Money Matters

1. 12 Money Matters

2. Key Questions • How can I budget my money to stop feeling constantly stressed about running out of money? • What can I do to deal with my growing credit card debt? • Even if I could save a little, would it be enough to make a difference? • How does having money relate to being happy and feeling satisfied with life?

3. Objectives • Explain the ABCs of money management • Create and implement a plan for financial fitness • Set financial goals to reduce money-related stress • Discuss how doodads and credit cards contribute to financial stress

4. Objectives (cont’d.) • Investigate what the research says about the relationship between money and satisfaction in life

5. FYI: There’s a Reason Loan Sounds Like Moan • Two-thirds of college seniors who graduated in 2011 had student loan debt, with an average of $26,600 per borrower • Meanwhile, unemployment for young college graduates remained high at 8.8 percent in 2011

6. Money Matters • Money is a leading source of stress for college students • Financial problems rank with poor grades as the major reason for dropping out of college

7. Research Highlight: Financial Worries Top Stressor List • 47% of respondents in a national survey currently feel more stress than they did six months ago • Finances are most common source of stress • Younger people are more stressed than older people • Coping strategies • Exercise • Breathing and meditation • Vacations

8. Sources of Stress

9. The ABCs of Money Management – Part I • Assessment • Look at where you are now • Evaluate how you got there • Exercise 1 • Track every penny you spend for a week

10. FYI: What Matters Most • According to the Financial Planning Association, the three most valuable steps people can take to improve their financial lives are: • Establishing goals • Paying yourself first • Sticking to a budget

11. The ABCs of Money Management – Part II • Assessment • Consider your thoughts and emotions that are linked to money • Exercise 2 • As you track your spending for Exercise 1, analyze the thoughts and emotions attached to your spending • Consider the roles of stress and boredom

12. The ABCs of Money Management – Part III • Budget • A plan you develop to manage your money to have what is most important to you and accomplish your financial goals • Exercise 3 • Write your financial goals and develop a plan to reach them • SMART goals: specific, measurable, action-oriented, realistic, time-based

13. The ABCs of Money Management – Part IV • Budget • Review your expenditures (Exercise 1) in light of your goals (Exercise 3) and cross out those that do not contribute to your goals • Exercise 4 • Calculate your expected income for the next year • Include all sources of money • Calculate your expected expenditures for the next year

14. The ABCs of Money Management – Part V • Budget • With your expected income and expenditures, you are ready to develop a budget • Consider using software if it will be easier • Exercise 5 • Create your budget • Categorize and total your expenditures • Compare your total expenditures to your income • Make adjustments as necessary • Making adjustments can be the hard part

15. The ABCs of Money Management – Control • Some expenditures are fixed • Tuition, rent, car payments • Others are flexible • Budgets can help manage them • Learn to distinguish between needs and wants

16. Time Tip: Two Credit Cards • Using one credit card for needs and another for wants can help you track your spending

17. Doodads and Credit Cards • Doodads • Small but steady expenses that can drain away cash • Lattes, cigarettes, ATM fees, 411 fees • Exercise 6 • Identify a doodad in your expenditures • Determine its cost • Calculate your costs over a month, year, 5 years, 10 years

18. Strategies for Saving • Eliminate a doodad and put the money into savings • Pay yourself first and put a portion of each paycheck into savings • Save up loose change and deposit it • Save your tax refund • Save one hour per day of your income

19. FYI: Who Gets Credit Cards? • Half of all college students have four or more credit cards • 30% of students put tuition on their cards • Freshmen carry a median debt of $939 • Seniors graduate with an average credit card debt of $4,100 • 45% of students say they feel a lot of anxiety about being able to pay their monthly credit card debt

20. Managing Credit • Credit cards • Financial advisors estimate that we would spend about 20% less by switching to cash-only payments • Tips for managing credit • Use credit cards only for emergencies or carefully planned-in-advance purchases • Pay off your balance every month • If you cannot pay off your balance, pay more than the minimum

21. Debit vs. Credit • Remember credit is a debt, not an income supplement • Use a debit card rather than a credit card • Learn to defer gratification • Be aware that student credit card offers may not be a good deal • Try to get a lower interest rate

22. Credit Cards – Pros and Cons • Exercise 7 • List the pros and cons of credit cards • Consider whether the cons outweigh the pros

23. Stress on the Job • Job stress is estimated to cost American companies more than $300 billion a year • Tips for preventing job stress • Meet with your manager at least once a year to talk about your job and performance • Get organized and keep track of your projects and deadlines • Don’t put things off • Learn to say “no”

24. Good Habits on the Job • Focus • Concentrate • Delegate • Unplug • Be realistic • Reward yourself • Schedule time for fun • Practice breathing/relaxation techniques

25. Setting Goals to Reduce Stress • Identify what causes you stress • Think about why you want to reduce stress • Set a goal that involves reducing your stress • Think about what might get in the way of your goal and how you would overcome it • Get support from others

26. Additional Tips for Managing Money • Look for activities that do not require money • Make and stick to a budget • Find inexpensive alternatives and ways to save • Find scholarships • Manage your credit carefully

27. FYI: Consequences of Credit • A typical minimum monthly credit card payment is broken down into 90% interest and 10% principal • By paying the minimum (2%) each month on a card with an 18% annual percentage rate (APR), paying off a $2,000 purchase will take more than 19 years

28. Can Money Make You Happy? • Happiness tends to increase as income rises to $50,000 a year • After that, more income does not have a dramatic effect • Affluenza • Disease-like epidemic that is causing our society to have more and more material possessions and to spend money we don’t have, leading to more debt

29. FYI: Who Wants to Be a Millionaire? • A study of lottery winners found that they did not wind up significantly happier than a control group

30. Research Highlight: Can Money Make Us Happy? • Once your basic needs are met, additional income does little to raise your sense of satisfaction with life

31. Reference Anxiety • People judge their possessions in comparison with others, not based on what they need • In nations with high levels of income equality, well-being is reported to be higher than in nations with unequal wealth distribution

32. Complaints Between Partners with Financial Issues

33. Culture Connection: The Haves and the Have-Nots • International survey of college students in the mid-1990s compared national differences in positivity (positive feelings) and subjective well-being • Relatively poor locales had the highest levels of cheerfulness • Surprising if we equate money and material possessions with high spirits • Not so surprising if we consider cultural norms

34. Putting It All Together: What the Experts Say • The most important financial principal is contentment • Fun can be bought; happiness cannot • STUFF does not equal contentment

35. Conclusion • Even though changing how you spend and save money can be challenging, it can bring a lifetime of financial freedom

36. Lab 12.1: Spending Habits and Emotions • Track your spending for a week • Analyze your spending • Look for patterns of spending, emotions associated with spending, and how spending contributes to stress • Set SMART goals