Economists say millenials will have to work until 73 (not 67) and many will have to work well into retirement. What if you don’t want to do either of those things—what can you do about it now and in your early 20s?
How to minimize risk in the stock market:
Be highly diversified.
Know your tolerance for risk (if high tolerance, be heavy in stocks. If low tolerance for risk, be heavier in bonds and cash.
With low tolerance for risk, you will need to save more money monthly over the years to meet your long term financial goals like retirement.
As your financial goal comes near, you will want to reallocate your assets within your portfolio away from riskier (but higher returning) stocks and into safer but lower returning bonds and “cash” (money markets, CDS).
Time Horizons:
10+ years = Long term goal (be heavy in stocks, light in “cash” (money markets, CDs)
5 – 10 years = Medium term
0 – 5 years = Short Term (take few risks; be light in stocks and heavy in bonds and “cash”)
Government Budget: Tax Revenue – Government Spending = Deficit
These will be on the test--I advise you to do this before the test. When you click on these, on the far right will be a list of more bullet points/links that relate to the topic. These will help you on the test!!! All of this was discussed in class. This will reenforce what we've learned in class.
Click on the Getting Started button and read the main article and then all the articles/links to the right
Click on the Starting to Invest button and read the main article and then all those articles/links to the right.
Click on the Retirement Planning button and read (a) retirement planning (b) 401ks (c) IRAs (no estate planning!). read the links to the right
10/07/201911/22/2019
Please print this vocabulary sheet and bring it with you to class every day during the personal finance unit.
Vocab Personal Finance
10/07/201911/22/2019
Print this--you should be able to answer all of these Qs. If you can, you will get 100% on the tests.
Review Qs personal finance
10/07/201911/21/2019
Please print the first 3 pages of this and study/bring to class daily.
4. What is an Exchange Traded Fund or ETF? Define it
5. What is the biggest advantage to owning an ETF rather than an individual company stock?
6. What are the advantages to owning an ETF over a mutual fund?
7. What are 3 disadvantages to owning an ETF over a mutual fund?
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Reallocating your mix of stocks and bonds as your financial goal (retirement) comes near.
Please click on the link below. It is the 2065 Vanguard Target Date Fund. These funds reallocate your assets for you as your financial goal comes nearer. You will be clicking on the marker on the graph near the bottom of the page and dragging it to the right to see the cnanged mix of stocks, bonds, and cash as you get older.
Then look closely at the diagram with the percentages of stocks and bonds in one's portfolio as their retirement comes nearer.
Answer the following questions all from the link above.
8. Click on Fees and Minimums. What is the yearly expense/fees? Reading the first paragraph below, what is the industry average fee and how does Vanguard's compare?
9. Click on Holdings and Management. What are the full names of the 4 mutual funds this Target Date Fund has.
10. What percent of the 2065 Target Date Fund is currently invested in stock funds? Bond Funds? Money market funds?
11. Near the bottom of the vanguard 2065 Target Date Fund webpage is a colorful graph with a slider (glide path) that you can click on and drag to the right (use your computer, not your phone).
a. Drag the slider to the right unti you are 40 years from retirement. What percent are they holding in Stocks, bonds, cash?
b. Drag the slider to the right unti you are 20 years from retirement. What percent are they holding in Stocks, bonds, cash?
c. Drag the slider to the right unti you are 10 years from retirement. What percent are they holding in Stocks, bonds, cash?
d. Drag the slider to the right unti you are 5 years from retirement. What percent are they holding in Stocks, bonds, cash?
e. Drag the slider to the right unti you are 40 at retirement. What percent are they holding in Stocks, bonds, cash?
f. Drag the slider to the right unti you are +5 years into retirement (in otherwords, you are already retired 5 years). What percent are they holding in Stocks, bonds, cash?
g. Why does Vanguard, 5 years into retirement, still have you holding 34% stocks?
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12. Using the link below, Index funds vs actively managed funds
Define Index Fund. Passive investing vs actively managed funds. What are main reasons index funds are better than actively managed funds for the average investor?
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13. Asset Allocation. Using the link below. Watch the short video as well.
why is asset allocation important? How does it work? what assets should you have in your 20s? What assets should you have at 67 when you retire?
11/04/201911/14/2019
READ ONLY! THIS INFO IS ON THE TEST. NO OUTLINE IS DUE--JUST READ/LEARN!!!
Long Term investing, stock splits, dividend reinvestment
Warren Buffett Tells You How to Turn $40 Into $10 Million By Patrick Morris; Motley Fool
Warren Buffett is perhaps the greatest investor of all time, and he has a simple solution that could help an individual turn $40 into $10 million.
A few years ago, Berkshire Hathaway CEO and Chairman Warren Buffett spoke about one of his favorite companies, Coca-Cola, and how after dividends, stock splits, and patient reinvestment, someone who bought just $40 worth of the company's stock when it went public in 1919 would now have more than $5 million.
Yet in April 2012, when the board of directors proposed a stock split of the beloved soft-drink manufacturer, that figure was updated and the company noted that original $40 would now be worth $9.8 million. A little back-of-the-envelope math of the total return of Coke since May 2012 would mean that $9.8 million is now worth about $10.8 million.
The power of patience
I know that $40 in 1919 is very different from $40 today. However, even after factoring for inflation, it turns out to be $540 in today's money. Put differently, would you rather have an Xbox One, or almost $11 million?
But the thing is, it isn't even as though an investment in Coca-Cola was a no-brainer at that point, or in the near century since then. Sugar prices were rising. World War I had just ended a year prior. The Great Depression happened a few years later. World War II resulted in sugar rationing. And there have been countless other things over the past 100 years that would cause someone to question whether their money should be in stocks, much less one of a consumer-goods company like Coca-Cola.
