Mo Money No Problems A financial Story Book BY: Austin Balestra
Chapter 1 Financial Planning and Planning Your Career Learning to manage your money is one of the most important life skills you need as an adult in order to succeed later in life. No matter how old you are, it’s never too early to make a financial plan. Financial plans are the easiest way to make sure you are financially set. You begin your financial planning process using six steps. 1. 2. 3. 4. 5. 6.
Determine your current financial situation. Develop your goals. Identify your options. Evaluate your alternatives. Create and use your financial plan of action. Review and revise your goals.
Using these steps to create a plan for you to manage your financial life and setting financial goals are two of the best things you can do. There are three types of goals; Short Term Goal which is about 1 year to 12 months, there’s Intermediate Goals which are 2 to five years and then there’s Long Term Goals which are more than 5 years. When writing your goals use the acronym SMART. S Smart M Measureable A Attainable R Relevant T Time Bound
Remember you have to take into consideration your needs vs. your wants. Needs are things you must have to survive. Where wants are things that you desire to have to meet your needs. On average there are three main factors that affect your dayto-day financial decisions. 1. Life Situations 2. Personal Values 3. Economic Factors.
Economic facts refer to the forces of supply and demand. Supply is the amount of goods and services available for sale. Demand is the amount of goods and services people are willing to buy. Planning your career is an important topic because it determines what you are going to do later in life and how you are going to do it. Careers influence your personal preference, salary, lifestyle, benefits, and your job satisfaction. When you grow up and become an adult, you will either be working just a job or you will have a career. A Job is something you do just to make money and get by. A Career is work you commit to doing in a particular field because you find it interesting and fulfilling. When you have a job you make Hourly which is being paid for the number of hours you work. A Salary is your pay based on contract. As a kid and a teenager you are always thinking about what you want to become when you grow up, and that idea is always changing, but when you get older you
have to actually start thinking about what you want to do as an adult whether it be a job or career. When deciding what you want to be take you Standard of Living and Costs of Living into consideration. Standard of Living is how much wealth, material goods, and necessities are in an area. Costs of Living are the costs of goods/services thought to be essential. Basically you want to think about what you want to have later in life and find a job or career that will allow you to reach those goals or dreams.
Chapter 2 Types of Insurance People get insurance on all types of things. Insurance is used as a safety net for when bad things happen. Say you get into a car crash, you would be ok because you have car insurance. There are 5 main types of insurance; -Automobile -Health -Life -Disability -Homeowners/Renters Automobile insurance is an arrangement between an individual and insurer to protect the individual against risk from automobile accidents. There are four types of automobile insurance;
-Liability Insurance -Medical payment Insurance -Uninsured or underinsured motorists Insurance -Physical Damage Insurance Liability insurance covers the insured if injuries or damages are caused to other people or their property. Medical Payment insurance covers injuries sustained by the driver of the insured vehicle or any passenger regardless of fault. Uninsured motorists insurance cover injury or damage to the driver, passengers or the vehicle cause by a driver with insufficient insurance. Physical damage insurance covers damages caused to the vehicle.
Chapter 3 Understanding Your Credit Score And Selecting a Credit Card Credit cards can be a very good thing or a very bad thing in your life. But before you can get a credit card you first must learn about and understand your credit score, and where you stand financially. In order to apply for a credit card you have to request a Credit Report which is a report of a consumer’s credit history. Note you will not be able to get a credit report if you have not previously used credit. Let’s assume you have. On a credit report, is information about you. Things such as Name, Current and past addresses, marital status, date of birth, employment history, public records, criminal record. The best thing you can do to have an excellent credit report is to have excellent credit. Meaning not going over your monthly limit and, paying your credit card bill on time and in full every month. Once you have good credit you can apply for a credit card. You file for a credit inquiry which is a request for your credit. Note; this can be done by business you apply to for credit or whom pre-approve you for credit. Then you get to the point where you have to select a credit card.
