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You and Your Money. Briefing to Class of 2008 “No Mission Too Great!” 7 January 2007. Why We Are Here. Talk about your pay and your money Give some standard advice about savings Help you think about your Cow Loan plan Motivate you to start planning and saving today. Your Pay. - PowerPoint PPT Presentation
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United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
You and Your Money
Briefing to Class of 2008“No Mission Too Great!”
7 January 2007
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Why We Are Here
• Talk about your pay and your money
• Give some standard advice about savings
• Help you think about your Cow Loan plan
• Motivate you to start planning and saving today
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Your PayRemainder AY07 AY08
ENTITLEMENTS: Cadet Pay 4317.30 10361.00Pay Advance - - TOTAL ENTITLEMENTS 4317.30 10361.00
DEDUCTIONS:FITW 183.75 441.00 SITW 62.50 150.00 FICA 330.25 792.60SGLI 135.00 324.00 Repayment of Advance 550.00 1320.00 TOTAL DEDUCTIONS 1261.50 3027.60
ENTITLEMENTS LESS DEDUCTIONS 3055.80 7333.92
CHECKING ACCOUNT ALLOWANCE 2000 6000
DEPOSIT TO CADET ACCOUNT 1055.80 1333.92
State Tax is variable
This is your
discretionary pay
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Your PayRemainder AY07 AY08
ENTITLEMENTS: Cadet Pay 4317.30 10361.00Pay Advance - - TOTAL ENTITLEMENTS 4317.30 10361.00
DEDUCTIONS:FITW 183.75 441.00 SITW 62.50 150.00 FICA 330.25 792.60SGLI 135.00 324.00 Repayment of Advance 550.00 1320.00 TOTAL DEDUCTIONS 1261.50 3027.60
ENTITLEMENTS LESS DEDUCTIONS 3055.80 7333.92
CHECKING ACCOUNT ALLOWANCE 2000 6000
DEPOSIT TO CADET ACCOUNT 1055.80 1333.92
You still Owe $1870
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Your “Budget”Cadet Account AY 07 Jun 07-graduation
Balance Forward xxxx.xx xxxx.xxDEPOSITS:Initial Deposit - - Deposit From Cadet Entitlements 1055.80 1333.92 Interest Earned 23.08 55.39Rations Earned 178.75 429.00TOTAL DEPOSITS 1290.63 1818.31
EXPENSES:Laundry/Dry Cleaning 159.75 383.40Personal Services 121.70 292.08DCA Fee/Eisenhower Hall Tickets 95.83 230.00Class Activities 55.42 333.00Cadet Publications 39.17 99.00 Athletic Fees 30.00 72.00Uniforms & Equipment 59.17 142.00Books & Supplies 834.00 1310.00Computer & Supplies 157.08 177.00 Class Fund - - Information Tech Fee 82.06 196.94Newspapers – NY Times 20.83 50.00Miscellaneous - - Inflation Factor - - TOTAL EXPENSES 1655.01 3285.42
Notice what’s nothere…..RING
2LT UniformsCar Insurance
Credit Card Pmtsetc.etc.
These are“set-asides”
by theTreasurer
Have you “topped-off”?
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Your “Budget”Cadet Account AY 07 Jun 07-graduation
Balance Forward xxxx.xx xxxx.xxDEPOSITS:Initial Deposit - - Deposit From Cadet Entitlements 1055.80 1333.92 Interest Earned 23.08 55.39Rations Earned 178.75 429.00TOTAL DEPOSITS 1290.63 1818.31
EXPENSES:Laundry/Dry Cleaning 159.75 383.40Personal Services 121.70 292.08DCA Fee/Eisenhower Hall Tickets 95.83 230.00 Class Activities 55.42 333.00Cadet Publications 39.17 99.00 Athletic Fees 30.00 72.00Uniforms & Equipment 59.17 142.00Books & Supplies 834.00 1310.00Computer & Supplies 157.08 177.00 Class Fund - - Information Tech Fee 82.06 196.94Newspapers – NY Times 20.83 50.00Miscellaneous - - Inflation Factor - - TOTAL EXPENSES 1655.01 3285.42
Total Expenses Exceed
Total Deposits
Minimum AccountBalance is required
Just for youto meet
Expenses
1467.11
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Should you “Top-Off”?
