1. Answers to Personal IQ Test 1. False 2. True 3. True 4. True 5. True 6. True 7. False 8. True

• 9. True 10. False 11. False 12. False 13. False 14. True 15. False 16. True

2.

17. True 18. False 19. False 20. True 21. True 22. False 23. True 24. False

25. False 26. True 27. True 28. True 29. True 30. False

3. Your Personal IQ Score & Grade 27-30 = A: Excellent Personal Financial IQ 24-26 = B: Above Average Personal Financial IQ 21-23 = C: Average Personal Financial IQ 18-20 = D: Below Average Personal Financial IQ 0 17 = E: Desperately Needs Financial Training 4. Element 1: Discoveryourcomparative advantage - What does this mean? Specialize in what you are good at; you'll be more productivein that area - Pick an area that is of more value to others to maximize yourearnings Ex: Engineering v. English degrees - Highest pay goes to those who are good at something thatothers value 5. How to figure out your comparative advantage - What do you like to do? What do you enjoy? - School subjects that come easily - How you spend your spare time - What you are passionate about; what you care about - What other people think about you & your talents - What else? Take a full career assessment evaluation; may beworth spending money on Did the online Personality ID Quiz help?- PRAY!God knows you better than anyone does; trust that Hewill lead you.Do not worry! 6. Element 2: Be Entrepreneurial. In a market economy people get ahead by helping others and discovering better ways of doing things.-Financial success =making your services more valuable to others.This is true whether you are an employer or an employee - Entrepreneurs < 1/5 of workforce but they = 2/3 of the millionaires Characteristics of Entrepreneurs: - Develop opportunities & new products that others have overlooked - Assume more risk b/c possible payback is higher - Save a lot, often reinvesting their profits - Work LONG hours, > 40 hours/week - Any employee can adopt some or all of these practices 7. Element 2: Be entrepreneurial THINK like an entrepreneur; DEVELOP SKILLS; Napoleon Dynamite was right! If you are an employee, think of ways to help your boss. What changes could be made to save money or improve the product or service you provide?How can you go the extra mile at work? Always look for new things to learn on the job.*** What business ideas do you have for the future or have already started? 8. Element 3: Budget to help you save regularly and spend your money more effectively. - How do people and nations become wealthy? By savingregularly. - Savings creates capital that can be used to generate wealth,such as a new business or investment - If you get in the habit now of knowing where your money isgoing and figuring out how to stick with your goals, you will dowell in life and avoid being a poor fool (Prov. 6) or a rich fool(Luke 12). - This is where knowing your goals and dreams is important.- NOTE: Your money and everything you own belongs to God.You are His steward. Manage what He has given you in a waythat will please HIM.Make Him Lord of your money! 9. A Budget = a Plan. START NOW! 1. Keep track of your income & expenses for a month 2. Set a minimum % for giving. Be willing to give more as God leads. 3. Decide how much spending money you need per month. 4. SAVE the REST OR set a % to save.- Save an Emergency Fund of $500 to $1000 that you don't touch. - Set Goals for your savings:short-term, medium-term & long-term. - What are your goals? PRAY! Put incentives to work for you. 5. STICK to your PLAN!Use Quicken, Budgetmap, Mvelopes from Crown Financial Ministries, or paper envelopes, but make it work. 6. AVOID DEBT, even to your parents and especially your friends. 10. How's Your Budgeting Going?

Have you been keeping track of your expenses and income this month?Any comments, surprises?

11. What is the difference between needs & wants? 12. How about the budgeting exercise you did this week?How did you make your decisions of how much to allocate to each category? Comments, reactions? 13. Hand them in. Keep going with your personal tracking. 14. Element 4: Don't Finance anything for longer than its useful life. - What should not be financed through debt?Items that are consumed or used up quickly: - When is it generally OK to purchase something on credit? When it's a long-lasting asset & the debt is paid before theasset wears out: 15. Element 5: Avoid Credit Card Debt & Consider purchasing used items.

What's so bad about credit cards?

