the fundamentals of taking ownership of your money, success

8/13/2019 The Fundamentals of Taking Ownership of Your Money, Success

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EDUCATIONASSOCIATION

SERVICESFriday, October 24, 2003

APTA11thAnnual National Student

Conclave


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Money

Moneyis an intense personal issue, oftendifficult to acknowledge and usuallyunspoken.

People, most students and manyprofessionals, who feel they should knowabout moneybut dont, find it lessembarrassing not dealing with the issue.


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Money

Money is the biggest contributing factor to apersons unhappiness even when moneyis working in your favor, it cant make you

completely happy. But it can - without a doubt- make you m iserable.

You Dont Have to Be Rich: Comfort, Happiness, and

Financial Security on Your Own Terms byJeanChatzky, published by Portfolio Books


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Good money management - takingownership of your money rather than letting itride roughshod over you - makes the

difference. Adopting good-money-management habits is like earning another$25,000 a year.

You Dont Have to Be Rich: Comfort, Happiness, and

Financial Security on Your Own Terms byJeanChatzky, published by Portfolio Books


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The Psychology of Spending vs. Saving

How much is enough?


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Spending and Saving Money is Like Hit T.V.Shows!

Survivor Fear Factor

Big Brother

Who Wants to be a Millionaire?


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Savings

Our economy and culture pushes theconsumer to be indulgent and over-consume(buy more than you need) on a daily basis,

thus making it easy to forget about savingand practically impossible to save.

Saving suffers from the perception of being asacrifice, which generally equates to being a

short-term effort as wellI will diet or savefor a month or two and then I can go back toeating or buying what I want.


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Savings

Saving is about wanting something else morethan you want to spend.

Saving can be more fun than spendingbecause it puts you in a position of being incontrol and making progress toward yourgoals.


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The Fundamentals of Taking Ownership of

Your Money, Success & Happiness


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About 95 percent of millionaires in Americahave a net worth of between $1 million and$10 million.

This level of wealth can be attained in onegeneration.

Eighty percent of Americas millionaires arefirst-generation rich.


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Three out of four millionaires considerthemselves to be entrepreneurs. Most of theothers are self-employed professionals, such

as doctors and accountants. Millionaires live well below their means. They

wear inexpensive suits and drive American-made cars. Only a minority drives the

current-model-year automobile. Only aminority ever leases their motor vehicles.


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Millionaires save at least 15 percent of theirearned income.

On average, they invest nearly 20 percent of

their household realized income each year. They hold nearly 20 percent of their

households wealth in transaction securitiessuch as publicly traded stocks and mutual

funds, but they rarely sell their equityinvestments.

They hold even more in their pension plans.


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Taking Ownership of Your

Money Requires You To: Identify and set your life goals. Determine what it

will take to achieve them and allocate your time,energy, and money efficiently, in ways conducive toachieving your goals. Think needsfirst and foremost.

Do not become a victim of wants (over-consumption).

Earn your own money.It is important that anindividual experience the effort it takes to earnmoney. Working to earn money puts spending in

perspective. Treat all money (money from parentsand financial aid) with the respect and appreciationthat you treat the money that you work for.


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Money Requires You To: Live well below your means. Starting as a

student, borrow less, borrow only what you needdont over consume student loans. Before youborrow, estimate how much you will reallyneed, not

just spend to the maximum of the school budget. When you borrow, estimate what your monthly

loan payments, earnings and living expenses willbe, after graduating.

Set borrowing limitsbased upon your goals. Keep track of how much you borrowand when

and how much you are expected to repay.


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Money Requires You To: Create a Spending Plan for Success (Budget)that

reflects your goals and work with it.

Be organized. Use or develop a system that willallow you to securely store and readily retrieveimportant documents such as: bank statements,insurance policies, financial aid papers,correspondence from your college's financial aidadministrator, loan documents, loan applications,

credit card and bank account numbers, passportsand birth certificates.


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Know Where Your Money Is

Going and WhyDoes your spending aid or hinder your life goals?

Take a couple of weeks to a month to record, why,where and when you spend your money.

Know how much you spend and why you spend.

Do you impulse buy to reward yourself or makeyourself feel better.

