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STATEMENT OF FINANCIAL POSITION ADVANCED LEVEL. 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 2 Funded by a grant.

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Presentation on theme: "STATEMENT OF FINANCIAL POSITION ADVANCED LEVEL. 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 2 Funded by a grant."— Presentation transcript:

1 STATEMENT OF FINANCIAL POSITION ADVANCED LEVEL

2 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona COMPETENCIES  Examine components and purposes of a personal net worth statement.  Identify anticipated and unanticipated income and expenses.

3 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona WHO IS WEALTHIER? IanMitchell Let’s learn more to answer this question! Income - $30,000 Net Worth - $50,000 Income - $85,000 Net Worth - $35,000

4 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Net WorthWealth The measure of _________ _________ Indicates the ________ value of all __________ that a person or household owns, ______ the total amounts _______ to others

5 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona NET WORTH VS. INCOME Net WorthIncome A person may have ______ ________ and _____ _____ _____ or vice versa Depends on how a person _________ their income Money __________ such as ________ ______from working for ______

6 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona HOW DO YOU DETERMINE WHAT YOUR ____ _______IS? _____________ of __________ Position - A financial statement that describes an individual or family’s __________ condition on a ______ ____ by showing _______, ____________, and ___ ______ Shows a person’s net worth Similar to a net worth statement or ___________ ____________

7 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona THREE COMPONENTS 1.______ 2._________ 3.____ ______

8 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona WHAT IS AN ASSET? Asset - _________ a person _______ with monetary value Cash Value of _______ _________ _

9 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona MONETARY ASSETS Monetary assets - Can be ______ and ______ ________ into _______ Cash Money in checking and savings accounts

10 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona TANGIBLE ASSETS Tangible assets - ________ property that was ________ to create a lifestyle or improve your life (also known as use or _______ assets) Homes Automobiles Electronics

11 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona HOW DO YOU DETERMINE THE VALUE OF TANGIBLE ASSETS? Market value Where can you find the market value? Example What you could realistically ____ that ______ for today, not what you ________ paid Listed on the Statement of _________ Position Websites available to _________ the value of ____________ Research the place you would sell the item to determine what _______ items are selling for Derek purchased a car for $12,000 two years ago The current market value = $8,500 He records $8,500 on his Statement of Financial Position

12 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona INVESTMENT ASSETS Investment assets – Financial assets purchased with the hope that they will _______ _________ and ________ in ______ to make it possible to sell at a _______ price in the future Value of retirement accounts Stocks

13 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona WHAT ARE LIABILITIES? Liabilities – A _____ or obligation _____ to others Loans (mortgage, automobile, student) Balance on a credit card

14 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona WHAT IS RECORDED IN THE LIABILITIES SECTION? Amount you _____ if you were to pay the _______ owed in _______ today Automobile loan If monthly payments are continued to be made If paid in full today Record on statement $180/ month $6,300$5,490

15 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona LIABILITIES VS. EXPENSES LiabilitiesExpenses Definition Characteristics Example Money _______ to others Money _______ ______ amount owed Bills paid on a _____ basis Automobile loan - $5,490 owed Monthly payment to ____ that automobile loan - $180/month

16 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona CALCULATING NET WORTH ______ ____ ______

17 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona NET WORTH – YOUR PERSONAL FINANCIAL THERMOMETER Provides a number that can objectively measure your “financial temperature” Determine what _____ of ___ ____you desire and then set ______ to ______ that ______

18 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona HOW CAN YOU INCREASE NET WORTH? How do you______ assets and/or _______ liabilities? Evaluate how you ______ your ______ Liabilities Assets

19 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona MONEY MANAGEMENT TOOLS What is my financial position today? Work together to help you objectively evaluate your past, present, and future financial decisions What is my future money management plan? Statement of Financial Position Income & Expense Statement Spending Plan How have I managed my money in the past? Reach net worth level desired

20 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona YOUR PRESENT SELF IMPACTS YOUR FUTURE SELF Keep your net worth in mind when making financial decisions Present Future How will this financial decision affect my future net worth?

21 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona SO WHO IS WEALTHIER? Ian’s Statement of Financial Position Mitchell’s Statement of Financial Position Assets Home60,000 Home100,000 Retirement Savings 20,000 5,000 Retirement Savings 20,000 7,000 Automobile10,000 Automobile20,000 Total Assets$95,000 Total Assets$147,000 Liabilities Mortgage (house loan)40,000 Mortgage (house loan)80,000 College loan5,000 College loan20,000 Automobile loan0 10,000 Credit card debt0 2,000 Total Liabilities$45,000 Total Liabilities$112,000 Net Worth$50,000 Net Worth$35,000 Income - $30,000 Net Worth - $50,000 Income - $85,000 Net Worth - $35,000

22 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 22 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona DISCUSSION Do you think Ian is making any trade-offs to have higher net worth than Mitchell even though he has a lower income? How could both Ian and Mitchell increase their net worth? If Ian and Mitchell were thinking about going on vacation, how would their statement of financial position guide their decision?

