Managing Your Money …..Planning Wisely with Your Present Resources

Vanderbilt University School of MedicineSeptember 8, 2009

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YOU

OBJECTIVESIdentify what money means to you

“Conscious beliefs represent only a fraction of our personal belief system. Like the tip of an iceberg, the stuff that sinks ships is

hidden beneath the surface, in our unconscious.” Dr. Susan Forward (Money Demons)

Identify steps to successful financial health & wealth

Identify steps to productive and successful budgeting

Identify differences between discretionary and fixed expenses

YOUR FINANCIAL PLAN

YOU RETIREMENT

ESTATEPLAN

INCOME PROTECTION

FINANCIAL PLANNING/INVESTING

HOME BUYING

(POSSIBLE) IDENTITY THEFT

CREDIT/DEBT SERVICE

BUDGET, BUDGET, BUDGET

don

’t le

t it g

et o

ut of

whac

k!!

EARLY MEMOR(Y)IES OF MONEY

►Family message about money as you were growing up?

►Allowance?If so, did you have to work for it or was it just given to you?

►Money discussed?

►Work?If so, what happened to the $$$ you earned?

►1st time you went into debt?

►1st time you lost money?

►Influence your choice of career?

►Are you afraid of it or know how to work with it?

COMMON SAYINGS/SLOGANS ABOUT MONEY

SAYINGS:(Love of) is the root of all evil.

.. doesn’t grow on trees.

.. isn’t everything.

.. think I’m made of money?

.. can’t buy you happiness.

.. CAN buy you happiness.

SLOGANS:Blood money …

Drug money …

Dirty money …

Funny money …

SO ….. ????

►Love?

► Security?

► Independence?

► Pay bills & don’t think about the rest?

► NEVER enough of it?

► Don’t think you deserve a lot of it?????

►Afraid to say “I want to be wealthy?”

YOU CAN’T GET TO WEALTHY WITHOUT A “BUDGET” OR, “A PLAN”

“Budget” can have negative connotations = restrictive, oppressing, impossible to do, where do I start, etc.

(Financial) “plan” = sense of control, connotes knowledge, understanding, personal teamwork, (partner) teamwork, etc.

VANDERBILT UNIVERSITY SCHOOL OF MEDICINE STANDARD STUDENT BUDGETS

(2009-10)

MS-1$61,410

$45,190 (fixed)$16,220 (discretionary)

MS-2 $59,540

$44,550 (fixed)$14,990 (discretionary)

MS-3 $65,220

$45,400 (fixed)$19,820 (discretionary)

MS-4 $60,950

$44,350 (fixed)$16,600 (discretionary)

27% of expenses are discretionary!!

AVERAGE DISCRETIONARY EXPENSES (4 YEARS)

$67,630

What part of this can you save?

WHAT IT CAN COST YOU

$67,630X

6.8%

OVER 10 YEARS

=

*$778/MONTH

OR

*$93,395 TOTAL

$67,630X

8.5%

OVER 10 YEARS

=

*$839/MONTH

OR

*$100,622 TOTAL

*approximatesource: bankrate.com

ACTUALLY, IT COSTS MORE …

Currently saved: $0Save per month: $778Years to save:

10Rate of return:

6%Inflation rate: 3.1%

After10 years: $127,020*

Currently saved: $0Save per month: $839Years to save:

10Rate of return:

6%Inflation rate: 3.1%

After10 years: $136,979*

*Does not account for federal & state taxes!!source: bankrate.com

DISCRETIONARY COSTS VS FIXED COSTS

FIXED 73%:

►TUITION

►FEES

►USMLE costs, etc.

DISCRETIONARY 27%:►rent roommate(s)►utilities roommate(s)►groceries co-op, discount

stores►insurance drop unnecessary

insurance►laundry individuals will

take in►eating out pot-luck dinner►phones limit plan►entertain movie vs rental ►vacations cruise vs local site-

seeing►clothing new vs consign►personal hair, etc.

PRESENT FINANCIAL RESOURCES

► Personal Resources???

► Family Resources???

► Grants/Scholarships???

► Federal Loans???

► PrivateLoans???

►???????

NOT AS SUCCESSFUL MANAGING MONEY??

►Fear

► Denial

► Inability to judge difference between “needs” and “wants”

► Lack of discipline

► Procrastination

► Lack of emotional support, early role-modeling, etc.

► Conflicting “societal” values

►Don’t know what resources are available to them

►Haven’t (clearly) articulated “goals” or, different “goals” from partner

BUDGETING/PLANNING FOR SUCCESS

►Get out of “denial”

►Be realistic about what you can do to hold down “discretionary” expenses

►Identify all of your resources

►Know where your $$$ is going on a daily, weekly, monthly, yearly basis

►Live by your financial compass …… no one else’s

►Set some financial goals, now, and ……. (LIVE ON Less than the Standard Student Budget)

►Reevaluate goals (& how you’re handling your budget), on a yearly basis

BUDGETING/PLANNING FOR SUCCESS

►plan for emergencies

►what is absolutely necessary►cable/satellite??

