Personal Financial Literacy What is PFL? What are some key terms we need to know? Who is Dave Ramsey?

“The U. S. economy is the eighth wonder of the world “The U.S. economy is the eighth wonder of the world. Americans’ ignorance of it is the ninth.” Arthur Levitt Former Chairman, New York Stock Exchange

Today’s Teens… Fewer than half of teenagers polled understood how to budget College freshmen have an average debt of $1,500 on personal credit cards. The average credit card debt for college seniors is $2,864; a 48% increase from Freshmen

Today’s Youth… The average debt of graduating college seniors including student loans is $40,000. Americans under age 25 are filing for bankruptcy faster than any other age group.

Personal Finance What is personal finance? JARGON process of planning your spending, borrowing, saving & investing your money Just as mechanics, doctors, farmers & baseball players have vocabularies unique to their skill or trade, personal finance has concepts & terms that must be understood JARGON

Vocabulary of Personal Finance Budget- detailed list of expected revenues & expenditures Opportunity costs- things not purchased when money is spent on something else instead Income- All sources of money coming in (wages, gifts, winnings) Assets- any good of value that you own (home, car, jewelry, TVs)

Vocabulary of Personal Finance Liquid assets- things you own that can be easily converted into cash without significant loss (stocks, bonds, money market) Liabilities- things you owe – your debt (mortgage, car loan, credit card) Net worth- equals your total assets minus your liabilities Equity- difference between the market value & amount owed

Liquidity- Real estate- Financing- Risk- Insurance- refers to amount of readily available cash you have access to- including liquid assets Real estate- Land & homes or structures attached to the land Financing- taking a loan to pay of majority of coast of a purchase- a form of credit (get it now, pay for it later) Risk- the potential of loss weighed against chance of gain Insurance- purchased to provide reimbursement in the event of a financial loss (auto, homeowners, health, life)

Components of good financial plan Creating a budget- requires understanding of net worth, income, expenses & taxes Managing liquidity- includes management of money & credit Financing large purchases- how to best buy a home or car Managing your risks- involves understanding and using insurance Developing an investment plan- using your money to earn more $ - stocks, bonds, mutual funds

6) Accumulating wealth for retirement- determining how much to set aside every year you’re working and investing it to spend after you retire 7) Communicating & keeping records- sharing your financial desires with family members and recording finances for tax & estate purposes If you write your financial goals down you will be more likely to achieve them

Dave Ramsey’s financial terms Emergency fund- cash set aside for unforeseen expenses Murphy’s Law- Anything that can go wrong WILL Investment anything you put your $ in to get it to grow and become more $ (mutual funds) Stupid tax- any purchase or financial decision one makes that you later realize that was a dumb choice that cost you

Who is Dave Ramsey? Dave Ramsey is an author, financial adviser, radio & TV host 3rd most popular radio show in country- over 24 million listeners teaches Financial Peace University class on personal finance