PersonalManagement

1

An Eagle RequiredMerit Badge

Merit Badge Presentation by Robert Casto

Robert Castocasto.robert@gmail.com

513-759-0633Troop 952

Dan Beard CouncilCincinnati, OH

Instructor / Presenter

Why Eagle RequiredPersonal management is about mapping a plan for your life that will involve setting short-range and long-range goals and investigating different ways to reach those goals. Education, training, and experience all help make your goals become a reality. To achieve your goals, you will choose the best path and make a commitment to it, while remaining flexible enough to deal with changes and new opportunities.

Participation and Content

• Participation is expected and encouraged• Don’t be afraid to ask questions• This is not a boring subject unless you want it

to be. Your attitude will decide.• There will be a lot of reading and discussion,

but I have some surprises too.

DisclaimerAny statements made today are the opinions of the instructors. We are not financial professionals and our recommendations should be carefully evaluated by your own research and discussion with a financial professional.

IANA(L|D|FA|SB|N)

I am not trying to sell anything.

Let’s Get Started

Pay attention Have fun Scouts are courteous and kind Learn Ask Questions

– Even if it isn’t in the MB book

Introduction

How many of you: Have a credit card? Have made a major purchase like a car? Have a retirement plan?

Know the difference between growth and income producing stock?

Most people between 11-17 have none of these, or know anything about them.

Older means more responsibilities

For most of you HS graduation is just around the corner or a few years away!

Some may go directly to work, full time or part time, some may go to college!

Either way, you’ll be responsible for taking control of your life!– Managing money and finances– Managing time

Adult Handbook Doesn’t exist, but personal management can help you succeed

where others fail. Just because you’re older doesn’t mean you’re wiser! When you’re 18 you can sign contracts!

– These are legally binding– “I didn’t know what I was signing” won’t get you off the hook if you

make a mistake. Many adults get themselves into money troubles through poor

financial decisions.– Knowledge is power to control your future.– Must live with your choices and their

consequences.

Lots of Homework 1: Discuss large purchase with family 2: Track your budget for 13 weeks 8: Track your time for 7 days 9: Plan a project

You will start the work here if you haven’t already and will have to complete this requirement later.

My email is casto.robert@gmail.com If you have already completed,

present to me at the end of class

Requirement 1Do the following:

a) Choose an item that your family might want to purchase that is considered a major expense.

b) Write a plan that tells how your family would save money for the purchase identified in requirement 1a.

1. Discuss the plan with your merit badge counselor.2. Discuss the plan with your family.3. Discuss how other family needs must be considered in this plan.

c) Develop a written shopping strategy for the purchase identified in requirement 1a.

1. Determine the quality of the item or service (using consumer publications or ratings systems).

2. Comparison shop for the item. Find out where you can buy the item for the best price. (Provide prices from at least two different price sources.) Call around; study ads. Look for a sale or discount coupon. Consider alternatives. Can you buy the item used? Should you wait for a sale?

Pick a major item that your family would like to buy Automobile Appliance Boat Furniture Vacation

You want to pick something that will take a while to save for

How long? Expensive enough so it takes 6-12 months of saving.

Requirement

1a

Item that is a major expense

• Document how you are going to save the money needed to make this major purchase

• The amount saved each week or month should be reasonable and not jeopardize family needs

• Special activities to generate money?

• What contributions can each member of the family make?

Requirement

1b

Write a savings

plan

• Sales, price reductions, seasonal discounts, phase outs, etc

• Comparison shop: Check at least 3 stores our sources for the item

• Consider alternatives such as used, older version, smaller, fewer features

Requirement

1c

Develop a shopping strategy

Canon EOS Rebel T5• Research– ConsumerReports– Review Websites– Amazon Reviews

• Pricing– Amazon : $399– Newegg : $399– Ebay: $259.99 Used

• Savings– $20 / week = 20 weeks, 13 for Ebay

Requirement

1c

Example Large

Purchase

Requirement 2Do the following:

a) Prepare a budget reflecting your expected income (allowance, gifts, wages), expenses, and savings. Track your actual income, expenses, and savings for 13 consecutive weeks. (You may use the forms provided in this pamphlet, devise your own, or use a computer-generated version.) When complete, present the results to your merit badge counselor.

b) Compare expected income with expected expenses.1. If expenses exceed income, determine steps to balance your budget.2. If income exceeds expenses, state how

you would use the excess money (new goal, savings).

• What is a budget?– Plan for how money will be used

• Income : Money that is received• Expenses : Money that is paid• Net : Amount left over after

tallying all income and expenses– Goal is to never go negative– Live within your means

Requirement

2

What is a Budget?

