Personal Finances

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Personal Finances. Why Study Personal Finance. To help prepare for your future To help you make decisions – the decisions you make now can greatly affect the decisions you have to make in the future Choices have consequences (both positive AND negative) To have an advantage over others - PowerPoint PPT Presentation

Text of Personal Finances

  • PERSONAL FINANCESD R A F T

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  • Why Study Personal FinanceTo help prepare for your futureTo help you make decisions the decisions you make now can greatly affect the decisions you have to make in the futureChoices have consequences (both positive AND negative)To have an advantage over othersMore & more it will be up YOU to provide for personal needsThe amount that companies/government, etc. are providing for retirement & benefits is decreasing.D R A F T

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  • Financial PlanningFollow itStick with itUpdate it

    Like your resume, your financial plan is a lifelong resource that changes as you change.D R A F T

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  • Financial PlanWrite down what you spend for several weeksDetermine where your money goesDevelop goals (short-term & long-term)Set a budgetStay on track AND out of debt

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  • ACTIVITY: Setting Financial GoalsSet a short-term goal & a long-term goalWrite objectives (ways you will reach each goal) for each goalEstimate the costSpecify a date in which you want to achieve each goalPost Your Plan!Where you can see it dailyPersonal PortfolioD R A F T

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  • ACTIVITY: Tracking Your SpendingKeep track of your spending for a week by keeping receipts in an envelope (or write amounts on the envelope)At the end of the week, list your expensesExamine your spending & write a one-paragraph summary on how your spending aligns or does not align with your financial goals/planThis information will be used to complete the Budget activityD R A F T

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  • IncomeGross Pay the amount of money paid to you before taxes & deductions are taken out

    Net Pay money you actually receive after taxes & deductions

    DeductionsFederal & State Income TaxHealth InsuranceSocial Security & Medicare (for future benefits)RetirementInvestmentsOther

    Sample Paycheck

    Have checks electronically depositedD R A F T

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  • IncomeWhen you receive a check, pay yourself firstImmediately put a set amount in a Savings AccountThis will help you meet your goalsElectronic deposits will assist with this

    YOUR financial goals are the most important expenses you have!

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  • IncomeForm W-4A form completed when starting a job so that the employer can withhold the correct income tax from your payEmployees should complete a new Form W-4 each year and/or when their personal financial situation changesHow to Fill Out a W-4:http://taxes.about.com/od/preparingyourtaxes/ht/W4.htmForm W-4:http://taxes.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=taxes&cdn=money&tm=70&gps=361_279_1419_665&f=10&su=p284.9.336.ip_p504.1.336.ip_&tt=7&bt=1&bts=1&zu=http%3A//www.irs.gov/pub/irs-pdf/fw4.pdf

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  • IncomeForm W-2Every employer engaged in a trade or business who pays remuneration for services performed by an employee must file a Form W-2 for each employee from whom income, social security or Medicare tax was withheldW-2s must be sent to the employee by January 31 of each yearThe W-2 received by the employee is used to file Federal Income Tax formshttp://taxes.about.com/od/formw2/a/IRSFormW2.htm

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  • Sample W-2 FormContains your tax information for one job in one yearYoull receive one for each job you worked at during the yearD R A F T

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  • IncomeFederal TaxesHelps pay for programs such as highways, law enforcement, etc.Required to file every yearMay get back most taxes paid Form 1040-EZState TaxesHelps pay for programs sponsored by the stateRequired to fileMay get back taxes paid

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  • ACTIVITY: Completing a Form W-4Complete Form W-4.http://taxes.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=taxes&cdn=money&tm=70&gps=361_279_1419_665&f=10&su=p284.9.336.ip_p504.1.336.ip_&tt=7&bt=1&bts=1&zu=http%3A//www.irs.gov/pub/irs-pdf/fw4.pdfTurn in for credit.D R A F T

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  • Employee Benefits & PerksBENEFITS - Non-wage compensations provided to employees in addition to their wages or salaryInsurance health, dental, lifeRetirementPaid vacationSick leaveTuitionDaycare HousingTransportation/parkingDisability income protectionProfit sharingOthers

