avoiding financial trouble prince william area financial education program
TRANSCRIPT
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Avoiding Financial Trouble
Prince William AreaFinancial Education
Program
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Financial Management
From Cradle to Grave…
Start
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Money Problems Involve
Lack of Planning Value Conflict Unrealistic Goals Emotional Uses of
Money Needs
vs Wants
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4
Setting Goals
Clearly define your goals– Personal, financial, career,
social, etc.
Goals should– Be measurable– Have a time frame (deadline)– Be visual
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Five Leading Causes of Overspending
5 - Thinking That Money Can Buy Happiness
4 - Wanting Only the Best for Your Children
3 - Trying to Keep Current
2 - Taking Out Car Loans
1 - Abusing Credit Cards
Credi
tors
OOF!
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Why?
$2,000 Times .02 = $40
Credit Card Issuers often require a minimum monthly payment of 2% to 3% Payment
Interest
Principal
InterestRate
18.5% divided by 12 = 1.54%
$40 - $31 = $9
$2,000 times 1.54% = $31
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Tips on Debt Bad Debt
– Borrowing for Consumption
From Personal Finance For Dummies™, 2nd Edition by Eric Tyson. Copyright © 1996 by Eric Tyson. All rights reserved. Reproduced here by permission of IDG Books Worldwide, Inc. …For Dummies is a registered trademark under exclusive license to IDG Books Worldwide, Inc., from International Data Group, Inc.”
Good Debt – Borrowing for Long
Term Investment
Slims’s Diner
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Dealing With Too Much Debt
HIGHPriority Debts
LowPriority Debts
Housing related - including utilities & condo or association fees Food Transportation Insurance Taxes
Credit cards Other “consumer” loans Doctor and hospital bills Professional services
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Tips on Saving
Pay Yourself First!– Treat Savings as a Fixed Expense– Try to Save at Least 5% - 10% of your Gross
Salary Build up 3 to 6 Months of Living
Expenses– Liquidity Account (safety)
Start Investing
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Investing – “The Market”
Bull & Bear
Markets
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11Source:www.ricedelman.com 11/05/01
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Beware of Percent Comparisons
Start Change ResultGrowt
h
$1,000
+$1,00
0 $2,000100.0
%
$2,000 -$1,000 $1,000 -50.0%
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S&P 500 Stock Index vs. 6% Annual Return - 1971 to 2003 – Cumulative
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
$10,000 Initial Investment
Do
llar
s
$281k
$463K
Years
$355k
$68k
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S&P 500 Stock Index 1971 to 2003% Change in Value by Year
$10,000 Initial Investment
0.4
0.6
0.8
1
1.2
1.4
1.6
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Procrastination(Waiting to Start)
22 30 6531
$18,000
9 Years
$70,000
35 Years
Age$2,000 per Year at 9%
$579,488
$470,249
Jack
Jill
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Income and ExpensesLiving Within Your Means:
Spend Less Than You Earn Save What You Do Not Spend Invest What You Save
Income
Expenses
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Some Final Thoughts
Delayed gratification Acceptance of
responsibility Dedication to truth Balance