Training - Southern Rural Development Center
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Transcript Training - Southern Rural Development Center
Avoiding Financial
Trouble
Prince William Area
Financial Education Program
Financial Management
From Cradle to Grave…
Start
Money Problems Involve
Lack of Planning
Value Conflict
Unrealistic Goals
Emotional Uses of Money
Needs
vs
Wants
Setting Goals
Clearly define your goals
– Personal, financial, career,
social, etc.
Goals should
– Be measurable
– Have a time frame (deadline)
– Be visual
4
Five Leading Causes of
Overspending
5 - Thinking That Money
Can Buy Happiness
4 - Wanting Only the Best
for Your Children
3 - Trying to Keep Current
2 - Taking Out Car Loans
1 - Abusing Credit Cards
5
OOF!
Why?
Credit Card Issuers often require a
minimum monthly payment of 2% to 3%
$2,000
18.5%
divided by 12 = 1.54%
$2,000
$40
Times .02 = $40
times 1.54% = $31
Payment
Interest
Rate
Interest
- $31 = $9
Principal
6
Tips on Debt
Bad
–
Debt
Borrowing for
Consumption
Good
–
From Personal Finance For Dummies™, 2nd Edition by
Eric Tyson. Copyright © 1996 by Eric Tyson. All rights
reserved. Reproduced here by permission of IDG
Books Worldwide, Inc. …For Dummies is a registered
trademark under exclusive license to IDG Books
Worldwide, Inc., from International Data Group, Inc.”
Debt
Borrowing for Long
Term Investment
Slims’s Diner
7
Dealing With Too Much Debt
HIGH
Priority Debts
Housing related including utilities &
condo or association
fees
Food
Transportation
Insurance
Taxes
Low
Priority Debts
Credit cards
Other “consumer”
loans
Doctor and hospital
bills
Professional
services
8
Tips on Saving
Pay
Yourself First!
– Treat Savings as a Fixed Expense
– Try to Save at Least 5% - 10% of your
Gross Salary
Build
up 3 to 6 Months of Living
Expenses
– Liquidity Account (safety)
Start
Investing
9
Investing – “The Market”
Bull & Bear
Markets
10
Source:www.ricedelman.com 11/05/01
11
Beware of Percent Comparisons
Start
Change
Result
Growth
$1,000 +$1,000 $2,000 100.0%
$2,000 -$1,000 $1,000 -50.0%
12
S&P 500 Stock Index vs. 6% Annual
Return - 1971 to 2003 – Cumulative
$463K
$10,000 Initial Investment
Dollars
$355k
$281k
$68k
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Years
21
22
23
24
25
26
27
28
29
30
31
32
13
S&P 500 Stock Index 1971 to 2003
% Change in Value by Year
1.6
$10,000 Initial Investment
1.4
1.2
1
0.8
0.6
0.4
14
Procrastination
(Waiting to Start)
$18,000
Jill
$579,488
9 Years
$70,000
Jack
35 Years
22
30 31
$2,000 per Year at 9%
$470,249
65
Age
15
Income and Expenses
Living Within Your Means:
Spend
Less Than You Earn
Save What You Do Not Spend
Invest What You Save
Income
Expenses
16
Some Final Thoughts
Delayed
gratification
Acceptance of responsibility
Dedication to truth
Balance
17