Journal 1. When will you be wealthy? 2. At what point is someone wealthy?
Habits Of Wealth
What is a HABIT? Something you do without thinking about it.
At what point is someone considered wealthy? Do you need $1 billion or more? $1,000,000,000
793 Billionaires Today 1. William Gates $50 Billion 2. Warren Buffett $42 Billion 3. Carlos S. Helu $30 Billion 4. Paul Allen $22 Billion 5. Kenneth Thomson $20 Billion
Do you need a million dollar home? Bill Gates Home $53 million
Do you need an expensive car? Ferrari 360 Spider Base $186,608
YOU ARE WEALTHY WHEN You can stop working and sustain your lifestyle for the rest of your life!
Money Habits, NOT INCOME Dictate Wealth
HABIT #1 PAY YOURSELF FIRST
Pay Yourself First Savings Rules: Save 10% of your paycheck before paying bills! Make Savings automatic! Look into direct deposit. Remember The dollar amount isn t as important as the habit of saving!
Reasons People Should Save Emergencies It is recommended individuals have a minimum of three to six months of salary in savings accounts for emergencies. Examples of emergencies can include illness, losing a job, or immediate need to replace a large item such as a washing machine. Expenses Savings accounts can be used as a budgeting tool to manage monthly expenses. Future Purchases Money can be used to meet future goals such as a college education, new car, down payment on a home, or a new stereo. Investing After an individual has established a savings account, money should be invested monthly for future income.
Savings Account Savings Account Interest Earning Account to hold money not spent on consumption. Money may be accessed or transferred between accounts through: Automated teller machines; Telephones; Internet.
Savings Accounts Generally yield a low interest rate, often barely meeting inflation. Liquidity is how quickly and easily an asset can be converted into cash. In an emergency, cash needs to be easily accessible. Savings accounts are more liquid than investment accounts.
Liquidity Checking Account Most Liquid Savings Account Money Market Deposit Account Certificate of Deposit Savings Bond Least Liquid
HABIT #2 Invest Wisely
Investing Basics The purchase of assets with the goal of increasing future income. Investments are not liquid as savings. Rate of return, or annual return on the investment, varies, but is usually higher. Risk in investments means uncertain outcome. Savings bonds are the lowest risk investments.
Rule of 72 The time it will take an investment to double in value at a given interest rate using compounding interest. 72 = Years to Interest Rate double investment (or debt)
Doug s Certificate of Deposit Doug invested $2,500 into a Certificate of Deposit earning a 6.5% interest rate. How long will it take Doug s investment to double? Invested $2,500 Interest Rate is 6.5% 72 = 11 years to double investment 6.5%
Rhonda s Treasury Note Rhonda is 22 years old and would like to invest $2,500 into a U.S. Treasury Note earning 7.5% interest. How many times will Rhonda s investment double before she withdraws it at age 70? 72 = 9.6 years 7.5% to double investment Age Investmen t 22 $2,500 31.6 $5,000 41.2 $10,000 50.8 $20,000 60.4 $40,000
Methods of Investing Financial planning Stocks Bonds Mutual Funds Retirement Account
Investment Strategy You re the coach. Where are you going to position your players on the field? Why?
Investment Strategy First base Left Field Right Field Pitcher Short Stop Center Field Why wouldn t you position your fielders like this? What could happen if you did?
Investment Strategy Center Field Left Field 2 nd Base Right Field 3 rd Base Pitcher 1 st Base Why is this the best placement? Why is the best investment strategy?
HABIT #3 Plan For Retirement
Retirement Facts Your retirement could last for a long time so you need to save for it! Make sure that in your will you appoint someone to be the executor of your estate. A 401 K plan deducts a certain amount of money from your gross pay and is placed in a special account. IRA s are Retirement plans that are available through a bank.
HABIT #4 Invest in the Stock Market
Why Learn About Stocks The stock market is the core of America s economic system Stock is a share of ownership in the assets and earnings of a company When you buy a stock you are investing in that company.
The Stock Market Stocks have had some of the best rates of return for retirement.
Stock Markets Dow Jones Industrial Average ( DOW ) Lists the 30 leading industrial blue chip stocks Standard and Poor s 500 Composite Index Covers market activity for 500 stocks More accurate than DOW because it evaluates a greater variety of stock National Association of Security Dealers Automated Quotations ( NASDAQ ) Monitors fast moving technology companies Speculative stocks, show dramatic ups and downs
Ups and Downs The term bull market means the market is doing well because investors are optimistic about the economy and are purchasing stocks The term bear market means the market is doing poorly and investors are not purchasing stocks or selling stocks already owned
Supply vs. Demand The stock exchange is organized based upon the laws of supply and demand Supply is the relationship of prices to the quantities of a good or service sellers are willing to offer for sale at any given point in time Demand is the relationship of prices to the quantities and the corresponding quantities of a good or service buyers are willing to purchase at any given point in time.
PIT GAME