1. PERSONAL FINANCIAL STATEMENTS Chapter 16-1

2. How Much Money Will You Earn in Your Lifetime?  From the U.S. Census Bureau, Current Population Survey, Educational Attainment 2009 data, in a sample of 100 Americans:  55 would have some college:  1 Professional degree  1 Doctoral degree  7 Master's degree  18 Bachelor's degrees  9 Associate's degrees  19 some college, no degree  45 would have no college:  31 would have a high school diploma, no college  14 would have no high school diploma  Combining Work-Life Earnings for Full-Time Employees* with the data above:  Professional Degree: $4.4 million x 1 = $4.4 million  Doctoral Degree: $3.4 million x 1 = $3.4 million  Master's Degree: $2.5 million x 7 = $17.5 million  Bachelor's Degree: $2.1 million x 18 = $37.8 million  Associate's Degree: $1.6 million x 9 = $14.4 million  Some College: $1.5 million x 19 = $28.5 million  High School Diploma: $1.2 million x 31 = $37.2 million  Some High School: $1.0 million x 14 = $14.0 million  Total = $157.2 ÷ 100 = $1.572 million or about $1.6 million average life-time earnings

4. Money Management Basics  Money management refers to the day-to-day financial activities associated with using limited income to satisfy your unlimited needs and wants.  It involves getting the most for your money through careful planning, saving, and spending.  It involves making and using a plan for spending.

5. Money Management  It doesn’t mean  Never spending  Doing without  Not having any fun

6. Successful Money Manager  Set goals  Make wise decisions  Buy wisely  Live within your income

7. Personal Balance Sheet  Balance sheet is a record of assets and liabilities at a point in time.  Reports what a person owns as well as what he or she owes.

8. Balance Sheet  Assets:  Items of value: money in bank, home, investments, furniture, clothing, automobiles, jewelry, …  Liabilities:  Amounts owned to others: credit card balance, automobile loans, home mortgage, personal loans,..  Net worth:  Difference between a person’s assets and liabilities.

9. Personal Cash Flow Statement  Examines the change in a person’s net worth.  Reports net wages and other income along with spending for a period.

10. Personal Cash Flow Statements  Personal Cash Flow Statement examines the changes in a person’s net worth.  Cash Inflows is the money you have available to spend as a result of working or from other income  Cash Outflows is amounts spent on food, clothing, transportation, other living cost.

11. Why Positive Cash Flow is Important  One of the fundamental building blocks of becoming wealthy is spending less than you earn. It is one of the core concepts of achieving wealth.  Your cash flow statement won’t tell you if you will become a millionaire or not, but it can tell you if you are on the right path – hint: you can’t build wealth if you are running on a deficit.