Pg personalmanagementfinal

Success Building and Financial Literacy for Young Adults

Instructor: Patrick Gentile
Committed to Teaching Young Adults Financial Literacy for Over 15
Years
CPA with over 30 years of Financial & Managerial experience
CFO and COO of a Multinational Company

 CONTROL
 LEVERAGE
 CONTROL + LEVERAGE = PERSONAL POWER
 OWNERSHIP
 RESPONSIBILITY
 GOALS/PRIORITIES
 EDUCATION/TRAINING/EXPERIENCE
 LEARNING FROM MISTAKES – BUIILD ON SUCCESSES

http://www.pbs.org/your-life-your-money/videos.php

THERE IS NO SUCH THING AS A FREE LUNCH!

WHY NOW MORE THAN EVER!
 YOUR EMPLOYER WON’T
 UNLIKE YOUR PARENTS YOU MAY CYCLE THROUGH MANY JOBS
TO GET TO THE NEXT LEVEL
 COMPETITION FOR JOBS ARE FIERCE
 EMPLOYERS FEEL NO ALLEGIANCE TO EMPLOYEES
 EMPLOYERS FEELTHAT WORKERS ARE DISPENSABLE AND CAN BE REPLACED
 EMPLOYERS NO LONGER FEEL ANY OBLIGATION TO FUND:
 PENSION PLANS
 POST RETIREMENT HEALTH PLANS
 And Certainly Not the Government
 WILL SOCIAL SECURITY BE THERE FOR YOU?
 HOW MUCH MORE DEFICIT SPENDING AND STEALING FROM OUR CHILDREN’S
FUTURE CAN WE WITHSTAND?

 WHAT DO YOU BELIEVE ARE THE MOST
IMPORTANT FINANCIAL DECISIONS FACING:
YOUR PARENTS?
YOURSELVES?
 OVER THE SHORT TERM?
 OVER THE LONG TERM?

 WHAT IS AN ASSET?

 WHAT DO YOU BELIEVE IS YOUR GREATEST ASSET?

 WHAT IS A LIABILITY?

 WHAT DO YOU BELIEVE IS YOUR GREATEST LIABILITY?

 WHAT DO WE MEAN BY FINANCIAL
LITERACY?
 “The ability to use knowledge and skills to manage financial
resources effectively for a lifetime of financial well-being.”-
(President’s Advisory Council on Financial Literacy states that financial literacy)

 HOW DOES FINANCIAL LITERACY
PROMOTE FREEDOM?

 GETTING STARTED EARLY - TIME IS
YOUR BEST ASSET

• How many of you:
– Have a credit card?
– Have made a major purchase such as a car?
– Have a retirement plan?
– Know the difference between growth and incoming
producing stock?

If you are like most people between the ages of 15-
18 the answer is probably “no”

10

 How did you learn to handle your money?

http://www.pbs.org/your-life-your-money/videos.php

 Whatare some strategies that you or the people
you know use to handle money?

 EMOTIONS:
 IMPULSE BUYING
 BUYER’S REMORSE
 SUPPLY & DEMAND
 LAW OF DIMINISHING RETURNS
 VALUE OF A GOOD VERSUS BAD ASSET
 DIFFERENCE BETWEEN AN ASSET AND AN
EXPENSE

 BALANCING ACT BETWEEN NEEDS AND WANTS

 THE DILEMNA WHICH BECOMES PART OF OUR DAILY LIVES

Learning to do without or with something different

OR

Learning how to achieve what you want

 WHICH IS THE BETTER STRATEGY?

 YOUR DISTANT UNCLE LEAVES YOU
AN INHERITANCE

 THERE IS ONLY ONE CATCH!

 HOWDOES HIS CONDITION MAKE
YOU FEEL?

 HOW DOES EMOTION SOMETIMES
GET THE BETTER OF US?

 EACH STUDENT

 LIST 5 THINGS YOU NEED

 LIST 5 THINGS YOU WANT

 EACH GROUP - PICK FROM ALL THEIR LISTS

 LIST 7 THINGS YOU NEED

 LIST 7 THINGS YOU WANT

 THE TRUSTEE OF YOUR UNCLE’S ESTATE
(ME) DETERMINES THE PRICE OF EACH
WANT AND NEED

 TAKE 4 WANTS AND 4 NEEDS FROM THE LIST
OF 7 ADD THEM UP AND DEDUCT FROM THE
AMOUNT RECEIVED FROM YOUR UNCLE AND
THE TEAM WITH THE MOST MONEY LEFT
OVER WINS.

