Avoiding Financial
Trouble
Prince William Area
Financial Education Program
Financial Management
From Cradle to Grave…
Start
Money Problems Involve




Lack of Planning
Value Conflict
Unrealistic Goals
Emotional Uses of Money
Needs
vs
Wants
Setting Goals

Clearly define your goals
– Personal, financial, career,
social, etc.

Goals should
– Be measurable
– Have a time frame (deadline)
– Be visual
4
Five Leading Causes of
Overspending
5 - Thinking That Money
Can Buy Happiness
4 - Wanting Only the Best
for Your Children
3 - Trying to Keep Current
2 - Taking Out Car Loans
1 - Abusing Credit Cards
5
OOF!
Why?
Credit Card Issuers often require a
minimum monthly payment of 2% to 3%
 $2,000
 18.5%
divided by 12 = 1.54%
 $2,000
 $40
Times .02 = $40
times 1.54% = $31
Payment
Interest
Rate
Interest
- $31 = $9
Principal
6
Tips on Debt
 Bad
–
Debt
Borrowing for
Consumption
 Good
–
From Personal Finance For Dummies™, 2nd Edition by
Eric Tyson. Copyright © 1996 by Eric Tyson. All rights
reserved. Reproduced here by permission of IDG
Books Worldwide, Inc. …For Dummies is a registered
trademark under exclusive license to IDG Books
Worldwide, Inc., from International Data Group, Inc.”
Debt
Borrowing for Long
Term Investment
Slims’s Diner
7
Dealing With Too Much Debt
HIGH
Priority Debts
Housing related including utilities &
condo or association
fees
 Food
 Transportation
 Insurance
 Taxes

Low
Priority Debts
Credit cards
 Other “consumer”
loans
 Doctor and hospital
bills
 Professional
services

8
Tips on Saving
 Pay
Yourself First!
– Treat Savings as a Fixed Expense
– Try to Save at Least 5% - 10% of your
Gross Salary
 Build
up 3 to 6 Months of Living
Expenses
– Liquidity Account (safety)
 Start
Investing
9
Investing – “The Market”
Bull & Bear
Markets
10
Source:www.ricedelman.com 11/05/01
11
Beware of Percent Comparisons
Start
Change
Result
Growth
$1,000 +$1,000 $2,000 100.0%
$2,000 -$1,000 $1,000 -50.0%
12
S&P 500 Stock Index vs. 6% Annual
Return - 1971 to 2003 – Cumulative
$463K
$10,000 Initial Investment
Dollars
$355k
$281k
$68k
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Years
21
22
23
24
25
26
27
28
29
30
31
32
13
S&P 500 Stock Index 1971 to 2003
% Change in Value by Year
1.6
$10,000 Initial Investment
1.4
1.2
1
0.8
0.6
0.4
14
Procrastination
(Waiting to Start)
$18,000
Jill
$579,488
9 Years
$70,000
Jack
35 Years
22
30 31
$2,000 per Year at 9%
$470,249
65
Age
15
Income and Expenses
Living Within Your Means:
 Spend
Less Than You Earn
 Save What You Do Not Spend
 Invest What You Save
Income
Expenses
16
Some Final Thoughts
 Delayed
gratification
 Acceptance of responsibility
 Dedication to truth
 Balance
17