Personal Management Merit Badge $ Lots of effort , but totally worth it!

HANDOUT Fill in the blanks. OR use your own pages. You may use the words I’ll suggest, or - You may use other words you like better! Brainless attendance

HANDOUT Name ______________________________________ Date of merit badge classes: 1st ____________ 2nd ____________ To help you in the future: Keep it! Read again in 5 yrs! * Boxed portions: To be reviewed with your Merit Badge Counselor. AFTER you’ve completed EVERYTHING (ready to discuss)! If I go too fast, stop me. Bring this handout back next time:

Item chosen: _______________ Approximate cost: ___________ HDTV $1,000 p.2, Requirement #1: Do the following: Choose an item that your family might want to purchase that is considered a major expense. Item chosen: _______________ Approximate cost: ___________ HDTV $1,000 (b) Write a plan that tells how your family would save money for it. We can save money by: _____________________________ Mostly _______ earnings, but each of us could contribute.

p.2, Requirement #1 (continued): (b)1. Discuss the plan with your merit badge counselor.* 2. Discuss the plan with your family. **When are you going to do this? (FHE?) 3. Discuss how other family needs must be considered in this plan.** *When are you going to discuss this with your merit badge counselor?

p.2, Requirement #1: Do the following: (c). Develop a written shopping strategy for the purchase: 1. Determine the quality of the item (using consumer publications or rating systems). _______________________________________ Google, Yahoo, EBay, Consumer Reports

p.2, Requirement #1: Do the following: (c). Develop a written shopping strategy for the purchase: 2. Comparison shop for the item. Find out where you can buy the item for the best price. Call around Who you called: What you learned: ____________ ________________ Gwido’s Pawn Shop Don’t go there!

p.2, Requirement #1: Do the following: (c). Develop a written shopping strategy for the purchase: 2. Comparison shop for the item. Find out where you can buy the item for the best price. Study ads Where you looked: What you learned: ________________ ____________________ Newspaper Sears had a great sale www.ebay.com Including shipping…

p.2, Requirement #1: Do the following: (1)(c)2 Yes Did you find a great sale or a discount coupon? ________ ____________________________________________ Consider alternatives: Maybe, but________ Can you buy the item used? ___________________ I could, but already found… Should you wait for a sale? ___________________

p.3 Prepare a budget reflecting: Your expected income (allowance, gifts, wages), Your expected expenses & savings (Outgo). Track your actual. 1st Week INCOME Expected Actual Allowance ______ ______ Job ______ ______ Gifts ______ ______ _________ ______ ______ Total in ______ ______ EXPENSES & SAVINGS Expected Actual Donations ______ ______ Savings ______ ______ Savings (for… ______ ______ Save to Buy ______ ______ Junk food ______ ______ _________ ______ ______ Total Out ______ ______

_________ ______ _____ OUTGO Expected Actual Donations ______ EXAMPLE INCOME Expected Actual Allowance _____ Job _____ Gifts _____ _________ ______ _____ Total in _____ OUTGO Expected Actual Donations ______ Savings ______ Savings (for… ______ Save to buy ______ Junk food ______ ______ _________ ______ ______ Total Out ______ $10 $30 $ 3 $30 $42 2(b). Compare expected income with expected expenses. I can increase income by ___________ determine steps to balance: 2. If outgo exceeds income, working more or decrease expenses by_______________ buying less junk

_________ ______ _____ OUTGO Expected Actual Donations ______ Another EXAMPLE INCOME Expected Actual Allowance _____ Job _____ Gifts _____ _________ ______ _____ Total in _____ OUTGO Expected Actual Donations ______ Savings ______ Savings (for… ______ Save to buy ______ Junk food ______ ______ _________ ______ ______ Total Out ______ $10 $30 $ 3 $12 2(b). Compare expected income with expected expenses. 2. If expected income exceeds expected outgo, state how you would use the excess money: I could have some for __________________ better stuff later.

_________ ______ _____ OUTGO Expected Actual Donations ______ EXAMPLE INCOME Expected Actual Allowance _____ Job _____ Gifts _____ _________ ______ _____ Total in _____ OUTGO Expected Actual Donations ______ Savings ______ Savings (for… ______ Save to buy ______ Junk food ______ ______ ______ ______ Total Out ______ $10 $30 $10 $20 $50 $ 3 $12 $ 5 $20 $40 Presents What actually happened? This guy should have $10 more now than 1 week ago. If you finish one week of expected and actual by next class...

