Dean’s Seminar

Ned C. HillNed C. HillDean, Marriott School of Dean, Marriott School of

ManagementManagement

Minneapolis, MNMinneapolis, MNApril 15, 2004April 15, 2004

Marriott School

What’s happening with:What’s happening with: RankingsRankings Student AchievementsStudent Achievements Alumni PortalsAlumni Portals Management SocietyManagement Society

Who Beat Stanford & USC?(not to mention UCLA, Notre Dame & Virginia)

Who Beat Stanford & USC?(not to mention UCLA, Notre Dame & Virginia) Answer: The Marriott School of Management!

22. MIT

23. Emory

24. IPADE (Spain)

25. Ohio State

26. Brigham Young

27. Wake Forest

28. Washington (St. Louis)

29. University of Virginia

30. Stanford

WSJ Rankings

31. Notre Dame

34. Thunderbird

37. NYU

38. UCLA

39. London Business School

40. USC

What the Wall Street Journal Said

““Schools making the biggest advances in the Schools making the biggest advances in the ranking: Brigham Young University…” (12)ranking: Brigham Young University…” (12)

““Brigham Young’s Marriott School of Brigham Young’s Marriott School of Management stood out for its students’ integrity in Management stood out for its students’ integrity in this era of corporate scandals. ‘Our recruiters this era of corporate scandals. ‘Our recruiters return to Brigham Young year in and year out return to Brigham Young year in and year out because of the school’s high ethical standards,’ because of the school’s high ethical standards,’ says Roger McCarty, corporate strategy says Roger McCarty, corporate strategy development leader for Dow Chemical Co.”development leader for Dow Chemical Co.”

…continued

““Recruiters find that Brigham Young produces a Recruiters find that Brigham Young produces a particularly valuable type of graduate these days…particularly valuable type of graduate these days…the the ethical accountantethical accountant.”.”

““Brigham Young, which is sponsored by the Church Brigham Young, which is sponsored by the Church of Jesus Christ of Latter-day Saints, is considered of Jesus Christ of Latter-day Saints, is considered one of the one of the best schools for hiring students with best schools for hiring students with high ethical standardshigh ethical standards.”.”

““In addition to ethics and integrity, recruiters gave In addition to ethics and integrity, recruiters gave students very high marks for analytical and problem students very high marks for analytical and problem solving abilities, solving abilities, communication and communication and interpersonal skillsinterpersonal skills,, fit with the corporate culture fit with the corporate culture and team orientation.”and team orientation.”

MBA Rankings We advanced or maintained We advanced or maintained

standing in every major standing in every major MBA ranking for the third MBA ranking for the third year in a rowyear in a row 22nd worldwide in Forbes (17th in U.S.) 26th worldwide in The Wall Street Journal 29th in U.S.News & World Report 1st bang for the buck in Business Week 2nd for Ethics in The Wall Street Journal

Other Rankings 3rd graduate accounting

(Public Accounting Report)

3rd undergraduate accounting (Public Accounting Report)

38th undergraduate management (U.S.News & World Report)

No. 1 “Stone cold sober school” (Princeton Review)

Student AchievementsUndergraduates beat out MBA students nationwide to win Fortune Small Business Magazine’s first business plan competition.

MBA team wins 2003 Thunderbird Innovation Challenge, beating 154 other teams.

Student Achievements

MBA students win the D.A. Davidson & Co. investment competition— earning a 32 percent return on their investment.

Three students placed second at the Net Impact 2003 International Case Competition.

Student AchievementsAn information systems student placed first and another student placed third in the school’s first appearance at the National Collegiate Conference.

An MPA student was the first in Utah to win an American College of Healthcare Executives Scholarship.

Student AchievementsMarriott School MBA team wins first place in U of Denver National Ethics Case competition—with invited schools known for their ethics programs.

Marriott School MAcc team wins first place in Deloitte national auditing case competition in March against all top Accounting programs.

