Transcript Personal Financial Literacy What is PFL?

Personal Financial Literacy
What is PFL?
What are some key
terms we need to know?
Who is Dave Ramsey?
“The U.S. economy is
the eighth wonder of
the world.
Americans’ ignorance
of it is the ninth.”
Arthur Levitt
Former Chairman,
New York Stock Exchange
Today’s Teens…
Fewer than half of teenagers polled
understood how to budget
 College freshmen have an average debt
of $1,500 on personal credit cards.
 The average credit card debt for college
seniors is $2,864; a 48% increase from
Freshmen

Today’s Youth…
The average debt of graduating college
seniors including student loans is
$40,000.
 Americans under age 25 are filing for
bankruptcy faster than any other age
group.

Personal Finance

What is personal finance?

process of planning your spending,
borrowing, saving & investing your
money
Just as mechanics, doctors, farmers
& baseball players have vocabularies
unique to their skill or trade,
personal finance has concepts &
terms that must be understood
JARGON
Vocabulary of Personal Finance

Budget

Opportunity costs

things not purchased when money is spent on
something else instead
Income

detailed list of expected revenues & expenditures
All sources of money coming in (wages, gifts, winnings)
Assets
any good of value that you own (home, car, jewelry, TVs)
Vocabulary of Personal Finance

Liquid assets

Liabilities

things you owe – your debt (mortgage, car loan, credit card)
Net worth

things you own that can be easily converted into cash
without significant loss (stocks, bonds, money market)
equals your total assets minus your liabilities
Equity
difference between the market value & amount owed

Liquidity

Real estate

taking a loan to pay of majority of coast of a
purchase- a form of credit (get it now, pay for it later)
Risk

Land & homes or structures attached to the land
Financing

refers to amount of readily available cash you have
access to- including liquid assets
the potential of loss weighed against chance of gain
Insurance
purchased to provide reimbursement in the event of a
financial loss (auto, homeowners, health, life)
Components of good financial plan
1)
Creating a budget- requires understanding of
net worth, income, expenses & taxes
2)
Managing liquidity- includes management of
money & credit
3)
Financing large purchases- how to best buy
a home or car
4)
Managing your risks- involves understanding
and using insurance
5)
Developing an investment plan- using
your money to earn more $ - stocks, bonds, mutual funds
6) Accumulating wealth for retirementdetermining how much to set aside every year you’re
working and investing it to spend after you retire
7) Communicating & keeping recordssharing your financial desires with family members and
recording finances for tax & estate purposes
If you write your financial goals down you will be more
likely to achieve them
Dave Ramsey’s financial terms

Emergency fund

Murphy’s Law

Anything that can go wrong WILL
Investment


cash set aside for unforeseen expenses
anything you put your $ in to get it to
grow and become more $ (mutual funds)
Stupid tax
any purchase or financial decision one
makes that you later realize that was a
dumb choice that cost you
Who is Dave Ramsey?

Dave Ramsey is an author,
financial adviser, radio & TV host

3rd most popular radio show in
country- over 24 million listeners

teaches Financial Peace University
class on personal finance