There are all types of credit cards you can get. You can get Bank Credit cards, Retail Credit Cards, Rewards Cars, Prestige Cards, and Affinity Cards. As an adult you must know how to use a credit card properly. Only use a card when there is no doubt about ability to pay off the charges at the end of the billing cycle. Record all expenses and keep receipts. Check credit statements for errors. Always pay off balance completely and timely. Also being safe is super important too, make sure card with signature, do not leave cards lying around, close unused accounts in writing and by phone then cut up the card, and finally do not give out account number unless making purchases.
Chapter 4 The Stock Market and Investing When investing in the stock market you buy shares of a certain company. A share is a single piece of a certain company. As soon as you buy a share you become a shareholder which is an individual who owns a piece of a company. There are two types of trading corporations. Private Corporation which is not publically traded, and only select individuals are permitted to buy shares. Then there are Public Corporations which sell their shares openly to anyone on the market. Generally people make money off the stock makeyt in one of three ways ways. Capital Gain which is profit from a sale of an asset such as stocks, bonds or real estate. On the flip side there is
On the flip side there is Capital Loss which is selling on an investment for less than its purchase price. Lastly there is Dividend which is a sum of money paid regularly by a company by its shareholders. When investing or buying stocks of a company it is either a good time to buy shares or a bad time. When it is a good time to buy shares it’s called Bull Market which occurs when investors are optimistic about the economy and buy a ton of stocks. When it’s a bad time to buy stocks it’s called Bear Market which occurs when investors are pessimistic about the economy and sell their stocks. When looking for stocks to invest in depending on what you are looking to invest in there are Blue Chip Stocks which are safe investments that attract conservative investors, Income Stocks which pay higher than average dividend compared to other stock issues, and then there are Growth Stocks which are stocks issued by a corporation whose potential earning may be higher than the average earnings predicted if the company in that country. Unfortunately, like all good things; there are risks. Which include Inflation which is the rising of prices over time. Interest Rate which is a fixed rate of return. Business Failure which is when a company you have invested in goes under and you lose all the money you invested into that company. There’s Financial Market which are prices of the market that go up and down and if they fall you could lose money potentially. Then there are Global Investments which are investments that are usually low risk.
Chapter 5 Checking Accounts And Endorsing a Check When you get a paycheck from a job it either goes right into your account or you cash the paycheck. But before you can cash the check you have to endorse the check first. Endorsement is your signature on the back of a check to approve it to be deposited or cashed. Endorsements come in 4 different styles -Blank Endorsement which means anyone can cash or deposit a check after it has been signed. -Restrictive Endorsement which allows the check to only be deposited. -Mobile Endorsement allows the check to only be deposited using the bank app on a mobile phone. -Special Endorsement which allows the check to be transferred to a second party. Completing a deposit slip is an important things to know how to do, why and when to do it. Deposit slips contain account holders account number and allows money to be deposited into correct account. You should use the back of a deposit slip for the total amount for all checks. Sign a deposit slip only when you are taking money out of your deposit.
On a deposit slip you should always fill out the date, the amount of cash you are depositing, the checks you are depositing, total from the other side, subtotal, less cash received, and the Total. Be careful and check your account balance often to eliminate the risk of bouncing a check which happens when a person tries to deposit a check, but does not process because the writer has insufficient funds. Check Terms Overdraft- A deficit in a bank account caused by drawing more money than the account holds.
Chapter 6 Calculating Interest Money Vocab -Time Value of Money- How long it takes for you money to grow over time. Interest-Money that a person/institution receives for lending money. Fixed Interest- A rate that is locked in or a rate that does not change. Variable Interest- A rate that does not change. In order to calculate interest you have to use a formula. The formula uses Principle which is the amount put into the bank or the amount borrowed from the bank. The Rate or the percent and Time, how many years the money is in the savings account at the bank or how many years it will take you to pay back the loan.
There are two types of interest that can be calculated using principle, rate, and time. First there is Simple Interest (I=PxRxT). Then there is Compound Interest which is basically earning interest on interest. For the compound interest equation a couple new variables are introduced. We still have Principle Rate Time Number of times compounded per year Amount The equation is A = P (1 + r/n) ^ nt: Annual Percentage Yield (APY) - The amount of interest you will earn annually. Annual Percentage Rate (APR) - The amount of interest you will pay annually. Maturity Value is the total amount saved or the total amount due. (MV=I+P)