Transcript Who Earns More Money?

Personal
Finance
James B. Wilcox
RESOURCES PROVIDED BY:
THE UNIVERSITY OF SOUTHERN MISSISSIPPI
CENTER FOR ECONOMIC AND ENTREPRENEURSHIP EDUCATION,
MISSISSIPPI STATE UNIVERSITY, VIRTUAL ECONOMICS,
NATIONAL COUNCIL ON ECONOMIC EDUCATION, THE MOODY’S FOUNDATION
Who Earns More Money?
Who Earns More? Round 1
• Bartender
(Nevada)
• Taxi Driver
(New York)
Bartender or Taxi Driver?
A. Bartender
B. Taxi Driver
Who Earns More?
• Bartender
(Nevada)
$20,430
• Taxi Driver
(New York)
$26,800
Job Duties
Bartender:
Mixes and serves alcoholic and
nonalcoholic drinks to patrons of bar,
following standard recipes: Mixes
ingredients, such as liquor, soda,
water, sugar, and bitters, to prepare
cocktails and other drinks. Serves
wine and draught or bottled beer.
Collects money for drinks served.
Orders or requisitions liquors and
supplies. Arranges bottles and
glasses to make attractive display.
May slice and pit fruit for garnishing
drinks. May prepare appetizers, such
as pickles, cheese, and cold meats. May
tend service bar and be designated
Service Bartender.
Taxi Driver:
Drives taxicab to transport passengers for
fee: Picks up passengers in response to
radio or telephone relayed request for
service. Collects fee recorded on taximeter
based on mileage or time factor and
records transaction on log. Reports by
radio or telephone to TAXICAB STARTER
on completion of trip. May drive limousine
or custom-built sedan to pick up and
discharge airport passengers arriving or
leaving on scheduled flights and be
Designated Chauffeur, Airport Limousine.
Job Requirements
Bartender
-Bartending school
-32 hours of training
-Many states require
bartenders to be
certified in Serve Safe
Alcohol program.
-May require other
certification.
Taxi Driver
-Regular automobile
driver’s license
-May need a taxi driver
license, aka “hack”
license
-May require 80 hours of
classroom instruction
Who Earns More? Round 2
• Miner
(West Virginia)
• Taxi Driver
(New York)
$26,800
Miner or Taxi Driver?
A. Miner
B. Taxi Driver
Who Earns More?
• Miner
(West Virginia)
$30,680
• Taxi Driver
(New York)
$26,800
Miner Job Duties
Mines ore, coal, or rock in underground mine, performing any combination of
following tasks in areas where high production equipment is limited by
economic factors or natural formations: Cuts channel under working face to
facilitate blasting, using pick, or by operating cutting machine. Operates
mounted or unmounted power drill to bore blasting holes in working face.
Charges and shoots (sets off) explosives or air charges to blast down
materials. Shovels shattered materials into mine cars or onto conveyor. Installs
timbering, roof bolts, or cribs, to support walls and roof. Lays track to
accommodate mine cars or track-mounted equipment. May mine rock in coal
mine at contract price per ton or footage of advance and be designated Rock Contractor
(mine & quarry). May mine ore, coal, or rock, using pick and shovel, and be designated
Miner, Pick (mine & quarry). When digging passageways between rooms, may be
designated Entry Miner (mine & quarry). May do development work, such as opening up
new passageways, air vents, auxiliary tunnels, rooms, and shafts to facilitate mining, and
be designated Drift Miner (mine & quarry); Raise Miner (mine & quarry); Shaft Sinker
(mine & quarry); Stope Miner (mine & quarry); Tunnel Miner (mine & quarry).
Who Earns More? Round 3
• Miner
(West Virginia)
$30,680
• Police Officer
(New Mexico)
Miner or Police Officer?
A. Miner
B. Police Officer
Who Earns More?
• Miner
(West Virginia)
$30,680
• Police Officer
(New Mexico)
$36,120
Police Officer Duties
Patrols assigned beat on foot, on motorcycle, in patrol car, or on horseback to control
traffic, prevent crime or disturbance of peace, and arrest violators: Familiarizes self with
beat and with persons living in area. Notes suspicious persons and establishments and
reports to superior officer. Reports hazards. Disperses unruly crowds at public
gatherings. Renders first aid at accidents, and investigates causes and results of
accident. Directs and reroutes traffic around fire or other disruption. Inspects public
establishments requiring licenses to ensure compliance with rules and regulations. Warns
or arrests persons violating animal ordinances. Issues tickets to traffic violators. Registers
at police call boxes at specified interval or time. Writes and files daily activity report with
superior officer. May drive patrol wagon or police ambulance. May notify public works
department of location of abandoned vehicles to tow away. May accompany parking
meter personnel to protect money collected. May be designated according to assigned
duty as Airport Safety And Security Officer; Dance-Hall Inspector Traffic Police Officer; or
according to equipment used as Ambulance Driver; Motorcycle Police Officer; Mounted
Police Officer. May be designated: Emergency-Detail Driver; Patrol Driver; Pool-Hall Inspector;
Radio Police Officer; Show Inspector.
Police Officer Job Requirements
Must be able to pass a pre-employment physical and drug screen.
Must be a US Citizen.
Must have a valid New Mexico driver’s license or be able to obtain one.
Must be able to pass a pre-employment physical and drug screen.Education: High
School Diploma or G.E.D. equivalent.
Experience:Prior Law Enforcement preferred (Up to one or more years of experience).
Knowledge:Requires work level knowledge, skills, and abilities related to a broad range
of either complex or technical functions or apprentice level knowledge of a single
function area or work specialization.
Certificates/Licenses:Must complete the State Accredited Basic Academy within first
year.
Recertification:Will certify under Certified Officer when recertification requirements
are needed.
Use of Tools/Equipment:Vehicle, baton, chemical sprays, handgun, shotgun, radar,
computers, radio, handcuffs, breathalyzer, first aid equipment, telephone, tasers
and AED machines.
Who Earns More? Round 4
• Truck Driver – OTR
(Indiana)
• Police Officer
(New Mexico)
$36,120
Truck Driver or Police Officer?
A. Truck Driver
B. Police Officer
Who Earns More?
• Truck Driver – OTR
(Indiana)
$36,940
• Police Officer
(New Mexico)
$36,120
Truck Driver Job Duties
Drives truck with capacity of more than 3 tons, to transport materials to
and from specified destinations: Drives truck to destination, applying
knowledge of commercial driving regulations and area roads. Prepares
receipts for load picked up. Collects payment for goods delivered and
for delivery charges. May maintain truck log, according to state and
federal regulations. May maintain telephone or radio contact with
supervisor to receive delivery instructions. May load and unload truck.