How are you going to remember to do this each day? p.3-7, Req 2a Track your actual income, expenses, and savings for 13 consecutive weeks. Income Source Actual ___________ _______ ___________ _______ Total _______ Expenses Where Actual ___________ _______ ___________ _______ ___________ _______ Total _______ How are you going to remember to do this each day? (How about putting it on your pillow?) Share this with your merit badge counselor.

a. The emotions you feel when you receive money: p.8 Req. #3 Discuss with your merit badge counselor Five of the following concepts: a. The emotions you feel when you receive money: When I honorably earn money, I feel ______ Good * If I’d stolen the money, I’d feel _____ Bad! b. How the amount of money you have with you affects your spending habits: If I have lots of money, I tend to spend ______ more. If I don’t have my money, it is ______ to spend. harder Unless I have a credit card, then it is still easy to spend money I don’t have.

c. Your thoughts when you buy something new: excited happy I usually feel ___________________ Your thoughts about the same item 3 months later: excited happy I’m usually less __________ about it.

p.8 Req. #3 Discuss with your merit badge counselor Five of the following concepts: (c) Explain the concept of: buyers remorse Often after buying something people feel _______ sorrow (remorse) and wish they could undo the _________. purchase Especially if they ________ $, when it is time to make payments, they feel sorry or have _______ _______. borrowed buyer’s remorse

3d. How hunger affects you when shopping for food items: If I’m hungry, I tend to buy . more 3e. Your experience of buying an item after seeing or hearing advertisements for it. Did the item work as well as advertised? ___ _______ Not always. Often, the ad makes it sound _____ than it actually is. better Once in awhile it is actually _____ than I expected. better

3f. Your understanding of what happens when you put money into a savings account: teller’s drawer It goes into the ______________, bank’s safe bank’s bank then into the ___________ or into the ___________ loaned out or invested then, most of it gets ___________________ interest They pay me _______ for the use of my money. They can afford to because they charge the borrowers interest at a ______ rate than the rate they pay me. higher

Charitable Giving 3g. Explain its purpose and your thoughts about it: I think it is a _______ idea to give to a charity or church. Good charities use money to help the ____ and _____, build buildings for __________ and other __________ purposes. poor sick worship worthwhile

3h. What you can do to better manage your money: I can save _____ of my earnings for more important things I’ll need in the future. more I can use ____ of it for junk. less I can use my money for ____ worthwhile purposes. more

usually means: ___ risk way to accumulate money. low- p. 9, Requirement #4. Explain the following to your mb counselor: 4a. The difference between saving and investing, including reasons for using one over the other. * “Saving” usually means: ___ risk way to accumulate money. low- My father wanted me to save ever penny I got, I didn’t like that.

Save $100 each month at 5% If you can put $100 each month into a relatively safe savings account (federally insured), you should be able to beat the 5% rate of this example, at least as soon as you build up a few hundred dollars and can take advantage of time certificates of deposit. As you accumulate funds, you can stagger the maturities, so you have relatively ready access to money in emergencies.

Save $100 each month at 5% After 5 years you would have saved up $6000 and the financial institution would have added interest of about $830. That is, if you do not withdraw any of the funds you’ve saved.

Save $100 each month at 5% If you continue making the deposits and refrain from taking any of the money out, after 10 years you will have deposited $12,000 and the financial institution will have added $3530 in accumulated interest.

Now earning > $110+ each month Save $100 each month at 5% If you can stick with the savings program for 15 years, at 5%, the value of compounding interest becomes evident to a remarkable degree. Now the monthly interest earned exceeds the monthly contribution you have been making. Now earning > $110+ each month

p. 9, req 4a Recommended Savings: Save _____% in an Emergency Fund. 10 Try to never, ever spend this money! Save enough for your “_____ ______” expenses. for sure Stuff you know you’ll be spending money on once a year! Save whatever you can just to _____ ______ . buy stuff

Savings Goal: Recommended savings goal: Start stashing 10% of your earnings into an emergency fund that you try to never, ever spend. Have a separate saving account for your “for sure” expenses. Things you know are coming around once in awhile (examples: Christmas, property tax, auto repairs, insurance premiums, etc.) Have a 3rd savings account to just buy stuff. We all like to buy things that cost more than our paycheck. If you don’t save for it, you borrow for it (if you buy it), and if you borrow, you get less for your money.

“Investing” usually means ______ -risk with a hope of a ______ return. p. 9, Requirement #4. Explain the following to your Merit Badge Counselor: 4a. The difference between saving and investing, including reasons for using one over the other. “Investing” usually means ______ -risk with a hope of a ______ return. Stocks & Bonds higher higher

emergencies less want it p.9, Requirement 4a. Explain the following to your merit badge counselor. Reasons for saving: People typically save money for future needs including ____________. emergencies Reasons for saving rather than investing: People who save money in a bank or credit union are much ____likely to lose it. And more likely to be able to get it when they ______ ___ less want it Banks and credit unions are usually very careful with our $, and our savings are insured by agencies of the U.S. Government: _____ & _______ Several companies have popped up recently which encourage people to “put their equity to work”. In other words, get another loan on your home, invest the proceeds, and use the earnings to make the mortgage payments. If you can consistently earn more on the investment than you pay on the loan, it works, but remember: Rule #1 The greater the rate, the higher the risk. Rule #2 If you can’t afford to lose it, don’t invest it. Rule #3 Don’t borrow it, if you don’t want to pay it back. (Realize that the investment may evaporate. There is a very real possibility of the benefits promised disappearing. Is the risk of being required to make the payments on the old and the new loan worth the possibility of the benefit promised?) Two recent programs we’ve reviewed involve out-of-the-country annuity investments. Remember: Question #1 Who will protect you if out-of-country problems occur? FDIC NCUA

