Personal Finance Unit 1: MONEY

What’s the BIG DEAL about MONEY? It allows us to move beyond the barter (good for good) system Characteristics of Money: –Durability –Portability –Divisibility –Uniformity –Limited Supply –Acceptability

What’s the BIG DEAL about MONEY? WATCH VIDEO

What’s the BIG DEAL about MONEY? US first created lawful money (backed by silver and gold). We currently use a fiat money system – LEGAL TENDER (backed by the confidence in its value)

Role of the Treasury Dept: Managing Federal finances; Collecting taxes, duties and monies paid to and due to the U.S. and paying all bills of the U.S.; Currency and coinage; Managing Government accounts and the public debt; Supervising national banks and thrift institutions; Advising on domestic and international financial, monetary, economic, trade and tax policy; Enforcing Federal finance and tax laws; Investigating and prosecuting tax evaders, counterfeiters, and forgers.

How can you buy stuff without CASH?

The Emergence of a Cashless Society: All the ways we DON’T use CASH: Gift Cards Debit Cards Checks Cashier’s Check Money orders Credit Cards Electronic Transfers

How do YOU Make Money? You will spend approximately 86,000 hours of your life working (about 10,000 days) Your CAREER Choice should be based on values and beliefs, not necessarily money (A LABOR OF LOVE)

How do YOU Make Money? Take the following into account as well: –Education Requirements –Job Trends (will the career exist in 20 years?) –Job Outlooks (are there any openings?)

US Income at a Glance… Criteria Overall Less than 9th grade High school drop-out High school graduate Some college Associates degree Bachelor's degree Bachelor's degree or more Master's degree Profession al degree Doctorate degree Median ind. income Male, age 25+ $33,517$15,461$18,990$28,763$35,073$39,015$50,916$55,751$61,698$88,530$73,853 Female, age 25+ $19,679$9,296$10,786$15,962$21,007$24,808$31,309$35,125$41,334$48,536$53,003 Both sexes, age 25+ $32,140$17,422$20,321$26,505$31,054$35,009$43,143$49,303$52,390$82,473$70,853 Median household income $45,016$18,787$22,718$36,835$45,854$51,970$68,728$73,446$78,541$100,000$96,830

US Income at a Glance… The median income in New York State for a person with 1-4 year’s experience is around:

Finding the Job for YOU Research Internships and Job Shadowing Part-time jobs early in life –Most successful people worked part-time as teenagers

Finding a Career – complete Career Exploration Profile scroll to bottom and click on CAREER RESEARCH – do NOT fill out nay surveys!

Analysis of a Paycheck As soon as you start working, either part-time or full-time, the money will start rolling in…. Unfortunately, you only get what’s left (after everybody else has taken their cut).

Analysis of a Paycheck GROSS INCOME The amount of pay you get before any deductions are taken out NET INCOME Amount of pay you actually get to take home and do something with

So, what’s taken out? Federal, State (maybe local) TAXES Social Security (FICA) – 6.2% Medicare (FICM) – 1.45% Automatic savings (Contributions to retirement plans that are taken out of gross pay) Health Insurance Premiums Life Insurance Premiums Union dues Charitable Contributions, and more…

GROSS PAY NET PAY SALARY DEDUCTIONS

CAN YOU READ A PAYSTUB? LET’S FIND OUT! Now YOU try it…

Taxes, Taxes, Taxes! I want MY MONEY!

The goal of tax planning is to arrange your financial affairs so as to minimize your taxes and keep the most of your money.

TAXES Adjusted Gross Income Your income from all sources minus any adjustments to your income Ex: Self Employment Taxes, health savings, IRA Taxable Income What’s left over after you have reduced your AGI – this is the amount your taxes are really based on

Reducing your TAXES: 1.Increase your TAX DEDUCTIONS 2.Take advantage of TAX CREDITS 3.Increase your WITHHOLDINGS

1. Increase your TAX DEDUCTIONS Deductions are things you use to decrease your taxable income. There are standard deductions for singles ($6,100) and married couples ($12,200) Itemized deductions include: Expenses for healthcare Mortgage interest Gifts to charity Job-related expenses State/local/property taxes

2. Take advantage of TAX CREDITS Tax credits reduce your tax - straight up $ for $ reduction There are tax credits for: Earned Income Tax (for low income families) Child Tax Education Retirement Savings Contribution 1 st Time Homebuyer Dependent Care Energy Efficient Home

3. Increase your WITHHOLDINGS Increase the amount of money taken out of each paycheck throughout the year – you’ll get a bigger refund at the end. CLAIM 0 CLAIM 0 – More money is taken out of each paycheck and you are more likely to get a refund CLAIM 1 CLAIM 1 – Less money will be taken out of each paycheck, but you may end up owing money at tax time

THANKS UNCLE SAM! Tax Examples Worksheet

LET’S REVIEW! End of Unit Notes!

Terms to KNOW Barter Lawful Money Fiat Money Legal Tender Treasury Dept Career Gross Income Deductions Adjusted Gross Income Taxable Income Net Pay Tax Credit Withholdings