OBJECTIVES Identify what money means to you Conscious beliefs represent only a fraction of our personal belief system. Like the tip of an iceberg, the stuff that sinks ships is hidden beneath the surface, in our unconscious. Dr. Susan Forward (Money Demons) Identify steps to successful financial health & wealth Identify steps to productive and successful budgeting Identify differences between discretionary and fixed expenses
YOUR FINANCIAL PLAN YOU RETIREMENT ESTATE PLAN INCOME PROTECTION FINANCIAL PLANNING/ INVESTING HOME BUYING (POSSIBLE) IDENTITY THEFT CREDIT/DEBT SERVICE BUDGET, BUDGET, BUDGET dont let it get out of whack!!
EARLY MEMOR(Y)IES OF MONEY Family message about money as you were growing up? Allowance? If so, did you have to work for it or was it just given to you? Money discussed? Work? If so, what happened to the $$$ you earned? 1 st time you went into debt? 1 st time you lost money? I nfluence your choice of career? Are you afraid of it or know how to work with it?
COMMON SAYINGS/SLOGANS ABOUT MONEY SAYINGS: (Love of) is the root of all evil... doesnt grow on trees... isnt everything... think Im made of money?.. cant buy you happiness... CAN buy you happiness. SLOGANS: Blood money … Drug money … Dirty money … Funny money …
SO ….. ???? Love? Security? Independence? Pay bills & dont think about the rest? NEVER enough of it? Dont think you deserve a lot of it????? Afraid to say I want to be wealthy?
YOU CANT GET TO WEALTHY WITHOUT A BUDGET OR, A PLAN Budget can have negative connotations = restrictive, oppressing, impossible to do, where do I start, etc. (Financial) plan = sense of control, connotes knowledge, understanding, personal teamwork, (partner) teamwork, etc.
VANDERBILT UNIVERSITY SCHOOL OF MEDICINE STANDARD STUDENT BUDGETS (2009-10) MS-1 $61,410 $45,190 (fixed) $16,220 (discretionary) MS-2 $59,540 $44,550 (fixed) $14,990 (discretionary) MS-3 $65,220 $45,400 (fixed) $19,820 (discretionary) MS-4 $60,950 $44,350 (fixed) $16,600 (discretionary) 27% of expenses are discretionary!!
AVERAGE DISCRETIONARY EXPENSES (4 YEARS) $67,630 What part of this can you save?
WHAT IT CAN COST YOU $67,630 X 6.8% OVER 10 YEARS = *$778/MONTH OR *$93,395 TOTAL $67,630 X 8.5% OVER 10 YEARS = *$839/MONTH OR *$100,622 TOTAL *approximate source: bankrate.com
ACTUALLY, IT COSTS MORE … Currently saved:$0 Save per month:$778 Years to save:10 Rate of return:6% Inflation rate:3.1% After 10 years:$127,020* Currently saved:$0 Save per month:$839 Years to save:10 Rate of return:6% Inflation rate:3.1% After 10 years:$136,979* *Does not account for federal & state taxes!! source: bankrate.com
DISCRETIONARY COSTS VS FIXED COSTS FIXED 73%: TUITION FEES USMLE costs, etc. DISCRETIONARY 27%: rentroommate(s) utilitiesroommate(s) groceriesco-op, discount stores insurancedrop unnecessary insurance laundryindividuals will take in eating outpot-luck dinner phoneslimit plan entertainmovie vs rental vacationscruise vs local site- seeing clothingnew vs consign personalhair, etc.
PRESENT FINANCIAL RESOURCES Personal Resources??? Family Resources??? Grants/Scholarships??? Federal Loans??? PrivateLoans??? ???????
NOT AS SUCCESSFUL MANAGING MONEY?? Fear Denial Inability to judge difference between needs and wants Lack of discipline Procrastination Lack of emotional support, early role-modeling, etc. Conflicting societal values Dont know what resources are available to them Havent (clearly) articulated goals or, different goals from partner
BUDGETING/PLANNING FOR SUCCESS Get out of denial Be realistic about what you can do to hold down discretionary expenses Identify all of your resources Know where your $$$ is going on a daily, weekly, monthly, yearly basis Live by your financial compass …… no one elses Set some financial goals, now, and ……. (LIVE ON Less than the Standard Student Budget) Reevaluate goals (& how youre handling your budget), on a yearly basis
BUDGETING/PLANNING FOR SUCCESS plan for emergencies what is absolutely necessary cable/satellite?? shop only when you REALLY need something when is it a WANT instead of a NEED?? shop with a list and stick to it & dont shop when youre hungry save, save, save how do you do that on student loans??? after medical school save for major purchases, i.e., car, vacation, etc.
