!!!!!!! Real Estate!

45. Unique items that are relatively rare in number! • Not many deal in it so Very high risk • Prices very volatile • Paintings, sculptures, baseball cards, antiques, classic cars, beanie babies, cabbage patch dolls etc…. Collectibles!