1. Session 15 Personal Finance
Disclaimer: The views expressed are those of the presenters and do not necessarily reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.

2. TEKS
(18) Personal financial literacy. The student understands the role of individuals in financial markets. The student is expected to:
(E) identify the types of loans available to consumers;
(F) explain the responsibilities and obligations of borrowing money; and
(G) develop strategies to become a low-risk borrower by improving one's personal credit score.
(19) Personal financial literacy. The student applies critical-thinking skills to analyze the costs and benefits of personal financial decisions. The student is expected to:
(A) examine ways to avoid and eliminate credit card debt;
(B) evaluate the costs and benefits of declaring personal bankruptcy;
(20) Personal financial literacy. The student understands how to provide for basic needs while living within a budget. The student is expected to:
(A) evaluate the costs and benefits of renting a home;
(B) evaluate the costs and benefits of buying a home; and
(C) assess the financial aspects of making the transition from renting to home ownership.

3. 3 M’s
Moving On and Moving Out
Mindset
Money
Management

4. Would you like to be a millionaire?
I know the secret….
High School Graduate $1,486,000
College Graduate $2,557,000
Spend less than you make!
Income is not the key…saving is.

5. Wealth
Most of us define wealth as the dollar value of the assets that we own. To determine our wealth we add up all that we own and minus all that we owe – that equals our net worth.
Simply put:
Own – Owe = Wealth

6. Budgeting
Budgeting (controlling you spending) will allow you to increase your wealth.
3 M’s of budgeting

7. Mindset A budget will not tell you what to do, you choose
Stop saying “ I can’t afford” , say “I choose to”
Be creative with alternatives

8. What type of spender are you ?
Sit down when you can’t give it up:
Candy
Cookie
Soda
Bottled water

9. Sit down when you can’t give it up
Starbucks
Going out with your friends once a week
Buying lunch vs. bringing lunch
Seeing the latest movies
Getting your nails done
Getting your hair done once a week

10. Sit down when you can’t give it up
Cable TV
Latest video games
Cell Phone

11. What type of spender are you
A’s - impulsive, leave the cash and debit card at home
B’s -you have more discipline but may have to find alternatives for some of the things you like to do
C’s – you are probably all ready on your way to good savings habits.

12. Why is it hard to discipline our spending?
Just do it!
Advertising
Keeping up appearances
It isn’t fun!
Average American savings rate was .3%- it has increased to 6%

13. Money Do the math: How much is coming in and how much is going out
Don’t forget those monthly or annual expenses – holidays, special events, prom
Include money for savings
Remember – Life happens!

14. Management Set aside time each week to go over your plan
Make adjustments
You won’t be perfect, don’t give up
Find a partner to work with you
Without a plan, you just plan to fail

15. Budgeting tips Pay yourself first Be honest with yourself
Don’t give up
Other people don’t budget and they are fine…….really

16. Savings Difficult to do Allows us to set money aside for emergencies
Allows you to have the freedom to make choices

17. Bank accounts Banks accounts are insured for up to $250,000.
Bank account features vary from bank to bank – do your research

18. Types of accounts
Checking
Savings
Money Market CD

19. Risk & return
Generally, the greater the risk the greater the rate of return.
What does that mean?
If investors are less certain that they will get their investment back they will ask for a higher interest rate to compensate them for the uncertainty (risk) that they are taking.
All purchases of stocks and bonds carry risk.
You should be comfortable with your investments
Each of us has a different risk tolerance

20. TYPES of RISK Risk of Default Risk of capital loss Risk of inflation
Risk of liquidity

21. How much risk can you afford?
Financial goals
Time horizon
Financial risk tolerance

22. Stocks, bonds, mutual funds
Each of these items is a way to invest the money that you have earned.
Stocks = you become one of the owners of a corporation. You can receive dividends, vote for the board of directors, and sell your stock.
Bonds = you make a loan to a company or government entity. They agree to pay you back over time at a set rate of interest.
Mutual Funds = a bundle of these assets used to diversify risk

23. Money
Credit Cards
Credit cards represent a loan. The card (or the number) is simply a way to access a line of credit.
On the other hand, a debit card is a way to spend checkable deposits, just like a paper check.

24. Credit Cards Advantages Pre-approved loan Widely accepted
Some consumer protection
Can establish credit history
Disadvantages
Requires discipline from borrower
Can have high fees and interest
Identity theft

25. Debit Cards Advantages Widely accepted Some consumer protection
Ease of use
Disadvantages
Requires recordkeeping
Can have fees and penalties
Identity theft
May lead to higher spending

26. Types of Accounts
Add from BW material

27. Questions?

28. Credit Cards/Debit Cards
Credit card is a pre-approved loan
You will pay interest each month if you don’t pay it off in full
Credit card companies are highly regulated about marketing to those under 21
If you spent $1500 when you were 18 on a credit card with 18% interest rate and paid the minimum amount it would take until you were 26 to pay off the balance.

29. Debit cards A debit card gives you electronic access to your account.
If you are overdrawn you will be charged a fee.
Consumers who shop with debit cards tend to spend about 30% more than those shopping with cash.

30. Using credit wisely
Credit can allow an individual to have the use of a product or service now rather than waiting for the future. When might this be a good decision?
Education
Housing
Transportation
Necessities

31. Identity theft Don’t give out information unless you contacted them.
Protect your information at school
Don’t text your information to others –you don’t know where there phone may be
Never carry your social security card
Order a credit report each year and check it annualcreditreport.com

32. Your financial future Think about your goals and dreams
Determine wants vs. needs
Make a plan
Implement your plan
Evaluate – weekly, monthly, yearly
Make adjustments
Stay informed about your options
A great financial future awaits you !

33. Questions ?