May inspect truck equipment and supplies, such as tires, lights, brakes,
gas, oil, and water. May perform emergency roadside repairs,
such as changing tires, installing light bulbs, tire chains, and spark
plugs. May position blocks and tie rope around items to secure cargo
during transit.
Truck Driver Job Requirements
-Commercial Driver’s license (CDL) (Federal Law)
-U.S. DOT regulations: 21 years old, pass physical once
a year, at least 20/40 eyesight (with glasses), good
hearing, cannot be colorblind, have epilepsy, have
diabetes, or high blood pressure, cannot take
controlled substances, no felony charges, DUIs, and
speak and read English well enough to read road
signs
Who Earns More? Round 5
• Truck Driver
(Indiana)
$36,940
• Electrical Repairer
(Kansas)
Truck Driver or Electrical Repairer?
A. Truck Driver
B. Electrical Repairer
Electrical Repairer Job Duties
Installs and repairs electrical systems, apparatus, and electrical and
electronic components of industrial machinery and equipment, following
electrical code, manuals, schematic diagrams, blueprints, and other
specifications, using handtools, power tools, and electrical and
electronic test equipment: Installs power supply wiring and conduit for
newly installed machines and equipment, such as robots, conveyors,
and programmable controllers, following electrical code and blueprints,
using handtools and voltage tester. Connects power supply wires to
machines and equipment, and connects cables and wires between
machines and equipment, following manuals, schematic diagrams, and
blueprints, using handtools and test equipment. Diagnoses malfunctioning
apparatus, such as transformers, motors, and lighting fixtures, using test
equipment, and replaces damaged or broken wires and cables, using
handtools. Tests malfunctioning machinery, using test equipment, and
discusses malfunction with other maintenance workers,
Electrical Repairer Job Requirements
-Knowledge of electrical equipment necessary.
-May require degree from vocational technical
school (1 to 2 years of training).
-Good eyesight, color perception.
-May need to be certified.
Who Earns More?
• Truck Driver
(Indiana)
$36,940
• Electrical Repairer
(Kansas)
$57,930
Who Earns More? Round 6
• Funeral Director
(Florida)
• Electrical Repairer
(Kansas)
$57,930
Funeral Director or Electrical Repairer?
A. Funeral Director
B. Electrical Repairer
Who Earns More?
• Funeral Director
(Florida)
$48,440
• Electrical Repairer
(Kansas)
$57,930
Funeral Home Job Duties
Undertaker. Arranges and directs funeral services: Coordinates activities of
workers to remove body to mortuary for embalming. Interviews family or other
authorized person to arrange details, such as preparation of obituary notice,
selection of urn or casket, determination of location and time of cremation or
burial, selection of pallbearers, procurement of official for religious rites, and
transportation of mourners. Plans placement of casket in parlor or chapel and
adjusts lights, fixtures, and floral displays. Directs pallbearers in placement and
removal of casket from hearse. Closes casket and leads funeral cortege to
church or burial site. Directs preparations and shipment of body for out-of-state
burial. May prepare body for interment.
Funeral Home Director Job Requirements
-Must be licensed: 21 years old, 2 years of
formal education including mortuary science,
serve one year apprenticeship, pass qualifying
exam. To embalm requires its own license.
-College programs in Mortuary Science include:
anatomy, pathology, restorative art, business
management, grief counseling, business law,
and ethics
Who Earns More? Round 7
• Faller
(Washington)
• Electrical Repairer
(Kansas)
$57,930
Faller or Electrical Repairer?
A. Faller
B. Electrical Repairer
Who Earns More?
• Faller
(Washington)
$64,110
• Electrical repairer
(Kansas)
$57,930
Job Duties
Fells timber trees, applying knowledge of tree characteristics and cutting techniques to
Control direction of fall and minimize tree damage: Appraises tree for characteristics,such
as twists, rot, and heavy limb growth, and gauges amount and direction of lean, using ax
as plumb bob. Determines position, direction, and depth of cuts to be made and
placement of wedges or jacks. Clears brush and debris from work area and escape
route,and cuts saplings and other trees from falling path, using ax and chain saw. Scores
cutting lines with ax, saws undercut along scored lines with chain saw, and knocks slabs
from cuts with ax. Saws back-cuts, leaving sufficient sound wood to control
direction of fall. Inserts jack or drives wedges behind saw to prevent binding of saw and
start tree falling. Stops saw engine as tree tips, pulls cutting bar from cut, and runs to
predetermined location to avoid injury from falling limbs and flying debris. May work on
piecework basis and be designated Busheler (logging). May cut trees into log lengths
[BUCKER (logging)]. Fallers of small timber (generally under 18 inches in diameter) are
classified as FALLER (logging) II.
Faller Job Requirements
-Generally, there are no educational requirements for
forest worker jobs.
-On-the-job training from the logging company
-State logging or forestry associations provide training
sessions for fallers, lead to certification.
-Generally advance from occupations involving
primarily manual labor to those involving the
operation of expensive, sometimes complicated
logging equipment.
Who Earns More? Round 8
• Faller
(Washington)
$64,110
• Sales Engineer
(Illinois)
Faller or Sales Engineer?
A. Faller
B. Sales Engineer
Who Earns More?
• Faller
(Washington)
$64,110
• Sales Engineer
(Illinois)
$73,120
Sales Engineer Job Duties
Sells electronic products and systems and
provides technical services to clients,
performing other duties
Sales Engineer Job Requirements
-A bachelor’s degree in engineering is typically
required.
-A business, chemistry, or other science degree
may be acceptable.
-May have work experience in an engineering
specialty.
-May need training in sales.
Who Earns More? Round 9
• Fashion Designer
(New York)
• Sales Engineer
(Illinois)
$73,120
Fashion Designer or Sales Engineer?
A. Fashion Designer
B. Sales Engineer
Who Earns More?
• Fashion Designer
(New York)
$73,390
• Sales Engineer
(Illinois)
$73,120
Fashion Designer Job Duties
Designs men's, women's, and children's clothing and accessories: Analyzes fashion trends and
predictions, confers with sales and management executives, compares leather, fabrics, and other
apparel materials, and integrates findings with personal interests, tastes, and knowledge of design to
create new designs for clothing, shoes, handbags, and other accessories. Sketches rough and
detailed drawings of apparel and writes specifications describing factors, such as color scheme,
construction, and type of material to be used. Confers with and coordinates activities of workers who
draw and cut patterns and construct garments to fabricate sample garment. Examines sample garment
on and off model and modifies design as necessary to achieve desired effect. May draw pattern for
sample, using sewing equipment. May arrange for showing of sample garments at sales meetings or
fashion shows. May attend fashion and fabric shows to observe new fashions and materials. May be
identified according to specific group designed for, such as men, women, or children or areas of
specialization, such as sportswear, coats, dresses, suits, lingerie, or swimwear. May design custom
garments for clients and be designated Custom Garment Designer (retail trade). May conduct
research and design authentic period, country, or social class costumes to be worn by film, television,
concert, stage, and other performers and be designated Costume Designer. May design, fabricate,
repair, and sell leather articles and be designated Leather Crafter (leather prod.).
