Winning Strategies for NCAA Tournament and Financial Success: Lessons from Batman and Robin

Who will win the NCAA Tournament? • North Carolina • Kansas • Memphis • UCLA • I don’t care

Why People Fail Financially

Three primary enemies to becoming financially successful are • Inflation, Taxes, Alcohol • Insurance, Cars, Houses • Inflation, Taxes, Procrastination • Insurance, Estate Planning, Procrastination

Batman: Age 22, Invests $5,000 per year, 8 years to and including age 29Robin: Age 22, starts investing $5,000 per year, age 30 for 43 years to age 7210% annual return RESULTS BATMAN: $3,788,943 ROBIN: $3,258,204 The lesson is • Procrastination is Expensive • Discipline is profitable • Instant gratification is expensive • It is important to invest early in your life

Your reaction to the prior problem • WOW! • I’m going to EXECUTE early! • I’m not going to procrastinate • Unbelievable! • Awesome! • Batman is my financial idol

Inflation: The Good, The Bad, and The Ugly

Currently, your annual salary is $80,000. If inflation is expected to be 3% annually, what salary do you need in 10 years to maintain the same salary in real (i.e., inflation adjusted) terms? • 104,513 • $105,513 • $106,513 • $107,513 • $108,513 20% 20% 20% 20% 20%

From a personal perspective, a 4% raise in an environment where inflation is 5% is • Good, because you will be able to buy more with the raise • Good, because 4% is less than 5% • Bad, because you will not be able to buy more with the raise • Bad, because inflation is bad for everyone 20% 20% 20% 20% 20%

Inflation can benefit some people, especially • Those who have a lot of debt. • Those who have little debt. • Those that have a high net worth • Those that have a low net worth 20% 20% 20% 20% 20%

Your salary equals $10,000 per month. Your mortgage payment equals $1,000 per month. If you receive a 20% raise, the percentage of your salary allocated to the mortgage payment goes from 10% to • 1.33% • 5.33% • 6.33% • 7.33% • 8.33%

Times are tough and your boss gives you a 1 percent raise telling you that you will only be able to live a little bit better next year. Inflation is 2%. Which is the most accurate statement. • You will be better off next year because you received a raise. • You will be better off next year because inflation is only 2% • Your “real” (inflation adjusted) wages are declining • Your “real” (inflation adjusted) wages will be increasing

Time Value of Money

Assuming an 8% annual return, a 25 year old would have to save $_____ a year (end of year) to have a net worth of $10,000,000 by age 75. • $20,000 • $200,000 • $17,428.58 • $27,428.58 • $37,428.58 • None of the above

A 25 year old who saves $10,000 per year for 50 years will have $_________ by age 75. Assume an annual return of 9%. • $5,150,835.56 • $6,150,835.56 • $7,150,835.56 • $8,150,835.56 • $9,150,835.56 • None of the above

Obtaining an extra 1 percent annual return over your lifetime is • Nice, but not that significant • Nice and very significant • Greedy, but not that significant • Greedy and very significant

Budgeting

“Pay Yourself First” mentality is • Good, instills a savings discipline • Bad, it is selfish • Good, helps balance your budget • Bad, prohibits living well long term

If you cannot pay all your bills this month because your 1970 Dodge Challenger repair bill was $600, in general this is • Acceptable, it is an old car • Unacceptable, you should be saving monthly for “surprise” expenses • Acceptable, “surprise” repair bills will challenge the budget • Unacceptable, you should own a newer car

Measuring Your Financial Success What is Financially Wealthy?

The main measure of your financial success is your • Income • Assets • Revenue • Net Worth • Debts

Net Worth is • Assets – Debts • Cash + Assets • Cash – Debts • Assets + Debts • Assets only

Financial Goal: To live off of your investment income and have enough funds to live forever. Annual Expenses this year = $60,000; After Tax Annual Investment Return = 5%, Inflation = 3%-- What new worth (assets assuming no debt) do you need today? • 3,001,044 • 3,044,677 • 3,144,677 • 3,150,000 • 3,244,677

Investing: Ownership vs. Lending

If you buy a corporate (e.g., IBM) bond, • You own a portion of IBM • You own the stock of IBM • You are loaning money to IBM • None of the above

As interest rates go up, the value of a bond goes • Down • Up • Depends • Not enough information

As interest rates go down, the value of a bond goes • Down • Up • Depends • Not enough information

If a bond is increasing in value, interest rates are likely going • Down • Up • Depends • Not enough information

Your Values and Spending Money

How you spend money • Communicates what you value • Is a form of voting for what you believe is good for our society • Says a lot about who you are as an individual • Is important, similar to voting during an election

Which expenditure of money is best for society? • Buying Doritos and ice cream • Taking a trip to Europe • Putting gas in a gas guzzling truck • Donating money to an organization that feeds the poor

HOME OWNERSHIP

The first $250,000 gain for singles ($500,000 for married couples) on the sale of a house is tax free if • As long as it is your first house • As long as you are 59 ½ or older • You lived in your home for two of the last five years • None of the above

Dollar Cost Averaging

You buy $10,000 of IBM at $100 per shareA month later, you buy $10,000 of IBM at $110 per share Your average price equals • $105 • Greater than $105 • Less than $105 • $100 • Greater than $110

Vehicle Lease or Purchase

From a financial perspective, a vehicle consists of • Materials, insurance, car payments • Interest, principal, depreciation • Insurance, depreciation, lease • Equity, depreciation, interest expense

You are considering leasing a $40,000 car with a residual value of $18,000 in four years. Your total lease payment would be • $22,000 • <$22,000 • >22,000 • Not enough info. • None of the above

End of Lease: Residual Value = $17,000 Actual Value= $13,000You total the car on the last day of the lease, you would owe • Nothing with gap insurance • $4,000 without gap insurance • Nothing, with collision auto insurance • 1 and 2 • None of the above

Paying for College

The benefits of 529 Plans for saving for college are • Earnings grow tax free • Withdrawals are tax free • Money withdrawn can be used for college expenses including room and board • Can redirect to another child (even child of a child) • None of the above • All of the above

The benefits of 529 Plans for saving for college are • Once an account is open, anyone can contribute • The owner is the person who establishes the account • Withdrawals not used for college qualifying expenses are tax free • 1 and 2 • 1 and 3 • All of the above

Love and Money Including Marriage

The benefits of 529 Plans for saving for college are • Once an account is open, anyone can contribute • The owner is the person who establishes the account • Withdrawals not used for college qualifying expenses are tax free • 1 and 2 • 1 and 3 • All of the above

Credit Good vs. Bad Credit

With multiple credit card bills, after making the minimum payments, you should pay off the credit card with the • Highest balance • Lowest balance • Highest interest rate • Lowest interest rate • None of the above

Home Ownership

List the three loans from likely highest to lowest interest rate • Credit card, car loan, mortgage • Car loan, mortgage, credit card • Mortgage, credit card, car loan • Car loan, credit card, mortgage • None of the above

Getting pre-approved for a mortgage is • Not in your self-interest • Useful, especially if you have a car loan • Useful, especially if you have credit card debt • Helpful for negotiating the purchase of a house

A 30 Year Mortgage is Better than • Not in your self-interest • Useful, especially if you have a car loan • Useful, especially if you have credit card debt • Helpful for negotiating the purchase of a house

Winning Strategies for NCAA Tournament and Financial Success: Lessons from Batman and Robin