the road to financial success marion
DESCRIPTION
What does a high school senior need to know before heading off to college? Marion has somesage tips.TRANSCRIPT
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THE ROAD TO
FINANCIAL SUCCESS
THE ROAD TO
FINANCIAL SUCCESS
By Marion McHenryBy Marion McHenry
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PART 1:FINANCIAL
INDEPENDENCE
PART 1:FINANCIAL
INDEPENDENCE» Provide for yourself» Do the things you want to
do in life» Set financial goals» Prevent debt» Be responsible &
reasonable » Look ahead» Do the math!
“I always knew I was going to be rich. I don't think I ever doubted it for a minute”-Warren Buffet
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» Start early» Use connections» Does it interest
you?» Put your skills to
use» Work hard» Be professional
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PART 2:SAVING & INVESTING
PART 2:SAVING & INVESTING
“Success to me is having ten honeydew melons, and only eating the top half of each one”
-Barbra Streisand
“Making money is a hobby that will complement any other hobbies you have, beautifully”
-Scott Alexander
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THINK ABOUT:» 10-15% of your annual salary » Save before you spend» Spend less» Opportunity cost of purchases» Create a savings plan» Risk of inflation
»Watch your money grow»Retire when you want to»Invest more
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Tips for Saving MoneyDon’t carry too much cash
Put 10-15% of salary directly into bankThink before you buySell thingsBargain shoppingAvoid financial blunders
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Investing: What is it?Investing: What is it?» A way to make your money
grow» Choice to place money in a vehicle
» Stocks, bonds, etc.» Invest to make money» Buying securities from money
markets, capital markets, liquid assets
» Investment risk
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Investing Your MoneyInvesting Your Money
» Money will grow over time» Finance your dreams» Enjoy retirement
THINK ABOUT…» How much to invest» How long you let your money grow» Interest and growth rates» Where to invest your money» Valuation» When to buy/sell
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More Tips on Investing…
Have an investment strategy Realize the risk Be conservative Don’t invest only in big capital gains Own something that has more money coming in than
going out Low-risk investments Keep inflation and taxes in mind Diversity among assets Look for great bargains, they’re there Start early
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PART 3: DIFFERENT ASSET
CLASSES
PART 3: DIFFERENT ASSET
CLASSES
» Create a plan before you invest» Do the research
THINGS TO CONSIDER:» Your time» The amount of money you have» How willing you are to take risks» How soon you need money» How long you are willing to invest
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STOCKSSTOCKS1.Expect volatility2.Expect to lose money3.Expect to wait
» Growth-time to grow» A share of ownership in a
company» Can buy/sell shares of public
stock» Long term and short term
stocks» 9-11% annual return» Growth stocks» Dividend stocks» Growth and income» Be diverse» Balance sheet & income
statement (p/e ratio)
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BONDSBONDS
» Fixed income- “money now!”» Issuer holds debt» Usually pays interest (coupon)» Pay all back + interest on
maturity date» Bond holder= lender» Issuer=borrower» Provide issuer with fast cash
» Finance long term investments» Lender, not owner » Maturity date
» Consol bond-no maturity» safe
» Fixed rate bonds» Constant coupon
» Floating rate notes» Changing coupon
» Zero coupon bonds» No coupon
» Inflation linked bonds» Subordinated bonds» Perpetual bonds
» No maturity date
» Municipal bond» Issued by government» Exempt from taxes
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Mutual FundsMutual Funds
» Professionally managed investment scheme
» Pools money from many investors
» Puts money in stocks, bonds and other securities
» Fund manager» Hundreds of sub-
categories» Fees
» Service, management & investment
» Open-end fund» Join and leave
» Exchange traded fund» Mixture of mutual fund
and closed-end fund
» Equity funds» Index funds» Bond funds» Money market funds» Low transaction costs
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PART 4: HOW DO I DO IT?
PART 4: HOW DO I DO IT?
» How to invest in bonds, stocks and mutual funds
» How to choose a bank» How to pick the right bank
account for you
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How to InvestHow to InvestStock
Brokerage account: (Merrill Lynch, Schwab)Advice for extra $$$
EtradeBond
Public authorities, credit institutions, companiesUnderwriting: Buy a bunch of bonds and sell
themBond issuers: (Morgan Keegan, Howard Weil)
Mutual FundBrokerage account
Specialize in mutual funds: (Fidelity, Vanguard)
StockBrokerage account: (Merrill Lynch,
Schwab)Advice for extra $$$
EtradeBond
Public authorities, credit institutions, companiesUnderwriting: Buy a bunch of bonds and sell
themBond issuers: (Morgan Keegan, Howard Weil)
Mutual FundBrokerage account
Specialize in mutual funds: (Fidelity, Vanguard)
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Choosing a Bank
Don’t be gullibleInterest rates on different accountsFees and restrictionsNegotiate Differing regulationsWill the bank give you a loan?Can you pay back the loan?
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Different Kinds of AccountsDifferent Kinds of Accounts
» Savings account» Checking account» Certificates of deposit
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Checking AccountChecking Account
» Don’t earn interest
» Not for savings» Overdraft
» protection
» No interest rates!» Frequent access to
funds» Money available on
demand» For convenience » Withdraw how much
you wish, how often» Cash machines » Internet banking» Debit cards
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Savings AccountSavings Account
» 65%» Pay & earn interest» Not used as direct money» Set aside a portion of
assets» Earn a return » Not as easily accessible » Government regulation
» Limits withdrawals, transfers, payments
» Pricy withdrawals» Don’t limit withdrawals
QuickTime™ and aTIFF (Uncompressed) decompressor
are needed to see this picture.
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Certificate of Deposit Certificate of Deposit
» Time deposit» Offered to consumers, banks and credit
unions» Insured (risk free)» Specific, fixed term
» 3 m, 6m, 1-5 y
» Fixed interest rate» Maturity date-get money and interest» Higher interest rates in exchange for
keeping money in bank» More money and time=higher interest rate» Penalty for early withdrawal
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MY CONCLUSIVE EQUATION
MY CONCLUSIVE EQUATION
» Be financially independent» Save your money
» Watch it grow
» Invest your money» Watch it grow
» Have a plan!» THIS EQUALS FINANCIAL SUCCESS
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WORKS CITEDWORKS CITEDGardner, Tom and David. The Motley Fool. New
York,NY: Fireside, 2002.
Wikipedia contributors. “Bonds.” Wikipedia. 7 May2009. http://en.wikipedia.org/w/index.php?title=Bond_(finance)&oldid=288302493.