May design, copy, or modify clothing accessories and be designated according to article designed as
Handbag Designer (leather prod.); Hat Designer (hat & cap); or Shoe Designer (boot & shoe).
Fashion Designer Job Requirements
-2 year or 4 year degree
-knowledgeable about fabrics, textiles,
ornamentation, fashion trends, eye for color
and detail, sketching ability, good portfolio.
-Coursework may include: anatomy,
mathematics, CAD, textiles, pattern making,
sewing and tailoring and fashion history.
Who Earns More? Round 10
• Fashion Designer
(New York)
$73,390
• Psychiatrist
(Mississippi)
Fashion Designer or Psychiatrist?
A. Fashion Designer
B. Psychiatrist
Who Earns More?
• Fashion Designer
(New York)
$73,390
• Psychiatrist
(Mississippi)
$136,610
Psychiatrist Job Duties
Diagnoses and treats patients with mental, emotional, and
behavioral disorders: Organizes data concerning patient's
family, medical history, and onset of symptoms obtained
from patient, relatives, and other sources, such as nurse,
and social worker. Examines patient to determine general
physical condition, following standard medical procedures.
Orders laboratory and other special diagnostic tests and
evaluates data obtained. Determines nature and extent of
mental disorder, and formulates treatment program. Treats
or directs treatment of patient, utilizing variety of
psychotherapeutic methods and medications.
Psychiatrist Job Requirements
-4 year undergraduate degree
-4 years of medical school
-3-8 years of internship and residency
-Must be licensed – pass exam
-May be board certified
-Course work includes: anatomy, physics,
biology, mathematics, organic chemistry,
pathology, pharmacology, medical ethics
Who Earns More? Round 11
• Secretary of State
Hillary Clinton
• Psychiatrist
(Mississippi)
$136,610
Secretary of State or Psychiatrist?
A. Secretary of State
B. Psychiatrist
Who Earns More?
• Secretary of State
Hillary Clinton
$186,600
• Psychiatrist
(Mississippi)
$136,610
Secretary of State Job Duties
The Secretary of State is responsible for the
overall direction, coordination, and supervision of
U.S. foreign relations and for the interdepartmental
activities of the U.S. Government abroad. The
Secretary is the first-ranking member of the
Cabinet, is a member of the National Security
Council, and is in charge of the operations of the
Department, including the Foreign Service.
Secretary of State Job Requirements
-Nominated by the President
-Confirmed or rejected by the United States
Senate by a majority vote.
Who Earns More? Round 12
• Secretary of State
Hillary Clinton
$186,600
• Anesthesiologist
(Kentucky)
Secretary of State or Anesthesiologist
A. Secretary of State
B. Anesthesiologist
Who Earns More?
• Secretary of State
Hillary Clinton
$186,600
• Anesthesiologist
(Kentucky)
$197,000
Anesthesiologist Job Duties
Administers anesthetics to render patients insensible to pain during
surgical, obstetrical, and other medical procedures: Examines patient to
determine degree of surgical risk, and type of anesthetic and sedation
to administer, and discusses findings with medical practitioner
concerned with case. Positions patient on operating table and
administers local, intravenous, spinal, caudal, or other anesthetic
according to prescribed medical standards. Institutes remedial
measures to counteract adverse reactions or complications. Records
type and amount of anesthetic and sedation administered and condition
of patient before, during, and after anesthesia. May instruct medical
students and other personnel in characteristics and methods of
administering various types of anesthetics, signs and symptoms of
reactions and complications, and emergency measures to employ.
Anesthesiologist Job Requirements
-4 year undergraduate degree
-4 years of medical school
-3-8 years of internship and residency
-Must be licensed – pass exam
-May be board certified
-Course work includes: anatomy, physics,
biology, mathematics, organic chemistry,
pathology, pharmacology, medical ethics
Hillary Clinton
- B.A. Wellesley College
- J.D. Yale Law School
- Professor – School of Law at the University of
Arkansas
- Lawyer – Rose Lawfirm
- First lady of Arkansas
- First lady of the United States
- United States Senator (New York)
- Secretary of State
Who Earns More: Bonus Round
• LeBron James
ProBasketball player
• Angelina Jolie
Actress
LeBron James or Angelina Jolie?
A. LeBron James
B. Angelina Jolie
Who Earns More: Bonus Round
• LeBron James
Pro Basketball player
$27,000,000
• Angelina Jolie
Actress
$27,000,000
LeBron James
High School
-Attended St. Vincent – St. Mary High School, Akron, Ohio
-”Mr. Basketball” Ohio 3 times
-USA Today All-USA First Team
-Gatorade National Boys’ Basketball Player of the year
NBA Basketball
-First overall pick in the NBA draft by the Cleveland Cavaliers
-All Rookie First Team 2004
-6 time NBA All-Star (2005-2010)
-3 time first team All-NBA (2006, 2008, 2009)
-2009 NBA MVP
Angelina Jolie
-Father is actor Jon Voight, Mother was actress
Marcheline Betrand.
-Studied at the Lee Strasberg Theatre Institute at 11.
-Began modeling at 16.
-Won Oscar for Best Supporting Actress in Girl,
Interruputed
-Won 3 Golden Globes, 2 SAG awards
-Goodwill Ambassador for the U.N. High Commissioner
for Refugees (UNHCR)
S
D
How do these incomes relate to Supply and Demand?
Why Don’t People Save?
Lesson 15
The Risky Behavior Mystery
• People usually know what is good for
them, but they often act as if they
don’t know.
• Some people:
– Drive too fast.
– Fail to take medications.
– Go surfing!
• Why would people do things that
don’t seem to be in their interest?
Lesson 15 Visual 1
Why Don’t People Do What They Should Do?
Question
How many of you know that smoking is unhealthy?
How many of you know people--even people your age--who
smoke?
How many of you know that eating foods that are high in transfats,
such as packaged cookies, margarine and peanut butter, isn’t
healthy?
How many of you know people who eat foods that are high in
transfats?
How many of you know that regular exercise provides many
health benefits?
How many of you know people who don’t exercise regularly?
Number of Yes
Responses
Perhaps the answer lies in identifying
the costs and benefits.
• Costs: All the things that have to be given up
when a choice is made.
• Benefits: Gains or favorable outcomes that
make people more satisfied when a choice is
made.
An analogy
• Saving is like smoking, diet
and exercise.
