Download - Who will win the NCAA Tournament? 1.North Carolina 2.Kansas 3.Memphis 4.UCLA 5.I don’t care
Who will win the NCAA Tournament?
North
Carolin
a
Kansas
Memphis
UCLA
I don’t
care
63%
0%
13%13%13%
1. North Carolina2. Kansas3. Memphis4. UCLA5. I don’t care
Why People Fail Financially
Three primary enemies to becoming financially successful are
Inflation, T
axes,
Alcohol
Insu
rance
, Cars,
Houses
Inflation, T
axes,
Procra
st...
Insu
rance
, Esta
te Planni...
25% 25%25%25%1. Inflation, Taxes, Alcohol
2. Insurance, Cars, Houses
3. Inflation, Taxes, Procrastination
4. Insurance, Estate Planning, Procrastination
Batman: Age 22, Invests $5,000 per year, 8 years to and including age 29Robin: Age 22, starts investing $5,000 per year, age 30 for 43 years to age 7210% annual return RESULTS BATMAN: $3,788,943 ROBIN: $3,258,204 The lesson is
Procra
stinatio...
Disc
ipline is
...
Insta
nt gratif...
It is
importa
n...
25% 25%25%25%1. Procrastination is Expensive
2. Discipline is profitable3. Instant gratification is
expensive4. It is important to invest
early in your life
Your reaction to the prior problem
WOW
!
I’m go
ing to E...
I’m not g
oing ...
Unbelie
vable!
Awesome!
Batman is
my f..
.
17% 17% 17%17%17%17%1. WOW!2. I’m going to EXECUTE
early!3. I’m not going to
procrastinate4. Unbelievable!5. Awesome!6. Batman is my financial
idol
Inflation: The Good, The Bad, and The Ugly
Currently, your annual salary is $80,000. If inflation is expected to be 3% annually, what salary do you need in 10 years to maintain
the same salary in real (i.e., inflation adjusted) terms?
104513 $105,513 $106,513 $107,513 $108,513
20% 20% 20%20%20%1. 104,5132. $105,5133. $106,5134. $107,513 5. $108,513
20% 20% 20% 20% 20%
From a personal perspective, a 4% raise in an environment where inflation is 5% is
Good, b
ecause
...
Good, b
ecause
...
Bad, b
ecause
y...
Bad, b
ecause
i...
25% 25%25%25%
20% 20% 20% 20% 20%
1. Good, because you will be able to buy more with the raise
2. Good, because 4% is less than 5%
3. Bad, because you will not be able to buy more with the raise
4. Bad, because inflation is bad for everyone
Inflation can benefit some people, especially
Those w
ho have a lot o
f...
Those w
ho have little debt.
Those th
at hav
e a high ...
Those th
at hav
e a low n..
25% 25%25%25%
20% 20% 20% 20% 20%
1. Those who have a lot of debt.
2. Those who have little debt.3. Those that have a high net
worth4. Those that have a low net
worth
Your salary equals $10,000 per month. Your mortgage payment equals $1,000 per month. If you receive a 20% raise, the percentage of your salary allocated to the mortgage payment goes from 10% to
1.33%5.33%
6.33%7.33%
8.33%
20% 20% 20%20%20%1. 1.33%2. 5.33%3. 6.33%4. 7.33%5. 8.33%
Times are tough and your boss gives you a 1 percent raise telling you that you will only be able to live a little bit better next year. Inflation is 2%. Which is the most accurate statement.
You will
be be...
You will
be be...
Your “re
al” (i..
.
Your “re
al” (i..
.
25% 25%25%25%1. You will be better off next year because you received a raise.
2. You will be better off next year because inflation is only 2%
3. Your “real” (inflation adjusted) wages are declining
4. Your “real” (inflation adjusted) wages will be increasing
Time Value of Money
Assuming an 8% annual return, a 25 year old would have to save $_____ a year (end of year) to have a net worth of $10,000,000
by age 75.
$20,000 $200,000 $17,428.58
$27,428.58
$37,428.58
None ofthe ab...
17% 17% 17%17%17%17%1. $20,0002. $200,0003. $17,428.584. $27,428.585. $37,428.586. None of the above
A 25 year old who saves $10,000 per year for 50 years will have $_________ by age 75. Assume an annual return of 9%.
$5,150,835.56
$6,150,835.56
$7,150,835.56
$8,150,835.56
$9,150,835.56
None ofthe ab...