Requirement

2

ExampleFamilyBudget

• Goal is to manage our money• Organize information so we can

make informed decisions• What decisions do we need to

make?– Saving for a specific goal– Determining if income is sufficient– Investing for the future– Building a safety cushion

• Preparing a budget is the first step in Money Management

Requirement

2

Budget

• Think of a budget in terms of your goals

• Most of us want to plan ahead and avoid negative consequences

• With our goals and plans, we can turn that into an action plan

• A budget is a plan that lets us obtain the financial goals we set

Requirement

2

PersonalBudget

• What happens if you don’t stay within your budget?

• What does a poorly managed budget look like?

• If you do not have enough money, what can you do?

• How do you handle the big purchases like college, car, house?

• What if you forget something?

Requirement

2

BudgetCheckpoint

Requirement 3Discuss with your merit badge counselor FIVE of the following concepts:

a) The emotions you feel when you receive money.b) Your understanding of how the amount of money you have with you

affects your spending habits.c) Your thoughts when you buy something new and your thoughts about the

same item three months later. Explain the concept of buyer’s remorse.d) How hunger affects you when shopping for food items (snacks, groceries).e) Your experience of an item you have purchased after seeing or hearing

advertisements for it. Did the item work as well as advertised?f) Your understanding of what happens when you put money into a savings

account.g) Charitable giving. Explain its purpose and your thoughts about it.h) What you can do to better manage your money.

• How do you feel when you receive money?

• Is the feeling the same when the amount is small or large?

• What is your first impulse with that money?

• How do you feel about $50 you worked for compared to received as a birthday present?

Requirement

3a

Emotions

• If you have a small amount of money, how would you spend it?

• Now consider you have 10x that amount? How would you spend it?

• What things do you have give up with little money?

• What new things would you consider buying having more money?

• Do you buy more or less?• Do you buy name brand vs generic?

Requirement

3b

How amount of

money affects

spending habits

Requirement

3c

Buyer’s Remorse

• The sense of regret after having made a purchase.

• Why do you feel bad later?– Worried you paid too much– Could have gotten something

better– Ended up not using it– Someone else got one

• Can you ever eliminate it?

Requirement

3c

RemorseCost

• Cars– Sign and it is a done deal– Depreciate the moment you drive it away

• Vacations– Cancelation fees– Penalties for late changes

• Electronics– Short return periods– Must have packaging or unopened

• Real Estate– Loose earnest money– Right of rescission (lose expenses)

• Contracts– Must pay remaining period (phone & rent)– May have early termination fees

Requirement

3d

How hunger affects

shopping

• You feel deprived• Will buy more than you need• Will buy food less healthy• Less concerned about cost– Easier to justify the expense– Hard to think about long term

http://www.forbes.com/sites/kateashford/2015/02/25/shopping-hungry/

• Ads are a $70B business (just TV)• Not a call to do something immediately• We respond negatively to straight

attempts at persuasion• So ads must be subtle and leave

impressions• They create positive memories and

feelings• How do you feel after seeing /hearing

an ad?• When does an ad work its magic?• What makes a good ad?

Requirement

3e

Experience after

hearing ads for

something

• Place to keep money• Bank pays interest while holding• Very liquid, money always

available• Insured up to $250k by FDIC• Accessible in person and debit

card if offered• Local and Internet choices– Differentiated by interest rates,

location, accessibility, minimum deposit/balance, fees, ATM’s

Requirement

3f

Savings Accounts

Requirement

3f

How is Interest

Paid?

Requirement

3f

How Banks Create Money

Requirement

3g

Charitable Giving

• Purpose?– Support a valued cause– Reduce tax burden

• 4 Tips from Warren Buffett1. Relevance

– What issue do you care about?– Where do you want to make a difference?– Solve a specific problem?

2. Impact– Money to one or multiple recipients?– Offer time instead of money?– Local, national, or international?

3. Sustainability– What other sources of revenue do they have?– Nonprofits don’t need to solicit money– Beware underpaid leadership, perform poor

4. Management & Operations– Strong board of directors– Safe, clean, and inviting facilities– Clear mission and communications– Consistent financials and open accountability

Requirement

3h

What can you do to

better manage money?

• Track your monthly spending• Develop a budget you can follow• Budget for savings (Rainy Day)• Pay bills and avoid late charges• Review credit report yearly• Eliminate debt• Take advantage of free money– Matching contributions– Lower tax obligations

• Use safe financial institutions• Follow long term strategies

Requirement 4

Explain the following to your merit badge counselor:

a) The differences between saving and investing, including reasons for using one over the other.

b) The concepts of return on investment and risk.c) The concepts of simple interest and compound

interest and how these affected the results of your investment exercise.

Saving InvestingShort TermFor near purchases, goals, emergencies, safety.

Long TermSaving for big goals, no need for the money short term.

Ready AccessShort time needed to get to the money. Will be there when you need it.

Limited AccessDifficult to get access to, may have penalties, or legal ramifications

Minimal RiskInsured by FDIC for $250k, principle is safe.