Student Achievements

Undergraduate accounting students took first place and the graduates took second place at the Deloitte Tax Case Study Competition. This is the seventh time in the twelve-year history of the competition that both BYU teams placed among the top three—an unparalleled accomplishment.

Alumni Portals

• New portal service unveiled in September 2003

• Portals are customized by program and year (i.e. MBA 1996, MAcc 2001)

• Alumni portals are a powerful tool to renew connections and establish new relationships

Alumni PortalsVisit your alumni

portal to:• Update your profile• Access a class directory• Participate in online forums• Connect to the Management

Society• Search 40,000 Marriott School

and nearly half a million BYU alumni records

Web: marriottschool.byu.edu • Click “Alumni Portals”

“I believe this new tool will help our graduates really leverage their Marriott School degree. One of the benefits of going to this school is the strength of the alumni network you’re tied into.”

— Dean Ned C. Hill

Management Society• Now a global organization

• 40 Chapters in the U.S.• 17 International chapters

• Developed central membership database• Membership records• Online dues/events payment• Online calendar• Communication tools

• Formalized 5-year strategic plan

Management Society

  “  “We need the members of the We need the members of the BYU Management Society to BYU Management Society to help build the moral base of our help build the moral base of our communities. You have communities. You have standards, ideals, and values that standards, ideals, and values that will not only lead you to success, will not only lead you to success, but will bless and strengthen this but will bless and strengthen this nation and all the world.”nation and all the world.”

— — Elder David B. Elder David B. HaightHaight

Questions?

Putting Our Financial Houses in Order

Ned C. HillNed C. Hill

Dean, Marriott School of ManagementDean, Marriott School of Management

President, BYU 5President, BYU 5thth Stake Stake

President Gordon B. Hinckley Priesthood Meeting, October 3rd, 1998

Story of Pharaoh’s dream of the seven fat cattle and the Story of Pharaoh’s dream of the seven fat cattle and the seven lean cattleseven lean cattle

“…“…I want to make it very clear I want to make it very clear that I am not prophesying, that that I am not prophesying, that I am not predicting years of famineI am not predicting years of faminein the future. But I am suggesting in the future. But I am suggesting that that thethe time has come to get our time has come to get our houses in orderhouses in order. . There is a portent There is a portent of of stormy weather aheadstormy weather ahead to which to which we had better give heed.”we had better give heed.”

““So many of our people are living So many of our people are living on the very edge of their incomes. on the very edge of their incomes. In fact, some are living on borrowings.”In fact, some are living on borrowings.”

President Gordon B. Hinckley (cont.)

““I urge you, brethren, to look to the condition of I urge you, brethren, to look to the condition of your finances.”your finances.”

““I urge you to be modest in your expenditures; I urge you to be modest in your expenditures; discipline yourselves in your purchases to avoid discipline yourselves in your purchases to avoid debt to the extent possible.”debt to the extent possible.”

““Pay off debt as quickly as you can, and free Pay off debt as quickly as you can, and free yourselves from bondage.”yourselves from bondage.”

““That’s all I have to say about it, but I wish to say That’s all I have to say about it, but I wish to say it with all the emphasis of which I am capable.”it with all the emphasis of which I am capable.”

President Gordon B. HinckleyGeneral Conference, October 7General Conference, October 7thth, 2001, 2001

““The economy is particularly vulnerable. We have The economy is particularly vulnerable. We have been counseled again and again concerning self-been counseled again and again concerning self-reliance, concerning debt, concerning thrift. So reliance, concerning debt, concerning thrift. So many of our people are heavily in debt for things many of our people are heavily in debt for things that are not entirely necessary.”that are not entirely necessary.”

““I urge you as members of this Church to get free I urge you as members of this Church to get free of debt where possible and to have a little laid of debt where possible and to have a little laid aside against a rainy day.”aside against a rainy day.”