Reasons for investing: People invest in hopes of earning __________. p.9, Requirement 4a. Explain the following to your merit badge counselor. Reasons for investing: People invest in hopes of earning __________. Several companies have popped up recently which encourage people to “put their equity to work”. In other words, get another loan on your home, invest the proceeds, and use the earnings to make the mortgage payments. If you can consistently earn more on the investment than you pay on the loan, it works, but remember: Rule #1 The greater the rate, the higher the risk. Rule #2 If you can’t afford to lose it, don’t invest it. Rule #3 Don’t borrow it, if you don’t want to pay it back. (Realize that the investment may evaporate. There is a very real possibility of the benefits promised disappearing. Is the risk of being required to make the payments on the old and the new loan worth the possibility of the benefit promised?) Two recent programs we’ve reviewed involve out-of-the-country annuity investments. Remember: Question #1 Who will protect you if out-of-country problems occur? more money Stocks & Bonds Reasons for investing rather than saving: Although the risk of loss is higher, and some investments require lots more ______, some investments earn ___ _____ money. work lots more

4b. Explain the concepts of return on investment and risk. p.9, Requirement 4b. Explain the following to your merit badge counselor. 4b. Explain the concepts of return on investment and risk. expected Return on investment refers to the amount you receive __ _____ of the amount you invested. in excess Risk is a measure of the possibility of suffering harm or ____. loss Why would anybody choose 5% when they invest at 25%? The greater the rate, the higher the ____. actual risk or: The greater the risk, the higher possible _______ and possible _______. return loss

Instead, suppose you put it in the bank and earn 5% for 20 years p. 9, Requirement #4c Explain the concepts of simple interest and compound interest. Suppose you bury $1,000, and dig it up 20 years from now Instead, suppose you put it in the bank and earn 5% for 20 years PRINCIPAL

p. 9, Requirement #4c Explain the concepts of simple interest and compound interest. Interest paid only on the ________ balance. Simple interest: principal

Compound Interest Principal p. 9, Requirement #4c Explain the concepts of simple interest and compound interest. Now, suppose you have them add your interest to your principal balance. Compound interest: Interest paid on both the principal and previously paid _______ interest. Compound Interest Principal

but also on the ______ _________ principal prior earnings p. 9, Req. #4 Explain how these (simple interest & compound interest) affect the results of your investment exercise (p.12). If I save or invest $1000 and I spend all the earnings as I get it, I do not get the advantage of _____________. compounding If I have my earnings added to the investment, I earn interest not only on the ________ but also on the ______ _________ principal prior earnings And, I get compound interest.

Is important to know how _____ an investor can buy, much p. 10, Req. #5 Select 5 publicly traded stocks from the business section of the newspaper. a. Explain to your merit badge counselor the importance of the following information for each stock: Current price: Is important to know how _____ an investor can buy, much and help him decide whether to ___, ___, ____, ____, or _____ a stock. buy sell trade hold avoid The current price may be obtained ______, from a ____ ______, or estimated from _________. on-line stock broker newspaper

p. 10, Req. #5 Explain the importance of: b. How much the price changed from the previous day: It is important to see if the price changed, and how _____, and whether it went __ or ____. much up down If it went down a lot, something might be seriously ______ with the company. wrong

p. 10, Req. #5 Explain the importance of: c. The 52-week high and the 52-week low prices: It is important to see if the price has been about the same, or ______, or _____ than it is now. higher lower If it went down a lot, something might be seriously ______ with the company, or with the stock market __ _______. wrong in general It might be a good time to ___. But it might be a good time to _____ __. buy avoid it a lot more Knowing this is enough to realize you need to know __ ___ ______!

Usually buy 100 shares at a time. p. 10, Req. # 5 Obtain the business section of your newspaper and obtain the following for 5 stocks: Usually buy 100 shares at a time. 9/25/04 Date of Newspaper: ________ Name1st stock Close Price Net Change 52-wk high “Name” “Last” “Chg” “1yrhi” ______________ _________ _________ ___________ Explain: The importance for this stock: Current price (est: _______) __________________________ Change from previous day: __________________________ The 52-week high: __________________________ DeltaAir 3.26 - .70 15.54 3.00 Low enough to buy a bunch Lost 70¢ per share: danger Lost $12.28 p/share: danger

Should I buy? (on 8/28/06: 68¢, then down to $0)

Date of stock quote: ________ p. 10, Req. # 5 Obtain the business section of your newspaper and obtain the following for 5 stocks: (I’ve already given you 1) Date of stock quote: ________ Name 2nd stock Close Price Net Change 52-wk high “Name” “Last” “Chg” “1yrhi” ______________ _________ _________ ___________ Explain: The importance for this stock: Current price (est: _______) __________________________ Change from previous day: __________________________ The 52-week high: __________________________

SATURDAY