HACE 3200 1nd Edition Exam 1 Study Guide Lectures 1 9 Lecture 1 January 8th Why do we care about money Money Status We judge people around us on a day to day basis based on money When people ask others about their majors they are hoping to discover their potential salary State of Georgia Median Income 49 736 Families below Poverty level 19 1 Individuals below poverty level including students 14 7 Children below poverty level 26 A family of 4 is defined as poverty stricken with 22 050 annual income Georgia has the 6th highest poverty rate for children in the U S Money Security Provides shelter Nourishes us Pays our bills Hopefully will support us through retirement What does money equal Money Power Conflict Theory Karl Marx a theory that all social groups exist in a state of conflict over the control of limited resources A K A Money Money Enjoyment Spring Break Gifts for ourselves and others The Impact of Money 1 reason cited by couples filling for divorce in 2013 Money problems One of the top reasons cited for suicides or suicide attempts in 2013 Money Problems The reason thousands of homes filed for bankruptcy in 2013 Poor Financial Management Skills Georgia ranked 3rd in bankruptcy fillings in US What kind of consumer are you 6 types of Spending Personalities Impulsive Buyer Buys on a whim Makes unplanned purchases Lacks self control in purchasing situations Lack clear priorities Fanatical Shopper Shops for weeks to find lowest price Views shopping as a win lose battle Purchases sale items that they neither want nor need just to save money Passive Buyer Dislikes shopping Doesn t comparison shop big purchases like a car or house Lacks sales resistance Easily talked into purchase Avoidance Shopper Goes shopping to escape life s pressures May purchase items to demonstrate dominance over another or revenge May buy gifts out of guilt or inability to show affection Esteem Buyer Buys only name brand items from top ranked stores When purchasing considers whether item will impress others Overdone Buyer Any collection hobby or activity that is pursued to the point of bankruptcy Excessive spending on clothing shoes etc Also includes addictions to substances Financial Management Knowledge about yourself Financial Management Lecture 2 January 10th Financial Planning The Binds That Tie o Achieve your financial goals o Achieve financial intelligence Research the companies you invest your money in o Invest intelligently After researching several companies choose the one with the best credentials o Minimize your payments to Uncle Sam Taxes o Cover your assets Insurance The Life Cycle of Financial Planning o Stage 1 The Early Years A Time of Wealth Accumulation o Stage 2 The Golden Years o Stage 3 The Retirement Years Stage 1 The Early Years o Develop your savings plan o Set your initial goals of all lengths o Establish your long range investment strategy o Through the age 54 Also a time of Debt Accumulation Good debt vs Bad Debt Good Student loans Bad revolving credit card balance Stage 2 Approaching Retirement The Golden Years o Realize intermediate term goals o Re evaluate the plan to match current goals o Plan for retirement o Ages 55 64 Stage 3 The Retirement Years o Reduce investment risk o Concentrate on preservation rather than growth of assets o Plan for the transfer of your estate Your personal will leaving belongings to loved ones o Ages 65 The Personal Financial Planning Process o Step 1 Evaluate your financial health o Step 2 Define your financial goals o Step 3 Develop a Plan of Action o Step 4 Implement your plan o Step 5 Review your progress Reevaluate and Revise your plan Step 1 Evaluate o Evaluate your current situation income spending wealth o Assess your whole financial picture Step 2 Define Your Financial Goals o Specifically define and write down your financial goals to reflect your financial and life situation o Attach a cost to each goal o Set a date for when the money is needed to accomplish the goal Step 3 Develop a Plan o Protection your ability to meet the unexpected large expenses without destroying your plan o Minimization of taxes your ability to pay as little as possible to the government Step 4 Implement Your Plan o Your plan is your road map o Use common sense and moderation don t force yourself to track every penny o Remain positive about your plan o Stay on track after the detours Step 5 Revise Your Plan o Review your progress o Match your plans to your goals o Be prepared to start over if your plan no longer meets your needs Divorce Goals The Cornerstone of a Financial Plan o Goals keep the future in mind by reminding you of the rewards o Goals entice you to keep the plan in effect o Goals provide tangibility for the question why Time Horizons for Financial Goals o Short term goals can be accomplished within a 1 year period o Intermediate term goals take 1 10 years to accomplish o Long term goals take more than 10 years to achieve Education may be the best single investment you ever make Income What Determines It o Earnings determine standard of living o Education is the key factor in determining income level o 70 of wealthy householders finished college Lecture 3 January 12th Measuring Your Financial Health and Making a Plan o Step 1 Evaluate your Financial Health You can t get to where you want to be financially until you know exact y where you are Balance Sheets Income Statements Budget o Incorporate Weekly Using a Balance Sheet to Measure Your Wealth o Personal Balance Sheet A statement of your financial position on a given date the financial Polaroid or snap shot of The Present Lists 1 your assets and 2 your liabilities Debt 1 Your Assets What You Own o Monetary o Investment o Retirement Plans o Real Estate Likely to have debt attached to it o Automobiles and other vehicles o Personal Property Monetary Assets o Cash or other assets that can be easily Liquidated o Examples cash checking accounts savings accounts Investment Assets o Assets that are invested for the future o Examples Stocks bonds mutual funds cash value life insurance Retirement Plans o Investment by you or your employer to save for retirement o Examples pensions IRAs 401 k Keogh or SEP IRA plans Tangible Assets o A physical asset something you can use feel and touch o Example once you buy a car and leave the lot the value of the car depreciates There is a drop in value Real Estate o Tangible asset such as land or a dwelling o Represents most of your savings and normally appreciates in