COA 4131 1st Edition Lecture 5 Outline of Last Lecture I. Financial decisions and taxesII. Use of CreditIII. Investment and TaxesIV. Children’s Investments and TaxesV. Tax Deferred Retirement PlansVI. Estate and Gift Tax TransfersVII. No State Income Tax InVIII. Sales TaxIX. No Sales Tax inX. Best Place’s Cost of Living CalculatorOutline of Current Lecture I. Cash Management ProcessII. Cash Management and Foreign CurrencyIII. InterestIV. SavingsV. Financial StatementsCurrent LectureA. Cash Management Processa. The routine and everyday administration of cash and near cash to take care of an individual’s or family’s needs i. What you need to know to tae care of yourself and your familyb. Near cashi. Debt and checking accountsc. Three stepsi. Awareness1. You get so much money per weeka. Parents give college students a weekly budgetii. Analysis1. Ask yourself what you are going to do with this money2. Need more money during some months versus othersiii. Action1. Move money around and figure out where it will go in the futurea. Open a checking accountb. Banking in-person or onlined. Spending less money than you actually earni. This is not easyii. Ease of pulling out cash 1. ATM machines are open 24/7iii. Have to keep track of how much money you have at any given timeB. Cash Management and Foreign Currencya. U.S. dollar: United Statesb. Euro: majority of Europec. Pound: Britaind. Dollar: Canadai. Right now Canada Dollar is worth more than U.S. dollar1. It fluctuates e. Yen: Japanf. Real: Brazilg. World Economyi. Yen, Euro, and U.S. dollar are the most important 1. If things happen to these, there is a ripple effect around the globeC. Interesta. The cost of using moneyb. Rate of interest determined by supply and demandc. Expressed as a percentage and as an annual feed. Supplyi. The amount of money lenders are willing to lende. Demandi. The amount of money borrowers are willing to payii. You do not want to borrow as much as lender is willing to give youf. Receiver of interesti. Savings accountii. Investmentsg. Payer of interesti. Borrowed money1. Credit cardsh. Interest ratesi. Adjustii. Move together1. When one part of the market adjusts interest rates, the other parts respondi. Tieredi. Interest rate structure tied to a balance levelD. Savingsa. Savingsi. Amount kept in it is a matter of preferenceii. Your attitude about maintaining a minimum balance has to do with your risk of toleranceiii. Fees1. Be cautious2. Can be expensive!b. Cash management includesi. Keeping abreast of your expenditures through1. Maintaining a balanced checkbook2. Paying bills promptly and 3. Establishing an ongoing saving programc. Large balances in low interest or non-interest accounts don’t earn interestd. Cash is useful for small immediate needs and checks are useful for monthly bills or larger purchasese. Saving ratesi. Many experts recommend a saving rate of 10-15%f. Emergency fundi. Three to six months (maybe more) of after-tax incomeii. Basic liquidity ratio1. Monetary assets over monthly expensesg. Take a regular amount out of each paycheck and put it into savingsh. Making savings growi. Based on amount put inii. Interest rateiii. Frequency that interest is compoundediv. Policies regarding deposit and withdrawalsv. Normal rate or interest1. State annual rate of interestvi. Effective rate1. Actual rate of interest including compoundingE. Financial Statementsa. Continuous compoundingi. Compounding of interest continuously during the dayb. Annual percentage yieldi. Amount of interest earned on a yearly basis expressed as a
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