Household (yearly) Income Income 1$0 Minus Tax (assume 30%)$0 Income after taxes$0 Other income/gifts, etc. Total yearly income$0 TOTAL MONTHLY INCOME $0 Household (yearly) Income Income 2 Minus Tax (assume 30%)$0 Income after taxes($0) Other income/gifts, etc. Total yearly income($0) TOTAL MONTHLY INCOME ($0) Financial Aid Total Financial Aid$0 MINUS Tuition & Fees$0 Total REFUND$0 Total MONTHLY Financial Aid $0 MONTHLY INCOME & FIN. AID ($0)
Cost of a mocha latte: 1 cup = $4 1 cup every work day = $20 1 cup every work day for year = $1,040 Discretionary/controllable costs can make a difference in your future!!
WHATS ANOTHER $1,040 WHEN YOURE ALREADY IN SO MUCH DEBT??? If you use a credit card or a student loan …. If there is capitalization …. If it is paid off over 10 years …. It could cost $3,000+ THE MORE YOU BORROW, NOW, THE FARTHER YOU ARE FROM REALIZING YOUR FINANCIAL GOALS/DREAMS!!!!
LATTE SAVINGS Latte price$4 Lattes/month20 Years 4 Rate of return8.5% Source: www. bankrate.com Home coffee $1 Monthly savings $60 Savings after 4 years $3,417
WHAT CAN YOU DO, NOW???? This is the time to focus on your financial HEALTH/WEALTH by minimizing educational debt »wealth is a marathon …….. Dave Ramsey Lifestyle = live moderately, now ….. Try to live on less than (standard) student budget Focus on your financial goals
FACTS REGARDING CREDIT CARD DEBT 2006:92% of graduate students had, at least, one credit card 4% decrease from 96% in 2003 average outstanding balance = $8,612 10% increase (from 2003) averaging $7,831 94% used credit cards to pay (some portion) of direct education expenses (primarily textbooks) 93% make, at least, required minimum monthly payments 20% pay off their cards, IN FULL, each month 67% of graduate students took out first credit card as an undergraduate student number of 18-24-year-olds declaring bankruptcy increased 96% in 10 years (Richmond Credit Abuse Resistant Education (CARE) Program) foreclosures rose by 75%, in 2007, from 2006 (RealtyTrac.com 2008) 49% of adults are concerned they have not paid enough attention to managing their finances (Harris Poll #22, 2007) 48% concerned they don't know enough about financial planning (Harris Poll #22, 2007)
BIBLIOGRAPHY Morris, Kenneth M., Siegel, Alan M., The Wall Street Journal Guide to Understanding Personal Finance. 1997. New York: Lightbulb Press, Inc. and Dow Jones & Co. Warren, Elizabeth, Warren Tyagi, Amelia, All Your Worth, The Ultimate Lifetime Money Plan. 2005. New York: Free Press. Strauss, StevenD., Jaffe, Azriela., The Complete Idiots Guide to Beating Debt. 2000. Indiana: Alpha Books. Morris, Kenneth, M., Siegel, Alan, M., and Morris, Virginia, B., The Wall Street Journal Guide to Planning Your Financial Future. 1998. New York: Lightbulb Press, Inc. and Dow Jones & Co. Orman, Suze. The 9 Steps To Financial Freedom. 2000. New York: Three Rivers Press. Klosowski, Allen, CFP. Personal Financial Fitness, A Practical Guide to Improve The Health of Your Wealth. 1997. Menlo Park: Crisp Publications. Singletary, Michelle. Picking a Financial Planner Takes Some, Well, Planning. The Washington Post 19 August 2001: p. H01 Quinn, Jane Bryant. Making the Most of Your Money. 1997. New York: Simon & Schuster. Dominguez, Joe, and Robin, Vicki. Your Money Or Your Life. 1992. New York: Viking Press.
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