Transcript Notes/Podcast - Intro to PF

INTRODUCTION TO PERSONAL
FINANCE
LEARNING OUTCOMES

Section 1: What is Personal Finance

Section 2: Money, the American Way

Section 3: You & Money
SECTION 1
WHAT IS PERSONAL FINANCE



Financial Decisions an Individual or Family must
make in order to earn, budget, save, and spend
their money.
Decisions are based on a variety of financial risks
and planning for the future.
Why is it Important?

Teenagers Face small financial responsibilities that
start to creep into their life.
KEY COMPONENTS OF FINANCIAL
PLANNING
1.
You Must ASSESS your financial situation (income,
assets, and liabilities).
2.
Set Money GOALS. Make sure you have a mix of
both short-term & long-term goals.
3.
You MUST write out a detailed plan.

This is your Budget.
4.
Execute your Plan – Discipline & Perseverance
5.
Know Your Money Personality.
6.
Monitor & Reassess your Plan
SECTION 2
HISTORY OF CREDIT & CONSUMERISM

Credit Prior to 1917





Buying things on credit was Uncommon
Illegal for lenders to charge interest rates high
enough to make a profit.
Lending money was not a money making business.
Small loan sharks offered loans at EXTREMELY
high interest rates
After 1920
Consumer demand for big ticket manufactured items
increased.
 Credit laws were relaxed as an attempt to
mainstream alternatives to loan sharks to the
working middle class.

HISTORY OF CREDIT & CONSUMERISM

Great Depression


In attempt to help Americans regain their financial footing
New Deal policymakers came up with mortgage &
consumer lending policies that convinced commercial
banks that consumer credit could be profitable.
WWII Fuels an Economic Recover
Proved to be the most important economic event in the 20th
century.
 Revived the American industry through government
spending and consumption
 War created jobs which provided an increase in income and
a permanent improvement to the standard of living

HISTORY OF CREDIT & CONSUMERISM

Post WWII Consumerism




Birth of the Suburbs
Post-war middle class bought the American Dream with credit.
Learned to borrow money in the midst of prosperity.
Borrowed because they believed incomes would grow.




Incomes grew steadily from 1945-1970
Banks lent more money and borrows paid it back.
Borrowing became normal
Decline into Debt
After 1970, consumer debt skyrocketed b/c people continued to borrow
the same way, but without the post-war well paying jobs.
 Banks were making HUGE profits so they lent more & more.
 Credit Industry became smarter than the borrowers.
 Credit world now resembles the pre-1920 “loan sharks”


Credit System
Now been reformed to accommodate uncertain employment and
income stability (high-risk borrower) INSTEAD of….
 Low Risk Borrower that had rising wages and stable employment.

TODAY’S REALITY

Many Families only have the appearance of being
financially secure.
Manicured Lawns, Nice Houses, & New Vehicles are
a Mirage – THEY AREN’T ACTUALLY OWNED.
 Most of these people are in debt



Car Loans, Student Loans, Credit Cards, Mortgage/Homes
Why are American’s not better at managing their
money?

They have never been taught the RIGHT WAY!
DEBT PROFILE
Debt Profile of American Family
Average Credit Card Debt
$15,799
Average Mortgage (Home) Debt
$149,667
Average Student Loan Debt
$32,559
Average Car Loan Debt
$13,125
THIS DOES NOT HAVE TO BE YOUR
FUTURE REALITY
Learning to Manage your money well from the start can
avoid stress and living paycheck to paycheck.
AMERICANS ARE BEING OUTSMARTED



Debt Becoming Profitable has led to our current
debt system.
Americans today, charge more than $1 trillion.
There is nothing wrong with a business turning a
profit – the problem is American’s are being
outsmarted.
1.
2.
3.
4.
5.
We LIKE Stuff!
We are told Debt is NORMAL.
We are taught that we can BUY HAPPINESS
Our debt system keeps us from building wealth.
Become AWARE of it & QUESTION it!
SECTION 3
LEARNING YOUR LANGUAGE OF MONEY



NO ONE is born Financially Smart!
Learning the Language of Personal Finance is
the 1st step to becoming Money Smart.
The language of money is spoken in a vocabulary
of:
Accounting
 Understanding Credits, Debts, assets, and liabilities


You must learn enough to understand your
personal financial statements and communicate
effectively about your finances
LEARNING YOUR LANGUAGE OF MONEY




Knowing the language of money allows you to tell
your money what to do.
Decide where your money is going before you get
your paycheck.
You’ll be able to communicate with bankers,
financial planners, and insurance agents.
Focus on understanding the vocabulary & you’ll
become an expert on your money.
BECOME MONEY SMART
1.
Be comfortable with BASIC Math.

Adding, Subtracting, Multiplying, Dividing, Percents
2.
Start learning the language of money.
3.
Manage your Behavior with Money.
WINNING WITH MONEY
1.
Survival: Hope that there is enough money to
pay the bills. You work for every dollar you
earn and spend everything you earn.
2.
Comfort: have a basic understanding of money
management, you have a SMALL monthly
surplus, you learn to save and invest – slowly
building wealth.
3.
Secure: Instead of saving and investing a
small surplus, you arrange your finances that
wealth generates your income. You MAKE your
money work for you!
HOW YOU VIEW MONEY MATTERS
WINNING WITH MONEY
80% Behavior & 20%
Knowledge
DISCUSSION QUESTIONS:
1.
Can you think of a financial goal you have at this moment? Is this a
long-term or short-term goal? Describe your plan to achieve this
financial goal.
2.
In what ways could you become better when it comes to managing
your money?
3.
Why is it important to set money goals?
4.
In what ways are people different when it comes to managing
money?
5.
What can you do to make sure your future financial reality does not
include debt?
BE SURE TO ANSWER THESE QUESTIONS – IN DETAIL – AND
UPLOAD YOUR RESPONSES TO THE NOTES/PODCAST
ASSIGNMENT ON CANVAS.