The dangers of timing
Yet as Buffett has noted continually, it's terribly dangerous to attempt to time the market:
"With a wonderful business, you can figure out what will happen; you can't figure out when it will happen. You don't want to focus on when, you want to focus on what. If you're right about what, you don't have to worry about when"
So often investors are told they must attempt to time the market, and begin investing when the market is on the rise, and sell when the market is falling.
This type of technical analysis of watching stock movements and buying based on how the prices fluctuate over 200-day moving averages or other seemingly arbitrary fluctuations often receives a lot of media attention, but it has been proved to simply be no better than random chance.
Investing for the long term
Individuals need to see that investing is not like placing a wager on the 49ers to cover the spread against the Cowboys, but instead it's buying a tangible piece of a business.
It is absolutely important to understand the relative price you are paying for that business, but what isn't important is attempting to understand whether you're buying in at the "right time," as that is so often just an arbitrary imagination.
In Buffett's own words, "if you're right about the business, you'll make a lot of money," so don't bother about attempting to buy stocks based on how their stock charts have looked over the past 200 days. Instead always remember that "it's far better to buy a wonderful company at a fair price."
I will be going over these notes the 2 days before the fill in the blank test. Print them and read them. Bring them to class. Feel free to shrink the font size to reduce pages printed.
Answer these 12 math questions. Number them 1-12. Skip lines between them Be sure to show math and write formulas. On Qs 6-12, show the amount of money earned from each investment listed in the question, then subract the state and federal taxes out (remember CA just takes this person's income taxes out for each investment), then show the after tax return (so 3 numbers per question).
Please read this article (don't print it). Then make a one page list of things this couple is doing financially wrong and what they should do to correct the problem. Please add your own advice to them as well. (click on the link below or just read it from this page).
MONEY MAKEOVER: Before the wedding, couple need to cut debts and stop overspending. A financial advisor tells the Pico Rivera residents to postpone their wedding until they can pay for it without going deeper into debt.
To hear Sam Brown and Briana Biddle talk about it, their upcoming wedding and civil commitment will be a fairy tale, complete with happily ever after.
But fairy tales can turn dark pretty quickly, and a look at the couple's finances shows that the poisoned apple in this story could be money.
Let's start with the wedding: Briana has a $986 wedding dress and a $2,600 engagement ring, both bought on credit. Then there are older debts: a $20,000 time share on which Biddle is not making payments and $17,000 in student loans for Brown, among others.
To the rescue rides financial planner Alfred McIntosh, who has agreed to look at the couple's finances.
Except here's where the fairy tale skids into reality: If the couple, who together earn about $79,000, don't clean up their finances, happily ever after is going to be awfully hard to reach.
"This situation requires change from both of you, quite honestly," McIntosh, founder of McIntosh Capital Advisors in Los Angeles, told them when he met with them this month.
Biddle, 28, and Brown, 27, met four years ago as students at Cal State Northridge and fell in love last year. They share a Pico Rivera apartment with an affectionate, high-energy pack of three small dogs and a cat.
Like many young people, they're learning the hard way about managing their money -- by overspending, underestimating how much income they need and generally getting in over their heads. Now, they say, it's time to get out of debt and set realistic goals for saving and spending money.
Brown earns an annual salary of $45,000 from a nonprofit social services agency where he counsels troubled children to help them stay with their families. He is working toward his license as a therapist. Biddle makes $34,000 a year from the Greater Los Angeles Agency on Deafness, where she advocates for deaf people who are looking for jobs. It's exhausting work for both of them.
"I don't know how he does what he does every day," Biddle said of Sam’s job. "I get just one case of discrimination against a deaf person, and I'm destroyed."
Brown has saved $2,200 in a retirement account, and they have $57 in their joint savings account. But their balance sheet is dominated by debt.
Biddle carries about $11,250 in debt on two credit cards, at interest rates of 25% and 30%, and $553 in a line of credit associated with her checking account. Brown carries about $1,450 on one card at a 7.23% interest rate.
They're racking up 45.2% interest on the credit line they took out to buy the engagement ring because they stopped making payments and the rate jumped. And they owe $3,000 on two more credit cards that they hold together.
Brown also has $17,000 in student loans at 2.48% and a $21,000 car loan at 4.99%.
It was during the discussion of debt that the meeting with the financial planner became tense. With a hollow look on her face, Biddle confessed that she hadn't been completely straightforward about her debts and spending.
Brown became upset. "I'm bitter now," Brown said, "because I've done everything I was supposed to do financially and she didn't."
McIntosh slipped into his therapist role. "Since you don't like letting him down," he told Biddle, "and you want to do better at this, you have one choice: to get better at this."
All that debt -- and its continued accumulation -- is the most pressing problem and the first thing the couple need to address, McIntosh said. "Stop using those cards," he told them.
Brown and Biddle can start taking responsibility for their finances by holding weekly meetings. To start each one, each should share the progress they have made that week on financial issues. Then they should discuss ongoing challenges. The meetings could end, he added, with a discussion of their goals for the coming week.
He praised them for coming in to see him now, more than a year before their planned wedding. "They need to be on the same page if this marriage is going to work," he said.
Right now, their financial goals are somewhat different: Biddle wants to get a master's degree in education. Brown wants to buy a house.
They need to talk about priorities, McIntosh said. But neither of those goals will be attainable if they don't get their finances under control. Both have spending issues that are sending them into debt at more than $800 a month.
Please click on the link above and print it. Please bring it to class.
10/16/201910/24/2019
Please print the following article (either click on link or print the article that's below the link). Then highlight the key points and then list all 20 things one can do to set themselves onto the path to a comfortable retirement. After each of the 20 bulletpoints, write a sentence or two explaining the bullet point.