 ITS ALL ABOUT CHOICES AND BALANCING TO
OPTIMIZE YOUR RESOURCES!

 CHOOSE 2 OF THE 4 WANTS AND FIND A WAY TO
CONVERT THEM TO PRODUCE INCOME

 CONVERT A “BAD” ASSET INTO A “GOOD” ASSET

 A GOOD ASSET IS SOMETHING THAT PROVIDES
FUTURE INCOME OR A FUTURE BENEFIT TO YOU

 IF AN ASSET NO LONGER BRINGS YOU VALUE
WHAT’S THE BEST THING TO DO WITH IT?

UNIT ONE SPENDING CUP RECAP:

AMOUNTS RECEIVED FROM YOUR UNCLE'S ESTATE A. $0

LESS:
AMOUNTS BY TEAM TO DETERMINE WANTS & NEEDS B. 0

AMOUNT LEFT OVER FOR FUTURE SPEND A. - B. = C $0

TAKING AN ASSET AND CREATING INCOME D. 0

TOTAL AMOUNT LEFT TO SPEND AFTER EARNING INCOME ON AN ASSET C. + D. $0

 What does the word “EMPLOYEE” mean
 An individual who is USED OR CONTROLLED as an asset to produce in a
business
 A person who is HIRED to work for another or for a business, firm, etc., in return
for PAYMENT
 An employee is a person who works in the service of another person under an
express or implied contract of hire, under which the employer has the right to
CONTROL the details of work performance
 The IRS classifies a worker as an employee as follows:
 In general, anyone who performs services for an organization is an employee if
the organization can CONTROL WHAT WILL BE DONE AND HOW IT WILL BE
DONE.

 Other Synonyms - worker - servant - clerk

"The only way to get people to like working hard is to motivate them.
Today, people must understand why they're working hard. Every
individual in an organization is motivated by something different."
-Rick Pitino (Louisville Baseketball Head Coach)

Keys to motivation:
 Empowerment: Feeling trusted and empowered is a tremendous
motivator.
 Growth: Feeling that they are growing and developing personally
 Inclusion: ‘To belong’ is a fundamental need, whether as a
member of a family, peer group, network, team or company. It’s
human nature to want to be on the inside, not the outside.
 Purpose: Today people care more about what happens tomorrow,
and want to contribute to ensuring the future of our children, and
the health of our communities and planet.
 Trust: the fabric that holds it all together and makes it real

FOOD FOR THOUGHT:

WOULD YOU RATHER BE MOTIVATED BY YOURSELF OR BY
OTHERS?

WOULD YOU RATHER WORK FOR YOURSELF BY WORKING
TOWARD DEVELOPING A CAREER OR SIMPLY WORK FOR
THE BENEFIT OF OTHERS?

WOULD YOU RATHER USE YOUR ENORMOUS GIFTS AND
TALENTS TO LEAD OR JUST FOLLOW?

WHY IS HAVING A CAREER VERSUS A JOB VITAL TO OUR WELL-BEING?

 Second only to personal relationships, work is the most
important determinant of quality of life
 A purpose derived from providing a product or
service - An individual may derive purpose in life from the
work that he or she completes.
 Many individuals describe their work as a calling, or in
other words, “a vocation to which the employee brings
a passion—a commitment to the work for its own sake.

HAVE YOU EVER OWNED YOUR OWN BUSINESS?

 WHAT ARE THE BENEFITS OF BEING AN OWNER?

 WHAT ARE THE DISADVANTAGES?

Individual or entity who owns a business entity in an attempt to profit
from the successful operations of the company. Generally has
decision making abilities and first right to profit.

WHAT DOES IT MEAN TO HAVE AN ENTREPRENEURIAL SPIRIT?

YOU INTERVIEW WITH THE LEFT HANDED SNOW SHOVEL
COMPANY

GOOD NEWS – YOU’RE ALL HIRED!

WHAT’S EVEN BETTER IS BECAUSE YOU ARE ALL SO QUALIFIED
THERE IS A SIGN ON BONUS!

CAN IT GET ANY BETTER THAN THIS?

WEEK 1 – YOU DAMAGE A KEY PIECE OF MACHINERY

EMPLOYER GARNISHES BACK FROM YOU PART OF YOUR SIGN UP
BONUS

YIKES – WHAT DOES THAT MEAN?

HOW DOES THAT MAKE YOU FEEL?

WEEK 2 – YOU RECEIVE YOUR FIRST PAYCHECK BECAUSE YOU’RE
ALL PAID EVERY 2 WEEKS

ALREADY THE EMPLOYER HAS AN ADVANTAGE ON YOU HE IS
PLAYING YOUR FLOAT

YOU WORKED WEEK 1 BUT DID YOU GET PAID RIGHT AWAY?