““But there is no need to fear. We can have peace But there is no need to fear. We can have peace in our hearts and peace in our homes.”in our hearts and peace in our homes.”

Elder Joseph B. WirthlinApril Conference, 2004

““Remember this: debt is a form of bondage. It is a Remember this: debt is a form of bondage. It is a financial termite. When we make purchases on financial termite. When we make purchases on credit, they give us only an illusion of prosperity. credit, they give us only an illusion of prosperity. We think we own things, but the reality is, our We think we own things, but the reality is, our things own us.”things own us.”

““Some debt—such as for a modest home, Some debt—such as for a modest home, expenses for education, perhaps for a needed first expenses for education, perhaps for a needed first car—may be necessary. But never should we enter car—may be necessary. But never should we enter into financial bondage through consumer debt into financial bondage through consumer debt without carefully weighing the costs.”without carefully weighing the costs.”

Other Counsel on Debt Revelation to Martin Harris: “Pay Revelation to Martin Harris: “Pay

the the debtdebt thou hast contracted with thou hast contracted with the printer. Release thyself from the printer. Release thyself from bondagebondage.” (D&C 19:35).” (D&C 19:35)

Heber J. Grant: “If there is any one Heber J. Grant: “If there is any one thing that will bring peace and thing that will bring peace and contentment into the human heart, contentment into the human heart, and into the family, it is to live and into the family, it is to live within our means. And if there is within our means. And if there is any one thing that is grinding and any one thing that is grinding and discouraging and disheartening, it discouraging and disheartening, it is to have debts and obligations that is to have debts and obligations that one cannot meet.”one cannot meet.”

Some Facts about Credit Cards

Average household has 8 credit cardsAverage household has 8 credit cards 65% of card holders do not pay off total 65% of card holders do not pay off total

balance each monthbalance each month Why so much credit card debt?Why so much credit card debt?

Good times = confidence = overspendingGood times = confidence = overspending Lots of money and it needs a place to goLots of money and it needs a place to go

Self-Test: Do I Have Too Much Debt? Can I pay off my credit card balance completely each month?Can I pay off my credit card balance completely each month? Do I skip some bills to pay others?Do I skip some bills to pay others? If I lost my job today, do I have enough in liquid assets to pay If I lost my job today, do I have enough in liquid assets to pay

living expenses for at least two months?living expenses for at least two months? Do my spouse and I often argue about money?Do my spouse and I often argue about money? Do I receive calls from creditors about overdue bills?Do I receive calls from creditors about overdue bills? Have I postponed medical or dental appointments because I Have I postponed medical or dental appointments because I

can’t afford them right now?can’t afford them right now? Am I using an increasing percentage of my monthly income Am I using an increasing percentage of my monthly income

to pay off debts?to pay off debts?

Origin of Most Debt Problems?Spending Problems

Income Expenditures

Debt

Gaining Control of Your Expenditures Step 1: Track cash flowsStep 1: Track cash flows

1-3 months back1-3 months back Find Find all all expendituresexpenditures Determine assets and liabilitiesDetermine assets and liabilities

Step 2: Agree on goalsStep 2: Agree on goals What do we want to accomplish?What do we want to accomplish? Agree on a budget for future cash flowsAgree on a budget for future cash flows

Step 3: Track cash flows--compare budget to actualStep 3: Track cash flows--compare budget to actual Use computer or any other methodUse computer or any other method

Step 4: Review monthlyStep 4: Review monthly Step 5: Make adjustmentsStep 5: Make adjustments

Compute Your Net Worth Net worth = Assets - LiabilitiesNet worth = Assets - Liabilities AssetsAssets

Market value (not purchase price)Market value (not purchase price) Real and financialReal and financial

LiabilitiesLiabilities Credit card and other consumer debtCredit card and other consumer debt MortgagesMortgages

Why do this?Why do this? Net worth helps you do stuff in the futureNet worth helps you do stuff in the future Track over time--should be growingTrack over time--should be growing Identifies assets that could be used to reduce debtIdentifies assets that could be used to reduce debt

Net Worth

What Adds to Net Worth?

