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Money 101 | finance-lectures.com 1
Personal money flows
Daniel Folkinshteyn, PhDhttp://finance-lectures.com/[email protected]
Money 101 | finance-lectures.com 2
Learning objectives
Describe personal money flows Explain saving and borrowing Distinguish between good and bad debt
Money 101 | finance-lectures.com 3
Money flows
Inflows
-Outflows
=Surplus/shortfall
Money 101 | finance-lectures.com 4
Inflows
Money you generate via productive activities during a period of time (month, year)
Sources of income: Trading time for money (wage/salary) Entrepreneurial activity (business profit) Passive investment income (interest, dividends)
Money 101 | finance-lectures.com 5
Outflows
Taxes Current spending Past spending (debt repayment)
Money 101 | finance-lectures.com 6
Surplus/shortage
Surplus
Save for future
Invest
Give it away
Shortage
Spend down savings
Borrow money
Money 101 | finance-lectures.com 7
Money flows
Income
stuff
Debtother people
Assets other people
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Present vs future
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Quiz 1
Which of the following are good reasons to borrow money?
Pay for education to improve future earnings Pay for computer to be more productive Pay for new car to replace your old but still
good car Pay for house to reduce your future housing
expenses
Money 101 | finance-lectures.com 10
Quiz 1 - answer
Which of the following are good reasons to borrow money?
Pay for education to improve future earnings Pay for computer to be more productive Pay for new car to replace your old but still
good car Pay for house to reduce your future housing
expenses
Money 101 | finance-lectures.com 11
Good vs. bad debt
Borrow to consume
Borrow to invest
Money 101 | finance-lectures.com 12
Additional reading
Search for "avoiding debt" using your favorite internet search engine.
Money 101 | finance-lectures.com 13
Attributions
All images, unless otherwise noted, are sourced from pixabay.com or Wikimedia Commons, and are licensed under CC0, public domain.