YOU RECEIVE YOUR GROSS PAY (30 TOOTSIE ROLLS) – AND IT
TRULY IS GROSS BECAUSE WHAT HAPPENS AFTER THAT IS
DEVASTATING!:

WHO ARE ALL THESE GUYS I’M GOING TO BE SHARING MY PAY WITH?

HERE IS THE LAUNDRY LIST OF USUAL GIVEBACKS:
 FEDERAL WITHHOLDING
 STATE WITHHOLDING
 SOCIAL SECURITY TAX
 MEDICARE TAX

Gross Pay 30

GROUPS IN OUR POCKET:
FEDERAL WITHHOLDING 35.00% (11)
STATE WITHHOLDING 5.00% (2)
FICA 7.65% (1)
TAXES FROM OUR PAY! 47.65%

NET PAY 16
% of our pay in our pockets 52%

CAN WE REALLY BE WORKING FOR 52% MONEY
ARE WE REALLY ONLY MAKING 52 CENTS ON
EVERY DOLLAR WE EARN

SO IT SEEMS EVERYONE IS IN YOUR POCKETS TRYING TO TAKE
AWAY FROM YOUR PAYCHECK!

IT’S LIKE A BIG SHAKEDOWN

http://www.youtube.com/watch?feature=player_detailpage&v=D5fVO1ci4t8

 DOES ALL THIS REALLY SEEM FAIR?

 WE CAN DEBATE ABOUT THE FAIRNESS OR EQUITY OF
THE OUTCOME BUT THE LARGER QUESTION IS?

WHAT CAN WE DO TO FIX IT FOR
OURSELVES AND EDUCATE OURSELVES
TO PLAN FOR A BETTER OUTCOME FOR
THE FUTURE?

FINANCIAL KNOWLEDGE IS POWER!

 AS AN EMPLOYEE THERE ARE VERY FEW THINGS YOU CAN DO
TO INCREASE YOUR GROSS TO NET PAY
WHY?
 BECAUSE YOU ARE THE LOWEST LEVEL IN THE FOOD CHAIN

 BUT WAIT ALL IS NOT LOST – THERE ARE THINGS WE CAN DO
EARLY IN OUR YOUNG LIFE TO BRING US UP THAT LADDER

FIRST PAYCHECK
INVESTI NG
BEFORE 6%
Gross Pay 30 30
401K contribution at 6% 0 2
Health savings account at 6% 0 2
GROSS Pay subject to federal & state withholding 30 26

FEDERAL WITHHOLDING 35.00% (11) (9)
STATE WITHHOLDING 5.00% (2) (1)
FICA 7.65% (1) (1)

ADD BACK: HEALTH SAVINGS WE CAN USE NOW! Or allow to earn interest tax free 2

NET PAY AVAILABLE NOW 16 16
% of our pay in our pockets NOW 52% 54%

ADD BACK 401K MONIES HELD LONG TERM FOR INVESTMENT:
401k money now in your account tax free! 0 2
Employer's matching contribution into your 401K tax free! 0 2

NET PAY AVAILABLE NOW & IN FUTURE 16 20

% of our net pay available now & for our future 52% 68%

CERTAINLY A BETTER OUTCOME – BUT CAN IT GET BETTER?

FIRST PAYCHECK
INVESTI NG INVESTI NG
BEFORE 6% 9%
Gross Pay 30 30 30
401K contribution at 6% & 9 % 0 2 3
Health savings account at 6% & 9% 0 2 3
GROSS Pay subject to federal & state withholding 30 26 24

FEDERAL WITHHOLDING 35.00% (11) (9) (8)
STATE WITHHOLDING 5.00% (2) (1) (1)
FICA 7.65% (1) (1) (1)

ADD BACK: HEALTH SAVINGS WE CAN USE NOW! Or allow to earn interest tax free 2 3

NET PAY AVAILABLE NOW 16 16 17
% of our pay in our pockets NOW 52% 54% 57%

ADD BACK 401K MONIES HELD LONG TERM FOR INVESTMENT:
401k money now in your account tax free! 0 2 3
Employer's matching contribution into your 401K tax free! 0 2 2

NET PAY AVAILABLE NOW & IN FUTURE 16 20 22

% of our net pay available now & for our future 52% 68% 74%

AMAZING HOW A SMALL CONTRIBUTION INCREASE CAN UPLIFT YOUR NET PAY!

