Sarah Richter
Fin Lit
What are my financial goals and how do I achieve them?
● To buy a house you must be able to hand them a check of 20% of the amount
○ Take out mortgage for a remainder of the money
● Which goals can be reached the fastest and why?
○ Short term (requires less than 6 months to achieve)
○ Medium term (less than year)
○ Long term (more than year)
● Financial goal → when do you want to complete it → how much must you save
→ what steps to take to reach it/ what “wants” can you cut back on to reach your
goal
What is Economics?
● Economics is the study of how people make CHOICES to satisfy their wants
○ Why??
■ Scarcity occurs when there are limited quantities of resources to
meet unlimited needs or desires
● Prioritize your wants and needs and what you can afford
● In the real world what is happening...
○ Trade-offs are all the alternatives that we give up whenever we choose
one course of action over others
■ Baruch vs. NYU
○ The most desirable alternative given up as a result of a decision is known
as the opportunity cost
■ Not the money value- it’s the opportunity
● When you decide how much more or less to do, you are thinking at the margin…
Options Benefit Opportunity cost
1st hour of extra study Grade of C on test 1 hour of sleep
time
2nd hour of extra Grade of B on test 2 hours of sleep
study time
3rd hour of extra study Grade of B+ on test 3 hours of sleep
time
● Cost Comparison
○ Comparing the cost of two or more goods or services in an effort to find
the best value - like my water bottle story at the airport
● Cost- Benefit Analysis
○ Cost = the price paid for a good or service
○ Benefit = an outcome that promotes well-being
○ Analyzing whether the cost of the item is more than, or equal to, or less
than the benefit that comes from purchasing that item
● Calculating Future Expenses
○ Identifying the cost of meeting future needs and goals
○ Short -term, medium-term, and long-term goals- goals to achieve over
specific periods of time
● Budget
○ A plan for future spending and saving, weighing estimated income against
estimated expenses
● Income
○ Payment received for goods or services, including employment
● Expense
○ Cost paid to secure a good or service
○
What’s so important about financial planning?
● Financial planning is a process of:
○ Setting goals
○ Developing a plan to achieve them
○ Putting the plan into action
● Its creating a roadmap for handling everything you do with your money-
○ Spending, saving, using credit, and investing
● A fiduciary is someone who manages property or money on behalf of someone
else
○ When you become a fiduciary, the law requires you to manage the
person’s assets for their benefit, and not your own
○ In a fiduciary relationship, the person who must prioritize their clients’
interests over their own is called the fiduciary
● People who are good at making and following a financial plan, are are able to live
comfortably and buy nice things without guilt or stress
● People who don’t plan often worry about having enough money for the things
they need and want
● 529 plans- for kids since they’re little so that it grows and you can use for
education for college, med school…
How to take control of your money (Video)
● Create budget and stick to it
○ Where can you cut spendings - coffee
● Set savings goals
○ Emergency fund
● Tackle your debts
○ Credit card- bad debt
■ Can have 15 to 20% interest, and also gets compounded
○ Mortgage - good debt
■ Getting equity bc you can sell the house after
○ Student loan- good debt
■ Investing in a future job too (medical degree)
○ Paying higher interest rates first
Emergency Funds
● How much should you save?
○ For a single person - 3 months of all your expenses
○ For a family - 6 to 9 months
5 Steps
● Set Smart Goals
● Analyze Info
● Create a Plan
● Implement the plan
● Monitor and modify the plan
SMART Goals
● Specific
● Measurable - How much do I need to save?
● Attainable - Can you pay your Range Rover?
● Realistic- Can you actually afford it?
● Time Bound - In a year I will…
Video on how to Budget
● Figure out what your net income is
● Determine your fixed expenses
○ Loans, tax, insurance, emergency funds
● Determine variable expenses
○ Phone bll, grocery bill, restaurants, clothes
● Prioritize
○ Do you really need unlimited texting
● Follow your spending and review monthly
○ Make sure you aren't spending on small things too much
● Keep track
○ Budgeting apps, pen and paper
Checking Vs Savings
Checking Savings
Offers easy access to your funds: Designed to save for long-term goals:
● ATM withdrawals ● Typically offer higher interest rates
● Debit card takes funds directly ● Limited access so you won’t be
from your account tempted to use for impulse buys
● Comes with a traditional ● You may need to move money into
checkbook checking to make frequent
withdrawal
● Easy transfers to pay bills online ● Can be linked to checking so you
can transfer funds between
accounts
● Checking
○ Used for:
■ Paying bills
■ Grocery or other everyday shopping
○ Pay fees for:
■ Not carrying a minimum balance
■ Using other bank’s ATMs
■ Withdrawing more money than is available in your account
● Savings
○ Used for:
■ Building an emergency fund
■ Saving for a big ticket item like a vacation or car
○ Pay fees for:
■ Not carrying a minimum balance
■ Excessive withdrawals- different banks have different rules
SmartyPig
● Online bank
● Can set up diff accounts and name them
○ School, car, diff house expenses
Debit Cards
● 3 most common fees
○ Monthly account fees
○ Overdraft fee
○ Out-of-network ATM fees
Your Bank Account: 10 questions to ask
1. Can I use the ATM for free?
2. What happens if I withdraw more money than I have in my account?
3. Is there a monthly fee?
4. Do I need to keep a certain amount in my account?
5. Is there a branch nearby?
6. What information can I access online?
7. Is there mobile banking available?
8. Will it cost me to transfer money?
9. Do I have to pay for checks of replacements fees?
10. Does the account pay me interest?
Checks
● First set on bottom is the Router number
● Second set is the Account number
● Make sure to right void if you ask for a blank check
● Blank Endorsement
○ Sign your name on back of check, nothing else
● Restrictive Endorsement
○ Write on top: for deposit only
○ You can also write ur account number too in case multiple ppl have the
same name as you
○ Then sign your name under
■ So that nobody else can do special endorsement and change the
ownership
○ Most secure
● Special Endorsement - Third Party
○ Write: Pay to the order of Ave J Florist
■ You're signing your check over to another person
■ Not so secure - not everyone accepts it
● Maintaining a Registry
○ Keeping track of old checks
○ Check number, date, if it's charity…
○ Put a check mark if money was cleared- the person cashed the check
○ Check will bounce unless you have overdraft if you don’t have enough
money for the check in your account
How banks process deposits:
● (If it’s between two different banks then it takes longer to clear a check)
● Cash deposit
○ Money avail in our account immediately or next day
● Direct deposit
○ Scheduled from employer- available usually on your payday
● Check deposit
○ Takes more time
○ Most banks go through a clearing house - the federal reserve to make
sure the person has the money
○ Person who cashed it can be charged a fee if the check bounces
○ $225 dollars or less, money can be available the next day, larger amounts
bank holds portion of check
● Ask bank how long till the money will be in your account and don’t touch it till it
does
● Ask what is considered a business day - cutoff time could be 3 and you deposit
330, you missed that day
6 Things you don’t know about your Checking account
● Not all fees are mandatory
● You might have to wait for your money
● You can get overdraft protection for a price!
● Better act fast to stop a payment
○ Could only stop a check if you know the check number
● You can change auto-pay through your biller or bank
● You can set up alerts to notify you via email or text of certain activity
Savings, Money Market, or CD. Which account is right for you?
● Regular Savings accounts
○ Basic accounts to help you build savings for short-term goals or
unplanned expenses with easy, anytime access to funds.
○ Earn interest
○ FDIC insured
○ Minimum $300
○ Teach your child about savings
○ Emergency fund
○ Vacation in 3 months
● Money Market Savings Accounts
○ Provide easy access to your money including check writing privileges
○ Generally have higher interest rates than regular savings
○ FDIC insured
○ Minimum $2500
○ Savings beyond your emergency fund
○ Furniture, appliances, or another big purchase in 6 months
○ (money market you get a checkbook, receipts, etc.)
● CD - Certificate of Deposit
○ Fixed interest rate and set maturity date (9,12,24 months or longer)
○ May be a penalty if you access your funds before then
○ Higher interest rates than regular or money market saving accounts
○ FDIC insured
○ Minimum $1000
○ GIft money for a child
○ Tuition money for continuing education
○ Part of your retirement savings
○ The overseas vacation you’d like to take
IRAs- Individual Retirement Account - see chart on GC
● Traditional IRA
● Roth IRA- if you make higher than … you cant put roth ira
○ Goes by tax year
○ If you get a salary and you know you will get a raise, you may not be
eligible for a Roth
● SEP IRA- provides retirement benefits
○ Self employed- you can only contribute if you are self-employed
● 401k - employer program
○ Private firm
○ If you put in money, they match some of it (free money)
● 403b - employer program
○ Non-profit
● 529’s - not FDIC insured
○ Allows parents to put away money for children's education
○ Allow you to invest in different stocks / funds / bonds
○ If your child doesn’t use, it can be rolled over to another
● Pension - guaranteed money - rare today - police/ sanitation
The effect of time on your retirement account
● Time and opportunity to put away money is very important
● Tax deferred - pay taxes later
● Not FDIC insured, not bank guaranteed , you could lose the money
○ Traditional 401k / Traditional IRA
■ Could be elibagle in a tax deduction if in an employer plan
■ 7 /10 rule
● 10 dollars away for 10 years it should grow 7% per year
● Could end up with $58,600 that started at $5200
■ Individual investment fees - from the companies
● Inflation, Taxes, and Fees
○ Things you have to keep in mind when investing in these things
Building a Foundation for Retirement
● Investing for Retirement
○ Stocks, bonds, mutual funds
Your 401k: 9 Things to Find Out
1. When can I start contributing?
2. Will I be automatically enrolled?
3. Is there a company match, and if so, what are the rules?
4. How much can I contribute?
5. Can I sign up for automatic increases to my contribution?
6. What investment options does the plan offer?
7. What are the maintenance costs and fees?
8. What happens if I withdraw the money early?
9. What happens if I leave my company?
