It’s Your Money

It’s Your Money!It’s Your Money!

Make, Manage, andMake, Manage, and

Multiply It!Multiply It!

Don Barkman

The Business Center

Oak Ridge, TN

www.bizcenter.comwww.bizcenter.com 22

IntroductionIntroduction

What we do with What we do with money:money:– EarnEarn– SpendSpend– SaveSave– InvestInvest– EnjoyEnjoy


AgendaAgenda IntroductionIntroduction GoalsGoals EarningEarning SpendingSpending Personal ProfitPersonal Profit SavingSaving Personal WealthPersonal Wealth InvestingInvesting StrategiesStrategies

Yo,

Dudes


Don BarkmanDon Barkman

Consultant / trainer.Consultant / trainer. Conducting business literacy training Conducting business literacy training

for company employees for 20 yrs.for company employees for 20 yrs. Used my MBA to help manage my Used my MBA to help manage my

own money for 40 yrs.own money for 40 yrs. Dad with a daughter who has no Dad with a daughter who has no

sense of money management.sense of money management.


DisclaimerDisclaimer

I am not a financial planner or I am not a financial planner or advisor.advisor.

This session barely scratches the This session barely scratches the surface.surface.

You should read more books and get You should read more books and get professional advice, especially for professional advice, especially for “Investing.” “Investing.”


Are You a Millionaire?Are You a Millionaire?

You will make at least $25,000/yr.You will make at least $25,000/yr. You will work for 40 years.You will work for 40 years.

What will you do with all that What will you do with all that money?money?

$25,000

x 40 yrs.

= $1,000,000


Pop QuizPop Quiz

What percentage of the US households What percentage of the US households surveyed by Parade magazine in 2007 surveyed by Parade magazine in 2007 said they were saving said they were saving NOTHINGNOTHING for for retirement?retirement?

15%15% 30%30% 40%40% 65%65%


Managing MoneyManaging Money

Why don’t people manage their Why don’t people manage their money better? Pick your 2 favorites.money better? Pick your 2 favorites.A. Don’t know how – never taught.A. Don’t know how – never taught.

B. Makes them feel restricted.B. Makes them feel restricted.

C. Can’t defer gratification.C. Can’t defer gratification.

D. The truth is scary.D. The truth is scary.

E. Have no goals.E. Have no goals.

F. Lazy.F. Lazy.


Financial GoalsFinancial Goals

No goals, no score.No goals, no score. A few simple goals A few simple goals

are better than are better than none at all.none at all.


Goal ExamplesGoal Examples

Create and use a spending budget.Create and use a spending budget. Keep spending less than income.Keep spending less than income. Do not carry a credit card balance.Do not carry a credit card balance. Save X Save X $$ or Y or Y %% each month. each month. Enroll in the company savings plan.Enroll in the company savings plan. Read a book on money management.Read a book on money management.


Goal ExamplesGoal Examples

Set up a tax-deferred investment Set up a tax-deferred investment account for retirement.account for retirement.

Set up savings funds for:Set up savings funds for:Unusual yearly expenses.Unusual yearly expenses.Major purchases: appliances, home.Major purchases: appliances, home.Special vacation.Special vacation.Kids’ college.Kids’ college.

Become debt free.Become debt free. Construct a personal balance sheet.Construct a personal balance sheet.


Pop QuizPop Quiz

In 2007, the poverty level for a family of In 2007, the poverty level for a family of four was approximately:four was approximately:

$16,400$16,400 $21,300$21,300 $24,000$24,000 $30,800$30,800


Pop QuizPop Quiz

What was the median* household income What was the median* household income in the USA in 2006? *in the USA in 2006? *(50% above and 50% below).(50% above and 50% below).

$35,900$35,900 $48,200$48,200 $62,500$62,500 $87,644$87,644


Pop QuizPop Quiz

To be in the top 5% of wage earners in To be in the top 5% of wage earners in 2007, you needed to make . . .2007, you needed to make . . .

$83,000$83,000 $105,000$105,000 $130,000$130,000 $260,000$260,000


EarningEarning

Brainstorm ways to make money.Brainstorm ways to make money.


EarningEarning

9 Ways to increase income:9 Ways to increase income:– Work more.Work more.– Do a good job.Do a good job.– Increase your education and training.Increase your education and training.– Gain useful experience.Gain useful experience.– Develop positive personal qualities.Develop positive personal qualities.– Shop the labor market.Shop the labor market.– Run your own business.Run your own business.– Invent something and sell it.Invent something and sell it.– Invest your savings to create earnings.Invest your savings to create earnings.


