Week 1 PowerPoint 2

Week One Getting Started

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Week 1 PowerPoint 2

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Week One Getting Started
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  1. Personal Finance for the College StudentBTE 141 with Mr. R. GordonWeek 1 Introduction & Direction!

    Slide 1 - Personal Finance for the College StudentBTE 141 with Mr. R. GordonWeek 1 Introduction & Direction!

    • Online classes are different. Please email me with any questions at anytime. rtgordo@ilstu.edu. I will check my email constantly.
    • Please use class website, class discussion forum, and class wiki to obtain and finish all class work.
    • At the end of the week…..Sunday at 11:59pm…. Your Week 1 report is due. 50% off if late. Please complete and CONVERT TO A PDF File, attach to an email and submit.
    • LETS GET STARTED….First …..Put a picture to the voice….IT IS NOT RADIO!!!. Mr. G’s Background…..
  2. PERSONAL FINANCIAL LITERACYFOR THE COLLEGE STUDENT BTE 141  ONLINE CLASS ONLY

    Slide 12 - PERSONAL FINANCIAL LITERACYFOR THE COLLEGE STUDENT BTE 141  ONLINE CLASS ONLY

    • Mr. R. Gordon...rtgordo@ilstu.eduClass wiki:  http://whatsnew4bus.wikispaces.com/home
    • BTE 141 CLASS SYLLABUSClass Website:  www2.cob.ilstu.edu/rtgordo/
    • TEXTBOOK INTRODUCTION CHAPTER....PDF Format
    • Week 1 POWERPOINTWeek 1 Weekly Evaluation ReportWeek 1 Weekly Evaluation Report PDF
    • Week 2 POWERPOINTWeek 2 Weekly Evaluation Report
    • Week 3 POWERPOINTWeek 3 Weekly Evaluation Report
    • Week 4 POWERPOINTWeek 4 Weekly Evaluation Report
  3. How About YOU?

    Slide 13 - How About YOU?

    • How about your background? Again, since we are not meeting in class, I would like a picture or video to go with your work. #1. Please send a picture of yourself along with a brief personal outline to rtgordo@ilstu.edu. Part of 1st week Report! Anything in red needs to go into your report!
  4. What do you know about PERSONAL FINANCE?

    Slide 16 - What do you know about PERSONAL FINANCE?

    • Download and complete in Weekly Report #1 the PERSONAL FINANCE SURVEY. Located at Class website at
    • www2.cob.ilstu.edu/rtgordo/141
    • PLEASE STOP AND COMPLETE that SURVEY NOW!!
    • Anything in red needs to go into your report!
  5. First the WHY????  The Rewards of Sound Financial Planning

    Slide 17 - First the WHY???? The Rewards of Sound Financial Planning

    • Improving Your Standard of Living
    • Spending Money Wisely
    • Accumulating Wealth
  6. WHY????

    Slide 18 - WHY????

    • QUESTION ……#2….. How much money would you have if you saved 100 a month for 35 years ($42000 total) and received a compounding rate of return of 15%? 99.99 % of my students in the past have answered $65000. How much do you say it is?????
  7. WHY?????

    Slide 19 - WHY?????

    • HOW ABOUT>>>>>>>>
    • ONE MILLION, 495 thousand dollars!!!!!!!!
    • $1,495,000 !!!!!!
    • You can be a millionaire!!
  8. But, Money STUFF IS BORING!!!

    Slide 20 - But, Money STUFF IS BORING!!!

    • But as a Capitalist (you are a Capitalist) as soon as you turn 21 you can drink legally but it is also EL CAVEAT EMPTOR or LET the BUYER BEWARE…..IF YOU DO NOT KNOW YOU LOSE and no one will hold your hand!!! YOU HAVE NO CHOICE!!!!!!! BUT, it is your money, so you choose. I want to be a millionaire…..do you?????
  9. The Economic Wheel –The Basics

    Slide 21 - The Economic Wheel –The Basics

  10. Average American Family

    Slide 22 - Average American Family

  11. The Personal Financial              Planning Process

    Slide 23 - The Personal Financial Planning Process

    • Systematic process that considers important elements of an individual’s financial affairs in order to fulfill financial goals
  12. Six-Step Financial                          Planning Process

