your money: buy anything you want, guilt-free

Your MoneyBuy Anything You Want, Guilt-Free

Brendan QuinnPatrick Johnson

Tuesday, November 16, 2010

What We’ll Talk About

Why is this important?

Credit cards and credit

Accounts you need

Building a system

Investing


How We Know This Stuff

I Will Teach You To Be Rich by Ramit Sethi

Most of what we’re going to talk about comes from this

Personal finance blogs


Three Rules of Personal Finance

1. Spend less than you earn

2. Make the money you have work for you

3. Prepare for the unexpected


Why Is This Important?

Compound interest yields HUGE results long-term if you start even a year or two earlier

Takes only a few hours to get your money working for you instead of against you

Money is stressful, and it shouldn’t be


Credit Cards


Why You Want One

Build credit rating - save money

Convenience

Easy to track your spending

Rewards


What To Look ForNo annual fee

Rewards

Cash Back

Airline Miles

Points

Low APR


6 Rules of Credit Cards1. Pay off your bill IN FULL each month

2. Get all fees waived

3. Negotiate a lower APR

4. Keep your cards for a long time, and use them

5. Ask for more credit (be careful with this, though)

6. Use your rewardsSource: I Will Teach You To Be Rich


PAY OFF YOUR BILL IN FULL

EVERY MONTH


Credit Score

35% payment history (late payments are bad)

30% amounts owed (credit utilization rate)

15% length of history (how long you’ve had credit)

10% new credit (older accounts are better)

10% types of credit (student loans, mortgages, credit cards)

Source: I Will Teach You To Be Rich


On a $200,000 30-year mortgage...

If your FICO score is... Your APR will be... You’ll pay a total of...

760 - 850 4.384% $359,867

700 - 759 4.606% $369,364

680 - 699 4.783% $377,021

660 - 679 4.997% $386,381

640 - 659 5.427% $405,515

620 - 639 5.973% $430,427Source: I Will Teach You To Be Rich


Accounts


Accounts You Need Right Now

CheckingSavingsRoth IRA


Checking Accounts

No monthly fees, ever

Find one that gives interest, if you can

Use any ATM in the country without paying fees

Schwab Investor Checking


Savings Accounts

High interest rates

Lets you create sub-accounts for goal-setting

Long-term money

Online-only banks generally have better offerings

ING Direct, Ally Bank


Saving For The Future


START NOW!

Even if it’s just $20/month


Saving for Goals

Everyone has huge expenses during their lifetime (down payments on a house, car, wedding costs, travel)

Think ahead and they become more manageable

Set aside money ahead of time


The average wedding costs $28,000...Your Age Months Until Wedding Monthly Amount

Needed to Save

20 84 $333

21 72 $389

22 60 $467

23 48 $583

24 36 $778

25 24 $1,167

26 12 $2,333

27 1 $28,000 Source: I Will Teach You To Be Rich


Saving for Retirement

Compound interest yields HUGE returns over time

Start immediately, even if it’s not very much - it will be in 40 years

401(k), Roth IRA


Compound InterestBritney deposits $5,000 into a Roth IRA

and then leaves it aloneBritney deposits $5,000 into a Roth IRA

and then leaves it alone

Age at deposit Value at retirement

20 $160,000

39 $40,000

Source: www.GetRichSlowly.org


To have $1,932,528 at retirement...Starting Age Annual Contribution Monthly Contribution

19 $4,618 $384.8320 $5,000 $416.6721 $5,414 $451.1722 $5,863 $488.5825 $7,459 $621.5830 $11,214 $934.5035 $17,059 $1,421.5840 $26,434 $2,202.83

Source: www.GetRichSlowly.org


Start NowMonthly

InvestmentIf you start

sophomore year...If you start

senior year... Difference

$20 $1,832,252 $1,816,160 $16,092

$30 $1,843,609 $1,819,691 $23,918

$10/month difference: $11,357 $3,531

*assumes you make the maximum contribution

after graduation


How To Stop Worrying


Building a System That Works

If you can automate your finances, you don’t have to worry about them

Automated saving is easier mentally and emotionally

Keep track of things with Mint.com & email alerts


Salary 401(K)

Checking Roth IRASavingsWedding...............................2%House...................................1%New iPhone...........................1%Emergency Fund....................1%

Credit CardRegular bills that can be paid

electronicallyGuilt-free spending money

Other BillsStuff that can’t be paid using a credit

card

5%

5%5%

100%

95%

Source: I Will Teach You To Be Rich


Parting Words

85% Rule

These are just tips, you should research on your own

Check out the book

Money is a means, not an end


Thanks for coming!


your money: buy anything you want, guilt-free

Economy & Finance

credit accounts

credit cards source

credit score

rules of credit cards

new credit older accounts

longterm money

credit utilization rate

build credit rating