23 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 23 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona WHEN WOULD A PERSON NEED OR WANT TO CREATE A STATEMENT OF FINANCIAL POSITION? RecommendedSpecial Times Once per year Must be written to be most effective – use any written method that works for you When making decisions regarding assets or liabilities May have to create a statement for a financial professional

24 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 24 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona MEET TORI Tori is considering purchasing a new pre- owned car. She would like to know what her net worth is to help her make this decision. Your Job: Use the information provided to create a Statement of Financial Position for Tori

25 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 25 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona SMALL GROUP ACTIVITY  Read slides 25 – 31  Answer the discussion questions

26 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 26 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona ABOUT TORI Record all applicable information in the “current” column of Tori’s Statement of Financial Position 21 years old Completing training to be a radiology technician Has one semester of training left Works part-time to earn $13,000 per year Owes $5,000 in student loans that helped pay for her schooling

27 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 27 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona ABOUT TORI Owns a car that runs fine but would like an upgrade Used a website to determine the market value of her current car = $3000 Has $1,000 in her checking account Keeps $20 in cash in her wallet at all times Keeps $2,000 in her savings account for emergencies

28 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 28 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona ABOUT TORI Rents a one bedroom apartment and owns $1,000 worth of furniture and other household supplies Bought a laptop computer when she started school but estimates that it is only worth $200 now Loves to shop and estimates that she owns $1,500 worth of clothes and shoes Invests $20 per month into a retirement account – that account is currently worth $500

29 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 29 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona TORI’S CURRENT STATEMENT OF FINANCIAL POSITION Assets Monetary assets Cash on hand Value of checking account 1, Value of savings account 2, Subtotal of monetary assets$3, Tangible Assets Market value of household furnishings 1, Market value of automobile 3, Market value of electronics Market value of clothing 1, Subtotal of tangible assets $5, Investment Assets Value of retirement account Subtotal of investment assets $ Total Assets $9, Liabilities Student loan balance 5, Total Liabilities $5, Net Worth = Total Assets - Total Liabilities $4,220.00

30 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 30 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Tori would like to trade in her car for a new pre-owned car priced at $12,000. She would receive $2,000 trade- in value for her car making the purchase price of the new car $10,000. She will use $1,000 from her emergency savings and apply for a loan for the remaining $9,000. If Tori purchased this car today, how would her Statement of Financial Position be affected? Current If she purchased a new car Assets Monetary assets Cash on hand Value of checking account 1, Value of savings account 2, , Subtotal of monetary assets$3,020.00$2, Tangible Assets Market value of household furnishings 1, Market value of automobile 3, , Market value of electronics Market value of clothing 1, Subtotal of tangible assets $5, $14, Investment Assets Value of retirement account Subtotal of investment assets $ Total Assets $9, $17, Liabilities Student loan balance 5, Installment loan balance for automobile 9, Total Liabilities $5, $14, Net Worth = Total Assets - Total Liabilities$4, $3, Decrease savings to $1,000 Increase value of automobile to $12,000 Add automobile loan for $9,000

31 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 31 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona DISCUSSION What is Tori’s current net worth? What would her net worth be if she purchased the new car today? Based upon Tori’s Statements of Financial Position, would you recommend that she purchase the new car? Why or why not? Consider what trade-offs she will have to make with both options

32 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 32 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona DISCUSSION How could Tori increase her current net worth? Tori has chosen to use student loans to help her pay for training to become a radiology technician This has lowered her current net worth, but what affect may it have on her future net worth? By investing in higher education she is helping to increase her future income earning ability and therefore make it easier to increase her future net worth

33 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 33 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona SUMMARY Statement of Financial Position is an important money management tool that shows net worth Assets – Liabilities = Net Worth Net worth is an objective measure of wealth Net worth is your “financial thermometer” to objectively measure your financial position To increase net worth you will have to increase assets or decrease liabilities

34 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 34 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona THE COSTS ADD UP How much do you think each item would cost if purchased every day for one month? Item Average Cost of Item Approximate Cost Per Month if purchased every day Approximate Cost Per Year if purchased every day 16 oz. soda $ $2.00 $ $60.00 $ $ oz. energy or sports drink $ $3.00 $ $90.00 $ $ Candy bar $ $1.25$22.50 – $37.50 $ $ oz. Latte’ or flavored coffee $2.50 -$3.50 $ $ $ – $

35 2.2.3.G1 INCOME AND EXPENSE STATEMENT

36 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 36 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Evaluate ____ financial decisions HOW CAN AN INCOME AND EXPENSE STATEMENT HELP YOU MANAGE MONEY? Make changes to _______ net worth Make changes to reach ______ Improve financial _____________

37 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 37 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona THREE COMPONENTS ________ _____ OR _______

38 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 38 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Income – money _____ WHAT IS INCOME?

39 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 39 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Expenses – money _____ WHAT ARE EXPENSES?

40 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 40 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona IncomeExpenses Net Gain or Net Loss NET GAIN OR NET LOSS Net ____ Net ___ Goal is to have ______ (from sources other than drawing down ______ or ______ assets) _______ than expenses.

41 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 41 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Statement of Financial Position Income & Expense Statement Spending Plan What is my financial position today? What is my future money management plan? How have I managed my money in the past? Net GainNet Loss A spending plan will help you plan your spending Use that money for ______ or other expenses ______ income and/or _________ expenses

42 2.2.3.G1 © Take Charge Today –August 2013– Statement of Financial Position – Slide 42 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona SUMMARY Tells you where your money is coming _____ and where it is ______ Three components: ______, __________, and net _____/_______ Use a tracking method that works best for you Customize income and expense categories


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