    Slide 24 - Six-Step Financial Planning Process

    • 1. Define financial goals.
    • 2. Develop financial plans and strategies to achieve goals.
    • 3. Implement financial plans and strategies.
    • 4. Periodically develop and implement budgets to monitor and control progress against goals.
    • 5. Use financial statements to evaluate results of plans and budgets, taking corrective action as required.
    • 6. Redefine goals and revise plans and strategies as personal circumstances change.
  13. The Role of Money

    Slide 25 - The Role of Money

    • Medium of exchange used to measure value
    • Utility amount of satisfaction derived from purchases versus cost
    • Link to personal psychological concepts and key role in personal relationships
  14. Putting Target Dates on                          Financial Goals

    Slide 26 - Putting Target Dates on Financial Goals

    • Long-term 6 years or more
    • Intermediate-term the next 2-5 years
    • Short-term in the next year
  15. From Goals to Plans:A Lifetime of Planning

    Slide 27 - From Goals to Plans:A Lifetime of Planning

    • Early childhood
    • High school and college
    • Family formation
    • Career development
    • Pre-retirement
    • Retirement
  16. Personal Financial Planning Life Cycle

    Slide 28 - Personal Financial Planning Life Cycle

  17. Plans to Achieve Your Financial Goals…we will cover all of this!!!

    Slide 29 - Plans to Achieve Your Financial Goals…we will cover all of this!!!

    • Asset Acquisition Planning
    • Liability and Insurance Planning
    • Savings and Investment Planning
    • Employee Benefits Planning
    • Tax Planning
    • Retirement and Estate Planning
  18. Special Planning Concerns

    Slide 30 - Special Planning Concerns

    • Adapting to Other Major Life Changes
    • Managing Two Incomes
    • Managing Employee Benefits
    • Managing Finances in Tough Economic Times
  19. Technology in Financial Planning

    Slide 31 - Technology in Financial Planning

    • Technology streamlines the number crunching and information gathering involved in financial planning.
    • Reasonably priced and user-friendly programs are available such as Microsoft Money and Quicken packages. BEST IS TO KNOW HOW TO USE EXCEL!!! You will need to know how to use Excel for this class.
    • Internet provides useful, relevant financial planning Web sites.
  20. The Planning Environment

    Slide 32 - The Planning Environment

    • As a Capitalist in charge of investing you will need to know how each of these groups effect your planning and execution.
  21.  Financial Planning Environment

    Slide 33 - Financial Planning Environment

    • GOVERNMENT has to tax you. Sales Tax and Income Tax! The Federal Government also plays a major role in regulating the level of economic activity. The government sponsored Federal Reserve System manages our money supply. It is a bankers bank…..#3 Who is the Chairman of the Fed right now? You should know and you need to find out. Federal Government makes Monetary and Fiscal Policy. What is the difference between the two? Put your answer in your 1st Week Report!
    • BUSINESS in a Capitalistic System are in business to make as much money and as much of YOUR money as possible. Profit is NOT A DIRTY WORD. You too can own your own business----by yourself as a sole proprietorship, as a partnership or by buying stock in a Corporation. We will be buying stock in this class in the next couple of weeks.
    • CONSUMERS….other consumers compete with you to make the right purchases.
    • #4. BEING A CAPITALIST is TOUGH!!! Question…Does the Government CONTROL THE ECONOMIC WHEEL?????? Why or Why not?
  22. So where does that leave you???    What Determines Your Personal Income?

    Slide 34 - So where does that leave you??? What Determines Your Personal Income?

    • Demographics and income
    • Age, marital status
    • Education (College is a good Choice!!))
    • Where you live
    • Career
  23. How Age and Education Affect Family Income.

    Slide 35 - How Age and Education Affect Family Income.

  24. Earnings…..

    Slide 36 - Earnings…..

    • #5. Looking at the chart at the previous page, how valuable is a College Education to you in terms of dollars and cents and future earning power? Put your answer in the Week One Report.
  25. SO …..Lets get started…..

    Slide 37 - SO …..Lets get started…..

