“The entire essence of America is the hope to first make money—then make money with money—then make lots of money with

lots of money.”

Paul Erdman

FINANCIAL MANAGEMENT

Personal financial management: the process of controlling your income and your expenses

FINANCIAL MANAGEMENTIncome

• Income: money coming in

• Income may come from:– Parents– Grants– Student loans– Job

• After college, your income most likely will increase

FINANCIAL MANAGEMENTExpense

• Expense: money going out• Common college expenses include:

– Tuition– Text books– School supplies– Housing– Transportation– Hobbies and entertainment

• These are life needs

PERSONAL FINANCIAL MANAGEMENT AFFECTS WORK PERFORMANCE

• Finances help you reach life goals

• Keep debt under control

• Begin a savings and investments plan now

• Protect yourself from identity theft

• Personal financial management can affect your work situation

YOUR PAYCHECK• Do not overdo spending

• Now is the time to manage your money

• Create a budget to help you reach your goals

• Financial success begins with discipline and planning

MONEY MANAGEMENTBudgeting

• Budget: a detailed financial plan used to allocate money for a specific time period

• Reflects your goals

• Controls and prioritizes spending

• Be honest and precise when creating a budget

MONEY MANAGEMENTCash Management

• Cash management is the key to good budgeting

• Carry a small amount of cash

• Be careful about using debit cards

• Reduce trips to the ATM

• Write checks instead of using cash

• Record all transactions

MONEY MANAGEMENTSteps to Creating a Budget

1. Identify goals

2. Attach financial goals to personal goals

3. Determine monthly income (money in)

4. Determine monthly expenses (money out)

– Budget on a monthly basis

– Keep track of all spending

– Reduce money wasters

MONEY MANAGEMENT• Fixed expenses: expenses that do

not change from month to month

• Flexible expenses: expenses that change from month to month

• Money wasters: small expenditures that you do not realize are actually using up a portion of your income

WISE USE OF CREDITManage Your Credit

• Managing credit is the best way to stay out of debt

• Do not abuse the privilege of credit and credit cards

• Spend wisely and pay off the balance each month

• Use credit only for items you can afford

• Try to stay away from taking out loans

TALK IT OUT

Identify potential terms and conditions that you should consider before getting credit from a lender

DEBT MANAGEMENT

• Debt management involves:– Debt

– Interest

– Net worth

– Assets

– Liabilities

DEBT MANAGEMENTDebt, Loans, and Interest

• Debt: money you owe– Debt vs. expenses

• Debt is usually a larger amount of money that is paid over a period of time

• Expenses are bills that come regularly

• Loan: a large debt that is paid in smaller amounts over a period of time and has interest added to the payment.

• Interest: the cost of borrowing money– This is extra money paid to the lender

DEBT MANAGEMENTTotal Net Worth

Total Assets – Total Liabilities= Total Net Worth

Assets: what you own Car, home, furniture

Liabilities: what you owe Car loan, home loan

Net worth: the amount of money that is yours after paying off debt

DEBT MANAGEMENTSteps to Get Out of Debt

• Do not create additional debt

• Prioritize your debt

• Pay off the smallest amount or the amount with the largest interest first

• Take the extra cash from a paid-off debt and apply it to the next debt on your priority list

TALK IT OUT

• What are warning signs that you may be getting into debt?

CREDIT REPORTS• Credit report: a detailed credit history

on an individual– Details credit cards and loans you have– Shows if you have paid debts on time and if

you are late with payments– Includes all personal identification

information– Previous names, addresses, and employers– Liens, foreclosures, or bankruptcies will

show

SAVINGS AND INVESTMENTS

• Do not wait• Rule of thumb: Have at least five

months’ income saved for emergencies

• Have savings in a bank• Determine if you should use a regular

savings account or a Certificate of Deposit

• Start investing now

IDENTITY THEFT• Identity theft is when another individual

uses your personal information to obtain credit in your name

• Prevent by:– Disposing of junk mail properly– Shred or cut up any mail that includes your

social security number, date of birth, credit card numbers, etc.

– Keep copies of important information in a safe place

IDENTITY THEFTTips to Remember

• Do not give out your social security number over the telephone or Internet without verifying the authenticity of the company and individual requesting the information

• Document all important numbers and keep them in a safe place

• Practice good personal financial management• Remove your name from credit card and

marketing lists

IDENTITY THEFTIf You Become a Victim of Identity Theft• File a police report• Contact your bank, credit card companies,

and cell phone provider• Do not change your social security number,

contact the Social Security Administration Fraud Department

• Contact the credit reporting agency fraud lines• Document everything you do