20 Easy Things That Will Make You the Next Millionaire 10/5/14
Here's everything you need to know in order to make your first million.
While you may be looking to make your first million off of your business alone, the fact of the matter is that becoming a millionaire does not just come about by raking in profits from your business. It arises from the decisions that you make in your day-to-day life as well. There are more millionaires than ever nowadays, and it's not because the financial market is good; in fact, it is pretty common knowledge that the economy has definitely seen better days, and the people able to find success in it know how to act accordingly. To become the next millionaire, you will need to blend business practices with responsible financial decisions in order to both maximize profits and squirrel away some cash for the winter. Even though this is easier said than done, the things that you have to do to become the next millionaire are theoretically fairly easy.
Buy The Things That You Need
Even though one of the reasons people strive to become millionaires is to be able to afford the things that they want to do, living in a house far too big for your needs or shelling out on a vehicle more luxurious than you require is going to set you back in your goals.
Spend Less Than You Earn
This is saving money and accruing wealth 101, but even old advice can be good advice, and such is the case with this.
Make Sure That You Can Pay Off the Things That You Buy
And the quicker you can pay them off, the better! This will enable you to search for a job that you love and will therefore be more conducive to putting you closer to your goals.
Exercising Patience
It may be really tempting to up your quality of living or your lifestyle expectations as you begin accruing more money and assets to make you into a millionaire, but you will not reach your goal by taking some out of the pot.
Utilize Automatic Paycheck Deductions
You cannot spend what you do not have, so having these set up with your bank is going to help you save money better than many other tactics will.
Pay Off Your Credit Cards Every Month
Having a good credit score is always a strong financial situation to be in, but making sure that you can afford what you are spending is even better when you are trying to become a millionaire.
Use Time to Your Advantage
The quicker you start saving, the better. If you begin saving in your twenties or thirties, you will be able to take advantage of compounding interest and put yourself in a better position without having to do much extra work.
Realize That Money Doesn't Buy Happiness
When you are working for a wholesome goal instead of a ploy to satisfy material urges, your goals will come to you faster and easier.
Realize That 'Life Happens'
Having a bit of money on the side separate from your millionaire fund will keep you on a steady track toward that goal; after all, you never know when a financial emergency will rear its ugly head.
Focus on Being Debt Free
Even if you have income coming in every month, if you have any sort of debt, you need to be deducting that from your gain--if it comes out negative, you are not financially free, and will not be able to achieve your millionaire dreams yet. In order to be the next millionaire, you have to make sure that your debts are all paid.
Work Hard And Diligently
If you keep putting in the effort, it will be easier to make amends after a financial mishap.
Get a Second Job
Not only will it add to your savings that much faster, but also if you stay busy you will have no time to spend the money that you are trying to save.
Don't Be Afraid to Have a Big Vision
Most modest savings plans do not end up panning out as the people who made them would have liked. Having a vision larger than what you can currently deliver will actually be the best way to ensure that you meet your goal.
Have Good Money Management Skills
Keep up to date on what you need to know to manage your money, and realize that without good management, it will never grow or mature into what you would like it to be.
Do What You Enjoy
Working in a field you enjoy will be one of the fastest routes to financial freedom and success, as you will spend more time at work and excel at it, putting you in a better position for promotions and pay increases.
Pay Yourself First
This will keep you satisfied and will help you achieve financial success with your goals.
Go Out And Find Your Money
Simply saving and hoping that it will come to you will never be good enough. You will only receive what you earn.
Invest in Yourself
Without furthering your education or professional development, there will be nothing to set you apart from others, and no reason for your employer to aid you in your goals.
Invest in Property When You Do Buy Assets
Having property on hand is always going to be a good asset, as there are always buyers for property and property values are beginning to climb again, healing from the collapse in 2008.
Realize That There Is More Than One Way to Approach a Problem
Being versatile will lead you quickest to the solutions for your problems.
There's certainly no surefire way to becoming a millionaire. After all, if there was, everyone would be making millions. However, if you manage to blend the right business practices with solid personal finance skills, there's no telling where you'll end up. Follow these 20 guidelines, and you, too, can become the next millionaire.
10/11/201910/17/2019
Please print all of the information listed below. Please read and highlight all of it.
Then number and explain in your own words 7 of the following concepts and how they could save you money while in your early 20s and for the rest of your life. Which of these make sense to you. I will collect your highlighted printout, your explanation of the 3 concepts below, and your 7 explanations. (If you're having trouble printing the assignment below, click on the hyperlink after this sentence for a word document of the same assignment. Savings and Personal Budgeting
Also, Explain the 3 following statements:
1. "pay yourself first" for your major financial goals
2. Put off a little consumption today for tomorrow's well-being
3. Opportunity Cost
(So I will be collecting 10 numbered items (7 from article and the 3 definitions here. Please number them and skip lines between numbers 1-10)
10 (more) Reasons Youre Not Rich
Many people assume they aren't rich because they don't earn enough money. If I only earned a little more, I could save and invest better, they say. The problem with that theory is they were probably making exactly the same argument before their last several raises. Becoming a millionaire has less to do with how much you make, it's how you treat money in your daily life. The list of reasons you may not be rich doesn't end at 10. Caring what your neighbors think, not being patient, having bad habits, not having goals, not being prepared, trying to make a quick buck, relying on others to handle your money, investing in things you don't understand, being financially afraid and ignoring your finances. Here are 10 more possible reasons you aren't rich:
1. You care what your car looks like: A car is a means of transportation to get from one place to another, but many people don't view it that way. Instead, they consider it a reflection of themselves and spend money every two years or so to impress others instead of driving the car for its entire useful life and investing the money saved.
2. You feel entitlement: If you believe you deserve to live a certain lifestyle, have certain things and spend a certain amount before you have earned to live that way, you will have to borrow money. That large chunk of debt will keep you from building wealth.
