Transcript True or False?

Disclaimer: The views expressed are those of the presenters and do not necessarily
reflect those of the Federal Reserve Bank of Dallas or the Federal Reserve System.
True or False?
• Most millionaires inherited their wealth.
• Most millionaires earn more than $500,000 per
year.
• College graduates earn about twice what high
school graduates earn over a 40-year work life.
• People who are self-employed rarely become
millionaires.
• All millionaires wear expensive clothes.
• Millionaires usually drive new cars.
• Many millionaires drop out of college to start work.
• It is impossible to save enough to be a millionaire.
Wealth is…
• Assets
Anything an individual or business owns that has
commercial or exchange value
• Liabilities
Money an individual or organization owes; same as debt
• Net Worth
The difference between the total assets and total
liabilities of an individual
Sandra’s Balance Sheet
Description
Amount
Owed to her mother for extra cell phone charges
$250
Present value of a savings bond that her uncle gave her $150
Balance on a car loan
$1,500
Savings account from summer job
$750
DVD collection
$200
1999 car
$3,500
Balance due on prom dress
$200
Sandra’s Balance Sheet
Assets
Present value of a
savings bond that
her uncle gave her
Savings account from
summer job
DVD collection
1999 car
Liabilities
$150
Owed to her mother for
extra cell phone charges
$750 Balance on a car loan
$200 Balance due on prom dress
$250
$1500
$200
$3500
Total assets $4600
Total liabilities
Sandra’s net worth = $2650
$1950
Using Credit Wisely
• Think about your balance sheet…
Debt increases your liabilities –
does it increase your assets?
• Think about your budget…
How will the payments affect your budget?
What other spending will you sacrifice to pay
off the debt?
Goals
• You might have a goal to simply increase
your net worth, but most people have a
more specific goal in mind.
• Once you set a goal, you have to evaluate
the saving and the income required to
achieve the goal.
Goals
•
•
•
•
•
•
•
•
Buy a new car
Go to college
Buy a used car
Go to the senior prom
Rent an apartment
Take a trip
Buy a house
Buy a new HDTV
Financial Personality Types
Sam’s Two-Week Budget
Spending Categories
Expenses
Eating out at lunch
60
Movie night with friends
40
Dinner with friends
20
Football game and snacks
10
New CD
20
New item of clothing
50
Gas
70
Soft drink from vending machine
10
Total Expenses
$280
Changes
New
Sam’s Two-Week Budget
Spending Categories
Expenses
Changes
New
Eating out at lunch
60
24
Movie night with friends
40
Dinner with friends
20
Take his lunch
Every other
week
Eat out once
Football game and snacks
10
Music downloads
20
Reduce
10
New item of clothing
50
Only one
25
Gas
70
Soft drink from vending machine
10
Total Expenses
$280
20
10
10
70
Only one
1
$170
Save and Invest
• Build a strong financial foundation first.
• How much risk are you willing to take?
• Think about your time horizon and other
factors.
• The sooner you start, the better (and
easier)!
Applying for Credit
• Read the fine print! Look for:
– Finance charges
the dollar amount you pay to use credit
– Annual percentage rate (APR)
the percentage cost of credit on a yearly basis
– Fees
can include loan fees, annual fees, latepayment fees, etc.
Credit Reports
• Credit reporting company
• Credit report
• Credit score
Reviewing Your Credit Report
• Three major credit reporting companies
– Equifax
– Experian
– Trans Union
• One website for free credit reports
www.annualcreditreport.com
Identity Theft
• It's not too early to pull your credit report!
• Carefully review the report and correct any
inaccuracies.
• Don't carry your Social Security card in
your wallet!
• Shred any papers that contain personal
information before throwing them away.