1. Personal Finance – An Introduction Dr. Steven M. Hays Personal Finance BKHS – Fall 2011

2. Why Is Money Important? Pay Bills Make Purchases Retirement Housing Vacations Education

3. Three Techniques for Understanding the Importance of Money 1.Budget 2.Rate of Return 3.Risk

4. BUDGETS What is a budget? Why is a budget important? How is a budget used?

5. Budgets and Expenses Define expense: Definition of EXPENSE 1 archaic : the act or an instance of expending : expenditureexpendingexpenditure 2 a : something expended to secure a benefit or bring about a result b : financial burden or outlay : cost c : an item of business outlay chargeable against revenue for a specific periodexpendedcost

6. Budget to Save – You Can Create Personal Wealth 1.Budget 2.Save and Invest 3.Pay off Debt 4.Avoid Credit Cards 5.Save for Retirement

7. The Millionaire’s Quiz – True or False Most millionaires inherited their wealth Most millionaires earn more than $500,000 a year College graduates earn about twice what high school graduates earn over a 40 year work life. People who are self-employed rarely become millionaires. All millionaires wear expensive clothing. Millionaires usually drive new cars. Many millionaires drop out of college to start work. It is impossible to save enough to be a millionaire.

8. “Wealth Is…” “Wealth is…”

9. Building Net Worth What is net worth? The Financial Equation –Assets – Liabilities = Net Worth Assets –Anything an individual or business owns that has commercial or exchange value Liabilities –Money an individual or organization owes; same as debt Is a person’s assets the same as a person’s net worth?

10. Balance Sheets of the Rich and Famous activity

11. Following the Money Map Destination 1 Emergency Savings  Begin using a spending plan  Save $1,000

12. Destination 2 Credit Cards Paid Off  Pay off credit cards  Increase savings to one month’s living expense

13. Destination 3 Consumer debt paid off  Pay off all consumer debt Auto loans Student loans  Increase savings to 3 months living expense

14. Destination 4 Save for Major Purchases  Begin saving for major purchases Home Auto  Begin saving for retirement  Begin saving for children’s college education  If you want to start own business, start saving Save for Major Purchases  Begin saving for major purchases Home Auto  Begin saving for retirement  Begin saving for children’s college education  If you want to start own business, start saving

15. Destination 5 Buy Home, Begin Investing  Buy affordable home  Begin prepaying home mortgage  Begin investing wisely

16. Destination 6 Home Mortgage Paid Off  Pay off mortgage  Children’s education funded  Confirm estate plan is in order

17. Destination 7 Final Destination  Retirement is funded  I am free to volunteer my time working for the Lord

18. What Does It Mean to be Wealthy? Name two assets that are likely to depreciate in value over time. What happens to wealth if debt is used to purchase consumable items? What conditions would allow a house to considered a wealth- creating asset? Why might a U.S. Treasury security be called a wealth creating asset?

19. Homework Sandra’s Balance Sheet – complete and turn in on Tuesday, September 13, 2011