    • Step 1. To create your own financial plan the first thing you need to do is to create a personal Net Worth Statement or what Accountants call a Balance Sheet! It includes your Assets (what you own), Liabilities (what you owe), and your Net Worth by subtracting Assets – Liabilities. Each person has a “Net Worth”. The next slide shows an Example…..
  26.                                                                                  Slide 38

    Slide 38 - Slide 38

    • How Is Wealth Measured?
    • 4-1 Resources and Choices
    • PERSONAL NET WORTH STATEMENT
    • Assets
    • Liabilities
    • Cash and checking account
    • $ 452.56
    • Car loan
    • $1,100.00
    • Savings account
    • 500.00
    • Credit card debt
    • 200.98
    • Savings bond
    • 300.00
    • Total liabilities
    • $1,300.98
    • Baseball card collection
    • 100.00
    • Computer, iPod, games
    • 300.00
    • Car, current value
    • 3,000.00
    • Net Worth
    • Total assets
    • $4,652.56
    • Assets minus liabilities
    • 3,351.58
    • Total liabilities and net worth
    • $4,652.56
    • Net Worth
  27. Slide 39

    • #6. In your Week One Report, Create your own Personal Net Worth Statement. It needs to be accurate.
  28. Step 2  Keeping Track of your Monthly Income and Expenses

    Slide 40 - Step 2 Keeping Track of your Monthly Income and Expenses

    • Keep track of your income
    • How much are You saving?
    • Keep Track of your expenses
    • Variable expenses (clothing, entertainment, etc.
    • Fixed expenses (rent, phone, etc.)
    • Charitable giving (church,good causes, etc.)
  29. What are your expenses?

    Slide 41 - What are your expenses?

    • #7. For your Week ONE report….How much do you save a month? (if you are not saving…START NOW!) If do have savings do you know what percent return you are making? YOU SHOULD…it is your MONEY!
    • Make a list of your fixed, variable, and charity expenses and include in your report.
  30.                                                                                  Slide 42

    Slide 42 - Slide 42

    • Create a budget….what you think you should spend vs what you are spending versus how much income you are bringing in! Everyone has to budget!!
    • 4-2 Basics of Budgeting
    • Income
    • Weekly
    • Monthly
    • Yearly
    • Work (part-time)
    • $30.00
    • $120.00
    • $1,440.00
    • Allowance for household chores
    • 10.00
    • 40.00
    • 480.00
    • Lunch money allowance
    • 15.00
    • 60.00
    • 720.00
    • Savings account interest
    • .50
    • 2.00
    • 24.00
    • Total income
    • $55.50
    • $222.00
    • $2,664.00
    • Savings
    • Deposit to savings account
    • $ 5.50
    • $ 22.00
    • $ 264.00
    • Expenses
    • Gifts
    • $ 5.00
    • $ 20.00
    • $ 240.00
    • Clothes and shoes
    • 15.00
    • 60.00
    • 720.00
    • Loan payment to parents
    • 5.00
    • 20.00
    • 240.00
    • Lunches
    • 15.00
    • 60.00
    • 720.00
    • Entertainment/miscellaneous
    • 10.00
    • 40.00
    • 480.00
    • Total expenses
    • $50.00
    • $200.00
    • $2,400.00
    • Total savings and expenses
    • $55.50
    • $222.00
    • $2,664.00
  31. DO YOU HAVE A BUDGET?

    Slide 43 - DO YOU HAVE A BUDGET?

    • In this class, you will eventually be asked to create a “future” budget for yourself. In the Week One Report….#8. Do you have and manage a budget now? Should you….why or why not?
    • ARE YOU SAVING ANY MONEY?
  32. YOU SHOULD…How a $1,000 Investment Grows over Time

    Slide 44 - YOU SHOULD…How a $1,000 Investment Grows over Time

  33. SO…….As a Capitalist with an effective BUDGET,  you should begin to save your money and it will accumulate.  Do you want it to sit around and do nothing?  The questions becomes what do I do with that money.  If I leave it in a passbook savings account, I will be actually losing money as the per cent return is .01 percent or 1/10th of a penny.  Remember the concept “Money Makes Money” so with that in mind I want you to become aware throughout the semester of how investing works.  In is not a short term thing, but a long term proposition.  In evaluating different investments, you need to understand how to calculate per cent return.   To calculate % return, you need to use the following formula:

    Slide 45 - SO…….As a Capitalist with an effective BUDGET, you should begin to save your money and it will accumulate. Do you want it to sit around and do nothing? The questions becomes what do I do with that money. If I leave it in a passbook savings account, I will be actually losing money as the per cent return is .01 percent or 1/10th of a penny. Remember the concept “Money Makes Money” so with that in mind I want you to become aware throughout the semester of how investing works. In is not a short term thing, but a long term proposition. In evaluating different investments, you need to understand how to calculate per cent return. To calculate % return, you need to use the following formula:

    • PerCent Return = (Value of Investment Now(VN) – Amount Invested (AI)) divided by (Amount Invested AI) or (VN – AI)/ Ai
    • Example. Value of Investment in mutual fund now is $1200. If I invested 1000 at the start, what is my percent return?
    • (1200 – 1000)/ 1000 = 20% return
    • For YOUR WEEKLY REPORT, #9 what is the percent return on an investment you made of $2000 that is now worth $2200. Put into our weekly report the percent return.
  34. One of the best places to get a better return on your money is by owning in one way or another your own business. The most common way is to own “stock” in a corporation.  As a capitalist, you have the opportunity to own stock in any public traded corporation that you want.  You do that with the idea that you can and will make money if that corporation is successful.  Imagine if you would have invested in the stock of APPLE back in the 80’s when it was selling at 10 dollars a share.  Today it is selling for 10000 a share!!  Most students do not understand the how to invest in the stock market and I want you to learn how and to see how important it is to becoming a competent capitalist.   To get some real “practice” you need to go to the website …. www.marketwatch.com and set up a new account and join the game at (see examples on next 5 slides)

    Slide 46 - One of the best places to get a better return on your money is by owning in one way or another your own business. The most common way is to own “stock” in a corporation. As a capitalist, you have the opportunity to own stock in any public traded corporation that you want. You do that with the idea that you can and will make money if that corporation is successful. Imagine if you would have invested in the stock of APPLE back in the 80’s when it was selling at 10 dollars a share. Today it is selling for 10000 a share!! Most students do not understand the how to invest in the stock market and I want you to learn how and to see how important it is to becoming a competent capitalist. To get some real “practice” you need to go to the website …. www.marketwatch.com and set up a new account and join the game at (see examples on next 5 slides)

    • http://www.marketwatch.com/game/bte141spring2015. The name of the game is BTE141SPRING2015 and the password is BTE141.
    • At the game, you need to buy the following three stocks
    • 100 of PFE or Pfizer
    • 1000 of EGHT or 8X8
    • 100 of MSFT or Microsoft
    • Plus three of your own stocks that you need to pick out on your own. We will follow those stocks for the rest of the semester. #10. Setup your account at marketwatch and buy at least the first three stocks. You have until the end of the second week to purchase your other three stocks.
  35. --A stock is a fractional piece of ownership of a corporation.

    Slide 52 - --A stock is a fractional piece of ownership of a corporation.

    • --Publicly traded stocks are sold in shares each of which has a share price which can change.
    • --Stocks are purchased, sold, exchanged and regulated at a Stock Market Exchange.
    • --Each stock has a three or four digit ticker symbol. ie Nike is NKE>
    • --The Biggest Stock Exchanges are the NYSE and the NASDAQ.
    • --In order to trade their stocks, a company listing their shares must meet many requirements.
    • --Two Kinds of Stock….Common and Preferred stock (dividend stock)
    • --Companies go public in order to sell their shares so that their business can expand and grow. It brings in needed capital.
    • --There are many kinds of stocks including:
    • Blue Chips
    • Dividend
    • Growth
    • Growth and Dividend
    • Large Cap
    • Medium Cap
    • Small Cap
    • Penny Stocks
    • International Stocks
    • --You can also divided stocks into industry sectors like Fast Foods ….McDonalds(MCD) and Starbucks (SBUX)
  36. --Why Buy stock?

    Slide 53 - --Why Buy stock?

