Transcript Ten Sound Money Management Principles for Students

Ten Sound Money
Management Principles for
Students
PPT Developed by Barbara O’Neill, Ph.D., CFP
Revised & presented by Jean Lown, Ph.D.,
Family, Consumer & Human Development, USU
[email protected]
What are Your $ Questions?
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PPT on FPW website
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Money Management Principles
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Are timeless and time-tested
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Apply to everyone
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Work well in up & down economies
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Help people grow wealthy over time
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Need to be taught in school
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1. Go For The Goal
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Goals provide a “why” for saving
Use goals to develop action plans
Break goals into benchmarks
Make your goals SMART
– Specific
– Measurable
– Attainable
– Realistic
– Time-Related
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Invest in your Human Capital
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Get a solid education
– For career satisfaction
– For better health
– For higher lifetime earnings
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It’s OK to borrow for education
– There is an opportunity cost to taking too long to
earn degree
– Student loans are better than credit cards
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2. Time Is Your Friend
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Time: a young person’s biggest asset
Compound interest is awesome
For every decade that savings is
delayed, the required investment triples
Example: $500,000 at 65; 10% yield
– Age 25: $
79 per month
– Age 35: $ 219 per month
– Age 45: $ 653 per month
– Age 55: $ 2,141 per month
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More About Time
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Time diversification reduces investment
volatility
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The Rule of 72
– 72/interest rate = doubling period
– 72/doubling period = interest rate
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Advantage calulators
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3. Live Below Your Means
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Spend less than you earn
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Create a spending plan
– Income = Fixed Exp (including savings) +
Flexible Exp + 1/12 of Occasional Expense
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Distinguish needs from wants
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“Step-down principle”
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Automate savings so money isn’t spent 8
4. Establish Emergency Fund
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Aka contingency fund
– Online savings accounts
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No minimum
FDIC insured
4.5% (varies)
Linked to checking account
– HSBC
– Emigrant
– ING & many others
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Pay Yourself First: Automate
Your Savings
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Tax-deferred employer plans
– Get full 401(k) match from employer
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Employer credit unions
Savings bond purchase plans
Mutual fund Automatic Investment Plan
Direct stock purchase plans
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Utah Saves
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http://www.utahsaves.org/
Build wealth, not debt
Saver Strategies
Get out of debt
Earned income tax credit
Free income tax preparation
Individual Development Accounts
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5. Buy Insurance According to
“The Large Loss Principle”
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Magnitude- not frequency- of losses
Increase deductible to save $
Spend premium dollars on large
potential losses:
– Liability
– Disability
– Destruction of home
– Large medical expenses
– Loss of household earner’s income
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6. Low Income Saver’s Credit
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Refundable tax credit up to
$1,000/person
Contribution to retirement account:
IRA, 401(k), 403(b), or SEP
Couple filing jointly AGI: $50k or less
Single with AGI: $25,000 or less
Sliding scale: 10-50% of contribution
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7. Repay Debt Quickly and
Borrow For Less
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Consumer debt ratio < 15% of net pay
Consumer debt + housing < 50% of net
High debt makes other problems worse
Negotiate lower interest rates
Always pay more than the minimum
Avoid “perma-debt”
Pay promptly to avoid late fees
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Family Life Center PowerPay analysis
8. Earned Income Tax Credit
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Refundable tax credit for workers
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9. Vita tax prep
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Provided by USU accounting students
in Business building- starts Feb.
AVOID instant tax refunds
– High cost loans (similar to payday loans)
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Auto deposit
Split your refund
– Save a portion, pay debt, spend
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9. Buying House/Vehicle
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Don’t buy more house than you can
afford (Subprime mortgage meltdown)
– Don’t’ trust mortgage broker
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Don’t buy before you are really ready for
the financial commitment
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Buy new cars every 8-10 years or buy
“new used”
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Check Your Financial Health
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Take the Financial Fitness Quiz
– http://njaes.rutgers.edu/money/ffquiz/
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Least common practices
– Not having a will
– No written financial goals
– No written budget
– No net worth calculation
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Financial Education Resources
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Investing For Your Future
– Home study course
– http://www.investing.rutgers.edu/
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Money 2000 & Beyond
– http://www.rce.rutgers.edu/money2000
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RU-FIT financial independence training
– http://www.rce.rutgers.edu/ru-fit/
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USU Extension
– http://extension.usu.edu/
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Spend Less,
Enjoy the Holidays More
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http://extension.usu.edu/htm/news/articl
eID=2361
Start a UESP account for your kids
Spend time with important people
Avoid gift cards
– High fees, money can’t be saved
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Pay cash! Avoid debt.
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Small Steps to Health & Wealth
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http://njaes.rutgers.edu/sshw/
“This program is designed to motivate
consumers to implement behavior
change strategies that simultaneously
improve their health and personal
finances.”
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Personal Finance Magazines
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Kiplinger’s Personal Finance Magazine
– Kiplingers.com
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Money Magazine
– Money.com
– Money 101 on-line financial mgmt course
• http://money.cnn.com/pf/101/
• 23 lessons
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FCHD 3350 Family Finance
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Personal Financial Management
DSS general education
Fall & Spring semesters
– Live and on-line
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Don’t leave campus without this class!
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The Financial Checkup by Alena Johnson
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USU Family Life Center
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Very low cost financial & housing
counseling
PowerPay Debt reduction computer
analysis https://powerpay.org/
First time homebuyer workshops
797-7224; 495 North 700 East, Logan
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Financial Planning for Women
http://www.usu.edu/fpw
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For women of all ages & knowledge
Second Wednesday (except December)
– 12:30-1:30 in Family Life room 318
– 7-8:30 pm in Family Life Center
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Email list: [email protected]
– Monthly e-news & program info
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Sign up sheet for FPW
PPT will be posted on the website
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Avoid Common Mistakes of Young
Adults
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Buying a house before you are ready
Buying too much house
Putting too much $ into vehicles
Keeping a balance on your credit cards
Waiting to invest for retirement until…
Not considering the cost of kids
Spending too much on eating out
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Closing Thought
“If it is to be,
it is up to me”
Comments? Questions? Experiences?
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