Higher RiskPossible to loose some or all of your invested money.

Earns InterestBank pays interest determined ahead of time, sometimes based on size of deposit .

Profit PotentialMoney can grow without limit through appreciation and other types of income.

Requirement

4a

Savingvs

Investing

• Abbreviated as ROI

• Used to compare the efficiency of different investments

• Also viewed as profit / cost• Measure is a percent• Example

20% = ($1200 - $1000) / $1000• Limited as it doesn’t consider time

Requirement

4b

Return on investment

and risk

Requirement

4c

Simplevs

CompoundInterest

Requirement 5

Select five publicly traded stocks from the business section of the newspaper. Explain to your merit badge counselor the importance of the following information for each stock:

a) Current priceb) How much the price changed from the previous

dayc) The 52-week high and the 52-week low prices

Requirement

5

Common Stocks

Current price to buy a share of the stockChange from previous day’s priceRange: High and low price for the day52 week: High and low price last 52 weeksOpen: Starting price for the dayVol / Avg: Number of shares sold and how many are

usually traded in a dayMkt cap: Value of the company (shares * price)P/E: Profit divided by earnings. Used to compare

different companiesDiv/yield: Latest dividend and effected rate over the

course of a yearEPS: Earnings per shareShares: Number of shares outstandingBeta: Measure of risk in relation to the marketInst own: Percentage of shares held by institutions

Requirement

5

ImportantNumbers

Requirement 6

Pretend you have $1,000 to save, invest, and help prepare yourself for the future. Explain to your merit badge counselor the advantages or disadvantages of saving or investing in each of the following:

a) Common stocksb) Mutual fundsc) Life insuranced) A certificate of deposit (CD)e) A savings account or U.S. savings bond

• Advantages– Potential for growth– Unlimited income potential– Can also return interest (dividends)– Lots of choices– Benefits those who choose well

• Disadvantages– Can lose initial investment– No guaranteed profit– Must setup an account– Per transaction fees– Could be difficult to sell

Requirement

6a

Common Stocks

Requirement

6b

Mutual Funds

• Advantages– Same as stocks– Less risk spread on many stocks– Less research needed– Dividend reinvestment– Lower cost of entry

• Disadvantages– Same as stocks– Expenses to pay managers– Less potential gain– Less control over choices– Limits on buy/sell frequency

Requirement

6c

Life Insurance

• Advantages– None, not an investment. It is an

expense. Used to provide a benefit in the event of death.

– Fixed value of the policy– Heavily regulated by government

• Disadvantages– Not an investment– Some policies are complex and give

poor returns– Need to continue paying premiums

to keep benefits

Requirement

6d

Certificate of Deposit

(CD)

• Advantages– Considered very safe– Easy to buy from a bank– Predictable rate of return– Wide selection of maturities– Can automatically reinvest– Insured by FDIC– Better return than savings account

• Disadvantages– Require set time frame– Early withdrawal penalties– Low rates of return for short time frames– Inflation risk as rates fall behind

Requirement

6e

Savings Account or

U.S. Savings Bond

• Advantages– Generally exempt from state income tax– May be exempt from federal income tax– Virtually guaranteed rate of return– EE bonds bought at ½ face value– Earn interest for up to 30 years

• Disadvantages– Taxed if not used for education– Only usable toward tuition and fees– Maximum annual purchase of $10k– Income limits to avoid taxes at redemption

Requirement 7Explain to your merit badge counselor the following:a) What a loan is, what interest is, and how the annual

percentage rate (APR) measures the true cost of a loan.b) The different ways to borrow money.c) The differences between a charge card, debit card, and

credit card. What are the costs and pitfalls of using these financial tools? Explain why it is unwise to make only the minimum payment on your credit card.

d) Credit reports and how personal responsibility can affect your credit report.

e) Ways to reduce or eliminate debt.

Requirement

7a

LoansInterest

APR

• Loan: Something borrowed, especially a sum of money expected to be paid back– E.g. Money from a bank to buy a car, house, or

other large item

• Interest: Money paid regularly at a particular for the user of the money lent, or for delaying the repayment of the debt– E.g. 12% a year would be 1% per month

• APR: Annual percentage rate is the actual percent of interest you will pay in the course of a year– The balance of your loan can be calculated daily

which is 12/365% or .033%. This is charged on the balance daily and ends up being more than the advertised rate of 12%

Requirement

7b

Ways to borrow money

Bank Loan: Sign contract with bank, fixed rateCredit Union: Same as bank but better termsSecured Loan: Large item guarantees amount

borrowedCredit Cards: 0% new purchase or low rate cardsCash Advance: Cash from credit card, high ratePayday Loans: Short term, high rate, charges if lateFamily & Friends: Negotiable terms and ratesSocial Lender: Online sites doing micro loans like

kiva.org. Also called peer to peer loan.HELOC: Borrow against the equity in your homeMargin Loan: Borrow against value of stocksPawn Shop: Give them something, they give you

cash, you pay off to get item back or they keep itTax Loan: Borrow against expected tax refund

