avoiding financial trouble prince william area financial education program

Avoiding Financial Trouble

Prince William AreaFinancial Education

Program

Financial Management

From Cradle to Grave…

Start

Money Problems Involve

Lack of Planning Value Conflict Unrealistic Goals Emotional Uses of

Money Needs

vs Wants

4

Setting Goals

Clearly define your goals– Personal, financial, career,

social, etc.

Goals should– Be measurable– Have a time frame (deadline)– Be visual

5

Five Leading Causes of Overspending

5 - Thinking That Money Can Buy Happiness

4 - Wanting Only the Best for Your Children

3 - Trying to Keep Current

2 - Taking Out Car Loans

1 - Abusing Credit Cards

Credi

tors

OOF!

6

Why?

$2,000 Times .02 = $40

Credit Card Issuers often require a minimum monthly payment of 2% to 3% Payment

Interest

Principal

InterestRate

18.5% divided by 12 = 1.54%

$40 - $31 = $9

$2,000 times 1.54% = $31

7

Tips on Debt Bad Debt

– Borrowing for Consumption

From Personal Finance For Dummies™, 2nd Edition by Eric Tyson. Copyright © 1996 by Eric Tyson. All rights reserved. Reproduced here by permission of IDG Books Worldwide, Inc. …For Dummies is a registered trademark under exclusive license to IDG Books Worldwide, Inc., from International Data Group, Inc.”

Good Debt – Borrowing for Long

Term Investment

Slims’s Diner

8

Dealing With Too Much Debt

HIGHPriority Debts

LowPriority Debts

Housing related - including utilities & condo or association fees Food Transportation Insurance Taxes

Credit cards Other “consumer” loans Doctor and hospital bills Professional services

9

Tips on Saving

Pay Yourself First!– Treat Savings as a Fixed Expense– Try to Save at Least 5% - 10% of your Gross

Salary Build up 3 to 6 Months of Living

Expenses– Liquidity Account (safety)

Start Investing

10

Investing – “The Market”

Bull & Bear

Markets

11Source:www.ricedelman.com 11/05/01

12

Beware of Percent Comparisons

Start Change ResultGrowt

h       

$1,000

+$1,00

0 $2,000100.0

%       

$2,000 -$1,000 $1,000 -50.0%

13

S&P 500 Stock Index vs. 6% Annual Return - 1971 to 2003 – Cumulative

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32

$10,000 Initial Investment

Do

llar

s

$281k

$463K

Years

$355k

$68k

14

S&P 500 Stock Index 1971 to 2003% Change in Value by Year

$10,000 Initial Investment

0.4

0.6

0.8

1

1.2

1.4

1.6

15

Procrastination(Waiting to Start)

22 30 6531

$18,000

9 Years

$70,000

35 Years

Age$2,000 per Year at 9%

$579,488

$470,249

Jack

Jill

16

Income and ExpensesLiving Within Your Means:

Spend Less Than You Earn Save What You Do Not Spend Invest What You Save

Income

Expenses

17

Some Final Thoughts

Delayed gratification Acceptance of

responsibility Dedication to truth Balance