Assets

Liabilities

Credit Card DebtStereo System

How do you balance this?

Net Worth

What Adds to Net Worth?

Assets Liabilities

Credit Card DebtStereo System

Net Worth Must Shrink!

Avoid Unproductive DebtIt Makes Net Worth Shrink

Productive debtProductive debt Unproductive debtUnproductive debt

Home

Education

Minimumtransportation

Business

Consumer goods

Vacations

Car

Most credit card debt

Corollary: Be careful where you borrow! Finance companiesFinance companies Credit cardsCredit cards BanksBanks Credit unionsCredit unions SavingsSavings

0

5

10

15

20

25

30

FC CC B CU S

Reducing Unproductive Debt Plastic surgery Plastic surgery Reduce spendingReduce spending Use assets to pay off debtUse assets to pay off debt Reduce interest rateReduce interest rate

Consider a home equity loanConsider a home equity loan Use another lower cost source of borrowingUse another lower cost source of borrowing

Make a plan -- stick to itMake a plan -- stick to it Talk to a credit counselor if neededTalk to a credit counselor if needed

Cash fromInsurance

Added Net Worth

Net Worth

Insurance--Makes Up for Low Net Worth Problems If you have low or negative net worth?If you have low or negative net worth?

Heirs may have difficultiesHeirs may have difficulties Severe cash flow problemsSevere cash flow problems

Insurance creates an Insurance creates an instant estate--instant estate--it becomes an it becomes an asset if you dieasset if you die

AssetsLiabilities

Goals of Estate Planning

1. Live life fully1. Live life fully Provide for self & spouseProvide for self & spouse Provide for others without spoiling themProvide for others without spoiling them Provide for own possible incompetenceProvide for own possible incompetence

2. Pass property according to desires2. Pass property according to desires Provide for administration (who does the work)Provide for administration (who does the work) Provide dispositive scheme (who gets what)Provide dispositive scheme (who gets what)

Goals of Estate Planning, Cont.

3. Provide for guardianship & conservatorship 3. Provide for guardianship & conservatorship of minor childrenof minor children

4. Avoid probate if desired or use probate 4. Avoid probate if desired or use probate strategicallystrategically

5. Decrease or eliminate taxes5. Decrease or eliminate taxes Income tax (capital gains basis problems)Income tax (capital gains basis problems) Gift & estate taxGift & estate tax

Provide for Others--Life Insurance Term life -- pure death benefitTerm life -- pure death benefit

No savings componentNo savings component About 1/10th the cost of wholeAbout 1/10th the cost of whole Expires at age 65 (usually)Expires at age 65 (usually)

Whole life -- death benefit plus savingsWhole life -- death benefit plus savings Builds cash valueBuilds cash value Does not expireDoes not expire Low but fixed rateLow but fixed rate Use for estate tax purposesUse for estate tax purposes

Provide for Others--Life Insurance

Term insurance (6-10 times annual income)Term insurance (6-10 times annual income) Convertible term may be best for young Convertible term may be best for young

familiesfamilies Group is least costly but what if you leave?Group is least costly but what if you leave? Have some for non-employed spouseHave some for non-employed spouse

Prepare for Retirement

Some Retirement MythsSome Retirement Myths ““I’ll live on Social Security benefits”I’ll live on Social Security benefits”

SS will replace only 24% of your incomeSS will replace only 24% of your income ““Someone else will take care of me”Someone else will take care of me” ““Better be safe and invest conservatively”Better be safe and invest conservatively” ““I can use my retirement funds for other I can use my retirement funds for other

things”things”

Start Saving Early! Sources of retirement money Sources of retirement money

Social Security Social Security 24%24% PensionsPensions 21%21% Real AssetsReal Assets 13%13% Financial SavingsFinancial Savings 11%11% TOTALTOTAL 69%69%

Start Early!Bill starts saving for retirement at age 20Joe starts saving for retirement at age 40

0100000200000

300000400000

500000600000

700000800000

9000001000000

20 25 30 35 40 45 50 55 60 65

20 Start40 Start

Bill has accumulated over 5 times what Joe did by 65!

