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…

• AssetsAnything an individual or business owns that has commercial or exchange value

• LiabilitiesMoney an individual or organization owes; same as debt

• Net WorthThe difference between the total assets and total liabilities of an individual

Sandra’s Balance SheetDescription AmountOwed 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 SheetAssets Liabilities

Present value of a savings bond that her uncle gave her

$150Owed to her mother for

extra cell phone charges

$250

Savings account from summer job $750 Balance on a car loan $1500

DVD collection $200 Balance due on prom dress $200

1999 car $3500

Total assets $4600 Total liabilities $1950

Sandra’s net worth = $2650

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

Sam’s Two-Week BudgetSpending Categories Expenses Changes New

Eating out at lunch 60Movie night with friends 40Dinner with friends 20Football game and snacks 10

New CD 20

New item of clothing 50Gas 70Soft drink from vending machine 10Total Expenses $280

Sam’s Two-Week BudgetSpending Categories Expenses Changes New

Eating out at lunch 60 Take his lunch 24

Movie night with friends 40 Every other week 20

Dinner with friends 20 Eat out once 10

Football game and snacks 10 10

Music downloads 20 Reduce 10

New item of clothing 50 Only one 25

Gas 70 70

Soft drink from vending machine 10 Only one 1

Total Expenses $280 $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, late-payment 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.