16. - Late fees, $25 and up; minimum payment problem 17. - Interest charges, 13% and up, much higher than you can earn in investments 18. - Temptation to buy things you can't afford; impulse buys sales only save you money if you were already needing to buy that item. 19. - Leads you to break your budget 20. - Can cause you to accrue a huge debt; average credit card debt in America is over $10,000 21. - If misused (late fees, etc) your credit rating will go down, making it harder to buy a house, giving you higher interest rates, more expensive insurance rates, etc. 22. My Credit Card Bill 23. What does the Bible say about debt?

Prov 22:7 ... the borrower is servant to the lender.

24. Prov. 17:18It's not wise to co-sign for or take on another's debt 25. Prov. 6:1-5If already in debt, get out of debt as fast as you can. 26. Romans 13:8 Let no debt remain outstanding except the continuing debt to love one another. 27. Matthew 6:33 Seek first his kingdom and his righteousness, and all these things will be given to you as well. 28. However, there is one debt that is legitimate; to whom are we all in debt? 29. More Questions to Ask about Debt

Isn't it odd that so many people who live in the richest nation in the world's history have a ton of debt? What's going on here?

30. When tempted to take on debt, ask yourself: 31. - Is this a need or want? 32. - Am I trusting God for this or taking matters into my own hands? 33. - How will this debt affect my ability to give to God's work? 34. - Will this debt enslave me or force me to continue my current lifestyle, losing the freedom to respond to God's call? 35. - Is my current lack of money God's way of protecting me from pursuing something that isn't best for me or His kingdom? 36. Rules for Using Credit Cards

#1 Pay off the entire billeverymonth

37. #2 Only use them for budgeted purposes 38. #3 Don't let 0% interest for 6 months, no annual fees, cash back or frequent flier miles turn your head. 39. #4 If you can't pay it off every month, cut it up! Go back to cash, checks, and debit cards 40. Buy Used Goods when you can't afford New

What is depreciation?

41. - loss in value when a new item is purchased; now considered used so you can't resell them for what you paid for it 42. What are the best things to buy used? 43. Any problem with buying used items? 44. Other Kinds of Debt

Car & other vehicle loans: 2.75% - 4.49%

45. Personal loans: 9.99% for < 6 mos. 46. Student loans: 6% 47. First Mortgages: ~ 4%, amazingly low! 48. Second Mortgages: 5% 49. Home Equity Line of Credit: 4.50% and up 50. Business Loans: depends on the business 51. Element 6: Begin Paying into a real-world Savings Account every month.

Real-world savings account = emergency or rainy day fund

52. How much should you have in this account?What kinds of expenses are you trying to cover? 53. What are SIT expenditures? 54. - S = 55. - I = 56. - T = 57. Why is this a mandatory budget item? 58. Element 7: Put the power of compound interest to work for you.

Why should you start saving now?

59. 1. 60. 2. 61. What is compound interest? 62. - Earning interest on interest 63. When does this happen? 64. Time and the interest rate are key 65. What is average rate of return of stock market since 1926 for S&P 500 largest firms? 66. T HER ULE OF70 ~ H OWL ONGD OESI TT AKE TOD OUBLEY OURP RINCIPALI NVESTMENT ? Place funds in a strategic investment vehicle and let them grow over time. Divide 70 by the expected rate of return (R) and see how long it takes to double in size.The Number of Years It will Take X to Double= 70/R When the rate of interest (R) = 7%, your investment will double in how many years? 10 years (=70/7) 67. Take a Closer Look: Rule of 70

Save $2000 at the age of 16 and place it in an investment that promises a 10% return.

68. How long will it take you to double it? 69. 7 years (70/10) 70. So at the age of 23 you will have $4000. 71. Take a Closer Look: Rule of 70

Save $2000 at the age of 16 and place it in an investment that promises a 10% return.

72. How much will you have at age 30 if you leave the funds there? 73. - $8000 (The funds double every 7 years) 74. Age 37? 75. Age 51? 76. Not bad, eh? But finding a 10% return these days is almost impossible. Even so, the principle is true. Interest rates change all the time and investment opportunities change with the times, too. Keep your eyes open and ask God to help you to know what to do. 77. Element 8: Diversify Don't put all of your eggs in one basket.

Do you know the story about the girl who sold eggs at the market?

