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Financial Fitness

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Parents pass on their habits to their children, good or bad. Common Mistakes ... Between her credit cards and her auto loan, she has $15,000 of debt. ... – PowerPoint PPT presentation

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Title: Financial Fitness


1
Financial Fitness
  • Chapter One

2
Are We in Trouble?
  • 1 million personal bankruptcies per year!
  • 25 of adults between 35-54 have not begun saving
    for retirement!
  • One out of every two marriages ends in divorce!
  • The main cause financial issues!
  • People are wasting money because they arent
    financially fit!

3
MONEY AT HOME?
  • Money taboo
  • Parents dont talk about money
  • Family Financial Limitations, realities and
    details of the family budget?
  • Parents pass on their habits to their children,
    good or bad.

4
Common Mistakes
  • Overspending (addicted to spending)
  • Buying with Consumer Credit
  • Falling Prey to Financial Sales Pitches
  • Not Doing Your Homework
  • Emotional Decision Making
  • Exposing Ourselves to Risk
  • Focusing too much on Money

5
Other Pitfalls
  • Peer Pressure (Spouse Pressure)
  • Wanting the Best for Your Children
  • Feeling Good About Spending Money
  • Keep up with the those around you
  • Ignoring Financial Goals
  • Not Planning for purchases
  • Delaying Saving for Retirement

6
Why do we borrow money?
  • To buy large ticket items
  • house, car education/college
  • To buy items now and pay for them later credit
    cards, installment loans

7
Good Debt
  • Good Debt
  • money owed on appreciating items
  • (items increasing in value)
  • Examples?

8
Bad Debt
  • Bad Debt
  • money owed on depreciating items
  • (items decreasing in value)
  • Examples?

9
How Much Is Too Much Debt?
  • Bad Debt / Annual Income Bad Debt Ratio
  • Keep your Bad Debt ratio 25 or lower
  • Example
  • Laura earns 30,000 per year. Between her credit
    cards and her auto loan, she has 15,000 of debt.
    Her bad debt is 50 of her income!

10
Financial Net Worth
  • Measures Financial Health
  • Financial Assets Financial Liabilities Net
    Worth
  • Financial Asset Something worth real money or
    something you can convert to hard dollars that
    you can use to buy things now or in the future.
  • Financial Liabilities Anything you do not own
    outright and must pay for in the future.

11
American Savings Rate?
  • At its height in 1975 of 9, over the next 20
    yrs with consumer spending on the rise, it hit an
    all time low of -0.2 in 1998.

12
The current economic recession has increase the
savings rate to 5
13
Recession Gross National Product
  • Recession An extended decline in general
    business activity, typically two consecutive
    quarters of falling real gross national product.
  • Gross National Product the total market value of
    goods and services produced by all citizens and
    capital during a given period (usually 1 yr)

14
Recessions Effect on Savings Rate
http//www.nytimes.com/2009/02/03/business/economy
/03econ.html http//www.dailyfinance.com/2009/08/2
9/americans-save-more-spend-less-will-it-last/ Rea
d and Discuss
15
What is Your Net Worth?
Net Worth is your own personal financial value
according to what you own or have control over.
Assets Liabilities Net Worth
16
Assets
  • Assets Anything you own that has real value and
    can be sold
  • Appreciating Assets
  • Depreciating Assets
  • Examples?

17
Liabilities
  • Liabilities Anything you currently owe money
    on.
  • Examples of your liabilities?

18
Fundamentals of Credit Cards
  • Disadvantages
  • High Interest Rates
  • Finance Charges
  • Self Control Issues
  • Minimum Payment Trap!
  • Advantages
  • Easy Access
  • Short Term Help
  • Possible O Interest Loan
  • Helps Build Credit Score

19
Credit Card Float
  • Using a credit card to pay for items in order to
    not have to put out your money until the credit
    card bill comes due.
  • The key is when the card is paid in full (no
    balance is carried over) each month, you will
    have a grace period before the item must be
    paid for.
  • If you have a hard time saving money Playing the
    Credit Card Float may not be for you.
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