Escolar Documentos
Profissional Documentos
Cultura Documentos
Overview
Objectives:
Introduction
Your financial health determines standard of living.
Basic human needs include food, clothing,
transportation, and shelter.
Lifestyle choices include hobbies, travel, career,
entertainment, vehicles and homes.
Although shelter is a basic human need, our
choice of a home is often a lifestyle choice.
The ability to afford a preferred lifestyle is
financial independence.
Record Keeping
Critical documents need to be stored safely.
Examples of common financial records:
Home Files
Electronic Files use to store you
electronic records.
Safety Deposit Boxes
Brainstorm
Brainstorming is the process of generating
ideas without censoring your thoughts.
To brainstorm get a pad of paper and a
pen and write down any thoughts that
come to mind.
Dont censor your thoughts.
Then go over your list of ideas and select
the ones you would like to turn into goals.
Specific
Measurable
action orientated
realistic
Time focused
Example 2.1
Becky Shuet is a 21 year old college student
from Enid, Oklahoma. She still lives at
home with her single mother and she
works part time at Masons Auto Parts.
She started her financial plan in the spring
semester of 2009. She plans to graduate
with a B.A. in accounting in May of 2011.
She set the following goals for herself:
Mid-Term Goals
3. Accumulate $5,000 in my savings account by May of 2011. The money will
be used for moving expenses to get my own apartment after graduation. I
will save for 26 months. I currently have $400 dollars in my account, so I
need to save an additional $4,600. I need to save $177 a month.
4. Buy a home 2 years after I graduate. I will need to save $10,000 between
2011 and 2013 to pay for the down payment and closing cost. I plan to buy a
small house for about $100,000. I will put 5% down. I will save $417/month
from my salary from my first full time job after graduation.
Notice Beckys short term goals are more specific than her long term goals.
Since she is still a college student she doesnt know what her future income
or expenses will be. Still she set clear goals in the long term. Each year as
she works toward her goals and revises them she will be able to become
more specific with her long term goals. Even though her long term goals
dont set an exact amount for her 401K, she will be better prepared to make
wise decisions when she first starts out on her own. Instead of spending the
maximum amount she can afford on an apartment or buying a new car
immediately, she will be thinking about her retirement and saving to buy a
house. Her goals will help her avoid some of the common pitfalls of
overspending in the first years of her career.
Example 2.2
Becky currently has a Roth IRA. She started with
$2500 she had in a savings account when she
graduated from high school. Since the stock market
is currently so volatile she has $1500 in money
market account and $1034 of it in a mutual fund.
Her account pays 1.05% interest on the money
market account and the mutual fund fluctuates with
the stock market. Assume she can average 7% on
the mutual fund for the next 4 years. How much will
Beckys Roth IRA be worth when she can afford to
start making contributions to it again?
PV = $1,500
i = 1.05%
n = 4 years
PV(1 + i)n = FV
$1,500(1 + .0105)4 = $1,564
PV = $1,034
i = 7%
n = 4 years
$1,034(1 + .07)4 = $1,355.36
Solution:
$2,919.36(1 + .10)35 = $82,041.13
Beckys Roth IRA is worth
$1,565,705.79 + $82,041.13 = $1,647,746.92
Personal Financial
Statements
Balance Sheet
Income
Paycheck
interest on savings accounts
unemployment benefits
child support
alimony
Record your net income.
Net income is your gross income minus taxes and
other paycheck deductions.
Record what you receive.
The cash flow statement records actual amounts
received, not estimated amounts.
Expenses
fixed expenses -- dont change from
month to month
Mortgage payments
car loan payments
To Create a Budget
Start with last months cash flow statement and your written
goals.
Add a line item for each of your goals and record the dollar
amount per month.
If you have a goal of saving $50 a month to build an
emergency fund, then add Savings for emergency fund, as a
fixed expense.
Once you add your goals, recalculate your net income.
If your net income is still positive or zero you can afford your
current goals.
If your net income is negative you need to readjust your goals
and/or your spending.
View Beckys example balance sheets found on the web
component under the Resources > Sample Excel Sheets link.
Characteristics of a Good
Budget
Well-planned
Practical
Open to the family
Flexible
Buy Used
Buy Staples
Make Gifts
Go Back to the Basics
Shop Off Season
Shop Thrift Stores and Garage Sales
Use Coupons
Buy Generics
Play Together
Savings Accounts
Money Market Accounts
CDs Certificates of Deposit
IRAs
Roth IRAs
Money Market Funds
Mutual Funds
Bonds
Stocks