STATEMENT OF FINANCIAL POSITION AND INCOME AND EXPENSE STATEMENT
ADVANCED LEVEL
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
AGENDA• Primer:
What is Net Worth? an Asset? a Liability?
• Statement of Financial Position• Income and Expense Statement• Net Worth Activity
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
3 MONEY MANAGEMENT TOOLS
What is my financial position
today?
Work together to help you objectively evaluate your past, present, and future
financial decisions
What is my future money
management plan?
Statement of Financial Position
Income & Expense Statement
Spending Plan
How have I managed my
money in the past?
Reach net worth level
desired
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 4Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
WHO IS WEALTHIER?
Let’s learn more to answer this question!
Income - $14,120,000
Net Worth - $120 Mill
Income - $19,200,000
Net Worth - $115 Mill
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Net Worth Wealth
Is an objective measure of financial
wealth
Indicates the monetary value of all possessions
that a person or household owns, minus the total amounts owed
to others
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
NET WORTH VS. INCOME
Net Worth Income
A person may have high income and low net worth or vice versa
Depends on how a person manages their
income
Money received such as wages earned from
working for pay
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
WHO IS WEALTHIER?
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
HOW DO YOU DETERMINE WHAT YOUR NET WORTH IS?
Statement of Financial Position - A financial statement that describes an
individual or family’s financial condition on a specified date by showing assets,
liabilities, and net worth
Shows a person’s net worth
Similar to a net worth statement or balance sheet
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
THREE COMPONENTS
1. Assets2. Liabilities3. Net Worth
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 10Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
WHAT IS AN ASSET?
Asset - Everything a person owns
with monetary value
Cash
Value of personal
possessions
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 11Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
WHAT ARE LIABILITIES?
Liabilities – A debt or
obligation owed to others
Loans (mortgage, automobile,
student)
Balance on a credit card
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
LIABILITIES VS. EXPENSES
Liabilities ExpensesDefinition
Characteristics
Example
Money owed to others
Money spent
Total amount owed
Bills paid on a regular basis
Automobile loan - $5,490 owed
Monthly payment to repay that automobile loan -
$180/month
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
HOW CAN YOU INCREASE NET WORTH?
Evaluate how you manage your
money Liabilities
Assets
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
SUMMARY
Assets – Liabilities = Net Worth
Net worth is an objective measure of wealth
Net worth is your “financial thermometer” to objectively measure your financial position
To increase net worth you will have to increase assets or decrease liabilities
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
• https://docs.google.com/spreadsheet/ccc?key=0AgC8bo4HR-otdDJYY1JMakpnOWlNNDZ6SDZERkJXRkE&hl=en#gid=0
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
NET WORTH ACTIVITY• Step 1
• Let’s read the handout together about a recent college graduate and highlight and underline important financial information
• Step 2
• Go to the PCs and find the Mommy’s Net Worth Calculator on the Anfindsen Global Drive• Complete the spreadsheet using the Biography• When done check your answers
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
START DAY 11
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
THE COSTS ADD UP
How much do you think each item would cost if purchased every day for one month?
Item Average Cost of Item
Approximate Cost Per Month
if purchased every day
Approximate Cost Per Year if
purchased every day
16 oz. soda $1.00 - $2.00 $30.00 - $60.00 $365.00 - $730.00
16 oz. energy or sports drink $2.00 - $3.00 $60.00 - $90.00 $730.00 -
$1095.00
Candy bar $0.75 - $1.25 $22.50 – $37.50$273.75 - $456.25
16 oz. Latte’ or flavored coffee $2.50 -$3.50 $75.00 - $105.00 $912.50 –
$1277.50
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Income and Expense Statement - lists and
summarizes income and expense transactions that have taken place
over a specific period of time, usually a month or
year
THE INCOME AND EXPENSE STATEMENT
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
THREE COMPONENTS
Income
Expenses
Net gain or net loss
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 21Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
WHAT IS INCOME?
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 22Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
INCOME CATEGORIES
Unearned income – income received from sources other than
employment
Received Income from Government Programs – offer a
form of income, usually temporary
Earned income – any money earned from work
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 23Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
WHAT ARE EXPENSES?
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 24Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
• Taxes• Saving and Investing• Insurance• Housing• Transportation• Food• Other
EXPENSE CATEGORIES
Expenses will vary for every person
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 25Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
EXPENSE CATEGORIES• Variable Expenses are those that
change each time period
• Fixed Expenses are expenses that remain the same each time period
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 26Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
NET GAIN OR NET LOSS
Net loss
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 27Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
FIND A TRACKING METHOD THAT WORKS FOR YOU
A written system is more effective than a mental system – like Evan you can trick yourself into
thinking you spend less than you do!
Record in writing Smartphone Keep receipts
Depository institution
account statements
Money management
computer software program
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 28Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Statement of Financial Position
Income & Expense Statement
Spending Plan
What is my financial position
today?
What is my future money
management plan?
How have I managed my
money in the past?
Net Gain Net Loss
A spending plan will help you plan your spending
Use that money for savings or other
expenses
Increase income and/or decrease expenses
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© Take Charge Today –August 2013– Statement of Financial Position – Slide 29Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
SUMMARYTells you where your
money is coming from and where it is going
Three components: income, expenses, and
net gain/loss
Use a tracking method that works best for you
Customize income and expense categories
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