HACE 3200 1nd EditionExam # 1 Study Guide Lectures: 1 - 9Lecture 1 (January 8th)• Why do we care about money?Money= StatusWe 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 ManagementLecture 2(January 10th)- Financial Planning: The Binds That Tieo Achieve your financial goalso Achieve financial intelligence Research the companies you invest your money ino Invest intelligently  After researching several companies; choose the one with the best credentialso Minimize your payments to Uncle Sam Taxeso Cover your assets Insurance- The Life Cycle of Financial Planningo Stage 1: The Early Years: A Time of Wealth Accumulationo Stage 2: The Golden Yearso Stage 3: The Retirement Years- Stage 1: The Early Yearso Develop your savings plano Set your initial goals of all lengthso Establish your long-range investment strategyo 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 Yearso Realize intermediate-term goals o Re-evaluate the plan to match current goalso Plan for retirement o Ages 55-64- Stage 3: The Retirement Yearso Reduce investment risko Concentrate on preservation rather than growth of assetso Plan for the transfer of your estate Your personal will- leaving belongings to loved oneso Ages 65+- The Personal Financial Planning Processo Step 1: Evaluate your financial healtho Step 2: Define your financial goalso Step 3: Develop a Plan of Actiono Step 4: Implement your plano Step 5: Review your progress, Reevaluate, and Revise your plan- Step 1: Evaluateo Evaluate your current situation: income, spending, wealtho Assess your whole financial picture- Step 2: Define Your Financial Goalso Specifically define and write down your financial goals to reflect your financial and life situationo Attach a cost to each goalo Set a date for when the money is needed to accomplish the goal- Step 3: Develop a Plano Protection- your ability to meet the unexpected large expenses without destroying your plano Minimization of taxes – your ability to pay as little as possible to the government- Step 4: Implement Your Plano Your plan is your road mapo Use common sense and moderation; don’t force yourself to track every pennyo Remain positive about your plano Stay on track after the detours- Step 5: Revise Your Plano Review your progresso Match your plans to your goalso Be prepared to start over if your plan no longer meets your needs Divorce- Goals: The Cornerstone of a Financial Plano Goals keep the future in mind by reminding you of the rewardso Goals entice you to keep the plan in effecto Goals provide tangibility for the question, “why?”- Time Horizons for Financial Goalso Short-term goals can be accomplished within a 1-year periodo Intermediate-term goals take 1-10 years to accomplisho 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 livingo Education is the key factor in determining income levelo 70% of wealthy householders finished collegeLecture 3 (January 12th)- Measuring Your Financial Health and Making a Plano 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- Budgeto Incorporate Weekly!- Using a Balance Sheet to Measure Your Wealtho 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 Owno Monetary o Investmento Retirement Planso Real Estate( Likely to have debt attached to it)o Automobiles and other vehicleso 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 futureo Examples- Stocks, bonds, mutual funds, cash value, life insurance- Retirement Plans:o Investment by you or your employer to save