What are the benefits of a eating a
healthy diet and exercising regularly?
•
•
•
•
•
Feel better
Look better
Reduce your risk of heart disease
Reduce your risk of cancer
Boost your life expectancy
Do the benefits of diet and exercise
occur now or in the future?
• Although people may start to feel better right
away, most of the benefits occur in the future.
If people choose a healthful diet and exercise regularly,
are they guaranteed these benefits?
• No.
• Some people may still get heart disease or
cancer, no matter what they eat or how well
they exercise.
• Also, a person engaged in a diet-and-exercise
program could die prematurely from any
number of causes other than heart disease or
cancer.
What are the costs of choosing a healthful diet and
exercising regularly?
• Possibilities include:
– Giving up food that tastes really good.
– Paying dues for membership at a fitness club.
– Spending time on exercise that you could spend in
other ways--napping, reading, gardening,
watching television, playing video games.
Saving
• Saving is income not spent on
consumption or taxes.
• Most people know that starting
to save money at an early age
and saving regularly are good
habits that lead to financial well
being.
• Yet many people fail to save early
and regularly.
• Why?
What are the benefits of saving?
• Ability to attain your goals for the future.
• A feeling of security and satisfaction.
What are the costs of saving?
• Things you could obtain now if you weren’t
saving.
When do the benefits of saving occur?
• In the future.
When do the costs of saving occur?
• In the present.
Psychology – cookie experiment
Instant vs. Delayed gratification
Cookie Experiment
• “Training in self-control has been useful in
helping children interact more effectively with
their peers and perform higher quality
schoolwork. These children also report higher
self-esteem”
• Longer self-imposed delay of gratification
durations in childhood have been linked to later
social, cognitive, and academic competence.
– Children with longer delay of gratification durations at
age four were found better able to plan, think ahead,
use reason, and cope with stress in adolescence, and
they had higher SAT scores in high school.
The Costs and Benefits of Saving
• The costs of saving are
immediate and certain.
– People have to give up things
they could buy now.
• The benefits of saving occur in
the future and are uncertain.
– Events might prevent people
from reaping the benefits of
saving.
Opportunity Cost and Incentives
• Considering the opportunity cost
of spending might change how
people analyze the costs and
benefits of saving.
• Setting goals is an important
factor related to saving.
• Goals act as incentives to save.
• Interest provides another
incentive to save.
Opportunity Cost and Incentives
• What are some things for
which you would like to
save?
Setting Savings Goals
Short-Term
Medium-Term
Savings Goals
Savings Goals
(One year or less) (One to five years)
Long-Term
Savings Goals
(Over five years)
Review
• What is saving?
• How is failing to save like failing
to eat right and exercise?
• What are incentives to save?
• What are short-term, mediumterm and long-term saving
goals?
Credit Cards
Legal Disclaimer
The information contained in this presentation is
provided for informational and educational purposes
only, and should not be construed as financial or legal
advice on any matter. The University of Southern
Mississippi, Mississippi Council on Economic
Education, Southern Miss Center for Economic and
Entrepreneurship Education disclaim all liability in
respect to actions taken or not taken based on any or
all the content presented here. Before acting on any
information or material obtained through this
presentation, we strongly recommend you to seek
advice from a personal financial advisor or
professional legal counsel, as appropriate.
Sound Advice
• 1. Charge only what you KNOW you can afford
to repay
• 2.You pay more when you use your credit card
and keep a revolving balance b/c you pay
interest on your outstanding balance
• 3. Pay your credit card bill in full each month.
If you can’t pay in full, ALWAYS pay more than
the minimum monthly payment
• 4. Don’t spend over your credit limit and wind
up paying special fees
Sound Advice
• 5. Pay your bills on time
– If not you will have late fees, higher APR, lower
credit score
• 6. Learn how to protect your credit rating, it is
your “financial report card”
• 7. Never use one credit card to pay another
(i.e., take out a cash advance on one card to
pay another
• 8. Only have one credit card
Definition of Credit
• Credit is a system of doing business where you
promise to pay at a later date for goods and
services received today
• Credit cards function as a loan
– Using a credit cards means that you are borrowing
money from the issuer
– The charges are unsecured loans that must be
repaid
Card Types
• Credit Card
– A credit card allows you make purchases for which you
are billed later.
• Most allow you to carry a balance from one billing cycle to
the next with interest.
• Typically include a minimum payment each billing period.
– A Charge Card is a special type of Credit Card
• The balance on a charge card account is payable in full when
the statement is received.
• The balance cannot be rolled over from one billing to the
next.
– Debit Cards are not Credit Cards.
• Debt cards allow payment and purchase to happen
simultaneously.
It’s a Fact
• The U.S. has the lowest personal savings rate of any
major industrialized nation.
– 40% of Americans say they live beyond their means
– Current debt-to-income ratio is 135%
• Americans have record credit-card debt
– $874 billion in U.S. credit card debt as of Nov 2009
• Source: www.federalreserve.gov/releases/G19/Current/
• The US has recently seen an over 50% increase in
bankruptcies among people under age 25
– Fastest growing age range for bankruptcies
College Student
Credit Card Statistics
• Over 75% of college students admit to having made
mistakes with their money when they arrived on
campus
– Biggest mistakes were overspending on food,
entertainment, and credit card purchases.
• University Administrators state that they loose more
students due to credit card debt than they do to
academic failure
– Drop-Out Rates
• Academic Failure – 6%
• Debt / Financial Pressure – 8.5%
Budgeting
• We can all benefit from having a clear
understanding of financial needs/wants and
spending habits.
• Create a realistic budget gives a personal plan
for spending a saving money, gives a sense of
comfort and guidance
• Take the time to use the guide on page 2
College Student
Credit Card Statistics
• Credit Card Availability
– Over 92% of college students have a credit card by
their sophomore year
• Only 55% pay off their balance monthly.
• The average balance for college students is $885.
• Over 21% of undergrads owed $3,000–$7,000 on credit
cards
– The average student has 2.8 credit cards.
• Recent Sallie Mae Survey:
– Over 50% of college students surveyed
accumulated $5,000+ in credit card debt
while in school
– Over 33% of college students surveyed accumulated
$10,000+ in credit card debt while in school
How Does this Happen?
• College Students are a Privileged Class
– College students are able to obtain credit cards without a
prior credit history, employment, or a parent’s cosignature.
– Credit card companies are betting on the student’s future
earnings potential.
Why You Should Use Credit Cards?
• Creates Opportunities
– Imposes self-discipline
– Proper use helps establish a good credit rating
• Beneficial for a future house or car purchase
• Free line of credit if you pay your balance monthly
• Convenience and Security
– Accepted across United States and abroad
• Often required to hold a reservation
– Emergency buying power
– Additional form of identification
– Record of purchases on bill statement
Handout 4.2
A Schumer Box
• The Schumer Box was introduced by Senator
Chuck Schumer to make it easier to compare
credit card offers.
