1. BUS 211 Principle of Business Management
Day 25

2. Day 26 Overview Questions? Graded
Individual 15,Team 15 and Reflections 15, Business Plan part 5
Reminders
Individual 16,Team 16, and Reflection 16 Due Today
Individual 17,Team 17, and Reflection 17 Due Dec 7
Crafting a Business Plan Part 6 Due Dec 7
All remaining assignments posted in Blackboard
Managing your Personal Finances

3. New Schedule for Assignments
Date
Team Exercise
Individual Exercise
Reflection
Crafting the Business Plan
Dec 4 16
Part 6
Dec 7 17
Dec 11
Business Plan Due @ Midnight
Dec 14
Final 8 AM
Remaining Lectures
Today Managing Your Personal Finances – Appendix III (optional)
Dec Make-up day (just in case, we have a unplanned delay)
Dec 8 AM Final exam 75 M/C questions from all 17 chapters

4. Final Business Plan Due Dec 11 @ Midnight
Make sure you incorporate any feedback and fix all spelling, grammar and formatting errors before submission. Add a title page, table of contents and a bibliography. Feel free to embellish the business plan with a few graphics but remember that this is to be a professional document.

5. Managing Your Personal Finances
Business Essentials
Eleventh Edition
Appendix III
Managing Your Personal Finances
Copyright © 2017, 2015, 2013 Pearson Education, Inc. All Rights Reserved

6. Introduction
Dealing with personal finances is a lifelong job involving a crucial choice between two options:
Committing to the rational management of your personal finances by controlling them, helping them grow, and therefore enjoying greater personal satisfaction and financial stability
Letting the financial chips fall where they may and hoping for the best (which seldom happens) and therefore inviting frustration, disappointment, and financial distress

7. Building Your Financial Plan
Financial Planning
process of looking at one’s current financial condition, identifying one’s goals, and anticipating requirements for meeting those goals
Advice
Keep two months wages in a separate account of emergencies
The sooner you adopt a financial planning strategy, you earlier you will become financial stable

8. Developing a Personal Financial Plan

9. Assessing Your Current Financial Condition
Personal Net Worth
value of one’s total assets minus one’s total liabilities (debts)
Should be always increasing
If you have excess student loan, you will start you adult working life with a negative net worth (sad but true)

10. Worksheet for Calculating Net Worth (1 of 2)

11. Worksheet for Calculating Net Worth (2 of 2)

12. Develop Your Financial Goals

13. Compounding Money over Time
retirement fund.xlsx

14. Timetable for Growing $1.00
FIGURE AIII.5 Timetable for Growing $1.00 n 1% 2% 4% 6% 8%
10% 1
1.010
1.020
1.040
1.060
1.080
1.100 2
1.082
1.124
1.166
1.210 3
1.030
1.061
1.125
1.191
1.260
1.331 4
1.041
1.170
1.262
1.360
1.464 5
1.051
1.104
1.217
1.338
1.469
1.611 6
1.062
1.126
1.265
1.419
1.587
1.772 7
1.072
1.149
1.316
1.504
1.714
1.949 8
1.083
1.172
1.369
1.594
1.851
2.144 9
1.094
1.195
1.423
1.689
1.999
2.358 10
1.105
1.219
1.480
1.791
2.159
2.594 15
1.161
1.346
1.801
2.397
3.172
4.177 20
1.220
1.486
2.191
3.207
4.661
6.727 25
1.282
1.641
2.666
4.292
6.848
10.834 30
1.348
1.811
3.243
5.743
10.062
17.449
Note: n = number of time periods; % = various interest rates

15. The Credit Card Trap Credit cards charge high interest ~18%
The minimum monthly payment is based on a very long payment period (1-3% of amount outstanding)
CCT.xlsx

16. Save Your Money: Lower Interest Rates and Faster Payments
Seeking Lower Interest Rates
Making Faster Payments 
Declining Asset Value: A Borrower’s Regret
FIGURE AIII.6 Paying off Credit-Card Debt
Balance = $5,000
MPD 3%
MPD 5%
MPD 10%
APR
Months
Costs 6%
144
$5,965.56 92
$5,544.58 50
$5,260.74 9%
158
$6,607.24 96
$5,864.56 51
$5,401.63
12%
175
$7,407.50
102
$6,224.26 53
$5,550.32
18%
226
$9,798.89
115
$7,096.70 55
$5,873.86
21%
266
$11,704.63
123
$7,632.92 57
$6,050.28
Note: APR, annual percentage rate; MPD, minimum payment due

