By: Celeste Utter
Component 1- A Plan for your Budgeting and Taxes
1) Know your Net Worth
2) Calculate your income
3) Identify your Expenses
4) Consider the impact of Taxes
~The Formula for calculating Net Worth: Asset-Liabilities= Net Worth
~Assets are anything you own.
~Liabilities are anything that you owe.
~Equity means ownership.
~Negative equity is when you owe more for an asset than it is worth.
~Income is the money coming in through your wages earned.
~Expenses will help you determine how much you spend each month
Component 2- A Plan for Managing your Liquidity
~Money Management and Credit Management decisions are BOTH involved in managing liquidity.
~Credit Management involves making decisions about credit and getting credit. Credit is used by the average American to meet cash shortfalls.
~An emergency fund is a saving account specifically earmarked for use of emergencies.
~High school students should have up to $500 in the emergency funds, Adults should have $1000 saved up.
Component 3- A Plan for your Financing
~Payment Terms are interests rates, time period of the loan, amount borrowed.
Component 4- A Plan for Managing your Risk
Component 5- A plan for your Investing
~ Investment is a crucial step for wealth building.
~ Wealth building is when you begin to acquire additional assets designed to increase your net worth.
~ When you invest you enable your money to grow, accumulate, and start working for you.
~ Risk which is the possibility of lose as well as the various types of investments.
Component 6- A planning for your Retirement
~ Determine how much money you need to save to retire at a desired standard of living, how to invest those funds , and how much you will need to save regularly to achieve that goal.
Component 7- A plan for Communucating and keeping Records
~ Be organized.
~ Have everything you need to complete and file tax returns, calculate your net worth and apply for loans and financing.
~ Have short, intermediate, and long term goals.
~ Make sure you're in good terms with family so in case you fall ill or die your financial wishes can still be fulfilled.