A Schumer Box
19.99%
Annual Fees
• An issuer may charge an annual fee for the
privilege of using their card.
• There are many without such a fee
• If your current card has one and you are a
good customer, your issuer will likely waive it
if you ask them
Interest Rates
• Every credit card has at least 4 different
interest rates depending on the types of
transactions
– Purchase
– Balance transfer
– Cash advance
– Default
A Schumer Box
19.99%
A Schumer Box
A Schumer Box
19.99%
APR
• Annual Percentage Rate
– The monthly interest on unpaid credit card balances
– The higher the APR, the more money is paid in interest
• Look for a card with a low APR!
• APRs can be fixed or variable
– Variable APR is based on a published index, like the “prime
rate” plus a few percentage points
– Can change without written notice
– Fixed APRs can be changed with 15 days written notice
U.S. Prime Rate
Grace Period
• Grace period
– If the balance is not paid off each month, interest
is applied to new purchases when they are made
– If the balance is paid off monthly, a grace period is
allowed before interest is charged = Free Credit
• No grace Period
– Regardless of the previous month’s balance,
interest is applied to new purchases as they are
made
A Schumer Box
19.99%
Balance Calculation Methods
• “Average Daily Balance”
– You pay interest on the average balance owed
during the billing cycle
– Creditor figures the balance in your account on
each day and then adds together these amounts
and divides by the number of days in the billing
cycle
• See the handout and answer the questions
Example
• Assume that you received this credit card with a
credit limit of $2,000.
– Assume that you bought a LG 32” LCD HDTV/DVD
Combo at Best Buy as shown below for $1,049
(Ignore sales tax and $49 HDMI cables).
– How long will it take to pay off at the minimum
payment of $35 per month?
• Time = 41.86 Months
• Time = 3.49 Years
– What was the total amount paid?
1 Year
Warranty
• Total = $1,465.36
– TV = $1,049.00
– Interest = $416.36 (39.69%)
• Any late payments would add $39.00+ in interest.
Balance Calculation Methods
• “Adjusted Balance”
– You pay interest on the opening balance after subtracting
the payment or returns
• “Previous Balance Method”
– Interest is only paid on the previous (opening) balance,
regardless of payments made during the month.
• “Two-cycle Average Daily Balance”
– The interest is paid on the current balance as well as the
previous month’s balance, this leads to double finance
charges
– A zero-balance must be held for two months in order to
avoid charges
– This method should be avoided by consumers!
Cash Advances
• Cash advances are cash loans one can get with
a credit card
• Expensive—only use in a true emergency
– Usually requires an up front fee plus 3% of the
advance or a minimum fee
– Higher APR
– No grace period
– Don’t always get to pay it off entirely if you have
revolving credit
Convenience Checks
• Pre-printed checks linked to a credit card
account that are mailed to one’s home
• Act like cash advances
• Shred them before you put them in the trash!
Default Rates
• A default rate has a high APR
• Most issuers apply a default rate if one:
– Makes a late payment
– Misses a payment
– Exceeds a credit limit
– Bounces a payment check
• Some default rates escalate according to the
number of payments missed
Balance Transfers
• Issuers try to get new customers by offering low
introductory rates to individuals who transfer their
balance from another card to theirs
• Find out..
–
–
–
–
Is there a fee?
How long does the “teaser rate” apply?
What is the APR that will replace the teaser rate?
Does the teaser rate apply to both the transferred balance
and new purchases?
– Choose a balance transfer offer only when there is no fee,
has a long-term APR that applies to both the transferred
balance and new purchases
Late Fees
• If a payment is received after the due date, a
late fee will be added to your bill
• Fees often escalate depending on the amount
of the outstanding balance
• Typically range from $15 to $39
• Negatively affects your credit rating b/c the
late payment is reported to the three major
credit reporting agencies
– After one or two late payments
Over-Credit Limit Fees
• Issuers will allow an individual to spend over
their credit limit but a fee will be assessed
every month until the balance is brought
below the credit limit
• $29 to $39 or a tiered fee depending on the
balance
• Default APR may be applied and it might be
reported to the credit agencies
Bounced Check Fees
• If the check you write to pay off your credit
card bounces, you will likely pay a fee of $29
to $39
• Default APR maybe applied and credit
reporting agencies advised
Currency Conversion Fees
• 3% to convert currency on foreign purchases
Pay by Phone Fee
• Some issuers charge $10-$15 to make a
payment by phone
How to
Wisely Choose and Responsibly Use
a Credit Card
Knowing is Half the Battle!
• Understanding how credit cards work will help you
use them effectively. Credit cards can either be
– Short-term high interest loan (“Revolvers”), or
– Short-term interest-free loans (Convenience Users)
• “Revolvers”
– Keep a balance on their account and pay interest on all
their purchases
– Low APR is most important
• Convenience Users
– Pay balances off in full each month
– Long grace period is most important
– Most cost effective
Pay More than the MMP!
• Assuming discontinued use of the card, a
MMP based on 1% of the outstanding balance
plus accrued monthly interest or payment of
$20 whichever is greater, and timely payments
• How long and what is the payoff for the
following?
– $1000 debt, 18% APR, MMP
– $1000 debt, 18% APR, MMP + $10
Look for…
•
•
•
•
•
A low APR
No annual fee
A long grace period (at least 20 days)
Average Daily Balance Method
Low Penalty Fees
Using a Credit Card Properly
•
•
•
Limit yourself to only one card until you know you can trust your manage
it properly
Student loans should be used for tuition, not credit cards
Wants do not equal needs
– “Can I do without this purchase?”