HOW MUCH OF YOUR PAYCHECK DO YOU WANT TO INVEST IN
YOUR 401K AND YOUR HEALTH SAVINGS
NONE
 6%
 9%
BEFORE YOU DECIDE REMEMBER YOU CAN’T TOUCH THE 401K
MONEY AS ITS LONG TERM INVESTED – ALTHOUGH YOU MAY BE
ABLE TO TAKE A LOAN AGAINST IT IN THE FUTURE

YOU CAN TOUCH THE HEALTH SAVINGS ACCOUNT WHEN YOU
NEED IT FOR MEDICAL EMERGENCY AND THAT’S WHY ITS ADDED
BACK TO YOUR CURRENT NET PAY

YOU STILL NEED TO FIGURE OUT A BUDGET ON HOW YOU ARE
GOING TO LIVE ON YOUR PAYCHECK (FOR NEXT TIME)!

BUT LIKE EVERYTHING IN LIFE YOU NEED TO MAKE A DECISION
NOW!

MAYBE THIS LAST SLIDE WILL HELP YOU DECIDE

LOOK AT THE AMAZING IMPACT THAT COMPOUNDING HAS OVER TIME!

401k CONTRIBUTIONS AT VARIOUS CONTRIBUTION LEVELS OVER TIME

Contributions Starting at age 21
ASSUMES INVESTMENTS EARN 6% ANNUALLY 5 Years 19 years 45 years

6% Employee contribution with 6% Employer Match 566 3,790 25,595

9% Employee contribution with 9% Employer Match 849 5,684 38,389

DIFFERENCE IN MONEY SAVED OVER TIME WITH INCREASED % 283 1,894 12,794

THE 401K IS YOUR FIRST FORAY INTO INVESTING AND IT’S SIMPLE!

UNIT TWO FINANCIAL RECAP SPENDING 401K
CUP AFTER 5 YRS

AMOUNT CARRIED OVER FROM UNIT ONE A. $0

ADD: SIGN ON BONUS FROM EMPLOYER B.

LESS: GARNISHMENT OF BONUS DUE TO YOUR NEGLIGENCE C.

ADD: YOUR FIRST NET PAYCHECK BEFORE ADD BACKS ON 401K D. 0

AMOUNT LEFT OVER FOR FUTURE SPEND A. + B - C + D $0

VALUE OF INVESTMENT IN 401k AFTER 5 YEARS 0

TOTAL AMOUNTS IN EACH BUCKET $0 $0
TOTAL OF BOTH BUCKETS COMBINED $0

 What is a budget?
▪ A budget is probably the single most important process for
achieving your personal goals.
▪ While it is easy to understand, it takes discipline to follow.
▪ It is a guideline to promoting your financial health

 What is in a budget?
▪ All cash inflows (income) and outflows (expenses).
▪ Income: money coming in from work, savings, gifts, parents,
starting your own business, selling assets you no longer use.
▪ Expenses: money going out for things that do not change from
month to month (fixed expenses), as well as money going out for
things that can change (variable expenses).
▪ http://www.pbs.org/your-life-your-money/videos.php

Available for
Income Expenses
Savings

Personal Goals

Help Pay Other
Income the Expenses INVESTING
Community Yourself

Personal Goals

Personal Management 43

Managing money is a critical skill you will need
•Personal finances
•Business finances
•Wise use of a scarce resource
•It really does not grow on trees especially after you’ve
worked for it
Benefits
More funds to use as you wish
Greater responsibility liberates you to do your things
Being able to build financial security over time
B UT ALSO HAVE FUN!


Saving money requires discipline, but is not difficult
•Monitor your spending
•Know your limits of what you can afford
•Need vs Want – REMEMBER!
•Needs are top priority
•Food, Shelter, Basic Transportation
•Wants are luxuries
•DVD’s, Game, CD’s
•Set a budget and adhere to it
•Know how you spend and what you spend with
•Cash is king
•Credit is a tool, but can be dangerous
•Know your limits
•http://www.pbs.org/your-life-your-money/videos.php


Your budget is your plan
•To have fun
•Buy your car, your gas, your
insurance
•Go on a date and buy dinner and a
movie
•To plan for the future
•College?
•Without a plan you will be adrift

 AS A PRACTICAL RULE YOU SHOULD SET ASIDE 7 TO 10% OF
YOUR INCOME TO PAY YOURSELF BACK

 FOR LONG TERM SAVINGS AND INVESTING ANOTHER 7 TO 10%
YOU ALREADY LEARNED HOW TO EASILY DO THIS!
AND HAVE THE GOVERNMENT HELP YOU TO DO IT!

