PERSONAL FINANCES

D R A F T

Why Study Personal Finance

To help prepare for your future To help you make decisions – the decisions

you make now can greatly affect the decisions you have to make in the future

Choices have consequences (both positive AND negative)

To have an advantage over others More & more it will be up YOU to provide for

personal needs The amount that companies/government, etc.

are providing for retirement & benefits is decreasing.

D R A F T

Financial Planning

Follow it Stick with it Update it

Like your resume, your financial plan is a lifelong resource that changes as you change.

D R A F T

Financial Plan

Write down what you spend for several weeks

Determine where your money goes Develop goals (short-term & long-term) Set a budget Stay on track AND out of debt

D R A F T

ACTIVITY: Setting Financial Goals Set a short-term goal & a long-term goal Write objectives (ways you will reach

each goal) for each goal Estimate the cost Specify a date in which you want to

achieve each goal Post Your Plan!

Where you can see it daily Personal Portfolio

D R A F T

ACTIVITY: Tracking Your Spending Keep track of your spending for a week by

keeping receipts in an envelope (or write amounts on the envelope)

At the end of the week, list your expenses Examine your spending & write a one-

paragraph summary on how your spending aligns or does not align with your financial goals/plan

This information will be used to complete the Budget activity

D R A F T

Income Gross Pay – the amount of money paid to you before taxes & deductions

are taken out

Net Pay – money you actually receive after taxes & deductions

Deductions Federal & State Income Tax Health Insurance Social Security & Medicare (for future benefits) Retirement Investments Other

Sample Paycheck

Have checks electronically deposited

D R A F T

Income

When you receive a check, pay yourself first

Immediately put a set amount in a Savings Account

This will help you meet your goals Electronic deposits will assist with this

YOUR financial goals are the most important expenses you have!

D R A F T

Income Form W-4 A form completed when starting a job so

that the employer can withhold the correct income tax from your pay

Employees should complete a new Form W-4 each year and/or when their personal financial situation changes

How to Fill Out a W-4: http://taxes.about.com/od/preparingyourtaxes/

ht/W4.htm Form W-4:

http://taxes.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=taxes&cdn=money&tm=70&gps=361_279_1419_665&f=10&su=p284.9.336.ip_p504.1.336.ip_&tt=7&bt=1&bts=1&zu=http%3A//www.irs.gov/pub/irs-pdf/fw4.pdf

D R A F T

D R A F T

Income

Form W-2 Every employer engaged in a trade or

business who pays remuneration for services performed by an employee must file a Form W-2 for each employee from whom income, social security or Medicare tax was withheld

W-2s must be sent to the employee by January 31 of each year

The W-2 received by the employee is used to file Federal Income Tax forms

http://taxes.about.com/od/formw2/a/IRSFormW2.htm

D R A F T

Sample W-2 FormSample W-2 Form

Contains your tax information for one job in one year You’ll receive one for each job you worked at during

the year

Real World Business

Chicago, IL 60640

Irma Money

2301 South Jackson

Chicago, IL 60640

000-00-000

16,680.24

16,680.24 1034.16

1,728.00

241.9216,680.24

IL 12-2222222 16,680.24

440.40

12-2222222

D 2000.00

D R A F T

Income

Federal Taxes Helps pay for programs such as highways,

law enforcement, etc. Required to file every year May get back most taxes paid Form 1040-EZ

State Taxes Helps pay for programs sponsored by the

state Required to file May get back taxes paid

D R A F T

ACTIVITY: Completing a Form W-4 Complete Form W-4. http://taxes.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn

=taxes&cdn=money&tm=70&gps=361_279_1419_665&f=10&su=p284.9.336.ip_p504.1.336.ip_&tt=7&bt=1&bts=1&zu=http%3A//www.irs.gov/pub/irs-pdf/fw4.pdf

Turn in for credit.

