Personal Finance

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Personal Finance

• 07 Feb 2009

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Warnings Apologies

• I am not a certified financial anything
• I will probably say something offensive
• What follows is highly opinionated
• My recommendations and feelings are partially
  based on my personality and situation

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Recommendations

• Use this talk as a starting point , or a
  refresher
• Find a system that works for you, and your
  personality
• Be realistic that finances involve both logic and
  emotion
• Dont be discouraged
• Do something

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What We Will Talk About

• Personal Finance
• Budgeting
• Strategies

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What We Will Not Talk About

• Investing
• Taxes

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What Is Personal Finance?

• The process of treating your assets and
  liabilities as if you were a business
• Any good business has a good budget

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Key 1

• I dont know HOW Im doing, so I have to know
  WHAT Im doing.

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Steps of Personal Finance

• Assessing
• Forecasting/Dreaming
• Budgeting
• Tracking/Revaluating

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Questions Assessing

• How much income do I have?
• How much debt am I liable for?
• What are my monthly expenses?
• What are my discretionary expenses?

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Questions Forecasting/Dreaming

• What does my future hold?
• How do I want to spend my money?
• What about school, marriage or buying a house?
• When will I go on vacation or buy a car?
• Is my job status likely to change?
• Might there be little mes on the way?

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Questions Budgeting

• How much do I want to spend on each category?
• How much money can I/do I want to save?
• How quickly can I pay down my debts?

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Questions Tracking

• How do I close the loop and keep on top of my
  finances?
• What system works for me?
• Are my spending and saving habits sustainable?

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Key 2

• Any budgeting system you choose will fail if
  dont close the loop, because everything feeds
  back.

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Starting A Budget The Basics

• Add up your income and look for fluctuation
• Add up your debts and become aware of their rates
  and terms
• Gather your bills and expenses
• Calculate your approximate tax burden

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Form a Preliminary Budget

• Look at your present expenses to establish
  categories
• Use your current expenses to estimate a projected
  budget
• What bills are monthly, and what are yearly?
• Start plugging in and guessing numbers

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National Averages
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National Averages
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Sample Budget 1
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Flesh Out Your Budget

• Account for maintenance and irregular costs
• Try to predict future expenses
• Nail down your bills
• Do you have positive cash flow?

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Sample Budget 2
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Key 3

• You want to have positive cash flow.

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Problem
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Key 4

• Plan beyond your month-to-month expenses.

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Plan For Things That Are Hard To Plan For

• Home Owners pipes break, refrigerators die,
  roofs leak windows crack
• Car Owners 30k, 60k, 90k checks, unexpected
  repairs, tires, eventual replacement
• Parents My condolences

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ACK! What DO I DO?

• Carefully consider your expenses, both
  necessities and discretionary items
• Be honest about what your needs and wants are
• Be realistic about your situation

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Key 5

• In light of your long term financial health, be
  willing to make hard decisions.

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Opinions, Pt. 1

• There is good debt and bad debt
• Good debt is sometimes bad and bad debt is never
  good
• Consumer debt on credit cards is enemy number one
• You NEED to have an emergency fund
• You must work towards having liquid savings

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Opinions, Pt. 2

• Largely ignore how your peers spend money
• Debt, especially at high interest rates closes
  windows
• If you have credit card debt, institute a debt
  snowball or other method to pay it off

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Opinions, Pt. 3

• Think long and hard about your standard of living
• If you grew up in a favorable situation, it may
  be hard to realize you need to downgrade

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Opinions, Pt 4

• Please, please, please try to save at least 10
  of your net income
• If youre not in a position to save, do your best
  not to dig a hole
• Learn to prioritize to a greater extent

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Opinions, Pt. 5

• We have many more things to buy than ever before
  (ipods, HDTVs, microwaves)
• There arent too many things we used to buy that
  we dont now
• Avoid lifestyle stores and purchases
• The internet is designed to separate you and your
  money

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Where To Cut Expenses?

• Try big items like food first
• Eliminate splurge spending
• Stop eating out
• Be careful with spending on clothes, luxury items
  and hobbies
• Ask how many hours of work does it take me to
  pay for this?

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Track Your Budget

• Paper
• Spreadsheet
• Software
• Websites

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Track Your Budget
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Track Your Budget
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Key 6

• A good budget/personal finance program is
  systematic.

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Tools

• Websites like Mint or Quicken
• Online banking
• Books
• Blogs like Get Rich Slowly

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Well, thats great, tell me,

• HOW DO I STICK TO MY BUDGET?!?!?!?

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Sticking To The Budget

• Cash only, no credit cards
• Envelope method
• Credit only
• Direct deposit accounts
• Self waiting periods
• Internalizing Costs

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Month-To-Month

• Dont pat yourself on the back for a month of low
  expenses
• Make sure you remember to mentally amortize your
  yearly bills, and projected expenses
• Track, track, track

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Goals

• Asses your situation
• Think about the present and the future
• Collect your financial data
• Make a budget
• Select a method for tracking spending
• Pick a strategy that fits
• Keep on keeping on

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Questions?