 HELPING THE COMMUNITY TIME IS JUST AS IMPORTANT AS
MONEY!

 LIST YOUR MAJOR VARIABLE EXPENSES THAT
YOU MAY HAVE SPENT OVER THE LAST MONTH

 LIST YOUR MAJOR FIXED EXPENSES THAT YOU
MAY HAVE SPENT OVER THE LAST MONTH

 ARE THERE CLEVER WAYS TO BRING DOWN OUR
EXPENSES BY MAKING OUR FIXED EXPENSES
VARIABLE?

 NAME INSTANCES WHEN CONVERTING TO A
FIXED EXPENSE IS CHEAPER

BUDGET ACTIVITY - 8

BASIC LIVING EXPENSES MONTHLY WEEKLY
AMOUNT AMOUNT
Fixed Expenses:
Savings $ - $ -
Charitie s 0
Rent 0
Utilities 0
Telephone 0
Insura nce 0
Other (list) 0
Total Fixed expenses $ - $ -

Variable Expense s:
Groceries 0
Eating Out 0
Persona l Grooming 0
Car/transportation (ga s, license,parking, 0
bus fare, insurance, mainte nance) 0
Clothing/lanudry 0
Medical care 0
Entertainment (cable TV, movies, dating) 0
CD's, DVD's, video games, etc. 0
Recre ation 0
Sports/hobbies 0
Vacations 0
Books, magazines 0
Gifts 0
Miscellaneous (not covered by above) 0
Total Variable expenses 0 0

Total by Month & Week $ - $ -

GOOD NEWS – YOU MADE IT THROUGH THE FIRST
MONTH OF WORK AT THE LEFT HANDED SNOW
SHOVEL COMPANY – YOU RECEIVED ANOTHER
PAYCHECK!

NOW YOU HAVE A MONTH’S WORTH OF INCOME
TO MATCH A MONTHS WORTH OF EXPENSES

UNIT THREE FINANCIAL RECAP SPENDING SAVINGS 401K
CUP CUP AFTER 5 YRS

AMOUNT CARRIED OVER FROM UNIT TWO A. $0

LESS: ADDITIONAL MONTHLY FIXED & VARIABLE EXPENSES B.

ADD: SECOND NET PAYCHECK C.

AMOUNT LEFT OVER FOR FUTURE SPEND A. - B + C $0

MOVE ALL AMOUNTS LEFT OVER TO THE SAVINGS CUP

VALUE OF INVESTMENT IN 401k AFTER 5 YEARS 0

TOTAL AMOUNTS IN EACH BUCKET $0 $0
TOTAL OF BOTH BUCKETS COMBINED $0

 Do the following:
 A. Prepare a budget using electronic spreadsheet
reflecting your expected income (allowance, gifts,
wages), expenses, and savings.
▪ Track your actual income, expenses, and savings for 13
consecutive weeks. Start this budget today!

 B. Compare expected income with expected expenses.
▪ 1. If expenses exceed income, determine steps to balance your
budget.
▪ 2. If income exceeds expenses, state how you would use the
excess money (new goal, savings).


Now you work it!
How did you do against plan?
Were you over? Under?
Refine the plan and work it until you are comfortable
Do not be afraid to change it
Make it work for you – within reason of what you can afford
Strive for success!

Revisit it often
Be diligent to track what you earn and spend
It does not take long
Tremendous benefit to you

EMPLOYEE
(50 TO 70% MONEY)

OWNER INVESTOR

GREATER THAN 80%+ MONEY

ADVANTAGES:
YOU ARE YOU OWN BOSS AND CAN ENJOY GREATER REWARDS
THE GOVERNMENT GIVES YOU SPECIAL INCENTIVES WHICH REDUCE
YOUR TAXES SIGNIFICANTLY
 YOU CAN REINVEST OR TAKE YOUR PROFITS OUT OF THE BUSINESS ITS
YOUR CALL
 YOU CAN CREATE REAL ENTERPRISE VALUE AND THEN GO AFTER OTHER
INVESTMENTS (SNOWBALL EFFECT)

DISADVANTAGES:
IF YOU FAIL ALL THE RISK IS YOURS
MOST NEW BUSINSESSES ONLY HAVE A 20% SURVIVAL RATE
YOU MAY HAVE TO GO THROUGH SEVERAL ATTEMPTS TO GET THINGS
RIGHT
ALL THE MAJOR DECISIONS RESIDE WITH YOU

THEN WHY DO PEOPLE PUT THEMSELVES THROUGH IT?