►shop only when you REALLY need something

►when is it a “WANT” instead of a “NEED??” ►shop with a list and stick to it & don’t shop when you’re hungry

►“save,” “save,” “save”►how do you do that on student loans???

►after medical school save for major purchases, i.e., car, vacation, etc.

Household (yearly) Income

Income 1 $0

Minus Tax (assume 30%) $0

Income after taxes $0

Other income/gifts, etc.  

Total yearly income $0

TOTAL MONTHLY INCOME   $0

       

Household (yearly) Income

Income 2  

Minus Tax (assume 30%) $0

Income after taxes ($0)

Other income/gifts, etc.  

Total yearly income ($0)

TOTAL MONTHLY INCOME   ($0)

 

Financial Aid

Total Financial Aid $0

MINUS Tuition & Fees $0

Total REFUND $0

Total MONTHLY Financial Aid

      $0

MONTHLY INCOME & FIN. AID

      ($0)

Cost of a mocha latte:

• 1 cup = $4

• 1 cup every work day = $20

• 1 cup every work day for year = $1,040

Discretionary/controllable costs can make a difference in your future!!

WHAT’S ANOTHER $1,040 WHEN YOU’RE ALREADY IN SO MUCH DEBT???

►If you use a credit card or a student loan ….

► If there is capitalization ….

► If it is paid off over 10 years ….

► ► It could cost $3,000+

THE MORE YOU BORROW, NOW, THE FARTHER YOU ARE FROM REALIZING YOUR FINANCIAL GOALS/DREAMS!!!!

LATTE SAVINGS

Latte price$4

Lattes/month 20

Years 4

Rate of return 8.5%

Source: www. bankrate.com

Home coffee►$1

Monthly savings ►$60

Savings after 4 years

►$3,417

WHAT CAN YOU DO, NOW????

►This is the time to focus on your financial HEALTH/WEALTH by minimizing educational debt

» “wealth is a marathon” …….. Dave Ramsey

► Lifestyle = live moderately, now …..

► Try to live on less than (standard) student budget

► Focus on your “financial goals”

FACTS REGARDING CREDIT CARD DEBT

►2006: 92% of graduate students had, at least, one credit card

►4% decrease from 96% in 2003

►average outstanding balance = $8,612

►10% increase (from 2003) averaging $7,831

►94% used credit cards to pay (some portion) of direct education expenses (primarily textbooks)

►93% make, at least, required minimum monthly payments

►20% pay off their cards, IN FULL, each month

►67% of graduate students took out first credit card as an undergraduate student

►number of 18-24-year-olds declaring bankruptcy increased 96% in 10 years (Richmond Credit Abuse Resistant Education (CARE) Program)

►foreclosures rose by 75%, in 2007, from 2006 (RealtyTrac.com 2008)

►49% of adults are concerned they have not paid enough attention to managing their finances (Harris Poll #22, 2007)

►48% concerned they don't know enough about financial planning (Harris Poll #22, 2007)

HELPFUL WEBSITES …….

www.bankrate.com

www.myfico.com

www.fool.com

www.annualcreditreport.com

www.optoutprescreen.com

www.equifax.com

www.experian.com

www.transunion.com

www.quicken.com

www.simpletuition.com

BIBLIOGRAPHY

Morris, Kenneth M., Siegel, Alan M., The Wall Street Journal Guide to Understanding Personal Finance. 1997. New York: Lightbulb Press, Inc. and Dow Jones & Co.Warren, Elizabeth, Warren Tyagi, Amelia, All Your Worth, The Ultimate Lifetime Money Plan. 2005. New York: Free Press.Strauss, StevenD., Jaffe, Azriela., The Complete Idiot’s Guide to Beating Debt. 2000. Indiana: Alpha Books.Morris, Kenneth, M., Siegel, Alan, M., and Morris, Virginia, B., The Wall Street Journal Guide to Planning Your Financial Future. 1998. New York: Lightbulb Press, Inc. and Dow Jones & Co.Orman, Suze. The 9 Steps To Financial Freedom. 2000. New York: Three Rivers Press.Klosowski, Allen, CFP. Personal Financial Fitness, A Practical Guide to Improve The Health of Your Wealth. 1997. Menlo Park: Crisp Publications.Singletary, Michelle. “Picking a Financial Planner Takes Some, Well, Planning.” The Washington Post 19 August 2001: p. H01Quinn, Jane Bryant. Making the Most of Your Money. 1997. New York: Simon & Schuster.Dominguez, Joe, and Robin, Vicki. Your Money Or Your Life. 1992. New York: Viking Press.

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THANK YOU!!!Mary B. W. Fenton, M.A.National Executive, Health Professions& Graduate SchoolsAmerican Student Assistance1-800-999-9080 ex. 2199mfenton@amsa.comwww.amsa.com