Chapter 31 Financial Management

Financial Fitness Takes effort Must be managed Shapes your future as an adult

Understanding your paycheck Paycheck Earning 1. hourly wages- $ times hours worked 2. piecework- by the piece 3. Salary- set amount for a year 4. Commission- based on what you sell or make for a company gross pay- total amount you make net pay- what you actually get

Deductions (subtracted from your gross pay) Federal tax (% based on earnings, etc.) State and local tax (depends where you live) Social Security (retirement, disability, and survivors benefits) *FICA-Federal Insurance Contributions Act

Deductions (con’t) 4. Medicare- medical expense for over age 65 Retirement or saving plan ( teachers get 8% taken) Benefits- health, dental, life ins plans ** any garnishment like student loan, child support, etc.

Paying Income Taxes *Varies from person to person- how much, how often, and other factors… Form W-2- form sent by your employer (s) by Jan. 31st that tells you your gross and taxes paid for the year. Form 1099-INT- bank statement of interest W-4 form to estimate taxes withheld from your paycheck. (handout Form w-4)

Paying Income Taxes (con’t) Instruction booklets and forms- 1040- long form and used by anyone 1040A- those who fit certain requirements 1040EZ- single/married, small income, and no major deductions ***forms available online and in public libraries http://www.irs.gov/pub/irs-pdf/i1040ez.pdf directions

Using Bank Accounts Opening a checking account- Safer than cash Shop around for best deal (interest rate, free checking, monthly fees, overdraft policy) Need social security card and other forms of identification

Using checks Make sure you have enough money to cover or it is considered “hot” or will “bounce”. It is also considered a felony over a certain amt and you will face jail time for issuing worthless checks. **You will also have to pay the store insufficient fund fees (appr. $25.00) AND the bank (appr. $25.00) so if you write a check for $5.00 you can add another $50 to that amount. (Handout – writing checks)

Making Electronic Transactions ATM transactions- have a pin and a FEE Debit card- can be used like a check- need pin number and can also use as credit Automated Services- transfer $ into (direct deposit- work) or pay bills automatically (like insurance on the 1st) Telephone banking- you call bank to find out info Online banking- You can see and make transfers and see what has cleared, etc.

Reconciling your account Balancing your checkbook- this causes people to write HOT checks Reconciling- bringing the bank and your transactions into agreement. What you have spent and what has cleared the bank and helps you see the real amount in the bank v. what is still coming out.

Building your savings Compound interest- calculated on $ deposited and on interest already earned. Annual percentage yield- how much you will earn. Money market account- has higher interest- you need to keep more money in this account Website: …..Iberia bankhttps://www.iberiabank.com/personal/ https://www.ouachitavalleyfcu.org/

Managing income and expenses BUDGET -is a plan for spending and saving every penny you earn. Fixed- things you have to buy (generally don’t change month to month- house note) Variable- things you buy but changes from month to month- Ex. clothes and medical

Buying insurance How it works- The policyholder-YOU, pays $ called PREMIUMS, in return if something happens they pay for it. Has deductible (to limit the number of claims) you must meet- may be $25 may be $1000 just depends. Types of Insurance Health- if you are sick or hospitalized Auto- if you are in a wreck Home- if it floods or burns or damaged Life- funeral or other bills (term or whole)

Insurance Needs Amount of coverage depends on your lifestyle and lifecycle.

Investing for the Future Investing is saving money is the hope that it will make more money over time The sooner you start investing the more you will make over time. Generally you should save 8% of your pay. More the older you get!!!

Investment Risk Take care of financial basics first- make sure you have a steady income, balanced budget, adequate insurance, and saving for emergency. Get the knowledge you need- don’t invest in things you don’t understand. Diversify and balance your investments- 401K, IRA, and other savings accounts

Investment Options Certificates of Deposit (CD)- invest for a specified time for a specified rate- early withdrawal equals a penalty Bonds- certificates of debt, will be repaid later plus additional amounts on a certain date. Stocks- ownership interest in a company Mutual Fund- group of investments held by many ind. investors

Planning For Retirement 401 (K) plan- certain percent is taken from your check and the company will match it to a certain % (*you pay 3% and they pay 3%) Individual retirement Account (IRA)- a type of retirement. Used as a tax deduction (lower the amount of taxes you owe) 5,500 6,500 max contribution -traditional- taxed when you retire -Roth- taxed as you pay https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits

THE END!!! Withhold