Requirement

7c

ChargeCreditDebit

CARDS

• A credit card is an unsecured loan• More convenient than carrying money

– Don’t have to have full amount in cash– Safer if it gets stolen

• Many charge no interest if paid in full monthly

• High interest rates on balances• Low minimum payments• Expensive to get cash

Requirement

7d

Credit Reports

• Record of a borrower’s credit history reported by lenders

• 3 Reporting Agencies– Equifax, Experian, Trans Union

• Fair Credit Reporting Act – Free copy from each every 12

months– https://www.fdic.gov/

consumers/consumer/ccc/reporting.html

Requirement

7d

Credit ReportItems

• Payment history of loans– Company, dates, limit,

balance, payments, requests

Requirement

7e

Reduce or Eliminate

Debt

“Those who understand interest earn it, those who don’t, pay it.”– Albert Einstein

• 7 Strategies you can employ1. APR: Best bang for the buck2. Highest payment3. Highest balance4. Lowest number of payments5. Lowest balance6. Lowest payment7. Custom: Mom & Dad first

http://www.zilchworks.com/debt-reduction-strategies.asp

Requirement 8Demonstrate to your merit badge counselor your understanding of

time management by doing the following:a) Write a “to do” list of tasks or activities, such as homework assignments, chores, and

personal projects, that must be done in the coming week. List these in order of importance to you.

b) Make a seven-day calendar or schedule. Put in your set activities, such as school classes, sports practices or games, jobs or chores, and/or Scout or place of worship or club meetings, then plan when you will do all the tasks from your “to do” list between your set activities.

c) Follow the one-week schedule you planned. Keep a daily diary or journal during each of the seven days of this week’s activities, writing down when you completed each of the tasks on your “to do” list compared to when you scheduled them.

d) Review your “to do” list, one-week schedule, and diary/ journal to understand when your schedule worked and when it did not work. With your merit badge counselor, discuss and understand what you learned from this requirement and what you might do differently the next time.

Requirement

8a

TimeManage-

ment

• Create a list of all the tasks and activities you have over the course of the next week

• Ideas– Homework– Chores– Projects– Meetings– Practice

• Do not include things like meals and items you cannot avoid

• List in order of importance

Requirement

8b

Calendar

• Make a seven-day calendar adding items such as– School classes– Sports practice– Music practice– Jobs– Chores– Club meetings– Church– Scout meetings– Walk / feed dog– Wake and bed time

• Plan when all the tasks from your “to do” list will be done between your set activities.

Requirement

8c 8d

Follow Plan

Review & Report

• Follow the schedule for one week• Keep a daily diary or journal each day• Write down when each task was

completed

• Review your “to do” list, one-week schedule, and diary/ journal

• What worked and what didn’t?• Write a letter to me presenting what you

learned from the experience and what you might do differently the next time.

• Mail or email the letter to me

Requirement 9Prepare a written project plan demonstrating the steps below, including the

desired outcome. This is a project on paper, not a real-life project. Examples could include planning a camping trip, developing a community service project or a school or religious event, or creating an annual patrol plan with additional activities not already included in the troop annual plan. Discuss your completed project plan with your merit badge counselor.

a) Define the project. What is your goal?b) Develop a timeline for your project that shows the steps you must take

from beginning to completion.c) Describe your project.d) Develop a list of resources. Identify how these resources will help you

achieve your goal.e) If necessary, develop a budget for your project.

Requirement

9

Written Project

Plan

• Choose a project that will take time to complete– NOTE: This is not a real-life project you have to do– Some Examples Are …

• Canoeing , camping, hiking trip• Community service project• School or religious event or activity

• Get approval of project from counselor

• Write our project and e|mail to counselora) Define the project. What is your goal?b) Develop a timeline for your project that shows the steps you

must take from beginning to completion.c) Describe your project.d) Develop a list of resources. Identify how these resources will

help you achieve your goal.e) If necessary, develop a budget for your project.

• Rest of class time while signing cards can be used to work on this requirement

Requirement 10

Do the following:a) Choose a career you might want to enter

after high school or college graduation.b) Research the limitations of your

anticipated career and discuss with your merit badge counselor what you have learned about qualifications such as education, skills, and experience.

Requirement

10

Careers

• Financial Careers– Financial controller– Accounting– Purchasing– Stock Broker– Banker

• Time Management Careers– Business Management– Project Planning– Logistics

MyContact

Info

• EMAIL: casto.robert@gmail.com

• POST:7723 Tylers Place Blvd #180West Chester, OH 45044

• Rest of class time is available to work on requirement 9

• Great time to ask questions!