EarningEarning

Get “free” money!Get “free” money!– Employer plan matching funds.Employer plan matching funds.– Company health & other benefits.Company health & other benefits.– Scholarships.Scholarships.– Clip coupons and shop sales.Clip coupons and shop sales.– Bargain!Bargain!– Earned Income Credit on income tax filing Earned Income Credit on income tax filing

(poverty level).(poverty level).


EarningEarning

More Free Money – Avoid Taxes!More Free Money – Avoid Taxes!– Tax-deferred saving & investing plans.Tax-deferred saving & investing plans.

IRA (defer both investment & gains taxes)IRA (defer both investment & gains taxes)Roth IRA (defer gains taxes only)Roth IRA (defer gains taxes only)401K / 403b (defer both investment & gains 401K / 403b (defer both investment & gains

taxes)taxes)529 (college education - defer gain taxes 529 (college education - defer gain taxes

only)only)

– Cluster income tax deductions in Cluster income tax deductions in alternate years vs. standard deduction.alternate years vs. standard deduction.


Pop QuizPop Quiz

In 2005, the top 5% of taxpayers In 2005, the top 5% of taxpayers accounted for what percentage of all accounted for what percentage of all the income taxes paid?the income taxes paid?

5%5% 25%25% 45%45% 60%60%

To be in the top 5% required an “Adjusted

Gross Income” of $145,283.


SpendingSpending

Brainstorm:Brainstorm:– What you spend money for.What you spend money for.– Ways to spend less.Ways to spend less.


SpendingSpending

Core Monthly Expenses:Core Monthly Expenses:– ‘‘Same’ each month.Same’ each month.

Mortgage / Rent.Mortgage / Rent. Groceries.Groceries. Utilities.Utilities. Gasoline.Gasoline.

Periodic and Annual Expenses:Periodic and Annual Expenses:– Occur once a year, a quarter, etc.Occur once a year, a quarter, etc.

Property taxes. Property taxes. Insurance: home, life, auto.Insurance: home, life, auto. Vacation / Holiday.Vacation / Holiday.

$1,500

$0 -2,500


SpendingSpending

Budget Core Monthly Expenses.Budget Core Monthly Expenses. Plot Periodic and Annual Expenses.Plot Periodic and Annual Expenses. Add together for each month.Add together for each month.

Jan.Jan. Feb.Feb. Mar.Mar. Apr.Apr. MayMay JuneJune

CoreCore 1,5001,500 1,5001,500 1,5001,500 1,5001,500 1,5001,500 1,5001,500

Periodic Periodic & Annual& Annual

850850

XmasXmas1,2001,200Prop. Tx.Prop. Tx.

1,0001,000

IRSIRS700700

Life Ins.Life Ins.2,5002,500

BeachBeach

TotalTotal 2,3502,350 2,7002,700 1,5001,500 2,5002,500 2,2002,200 4,0004,000


Pop QuizPop Quiz

The average number of credit cards per The average number of credit cards per card holder is:card holder is:

33 66 99 1212


Pop QuizPop Quiz

In 2006, the amount that banks collected In 2006, the amount that banks collected from customers as “penalties” was:from customers as “penalties” was:

$600 million$600 million $2 billion$2 billion $8 billion$8 billion $17 billion$17 billion


Personal ProfitPersonal Profit

Maximize Your EarningsMaximize Your Earnings Minimize Your SpendingMinimize Your Spending Optimize Your Personal ProfitOptimize Your Personal Profit

Earnings Earnings (Paycheck)(Paycheck)

- Spending- Spending= Personal Profit= Personal Profit



Calculate your Calculate your

annualannual profit position. profit position.

Jan.Jan. Feb.Feb. Mar.Mar. Apr.Apr. MayMay JuneJuneIncomeIncome 2,6002,600 2,6002,600 2,6002,600 2,6002,600 2,6002,600 2,6002,600

Total Mo. Total Mo. ExpensesExpenses

2,3502,350 2,7002,700 1,5001,500 2,5002,500 2,2002,200 4,0004,000

ProfitProfit 250250 (100)(100) 900900 100100 400400 (1,400)(1,400)

Total Income 31,200

- Total Expenses 28,700

= Annual Profit 2,500

Calculate your Calculate your monthlymonthly profit position. profit position.



Track your rolling profit position.Track your rolling profit position. Save monthly surpluses to cover monthly Save monthly surpluses to cover monthly

shortfalls.shortfalls.

Jan.Jan. Feb.Feb. Mar.Mar. Apr.Apr. MayMay JuneJune

ProfitProfit 250250 (100)(100) 900900 100100 400400 (1,400)(1,400)

RollingProfitPosition +250 +150 +1,050 +1,150 +1,550 +150

Add & Subtract from left to right for running total.