You can control your own destiny
You can find your own Work/Life Balance
You choose the people you want to work with
You take the Risks – But Reap the Rewards
You can challenge yourself
You can follow your Passion
You can get things done Faster
You can connect with your customers
You can give back to the Community
You can feel Pride in Something you build

NOTICE UNTIL YOU BECOME BIGGER THE OPERATIVE WORD IS “YOU”


What is Saving? What is Investing?
What is the difference?
And why do I care

You care as it will help you understand how to make more money off the
money you already have!

How do I decide?
Study your options
Define your tolerance for losing money

What is my benefit?
You may be able to earn more money

 What is Saving?
 Saving is where you place your money in a financial institution
and allow it to earn interest
▪ Bank
▪ Credit Union
 Generally earn lower interests rates
 Relatively “safe” investments
▪ Insured by Federal Deposit Insurance Corporation (FDIC)
▪ Maximum of $100,000 insurance
▪ If the institution goes under, you are guaranteed your
investment up to $100k
 You have fairly easy access and liquidity to your cash
▪ Automatic Teller Machine
▪ Branch office


 What is Investing?
 You use your cash to support a business or government
 Fosters growth as permits the recipient to use your cash
 Based on an “expectation” of earning money
 Generally a higher return than a savings account
 How is it different than saving?
 Business
▪ Stocks
▪ May lose value
▪ You could lose your entire investment
▪ Corporate Bonds
▪ Guaranteed, but payout may vary on type
 Government
▪ Bonds
▪ But your return may vary here as well


• Savings vs. Investing
• Risk vs. Reward

Risk vs. Reward

Risk

65

 The decision to Save or Invest – that is up to you!
 It is not an easy decision
 Determine your Risk Tolerance
▪ What are you willing to lose?
▪ What can you afford to lose?
▪ Not sure? Ask questions!
 Get advice!
▪ From whom?
▪ Parents
▪ Professionals
▪ Prospective Investment companies
▪ Study your options!
▪ Decide wisely, based on the above


 The Stock Market
 Buy from a broker
 Invest in companies buy purchasing “shares”
 Mutual or Index Funds
 Types of stocks, all grouped together & managed by someone
 Buy “shares” of the fund
 Insurance
 Generally life insurance
 Bonds
 Assets of a company, backed by the company
 Certificates of Deposit
 Guaranteed return after a specific period of investment


 Borrowed Funds
 Using your word (and sometimes your assets)
to get money
 You must repay it
 What makes up a loan?
 Principle
▪ What you borrow
 Interest
▪ What is costs you to borrow that money
 Term
▪ How long youManagement the money
Personal borrow 68

 Other loan options
 Credit Cards
▪ You have time to repay the amount
▪ Interest is charged
▪ VISA, MasterCard, Discover are examples
 Charge Card
▪ You are expected to pay the amount in full each
month
▪ American Express is most common example
 These options require


 What about my Debits Card?
 Not a loan
 It is CASH as it comes directly from your bank
account!
 Easy to over draw your account
▪ When you take out more money than you have
▪ “Bouncing” checks

 So what is my Credit Report?
 A scorecard on how well you manage your
funds Personal Management 70

 Time Management
 Making sure you can accomplish what you
need to do
 Finding time
 Being efficient and effective


 Project Management for a Goal
 Planning for a goal
 Components to attaining the goal
▪ Resources
▪ Tools
▪ Guide or Plan


 Planning for the future
 College?
 Work?
 Both?
 It is up to you to decide what you will do
 Any requires planning
 Both will brings rewards
▪ Financial
▪ Personal growth
 Make a plan as appropriate!

 C. Develop a written shopping strategy for the Bring
Day 2!
purchase identified in requirement 1a.
▪ 1. Determine the quality of the item or service (using
consumer publications or rating systems).

▪ 2. Comparison shop for the item.
▪ Find out where you can buy the item for the best price.
(Provide prices from at least two different price sources.)
Call around; study ads. Look for a sale or discount coupon.
▪ Consider alternatives. Can you buy the item used? Should
you wait for a sale?

 5. Select FIVE publicly traded stocks from the Bring
business section of the newspaper. Explain to Day 2!

your merit badge counselor the importance of
the following information for each stock:
 A. Current price
 B. How much the price changed from the previous day
 C. The 52-week high and the 52-week low prices
HINT: Go to either…
Wall Street Journal
finance.google.com or
finance.yahoo.com

 8. Demonstrate to your merit badge counselor your
understanding of time management. Do the following:
 A1. Write a list of "to do" tasks or activities that must be done in
the coming week. Prioritize this list in order of importance to you.

