Personal Management Merit Badge Presentation

Slides for use in presenting requirements for the personal management merit badge.

1. Personal Management 1 An Eagle Required Merit Badge Merit Badge Presentation by Robert Casto

2. Robert Casto [email protected] 513-759-0633 Troop 952 Dan Beard Council Cincinnati, OH Instructor / Presenter

3. Why Eagle Required Personal 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.

4. 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.

5. Disclaimer Any 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.

6. 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

7. 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.

8. 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

9. 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.

10. 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 [email protected] If you have already completed, present to me at the end of class

11. Requirement 1 Do the following: Choose an item that your family might want to purchase that is considered a major expense. Write a plan that tells how your family would save money for the purchase identified in requirement 1a. Discuss the plan with your merit badge counselor. Discuss the plan with your family. Discuss how other family needs must be considered in this plan. Develop a written shopping strategy for the purchase identified in requirement 1a. Determine the quality of the item or service (using consumer publications or ratings systems). 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?

12. 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

13. 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

14. 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

15. 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

16. Requirement 2 Do the following: 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. Compare expected income with expected expenses. If expenses exceed income, determine steps to balance your budget. If income exceeds expenses, state how you would use the excess money (new goal, savings).

17. 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?

18. Requirement 2 Example Family Budget

19. 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

20. 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 Personal Budget

21. 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 Budget Checkpoint

22. Requirement 3 Discuss with your merit badge counselor FIVE of the following concepts: The emotions you feel when you receive money. Your understanding of how the amount of money you have with you affects your spending habits. Your thoughts when you buy something new and your thoughts about the same item three months later. Explain the concept of buyer’s remorse. How hunger affects you when shopping for food items (snacks, groceries). Your experience of an item you have purchased after seeing or hearing advertisements for it. Did the item work as well as advertised? Your understanding of what happens when you put money into a savings account. Charitable giving. Explain its purpose and your thoughts about it. What you can do to better manage your money.

23. 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

24. 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

25. 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?

26. Requirement 3c Remorse Cost 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

27. 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/

28. 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

29. 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

30. Requirement 3f How is Interest Paid?

31. Requirement 3f How Banks Create Money

32. Requirement 3g Charitable Giving Purpose? Support a valued cause Reduce tax burden 4 Tips from Warren Buffett Relevance What issue do you care about? Where do you want to make a difference? Solve a specific problem? Impact Money to one or multiple recipients? Offer time instead of money? Local, national, or international? Sustainability What other sources of revenue do they have? Nonprofits don’t need to solicit money Beware underpaid leadership, perform poor Management & Operations Strong board of directors Safe, clean, and inviting facilities Clear mission and communications Consistent financials and open accountability

33. 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

34. Requirement 4 Explain the following to your merit badge counselor: The differences between saving and investing, including reasons for using one over the other. The concepts of return on investment and risk. The concepts of simple interest and compound interest and how these affected the results of your investment exercise.

35. Saving Investing Short Term For near purchases, goals, emergencies, safety. Long Term Saving for big goals, no need for the money short term. Ready Access Short time needed to get to the money. Will be there when you need it. Limited Access Difficult to get access to, may have penalties, or legal ramifications Minimal Risk Insured by FDIC for $250k, principle is safe. Higher Risk Possible to loose some or all of your invested money. Earns Interest Bank pays interest determined ahead of time, sometimes based on size of deposit . Profit Potential Money can grow without limit through appreciation and other types of income. Requirement 4a Saving vs Investing

36. 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

37. Requirement 4c Simple vs Compound Interest

38. 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: Current price How much the price changed from the previous day The 52-week high and the 52-week low prices

39. Requirement 5 Common Stocks

40. Current price to buy a share of the stock Change from previous day’s price Range : High and low price for the day 52 week : High and low price last 52 weeks Open : Starting price for the day Vol / Avg : Number of shares sold and how many are usually traded in a day Mkt cap : Value of the company (shares * price) P/E : Profit divided by earnings. Used to compare different companies Div/yield : Latest dividend and effected rate over the course of a year EPS : Earnings per share Shares : Number of shares outstanding Beta : Measure of risk in relation to the market Inst own : Percentage of shares held by institutions Requirement 5 ImportantNumbers

41. 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: Common stocks Mutual funds Life insurance A certificate of deposit (CD) A savings account or U.S. savings bond

42. 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

43. 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

44. 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

45. 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

46. 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

47. Requirement 7 Explain to your merit badge counselor the following: What a loan is, what interest is, and how the annual percentage rate (APR) measures the true cost of a loan. The different ways to borrow money. 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. Credit reports and how personal responsibility can affect your credit report. Ways to reduce or eliminate debt.

48. Requirement 7a Loans Interest 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%

49. Requirement 7b Ways to borrow money Bank Loan : Sign contract with bank, fixed rate Credit Union : Same as bank but better terms Secured Loan : Large item guarantees amount borrowed Credit Cards : 0% new purchase or low rate cards Cash Advance : Cash from credit card, high rate Payday Loans : Short term, high rate, charges if late Family & Friends : Negotiable terms and rates Social Lender : Online sites doing micro loans like kiva.org. Also called peer to peer loan. HELOC : Borrow against the equity in your home Margin Loan : Borrow against value of stocks Pawn Shop : Give them something, they give you cash, you pay off to get item back or they keep it Tax Loan : Borrow against expected tax refund

50. Requirement 7c Charge Credit Debit 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

51. 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

52. Requirement 7d Credit Report Items Payment history of loans Company, dates, limit, balance, payments, requests

53. Requirement 7e Reduce or Eliminate Debt “Those who understand interest earn it, those who don’t, pay it.” – Albert Einstein 7 Strategies you can employ APR: Best bang for the buck Highest payment Highest balance Lowest number of payments Lowest balance Lowest payment Custom: Mom & Dad first http://www.zilchworks.com/debt-reduction-strategies.asp

54. Requirement 8 Demonstrate to your merit badge counselor your understanding of time management by doing the following: 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. 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. 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. 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.

55. Requirement 8a Time Manage- 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

56. 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.

57. 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

58. Requirement 9 Prepare 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. Define the project. What is your goal? Develop a timeline for your project that shows the steps you must take from beginning to completion. Describe your project. Develop a list of resources. Identify how these resources will help you achieve your goal. If necessary, develop a budget for your project.

59. 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 counselor Define the project. What is your goal? Develop a timeline for your project that shows the steps you must take from beginning to completion. Describe your project. Develop a list of resources. Identify how these resources will help you achieve your goal. If necessary, develop a budget for your project. Rest of class time while signing cards can be used to work on this requirement

60. Requirement 10 Do the following: Choose a career you might want to enter after high school or college graduation. 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.

61. Requirement 10 Careers Financial Careers Financial controller Accounting Purchasing Stock Broker Banker Time Management Careers Business Management Project Planning Logistics

62. My Contact Info EMAIL: [email protected] POST: 7723 Tylers Place Blvd #180 West Chester, OH 45044 Rest of class time is available to work on requirement 9 Great time to ask questions!