($2,000 per year at 8%)

$903,800

$172,702

How Does This Work?

Compound interestCompound interest Bill started earlier--compound interest has Bill started earlier--compound interest has

more time to work its miraclemore time to work its miracle If someone had put $1 in an account back in If someone had put $1 in an account back in

1776 at 8% interest how much would the 1776 at 8% interest how much would the account have in it today?account have in it today?

$30,685,000 !!$30,685,000 !!

How Much Will I Need in Retirement?Money Magazine Survey

Estimates: Estimates: 53%53% Actual: Actual: 71%71% One third of retirees support children and One third of retirees support children and

grandchildrengrandchildren Health care costs generally higherHealth care costs generally higher Biggest regrets for retirees:Biggest regrets for retirees:

Didn’t take full advantage of tax deferred Didn’t take full advantage of tax deferred investmentsinvestments

Didn’t start earlier to save for retirementDidn’t start earlier to save for retirement

Life Cycle Savings

-100

0

100

200

300

400

500

600

20 25 30 40 50 60 65 70 80 Age

(000’s)

Borrowing

Save 10%

Save 20%Retirement

To heirs

What Should I Invest In? Principle: risk-return trade-offPrinciple: risk-return trade-off

High risk--high returnHigh risk--high return Low risk--low returnLow risk--low return

What?What? Stocks -- ownership in a company (risky)Stocks -- ownership in a company (risky) Bonds -- loan to a company/government (less risky)Bonds -- loan to a company/government (less risky) Deposit accounts -- (insured, no risk)Deposit accounts -- (insured, no risk)

How?How? Mutual fundsMutual funds Tax-advantaged investingTax-advantaged investing

Best and Worst Total Returns(1926-2002)

54%

-43%

15%

0%

20%

-1%

9%

0%

17%

3%

8%

0.4%

One yearholdingperiod

10-yearholdingperiod

20-yearholdingperiod

S&P 500

U.S. T-bills

Chances of Beating Inflation

0102030405060708090

100

One-year 5 Years 10 Years 20 Years

S&P500

Bonds

T-bills

Holding Period

%

Chances of Loss

Oneyear

5years

10years

20years

0

5

10

15

20

25

30

Oneyear

5years

10years

20years

S&P 500

Bonds

T-bills

Corollary 1:

When investing for a short period (5 years or less), When investing for a short period (5 years or less), put your money in less risky investments like put your money in less risky investments like savings accounts and bonds.savings accounts and bonds.

When investing for a longer period (10-20 or more When investing for a longer period (10-20 or more years), put your money in stocks.years), put your money in stocks.

Corollary 2: Where Possible Use Tax Deferred Investments IRAsIRAs Roth IRAs (not tax deductible) Roth IRAs (not tax deductible) Keogh Plan (various types, up to 30% of self-emp inc)Keogh Plan (various types, up to 30% of self-emp inc) SEP Plan (up to 25% of self-empl income)SEP Plan (up to 25% of self-empl income) 401(k)--retirement plans401(k)--retirement plans

Employer may participateEmployer may participate Loan provisionsLoan provisions Tax exempt until retirementTax exempt until retirement

403(b)--retirement (employees of govts, ed, relig.)403(b)--retirement (employees of govts, ed, relig.)

What’s a Tax-advantaged Investment?