Examples of “to do” activities:
Homework time, chore time, and personal projects

 A2. Write a list of “set activities” that are scheduled to happen in
the week. Prioritize this list in order of importance to you.

Examples of “set activities”:
School classes, sports practices or games, jobs or
chores, Scouts, and church or club meetings

 B. Make a seven-day calendar or schedule. Put in your “set Bring
activities”, then plan when you will do all the tasks from your Day 2!

"to do" list between your set activities.
 C. Follow the one-week schedule you planned. Keep a daily
diary or journal during each of the seven days of this week's
activities, writing down when you completed each of the tasks
on your "to do" list compared to when you scheduled them.
 D. Review your "to do" list, one-week schedule, and
diary/journal to understand when your schedule worked and
when it did not work.
▪ With your merit badge counselor, discuss and understand what
you learned from this requirement and what you might do
differently the next time.

 Time Management
 Making sure you can accomplish what you need to do
 Finding time
 Being efficient and effective
 Project Management for a Goal
 Planning for a goal
 Components to attaining the goal
▪ Resources
▪ Tools
▪ Guide or Plan
 Planning for the future
 College?
 Work?
 Both?

Bring
 9. Prepare a written project plan demon- Day 2!

strating the steps below, including the desired
outcome. This is a project on paper, not a
real-life project.
 Examples :
▪ Planning a camping trip
▪ Developing a community service project or a school or
religious event
▪ Creating an annual patrol plan with additional activities not
already included in the troop annual plan
▪ Other ideas that may be interesting to you

 Discuss your completed project plan with your merit
badge counselor.

▪ A. Define the project. What is your goal?
▪ B. Develop a timeline for your project that shows the steps you
must take from beginning to completion.
▪ C. Describe your project.
▪ D. Develop a list of resources. Identify how these resources
will help you achieve your goal.
▪ E. If necessary, develop a budget for your project.

 10. Do the following:

 A. Choose a career you might want to enter after high
school or college graduation.

 B. Research the limitations of your anticipated career
and discuss with your merit badge counselor what you
have learned about qualifications such as education,
skills, and experience.

 Your homework for two weeks from now
is to complete the following requirements:

 Req. 1: Write a Shopping Strategy
 Req. 2: Prepare a 13-Week Personal Budget
 Req. 5: Collect Info for 5 Stocks
 Req. 8: Prepare and Follow a 7-day Schedule
 Req. 9: Write a Project Plan
 Req. 10: Research Career Qualifications

 How to Manage Money – Your Own and
Others’
 How to Save Money
 What is a Budget?
 Uses for planning
▪ To purchase goods and services
▪ To plan for the future
 Uses for monitoring
▪ How well you adhere to the budget
▪ When there is more or less money remaining than

 Budget = Plan
 You figure out what you need and what you
want
 Set up how to achieve the plan
 Track it and work it

 Plan – Why? What for?
 The plan is your self-designed roadmap
▪ You determine what you want
▪ Then devise how to achieve it
 You are in control

• Principal – the amount of money you
“put up”
• Interest – The amount you get
[for “loaning” the bank your money
• Inflation – How much more things cost
than previously

86

• Principal x Interest
• Principal is $100
• Interest is 10% per year [ 0.10]
• $100 x 0.10= $10
Year Principal Interest
1 100 10
2 100 10
3 100 10
4 100 10

• What if the interest is reinvested

87

• 10% Simple Interest
• FDIC
• Bring cups to the “Bank”

88

• Everyone gets a mm
• Eat it, Save it .. Its up to you

89

• 1 mm
• Eat it Save it, its up to you

90

• How many mm do you have?
– 10
– 11
– 12?

91

Another Example ($1000/10%/
10years)
Year Principal Interest P I (Compound) P&I Simple

1 $1,000.00 $100.00 $1,100.00 $1000

2 $1,100.00 $110.00 $1,210.00 $1000

3 $1,210.00 $121.00 $1,331.00 $1000

4 $1,331.00 $133.10 $1,464.10 $1000

5 $1,464.10 $146.41 $1,610.51 $1000

6 $1,610.51 $161.05 $1,771.56 $1000

7 $1,771.56 $177.16 $1,948.72 $1000

8 $1,948.72 $194.87 $2,143.59 $1000

9 $2,143.59 $214.36 $2,357.95 $1000

10 $2,357.95 $235.79 $2,593.74 $1000

92

• Initial Principal = $100
• Interest = $10/year
• This is how your money grows!
Year Principal Interest P+I
1 100 10 110
2 110 11 121
3 121 12.10 133.10
4 133.10 13.31 146.41

