Transcript Slide 1
Jerry L. Basford sa.utah.edu/personalfinance 1 Top Priorities Get out of debt. – National credit debts is at $970 billion, 50% higher than in 2000. Strike the word “deserve” from your conversations. – What you deserve is irrelevant; what you can truly afford is what counts. Decide once and for all if you want to indulge or protect your family. 2 5 Important Components of Goals (SMART): Specific Measurable Attainable Realistic Timely 3 How Financial Planning Affects Your Cash Flow 1. Budgeting and Tax Planning $ Income 6.Retirement and Estate Planning $ Credit Your Cash $ Deposit 2. Managing Liquidity (Cash and Credit Management) 5. Investing $ Spending 4. Income and Asset Protection 7. Products and Service 3. Managing expenditures for major purchases 4 Good Debt vs. Bad Debt Debt incurred for consumption is bad debt. Bad Debt = Debt Danger Ratio Annual Income Debt Danger Ratio beyond 25% can spell trouble. 5 Income Statement INCOME STATEMENT INCOME Gross Wages Loan from parents EXPENSES Taxes Room rent Utilities Laundry Food Car Insurance Car loan Medical Insurance Telephone Clothing Entertainment Other SURPLUS/(DEFICIT) $ $ 1,000 500 $ 1,500 $ 1,445 $ 55 250 500 25 15 120 125 150 150 40 25 45 - 6 Balance Sheet Assets Monetary (Liquid) Assets Cash Checking account Liabilities $ 1,200 250 Savings account 350 Total monetary (liquid) assets Tangible (Household) Assets Home Car Furniture Total investment assets Total Assets $ 120 1,500 Total short-term (current) liabilities 1,620 $ 1,800 $ Long-term Liabilities Mortgage Car loan 2,500 400 Total tangible (household) assets Investment Assets Stocks Short-term (Current) Liabilities Dentist bill Credit card balance Total long-term liabilities 2,900 Total Liabilities Net Worth $ 2,000 $ 2,000 3,620 $ 2,580 $ 1,500 $ 1,500 $ 6,200 7 Investment Terminology Bull Market – A random market movement causing an investor to mistake him/herself for a financial genius. Bear Market - a 6 to 12 month period when the kids get no allowance and adults get no date nights. P/E Ratio – The percentage of investors wetting their pants as the market keeps crashing. Broker – What my broker has made me. Standard & Poor – Your life story in a nutshell. Financial Planner – A person that actually remembers their wallet when they run to the 7-2-11 for toilet paper and milk. Market Correction – The day after you buy stocks. YAHOO – What you yell after selling it to some sucker for $240 a share. Windows 7 – What you jump out of when you’re the sucker that bought Yahoo for $240 per share. 8 If you’d invested $1,000 in 1950 Perfect timing and missed 20 worst months through June 2008 – $800,000 If you’d missed the 20 best months – $11,500 Let it ride – $73,000 9 10-20-30 Rule 10% Savings 20% Debt not including mortgage 30% Debt including mortgage 10 10 Top Finance Tips Pay yourself first and spend less than you make. Stick to a budget. Pay off credit card debt. Contribute to a retirement plan. Have a savings plan. Invest. Maximize employee benefits. Review your insurance annually. Update your will. Keep good records. 11