    PERKS benefits of a discretionary natureTransportation/parkingMealsOther

    Source: http://en.wikipedia.org/wiki/Employee_benefitD R A F T

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  • Personal BudgetFixed Expenses NeedsCar loan/payment, upkeep, gasRent or mortgageUtilities Electricity, Gas, Water & Sewerage, PhoneInsurance car, health, rental or homeownerFoodClothing & GroomingSchool loans, tuition & booksSavings short term goals & long-term goalsUnexpected expensesDonations (community, charity) & TithingFlexible Expenses - WantsAdditional ClothingDining outSocial activities

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  • RentingMonthly rental feeUtilitiesElectricityGasPhoneWater & SewerageRenters InsuranceCan be as low as $15/month

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  • OwningA good investmentMust save for a down paymentUsually goes up in valueMay borrow against the equity built up over the yearsAble to deduct mortgage interest & property taxes from income taxeshttp://financialplan.about.com/od/realestatemortgages/a/BuyingaHome.htm

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  • TransportationCarInsuranceGasMaintenanceProblemsBusPay each time you ride

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  • InsuranceA way to protect things you ownCar in case of accident or injuryHealth medical expensesRenters for the items you own even though you are rentingD R A F T

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  • ACTIVITY: Create a BudgetPrepare a budget using your current financial statusTurn inhttp://financialplan.about.com/od/moneyandcollegestudents/l/blcollbudget.htm

    Use the budget calculator to develop a budgethttp://www.bankrate.com/calculators/smart-spending/college-student-budget-calculator.aspx

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  • Financial InstitutionsBankCredit UnionFederally insured FDIC (Federal Deposit Insurance Corporation)

    Check policies on:FeesBalance requirementsOverdraft protectionHours of businessD R A F T

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  • Bank AccountsSavingsCheckingWrite checksUse a Debit CardMay be a monthly feeATM (Automated Teller Machine)Access funds anytimeATM card required (keep your PIN safe & secretive)Must pay a fee which is automatically taken out of your account at the time of withdrawal

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  • Saving & InvestingSavings Account earn simple or compound interestCertificates of Deposit (CDs)need a large amount to begin (~$500)investing more may provide a higher interest ratemust leave money in CDs for a specified amount of timeMoney Market Accountcan write checksearns interestU.S. Savings Bondsgood way to save for higher educationMust be held for a specified period of time or penalties may be charged for cashing in early

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  • InvestingSave earlyEven a small amount invested while you are young makes a tremendous difference later in lifeCompounding InterestMoney invested makes interestThe interest then earns interestMoney accumulates faster than you might thinkIts better to invest a little when you are young rather than waiting to invest more when you are olderD R A F T

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  • Calculate saving/investing $100 per month starting at age 18 for 13 years at an 8% annual rate (compounding interest)Calculate the amount you will have at the age of 65 without investing any other additional amount.http://www.moneychimp.com/calculator/compound_interest_calculator.htm

    Chart Your CourseD R A F T

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  • InvestingStocks ownership in a companyBonds loan moneyMutual Funds money is invested in various ways

    There is some risk but may make more money (reward)The higher the reward, the higher the riskD R A F T

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  • Investing & Money Making Ideashttp://teenmoneycentral.com/2009/07/15/investing-for-teens/http://teenmoneycentral.com/2009/07/15/ways-for-kids-to-make-money/

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  • ACTIVITY: Committing to SavingMake a commitment to invest a portion of your income each month, not matter how little or how much.Write the commitment down.Post it where you can see it every day.Include it in your personal portfolio.D R A F T

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  • LoansInterest is chargedIf you pay more than the required monthly payment, you will pay the loan off early AND pay less interest

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  • Credit CardsUse for emergencies onlyWill help you establish creditCheck the interest rate & yearly feePay the full amount owed EVERY monthStay away from spending up to your credit limitDo not skip payments or make late payments you will be charged extra feesYou will pay interest on what you owe AND interest on the interest you previously paid

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  • ReceiptsKeep all receiptsUse checking account, savings account & Debit Card receipts to balance accountUse credit card receipts to check monthly statements

    Using receipts & checking/balancing accounts helps prevent theft or errors made by the institutionIdentity Theft Example: Sears credit card; over $800 charged on the card over the Internet; checking the receipts against the statement identified this problem; the credit card owner was not held liableCan cause a persons credit to be ruinedD R A F T

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  • Credit ScoreEveryone has oneThe higher the score, the better y