Personal finance 2
Personal finance 2 AAEC 2104
Popular in Personal Financial Planning
verified elite notetaker
Popular in AAEC
verified elite notetaker
This 5 page Class Notes was uploaded by Savah Notetaker on Friday September 16, 2016. The Class Notes belongs to AAEC 2104 at Virginia Polytechnic Institute and State University taught by Dr. White in Fall 2016. Since its upload, it has received 6 views. For similar materials see Personal Financial Planning in AAEC at Virginia Polytechnic Institute and State University.
Reviews for Personal finance 2
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 09/16/16
Personal Finance Measuring Financial Health Balance sheet o Budget o Income and expense statements What you own and how you paid for it What you own and owe on a given date Terms o Assets what you own Listed at fair market value o Liabilities debts, what you owe o Net worth financial value Net worth=AssetsLiabilities Balance sheet Assets Monetary Assets o Cash, checking, savings, CDs, MMAs, Emergency funds Investments (nonretirement) o Stocks, bonds, mutual funds, real estate Retirement Assets o Value of IRAs, 401 (K) Tangible assets: o Automobiles Value of Automobiles o Personal property Collectables, clothing, furnishings, etc. Other o Anything else owned that is not listed above o Value (equity) of any businesses you own o Money owed to you Balance sheet Liabilities What you legally owe TODAY! Current liabilities due within 1 year o Payable Net worth What you’re ‘worth’ (in money), your ‘wealth’ NOT a measure of selfworth Want your net worth to be positive o If negative you are insolvent o College students tend to be negative Want net worth to grow over time o Until retirement years Income statement Tracks your money over a period of time Cash accounting o Record when cash changes hands Easier to do on a monthly basis than to do on an annual one Income statements help o Identify ways to reduce spending o Project budget for the future Income List ALL sources of income o Gross salary/wages (before taxes) o Tips, commissions, bonuses o Scholarships, grants, welfare, “GI Bill”, gifts o Investment income Interest earned Dividends (cash or stock) o Other income such as garage sale Income taxes Total all incomebased taxes o Local state and federal income taxes **Advice: after you graduate, try to have 12 months of savings built up Expenses Housing o Rent, repairs, utilities, property taxes, etc. Food o Groceries, food away from home, meal plan Clothing and personal care o Clothes, toothpaste, haircare, toilet paper Transportation o Auto loan payments, rental/lease o Gas, repairs, etc. Medical o Copays, prescription, tests, etc. Insurance premiums o Auto, life, health, LTC, etc. Recreation o Need to classify what you consider “recreation” o Movies, T.V., football games, etc. (entertainment) Other: anything not listed above o Savings, investments, retirement, etc. Don’t double count credit card payments!! o Include under proper expense category Nonregular payments o Insurance premiums Investments as expenses o Savings, investment, retirement, etc. Expenses BEWARE!! Main mistakes: o Double counting o Forgetting what you pay only once or twice a year o Tuition o Investments in expense Budgeting Crucial for your financial future Relatively simple but few people do it Review your goals Review your income statement Take best guesses Estimate income o Gross income/net of income taxes Build savings o 2025%, 10% at least Incorporate “fudge factor” of 10%20% o Unexpected situations Main Financial Ratios: 1. Months Living Expense: Total monetary assets / total monthly living expenses a. 36 months is the bench mark 2. Debt Payment/Income: Total debt payments / Gross income a. 38%40% is the bench mark 3. Savings Ratio Savings and investment / Gross income a. 10% is the bench mark Green – low risk (good) Yellow – Caution area (slow down and try making changes) Red high risk (STOP!) Record keeping People keep records mainly for taxes Keeps track CYA “Cover You’re A**” in case of lawsuit Emergencies and the 5 D’s o Disease o Disability o Divorce o Disasters o Death Other D’s o Drugs o Dependence o Dumbness o Debt o Etc. Where to keep records Filing cabinets QuickBooks Fireproof safe Safe deposit box (at the bank) Keep tax records for 37 years Keep debt records for life of loan and 3 years’ after
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'