78. Why is diversification important? 79. - What are you trying to minimize? 80. What is the random walk theory? 81. Current stock prices already reflect what is known about the future so future stock prices will be determined by surprise happenings that can't be anticipated now so future prices will change in a random fashion. 82. What are the most common investments in America? 83. Real estate, Stocks & Bonds, Savings Accounts 84. Real Estate Investments

Save at least 20% for a down payment

85. - Tell my story; my advice to all young married couples 86. Avoid ARM's and other adjustable rates 87. Pay off the mortgage early if possible 88. Don't borrow against the equity you build in your home; Avoid second mortgages or home equity loans 89. Stocks & Bonds

7% return for stocks over the last two centuries after adjusting for inflation; What is a stock?

90. 3% average return for bonds over the same period; What are bonds? 91. How do you reduce your risk? 92. What are mutual funds? 93. No load funds? 94. What about owning stock in the company you work for? What is the risk here? 95. QUESTION FOR DISCUSSION If Microsoft constitutes a sizeable share of your current stock holdings, the purchase of which of the following stocks would provide you with the greatest increase in diversification and reduction in risk? Lowes Home Improvement Apple Computer Google Oracle 96. Savings Accounts

What are the current interest rates for savings accounts at your bank?

97. What are Certificates of Deposit (CD's)? Rates for these? 98. What are money market accounts?Rates? 99. Do you know of any other savings vehicles? 100. NOTE: Your emergency fund must be liquid. What does this mean? 101. Element 9: Indexed Equity Funds can help you beat the experts without taking excessive risks. What's the problem with investing in the stock market for most people? 1. they lack expertise or time to know which stocks to buy & when to sell 2. the future is impossible to predict; Who is the next Steve Jobs? - What is the solution suggested by CSE? 102. Stock Index Mutual Funds

What are they?

103. Mutual funds that holds funds in the same proportions as one of the indexes of the stock market such as the S&P 500 or the Dow Jones Industrial 104. What are their advantages? 105. - lower operating costs b/c little research is needed 106. - thus lower fees charged to the investors 107. - they earn about the average rate of return for the stock market 108. - they outperform managed funds 98% of the time over the long run 109. What is the historical average return for the stock market? 110. Stocks are hard to beat as a good investment

7% per year

111. This means the real value of your investment after adjusting for inflation doubles every 10 years. 112. What's the moral of this story? 113. - Don't avoid investing in the stock market just because you lack the time or energy to do the research. Pick an indexed fund or two and hold onto them for a long time. Stocks yield the best returns over time with the least effort on your part. 114. - As you approach retirement, you will want to make some adjustments. 115. Element 10: Invest in Stocks for long-run objectives, but as the need for income approaches, increase the proportion of bonds.

What are bonds?

In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity. A bond is a formal contract to repay borrowed money with interest at fixed intervals (ex semi annual, annual, sometimes monthly).[1]

116. Thus a bond is like a loan: the holder of the bond is the lender (creditor), the issuer of the bond is the borrower (debtor). Bonds provide the borrower with external funds to finance long-term investments, or, in the case of government bonds, to finance current expenditure. 117. How are Stocks & Bonds Different?

Bonds and stocks are both securities, but the major difference between the two is that (capital) stockholders have an equity stake in the company (i.e., they are owners), whereas bondholders have a creditor stake in the company (i.e., they are lenders).

118. Another difference is that bonds usually have a defined term, or maturity, after which the bond is redeemed, whereas stocks may be outstanding indefinitely. 119. Finally, stocks usually have a higher rate of return over the long run (7% v. 3.5% for bonds) but they are a much riskier investment; bonds are susceptible to losing value due to inflation but they have a more stable return over the short-run. Thus they are better for retirees than are stocks. 120. Types of Retirement Plans

401(k) or 403(b) Plans contributions are tax-deductible initially but will be taxed when you make withdrawals in retirement; interest growth not taxed until withdrawals made; these funds are set up by your employer or by you if you are self-employed. Employers typically make some kind of contribution to your fund annually.

121. IRA's = Individual Retirement Plans function similarly to 401(k)'s except that you set up the fund rather than your employer. 122. Roth IRA's contributions are not tax deductible so you won't be taxed when you make withdrawals later; thus, the investment grows entirely tax-free once you've made the contribution. 123. Tips for investing in Bonds

Buy TIPS (Treasury Inflation-Protected Securities) b/c in addition to paying back the interest & principle at maturity, there's an extra payment to adjust for inflation, which is especially helpful for retirees.