•
Credit cards do not change our socioeconomic status
– Buy only what you can afford to repay each month
•
Always pay off the entire balance….on time
– If you cannot pay the entire balance in a month, stop using the card until it is
paid off
• Make sure you pay more than the minimum balance
•
•
•
•
•
•
Pay more than the MMP asap, don’t wait for the due date
Manage a credit card account like a checking account
Avoid cash advances, convenience checks, and going over your limit
Don’t skip payments…even if your bank says you can
Keep a low credit limit…even if your bank says you can have more
Record all expenses and keep receipts
– Check credit statement for errors
• Notify issuers of change of address
Handling Disputes
• Two Types of Disputes:
– In the case of any unauthorized use:
• Liability Limited to $50
• Notify Bank ASAP – Phone and Written Notice
– In the case of a billing error…
• Notify Bank Within 60 Days
• Include Form on Back of Bank Statement and a Letter
• Letter and Form must include
– Name and Account Number
– Dollar Amount Involved
– Reason for Dispute
– Any Other Clarifying Information
Credit Card Safety Tips
• Secure Your Cards
– Sign card with Signature and “Please See ID”
– Do not leave cards lying around
– Do not give out account number unless making
purchase with a reputable source
• Report Lost or Stolen Cards Promptly
– Keep a list of account numbers and bank phone
numbers in a safe place separate from cards
• Close unused accounts by phone, then in
writing, and then cut up the card
– Note: Closing a card may hurt your credit score
Always a Solution
• If you have an overwhelming debt, it is better to deal
with the problem rather than deny it
• Do not skip a payment
• Pay down higher APRs first
• Stop using the card
• Call the issuer and tell them the problem
• If they offer a more manageable payment plan, get it in
writing
• Increase your monthly income and reduce monthly
expenses
• Contact the National Foundation for Credit Counseling
800-388-2227 or www.nfcc.org to enter a debt
consolidation program
Credit Reports
and
Credit Scores
Credit Reports
• Financial report card reflecting the extent of an
individual’s credit and payment history
– Negative information can stay on for 7 years while bankruptcies
remain for 10 years
– Lenders buy the reports to determine whether they will grant an
individual credit and at what rate
• Three U.S. Credit Reporting Agencies
– Equifax, Experian, and Trans-Union
• Can be obtained for free
– Once per year and after denial of credit
– 877-322-8228 or www.annualcreditreport.com
Credit Scores
• Numeric value obtained from a credit report
– Defines you by a single number
– Quick Screening Mechanism for Lenders
• Low Credit Score = No Credit or High Interest Rates
– Many employers check credit reports
– Most common scoring system is Fair Isaac Corporation (FICO)
•
•
•
•
•
•
•
Scores range from 300-850
National Average = 678
Payment history: 35%
Total amount owed: 30%
Length of credit history: 15%
New credit: 10%
Types of credit: 10%
FICO Scores by Age Group
Your Credit Reflects You
The Impact of Credit Scores
Consequences of
Irresponsible
Credit Card Use
Irresponsible Credit Card Usage Leads to…
• Denial of credit
• High APR b/c of the higher risk
• Universal Default Clause
– Allows an issuer to increase an individual’s APR if they fail
to make a payment to another lender
•
•
•
•
•
Difficulty renting an apartment
Denied employment
Denied financial aid
Higher automobile insurance premiums
High security deposits, e.g., Cell phone, gas,
electronic
Make Good Choices!
• Students should clearly understand that while
credit cards are a great financial tool, they are
also a big responsibility, which require
maturity, consistency and sound financial
management skills so that they can enjoy the
benefits of credit while avoiding the pitfalls.
Identity Theft
Identity Theft
• Occurs when an impostor steals personal
information such as a social security card,
driver’s license, bank account or credit card
number in order to impersonate someone else
• The information is then used to obtain credit,
merchandize, and services using the victim’s
identity
Signs
• A credit card or statement for an account that
was not requested
• A missing statement
– Unauthorized change of address
• Unauthorized changes on the credit card
statement
• Denied credit for no apparent reason
• Debt collectors call and write regarding
purchases you did not initiate
Avoiding Identity Theft and Other
Financial Trouble
• Guard your Social Security Number and other personal
information
– Shred old documents and credit card offers
– Do not carry unnecessary documents/cards
– Do not mail payments from home
• Monitor your Credit Report
– Remove your name from the marketing lists of the three major
credit reporting agencies
– Subscribe to a credit monitoring service
– Avoid business with or loans to friends / family
• Never cosign a loan for anyone
Avoiding Identity Theft and Other Financial
Trouble
• Become familiar with the billing cycles and when
statements should arrive in the mail
• Don’t leave mail in the mailbox and use the Post
Office for outgoing mail
• Use creative passwords—avoid the last 4 digits of
your SSN or your mom’s maiden name
• Only make on-line purchases if the website is secure
and protected by an encryption system
• Place virus protection software on your computer
If you are a victim of
identity theft
• Contact the three major credit-reporting agencies
and ask them to place a “fraud alert” on your file
• Order a free credit report from each of the agencies
and review the reports
• Contact the fraud departments for creditors
• Close the accounts and follow up in writing
• File a police report and ask for a hard copy
• Federal Trade Commission maintains an identity theft
clearinghouse that provides information for victims
– 877-IDTHEFT or www.consumer.gov/idtheft
Auto Insurance: Coverage Types
Time to Pick a Car
and Get on the Road
Closest to the MSRP
(Manufacturer’s Suggested Retail Price)
Without going over – wins!
2005 Honda Civic LX
• Automatic
Transmission
• Dual Zone Air
Conditioner
• Keyless Entry
• Auto Lock Brakes
The MSRP is
$16,975
2005 Mitsubishi Spyder GT
• Automatic, 4-Spd
w/Overdrive &
Sportronic
• V6, 3.0 Liter
• Leather Interior
The MSRP is
$28,944
2005 Hummer H2 SUV
• 7-Spoke Aluminum
• Automatic, 4-Spd HD
• Leather Surfaced
Heated Bucket Seats
• V8, 6.0 Liter Engine
The MSRP is
$53,280
Are You Ready to Drive?
• Ask yourself…
– Do I have a license?
– Is my car registered?
– Am I covered by auto insurance?
Why do I need auto insurance
• It’s the law!
• There are risks you can’t afford to take
• What happens if…
– You’re involved in a crash that causes property damage?
– You hurt yourself or someone else?
– Your car is damaged when you’re not driving it?
(by weather, vandalism or a hit-and-run)
– Your car is stolen?
– Your car breaks down and needs to be towed?
Automobile Insurance: The Basics
What is the likelihood you will be in an
automobile accident?
There are more than 12 million motor vehicle accidents annually
The typical driver will have a near automobile accident one or
two times per month
The typical driver will be in a collision of some type on average
of every 6 years
Crashes are the leading cause of death for ages 3-33
Automobile Insurance: The Basics
Even a minor accident can result in thousands of
dollars in damages
•Damage to your car
•Damage to other cars involved
•Medical Bills
•Lost wages
•Pain and suffering
•Prosecution
•Legal Fees
•Fines
Automobile Insurance: The Basics
If you are in an accident how do
you pay for it?
Bank Account?
Parents?
Rich Uncle?
Best Friend?
Insurance?
Automobile Insurance: The Basics
What is Automobile Insurance?
An auto insurance policy is a contract between you
and an insurance company.
You pay a premium, and in exchange, the insurance
company promises to pay for specific car-related
financial losses during the term of the policy.
Automobile Insurance: The Basics
Are you a risk to the insurance
company?