D R A F T

Employee Benefits & Perks

BENEFITS - Non-wage compensations provided to employees in addition to their wages or salary

Insurance – health, dental, life

Retirement Paid vacation Sick leave Tuition Daycare Housing Transportation/parking Disability income protection Profit sharing Others

PERKS – benefits of a discretionary nature

Transportation/parking Meals Other

Source: http://en.wikipedia.org/wiki/Employee_benefit

D R A F T

Personal Budget

Fixed Expenses – Needs Car – loan/payment, upkeep, gas Rent or mortgage Utilities – Electricity, Gas, Water & Sewerage, Phone Insurance – car, health, rental or homeowner Food Clothing & Grooming School – loans, tuition & books Savings – short term goals & long-term goals Unexpected expenses Donations (community, charity) & Tithing

Flexible Expenses - Wants Additional Clothing Dining out Social activities

D R A F T

Renting

Monthly rental fee Utilities

Electricity Gas Phone Water & Sewerage

Renter’s Insurance Can be as low as $15/month

D R A F T

Owning

A good investment Must save for a down payment Usually goes up in value May borrow against the equity built up

over the years Able to deduct mortgage interest &

property taxes from income taxes http://financialplan.about.com/od/realest

atemortgages/a/BuyingaHome.htm

D R A F T

Transportation

Car Insurance Gas Maintenance Problems

Bus Pay each time you ride

D R A F T

Insurance

A way to protect things you own Car – in case of accident or injury Health – medical expenses Renter’s – for the items you own even

though you are renting

D R A F T

ACTIVITY: Create a Budget

Prepare a budget using your current financial status

Turn in http://financialplan.about.com/od/money

andcollegestudents/l/blcollbudget.htm

Use the budget calculator to develop a budget

http://www.bankrate.com/calculators/smart-spending/college-student-budget-calculator.aspx D R A F T

Financial Institutions

Bank Credit Union Federally insured – FDIC (Federal Deposit

Insurance Corporation)

Check policies on: Fees Balance requirements Overdraft protection Hours of business

D R A F T

Bank Accounts

Savings Checking

Write checks Use a Debit Card May be a monthly fee

ATM (Automated Teller Machine) Access funds anytime ATM card required (keep your PIN safe &

secretive) Must pay a fee which is automatically taken

out of your account at the time of withdrawal

D R A F T

Saving & Investing

Savings Account – earn simple or compound interest

Certificates of Deposit (CDs) need a large amount to begin (~$500) investing more may provide a higher interest rate must leave money in CDs for a specified amount of

time Money Market Account

can write checks earns interest

U.S. Savings Bonds good way to save for higher education Must be held for a specified period of time or

penalties may be charged for cashing in earlyD R A F T

Investing

Save early Even a small amount invested while you are

young makes a tremendous difference later in life

Compounding Interest Money invested makes interest The interest then earns interest Money accumulates faster than you might think

It’s better to invest a little when you are young rather than waiting to invest more when you are older

D R A F T

Calculate saving/investing $100 per month starting at age 18 for 13 years at an 8% annual rate (compounding interest)

Calculate the amount you will have at the age of 65 without investing any other additional amount.

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Chart Your Course

D R A F T

Investing

Stocks – ownership in a company Bonds – loan money Mutual Funds – money is invested in

various ways

There is some risk but may make more money (reward)

The higher the reward, the higher the risk

D R A F T

Investing & Money Making Ideas http://teenmoneycentral.com/2009/07/1

5/investing-for-teens/ http://teenmoneycentral.com/2009/07/1

5/ways-for-kids-to-make-money/

D R A F T

ACTIVITY: Committing to Saving Make a commitment to invest a portion

of your income each month, not matter how little or how much.

Write the commitment down. Post it where you can see it every day. Include it in your personal portfolio.