124. Pick a maturity date that expires about the time you think you will need the money. Otherwise, if you have to cash it in early, you may not get the full principle back if interest rates have risen in the meantime. Of course, if interest rates drop, then it might make sense to cash it in early if you need the money. 125. When to buy stocks v. bonds?

Depends on when you need the money

126. - If money not needed for 15 or more years, invest in_________ . 127. - If money needed in just a few years, invest in ____________. 128. If concerned about risk, move more of your investments to bonds. 129. Is now a good time to purchase bonds? 130. How to Save for Retirement

1. Start early, like now! Or as soon as you start working full-time. 2. Take advantage of 401(k)'s and IRA's and other tax breaks. 3. Invest in diversified stocks such as an indexed fund until you need the money. 4. Start gradually moving your investments into bonds as retirement age nears to protect your investments from risk.

131. Element 11: Beware of investment schemes promising high returns with little or no risk.

Rule #1: BE SKEPTICAL.Why are they coming to you rather than the bank? High-risk returns involve high risk. Are you OK with that?

132. What is the principal-agent problem? 133. Hint: You are the principal in this case. 134. Hint: Your priorities are different than the agent's priorities. 135. Hint: Once they have your money, it's out of your control. 136. How can you tell beforehand if an investment is a wise one? 137. Rules of Engagement for judging investment propositions

If it looks too good to be true, then it probably is.

138. Deal only with parties that have a reputation to protect, that is, established companies. 139. NEVER purchase an investment solicited by telephone or email. 140. Do not allow yourself to be forced into a quick decision. 141. Do not allow friendship to influence an investment decision. 142. If high-pressure marketing is involved, run away! 143. Only invest funds that you can afford to lose in high-risk investments. 144. What's the Best Investment you can make?

What has a guaranteed return of 1000%?

145. What investment can you never lose? 146. What are some bad reasons to invest? 147. I Tim 6:9-10, Psalm 73:3, I Tim 6:17, Prov. 14 :7 148. Make sure you are rich toward God: Luke 12:21 149. Element 12: Teach your children how to earn money and spend it wisely.

1. Teach them that money has to be earned; it's not manna from heaven.- What do you think about allowances or being paid for chores? How did your parents handle this?- Jesus Can, Piggy Bank & Personal Jollies- Do you agree with the authors about giving children the money for a brand-name item, but encouraging them to buy a less expensive alternative, saving the difference? - How about the meal allowance idea while on vacation? 2. Teach them that life is full of trade-offs. It's all about making choices and setting priorities & goals. 3. Teach them to share & give.

150. What are the three best methods of teaching your children?

By example, by example, and by example

151. Resist materialism in your own life 152. Recognize that giving things like toys is not = love 153. Teach them delayed gratification 154. Don't bail them out; allow them to learn from the consequences of their actions 155. Talk to them about money and why you did or did not buy something 156. Encourage thankfulness and contentment; model it for them! 157. What leads to Success in Life?

Setting goals

158. Working hard to achieve your goals 159. Figuring out how to make yourself useful to others 160. Saving for specific purposes 161. Spending money wisely 162. Avoiding debt 163. Being at peace with God and your fellow man 164. How do you define success? 165. Paying for College

How many of you are planning to go to college?Do you have any idea how you will finance it?

166. Do you agree with the authors that students should bear at least some of the cost of their education? 167. I like the idea of parents matching whatever their children save toward college. I wish we had done that. 168. Summing it all up

We want to be wise as serpents and yet innocent as doves. You cannot serve two masters.

169. Recognize that everything you have has been given to you by God. You are his steward. How can you best manage what He has entrusted to you? Are you building your kingdom or His? 170. You can't take it with you. The moment you die, all of this stuff will mean nothing to you. So why not use it now for eternal purposes?After all, it belongs to God, right? 171. Life can be exciting if we will learn to see our money through God's eyes. As nice as the American dream can be, it is no substitute for what God has in store for us. Never forget it! 172. He is no fool who gives what he cannot keep to gain what he cannot lose. - Jim Elliot, missionary