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Duke University NROTC 04 March 2014 Personal Financial Management Slide 2 Mental Gym What is the reciprocal bearing of 170? 350 Slide 3 Mental Gym What is the reciprocal bearing of 200? 020 Slide 4 Mental Gym What is the reciprocal bearing of 100? 280 Slide 5 Mental Gym What is the reciprocal bearing of 320? 140 Slide 6 Mental Gym What is the reciprocal bearing of 005? 185 Slide 7 Mental Gym Your ship is traveling at 6 kts. How long will it take to travel 1800 yds? 9 minutes Slide 8 Mental Gym Your ship is traveling at 4 kts. How long will it take to travel 2400 yds? 18 minutes Slide 9 Mental Gym Your ship is traveling at 9 kts. How long will it take to travel 1200 yds? 4 minutes Slide 10 Mental Gym Your ship is traveling at 18 kts attempting to overtake a vessel traveling at 12 kts. The vessel is 800 yards away. How long until you reach the vessel? 4 minutes Slide 11 Mental Gym Your ship is traveling at 13 kts attempting to overtake a vessel traveling at 10 kts. The vessel is 1000 yards away. How long until you reach the vessel? 10 minutes Slide 12 Disclaimer I am not a trained and/or certified Financial Professional I do not promote USAA, Navy Federal Credit Union, etc. I trust math I follow the basics of saving money: SPEND LESS THAN YOU MAKE Slide 13 Financial Management for Geeks Slide 14 Slide 15 Learning Topics Importance College Life Expenses Stipend Wasting Money Loans Debt Navy Salary Investing Sailors Problems Slide 16 Importance Money is one of the biggest concerns of most people in the world It influences everything you will be able to do The Navy pays a lot of money and you have to be able to manage your money and deal with the monetary issues of your sailors If you dont know what youre doing, your sailors will not take your advice seriously Slide 17 College Life College life is stressful and hard You need to be focusing on your studies Adding monetary problems to the picture will only make life more stressful for yourself Food Room and Board Tuition Many other issues Slide 18 College Life You dont live with your parents anymore! You need to start being responsible for you own decisions If you cant take care of your own finances how can you be expected to take care of enlisted personnel under your command? Slide 19 Expenses in College Since there are so many expenses in college you need to effectively manage them and make sure you are not falling into debt Keep track of where your money goes. This will allow you to see where you can cut spending in order to save money. You always want to have a certain amount of saved money in case of unforeseen expenses. Slide 20 Navy Stipend Freshmen-250/month Sophomore-300/month Junior-350/month Senior-400/month Living on campus has its benefits Book stipend-375/semester Slide 21 How to Avoid Wasting Money Live on campus to take advantage of the possible room and board assistance Avoid eating out on regular basis Walk to class Spend money on things you need, not want Slide 22 Loans College loans are expensive Many of you will not have college loans due to the NROTC Scholarship However, if you do make sure you have them correctly financed Pay them off as soon as you can Slide 23 Pre-Commissioning Loans USAA and NFCU offer a $25,000 loan to senior MIDN who are about to commission This loan has a very low interest rate compared to other student loans It would be wise to use this loan to pay off higher interest rate loans Slide 24 Credit Cards If you spend $4,000 on credit cards at 18.5% interest and pay only the minimum payments, it will take you 11 years to pay off ($7,800 total) Make sure you stay on top of your payments if you choose to get a credit card Slide 25 Credit Cards Continued Build good credit by consistently paying your bills on time Do not carry a credit card balance month to month Having good credit will open many doors for you in the future If you neglect your bills it will hurt you credit history and make life difficult for you in the future Slide 26 Credit Card Tricks The old bait and switch Musical Address Over the limit fees Cash advance fees and rates Increasing the rate based on other accounts Slide 27 Signs of Predatory Lending 1. Triple digit interest rate: Payday loans carry very low risk of loss, but lenders typically charge fees equal to 400% APR and higher 2. Short minimum loan term: Payday customers unable to repay their loan within two weeks are forced to get a loan "rollover" at additional cost. In contrast, small consumer loans have longer terms 3. Lenders who advertise to E-1, E-2, and E-3s are often looking to take advantage of their lack of financial management experience 4. Single balloon payment: Unlike most consumer debt, payday loans do not allow for partial installment payments to be made during the loan term. A borrower must pay the entire loan back at the end of two weeks Slide 28 Navy Salary (O-1) MonthlyAnnual O-1 Base Pay$2,905.20$34,862.40 O-1 BAH (Durham, NC)$1,197.00$14,364.00 Officer BAS$246.24$2,954.88 Total$4,348.44$52,181.28 Tri-Care Value$5,000.00 Tax-Advantage (15%)$7,500.00 Civilian Equivalent Compensation$64,681.28 Slide 29 Navy Salary (E-2) Slide 30 Personal Finance Savings Short term investments Emergency Fund Investing Short to Intermediate Term Mutual funds, stocks, bonds, money markets, CDs, etc. Long Term Individual Retirement Accounts (IRA) Federal Thrift Savings Plan (TSP) 401(k) Employer Retirement Plans Insurance Service members Group Life Insurance (SGLI) & Family SGLI Term vs. Whole Life Slide 31 Emergency Fund Rainy days will happen Rule of Thumb: You need 3-6 months of income saved and available The more secure your job, the less you need (Military 3 months) Aim for $15,000, liquid More responsibilities = larger savings needed Slide 32 Thrift Savings Plan (TSP) Similar to a civilian 401(k) retirement plan Funded with before tax dollars Earnings grow tax deferred & taxes are owed on the interest and capital gains when withdrawn Can withdraw the money at 59 years old $16,500 annual contribution limit Slide 33 Roth IRA Usually invested inside mutual funds or a brokerage account with individual stocks Funded with after tax earnings Earnings grow tax free & no taxes are owed on interest and capital gains when withdrawn Can withdraw the money at 59 years old $5,500 maximum contribution limits ($458 a month) Investing $5,000 a year starting at 22 years-old, earning 8% annually, will grow to over $2.2 million at age 62 (your investment =$245,000) Slide 34 Dealing with Sailors Financial Problems Become an expert at your own finances so you can help your sailors deal with their problems If you cant manage your own life no one serving for you is going to take any of your advice seriously Expand your knowledge of different financial situations and options Slide 35 Conclusion You need to be responsible for yourself now College is an expensive place and in many cases the Navy stipend will not seem like enough to survive You need to effectively manage your expenses and be wise with your money Start saving NOW! Educate yourself and your sailors on financial options Be wise with your credit Slide 36 References Roth IRA http://www.kiplinger.com/columns/starting/archive/2006 /st0309.htm Social Security Online http://www.ssa.gov/retire2/ About http://retireplan.about.com/