What can you do without - or with less?

Are you addicted to ATM withdrawals?Is your budget realistic or is it padded?Be honest!

Can you spend less or earn more?

Be sure you understand the consequences of both.


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Going and WhyCreate a system that allows you to keep tabson everything you spend(dont forget ATMwithdrawals).

Pay your bills as they come in. Jean Chatzkysays people who pay bills as they come in aremore financially content than those who paythose same bills all at once at the end of themonth.

Be sure to balance your checkbook at leastevery month and use a cash flow analysis tocomplement your budget.


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Going and Why Know what you are worth. Whether on the brink of

bankruptcy or comfortably wealthy, a net worthstatement is a valuable planning tool.

Determine you net worth on a regular basis, at

least annually and I would suggest making January2nd, Annual Update Your Net Worth day.

Calculating your net worth will assist you inmeasuring your progress toward your goals. You

have to know where you are before you can figureout how to get where you want to go.


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Going and Why If possible, pay the interest on unsubsidized

student loans as you go.Deferring your studentloan interest payments may be necessary and easy,but compounding interest accumulation will have you

paying a lot more in the long run. If you are not able to pay interest as you go,

prepay or accelerate payment on loans when youcan.You can save a great deal of money in interest.

Interest accrues over time, and the more time youtake to repay your loans, the more interest thataccrues.


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Going and Why Take advantage of tax breaks.Find out if

you and/or your family qualify for any of thefederal tax breaks such as the Hope orLifetime Learning tax credit.

In addition, find out if you are eligible todeduct your student loan interest paymentson your tax return.

When dealing with tax matters it isrecommended to consult with a qualified taxprofessional.


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Going and Why Make saving money and becoming money-savvy

a priority.Saving money and gaining money savvy isboth attitude and acquired skill.

Understand that as a student, money not

borrowed is like creating your own scholarshipbecause it does not have to be repaid.

Understand the time value of money and howmoney can make moneyto be used in achieving

your goals is fundamental in achieving success.


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Going and Why

Always make payments on time. Be wary ofplans with low monthly payments. Lower

monthly payments mean a longer period ofrepayment, which means more interest.

Build and maintain a cash reserve.


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Going and Why

Pay debt down!

Set a fixed debt reduction amount in yourspending plan/budget.

Set a plan to pay off bills and stay the courseuntil you are out of debt.

Focus on paying off credit card and revolving

debt carrying the highest interest rates first.


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Going and Why

Remember that the goal is to minimize debt,grow your net worth and achieve your goals.

Employer-sponsored retirement plans often

provide free money, and tax leverage. Use online calculators found on web sites to

inform your decisions.


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Going and Why

Prepare a will.


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Going and Why

Purchase disability and lifeinsurance(if you have

dependents).


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Going and Why

Minimize and if possibleeliminate credit-card debt.


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Going and Why Spend wisely. Dont spend more on large

items (houses, cars) or small items(magazines, eating out, vending machinepurchases, lattes, gifts) than you need

which is different than what is calculated aswhat you can afford or what you want.

Most affordability calculations do not take intoaccount the need or desire to substantially

save. Make sure you know what you arespending, especially the small items, theyadd up.


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Going and Why

Pay your bills on time whenever they aredue. This is an important way to build goodcredit history. Good credit will help you later if

you want to take out a loan to buy a car or ahouse.


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Going and Why

Start a savings account.Even if you canonly put away a few dollars every month, themoney will start earning interest, and your will

start the habit of saving money. One simple idea: put $1 a day plus your

extra change in a jar. Once a month, depositthe money into a savings account at your

bank. Work toward saving 1% of you incomethen 2% then 3% and so on until you reachyour savings goal.


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Going and Why

Be alert to deadlines.Make sure you applyto colleges for admission and financial aidwell before the cutoff dates.

Give(volunteer, money, old belongings) tothe causes you believe in. This creates asense of personal fulfillment and happiness.


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ConsolidationThe No BrainerStudent LoanRepayment Management Tool

Student loan consolidation is an excellentmoney management tool for highly indebtedprofessionals.