    • Share in profits….dividend
    • Capital Appreciation ( the share price goes up)
    • --Stocks are very volatile and there is risk but over the long haul it is one of the best investments.
    • --Stock prices change based on
    • Company News
    • Current Events
    • Analyst ratings
    • --The Stock Market has a whole can be measured by various indices like the Dow Jones Industrial Average. The most widely used & made up of the top 30 companies in the US.
    • NASDAQ
    • S&P 500
    • Russell 2000
    • --The Dow Jones average has been kept since 1897. The DOW started out at 25 and has gone as high as 14000. Currently the DOW is at 10000.
    • --To Invest in stock an investor should do their own Research. One good website is www.aaii.com You can use that website by logging in as room225 and a password of room225. Use the stock screens to help you pick stocks.
    • --You will create your own “portfolio” of stocks. You need to define your risk tolerance. Your risk should be based on how much money you have, how much you can afford to lose, your time horizon, you life situation, and how much you worry. 
    • --Good Luck with your investing!
  37. Why Invest in Stock?

    Slide 54 - Why Invest in Stock?

    • Earn regular income – dividend payments
    • Buy low, sell high…hopefully ☺
    • Sell at higher price than you bought?
    • Capital gain
    • Sell at lower price than you bought?
    • Capital loss
    • When do you reap the benefits?
  38. The Major Exchanges WHERE STOCKS ARE Exchanged between people!

    Slide 55 - The Major Exchanges WHERE STOCKS ARE Exchanged between people!

    • NYSE - New York Stock Exchange – “The Big Board”
    • Founded in 1792, the oldest and most prestigious stock exchange in the U.S. – 3,000 mostly large-cap companies
    • NASDAQ - National Association of Securities Dealers Automated Quotation System - computerized national trading system that lists more than 5300 small-cap & technology companies
    • AMEX - The American Stock Exchange founded in 1842 as the New York Curb Exchange – 700 companies
  39. Market Cycles

    Slide 56 - Market Cycles

    • Ups and Downs
    • Throughout its history, the stock market has tended to move in cycles of activity.
    • The stock market is greatly affected by economics, social, and political factors.
    • While it's impossible to predict the market's future activity, one thing is certain: The stock market will continue to experience ups and downs.
  40. Bull and Bear Markets

    Slide 57 - Bull and Bear Markets

    • Bull: attacks by thrusting horns up (positive)
    • Optimistic outlook, investor confidence
    • Prices rising or expected to rise
    • Can apply to anything that is traded
    • Bear: attacks by swiping paw down (negative)
    • Prices falling or expected to fall
    • Enter a downturn of 15-20% in multiple indexes
    • Psychological effects & speculation
  41. Market Indices & Averages

    Slide 58 - Market Indices & Averages

    • A short list of the major U.S. indices:
    • Dow Jones Industrial Average (DJIA)
    • Dow Transports (DJTA)
    • Dow Utilities (DJUA)
    • DJ Wilshire 5000
    • NASDAQ Composite / NASDAQ 100
    • S&P 500 Index (S&P 500) / S&P 100
    • Russell 2000
    • NYSE and AMEX Composites
  42. Indexes

    Slide 59 - Indexes

    • Each exchange calculates an index, or benchmark, based on the activity of its member companies' stock prices.
    • "The market's up" or “the market's down," refers to the Dow Jones Industrial Average. It is considered a reliable indicator of the strength - or weakness - of stocks in general. Composite of 30 companies.
    • #11 What is the Dow Jones Average Currently at?
  43. The Dow Jones Averages

    Slide 60 - The Dow Jones Averages

    • T.V. & radio news programs report the Dow Jones Industrial Average many times during the workweek.
    • What is the Dow Jones Average?
    • In 1882, Charles H. Dow, Edward Jones & Charles M. Bergstresser start a company that distributes copies of stock market reports to business customers in New York City. The first reports are handwritten & distributed by messenger boys. In 1889, the reports, plus additional editorials, become known as the Wall Street Journal.
    • Charles H. Dow
  44. FUN STUFF

    Slide 61 - FUN STUFF

    • This Financial Stuff can be tedious and boring…in your weekly reports I will include a Quote to live by, dumb jokes, and what I call Wakki Wordies. For every Wakki Wordi you can solve, you will earn 1 bonus point!! Here they are.
  45.  Quote to Live By

    Slide 62 - Quote to Live By

    • It’s not whether you get knocked down. It’s whether you get up again. Failure is success if we learn from it. Success is defined as getting up one more time that you fall down.
  46. END OF WEEK 1.

    Slide 64 - END OF WEEK 1.