To keep premiums as low as possible to the insured,
a screening process is completed before an
insurance contract is completed
Automobile Insurance: The Basics
What is the insurance company
looking for?
Some vehicles, and some drivers, carry more risk
than others
•Low risks will be charged a lower premium
•High risks will be charged a higher premium
Automobile Insurance: The Basics
What determines your premium?
Age
Gender
Vehicle Type
Driving Record
Geographic Location
Types of Automobile Insurance Coverages
Three Questions
1. What are third-party coverages?
2. What are first-party injury coverages?
3. What are first-party property
coverages?
Types of Automobile Insurance Coverages
What are third-party coverages?
Bodily Injury Liability
People costs (medical expenses, lost wages,
pain and suffering)
Property Damage Liability
Things (other cars and property)
Both are types of coverage required by law in
most states
Types of Automobile Insurance Coverages
What are first-party injury coverages?
Medical Payments (MedPay)
Covers medical and funeral expenses resulting from
accidents with your vehicle
Personal Injury Protection (PIP)
Extends MedPay to include lost wages
Uninsured Motorists
Covers expenses if the at fault driver does not have
coverage
Underinsured Motorists
Covers expenses when the at fault driver does not have
enough coverage
Types of Automobile Insurance Coverages
What are first-party property coverages?
Comprehensive
Compensates you for physical damage to your car,
including theft, vandalism, natural disasters
Collision
Pays for damage to your vehicle in case of
collision
Both Coverages require you to pay a deductible
What is a Deductible?
This is the amount per accident that you pay out
of pocket before insurance starts to pay
Common deductible amounts are usually $250,
$500, and $1000
The higher the deductible amount you pay the
lower your premiums are
Automobile Insurance: The Policy
A common mistake when shopping for
automobile insurance is looking only at the
price between two policies
Policies differ from policy to policy and
company to company
Automobile Insurance: The Policy
Five parts to an insurance policy
Declarations
Coverages
Exclusions
Conditions
Definitions
Coverage Parts/Insuring Agreement
Outlines the coverage options and coverage
limits purchased
In short, what your insurance company
promises to provide in return for your
payment, based on the coverages and
coverage limits selected
Exclusions
Details what is not covered by the policy
Examples:
Intentional damage to your own vehicle
Damages caused while vehicle is used as a delivery
vehicle
Conditions
Define the insured’s and the insurer’s duties
that, under the terms of the policy, must be
fulfilled
Includes:
premium payment obligations
steps to filing a claim
procedures for resolving a claim
Definitions
Explains specific terms used throughout the
policy
Examples:
“You” or “Your” refers to the “Named Insured”
“We” or “Us” or “Our” refers to the insurance
company
“Family Member” refers to a resident of your
household
Automobile Insurance: Accidents
Chances are even if you are never in an
accident you will witness one
What should you do if you are involved
in an accident?
Automobile Insurance: Accidents
Chances are even if you are never in an
accident you will witness one
What should you do if you are involved
in an accident?
Steps to take after an accident
•Help anyone who is injured
•You have an ethical and legal responsibility
•Notify the police
•Prevent further accidents
•Protect the accident scene
•Record information
•Exchange information with the parties involved
•Take note of time, location, weather, and road
conditions
Filing a Claim
It is important that the accident is reported
promptly to the insurance agent or company
The policy will guide the insured on the
correct steps to take to report the claim
The company will guide the insured through
the process
Filing a Claim
When you are liable for an accident
•The insurance company covers the loss up to the
policy limits
•Your insurer represents you if you are sued
•Your insurer has the right to settle any legal action
without your permission
•Your premium may rise
•Insurer has the right to cancel your policy
•If the losses exceed the policy provisions, the
insured is responsible to cover the excess
Automobile Insurance: The Basics
What can you do to reduce risk and
lower premiums?
Use your seatbelt
Be Patient
Observe Speed Limits
Don’t Drink and Drive
Know your own limits
Get good grades
Concentrate on driving
Automobile Insurance: Accidents
Chances are even if you are never in an
accident you will witness one
What should you do if you are involved
in an accident?
Steps to take after an accident
•Help anyone who is injured
•You have an ethical and legal responsibility
•Notify the police
•Prevent further accidents
•Protect the accident scene
•Record information
•Exchange information with the parties involved
•Take note of time, location, weather, and road
conditions
Filing a Claim
It is important that the accident is reported
promptly to the insurance agent or company
The policy will guide the insured on the
correct steps to take to report the claim
The company will guide the insured through
the process
Filing a Claim
When you are liable for an accident
•The insurance company covers the loss up to the
policy limits
•Your insurer represents you if you are sued
•Your insurer has the right to settle any legal action
without your permission
•Your premium may rise
•Insurer has the right to cancel your policy
•If the losses exceed the policy provisions, the
insured is responsible to cover the excess
Building Wealth for the Long Term
Lesson 12
Lesson 12 Visual 1
Three Rules for Building Wealth
1. Start early.
– Give money time to grow.
2. Buy and hold.
– Keep your money invested.
3. Diversify.
– Don’t put all your eggs in one basket.
Lesson 12 Visual 2
Charlayne Becomes a Millionaire-- Accidentally
Year
0
1
2
3
4
5
6
7
8
9
Beginning Addition to
Ending
Balance
Principal
Return
Balance
$0.00 $2,080.00
$88.40
$2,168.40
$2,168.40 $2,080.00
$272.71
$4,521.11
$4,521.11 $2,080.00
$472.69
$7,073.81
$7,073.81 $2,080.00
$689.67
$9,843.48
$9,843.48 $2,080.00
$925.10
$12,848.58
$12,848.58 $2,080.00 $1,180.53
$16,109.11
$16,109.11 $2,080.00 $1,457.67
$19,646.78
$19,646.78 $2,080.00 $1,758.38
$23,485.16
$23,485.16 $2,080.00 $2,084.64
$27,649.80
$27,649.80 $2,080.00 $2,438.63
$32,168.43
Lesson 12 Visual 2 (continued)
Charlayne Becomes a Millionaire-- Accidentally
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
$32,168.43
$37,071.15
$42,390.59
$48,162.19
$54,424.38
$61,218.85
$68,590.85
$76,589.48
$85,267.98
$94,684.16
$104,900.72
$115,985.68
$128,012.86
$141,062.35
$155,221.05
$170,583.24
$187,251.22
$205,335.97
$224,957.93
$246,247.75
$269,347.21
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,822.72
$3,239.45
$3,691.60
$4,182.19
$4,714.47
$5,292.00
$5,918.62
$6,598.51
$7,336.18
$8,136.55
$9,004.96
$9,947.18
$10,969.49
$12,078.70
$13,282.19
$14,587.98
$16,004.75
$17,541.96
$19,209.82
$21,019.46
$22,982.91
$37,071.15
$42,390.59
$48,162.19
$54,424.38
$61,218.85
$68,590.85
$76,589.48
$85,267.98
$94,684.16
$104,900.72
$115,985.68
$128,012.86
$141,062.35
$155,221.05
$170,583.24
$187,251.22
$205,335.97
$224,957.93
$246,247.75
$269,347.21
$294,410.12
Lesson 12 Visual 3
Charlayne Becomes a Millionaire-- Accidentally
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
$294,410.12
$321,603.38
$351,108.07
$383,120.66
$417,854.31
$455,540.33
$496,429.66
$540,794.58
$588,930.52
$641,158.01
$697,824.84
$759,308.35
$826,017.96
$898,397.89
$976,930.11
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$25,113.26 $321,603.38
$27,424.69 $351,108.07
$29,932.59 $383,120.66
$32,653.66 $417,854.31
$35,606.02 $455,540.33
$38,809.33 $496,429.66
$42,284.92 $540,794.58
$46,055.94 $588,930.52
$50,147.49 $641,158.01
$54,586.83 $697,824.84
$59,403.51 $759,308.35
$64,629.61 $826,017.96
$70,299.93 $898,397.89
$76,452.22 $976,930.11
$83,127.46 $1,062,137.57
Lesson 12 Visual 4
The Magic of Compounding
• When you save, you earn interest.