In July, rates on federally guaranteed studentloans fell to:

3.42 percent for loans already inrepayment;

2.82 percent for loans in deferment (in- school and until six months aftergraduation).


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ConsolidationThe No BrainerStudentLoan Repayment Management Tool

Consolidation makes student loan paymentsmore manageable while locking in current lowinterest rates for the life of the loan.

Currently, monthly payments can be reducedup to 50% or more.

Consolidation loans can stretch repaymentover 30 years, depending on the students

total indebtedness.


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Know Your Credit History and

Score

You should know what the credit bureausknow about you and make sure theinformation is correct.

If you are denied credit, you have the right toask for a free copy of your credit report.

For more information on credit reports fromEquifax, Experian (TRW) and trans union go

to http://www.majorcreditreports.com/.

K Y C di Hi d
http://www.majorcreditreports.com/http://www.majorcreditreports.com/


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Know Your Credit History and

Score

Your credit score is a formulated figure thatlargely determines your eligibility for creditand the quality (rate and terms) of credit you

are offered. Credit score factors include:

Payment history, Amounts and types ofoutstanding debt, Length of credit history,

Recent credit sought/gained and Types ofcredit in use.


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K h P f T


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Know the Percentages of Too

Much Debt Debt is like cholesterol. A certain level is good,

even necessary for life. However, too much willdevastate you.

Monthly student loan payments should not

exceed 8 to 10% of gross monthly income.

As debt exceeds 15% of gross income it becomesmore difficult to manage.

The general rule of thumb for managing

households is to keep monthly debt payments toa maximum of 20% of gross monthly income.

K th P t f T


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Much Debt For someone making $5,000 a month before

taxes, this means keeping car payment, creditcard payments, etc, to $1000 per month or less.

This figure does not include mortgage payment,

which is considered a form of safer debt becauseits backed by property.

The idea of good debt is dangerous, because itencourages people to buy more house than they

need or can comfortably afford considering theirother financial obligations and goals.

K th P t f T


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Much Debt

Total debt payments should be comfortablyless than 50% of gross monthly income. Thisformula leaves some income left over each

month for spending money, savings,investments and the unexpected stuffthatinevitablyhappens.


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Richer and Happier!

Adop t ing good money management

habi ts rather than poor ones can

make you feel as much as 50 percent

r icher and happ ier.

Jean Chatzky, Today Show, October 2, 2003


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Take ControlIts Your Life!

Take control of your money and

you take control of your lifeyourhappiness and your success!


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How Happy Are You?

Not at all happy

Not too happy

Somewhat happy

Very Happy


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How Happy Are You?

Not at all happy2%

Not too happy11%

Somewhat happy50%Very happy31%

Conducted as part of the research for You Dont Have to Be Rich,by RoperASW intensive survey of 1,500 Americans. Reported inMoney October 2003.


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What Do You Worry About?

Your Marriage or Relationship

Your Health

Your Job

Your Friendships Your Appearance

Your Self-Esteem

Your Financial Situation

Your Children Your Lifestyle

Your Finances


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Six in 10 respondents say that they worry a lot orsometimes about their finances, about twice asmany as worry about their self-esteem, jobs,marriage and friendships.

Women (66%) worry more than men (58%) Younger people (69% of those ages 35to 49,

and 56% of those 50 to 64) worry more than olderones (44% over 65)

Parents of children under 18 (73%) worry more

than people with no children at home (57%). Between $25,000 and $100,000, income makes no

difference.


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More people say they have less control overtheir finances than any other factor.

Men are a bit more likely to feel in financial

control than women. Parents are a little less likely than non-

parents to feel in financial control.

Seniors feel more in control than youngerpeople.


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Success Vs. Happy?

Are you happy because you are successful?

OrAre you successful because you are happy?


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Success Vs. Happy?

Two-third of the respondents said that theywere successful because they are happyand they also reported being happier overall,with their standard of living, their marriages or

live-in relationships and their financialsituations, than people who believed that theirhappiness rested upon their success.

Both groups had similar worries, but the latter

worry more about their self-esteem and theirjobs. More men (30%) than women (18%)attribute happiness to success.

the fundamentals of taking ownership of your money, success

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