Presentation on theme: "Session 15 Personal Finance"— Presentation transcript:
1Session 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.
2TEKS(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.
33 M’sMoving On and Moving OutMindsetMoneyManagement
4Would you like to be a millionaire? I know the secret….High School Graduate $1,486,000College Graduate $2,557,000Spend less than you make!Income is not the key…saving is.
5WealthMost 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
6BudgetingBudgeting (controlling you spending) will allow you to increase your wealth.3 M’s of budgeting
7Mindset 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
8What type of spender are you ? Sit down when you can’t give it up:CandyCookieSodaBottled water
9Sit down when you can’t give it up StarbucksGoing out with your friends once a weekBuying lunch vs. bringing lunchSeeing the latest moviesGetting your nails doneGetting your hair done once a week
10Sit down when you can’t give it up Cable TVLatest video gamesCell Phone
11What type of spender are you A’s - impulsive, leave the cash and debit card at homeB’s -you have more discipline but may have to find alternatives for some of the things you like to doC’s – you are probably all ready on your way to good savings habits.
12Why is it hard to discipline our spending? Just do it!AdvertisingKeeping up appearancesIt isn’t fun!Average American savings rate was .3%- it has increased to 6%
13Money 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, promInclude money for savingsRemember – Life happens!
14Management Set aside time each week to go over your plan Make adjustmentsYou won’t be perfect, don’t give upFind a partner to work with youWithout a plan, you just plan to fail
15Budgeting tips Pay yourself first Be honest with yourself Don’t give upOther people don’t budget and they are fine…….really
16Savings Difficult to do Allows us to set money aside for emergencies Allows you to have the freedom to make choices
17Bank accounts Banks accounts are insured for up to $250,000. Bank account features vary from bank to bank – do your research
19Risk & returnGenerally, 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 investmentsEach of us has a different risk tolerance
20TYPES of RISK Risk of Default Risk of capital loss Risk of inflation Risk of liquidity
21How much risk can you afford? Financial goalsTime horizonFinancial risk tolerance
22Stocks, 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
23MoneyCredit CardsCredit 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.
24Credit Cards Advantages Pre-approved loan Widely accepted Some consumer protectionCan establish credit historyDisadvantagesRequires discipline from borrowerCan have high fees and interestIdentity theft
25Debit Cards Advantages Widely accepted Some consumer protection Ease of useDisadvantagesRequires recordkeepingCan have fees and penaltiesIdentity theftMay lead to higher spending
28Credit Cards/Debit Cards Credit card is a pre-approved loanYou will pay interest each month if you don’t pay it off in fullCredit card companies are highly regulated about marketing to those under 21If 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.
29Debit 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.
30Using credit wiselyCredit 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?EducationHousingTransportationNecessities
31Identity theft Don’t give out information unless you contacted them. Protect your information at schoolDon’t text your information to others –you don’t know where there phone may beNever carry your social security cardOrder a credit report each year and check it annualcreditreport.com
32Your financial future Think about your goals and dreams Determine wants vs. needsMake a planImplement your planEvaluate – weekly, monthly, yearlyMake adjustmentsStay informed about your optionsA great financial future awaits you !