Personal Management
Merit Badge
Robert Adkins
Fall 2009
Overview
• What is Personal Management?
• Badge Requirements (per 2007 Book)
• Class one curriculum
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Managing yourself
Smart shopping
Money, emotions, discernment, and discipline
John Wesley: Biblical Thoughts on Money
Budgeting overview and the 13-week project
requirement
– Risk and Return
– Saving vs. Investing
– Stocks: selecting 5 and tracking performance.
Managing Yourself
• Before you can effectively manage others,
you must manage yourself effectively.
– If you can’t manage your money, who would
trust you with theirs.
– Employers check potential employee’s credit
scores.
• Take yourself seriously
• If you don’t know where you are going any
road will get you there.
Effective Personal Management
• Requires setting of long term and short
term goals.
– Goals cascade and are interdependent.
Achievement of long term goals may require
completion of many short term goals.
– Must have discipline to think, plan, and
execute.
– Keep list “alive.” (Revalidate long term list
quarterly, Daily to do list.)
– Satisfaction of accomplishment.
Managing Yourself
• Take responsibility for yourself and your actions.
• Consider what adults do you now?
– How will you meet your housing and food needs?
– How will you meet your anticipated life style?
• Much of your life is managed for you now.
• Need to guide you toward success in the future.
– Manage Resources: time, life, money.
• Create a road map and prepare for life outside
your parent’s house when you are on your own.
Smart Shopping
• Research what you want. Define function(s)
• Look for sales (End of season)
• Comparison shop at least 3 sources.
– Check cost per unit.
• Advertisements (new and improved; really?)
– Try to push your emotion buttons to get you to buy.
– Avoid bait and switch.
• Consider alternatives
• Warranties
• Avoid impulse buying or shopping while hungry.
– Focus on your savings goal to help yourself say, “No.”
• If it sounds too good to be true, it probably is.
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Control Impulse Buying
• Advertisers try to tempt you to buy.
– Envy
– Entitled
– Girls will like you
• All of your emotions can influence your
purchases. (But purchasing something does not
change the reason that you feel the way you do.)
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Happy
Sad
Money can “burn a hole in your pocket.”
Ever have “post purchase dissonance?”
Shopping and Use of Credit
• In general, avoid buying ordinary items on credit.
• Avoid teaser rates that go up.
• Better to save your money for something you
want.
• Learn to budget
• Credit cards tend to have high interest and
should be paid off in full monthly.
• Avoid minimum payments that will keep you in
debt and increase the total cost of the purchase.
Money: Biblical Perspective
John Wesley's 1760 Sermon The Use
of Money (Credit: Jim Jackson)
“Make all you can: Industry
Deuteronomy 8:18 "...the Lord your God...gives
you the power to get wealth"
• Save all you can: Frugality
Mark 8:34 "...deny yourself"
• Give all you can: Generosity
Acts 20:35 "It is more blessed
(satisfying) to give than to receive"
John Wesley's 1760 Sermon
• Timothy 6:17-19 "As for those who in the
present age are rich: command them not
to be haughty, or to set their hopes on the
uncertainty of riches, but rather on God
who richly provides us with everything for
our enjoyment.
John Wesley's 1760 Sermon
• They are to do good, to be rich in good works,
generous, and ready to share, thus storing up
for themselves the treasure of a good foundation
for the future, so they take hold of the life that
really is life.“
• Keep good records
Proverbs 27:23 "Know well the
condition of your flocks…, herds,
for riches will not last forever."
John Wesley's 1760 Sermon
• What do you own? Assets
 What do you owe? Liabilities
 What do you make? Credits
 What do you spend? Debits
• Have a responsible spending plan
Proverb 21:5 "The plans of the diligent
lead surely to abundance, but everyone
who is hasty comes only to want"
Isaiah 55:2 "Why do you spend
your money...for that which does not
satisfy?"
John Wesley's 1760 Sermon
• Live debt free
Proverbs 22:7 "The borrower is a
slave to the lender.”
• Make sure God is in your budget
Proverbs 3:9-10 "Honor the Lord
with your substance and with the
first fruit of all your produce;
then your barns will be filled with
plenty..."
Learning to Manage Money
• Monitor state of economy
• Workforce changes
• Fewer companies offer pensions.
– You must save for retirement.
• May have to have multiple employers over
your life.