Reasons not to Top-OffSave for your Class Ring $1200
Save for your Uniforms $2000
Money is in an interest bearing account
Reasons to Top-Off
Get out of Credit Card Debt
Avoid Credit Card Debt
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Review Budget Basics
Short Term Goals
Ring
Uniforms
Spring Break
Car
Medium Term Goals
Wedding
House Down Payment
Spouse’s Tuition
Long Term Goals
Retirement
Kid’s College
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Should you “Top-Off”?Between now and graduation you will collect $8000 in discretionary pay
Class Ring $1200
LT Uniforms $2000
Travel Home x 5 $1500
Spring Break x 2$1600
Total $6300
$8000 - $6300 = $1700
There are 17 months until graduation
You have about $100 per month for incidentals
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Should you “Top-Off”?Between now and graduation you will collect $8000 in discretionary pay
Class Ring $1200
LT Uniforms $2000
Mom and Dad pay for
travel and vacations
Total $3200
$8000 - $3200 = $4800
There are 17 months until graduation
You have about $282 per month for incidentals
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Avoiding Credit Card Debt
Do not use your credit card for routine expenses if you are not currently paying it off every month
Establish and maintain an Emergency Fund
Emergencies are unscheduled trips home and car repairs
Plan ahead for your known major expenses
Avoid impulse purchases on credit
Don’t try to keep up with the Joneses
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Myth: I’ll start saving after graduationYour financial planning will never be simpler than it is now
If you haven’t learned to live within your budget now what makes you think you’ll do it when you’re paying for groceries and rent?
If you’re not eating in the mess hall now, what makes you think you’ll stop eating fast food later
The green zone in Baghdad has Subways
AAFES is in Iraq, too
If you have access to the internet you can spend money
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
The Cow Loan
Should I take the loan?
What should I do with it?
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Background• Cadets sign for $30k loan with very favorable interest terms
second semester Cow year
• Repayment represents 25% of base 2LT pay (30% after tax)
• We have seen an increase in financial vendors and interest from financial vendors in the last several years
• We have many reports of vendors pressing cadets to purchase products that are not always in their best interest
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Concerns
• Many cadets have no plan for the loan
• Cadets are bombarded by vendors who are selling products they don’t need
• Cadets are not planning ahead for major purchases and are taking on credit card debt in addition to the loan
• Cadets believe USMA sanctions the vendors that are selling them inappropriate products
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Cow Loan Basics
It’s a good deal -- take it!!
BUT!!!!
It’s a COW LOAN not a CASH COW!
Know thyself!!
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Review Budget Basics
Short Term Goals
Ring
Uniforms
Spring Break
Car
MediumTerm Goals
Wedding
House Down Payment
Spouse’s Tuition
Long Term Goals
Retirement
Kid’s College
These are the only items that a financial planner will recommend financing with debt
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Cow Loan Basics
#1 Priority is to pay off credit card debt
#2 Priority is to plan for known expenses without going into credit card debt
Class ring and uniforms
Any known travel
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Cow Loan Basics
#3 Priority is to pay for your car
Do not take on additional debt to buy a car
You are already maxed out!
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Cow Loan Basics
The ideal plan is to save and invest
Max out your Roth IRA
Invest the rest according to your medium and long term financial
needs
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Financial Goals
Short Term Goals
Ring
Uniforms
Spring Break
Car
Medium Term Goals
Wedding
House Down Payment
Spouse’s Tuition
Long Term Goals
Retirement
Kid’s College
The Cow Loan presents you with the opportunity to get a head start on your Medium and Long Term Goals
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Max Out Your Roth IRA
Invest $4000 toward 2006 before filing your taxes
Invest an additional $4000 against 2007
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Max Out Your IRA
Where?
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Invest the Rest
Okay, but where?
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Investing
Do Your Homework!
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
ResourcesYahoo! Finance
MSN Money
About.com
Investopedia.com
Investment Company Websites
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Investing
You can do it!
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Financial Planners
Are guaranteed to make their commission on load funds and annuities
You are not guaranteed a return
Must disclose how they are compensated
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Financial Planners
If you do not feel
like you are in charge of
YOUR MONEY
you have the wrong financial planner
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Cow Loan Don'tsDo not invest in an instrument that you do not understand
Do not transfer responsibility for your finances to your room mate
Do not trust someone just because they have permission to sell products on post
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Cow Loan Don'ts
Do not take on a car loan in addition to your cow loan
Do not take on credit card debt in addition to your cow loan
Do not invest in a financial instrument that you do not understand
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Recommendations
Plan ahead starting today
Get out of Credit Card debt ASAP
Avoid Credit Card debt by planning ahead
Max out your Roth IRA
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
The Way Ahead
• Company meeting with an Econ Instructor –M hour– More specifics on the Cow Loan– More specifics on products and plans– Opportunity to answer questions/dispel rumors
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
Additional Resources
• Economics Faculty• Investment Club holds a special seminar for the
cow loan
United States Military AcademyUnited States Military AcademyDepartment of Social SciencesDepartment of Social Sciences
Duty, Honor, CountryDuty, Honor, Country
No Mission Too Great!