D R A F T

Loans

Interest is charged If you pay more than the required

monthly payment, you will pay the loan off early AND pay less interest

D R A F T

Credit Cards

Use for emergencies only Will help you establish credit Check the interest rate & yearly fee Pay the full amount owed EVERY month Stay away from spending up to your credit

limit Do not skip payments or make late

payments – you will be charged extra fees You will pay interest on what you owe AND

interest on the interest you previously paid

D R A F T

Receipts

Keep all receipts Use checking account, savings account & Debit

Card receipts to balance account Use credit card receipts to check monthly

statements

Using receipts & checking/balancing accounts helps prevent theft or errors made by the institution Identity Theft – Example: Sears credit card; over

$800 charged on the card over the Internet; checking the receipts against the statement identified this problem; the credit card owner was not held liable Can cause a person’s credit to be ruined

D R A F T

Credit Score

Everyone has one The higher the score, the better your rating The better the score, the easier it is to

borrow money at a lower rate if/when necessary House Car

3 Major Credit Bureaus Equifax Trans Union Experian

D R A F T

Debt

Limit your debt Purchase needs Save for wants Have a plan Avoid late fees, high interest rates

D R A F T

Retirement

Start saving early 401(k) plan

Invest a portion of your income Sometimes companies match your

contribution IRA (Individual Retirement Account)

Regular – you do not pay taxes until retirement

Roth – pay taxes while contributing to it

D R A F T

EVERFI: Online Financial Literacy Program

www.everfi.net 10 modules (introduction & 9 lessons) Obtain your Site Code Register Create Class Code(s) & description of the code

Examples: 2nd Hour EFC, 5th Hour EFC Students will use code when they register (they

MUST use the correct code) Student logins

REQUIRE them to use their school login (User ID & Password)

D R A F T

EVERFI: Online Financial Literacy ProgramGrading: 10 points for each module = 90 total points Must make a 70 or above to be certified Can give them points for completing the introductory

lesson Set class goal Provide incentives Print & post certificates 100% Percenters:

Signs for each module Students write name on cutout & post under sign

when score 100% by due date

D R A F T

Student Resources

Web sites: http://

personalfinancetipsforyoungpeople.com/ http://www.mlive.com/business/ann-arbo

r/index.ssf/2009/04/josh_levine_six_principles_of.html

Banks & Credit Unions Parents Realtors Finance Planners

D R A F T

Sources http://taxes.about.com/od/preparingyourtaxes/ht/W4.htm http://www.irs.gov/pub/irs-pdf/iw2w3.pdf http://taxes.about.com/od/formw2/a/IRSFormW2.htm www.kellyhs.org/.../Hicks/Information%20Technology/documents//

Sample_W-2_Form%5B2% http://EzineArticles.com/?expert=Cynthia_B._Carlton http://EzineArticles.com/2614052 http://taxes.about.com/od/1040ez/Form_1040_EZ_Instructions.htm http://financialplan.about.com/od/realestatemortgages/a/

BuyingaHome.htm http://financialplan.about.com/od/moneyandcollegestudents/l/

blcollbudget.htm http://www.bankrate.com/calculators/smart-spending/college-student-

budget-calculator.aspx http://www.moneychimp.com/calculator/

compound_interest_calculator.htm GoVenture Education IdeaBook. www.goventure.net

D R A F T

Teacher Resources

Request free materials from to access resources such as the “What Do You Think?” activities & steps to financial planning

NEFE High School Financial Planning Program. Greenwood Village, SC: National Endowment for Financial Education, 2006. Free Hsfpp.nefe.org Click on Instructors

D R A F T

Additional Teacher Resources InVEST – tools for personal finance &

insurance; fun, interactive lessons for students Teacher & Student Workbooks Lesson plans Games Rating software Guest speakers Etc.

www.investprogram.orgD R A F T

Additional Teacher ResourcesFinancial Literacy: Spend, Save and Track

Your Money. Learning ZoneXpress (www.learningzoneexpress.com)

Financial Literacy: Manage and Multiply Your Money. Learning ZoneXpress (www.learningzoneexpress.com)

D R A F T