17% 17% 17%17%17%17%1. $5,150,835.562. $6,150,835.563. $7,150,835.564. $8,150,835.565. $9,150,835.566. None of the above
Obtaining an extra 1 percent annual return over your lifetime is
Nice
, but n
ot ...
Nice
and very ...
Gre
edy, but n
o...
Gre
edy and ver...
25% 25%25%25%1. Nice, but not that significant
2. Nice and very significant
3. Greedy, but not that significant
4. Greedy and very significant
Budgeting
“Pay Yourself First” mentality is
Good, in
stills
...
Bad, it
is se
l...
Good, h
elps ba...
Bad, p
rohibits
...
25% 25%25%25%1. Good, instills a savings discipline
2. Bad, it is selfish3. Good, helps balance
your budget4. Bad, prohibits living
well long term
If you cannot pay all your bills this month because your 1970 Dodge Challenger repair bill was $600, in general this is
Accepta
ble, it...
Unacce
ptable, ...
Accepta
ble, “s..
.
Unacce
ptable, ...
25% 25%25%25%1. Acceptable, it is an old car2. Unacceptable, you should
be saving monthly for “surprise” expenses
3. Acceptable, “surprise” repair bills will challenge the budget
4. Unacceptable, you should own a newer car
Measuring Your Financial SuccessWhat is Financially Wealthy?
The main measure of your financial success is your
Inco
me
Assets
Revenue
Net W
orth D
ebts
20% 20% 20%20%20%1. Income2. Assets3. Revenue4. Net Worth5. Debts
Net Worth is
Assets
– Debts
Cash +
Assets
Cash –
Debts
Assets
+ Debts
Assets
only
20% 20% 20%20%20%1. Assets – Debts2. Cash + Assets3. Cash – Debts4. Assets + Debts5. Assets only
Net Worth is
Assets
– Debts
Cash +
Assets
Cash –
Debts
Assets
+ Debts
Assets
only
20% 20% 20%20%20%1. Assets – Debts2. Cash + Assets3. Cash – Debts4. Assets + Debts5. Assets only
Financial Goal: To live off of your investment income and have enough funds to live forever. Annual Expenses this year = $60,000; After Tax Annual Investment Return = 5%, Inflation = 3%-- What new worth (assets assuming no debt)
do you need today?
3001044
3044677
3144677
3150000
3244677
20% 20% 20%20%20%1. 3,001,0442. 3,044,6773. 3,144,6774. 3,150,0005. 3,244,677
Investing: Ownership vs. Lending
If you buy a corporate (e.g., IBM) bond,
You own a port.
..
You own the st
...
You are loan
in...
None of t
he ab...
25% 25%25%25%1. You own a portion of IBM
2. You own the stock of IBM
3. You are loaning money to IBM
4. None of the above
As interest rates go up, the value of a bond goes
Down U
p
Depends
Not e
nough in
f...
25% 25%25%25%1. Down2. Up3. Depends4. Not enough
information
As interest rates go down, the value of a bond goes
Down U
p
Depends
Not e
nough in
f...
25% 25%25%25%1. Down2. Up3. Depends4. Not enough
information
If a bond is increasing in value, interest rates are likely going
Down U
p
Depends
Not e
nough in
f...
25% 25%25%25%1. Down2. Up3. Depends4. Not enough
information
Your Values and Spending Money
How you spend money
Communicate
s w...
Is a fo
rm of v
...
Says a
lot a
bo...
Is im
portant, .
..
25% 25%25%25%1. Communicates what you value
2. Is a form of voting for what you believe is good for our society
3. Says a lot about who you are as an individual
4. Is important, similar to voting during an election
Which expenditure of money is best for society?
Buying Doritos..
.
Taking a
trip ...
Putting ga
s in...
Donating m
oney...
25% 25%25%25%1. Buying Doritos and ice cream
2. Taking a trip to Europe3. Putting gas in a gas guzzling
truck4. Donating money to an
organization that feeds the poor
HOME OWNERSHIP
The first $250,000 gain for singles ($500,000 for married couples) on the sale of a house is tax free if
As long as it
...
As long as y
ou...
You lived in
y...
None of t
he ab...
