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2 Take Charge of Your Finances Reality Check – Salaries, Expenses, Budgets Credit and Debt Saving and Investing.

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Presentation on theme: "2 Take Charge of Your Finances Reality Check – Salaries, Expenses, Budgets Credit and Debt Saving and Investing."— Presentation transcript:

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2 2 Take Charge of Your Finances Reality Check – Salaries, Expenses, Budgets Credit and Debt Saving and Investing

3 3 Roadmap for Success Plan for Success: Security, Freedom, Legacy, Happiness Set realistic and measurable goals – Short- and long-term Make a plan with timeframes Create a budget Reevaluate goals, plan and budget regularly

4 4 The “Real” Real World What can you expect to make? Where will it go? How much is left? How to pay yourself more?

5 5 Snapshot: 2007 Starting Salaries Source: National Association of Colleges and Employers, Salary Survey – Summer 2007 Degree/FieldAverage Salary Offer Chemical Engineering$59,361 Computer Science$53,396 Finance$47,239 Accounting$46,718 Business Administration/Management$43,701 Marketing$40,161 Political Science/Government$34,590 Elementary Education$34,565 Communication$33,798 Psychology$31,631

6 6 Housing Costs The cost to rent an apartment can often exceed $1,000 a month – excluding utilities, cable, or phone bills Moving back home for a year could save you $12,000 or as much as $19,440 for certain cities! Average Rental Prices: Nation’s Most Expensive Real Estate Markets New York, NY $2,507 San Francisco, CA$1,863 Los Angeles, CA $1,709 Boston, MA$1,476 Washington, DC$1,358 Miami, FL$1,148 Chicago, IL$1,016 Source: Property & Portfolio Research 2007 (PPR)

7 7 Benefits are as Important as Salary Salary vs. total package Job 1 offers a salary of $50,000 with no benefits Job 2 offers a salary of only $47,000 but pays 80% of your $350 per month health insurance premium and contributes 3% of your salary to a 401K Job 2’s $47,000 base salary could actually be worth more than $51,700

8 8 Where Does $50,000 Go? Graduate #1 Transportation 13% $6,300 Housing 25% $12,500 Social Security/Medicare 8% $3,800 Federal/State Taxes 30% $15,000 What’s Left 8% $4,000 Utilities 7% $3,600 Health/Dental Insurance 9% $4,800

9 9 Where Does $50,000 Go? Graduate #2 Utilities 7% $3,600 Savings 6% $3,000 What’s Left 13% $6, (k) Savings 6% $3,000 Transportation 11% $5,550 Housing 20% $10,000 Social Security/Medicare 7% $3,572 Federal/State Taxes 28% $14,100 Health/Dental Insurance 2% $840

10 10 Who has the Better Deal? What’s Left? $4,000 / $333 per month What’s Left? $6,338 / $528 per month PLUS $3,000 Savings & $3,000 Retirement Savings Graduate #1 $50,000 Salary Total Taxes$18,800 Health Insurance$4,800 Rent$12,500 Transportation$6,300 Utilities$3,600 Graduate #2 $50,000 Salary Total Taxes$17,672 Health Insurance$840 Rent$10,000 Transportation$5,550 Utilities$3,600

11 11 In Summary Realistic salary expectations Where will your money go? Weigh your options before you spend

12 12 Managing Debt What is debt? How can you manage debt? How much debt can you afford? How long will it take you to pay off debt? Whose responsibility is it to pay off debt? Is all debt bad?

13 13 Student Loans Repaying a student loan can be a big chunk of the monthly budget – The average student loan debt among graduating seniors nationwide is $19,646 – Paying an additional $100 a month could reduce a 10-year loan to 7 years and save $2,141 in interest. Student loan repayment is also key to establishing good credit Source: The Project on Student Debt 2007

14 14 How Credit Works What is credit? How to establish credit? What determines your credit score? What’s in your credit report? Length of Credit History 15% New Credit 10% Amounts Owed 30% Types of Credit Used 10% Payment History 35% What is Your FICO Score?

15 15 Why Credit Matters Who cares about your credit? Good credit = better interest rates How can you control your credit history? The Cost of Interest $20,000 Car Loan Over 48 Months Interest Rate Monthly Payment Interest Paid 6.0% Interest$469$2, % Interest$492$3,662

16 16 Avoiding the Credit Card Trap Minimize the number of credit cards you have Comparison shop for best rates and terms Limit credit card use Avoid impulse buying Pay off balances in full each month

17 17 Booking a “cheap” $1,000 spring break trip on your credit card and paying just the minimum balance each month will take you 16 years to pay it off. After paying interest, the trip will wind up costing $2,100! *Based on 12% interest rate and $15 minimum payments Did You Know…

18 18 In Summary Establish good credit early Look at your credit report every year Understand how credit affects your life Keep debt manageable Ultimately, credit and debt are your responsibility

19 19 Why Save Money? Establish an “emergency fund” Plan for future purchases Build wealth Plan for retirement – Don’t count on Social Security

20 20 Time Value of Money Start early The power of compounding – Earn interest on your investment – Earn interest on your interest ! Inflation

21 21 Compounding Example Starting Early Can Make a Big Difference Based on an 8% annual return, compounded monthly Monthly Contribution Annual Contribution What You Could Have In: 5 Years 10 Years 20 Years 30 Years $50$600 $3,698$9,208$29,647$75,015 $100$1,200 $7,397$18,417$59,295$150,030 $150$1,800 $11,095$27,625$88,942$225,044 $400 $4,800 $29,390$73,178$235,608 $596,143

22 22 What Happens if You Wait? If you put away just $400 a month starting at age 25, your savings would be $500,000+ by the time you were 55 If you wait until you are 35 to start, your savings would be less than $250,000

23 23 Types of Investment Vehicles Savings Account CDs Bonds Money Market Stocks Mutual Funds

24 24 Choosing the Best Vehicles Timeframe Risk/return tradeoff Diversification Do your research

25 25 Choosing a Financial Advisor Seek help from someone with verifiable credentials Meet with a potential advisor to make sure they understand your needs and objectives Find out up front how payment works For more information visit:

26 26 In Summary Start early! Invest on a regular basis Understand your risk tolerance Educate yourself Do your homework on potential financial advisors

27 27 Gameplan for Success Set goals, make a plan, develop a budget Be responsible Protect your credit rating Start today – time is on your side Reevaluate your plan regularly

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