• $146.41 vs $100

30

Time to Deposit
10mm
• Bring to the Bank

94

• Interest - 1 mm
• Total is 11

95

• Interest 1.4 mm
• Total is 12.4

96

• Interest – 1.6mm
• Total – 14mm

• What happened?
• Withdraw from the bank

97

• Very Little Principal to Open ($25)
• FDIC – Federal Deposit Insurance
Company (Usually if Bank is a member)
• Demand Account (in Person )
• May have ATM access
• Almost Impossible to Overdraw
(attempt to take more money than you
have)

98

Deposit your money in the
Bank Savings Acccount
• Bring up to the bank

99

• If you want some, come up
now.

• No penalty, but reduce interest
payment

• 1 mm to those who withdrew
• 2mm to those who left

100

Checking Account

• Very Little Principal to Open ($25)
• FDIC Insured (Usually if Bank is a
member)
• Demand Account (Check, Electronic
Access, ATM Access)
• Has Fees
• Need to Balance FREQUENTLY to
prevent overdrafts – lots of $$$ fees
and can be a criminal offense
• Very rare to have interest

101


•Watching your cash is all it takes
•First, track what you earn
•Your chores and allowance
•Your job
•Christmas and birthday money
•Next plan what you expect to spend
•Based on experience
•Categories by type
•Food, Gas, Entertainment, Books, Scouts
•Give each category a set amount you expect to spend
•Then track what you earn and spend
•How well you adhere to the budget
•Where did you over spend?
•Where did you save? (That is, not spend it all?)

Average debt amounts
 The average debt levels for graduating seniors with loans rose almost 82 percent from
1996 to 2008, based on data from the National Postsecondary Student Aid Study,
conducted by the Department of Education every four years. Students at private for-profit
colleges borrowed the most in 2008.

 How to avoid borrowing
 • Opt for a community college for two years and then transfer to a four-year
institution, or attend an in-state public university.

• Fill out the Free Application for Federal Student Aid, or FAFSA, as soon as
possible after Jan. 1 for each coming academic year to determine your eligibility
for need-based assistance, which doesn't need to be repaid. Take advantage of
all grant, scholarship, and work-study opportunities.

• Choose thriftier meal plans and housing if you can. Don't take out loans to
cover such nonessentials as entertainment and room furnishings. Consider
working part-time to cover incidentals.

• If you must borrow, avoid using private loans except as a last resort, even
though their interest rates may be lower than federal loans now. That's because
federal loans issued after July 2006 have a fixed rate of 6.8 percent, while most
private loans have variable rates often tied to the London Interbank Offered
Rate (LIBOR). Home-equity loans, which may be cheaper now, are also riskier
because they can cost you your home if you default.

A good rule of thumb is that your total education debt for your entire
college education should be less than your expected starting salary
after you graduate

Ideally your student loan debt should be less than half your expected
starting salary

Other signs of over-borrowing include borrowing more than $10,000 for
each year in school or needing to borrow private student loans.

If you borrow more than twice your expected starting salary, you will be at
high risk of defaulting on your debt.

You can’t get away from this debt, as the federal government has very
strong powers to compel repayment. The federal government can
garnish up to 15% of your wages and intercept your income tax refunds
without a court order.

student loan default on your credit history will make it more difficult to get
credit cards, auto loans, home mortgages. It can even affect your ability
to get a job or rent an apartment.

Student loans are almost impossible to discharge in bankruptcy. A
successful discharge requires demonstrating undue hardship in an
adversary proceeding, a very harsh standard

Of roughly 72,000 borrowers in bankruptcy in 2008, only 29 had all or part
of their federal student loans discharged. That’s 0.04%

 67% OF STUDENTS WHO GRADUATED IN 2012 HAVE THEM

 ON AVERAGE $26,000 OF DEBT

 EXCLUDES LOANS THEIR PARENTS MAY HAVE TAKEN

 USE FEDERAL STUDENT LOANS
▪ LOWER INTEREST RATES
▪ BORROWER PROTECTION IS GUARANTEED

 FOR THE FIRST TIME THE AMOUNT OF STUDENT DEBT OWED BY AMERICANS
EXCEED CREDIT CARD DEBT

 ONE STUDENT COMPARED IT TO A PRISON SENTENCE

 AVERAGE DEFAULT RATE IS ALMOST 9%

 FOR HIGHER LOANS OVER $40,000 THAT JUMPS TO ALMOST 15%

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