3. You lack diversification: There is a reason one of the oldest pieces of financial advice is to not keep all your eggs in a single basket. Having a diversified investment portfolio makes it much less likely that wealth will suddenly disappear.
4. You started too late: The magic of compound interest works best over long periods of time. If you find you're always saying there will be time to save and invest in a couple more years, you'll wake up one day to find retirement is just around the corner and there is still nothing in your retirement account.
5. You don't do what you enjoy: While your job doesn't necessarily need to be your dream job, you need to enjoy it. If you choose a job you don't like just for the money, you'll likely spend all that extra cash trying to relieve the stress of doing work you hate.
6. You don't like to learn: You may have assumed that once you graduated from college, there was no need to study or learn. That attitude might be enough to get you your first job or keep you employed, but it will never make you rich. A willingness to learn to improve your career and finances are essential if you want to eventually become wealthy.
7. You buy things you don't use: Take a look around your house, in the closets, basement, attic and garage and see if there are a lot of things you haven't used in the past year. If there are, chances are that all those things you purchased were wasted money that could have been used to increase your net worth.
8. You don't understand value: You buy things for any number of reasons besides the value that the purchase brings to you. This is not limited to those who feel the need to buy the most expensive items, but can also apply to those who always purchase the cheapest goods. Rarely are either the best value, and it's only when you learn to purchase good value that you have money left over to invest for your future.
9. Your house is too big: When you buy a house that is bigger than you can afford or need, you end up spending extra money on longer debt payments, increased taxes, higher upkeep and more things to fill it. Some people will try to argue that the increased value of the house makes it a good investment, but the truth is that unless you are willing to downgrade your living standards, which most people are not, it will never be a liquid asset or money that you can ever use and enjoy.
10. You fail to take advantage of opportunities: There has probably been more than one occasion where you heard about someone who has made it big and thought to yourself, "I could have thought of that." There are plenty of opportunities if you have the will and determination to keep your eyes open.
It's time to make adjustments to your daily spending. Alan Greenspan, the former Federal Reserve chairman, said last weekend on ABC This Week that this is the worst economy he has ever seen and the decline "still has a way to go." Things will get worse before they get better, so make adjustments to your finances. When it comes to saving money and getting your personal finances in order, it's often little changes that can add up to big savings. (However, you can also save a lot of money quickly the hard way. Here are some simple daily changes that you can make right now:
Get up an hour earlier. Many costs you incur on a daily basis stem from disorganization. If you are rushing out the door, you're going to end up forgetting something that will cost you. Rising earlier in the morning will mean you have enough time to do everything that needs to be done properly.
Use less. Once you get up in the morning, you head to the bathroom to get ready for the day. You likely use a lot of health-care products such as toothpaste, mouthwash, soap, shampoo, conditioner and deodorant, to name just a few. Chances are you use a lot more than you really need to. Commercials encourage consumption because companies make more money if you buy another bottle, tube or container of their product. Try using half (or less) and find the least amount that still gets the job done. If you pay half as much for all your products, you will save several hundred dollars a year at a minimum.
Time your shower. As the weather gets colder, it can be tempting to take longer showers to get warm. Set a timer just outside the shower to go off after 10 minutes. That saves energy and water.
Make your own breakfast. One of the reasons you should get up earlier is to make your own breakfast. Eating a healthy meal at home before you take off to work will be better for your energy level and stamina for the day and cost you a lot less than picking something up. Another alternative is to bring fruit and a breakfast bar with you, which will still be faster than buying something on the way to work, but also healthier and cheaper.
Brew your own coffee. Skip the Starbucks and make your own coffee at home. If you don't like to do a lot of things in the morning, it can be a wise investment to purchase a coffee maker with an automatic timer. You can set it the night before when you go to bed and enjoy your coffee as soon as you get up. Make extra and pour it into a thermos for work.
Turn off phantoms. One big energy drain many people still don't realize they pay for is phantom electricity. Most electronics use energy even when they are turned off so that the clock on the device still tells time and it can instantly turn on when you use the remote. Purchase power strips, plug all your appliances into them and switch them off when you leave the house for work. This will keep these appliances from costing you money when you aren't at home.
Change your commute. There are a number of ways you can save money on your commute to work. No matter what type of gas mileage your vehicle gets, you can save money by leaving earlier to miss rush-hour traffic and even improve career prospects. Work with your boss on when you can leave so you can also miss rush hour going home. (drive the more gas efficient car around town on weekends to run errands).
Keep a snack stash. If you frequent the vending machine at work, keep a snack stash in your desk. This will allow you to have healthier snacks and drinks. But you can also bring into work the same junk food that's in the vending machines and save money.
Prepare your own meals. While it may be tempting to eat out for lunch or pick up something on the way home from work, cooking your own meals at home will trim your food costs by a significant amount. Make sure to cook extra so you can take the leftovers to work the next day, meaning you won't have to prepare something in the morning. If you don't have enough leftovers for lunch, make your lunch in the evening.
10/11/201910/15/2019
Please click on the following link and or just print the 2 articles.
Highlight the key points in both articles.
Then, on a single sheet of paper, write a minimum of a 3/4 page summary for each article(ie, 3/4 page summary on the front of your paper; the 2nd 3/4 page summary for the 2nd article on the back). If that link is not working, feel free to copy/paste the text/articles that are right here at the bottom of this page.
Getting Rich in America: Follow Grandma's Advice to Save, Sacrifice (Article 1 of 2) Authors say keys to wealth are simple: Work hard, resist temptation and sock away the savings.