Use your profit to . . .Use your profit to . . .– Take a “pleasure dividend.”Take a “pleasure dividend.”– Save for upcoming expenses.Save for upcoming expenses.– Invest for long-term growth.Invest for long-term growth.


SavingSaving

Save for three time frames:Save for three time frames:– Short-term: pay upcoming bills.Short-term: pay upcoming bills.– Intermediate: future purchases.Intermediate: future purchases.– Long-term: education & retirement.Long-term: education & retirement.


SavingSaving

Use variety of accounts:Use variety of accounts:– Basic savings.Basic savings.– Money market.Money market.– Certificate of deposit.Certificate of deposit.– Brokerage / investment.Brokerage / investment.– Employer savings & investing plan.Employer savings & investing plan.


SavingSaving

Not every bank or account is insured.Not every bank or account is insured.– FDIC insured banks:FDIC insured banks:

Amounts up to $100,000 per depositorAmounts up to $100,000 per depositor CheckingChecking SavingsSavings Money marketMoney market CDsCDs Not stocks, bondsNot stocks, bonds

– Credit Unions have own private insurer groups.Credit Unions have own private insurer groups. Coverages vary – check.Coverages vary – check.

– Brokerage accounts are not insured.Brokerage accounts are not insured.


Savings & WealthSavings & Wealth

SavingsSavings WealthWealth


Personal WealthPersonal Wealth

All wealth is not material.All wealth is not material.– Good health.Good health.– Family and friends.Family and friends.– Self respect.Self respect.– Achievement.Achievement.



OwnOwn

- Owe- Owe

= Ours= Ours



Own = AssetsOwn = Assets– House, Car, Furniture, InvestmentsHouse, Car, Furniture, Investments

Owe = LiabilitiesOwe = Liabilities– Mortgage, Auto Loan, Credit CardsMortgage, Auto Loan, Credit Cards

Ours = Net WorthOurs = Net Worth– a.k.a. “Equity”a.k.a. “Equity”

Assets

- Liabilities

= Net Worth



List the current values of your Assets and List the current values of your Assets and Liabilities and figure your Net Worth on a Liabilities and figure your Net Worth on a personal “Balance Sheet.”personal “Balance Sheet.”

Assets Assets

House $200,000

Cars $ 20,000

Invest. $75,000

Furn. & Appl. $5,000

Total $300,000

Liabilities Liabilities

Mortgage $90,000

Car Loans $5,000

Credit Cards $5,000

Etc. $X0,000

Total $100,000

Net Worth = $200,000Net Worth = $200,000



Personal Wealth increases by:Personal Wealth increases by:– Spending less than income to create a Spending less than income to create a

Personal Profit.Personal Profit.– Saving and investing the profit.Saving and investing the profit.

Increasing Assets (investments, property).Increasing Assets (investments, property).Paying off Liabilities.Paying off Liabilities.

Income

- Expenses

= Personal Profit

Assets

- Liabilities

= Net Worth

Pleasure Dividend Today

Save

Invest

Security & Fun Tomorrow



Why you need to build Net Worth.Why you need to build Net Worth.– Retirement or disability.Retirement or disability.– Kids’ education.Kids’ education.– Temporary job loss.Temporary job loss.

Rule of thumb: 6 months living expenses in Rule of thumb: 6 months living expenses in an accessible fund.an accessible fund.

All wealth is not equal.All wealth is not equal.– You live on what is “liquid.”You live on what is “liquid.”


Pop QuizPop Quiz

How much yearly How much yearly Social Security Social Security benefit will you benefit will you receive if you are:receive if you are:– 6565– earn $50,000/yr.earn $50,000/yr.– retire today?retire today?

According to Social Security’s According to Social Security’s benefits estimator.benefits estimator.

$8,655$8,655 $14,244$14,244 $20,913$20,913 $25,000$25,000


Pop QuizPop Quiz

According to the commissioner of Social According to the commissioner of Social Security, in what year will Social Security Security, in what year will Social Security begin paying out more in benefits than it begin paying out more in benefits than it collects in taxes?collects in taxes?

20172017 20252025 20332033 20412041 In 2041, the “Trust Fund” is 0.


InvestingInvesting

Brainstorm ways you have invested Brainstorm ways you have invested money.money.


Pop QuizPop Quiz

$1.00 today will be worth how much after $1.00 today will be worth how much after 40 years? 40 years? (Assume inflation averages 3% per year.)(Assume inflation averages 3% per year.)

