FINANCIAL LITERACY

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FINANCIAL LITERACY

• OVERVIEW
• CREDIT CARDS
• ROTH IRA
• INVESTMENT OPTIONS

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MISSION OF MISS PORTERS

• PREPARATION FOR LIFE
• PREPARATION FOR LEADERSHIP
• PREPARATION FOR COLLEGE
• BECOME INFORMED
• BECOME RESOURCEFUL
• BE ETHICAL

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NET WORTH

• WHAT IS IT?
• ASSETS MINUE LIABILITIESNET WORTH
• EXAMPLES OF ASSETS
• CASH
• SAVINGS
• INVESTMENTS(STOCKS,BONDS, MUTUAL FUNDS)
• REAL ESTATE
• COLLECTIBLES

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NET WORTH

• EXAMPLES OF LIABILITIES
• MORTGAGE
• CAR PAYMENTS
• CREDIT CARD DEBT
• OBJECTIVE
• TO HAVE A POSITIVE NET WORTH

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NET WORTH

• FINANCIALLY SPEAKING, YOU WANT A POSITIVE NET
  WORTH.
• AND HUMANELY SPEAKING, YOU WANT A POSITIVE NET
  WORTH AS WELL.
• DON CLIFTON-GRANDFATHER OF POSITIVE PSYCHOLOGY
  COWROTE HOW FULL IS YOUR BUCKET
• CHECK OUT WEBSITE WWW.BUCKETBOOK.COM
• WWW.CLIFTONSTRENGTHFINDER.COM
• IDEA IS THAT YOU WANT TO FILL SOMEONE ELSES
  BUCKET WITH POSITIVE INTERACTION BEFORE FILLING
  YOUR OWN BUCKET.

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A FEW REVIEWS

• THE GRANDFATHER OF POSITIVE, DON CLIFTON, AND
  HIS GRANDSON, TOM RATH, OFFER ILLUMINATING WISDOM
  FOR FULFILLING WORK AND FOR A MEANINGFUL LIFE.
• -MARTIN P. SELIGMAN, PH.D.
• FORMER PRESIDENT OF THE AMERICAN PSYCHOLOGICAL
  
• ASSOCIATION
• SHOULD BE REQUIRED READING FOR EVERY COMPANY,
  EVERY
• SCHOOLS CURRICULUM, AND EVERY COUPLES
  PREMARITAL
• COUNSELING.
• -GARY f. RUSSELL, ED.D.
• CEO, MAJOR LEAGUE SOCCER CAMPS

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REVIEWS CONTINUED

• POWERFUL, CAPTIVATING, AND EASY TO READ. THIS
  BOOKS HEARTWARMING MESSAGE HAS A SPIRITUAL
  QUALITY, YET IT IS GROUNDED IN DECADES OF
  RESEARCH.
• -LEA E. WILLIAMS, ED.D.
• EXECUTIVE DIRECTOR NATIONAL AFRICAN-AMERICAN
  WOMENS LEADERSHIP INSITITUE INC.

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CREDIT CARDS

• Advantages
• Ability to purchase items now
• Dont have to carry cash
• Creates a record of purchases
• Consolidates bills into one payment

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CREDIT CARDS

• DISADVANTAGES
• May require additional fees
• Interest charged if bills not paid in full
• Increased impulse buying may occur
• Financial difficulties may arise if one loses
  track of how much has been spent each month

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CREDIT CARDS

• Experts suggest spending no more than 15-20 of
  your after-tax income on credit purchases.
• Example If you earn 400 per month after taxes,
  then your net income is
• 400 X 12 4800
• Your safe debt load is
• 15 X 4800 720
• This amount excludes mortgage payments.

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CREDIT CARD MYTH

• Paying the minimum balance each month is ok.
• Paying only the minimum balance extends your
  balance and payments for months, even years,
  adding to the interest to be paid.
• Chad Foster states in his book Financial Literacy
  for Teens

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WARNING SIGNS OF TROUBLE

• You dont know how much you owe
• You often pay bills late
• You get a new loan to pay old loans
• You pay only the minimum balance due
• You spend more than 15 of your net income
• Youre spending more than you earn, using your
  savingsd to pay for day-to-day expenses

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FACTS ABOUT CREDIT CARD USE

• Among the American population, it is estimated
  that
• 20 have maxed-out their credit cards
• The average credit card balance per household is
  8400
• 78 of college students have a credit card 32
  have 3 or more the average credit card balance
  is 2748
• 13 of college students have a credit card debt
  between 3000-7000 9 have credit card debt
  greater than 7000.

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ADDITIONAL FACTS ABOUT CREDIT CARD USE

• The average APR(annual percentage rate) is 18.9
• The average household pays 83.33 in credit card
  interest per month.
• Source creditcounselingbiz.com

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GUIDELINE FOR NON-HOUSINGDEBT TO INCOME RATIOS

• 10 OR LESS EXCELLENT
• 11-20 ACCEPTABLE
• 21-35 OVEREXTENDED
• 36 DANGER!
• Source salliemae.com

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DETERMINE YOUR RATIO

• Example You earn 3000 each month in gross
  income, and a yearly bonus nets you 250 per
  month. Your total monthly income is 3250.
• You pay 350 a month in student loans, 300 on a
  car payment, and 220 on your credit cards. Your
  total month debt payments are 870.
• 870(debt) divided by 3250(income)26.7

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CHAD FOSTER SPEAKS

• Dont ever sign up for a credit card unless you
  are prepared to and are capable of paying off the
  total balance at the end of every monthnot most
  of the balance, but every dime of the balance,
  and not most of the months, but every month.most
  important, when you do use a credit card and then
  pay your bill on time (every time!), you will be
  establishing a good credit record which will help
  you later on when you want to rent an apartment
  or buy a car.