Say you make $10,000Say you make $10,000 You put $1,000 in a 401kYou put $1,000 in a 401k

Money goes into stock, bonds—wherever you wantMoney goes into stock, bonds—wherever you want You leave it there until you retireYou leave it there until you retire

You are taxed on $9,000—not $10,000You are taxed on $9,000—not $10,000 The $1,000 grows for many yearsThe $1,000 grows for many years You DO pay taxes when you take out the ($1,000 You DO pay taxes when you take out the ($1,000

+ the increase)+ the increase)

Corollary 3: Diversify!

Never put all or even most of your eggs in Never put all or even most of your eggs in one basketone basket

Use mutual fundsUse mutual funds

Where to Put Your Money

Food StorageInsurance Health Life

MMMF, Ins. Savings

Home CheckingAccount

Conservative Stock Mutual Funds

Government Bonds

Corporate Bond Funds

Blue Chip Stocks

Growth Stocks Specialty Funds

Corporate Bonds Growth Mutual Funds

GARBAGE:Speculative Investments, LPs, Derivatives, Gambling

Start-ups

Tax-Advantaged Retirement Funds: Growth Stock Mutual Funds

Stay away from “get rich quick” schemes Some investment Some investment

seminars!seminars! $1.00 per box cereal $1.00 per box cereal

scamscam Telephone scamsTelephone scams Pyramid schemesPyramid schemes

““Make $3 each stuffing Make $3 each stuffing envelopes in your own envelopes in your own home!”home!”

How to Recognize Them Is promised return unusually high?Is promised return unusually high?

Remember the risk-return trade-offRemember the risk-return trade-off Is product significantly above or below Is product significantly above or below

reasonable market price?reasonable market price? Does sale require pressure tactics?Does sale require pressure tactics? Does seller emphasize BYU or Church Does seller emphasize BYU or Church

connections?connections? Is most of the product purchased by end Is most of the product purchased by end

users or by other distributors? users or by other distributors?

Read a Good Personal Finance Book

Tyson, Tyson, Personal Finance for DummiesPersonal Finance for Dummies, 3, 3rdrd Edition Edition Engel and Hecht, Engel and Hecht, How to Buy StocksHow to Buy Stocks, 8, 8thth Edition Edition Lynch and Rothchild, Lynch and Rothchild, Learn to EarnLearn to Earn Jane Bryant Quinn, Jane Bryant Quinn, Making the Most of Your Making the Most of Your

MoneyMoney Stanley and Danko, Stanley and Danko, The Millionaire Next DoorThe Millionaire Next Door

Learn about Your Own Finances Organize and know how to read your financial Organize and know how to read your financial

documents (insurance, retirement, bank and documents (insurance, retirement, bank and investment statements)investment statements)

Create financial reports for your family (assets and Create financial reports for your family (assets and liabilities)liabilities)

Know your monthly cash inflows and outflowsKnow your monthly cash inflows and outflows Use the Web for financial informationUse the Web for financial information Develop a planDevelop a plan

Computerize your Finances

Quicken Money

Manager

Excel

Personal BranchTurboTax

Internet

Yahoo!Finance

Use Web Sites on Personal Finance

Yahoo!Finance (general)Yahoo!Finance (general) finance.yahoo.comfinance.yahoo.com MSN Money Central (general)MSN Money Central (general) www.moneycentral.comwww.moneycentral.com Quicken.com (general)Quicken.com (general) www.quicken.comwww.quicken.com Charles Schwab (discount brokerage)Charles Schwab (discount brokerage) www.schwab.comwww.schwab.com E-Loan (mortgages)E-Loan (mortgages) www.eloan.comwww.eloan.com INSWEB (insurance quotes)INSWEB (insurance quotes) www.insweb.comwww.insweb.com Utah Community Credit UnionUtah Community Credit Union www.uccu.comwww.uccu.com

(credit union services and general)(credit union services and general) College saving informationCollege saving information savingforcollege.comsavingforcollege.com

Conclusions Be very careful about debt: avoid it where Be very careful about debt: avoid it where

possiblepossible Wise financial management empowers you Wise financial management empowers you

to serve more capably: family, community, to serve more capably: family, community, church church

