The document provides tips for personal finance management. It discusses the importance of education for career success, creating budgets and savings plans, investing in assets like real estate that appreciate over time, using insurance to protect assets, and planning for retirement through Social Security, IRAs, 401ks, and estate planning with wills. The key steps outlined are taking an inventory of finances, tracking expenses, preparing a budget, paying off debts, starting savings, and only borrowing to purchase income-generating assets.
2. Finance Facts
U.S. is the largest capitalist country
Secret to capital (money) is SUCCESS!
3. Financial Planning
Secret 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.
4. 6 steps to controlling assets
1. take an inventory of your financial assets
Develop balance sheet. (Assets=liabilities +owners
equity)
List tangible assets
List liabilities
Create income statement
List revenues and expenses
Subtract expenses from revenues
Get you profit
5. 6 steps to controlling assets
2. Keep track of all expenses
List everything you spend money on
Make spending categories
6. 6 steps to controlling assets
3. Prepare a budget
Make budget for food, spending, payments
7. 6 steps to controlling assets
4. Pay off debts
5. Start a savings plan
Save money each month and put in separate account for
bigger purchases
8. 6 steps to controlling assets
6. Borrow only to buy assets that increase in value or
generate income.
Car repairs, health care costs
9. Building Financial Base
Best way to a capitalist system is to have capital to
invest
Planning
Sacrifice
10. Real Estate
A 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.
11. Tax Deductions and
Homeownership
Buying a home is the biggest investment
Government is willing to help
Interest on a home is tax deductible
Location is best way to get optimal return on a home.
12. 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 return
When stock is low, it is the best time to buy
13. Learning to manage credit
Credit 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!
14. Protecting your financial base:
buying insurance
Life insurance
Least expensive form
Whole life insurance
Pure insurance and savings
Variable life insurance
whole life insurance that invests the cash value of the
policy in stocks
Annuities
Contract to make regular payments to a person for life or
a fixed period
15. Protecting your financial base:
buying insurance
Health insurance
Blue Cross Blue Shield
Disabilities insurance
insurance that pays part of the cost of a long-term sickness
or an accident
16. Protecting your financial base:
buying insurance
Homeowners or renters insurance
Can have guaranteed replacement
Other insurance
Most states require automobile insurance
Liability insurance
Protect against getting sued
Umbrella policy
Broad insurance policy that saves you money
17. Planning Retirement
Social Security
Continuous flow of money coming in and being paid out
Old age, survivors, disability insurance program
established by social security act of 1935
18. Planning Retirement
Individual 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 IRA
No up from deductions from taxes but the earnings grow
tax-free when they are withdrawn
19. Planning Retirement
Advantage of IRAs
Cant take money from any type of IRA until 59 ½ years
old without paying 10% penalty
20. Planning Retirement
401k 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.
21. Planning Retirement
Koegh plans
IRA for entrepreneurs
Can invest up to $40,000 per year
Not taxed till withdrawn
22. Planning Retirement
Estate 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.
23. END
Get a financial planner to help if needed.