It was a defining moment. Richard McKenzie was in the seventh grade when a teacher turned to him and said, "Dickie, it will be you, not circumstances, that determine how far you go in life." Today McKenzie is a college professor, author and self-made millionaire. None of which would be surprising to those who didn't know that he grew up in the least desirable of circumstances. A child of two alcoholic parents, he was sent to an orphanage at age 10 after his mother's suicide. By then, he was a budding delinquent--a shoplifter, a discipline problem, a "child of the streets." A high school guidance counselor suggested that McKenzie look into trucking. He didn't have the intellect or the aptitude for college, the counselor told him.
But McKenzie preferred to think about the advice from that seventh-grade teacher. So, despite his shortcomings, he went to college and on to graduate school--and made himself a fortune. In retrospect, the experience was the foundation for his latest book, "Getting Rich in America: 8 Simple Rules for Building a Fortune and a Satisfying Life" (Harper Business 1999), co-written with University of Georgia economist Dwight R. Lee. "From my standpoint, the intent is to say: 'You can do it. It doesn't matter what your background is. Don't listen to the naysayers,' " says McKenzie. "In fact, it's relatively easy."
Lee, whose childhood was happy and middle-class, had a different reason for writing the book. He wants people to know that they've got the whole "wealth and happiness" thing backward. "Most people want to get rich so that they can have a good life. But, if anything, things work the opposite," Lee says. "If you lead a good life--a responsible life--and put in productive effort, then you'll get rich." Lee says the idea for the book hit him when he was asked to give a last-minute speech at an economics conference. He'd been giving these talks for years, telling students and other economists about what made nations wealthy, he says. But suddenly it struck him that the topic was boring. "It occurred to me that most people couldn't care less about how countries get rich. They want to know how they can get rich," he says. The keys to wealth are largely the same everywhere.
They are also exceptionally simple. McKenzie and Lee acknowledge that they're spouting advice your grandmother might have given you. Study. Work hard. Be honest, forthright, faithful and a little frugal. (Two of their eight rules: Get married and stay married, and "resist temptation.")
In fact, McKenzie and Lee's book is the latest in a series of financial tomes--starting with the best-selling "The Millionaire Next Door"--that show how ordinary people can accumulate extraordinary wealth in ordinary ways. Becoming wealthy in America is a choice, McKenzie says. If you choose to work hard, save prodigiously and invest for the long haul, you're likely to wake up one day with more money than you could have imagined possible.
"The opportunities that are currently available in this country should be considered a form of wealth," he says. "The task of the average American is to simply convert the opportunities to money." Or, as Ron Jones, owner of a Plano, Texas, janitorial service says in the book: "If you want your prayers answered, get off your knees and hustle."
Of course, the biggest key to becoming wealthy is to save some of the money you earn from all that hard work. To make saving easier, Lee and McKenzie rattle through a series of examples designed to show how making small sacrifices--and saving the money involved--can result in a fortune over time. Consider tennis shoes. Often, teenagers insist on the latest fashion-forward sneakers at $165 a pair. However, if you resist the temptation, settling for a functional $40 pair instead, you could amass an extra $73,745 in your retirement account by saving the difference. (That assumes you need two pairs of sneakers a year for five years, earn 8% on your savings and retire at age 67.)
Cut back on alcohol, soft drinks and junk food by just $1.50 a day when you're age 18, and you'll boost your retirement savings by $290,363. Or start clipping coupons at age 25, saving an average of $5 a week, and by retirement you'll have $85,692 in the coupon account. "You don't have to live the life of a monk," Lee says. "But recognize that if you can make some fairly minor sacrifices and earn a reasonable return on your money, it's easy to become rich."
Article 2:
Wealth More Issue of Choice Than Chance (article 2 of 2)
Finance: Study says consistent saving is best path to security, but questions if tax system penalizes the frugal.
Old-fashioned saving seems a bit out of date--quaint, s-o-o-o 20th century. And the flip side is that many families may figure that unless they can pick the next Apple stock, there isn't much hope of achieving such goals as a comfortable retirement. But a recently published study of the lifetime earnings and current wealth of a large number of American fifty-somethings concludes that neither of these views is correct.
Saving does work, the study found, and the most important factor in long-term wealth accumulation is the act of saving itself. Getting into the game at all is far more important than how you play it. In fact, the data indicate that many households with relatively low lifetime earnings manage to accumulate six-digit nest eggs. And while higher-income families generally accumulate more by retirement age than do those that are less well-off, the study found that there is wide variation in wealth among families with similar earnings.
"It's clear that some people with low incomes do save relatively large amounts and that some people with high incomes don't," one of the study's authors, David Wise, a professor at Harvard's Kennedy School, said last week. In reaching this conclusion, the study also raises what is already one of the hot-button issues of this year's presidential campaign: To what extent does the current federal tax system--including income taxes and estate taxes--penalize the frugal, no matter their income level, while rewarding the prodigal?
After examining the role of chance factors, such as poor health on the downside or a windfall inheritance on the upside, and the role of investment choices, such as stocks versus bank accounts, "We conclude that the bulk of" the variation in wealth among families with similar earnings histories "results from the choice of some families to save while other similarly situated families choose to spend," Wise and co-author Steven Venti of Dartmouth College wrote in their study.
Chance factors and investment choices play a much more modest role, they found. The findings come at what may be a pivotal time for the future well-being of American families. First, the future of Social Security is uncertain, both as to the system's ability to continue benefits at today's levels and as to what remedy might be adopted to deal with possible shortfalls. Second, private pensions are increasingly shifting to plans such as the 401(k), whose benefits depend on the worker's own investment success. Traditional gold-watch pensions, with funds invested by the employer and guaranteed by the government, are becoming less common. And third, the nation's savings rate is low, with personal annual savings rates down to 4%, sometimes even in negative territory, depending on whose figures you use.