$0.31$0.31 $0.42$0.42 $0.55$0.55 $0.69$0.69


Pop QuizPop Quiz How much do you need to save How much do you need to save each yeareach year

to have $1,000,000 to have $1,000,000 in today’s dollars?in today’s dollars? Assume:Assume:

You save for 35 years.You save for 35 years. The funds are in a tax-deferred plan.The funds are in a tax-deferred plan. The funds grow at 9% per year. The funds grow at 9% per year. Inflation averages 3% per year.Inflation averages 3% per year.

$3,000$3,000 $6,000$6,000 $9,000$9,000 $15,000$15,000


InvestingInvesting

Risk versus ReturnRisk versus Return– Lower risks yield lower returns.Lower risks yield lower returns.– Higher returns require higher risks.Higher returns require higher risks.– Low risk and high returns are a con.Low risk and high returns are a con.


InvestingInvesting

Investing options:Investing options:– Mattress & Sock, Inc.Mattress & Sock, Inc.– Savings acct., Money Mkt., CD.Savings acct., Money Mkt., CD.– Bonds: U.S. Savings, corp., municipal, funds.Bonds: U.S. Savings, corp., municipal, funds.– Stocks – mutual funds.Stocks – mutual funds.– Stocks – individual firms.Stocks – individual firms.– Real Estate: land or buildings.Real Estate: land or buildings.– Annuities: promise to pay regularly.Annuities: promise to pay regularly.– Collectibles & CoinsCollectibles & Coins– Your own business.Your own business.– Sophisticated stuff.Sophisticated stuff.


InvestingInvesting

Requires reasonable knowledge.Requires reasonable knowledge.– Newspapers, magazines, newsletters.Newspapers, magazines, newsletters.– Books.Books.– Seminars (beware)Seminars (beware)– Brokerage firm advisors.Brokerage firm advisors.– Private advisors – fee based.Private advisors – fee based.


InvestingInvesting

Know your:Know your:– Time horizon.Time horizon.– Goals for growth vs. security.Goals for growth vs. security.– Risk tolerance.Risk tolerance.


InvestingInvesting

Diversify:Diversify:– Short-term needs vs. long-term.Short-term needs vs. long-term.– Secure principal vs. at-risk principal.Secure principal vs. at-risk principal.

Savings, U.S. bonds, property, company Savings, U.S. bonds, property, company bonds, stocks.bonds, stocks.

– Stocks: Stocks: Small, medium, large firms.Small, medium, large firms.Domestic and international firms.Domestic and international firms.Growth vs. value vs. blended firms.Growth vs. value vs. blended firms.

– Multiple institutions.Multiple institutions.


StrategiesStrategies

Have goals.Have goals. Create a system.Create a system.

– Budget.Budget.– Organized records.Organized records.

Invest in yourself.Invest in yourself. Get free money.Get free money. Defer and avoid taxes.Defer and avoid taxes. Know all your expenses.Know all your expenses. Defer gratification – save, then buy.Defer gratification – save, then buy.



Borrow for long-term assets, not pleasure.Borrow for long-term assets, not pleasure. Balance spending and saving – “pay yourself Balance spending and saving – “pay yourself

first.”first.” Shop for cheapest credit. Shop for cheapest credit. Be insured.Be insured. Educate yourself.Educate yourself. Diversify investments.Diversify investments.



Have the following:Have the following:– Last will and testament.Last will and testament.– Durable power of attorney.Durable power of attorney.– Living will Living will – Medical power of attorney.Medical power of attorney.– Safety deposit box.Safety deposit box.– List of accounts and passwords.List of accounts and passwords.


Pop QuizPop Quiz 5 Things we do with money:5 Things we do with money:

– EE– SS– SS– II– EE

The 3 M’s of Money:The 3 M’s of Money:– MM– MM– MM


SummarySummary

Keys to success:Keys to success:– Self discipline.Self discipline.

Goals and a system.Goals and a system. Defer gratification.Defer gratification.

– ““Pay yourself first.”Pay yourself first.”– Take time to get educated and Take time to get educated and

helped.helped.– Make, manage, and multiply!Make, manage, and multiply!


SummarySummary

Earn more.Earn more. Spend less.Spend less. Save always.Save always. Invest wisely.Invest wisely. Enjoy good fortune today Enjoy good fortune today

tomorrow!tomorrow! Thank you for your participation!Thank you for your participation!


Copyright NoticeCopyright Notice

This material is copyrighted by The This material is copyrighted by The Business Center which retains all Business Center which retains all rights for its reproduction in all rights for its reproduction in all media forms.media forms.

Copyright © 2008Copyright © 2008

The Business CenterThe Business Center

120 Westview Lane120 Westview Lane

Oak Ridge, TN 37830Oak Ridge, TN 37830

All Rights ReservedAll Rights Reserved

www.bizcenter.comwww.bizcenter.com

It’s Your Money

Economy & Finance

Transcript of It’s Your Money