bodeman personal finance_presentation1-1
TRANSCRIPT
Managing Personal Finance
Finance FactsU.S. is the largest capitalist country
Secret to capital (money) is SUCCESS!
Financial PlanningSecret to a good job is a good education
Typical full time worker in U.S. with a 4 year college degree earns about $50,000. (62% more than one with high school diploma)
Finish college.Government will be more likely to help with tax
breaks like free education accounts.
Make money, then work on saving, investing, and spending.
6 steps to controlling assets
1. take an inventory of your financial assetsDevelop balance sheet. (Assets=liabilities
+owners equity)List tangible assetsList liabilities
Create income statementList revenues and expensesSubtract expenses from revenuesGet you profit
6 steps to controlling assets
2. Keep track of all expensesList everything you spend money onMake spending categories
6 steps to controlling assets
3. Prepare a budgetMake budget for food, spending, payments
6 steps to controlling assets
4. Pay off debts
5. Start a savings planSave money each month and put in separate
account for bigger purchases
6 steps to controlling assets
6. Borrow only to buy assets that increase in value or generate income.
Car repairs, health care costs
Building Financial BaseBest way to a capitalist system is to have capital
to invest
Planning
Sacrifice
Real EstateA home is an investment you can live in
Once you buy a home, mortgage payments are fixed.
As income goes up, mortgage is easier to pay.
A home is a good asset to use when applying for a business loan.
Buying older homes and fixing them up to sell is a good way for financial security.
Tax Deductions and Homeownership
Buying a home is the biggest investment
Government is willing to help Interest on a home is tax deductibleLocation is best way to get optimal return on a
home.
What to do with savings?Worst place for young people is a savings bank
Best to have 6 months of money made saved up for emergencies or other payments
Best places to invest is stock market.Greater the risk, greater the returnWhen stock is low, it is the best time to buy
Learning to manage creditCredit cards are very useful
Most places require credit cards to ensure payment.
Keeps track of purchases
More convenient to carry
Sometimes gives you 5% back.
Danger with credit cards=debt!
Protecting your financial base: buying insurance
Life insuranceLeast expensive form
Whole life insurancePure insurance and savings
Variable life insurancewhole life insurance that invests the cash value of
the policy in stocks
AnnuitiesContract to make regular payments to a person for
life or a fixed period
Protecting your financial base: buying insurance
Health insuranceBlue Cross Blue ShieldDisabilities insurance
insurance that pays part of the cost of a long-term sickness or an accident
Protecting your financial base: buying insurance
Homeowners or renters insuranceCan have guaranteed replacement
Other insuranceMost states require automobile insuranceLiability insurance
Protect against getting sued
Umbrella policyBroad insurance policy that saves you money
Planning RetirementSocial Security
Continuous flow of money coming in and being paid out
Old age, survivors, disability insurance program established by social security act of 1935
Planning RetirementIndividual retirement accounts (IRAs)
tax deferred investment plan that enables you to save part of income for retirement.
Tax-defered contributions Those for which you pay no current taxes but the
earnings gained from IRA are taxed as income when they are withdrawn from IRA after retirement.
Roth IRANo up from deductions from taxes but the earnings
grow tax-free when they are withdrawn
Planning RetirementAdvantage of IRAs
Cant take money from any type of IRA until 59 ½ years old without paying 10% penalty
Planning Retirement401k plans
Allows you to deposit a set amount of pretax dollars and collect compounded earnings tax free until withdrawal, when the money is taxed at ordinary income tax rates.
Has 3 benefits Your contributions reduce your present taxable income Tax is defered on the earnings More than 80% of employers will match your
contributions.
Planning RetirementKoegh plans
IRA for entrepreneursCan invest up to $40,000 per yearNot taxed till withdrawn
Planning RetirementEstate planning
Ensuring everything that you own has a place to go (inheriting)
Will Document that names the guardian for children and
stated how you want your assets distributed, and names the executor for estate
Executor- person who assembles and values your estate and other taxes and distributes assets.
Prepare a durable power of attorney Document that gives an individual you name the power
to take over your finances if you become incapacitated.
ENDGet a financial planner to help if needed.