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Finance

Notes.
by

Tiarra Kick

on 17 May 2013

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Transcript of Finance

_ Credit + Credit -Money in (earnings plus borrowing) must equal money out (spending plus saving).
-The goal is not to borrow to meet daily needs -Savings
-payment services
-borrowing
-other services Writing Checks Before writing a check, write it in your registry
Record all checks, deposits, ATM, withdrawals, debit card charges, etc.
If you make a mistake on a check, write VOID across it.
Endorsing: Blank, restrictive, for deposit only.
Do not endorse until you are ready to cash or deposit
Sign exactly how it appears on the front Financial Planning Helps:
Determine and evaluate options for your money
prioritize options
Avoid careless spending
Avoid money worries A budget is a spending and saving plan on your expected income and expenses. Term Life vs. Whole Life
Whole Life- a permanent policy for the rest of your life. Usually a high premium.

Term- protection for a specified time, needed mostly when raising children.
Taxes Every tax payer receives at least a standard reduction.
Common Deductions:
medical
donations
tax credits
Insurance Budgets Banking and Credit Why should you invest? - Increasingly important
unstable economy, jobs changing with little pensions prepared for the future Steps to Create: Estimate your total expected income
Decide how much you want to save
Estimate Expenses
Balance Budget -Also any variance that is more or less than 10 percent should be looked at Variance- when the planned income or spending is different than the actual spending. Fixed Expenses- costs you are obligated to pay at specific times. * Money in must equal money out- cash flow Savings CD- money is left for stated period of time to gain a specific rate of return Money Market Account- typically higher than regular accounts, interest rates will vary. U.S Savings Bonds- face values are double what you pay, must wait until maturity date. LIMITS 1. Have to leave money for time period
2. Penalty if money is taken before maturity
3. Minimum account required to deposit. Consider when you will need the money, and always research the best rate. TAXES
Must pay federal taxes on interest earned.
May defer taxes by exchanging for HH bonds.
Exempt if money is used to apy for higher education. Checking Accounts Regular Checking- usually no requirement for minimum balance. Activity Accounts- If you write only a few checks and unable to maintain a minimum balance Interest Earning- combination of checking and saving. You can decide on personal or joint. Stop Payment order: request to the bank not to cash a check, usually a fee of ten dollars. Enjoy things now, pay later
Allows you to combine several purchases into one monthly purchase.
Other lenders will view you as a responsible person. Costs money
Temptation to buy more than you can afford
May lose some income and property taken from you to pay debt. credit is an arrangement to receive cash, goods, or services now and pay for them in the future. Closed End Credit
One time loan that you will pay back over a specified period of time in payments of equal amounts.
A contract lists the repayment terms:
Installment sales credit- allows you to receive high priced items.
Installment cash credit- direct loan or personal purchases
Single lump sum credit- loan that must be repaid in total on a specified day. Open End Credit
Credit Cards
Revolving Check Credit- prearranged loan for a specific amount
Credit as a loan with a certain limit on the amount of money Credit Score Having a good credit score can help you: Lower your interest rates
Speed up credit approvals
Reduce deposits required by utilities
Get approved for apartments
Obtain better credit cards, car loans, and mortgage offers What makes it up? Payment History
How much you Owe
Length of Credit History
New Credit
Other Factors General Range: 300-850
Above 700- Low risk to lenders; demonstrates good financial health
Below 600- High risk to lenders Identity theft is the fastest growing financial crime.
If you think your identity is stolen:
contact credit bureaus
contact creditors
file a police report Avoid Phishing and Pharming scams. Clicking on a fake link and providing your information will result with a virus.

1. Through dividends
2. Increases in prices of stocks you own
3. Compound Interest- interest on interest.
The rule of 72- determines how many years it takes to double investment money at growth rate.
* if asset grows x% a year value will double in 72/ X years. How money is made through investment
1. Invest on regular basis over a long time
2. Reinvest all your earnings
3. Invest in common stocks/mutual funds quality companies
4. Diversity portfolio to reduce overall risk Rules for Investing: Bonds -Is a loan you give to the bank Between the date when you buy a bond and the maturity date, the corporation pays you annual interest at the rate on the stated bond Mutual Funds -An investment alternative in which investors pools their money to buy stocks, bonds, and other securities based on the selections of professional managers who work for an investment company Positives to Mutual Funds 1. Diversification
2. Professional management Closed-End Funds
A mutual fun with a fixed number of shares that are issued by an investment company when the fund is first organized -After all the original shares have been sold, an investor can buy shares only from another investor. Open-End Funds
An unlimited number of shares that are issued and redeemed by an investment company at the investors' request Two Types of Mutual Funds
1. Load Funds or "A" Fund
Pay a commission every time you buy/sell shares
-Can be as high as 8.5%
-Usually between 3-5%
Advantage- Financial planner offers guidance about when shares of the fun should be bought/sold. 2. No-Load Fund
No commission fee or salesman
Choose this option if it has equal investment opportunities
Always has a management fee
- Fixed % of the funds asset value which usually ranges from .5-1.25% of the funds assets
-Back-End Load
-Fee charged for withdrawing $ from your fund
- Designed to discourage early withdraws 3 Categories of Funds
1. Stock Mutual Funds
-Invest only in stocks
2.Bond Mutual Funds
-Invest only in bonds
3. Mixed Mutual Funds
-Invest in a mix of stocks and bonds IRA- (Individual retirement account) -Special account in which you save a portion of your income for retirement Traditional IRA- (May be fully or partially tax deductible) -Allows you to make annual contributions until 701/2 years old
-Can put $5,000 a year in
-Can make annual contributions even after 70 1/2
-Can withdrawal money from the account without paying penalties or taxes after 5 years if you are t least 59 1/2 years old or if you are using the money to help you buy your first home. Roth IRA -Annual contributions are not tax-deductible but the earnings are tax free -If you make less than $95,000 you can put in $5,000 a year or a combined married income of less than $150,000
-Can make annual contributions even after 70 1/2
-Can withdrawal money from the account without paying taxes/penalties after 5 years if you are at least 59 1/2 years old or if you are using the money to help buy your first house What is a 401(k)? - A plan funded by a portion of your salary that is deducted from your gross paycheck and placed in a special account Why have Insurance? - So you will be covered if anything happens like.. property loss, illness, or injury Home owners Insurance -Coverage that provides protection for your residence and its associated financial risks
-covers the following:
1. buildings and other structures
- Detached structures and landscaping
2. Additional Living Expense
- Pays for you to stay someplace else when
damages to your home prevents you from
living in it
- Can be limited to 10-20% of your total
coverage and to max of 6-9 months
3. Personal Property
- Household belongings
- Usually limited to a % of the coverage
4. Personal Liability
- Protects you if others sue you for injuries
they suffer or for damage to their damage Auto Coverage you should have Coverage falls into 2 categories: -Bodily Injury &Property Damage Bodily Injury covers physical injuries caused by a vehicle accident for which you are responsible. Property Damage applies when you damage the property of others (car or other structures/buildings) Group Health Vs. Individual Heath Insurance Group Health Individual Health - Protection from financial loss due to illness or injury - Premium pays for insurer to pay most of medical costs - Most people are covered under this -Typically employer sponsored - Employer offers this plan and pays some or all of the premium
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