Money Matters
• Money skills must be learned.
• If you don’t learn these skills:
– Stress
– Marital discord/dysfunction
– Bad credit
• No credit
• Higher borrowing costs
Money
• Don’t have unlimited money: Finite resource.
• Discuss emotions about money.
• A Scout is Frugal: Makes smart money
decisions.
• Must make budget tradeoffs.
– If revenue (money in) is down.
• Discuss Options
– If expenses (money out) is up.
• Discuss Options
Is Money the Most Important Thing
in Life?
• No! Consider:
– Family, friends, religion, achieving personal
growth.
– But, not enough money can impact your
health, well being, and relationships.
• Discussion
The Accounting Equation
(Simplified)
USES = SOURCES
• Assets = Liabilities + Owner’s Equity
• Assets: Something of value (It is a use of
money.)
– Cash, car, house, IPOD, stocks, bonds, etc.
• Liabilities: Something that you owe
– Note, bill, mortgage, etc.
• Liabilities and owner’s equity are sources.
• Therefore, Assets – Liabilities = Owner’s equity
(What you own or your net worth.)
The 13 Week Personal Budget
Requirement
• Set savings goal.
• Over 13 Weeks, Track:
– Revenues
– Expenses
– Net income
• Use Excel or do so on paper.
• Discuss tradeoffs and discipline to achieve
goal.
Budgeting
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Budget helps you manage your money.
Organizes your finances.
Fixed expenses vs. variable expenses
Spend categories
– Entertainment (too broad: break down)
– Restaurants vs. groceries
• Pay close attention to your discretionary
spending. (ex. Candy bar after school or
newly released video game.)
Revenues (money in)
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Allowance
Extra chores
Work part time
Start a business
Sell items you no longer need
Save gift money
Can you forecast revenues?
Expenses (money out)
• Analyze your forecasted (budgeted) and actual
expenses.
• What can you give up?
– Are your fixed expenses really fixed?
– Think outside the box.
• Rent or share a video game instead of buying.
• Get a book from a library instead of buying.
• Other options
– Change goal
– Extend time
– Opt for less expensive option
Risk and Return
• You must demand a commensurate return
for the amount of risk. Generally, the
higher the risk the higher the reward.
Saving vs. Investing
• Saving
– Purpose is to keep money.
– Paying yourself or setting aside money in a bank account or having on
hand for an emergency.
– Savings in a bank is guaranteed by the FDIC (Govt.)
– Tend to have short term time horizon.
• Investing
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Purpose is to make money.
Invest in a business (lawn mower)
Invest in your education, skills, or trades.
Invest in a financial instrument. (Stock, bond, mutual fund, etc.)
Investing involves some risk of loss. (Generally, not guaranteed, and
you may lose some or all of your money.)
– Tend to be longer time horizon.
– Remember to match the investment with the time horizon.
Savings
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Pay yourself first
Determine discretionary expenses
Keep records
Manage money to stay on track.
– If expenses go up, do what? Discussion
– If revenues go down, do what? Discussion
Savings: Bank
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Insured by FDIC
Low interest, but better than 0% interest.
Low yields on checking and savings
Watch fees (ATM, Over draft, checking account)
Higher yields on CD and Money Markets
CD requires money to be tied up for a specified period.
(longer period = more interest.)
• Debit Card: Draws money from your account. You must
have money in the account for it to work.
• Credit Card: Don’t have to have money in the account.
Pay off each month due to high interest rates.
Checking Accounts
• Some pay interest on balance
• Many banks charge fees on checking
accounts. Shop around for best deals.
• You must have money in the bank to cover
your checks or debit card transactions.
• Overdrafts are expensive: Avoid through
good record keeping.
Investments
• Invest to make more money
• Save to keep money.
• Investments involve risk of losing money
(principal.)
• Invest in yourself
– College
– Obtain marketable skills
Investment Types
• Owned Investments (Equity Investments)
– Stocks (a certificate of company ownership)
• Share Appreciation (Greater fool theory)
• Dividends (not guaranteed)
• Value may decrease to $0.
• Loaned Investments (Debt Instruments)
– Bonds (IOU) Pay back principle plus interest.
• Money Market (Low Risk) Maturities less than 1 year.