• When you take the interest out and spend it, it stops
growing.
• But if you leave the interest in your account so it can grow,
you start to earn interest on the interest you earned
previously.
• Interest on interest is money you didn’t work for. It is
money your money makes for you!
• Over time, interest on interest can increase your total
savings greatly.
Lesson 12 Visual 5
Marcus’s Mistake
Beginning
Balance
Year
0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0.00
$2,168.40
$4,521.11
$7,073.81
$9,843.48
$12,848.58
$16,109.11
$19,646.78
$23,485.16
$27,649.80
$32,168.43
$37,071.15
Addition to
Principal
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
Return
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$88.40
$272.71
$472.69
$689.67
$925.10
$1,180.53
$1,457.67
$1,758.38
$2,084.64
$2,438.63
$2,822.72
$3,239.45
Ending
Balance
$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
$2,168.40
$4,521.11
$7,073.81
$9,843.48
$12,848.58
$16,109.11
$19,646.78
$23,485.16
$27,649.80
$32,168.43
$37,071.15
$42,390.59
Lesson 12 Visual 6
Marcus’s Mistake
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
$42,390.59
$48,162.19
$54,424.38
$61,218.85
$68,590.85
$76,589.48
$85,267.98
$94,684.16
$104,900.72
$115,985.68
$128,012.86
$141,062.35
$155,221.05
$170,583.24
$187,251.22
$205,335.97
$224,957.93
$246,247.75
$269,347.21
$294,410.12
$321,603.38
$351,108.07
$383,120.66
$417,854.31
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$2,080.00
$3,691.60
$4,182.19
$4,714.47
$5,292.00
$5,918.62
$6,598.51
$7,336.18
$8,136.55
$9,004.96
$9,947.18
$10,969.49
$12,078.70
$13,282.19
$14,587.98
$16,004.75
$17,541.96
$19,209.82
$21,019.46
$22,982.91
$25,113.26
$27,424.69
$29,932.59
$32,653.66
$35,606.02
$48,162.19
$54,424.38
$61,218.85
$68,590.85
$76,589.48
$85,267.98
$94,684.16
$104,900.72
$115,985.68
$128,012.86
$141,062.35
$155,221.05
$170,583.24
$187,251.22
$205,335.97
$224,957.93
$246,247.75
$269,347.21
$294,410.12
$321,603.38
$351,108.07
$383,120.66
$417,854.31
$455,540.33
Lesson 12 Visual 7
Buy and Hold
• In order to leave money in savings or investments, you have
to do these things:
• Spend less than you receive. How?
– Earn more by improving your formal education or job skills.
– Spend less by using a budget to keep track of where your money is
going.
• Become connected to financial institutions.
– Open and maintain accounts at mainstream financial institutions-banks, credit unions and brokerages.
Lesson 12 Visual 7(continued)
Buy and Hold
• Manage your credit responsibility. How?
– Limit the number of credit cards you have.
– Limit your purchases to what you can pay off each
month.
– Apply for loans when you are confident that your
current income (in the case of college loans,
future income) will allow you to repay the loan.
Lesson 12 Visual 8
The Stock-Market Roller Coaster
If you buy and sell on the ups and downs,
you may lose money.
But if you buy and hold on for the long term,
the ups are greater than the downs.
Lesson 12 Visual 9
Don’t Put All Your Eggs in One Basket
If you put all your money in
one stock, a disaster
befalling that stock will hit
you hard--as if you had put
all your eggs in one
basket and then dropped the basket. With your money
spread out across variety of assets (stocks, bonds and
cash, for example), you’re not hurt as badly when any one
asset does poorly.
Lesson 12 Visual 10
Forms of Saving and Investing: Some Benefits and Costs
• Savings accounts: provide a small but steady return.
• Certificates of deposit: very safe, but instant access carries a
penalty.
• Bonds: lending money to a corporation or government, with a
promise of higher returns than those offered by bank savings
accounts and CDs.
• Stocks: part ownership in a company, offering higher risks and,
potentially, higher returns than some other investments.
• Real estate: the risks and benefits of being a landlord.
Lesson 12 Visual 11
Investment Situations
• You have $5,000 to invest. No other information is available.
• You have $4,000 that you’ll need six months from now.
• You inherited $10,000 from your great-aunt; she has suggested that
you save it for use in your old age.
• You are just starting a career and can save $50 per month for
retirement.
• A new baby arrives, and Mom and Dad plan to save $100 a month for
the child’s college education.
Lesson 12 Visual 12
The Pyramid of Risks and Reward
Highest Risk--Highest
Potential Return or Loss
Lowest Risk--Lowest
Potential Return or Loss
Lesson 12 Visual 13
Mutual Funds
• A mutual fund pools investors’ money.
• The fund puts its investors’ money into the markets on
their behalf.
• In effect, investors own small amounts of many different
assets.
• Mutual funds enable investors to avoid the risk that comes
from owning any one asset. In other words, mutual funds
make it easy to diversify.
Personal
Finance
James B. Wilcox
RESOURCES PROVIDED BY:
THE UNIVERSITY OF SOUTHERN MISSISSIPPI
CENTER FOR ECONOMIC AND ENTREPRENEURSHIP EDUCATION,
MISSISSIPPI STATE UNIVERSITY, VIRTUAL ECONOMICS,
NATIONAL COUNCIL ON ECONOMIC EDUCATION, THE MOODY’S FOUNDATION