Question

Money Management: Finance 101
**This is a tutorial, let me know if it helps anyone! **

Answer 1

This is a tutorial...so please do not comment until I am through, thanks!

Answer 2

Why is money important to have and manage properly anyway? Here are a few reasons:
**lifestyle (have a house, feed yourselves)
**help others (charity)
**free time (some people have to work multiple jobs just to earn enough to live)
**reduce stress (money stresses out people a lot!)

Ever find yourself saying, "If I won the lottery, I would do this, and this and this...? Well, here are some scary facts for you:

Frightening Fact #1: What % of lottery winners waste their winnings within a few years? 70%
Frightening Fact #2: What % of NBA and NFL players are broke or bankrupt within 5 years of retirement? 60% (people don't plan ahead!)

**People with no money skills often make poor financial choices regardless of how much money they have.**

Answer 3

To make better money choices, what are some things we can do?

One of the first steps that can be taken is to learn how to differentiate between wants and needs.
Needs: Something we must have for survival (food, shelter, clothes, transportation, basic necessities)

Wants: Something that would be nice to have...we would like to have...($5 mocha latte, designer shoes, $100 jeans, brand new car, iPhone, Oculus Rift)

Never prioritize needs over wants; that's when you start getting in huge trouble financially. If you have extra money that you budgeted and didn't end up using, however, then you can either INVEST or SPEND on (more on that later)

Answer 4

A budget is a set financial plan that details how much money you want to spend on certain things for a set period of time:
Word of the wise: never budget money that you don't have to begin with

For example, the government has a set budget due to annual tax payers dollars that it receives. With this money, the government decides how much money it wants to spend in education, law enforcement, etc. The problem with government, however, is that it overspends in a certain sector and doesn't have enough funds to pay for the rest of the things that need funding. This is called a defecit

In your own budgeting, plan everything wisely so that you're not in a defecit. Everything will be happier that way :)

Answer 5

*deficit

Answer 6

So..what are banks?
-a type of insured Financial Institution (this means that if a bank if ever closes or is robbed, you are guaranteed money back)
-banks area safe place to keep money
-banks offer many financial services (such as loans!)
-banks use deposits to make loans
-banks earn profit on interest and fees
More money + more time = HIGHER INTENREST (the higher interest rates that people pay on loans, the more interest you get for your savings account in return)

Answer 7

How transactions work a.k.a. avoiding overdrafts:
First off..an overdraft is when you try to use money that doesn't actually exist (for example, you try to pay for an $150 dollar item but you only have $100 in your checking account).
--> If you make this mistake, you have to pay a fee! oh no!
To avoid overdraft, you must ALWAYS KNOW HOW MUCH MONEY IS IN YOUR ACCOUNT!!!
**By keeping track of your expenses, you can make sure you stay on budget and monitor your spending habits

Ways to keep track of your funds:
-mobile banking
-debit card (takes money directly from account, more on this later)
-online banking (check statements online)
-text alerts (real time)
-keep receipts...tedious but foolproof.

Answer 8

Quick overview on the difference between Debit and Credit

Debit: Takes money right from your account (sometimes takes a few days to process, so keep track of how much your spending mentally)

Credit: A promise to pay money later (Visa sends a bill at the end of the month, and we pay it all at the end of the month...in an ideal situation)

A credit card can be seen as a \(\bf{loan}\), as a credit card can let you take home that brand new iPhone...the bank is simply trusting you to pay for that iPhone by the end of the month.

Other examples of loans are:
-auto/boat/motorcycle loans
-mortgage loans
-home equity loans (only works if your house is rising in value and if you can afford to get a home equity loan)
-business loans
-education/research loans

Another important factor to think about is the cost of credit.
Let's create an example

Suppose you went on a trip over spring break. Super happy fun times! However, the trip cost $1500. You can't afford to pay the entire amount in one go, so you put the price of the trip on your credit card.

Now say there was an interest rate of 21% . Let's compare a minimum payment vs. a higher payment

Price: $1500 Interest Rate: 21%
Minimum payment: $15
--># of years to pay off: 11 years
--> Interest paid: $1,657
--> TOTAL cost of trip: $3,157 ( the cost more than doubled!...and it took so long to pay off!

VERSUS
Larger payment: $100
--> # of years to pay off: 1.5 years
--> interest paid: $255
--> TOTAL cost of trip: $1,755 (see how this plan is ideal, even though you pay more money every month?)

Answer 9

Important tips:
-Keep a good credit score! By paying off everything that you buy at the end of the month, the bank entrusts you with an elevated balance on your credit card and when you're trying to get a loan to buy a house/car, the company will trust you more!

-follow the BBB philosophy: Budget Before Buying. Always budget all costs of an item before your purchase it to ensure that you can afford it (for example, when buying a car, take car insurance, gas, and maintenance into account)

-Investing! Create a savings account, and start putting money into it. That way your funds can grow. Start investing at a young age, time is a huge friend! The younger you are when you start investing, the interest will return that much more money for you (*see attached pictures)

-Stock market: Good way to gain funds, AS LONG AS YOU SEE STEADY INCREASES! sometimes, stock market is unpredictable, will crash, and you will lose lots of money, so invest with caution.

These are the basic fundamentals everyone must know to have a stable finance situation and live independently.

Please be sure to check out MoneyMoments.com for additional information

Answer 10

Good job Jamie! :)

Answer 11

thanks! :o

Answer 12

Great job Hana! Your tutorial is very detailed and precise :)

Answer 13

Thank you! @Miracrown