• Savings Bonds (Zero Coupon, bought at discount to face
value)
• US Treasury Bonds (Low Risk: backed by US Taxpayers)
• Corporate Bonds (Higher Risk: potential greater yield
• Municipal Bonds (Low Risk: tax deferment increase return
Common Investment Types
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Stock in US or Foreign Companies
Mutual Funds (stocks or bonds)
Real Estate (Land, houses, apartments)
Personal Business
Commodities (Think of examples.)
Collectibles (Think of examples.)
KEY: Match Your Investment with
Your Time Horizon.
• When you are younger you can assume more
risk.
• As you get older you need to reduce your risk.
• The longer you have until you need your money
the more risk you can incur.
– Ex. If you are needing tuition in 2 years it should be
saved not invested.
• Diversification
• Asset Allocation
Bonds (Debt Instruments)
• Common US Bonds
– EE (Savings Bond)
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Zero Coupon
Bought at discount from face value.
Does not pay a coupon.
Pays full face value at maturity.
– I (Adjusts for inflation)
• Adjusted every 6 months
• Long term investment: penalty for redemption
within 5 years of purchase.
Stocks
• Quality Growth Stocks
– Leaders in its industry
– Grow faster and more consistently than the economy
as a whole. (But what if the company’s earnings
disappoints?
• Mutual Fund
– Diversification across companies and asset classes.
(Covariance)
– Consider investment costs (loads, fees, commissions)
– Consider suitability of fund’s investment goals for your
time horizon.
Stocks
• Where to Buy Shares: Buy in Blocks of 100
Shares
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NYSE (Most capitalize companies)
AMEX
OTC: NASDAQ (Less capitalized companies)
Pink sheets: Penny Stocks (Beware, some stocks are
cheap for a reason.)
• Set up an account at a brokerage (discount or
full service)
• You must be 18 to trade stocks, but may own
through a custodial account.
The Power of Compounding: The
Power to Make You Rich
• In principle you make interest on the
interest.
• Example with Excel spreadsheet.
• Lesson: In investing time is your friend;
you must start saving and investing when
you are young.
Selecting Stocks
• Discuss how to find share prices and read
and interpret stock data.
• EX: Yahoo Financial
• Wall Street Journal
• Investor’s Business Daily
Borrowing Money
• Interest is the cost of money.
• Cost = Principal X Rate X Time
– The more you borrow, the higher the interest rate, and
the longer you borrow the more you will pay.
• Appropriate borrowing
– College education
– Buying a house
• Inappropriate borrowing
– Depreciable assets
– Discretionary living expenses (eating out etc.)
Borrowing Money
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Shop around
Compare Annual Percentage Rates
What is the Total Cost of the Loan?
What are the fees?
Lowest payments per month may increase
the total cost of the loan.
• Is there a charge for early repayment?
Credit Cards
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Cards have charge limits
Cards have high interest (>18%) and fees
Should pay off balance each month.
Avoid paying only the minimum payment
Paying off your charge cards is like having an
investment that pays the same interest of your
credit card.
• Avoid getting in over your head. (Especially
when you go to college.)
Planning Your Time
• Know Your Vision
• Have a Plan
• Create “SMART” Goals to achieve your
Plan
– Specific
– Measurable
– Attainable
– Relevant
– Time-Based
Insurance
• In exchange for payments (premiums) insurance companies will pay
you for a loss.
• Pay to Offset Risk
– Risk of a car crash: Car insurance
– Risk of dying: Life insurance
• Permanent Life
– Generally more expensive
– Includes an investment component that you can borrow against.
– Cost stays the same
• Term Life
– Generally less expensive than whole life
– Purchase for a term (like 5 years)
– Cost may go up when renewing at next term.
• Discuss when you will need insurance.
Managing Your Time
• Setting Priorities
– Right Mix of Short and Long Term Goals
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Reward Yourself
Schedule Relaxation Time
Schedule Emergency Time
Create a List: Check off Completed Tasks
Schedule Your Most Difficult Tasks
Be Flexible
Ask for Help
Eliminate Low Priority Items
Say, “No.”
Revaluate Goals Periodically
Planning Exercise
• Use Excel to Create a Plan
• Use Outlook to Schedule Your Week.
Planning Your Future
• What do you want to do?
• What education, skills, licenses do you
need?
• How much money do you want to make?
• What are your interests?
• Set up informational interviews with people
that are successful in fields/industries that
interest you. (Your ASMs can help set
these up.)