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CHAD FOSTER SPEAKS AGAIN

• Dont spend money that you dont have on credit
  card purchases, even if all your friends are
  doing it, and , yes, even if your parents are
  doing it. Just because they are your parents
  does not mean that you have to make the same
  stupid mistakes that they make!

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LATTE FACTOR

• WHAT IS IT?
• ASK YOURSELF WHAT IS MY LATTE FACTOR?
• MY LATTE FACTOR IS..
• SIR JOHN TEMPLETON, DAVID BACH SAVINGS RATE
• IF THOSE DOLLARS WERE INVESTED IN AN IRA, HERE
  IS THE OUTCOME.
• 1,575,118 CONTRIBUTIONS OF 2750 FROM AGE 22-65.

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INDIVIDUAL RETIREMENT ACCOUNTS

• WHAT ARE THEY?
• A TRADITIONAL IRA DEFERS THE EARNINGS ON THE
  INVESTMENT UNTIL YOU WITHDRAW THE MONEY, WHICH IS
  REQUIRED AT AGE 70.5 YEARS. ALL WITHDRAWALS ARE
  TAXABLE.
• YOU ALSO GET A TAX DEDUCTION DEPENDING UPON YOUR
  INCOME
• THERE ARE MINIMUM DISTRIBUTION RULES.
• A ROTH IRA IS ONE WHERE YOU BUILD UP EARNINGS TAX
  FREE. NO TAX DEDUCTION UPFRONT-BUT THERE ARE NO
  TAXES UPON WITHDRAWAL. THERE ARE INCOME LIMITS.
  BEST BET FOR A FIRST-TIME EMPLOYEE IS A ROTH IRA.
  
• THE DESIGNEE MUST KEEP THE CONTRIBUTIONS IN THE
  ROTH IRA FOR A MINIMUM OF 5 YEARS BEFORE
  WITHDRAWAL.
• THERE ARE NO MINIMUM DISTRIBUTION RULES.

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401K PLANS/403B PLANS

• EMPLOYER SPONSORED PLANS
• USUALLY CONTRIBUTION MATCHING BY EMPLOYER
• NEW THIS YEAR-ROTH 401K PLANS
• THE DIFFERENCE WITH TRADITIONAL ROTH AND THE 401K
  ROTH IS THAT THERE ARE MINIMUM DISTRIBUTION
  REQUIREMENTS WITH THE 401K ROTH.

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QUICK SUMMARY ON DEFERREDINCOME PLANST

• TRADITIONAL PLANS
• -TAX DEDUCTION
• -TAXED UPON WITHDRAWAL
• -MINIMUM DISTRIBUTION RULES
• -10 PENALTY IF WITHDRAWAL BEFORE
• AGE 59.5

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SUMMARY CONTINUED

• ROTH IRA
• -NO TAX DEDUCTION
• -NO TAX UPON WITHDRAWAL
• -NO MINIMUM DISTRIBUTION RULES
• MUST BE KEPT IN ACCOUNT FOR MINIMUM OF 5 YEARS
• INCOME LIMITS TO PARTICIPATE

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SUMMARY CONTINUED

• 401K/403B PLANS
• EMPLOYER CONTRIBUTIONS
• DOLLARS TAKEN OUT OF YOUR PAY(FORCED SAVINGS!)
• TAXED UPON WITHDRAWAL
• CONTRIBUTIONS EXCLUDED FROM GROSS INCOME
• ROTH 401K/403B NEW THIS YEAR-
• ONLY DIFFERENCE FROM REGULAR ROTH IRA IS
  REQUIREMENT OF DISTRIBUTIONS BY AGE 70.5

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INVESTMENT OPTIONS

• BEFORE INVESTING IN A TAXABLE ACCOUNT
• -SET ASIDE ABOUT 6MONTHS-1 YEAR OF YOUR SALARY
  FOR EMERGENCIES
• USE UP ALL THE OPPORTUNITIES FOR DEFERRED
  INVESTING-I.E. 401KS/ IRAS
• AND BEFORE WE TALK ABOUT INVESTING, ESTIMATE THE
  INCOME YOU THINK THAT YOU WILL EARN OVER YOUR
  CAREER.

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ASSET ALLOCATION

• In general, this means how you allocate your
  assets depending on age, risk tolerance, and
  valuation.
• Conventional thinking states that a larger
  percentage of assets should be in stocks the
  younger we are and that by age 50 we should be
  reducing our exposure to the asset class of
  stocks.

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SEDUCTIVE MARKETING

• WHICH RETURN WOULD YOU PREFER?
• 20
• 10
• 5

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ANSWER IT DEPENDS

• 20 RETURN ON 10 STOCK 12.00
• 10 RETURN ON 11 STOCK 12.10
• 5 RETURN ON A 12 STOCK 12.60
• WHICH INVESTMENT RETURN INCREASES YOUR NET WORTH
  MORE THAN THE OTHERS?

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CONCLUSION

• WATCH OUT FOR ADVERTISING TOUTING SPECULAR
  RETURNS.
• IS THE BASIS OF THE STOCK/FUND
• SMALL SO THAT A SMALL RETURN WOULD RESULT IN A
  LARGE GAIN?

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SAMPLE ACCOUNT
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CUMULATIVE DIVIDEND RETURNS

• YIELD ON INVESTMENT VS. MONEY MARKET RATES
• DRIP-DIVIDEND REINVESTMENT PLANS
• ADVANTAGES ETFS
• - LOW COSTS
• -EASY LIQUIDITY