01-31-2011 PowerPoints

01-31-2011 PowerPoints - 1/31/2011 Important Course...

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Unformatted text preview: 1/31/2011 Important Course Activities Critique Previous Student’s Spending Plans February 2, 2011 Complete Personal Finance Guidebook (pages 69-76) 69 February 2, 2011 Estimated Spending Plan Due February 16, 2011 Team Investments Team 1: (Enviva ???, Johnson & Johnson, Apple), VNQ, Municipal Bond, Live Cattle , Peso Team 2: (General Motors, BP Oil, Dunkin Donuts ???), VCIT, Eurodollar Bond, Oil, Renminbi Team 3: (Disney, Wal-Mart, Verizon), VAW, Corporate VAW Bond, Corn, Ruble Team 4: (Nike, Pepsi, Google), VFH, Treasury Bill, Coffee, Rupee Team 5: (GE, Oracle, Comcast), VEU, Treasury Bond/Note, Gold, Real Compounding Formula YEARS TO RETIREMENT? How many years until many years until you might retire? Class Exercise r⎞ ⎛ FA = IA ⎜ 1 + ⎟ ⎝ 100 ⎠ n FA = Final Amount IA = Initial Amount r = Interest rate (percent) n = Number of periods (usually years) 1 1/31/2011 IA = $10,000 (start with) and r = 8% What is the FA? Team 1: 10 years 1: 10 years Team 2: 20 years Team 3: 30 years Team 4: 40 years Team 5: 50 years IA = 10,000 and r = 8% What is the FA? Team 1: 10 years = $21,589 Team 2: 20 years = $46,609 2: 20 years $46 Team 3: 30 years = $100,627 Team 4: 40 years = $217,245 Team 5: 50 years = $469,016 ANNUITY Annuity - A stream of payments made through time. Fixed Annuity - A stream of equal Fixed Annuity stream of equal payments at equal time intervals. Ordinary Annuity – payments made at the end of each time period (month, quarter, year, etc…). Ordinary Annuity FA = PPMT {[(1 + r )n – 1] /r} FA = Final Amount Fi PPMT = Periodic Payment Amount r = Interest rate (decimal) n = Number of periods (usually years) 2 1/31/2011 r = 8% and n = 40 What is the FA? Team 1: $1,000 per year Team 2: $2,000 per year 2: $2 per year Team 3: $3,000 per year Team 4: $4,000 per year Team 5: $5,000 per year r = 8% and n = 40 What is the FA? Team 1: $83/month = $259,056 Team 2: $167/month = $518,113 2: $167/month $518 Team 3: $250/month = $777,169 Team 4: $333/month = $1,036,225 Team 5: $417/month = $1,295,282 “Spending is quick, earning is slow” Russian Proverb “Watch your pennies, and your dollars will take care of themselves” 3 1/31/2011 SPENDING PLAN • Today, and for the next class, we are going to discuss budgeting, spending and saving. Goals for this Section of the Course are - • • • • To start thinking about having a spending plan The importance of putting some money aside – money you cannot see. Doing it systematically. Making it a habit. • We will be laying the ground work for your first report – an estimated spending plan - which will be due Wednesday - February 16, 2011 Budget What is the first thing that comes to mind when I say the following word? following word? • • • What do you think is the reason that most people have some sort of negative feeling about the word budget? Can you think of a better word or words for budget or budgeting? Opdyke say that a "Budget can be liberating.” How is this possible especially if the word has such negative connotations? BUDGET 4 1/31/2011 Various Budgets What is Philadelphia’s 2011 Budget? Do you have a budget? budget? $3.85 billion What is Pennsylvania’s 2011 Budget? is Pennsylvania 2011 Budget? $28.05 billion What is Federal Government’s 2011 Budget? $3,728 billion (est.) US Federal Government What is the estimated deficit for 2010? $1.5 trillion What was the deficit in 2008? th 2008? $459 billion What is the US national debt? $14.1 trillion US Federal Government Cont’d The 2010 deficit amounted to what percentage of the US economy? 10.6% How many people are in the US? 310 million What is the average debt per citizen? $45,483 5 1/31/2011 Of the Following - Which One Are You? Which One Would You Like to Be? 1. A person who spends more than they earn than they earn. 2. A person who spends all they earn. Class Exercise OVERSPENDING • Develop a list of the reasons for overspending. • Which category do you fit into? It pays, figuratively as well as literally, to be honest with yourself. Team Exercise 3. A person who spends less than they earn. Spending List & Categories Let’s Make a List of Spending Categories Class Exercise 6 1/31/2011 Spending Plan Assignment 1. Develop your spending categories. 2. Estimate how much you spend a month for each category. 3. Start keeping track of your spending. Individual Exercise Good Debt & Bad Debt Good debt and bad debt ?- I thought ?debt was debt. 1. Why good debt and bad debt? 2. What makes some debt good and Wh what what makes some debt bad? 3. What are some examples of good debt? Team 4. What are some examples of bad debt? Exercise Good Debt & Bad Debt Good debt Bad debt Benefits of Good Credit 1. Affordable home 2. Education 3. Rental or investment on real estate 1. If you consume it 2. If it loses value over time over time • Getting a line of credit • Lower interest rates, which lead to lower payments 3. If you have to feed it 4. Car • Less paperwork • Many employers now check credit history • Ability to shop around • Increasing your buying power 7 1/31/2011 Ticket to Class Please Bring to the Next Class: 5 reasons for not saving and 5 ways to save 8 ...
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This note was uploaded on 04/19/2011 for the course EE 0822 taught by Professor Lengkeek during the Spring '11 term at Temple.

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