How do you become “wealthy”? Be born into wealth (inheritance) Marry someone wealthy Do it yourself Win the lottery Get injured and win a lawsuit **Most people will need to do the third option…

Why is it important to be financially healthy? Having money makes life easier The real issue revolves around how to handle the money you will have in your lifetime In short? = spend less, save more, get educated

Your financial challenges You cannot afford to be uneducated (or unskilled) in today’s economy…Education is not cheap Government programs will likely not cover your retirement needs Life gets more expensive every day You will live longer, but not necessarily better You may have to care for sick kids or parents someday You are likely to assume more debt in the future You are expected to save less than years past

ACTIVITY #1: Some questions to ask: How do you get your money? What do you generally do with it? Have you ever talked about money with your parents? Does your family plan a budget? How do your close friends treat money? How do you spend your free time? If you had to cut out spending in your life, how would you do it?

ACTIVITY #2 List financial goals/obligations for the next year. List financial goals/obligations for the next 5 years. List financial goals/obligations for the next years. Be specific — how do you expect to accomplish these things during this time? Go through of the time periods above.

Summary questions What types of things did you list? What changed about your goals as the years progressed? What could happen to you during this time period that could change your goals?

ACTIVITY #3 How much does your life cost each month? EXPENSESAPP. COST(list) TOTAL AMOUNT SPENT: TOTAL INCOME:

Go through your budget and look for cuts: COULD CUT/REDUCE “UNTOUCHABLE” How could you save more $$ each month? How could you increase income each month?

Things that cost money: Getting coffee out = $1000/year (a medium coffee twice a day) Smoking = $1600/year (one pack per day) Others: Gambling Alcohol abuse Poor use of credit Eating out too much Excessive shopping Reckless driving

Wealthiest People in the World: Bill Gates Net Worth: $79.2 B Source of wealth: Microsoft 2. Carlos Slim Helu & family Net Worth: $77.1 B Source of wealth: telecom 3. Warren Buffett Net Worth: $72.7 B Source of wealth: Berkshire Hathaway 4. Amancio Ortega Net Worth: $64.5 B Source of wealth: Zara 5. Larry Ellison Net Worth: $54.3 B Source of wealth: Oracle 6. Charles Koch Net Worth: $42.9 B Source of wealth: diversified 6. David Koch Net Worth: $42.9 B Source of wealth: diversified 8. Christy Walton & family Net Worth: $41.7 B Source of wealth: Wal-Mart 9. Jim Walton Net Worth: $40.6 B Source of wealth: Wal-Mart 10. Liliane Bettencourt & family Net Worth: $40.1 B Source of wealth: L’Oreal 11. Alice Walton Net Worth: $39.4 B Source of wealth: Wal-Mart 12. S. Robson Walton Net Worth: $39.1 B Source of wealth: Wal-Mart 13. Bernard Arnault & family Net Worth: $37.2 B Source of wealth: LVMH 14. Michael Bloomberg Net Worth: $35.5 B Source of wealth: Bloomberg LP 15. Jeff Bezos Net Worth: $34.8 B Source of wealth: Amazon.com 16. Mark Zuckerberg Net Worth: $33.4 B Source of wealth: Facebook 17. Li Ka-shing Net Worth: $33.3 B Source of wealth: diversified 18. Sheldon Adelson Net Worth: $31.4 B Source of wealth: casinos 19. Larry Page Net Worth: $29.7 B Source of wealth: Google 20. Sergey Brin Net Worth: $29.2 B Source of wealth: Google

Saving vs. Investing Saving = the absence of spending money (usually for some larger purpose in future, like college or a car) Investing = using current funds to create future gains (must “appreciate” in value over time, such as stocks or a retirement fund)

Assessing saving & investing methods: 1.Access (can I get to my money?) 2.Safety (is my money secure?) 3.Rate of return (what will I get for my money?) All methods can have these standards applied to them…

Debt = any $$ owed for any purpose Debt is a negative thing long-term Short term, debt can enable you to buy things (this is done “on credit” or “by loan”) Debt = on the rise in the United States

Good debt vs. bad debt Good debt: An affordable home Education Real estate Automobile (this is often debated) Bad debt: Everything else (because it loses value over time)

Ways to prevent debt Buy what you can afford (pretty simple) Pay off any loans you take on in your life Pay any $$ obligations on time Protect your identity very carefully Use cash whenever you can Use credit cards conservatively Pay off more than the “minimum payment” each month

Case Study: Credit Cards Imagine a $7000 credit card balance (12% interest rate) If you paid the minimum amount required (usually 1% of total balance—$139.30/month) = it would take nearly 28 years to pay off the entire amount owed Total interest: $

Imagine the same balance ($7000) with the same interest rate (12%)… Except—if you paid the same amount each month ($139.90/month) no matter what was required… = balance would be paid off in about 6 years Total interest: $2775 Certainly, you could do even more than this

Why is debt bad long term? Can negatively affect credit rating (FICO score) Can negatively affect income Can keep you from getting certain jobs Can affect your ability to purchase goods and services (debt “crowds out” spending) Can have devastating personal effects in your life (bankruptcy, divorce, other problems) Debt gets worse as time goes on if left unpaid (it doesn’t go away or get smaller)