Personal Finance 101

Dr. Rita Littrell

Bessie B. Moore Center for Economic Education
What can you do with money?

 Spend it
 Save it
 Invest it
 Share it
Spending
 Make good decisions
 Use a budget
 Research products
 Compare prices
 Consider the opportunity cost
 Keep receipts & warranties
 Return faulty items
 Use credit wisely
 Consumer Credit

A loan – spending money you have not earned

Two types:
 Closed End Credit -- Ex: Auto Loans, Mortgage
Loans
 Open End Credit -- Ex: Credit Cards

Interest is the cost of credit

 Credit Cards
 Make Sure You Know All The Terms and
Conditions
 Beware of “Store Credit Cards” & Their High
Interest Rates
 Avoid Getting Too Many Credit Cards
 Beware of the Minimum Monthly Payment Trap

 Home Equity Line of Credit

Credit Counseling Services

 If You Are Having A Problem Paying A

Bill, You Can…
1. Contact the Creditor
2. Contact A Nonprofit Financial
3. Counseling Program
 Saving
Consuming less than you earn.

Ways to save:
 Saving Account
 Certificate of Deposit
 Savings Bond
Rainy day or to invest
Sharing
Contributions of philanthropic organizations
1. Walton Family Foundation
2. Wal-Mart Foundation
3. Winthrop Rockefeller Foundation
4. Winthrop Rockefeller Trust
5. Walton Family Charitable Support Foundation
6. Charles A. Frueauff Foundation,
7. Arkansas Community Foundation
8. Ross Foundation
9. Harvey and Bernice Jones Center for Families
10. Murphy Foundation
11. Windgate Charitable Foundation
 Arkansas Philanthropy
 Between 1997 & 2004, AR ranked among top 7
states in individual charitable contributions while
being among the five least wealthy
 National or International nonprofits groups
 Heifer International – LR – eliminate starvation by
enabling low-income people to feed themselves on a
sustained basis
 Potluck Food Rescue for Arkansas – redirects
otherwise wasted food to low-income Arkansans
 AR Foodbank Network & AR Rice Depot – work to
relieve hunger and malnutrition
 Investing

Options for Investing

 Open a Savings Account

 Invest in the Stock Market
 Buy Bonds
 Invest in a Mutual Fund

First step is to determine short and long term financial

goals.
 Fundamentals of Investing
1. How Much Money Do You Want to Accumulate?
2. How Long Will It Take?
3. How Much Risk Are You Willing to Assume?

4. Are Your Goals Reasonable?

5. Are You Willing to Make the Necessary Sacrifices?

6. What Are the Consequences If You Don’t Reach Your

Goals?
 Before Investing

Get Your Financial House In Order

 Make Sure You Have Adequate Insurance

 Start an Emergency Fund

 Balance Your Budget

 Use These Options

1. Employer Sponsored Retirement Plans

2. Employer Savings Plans

3. Gifts, Inheritances or Windfalls

Save – Even If It Is a Small Amount!

(www.dinkytown.net)
 Stocks

 Ownership in a company

 Buy Stock for:

1. Dividends
2. Price Appreciation

 Level of Risk
Mutual Funds
 Stocks in several companies
 Professionally managed

 Wide variety of funds

 Less risk due to diversification

 But You Can Lose Money Too!!

 Bonds – a loan
 Corporate Bonds – not insured by
Federal Government
 US Government Bonds – Treasury Bills,
Bonds & Notes (terms vary)
 Municipal Bonds – issued by state and local
governments – Fed tax exemptions & that
state
 Bureau of Public Debt - US Dept of Treasury
 For ratings – Moody’s Investor Service
-Standard and Poor’s Corp
Financial Institutions
Use financial institutions to:
 protect your money
 help you manage your money – checks,
debit cards
 savings, checking and other accounts
 to help your money work for you
 for financial advice
 Stock Market
 New York Stock Exchange (NYSE)
 American Stock Exchange (AMEX)
 Nasdaq (Nat’l Assn of
Securities Dealers
Automated Quotation)
List of up and coming comp
anies from Fast Company!
Influences on the Market
• War
• Emotions
• Politics
• Economy
• Natural Disasters
What influences the price of a stock
• Conditions in the Industry
• Changes in Technology
• Competition
• Health of the Company
• Supply and Demand
Reading a Stock Table
What Does it Mean?
Reading a Mutual Fund Table
Understanding the Mutual Fund Table
Reading a Bond Table
Understanding the Bond Table
Three Rules for Building Wealth
1. Start early.
 Give money time to grow.
2. Buy and hold.
 Keep you money invested.
3. Diversify.
 Don’t put your eggs in one basket.
Buy & Hold
1. Spend less than you receive.
 Earn more by improving your formal education or job skills.
 Spend less by using a budget to keep track of where your
money is going.
2. Become connected to financial institutions?
 Open and maintain accounts at mainstream financial
institutions.
3. Manage your credit responsibly?
 Limit the number of credit cards you have.
 Limit the number of purchases to what you can pay off each
monthly.
 Apply for loans only when you are confident you can repay
with your current income.
 Stock-Market Roller Coaster

If you hold long enough, the ups are greater than the downs.
Diversify

Don’t put all your

eggs in one basket!
Costs & Benefits of Saving &
Investing
• Saving accounts: provide small but steady return
• Certificates of deposit: very safe, but instant
access is penalized
• Bonds: lending money to a corporation or
government, with a promise of higher returns than
those offered by bank savings accounts and CDs
• Stocks: part ownership in a company, offering
higher risks and potentially higher returns than some
other investments
• Real estate: the risks and benefits of being a
landlord