25% 25%25%25%1. As long as it is your first house
2. As long as you are 59 ½ or older
3. You lived in your home for two of the last five years
4. None of the above
Dollar Cost Averaging
You buy $10,000 of IBM at $100 per shareA month later, you buy $10,000 of IBM at $110 per share
Your average price equals
$105 Greaterthan $105
Less than$105
$100 Greaterthan $110
20% 20% 20%20%20%1. $105 2. Greater than $1053. Less than $1054. $1005. Greater than $110
Vehicle Lease or Purchase
From a financial perspective, a vehicle consists of
Materia
ls, in
s...
Inte
rest,
prin...
Insu
rance
, dep...
Equity
, deprec..
.
25% 25%25%25%1. Materials, insurance, car payments
2. Interest, principal, depreciation
3. Insurance, depreciation, lease
4. Equity, depreciation, interest expense
You are considering leasing a $40,000 car with a residual value of $18,000 in four years. Your total lease payment would be
$22,000 <$22,000 >22,000 Notenough
inf...
None ofthe ab...
20% 20% 20%20%20%1. $22,0002. <$22,0003. >22,0004. Not enough info.5. None of the above
End of Lease: Residual Value = $17,000 Actual Value= $13,000
You total the car on the last day of the lease, you would owe
Nothingwith g...
$4,000without...
Nothing,with ...
1 and 2 None ofthe ab...
20% 20% 20%20%20%1. Nothing with gap insurance
2. $4,000 without gap insurance
3. Nothing, with collision auto insurance
4. 1 and 25. None of the above
Paying for College
The benefits of 529 Plans for saving for college are
Earn
ings gro
w ...
With
drawals ar..
.
Money w
ithdraw...
Can redire
ct t..
.
None of t
he ab...
All of t
he abo...
17% 17% 17%17%17%17%
1. Earnings grow tax free2. Withdrawals are tax free3. Money withdrawn can be
used for college expenses including room and board
4. Can redirect to another child (even child of a child)
5. None of the above6. All of the above
The benefits of 529 Plans for saving for college are
Once
an accoun...
The owner is t..
.
With
drawals no...
1 and 2
1 and 3
All of t
he abo...
17% 17% 17%17%17%17%
1. Once an account is open, anyone can contribute
2. The owner is the person who establishes the account
3. Withdrawals not used for college qualifying expenses are tax free
4. 1 and 25. 1 and 36. All of the above
Love and MoneyIncluding Marriage
The benefits of 529 Plans for saving for college are
Once
an accoun...
The owner is t..
.
With
drawals no...
1 and 2
1 and 3
All of t
he abo...
17% 17% 17%17%17%17%
1. Once an account is open, anyone can contribute
2. The owner is the person who establishes the account
3. Withdrawals not used for college qualifying expenses are tax free
4. 1 and 25. 1 and 36. All of the above
Credit
Good vs. Bad Credit
With multiple credit card bills, after making the minimum payments, you should pay off the credit card with the
High
est balanc..
.
Lowest
balance
High
est inte
re...
Lowest
interes..
.
None of t
he ab...
20% 20% 20%20%20%1. Highest balance2. Lowest balance3. Highest interest rate4. Lowest interest rate5. None of the above
Home Ownership
List the three loans from likely highest to lowest interest rate
Credit
card
, c...
Car loan, m
ort...
Mortg
age, cre
d...
Car loan, c
red...
None of t
he ab...
20% 20% 20%20%20%1. Credit card, car loan, mortgage
2. Car loan, mortgage, credit card
3. Mortgage, credit card, car loan
4. Car loan, credit card, mortgage
5. None of the above
Getting pre-approved for a mortgage is
Not in
your se...
Use
ful, esp
eci...
Use
ful, esp
eci...
Helpfu
l for n
e...
25% 25%25%25%1. Not in your self-interest 2. Useful, especially if you
have a car loan3. Useful, especially if you
have credit card debt4. Helpful for negotiating the
purchase of a house
A 30 Year Mortgage is Better than
Not in
your se...
Use
ful, esp
eci...
Use
ful, esp
eci...
Helpfu
l for n
e...
25% 25%25%25%1. Not in your self-interest 2. Useful, especially if you
have a car loan3. Useful, especially if you
have credit card debt4. Helpful for negotiating the
purchase of a house
Insurance
The purpose of insurance is to protect you against
Likely, s
ignif..
.
Likely, in
sign...
Unlik
ely, but ..
.
Unlik
ely, but ..
.
25% 25%25%25%1. Likely, significant financial loss
2. Likely, insignificant financial losses
3. Unlikely, but possible, significant loss
4. Unlikely, but possible, insignificant loss