Policymakers so far have been reluctant to tackle the saving issue in more than a marginal way. There are a number of proposals to boost individual retirement accounts and 401(k)-type retirement savings plans, and to allow or compel workers to invest at least a portion of their Social Security taxes in the private marketplace. But there is clear reluctance to face the core issue here: To what extent do we wish to be a society in which people manage their own finances, keeping the winnings and living with the consequences of failure, and to what extent do we wish to penalize the winners to repay the losers? Historically, the United States has tended to regard its social programs, public and private, as a form of insurance--a mechanism that helps people deal with difficulties encountered through no fault of their own. But in recent years, this model has come into question. In many circumstances, the payers/savers have begun to wonder if they are being taken advantage of by people who don't save.
An example that middle-class families can identify with is college financial aid. Initially meant to assist the deserving poor, aid programs have been expanded to help the middle class as costs soared beyond many families' reach. But the formulas in these programs tend to penalize the family that watched its spending, denied itself luxuries and saved for college, while providing more generous assistance to those that spent all their income and then threw themselves on the mercy of the financial-aid office. Wise and Venti believe that current tax policies do somewhat the same thing by penalizing savers. They note that people who are highly successful in saving over a lifetime face higher taxes on Social Security benefits, they may be forced to liquidate their assets to qualify for nursing-home care under Medicaid (the Medicaid "spend down"), and "pension assets left as a bequest can be virtually confiscated through the tax system."
"The issue raised here is not about progressive taxation, but rather about the differences in tax imposed on persons who spend tomorrow versus today, given the same after-tax lifetime earnings," they wrote. In their view, current policy is implicitly based on the assumption that wide disparities in wealth are largely the result of chance, and that taxing those who succeed to help those who fail is therefore neither unjust nor a disincentive to saving. (should we tax consumption more and savings less? Savings is taxed the same as income).
But Wise and Venti conclude that in the aggregate, accumulation of wealth by wage earners is more a matter of choice than chance. And if that is true, then tax policies represent a specific penalty on virtuous behavior, much like the college-aid formula. "The evidence that differences in retirement wealth [are due] largely to saving choices [made when people are younger] brings into question this tendency" to tax such wealth, they conclude. "Although the distribution of the tax burden will inevitably be based on many factors, most observers believe that the extent to which older persons with more assets are taxed more should depend in part on how they acquired the assets. . . . Accumulation by choosing to consume less while young, while others chose to consume more while young, weighs against heavier taxes on those who accumulate assets for retirement," Wise and Venti said.
Besides food for thought about the policy issues of this and future elections, the paper also provides encouragement for Americans wondering about their economic futures. The findings indicate that with discipline and time, even moderate-income families can build up a meaningful cushion for retirement, and they can do it even if they aren't really good or really lucky investors. Obviously, choosing higher-return investments, such as stocks and stock mutual funds instead of bank certificates of deposit or money-market funds, will help. But the biggest difference is not between the stock pickers and bank depositors--it's between those who save and those who don't.
10/03/201910/11/2019
Please read this article and give me a 1 page summary. This is an important article for your future.
The young and the riskless shun the market, Money Magazine, Jan 6, by Hibah Yousuf and Penelope Wang
(MONEY Magazine) -- During the years B.C. -- that is, Before the Crash (September 2008) -- Caroline Chesnutt was the very model of a modern young investor. She started early, at age 24, socking away money in both a taxable account (where she focused on individual companies like Starbucks and Wal-Mart) and a Roth IRA (holding two stock funds). Sure, being 100% in equities was aggressive, but not out of line for her age, and she enjoyed trading several times a month.
Then, in 2008, the bottom fell out of the market. Though her taxable account was unscathed (fortunately she'd sold her shares shortly before to free up cash to buy new stocks), her Roth plummeted 55% by year-end. Chesnutt quickly closed the trading account and later cashed out the Roth, moving most of her money to two savings accounts (except for a mandatory 401(k) that her employer invests in a target-date fund). "I don't want anything to do with stocks," declares Chesnutt, now 30 and a nurse at Vanderbilt University Medical Center in Nashville. "Watching so many people lose all their savings was life altering."
The young and the riskless: shunning the market:Once bitten, forever shy? That seems to be the new mantra for a growing number of twenty- and thirty-somethings who came of age during the so-called Lost Decade. Like Caroline Chesnutt, they've become skittish about -- and in some cases, even repulsed by -- the idea of investing in stocks. Today only 34% of people under age 35 say they're willing to take substantial or above-average risks in their portfolios, down from 48% in 2005.
Meanwhile, a recent survey of affluent investors by Merrill Lynch found that more than half of those 34 and younger described their risk tolerance as low -- a far greater percentage than the 35- to 64-year-olds who describe themselves that way, even though those older investors have a lot less time to recover from market setbacks. In fact, a new study from MFS Investment Management found these younger investors to be more gun-shy about stocks than any other age group, with 35% agreeing with the statement "After what's happened in the markets the past few years, I'll never feel comfortable investing in the stock market."
0:00 /3:56How to invest in 2011
The consequence, many experts fear, is that these young adults, mired for a lifetime in low- to no-growth investments, won't amass enough savings to see them comfortably through retirement -- let alone buy a house, put their kids through college, and enjoy a few of life's pleasures along the way.
That's especially true given the challenges this generation faces: They probably won't have pensions and will get reduced Social Security benefits [and will face higher taxes], yet they'll have to make their money last longer than their parents and grandparents did. "With medical breakthroughs, many of them will live beyond 100," says Yale School of Management professor Barry Nalebuff, co-author of Lifecycle Investing. "The only way younger investors will have enough assets to last them is to invest in stocks."
Of course, not every Gen Y-er is a wimp when it comes to investing, and it's possible that today's discomfort with stocks will yield to an exuberant embrace once a more robust recovery is under way and memories of the meltdown fade. Possible, yes -- but there's good reason to worry that this is more than a fleeting phenomenon.
