CREATING AND MANAGING
A BUDGET: KNOW YOUR HABITS
First, know your habits by tracking your expenses
to fully understand how you spend your money
SECOND, DO THE MATH! DETERMINE YOUR MONTHLY INCOME
LITTLE SAVINGS ADD UP
Saving: Primarily for funds we may need in a short period of time.
Major Concern: Preservation of principle
Selection: choose saving investments of low risk
Money Market Accounts
Short Term Certificates of Deposit
HOW MUCH CREDIT?
Be sure your monthly repayment burden does not exceed 20% of your monthly takehome pay.
Recommended debt safety ratio
- 10% to 15% of your take-home pay
Debt Safety Ratio = Total Monthly Consumer Credit Payments @
1. If it looks too good to be true, it probably is.
2. Deal only with parties that have a reputation to protect.
3. Never purchase an investment solicited by telephone or email.
4. Do not allow yourself to be forced into a quick decision.
There is no such thing as a guaranteed return!
Diversification is the practice of holding a large number of unrelated assets.
The Law of Large Numbers
Mutual funds are one way of diversifying inve
longer than its useful life.
Why continue to pay for something- a car, a vacation, a television- that you are no longer
able to use and enjoy?
Purchase on credit only when buying a long-lasting asset with short-lasting
Practical Element #1
Discover your comparative advantage.
We are all relatively more productive in some areas than in others.
Your comparative advantage is determined by your comparative abilities, n
Begin with and keep a low credit limit one you can easily
pay off (try $250 or $500)
Know your credit limit and NEVER go over
If you can eat it, wear it, or drink it, dont charge it!
Think before you charge
Limit cash advance
May charge annual fees? Could cost you $50 just to have the card!
May charge a transaction fee for cash advances and the interest starts immediately? A
percentage of your cash advance amount is added to your balance.
May charge a fee for goi
1. Determine your personal financial situation
Individual Stocks Vs. Mutual Funds
Limited Funds to Invest?
- Do not invest in individual stocks!
- Easier to achieve by buying mutual funds
What Are Mutual Funds And How Do They