1. PERSONAL FINANCES FOR FAMILIES Dr. David G. Baker

2. LIFE STAGE PURCHASES Young adult (20-30): Education, car
Young professional (30-45): Home, debt reduction, child rearing
Peak Accumulation (45-55): Debt elimination
Pre-retirement (55-65): Investment growth
Retirement (65-70+): Know what you want to do! (otherwise  boredom, mental & physical decline)

3. Guidelines to Wealth Live below your means (budget)
Start early: it takes years
Financial independence is more important than social status
Develop healthy financial habits

4. Guidelines to Wealth
Minimize bad debt (CC, borrowing for vacations, leasing cars, etc )
Set financial goals with target dates
Work smart and hard! (Success = 20% knowledge + 80% behavior)
Note that there is not one big thing you can do to grow wealth- it is a series of small, consistent practices done over time.

5. Common Sense
Buy most items with cash/debit card OR use credit card and pay off monthly (only 40% do that). If you don’t have the $ then don’t buy it!!
In 2015, the average American family had $132,158 in debt; $15,355 in credit card debt at 18-22% interest.

6. Common Sense
Bring your lunch to work. Why pay someone to make a sandwich for you?
Limit alcohol ($) when out and in home
Buy things in quantity when possible
Limit travel
Do things for yourself if you can (wash car, mow yard, etc)

7. Common Sense Know the difference between nice to have & need to have
Eat out sparingly at moderately priced restaurants
Use discount coupons
Don’t buy new cars
Plan and set aside tithe and gift money (family, church, other charities, etc. )

8. Money Management Mistakes
Not having a financial plan & specific goals
Not keeping a budget
Living beyond your income
Failing to diversify investments
Not saving enough for long enough

9. Money Management Mistakes
6. Too much bad debt (home & educational debt = good debt within reason)
7. Not maintaining a cash reserve
8. Failure to use “experts” (Attorney, CPA, CFP- be careful with these)
Focusing on short term (vs power of time)
10. No current will (probate = state takes 50%)

10. Getting Started
Once you have selected a job compatible with your spiritual principles and objectives, negotiate the highest starting salary possible because future salaries may be based on it.

11. INVESTMENTS- “RULE OF 72”
The rule of 72 approximates the number of years it takes to double your money 72
Interest Rate

12. DOUBLE YOUR MONEY
72 / 3%
72 / 6%
72 / 12%
24 YEARS
12 YEARS
6 YEARS

13. Growth of $170 per Month (~$2,000/Yr) for 35 Years
3% Interest
6% Interest
12% Interest
$126,380
$243,411
$1,104,195

14. Start Early! Geometric Progression (Save ≥ 15 % of your income) “Nothing is more powerful than the power of compounding interest. It is the 8th wonder of the world” Albert Einstein

15. Growth of $417 per Month Invested at 8% Interest

16. Diversity Investments
“Don’t put all your eggs in one basket”:
Real estate
Stocks & mutual funds
Bonds
Money market
Collectibles (coins, art, antiques = no liquidity)

17. Never Invest in Anything You Do Not Fully Understand

18. Use Tax Deductible or Sheltered/Deferred Investments
Roth IRA (tax-free on payout)
SEP/IRA
401(k)
403(B)

19. U.S. Debt (2015) Mortgages: $165,892; $8.12T total
Student loans: $47,712; $1.21T total
Auto loans: $26,530; $1.03T total
Credit Card: $15,355; $713B total
Interest payout: $6,658/year

20. Credit Card Debt 2015 Avg. family CC debt = $15,355.
60% do not pay off monthly, and 75% of people seeking credit counseling have debt on ≥ 2 cards. Avg. person has 4 CC (1/10 have 10!)
Avg. interest rate >19% when penalties are included.
Limit spending and pay balance monthly even if you have to borrow at a lower rate to do so.
Use just one card (to consolidate rewards).

21. Home Mortgage A home is an excellent investment Leverages money
Profit is tax free up to $1 million at age 55
Take out a fixed rate loan (vs ARM)
Pay off ASAP i.e. 15 year fixed loan- make one extra payment per year will cut loan term about in half (depending on interest rate), saving a lot of $.

22. Payment Schedule for $250,000 @ 5.0% Over 30 Years
Monthly Payment
$1,342
Yearly Payment
$16,104
Total Interest
$233,141

23. Payment Schedule for $250,000 @ 5.0% Over 15 Years
Monthly Payment
$1,977
Yearly Payment
$23,724
Total Interest
$105,858

24. Automobile Poor “investment” (even most collector cars)
Should not have value of >50% income
Pay cash for a used car (5 – 7 yrs old)
Certified used (less depreciation/better warranty than new)
Zero interest good but usually must pay full sticker price (40% depreciation in 2 years!)
Always pay 8-10% less than asking or blue book. See or

25. Student Loan Debt
Just behind home mortgages and ahead of credit card debt and car loans as the source of greatest debt for American families
Pay off ASAP (depending on amount & interest rate) (See debt payoff calculator for impacts of making additional principal payments)

26. Questions?