"We're coming off a series of financial crises that hit this young generation at points in their lives where external events shape strong opinions," says Christopher Geczy, adjunct associate professor of finance at the University of Pennsylvania's Wharton School. The 2008 crash was just the seismic capper to a series of cataclysmic market events (the dotcom collapse, the real estate bust) that wiped out returns over an entire decade. Older investors can look back to earlier periods of sustained growth to reassure themselves that stocks are likely to deliver superior returns in the long run. But anyone who entered the market in the past several years has only known disappointment.
"We're a product of our early market experiences, which shape our personality and identity as investors," says psychologist Frank Murtha, managing director of the consulting firm MarketPsych. If the under-35 crowd turns out to be anything like the folks who came of age during the Great Depression, the current bias against stocks could be long lasting. A study last year examining the effects of major economic events on financial risk taking found that people who grew up in the 1930s were nearly three times less likely to invest in stocks than those who reached adulthood in better times.
And when they did invest, they put a smaller fraction of their money into the market. That held true well into their forties, 20 to 30 years after the Depression had ended. "Experiences have significant effects-- even decades after the fact," says Stanford finance professor Stefan Nagel, a co-author of the study.
The turbulent market of the past two years has definitely had a profound effect on Shawn Lakhani, 28, a once-avid investor who had about 75% of his savings in stocks before the crash. His portfolio now: 85% cash, 15% stocks. "To be an investor in today's roller-coaster market is a hard pill to swallow," says Lakhani, a business systems analyst in Yorba Linda, Calif. He plans to invest again eventually but can't bring himself to do it yet: "I'm waiting for a significant downturn or signs of stability before I get back in."
Unfortunately, the wait could prove costly. The greatest advantage that young investors possess is time: The effect of compounding earnings over long periods magnifies savings. The longer they delay, the less they benefit. Moreover, argue financial advisers like Chris Cordaro of Regent Atlantic Capital, young investors still have an opportunity to get in pretty cheaply -- stocks are trading more than 20% below their 2007 peak. "It's far more important to focus on buying when stock prices are low," Cordaro says, "than to rehash what's gone wrong over the past 10 years." (“Be greedy when others are fearful; be fearful when others are greedy.” Warren Buffet)
Understand the bigger danger: If you're a young investor trying to balance your desire for safety with your need for long-term growth -- or you're the parent or grandparent of one and are eager to offer advice -- the following strategies should help. Twenty-somethings are the least confident among all age groups that stocks are the best place for investment gains and the most likely to choose a bank CD over stocks for retirement savings, according to a new survey from Wells Fargo.0:00 /3:26How to protect your savings That's a smart strategy if you don't mind eating cat food in retirement but a recipe for disaster for just about everyone else.
Sure, losing money in the stock market is a risk. But the longer your time frame for investing, the weaker that risk becomes: There hasn't been a single 20-year rolling period since 1926 when stocks have lost money, and in most of them the returns on stocks have handily beaten those of bonds and cash investments, according to Ibbotson Associates.
The far bigger threat to your financial health is inflation, even at today's modest 1.2% annualized rate (as of 5/16, inflation is now 3.2%) . If prices continue to rise at that pace for the next 40 years, a $100,000 nest egg would be worth only $62,000 in today's dollars. And if inflation heats up to its historical average of 3%, as many forecasters expect, your $100,000 portfolio would be worth just $31,000 by 2051.
"Over the long run, inflation is still the biggest hurdle to affording a comfortable retirement," says planner Stuart Ritter of T. Rowe Price. Betting primarily on stocks, not bonds or cash, when you're in your twenties and thirties historically has been the best way to get ahead of inflation over the long run. While it's true that fixed-income returns have outpaced stocks over the past 10 years, those gains have been largely fueled by falling interest rates, which pushed up bond prices. That game appears to be over, says Tom Idzorek, Ibbotson's chief investment officer. Meanwhile, since World War II, only stocks have consistently outpaced rising prices by a wide margin, delivering inflation-adjusted returns of 5.8% a year, vs. 1.8% for bonds and 0.4% for cash.
Pump up your savings: Half of eligible young employees do not contribute to their 401(k)s, and among those who do participate, about 40% don't kick in enough to get their employer's full match, an Aon Hewitt survey shows. That's a sure path to nowhere. But at least twentysomethings do have good intentions: Some 70% of Gen Y-ers say they plan to boost the amount they're investing in the year ahead, a recent Scottrade study shows.
Saving more is critical. The more money you tuck away, the less you have to rely on stock market returns for the growth you need to build a comfortable retirement account, thanks to the power of compounding. Boosting your savings rate by, say, five percentage points, combined with a modest step-up in your commitment to stocks, may enable you to build a larger nest egg than if you load up on stocks when you're young, then gradually shift to more conservative investments as you get older, as conventional wisdom suggests.
Of course, when you're just starting out, saving anything at all can be a major challenge. As a starting point, stash at least enough to take full advantage of any matching contributions your employer offers -- typically that means kicking in 6% of your pay -- then gradually increase that amount as your salary grows.
Take baby steps: To get more comfortable with investing in stocks, commit small amounts at first instead of diving in to reach an allocation considered more appropriate for your age. Then gradually increase the proportion of your savings you put in equities. That's the approach that Brandon Baird, 30, a financial products manager in St. Louis, is following. Baird, who once had as much as 90% of his portfolio in stocks, now keeps most of his savings in cash investments with minuscule yields; he's too nervous about the possibility of another crash to get back into stocks in a big way. So he's taken an interim step, directing 65% of new contributions to his 401(k) into stocks and leaving the rest alone. "For now," he says, "this is all I can handle."