Spend the time to acquire a basic Spend the time to acquire a basic understanding of personal financeunderstanding of personal finance

Surely we will be held accountable for how Surely we will be held accountable for how we manage our resourceswe manage our resources

Day Trading--A Scam? ““Beat the market” adsBeat the market” ads Low transaction costs inviting many to test their Low transaction costs inviting many to test their

own trading abilitiesown trading abilities Day traders under-perform the marketDay traders under-perform the market Study by prominent investment firm:Study by prominent investment firm:

Market gained 22% in 1998Market gained 22% in 1998 Average day-trader gained 2%Average day-trader gained 2% Why? Trades based on emotional, band-wagon Why? Trades based on emotional, band-wagon

excitementexcitement

Family Spending GuidelinesAfter-tax Expenditures ContributionsContributions 5-12% 5-12% Short and Long Term Savings Short and Long Term Savings 10-20%10-20% HousingHousing 25-30%25-30% TransportationTransportation 10-15%10-15% FoodFood 10-14%10-14% Health CareHealth Care 4-6% 4-6% UtilitiesUtilities 4-6% 4-6% ClothingClothing 3-6% 3-6% OtherOther 2-8% 2-8%

Nigerian Money Scam

Faxes sent to many hundreds of CEOs and Faxes sent to many hundreds of CEOs and other managersother managers

Need to arrange for $40M transferNeed to arrange for $40M transfer However, need a U.S. bank accountHowever, need a U.S. bank account Lend us your account and we pay you $10M Lend us your account and we pay you $10M

for your services!for your services! Only need to cover a few incidental expenses Only need to cover a few incidental expenses

for usfor us

Diamonds Are Forever?

Investors promised 30% return per monthInvestors promised 30% return per month Invest now or you’ll miss the opportunityInvest now or you’ll miss the opportunity First few investors did receive promised First few investors did receive promised

returnreturn Later investors lost everythingLater investors lost everything

Sophisticated Selling

Fax sent to motelsFax sent to motels Large tour groups seeking quality motelsLarge tour groups seeking quality motels Fax us your rates and availability at 900-xxx-Fax us your rates and availability at 900-xxx-

yyyyyyyy Footnote: Footnote: Each fax received will be billed at $39Each fax received will be billed at $39 . .

Cost?Cost?

Credit Counseling Services

National Foundation for Consumer CreditNational Foundation for Consumer Credit American Consumer Credit CounselingAmerican Consumer Credit Counseling American Debt Management ServicesAmerican Debt Management Services Debt Counselors of AmericaDebt Counselors of America

Some Facts about Personal Debt

Total consumer debt = $1.2 trillion (3/98)Total consumer debt = $1.2 trillion (3/98) Over $420 billion is credit card debtOver $420 billion is credit card debt Consumer debt = 19.3% of disposable Consumer debt = 19.3% of disposable

income (up from 16.3% in 1993)income (up from 16.3% in 1993) Personal bankruptcies = 1.35 million (1997)Personal bankruptcies = 1.35 million (1997)

50% increase since 199250% increase since 1992 362,000 filings in 2Q, 1998--largest ever362,000 filings in 2Q, 1998--largest ever

You May Need a Trust Estate taxes: about 50% of assets above Estate taxes: about 50% of assets above

$650,000 per person (indexed)$650,000 per person (indexed) Spouse may pass on unlimited amount to Spouse may pass on unlimited amount to

surviving spousesurviving spouse BUT…then only one gets the $650,000 BUT…then only one gets the $650,000

exemptionexemption Need A/B trustNeed A/B trust Consider life insurance trustConsider life insurance trust

Risk and Scams

There is risk in everything we doThere is risk in everything we do What is a scam?What is a scam? How does a scam differ from a legitimate How does a scam differ from a legitimate

investment?investment? How can we avoid How can we avoid unnecessaryunnecessary risk? risk?