17. The New Car Financing Car depreciation
Which is better? 0% financing for 4 years or $2500 cash back at signing?
Price of car 20,000
Monthly 0% = 20000/48 = $416.67
Take the discount
Price is $17,500
Finance at Norstate 48 months = 3% =
48* = $
If you pay off in 3 year rate is 2.5% = $505.07/month
* 36 =
Car depreciation
11% when drive off the lot ,000  17,800 0 = 20000
25% after one year ,000  15,000 0 =
46% after 3 years ,000  10, = 5000
63% after 5 years ,000  7, = 0

18. Best Advice for New Car/truck Buying
Buy leftovers (one model year eelier)
Dealer sells at depreciated price
ME Excise tax is cheaper
Insurance is chaper
Best Month to buy
December, buy a 2017 vehicle in Dec, 1017 and register in Jan 2018
Best deals
“Program” Cars/truck
Vehicle turned in from lease
Worst time to buy
Anytime there is a major flood in US

19. Financial Commitments of Home Ownership
Mortgage Loan
loan secured by property (the home) being purchased
FIGURE AIII.7 To Buy or Not Buy
Renting
Buying
No down payment to get started
Must make payments for mortgage, property taxes, and insurance
Flexibility to leave
Equity builds up over time
No obligation for upkeep or improvements
More privacy
No groundskeeping
Value of property may increase
Easy cash-flow planning (a single monthly payment)
Lower income taxes: mortgage-interest and property tax payments reduce taxable income
May provide access to recreation and social facilities
Financial gains from selling house can be exempt from taxes
Rental conditions may be changed by owner
Greater control over use of property and improvements
Timing for repairs controlled by owner
The home can become a source of cash by refinancing with another mortgage loan or a home-equity loan

20. Monthly Payments on a $10,000 Loan
FIGURE AIII.8 Monthly Payments on a $10,000 Loan
Length of Loan
Interest Rate (%)
3 Years
5 Years
10 Years
20 Years
30 Years
5.0
$299.71
$188.71
$106.07
$66.00
$53.68
6.0
304.22
193.33
111.02
71.64
59.96
6.5
306.49
195.66
113.55
74.56
63.21
7.0
308.77
198.01
116.11
77.53
66.53
8.0
313.36
202.76
121.33
83.65
73.38
9.0
318.00
207.58
126.68
89.98
80.47
10.0
322.67
212.47
132.16
96.51
87.76
11.0
327.39
217.42
137.76
103.22
95.24
12.0
332.14
222.44
143.48
110.11
102.86

21. Worksheet for PITI Calculations

22. Cashing Out from Tax Avoidance (Legally)
Traditional Individual Retirement Account (IRA)
provision allowing individual tax-deferred retirement savings (up to $5500 for < 50, 6500> 50)
Roth IRA
provision allowing individual retirement savings with tax-free accumulated earnings
Income limits ira/contribution-limits-deadlines
Coverdell Education Savings Account (529)
(also known as an Education IRA) you can contribute up to $2,000 annually for each child under age 18

23. Cash Flows: Roth IRA versus Traditional IRA
FIGURE AIII.10 Cash Flows: Roth IRA versus Traditional IRA
Assumptions:
Initial contribution and earnings average 10 percent growth annually.
Initial contribution and earnings remain invested for 40 years.
Income tax rate is 30 percent.
blank
Traditional IRA
Roth IRA
Initial cash contribution to IRA
$3,000
Income tax paid initially: $4,285 income x 30% tax rate = $1,285 tax
1,285
Total initial cash outlay
$4,285
Accumulated earnings (40 years)
$132,774
Initial contribution +
3,000
Total available for distribution after 40 years =
$135,774
Income tax at time of distribution −
$40,732
Blank
After-tax distribution (cash)
$95,042

24. 401(k) accounts (best retirement option)
Offered by employers
allows employee to invest pre-tax dollars in a retirement account (limit of 18,500, year)
Some employers will match employee contribution (up to a limit)
Example Sally makes $50,000/ year at Acme which has a 401K plan where ACME matches to the first 4% of employee contributions. Sally elects to place 5% of her salary into a 401K. Her contributions is $2500, her employer will match that with $2000 (4%) giving here a $4500 contribution to her account.
Since Sally is single, she is in 25% tax bracket which means she will save $625 in taxes due to her $2500 contribution. (true cost = %1875)
Sally ROI on her contribution is 140% in year 1
the 401k miracle.xlsx