Make safer choices and Diversify: All stocks don't move in tandem. To cut the odds of nerve-jangling losses, diversify among several different types -- large and small companies, domestic and foreign, for example -- so that if one sector of the market tanks, you may have gains in other areas to cushion the blow.
Investors who owned assets other than large-company stocks, for instance, have not had a Lost Decade: Over the past 10 years the Russell 2000 index of small-company stocks has averaged gains of 6.3% a year, while the MSCI Emerging Markets Index is up an annualized 12.3%. Be aware, though, that on a yearly basis small-company and emerging-market stocks tend to have wilder price swings than the average issue. If big changes in value will rattle you, focus instead on less volatile shares-- think established blue chips instead of small up-and-comers, and companies in developed nations rather than emerging markets.
Diversifying among asset categories will also dampen volatility. One easy option: balanced funds, which typically hold 60% in U.S. big-company stocks and 40% in high-grade bonds. "When the market is up, you earn most of the returns of stocks but suffer smaller losses during drops," says Rob Oliver, a planner in Ann Arbor. In 2008, when the average big-company fund lost 38%, balanced funds gave up 25%.
Tune out the noise: It's not exactly surprising that this generation of texters, tweeters, and smartphone addicts stay overly connected to their investment accounts online. Nearly 60% of Gen Y-ers in the Scottrade study reported they check their accounts several times a week or more (20% check several times a day), vs. just 30% of boomers.
Word to the wise: Cut it out. Studies show that investors who regularly monitor the market earn worse returns than those who avoid information about their portfolios. Why? News reports tend to overplay the importance of any piece of info, prompting investors to overreact-- they panic and sell at a market bottom or buy in at lofty prices. All of which damages returns. Blocking out market hysteria will take work. "Wall Street hype is like gravity -- it's always there, and you have to continually resist it to get where you want to go," says psychologist Murtha. Help yourself by fighting the urge to check your account each day -- once each quarter is fine. By 2040 yesterday's dip in the Dow will be meaningless. Decades of steady saving and investing won't be.
Diversify. Small cap, mid cap, large cap, sector funds, high dividend paying stocks, foreign stocks, bonds, some money market mutual funds. Invest when young to maximize the power of compound interest. Pay yourself first. Put your money in tax shelters such as 401Ks, IRAs, 403bs. Stay ahead of inflation! Plan to save around 10% of your income --straight out of college (a minimum of 6% if you have a 401K to get matching funds). Save early, save often. Set a goal (say $1-2 mn) “Put off a little consumption today for tomorrow’s well-being.” Know your tolerance for risk. If it’s low, you must save even more on a monthly basis. Know your time horizon and minimize your exposure to stocks (risk) as your time horizon comes near: 1-5 years: short term; 5-10 years: medium term time horizon; 10+ years: long term time horizon. Have greater exposure to stocks when you have a long time horizon (say 70-90% stocks/10-30% bonds, no cash). As your financial goal (retirement, child’s college education fund) becomes a medium term goal (you’re only 5-10 years away), move more of your money out of stocks and into bonds and cash (say 50% stocks, 40% bonds, 10% cash). Short time horizon (1-5 years), have even less stock exposure (especially for kid’s education funds) and mostly cash and bonds). Current American life expectancy = 77 years old. Your generation will live probably into your 90s so you’ll need say 30% still in stocks when you retire in your 60s because you still have a long term time horizon. Don’t outlive your retirement fund!
10/15/201510/27/2015
The following are instructions for how you will sign in to classroom.google.com in order to submit online your Google Slide presentation. Focus more on the slide show for now than an in-class presentation.
All students have chosen a stock that must be approved by the teacher. You are to click on the instructions below and make a slide presentation using Google Slides.
Below is a sample powerpoint presentation (not Google Slides) . Although this is microsoft powerpoint, you will be using Google Slides.
Please look at the tables and charts from finance.yahoo.com in this sample powerpoint presentation. Your presentation should look like this. Please feel free to be more creative with backgrounds, pictures, pictures of products, animation, etc. But copy the format of the tables.
If you are having trouble transferring charts, graphs, and tables to Google Slides here are some tips to help.
If using a mac, push command-shift-4 at the same time to get to the screen shot tool. Then, click and drag over the area you want for the screen shot. That will automatically be saved to your computer’s desktop. Now drag that into Google slides.
If using a Windows-based PC, push Control-Alt-Print (screen) at the same time. That just took a full screen shot. Then open Google Slides and paste it in a slide. Then use the Google Slides crop tool from the tool bar and crop unwanted info. from the slide.
FOR REVIEW ONLY--NOT A HOMEWORK ASSIGNMENT!!! Study if you want
10/20/201410/24/2014
If you buy $400 worth of stock and sold it for $530 in 6 months, what percent return did you make on your money (pre-tax)? If you were in the 30% tax bracket, calculate the correct tax and also state what your after tax return be (in dollars)?
If you buy $1,000 worth of stock and sell it 2 years later for $2,900, what percent return did you make on the investment before taxes? If you're in the 30% tax bracket, calculate the tax and state the after tax income.
For the next 2 questions, please use your tax brackets you printed that were posted online.
Please calculate the total taxes owed for each of the following. Be sure to withdraw federal income tax, CA state income tax, social security tax, and medicare taxes and the other taxes. Round to the nearest dollar. Be sure to mention the marginal federal income tax bracket and to show total taxes taken out. The standard deduction is $6,200 for single people, $12,400 for married tax filers. Should the person take the standard deduction or itemize their deductions? In the end, on the following April 15, how much will they owe or will they receive as a tax refund?
A single, Californian: Income $50,000
This individual earned $1,000 in interest from savings accounts, CDs, Bonds, and money markets.
Dividend income: $300
Short term capital gains (less than one year): $500
Long term (more than one year) capital gains: $500
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