Notes: This booklet has been assembled from many sources. All of the sources are denoted by URLs. If an item does not have a source it is an unintentional omission and will be corrected or removed when brought to our attention.

This work is only for the use with Scouting Personal Merit Badge. This is a no cost item and may in no way be sold. There are no guarantees or warrantees provided with this work. This work is provided “As is”.

Personal Management Requirements Overview

1. Do 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 rating 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?

2. Do the following:

3. Discuss 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.

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.

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 price

b. How much the price changed from the previous day

c. The 52-week high and the 52-week low prices

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 stocks

b. Mutual funds

c. Life insurance

d. A certificate of deposit (CD)

e. A savings account or U.S. savings bond

7. Explain 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 eliminate debt.

8. Demonstrate 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 church 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.

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.

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.

i. Note: Develop a budget for your project (this is not a choice in Troop 174)

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 1

Do 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 rating 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?

Choose An Item

What is a major expense? __________________________________________________

Item Ideas ________________________________________________

________________________________________________

Ideas for Saving Money

________________________________________________

What are your family Needs? What is a Need?

What much are you willing to spend?

How long are you willing to wait?

Is this an item you need or want?

What is disposable income?

Can disposable income change from month to month?

How do measure disposable income?

How can you lower the cost of an item?

How will a sale or discount coupon help?

Now that you know your disposable income how do you plan to save money?

How long will it take to purchase your item?

What can you do to increase your disposable income?

Where would you go to shop for your item?

________________________________________________

Where can we look to find the “quality of the item”?

________________________________________________

Who are Consumer Reports? What other consumer publications are there?

Where did you look for your item? (list them all)

________________________________________________

Did you look on-line? What did you find there?

________________________________________________

Requirement 2

Do 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).

Definitions of budget on the Web:

a sum of money allocated for a particular purpose; "the laboratory runs on a budget of a million a year"
a summary of intended expenditures along with proposals for how to meet them; "the president submitted the annual budget to Congress"
wordnet.princeton.edu/perl/webwn
Budget generally refers to a list of all planned expenses. A budget is an important concept in microeconomics, which uses a budget line to illustrate the trade-offs between two or more goods.
en.wikipedia.org/wiki/Budget
An estimate of income and expenses for a specified period.
https://www.travelerslife.com/Tips/html/Retirement_Glossary.jsp
The budget is the annual announcement of the government’s fiscal policy changes. It announces the tax changes proposed for the following tax year, and also how the government plans to spend that revenue.
web.idrc.ca/es/ev-42971-201-1-DO_TOPIC.html

Definitions of income on the Web:

the financial gain (earned or unearned) accruing over a given period of time
wordnet.princeton.edu/perl/webwn
Income, generally defined, is the money that is received as a result of the normal business activities of an individual or a business. For example, most individuals' income is the money they receive from their regular paychecks.
en.wikipedia.org/wiki/Income
For each person in the sample who is 15 years old and over, questions are asked on the amount of money income received in the preceding calendar year from each of the following sources: (1) money wages or salary; (2) net income from nonfarm self-employment; (3) net income from farm self-employment; (4) Social Security or railroad retirement; (5) Supplemental Security Income; (6) public assistance or welfare payments; (7) interest (on savings or bonds); (8) dividends, income from estates or trusts, or net rental income; (9) veterans' payment or unemployment and workmen's compensation; (10) private pensions or government employee
www.bls.census.gov/cps/bglosary.htm

Definitions of Expenses on the Web:

In accounting, an expense is a general term for an outgoing payment made by a business or individual.
en.wikipedia.org/wiki/Expenses
These are the expenses an insurance provider will consider for payment. These normally include expenses for surgery, hospitalization, doctors’ services, x-rays, laboratory tests, prescription drugs and other treatments. Some of these expenses may be limited by the insurance contract. See exclusions.
www.wsfa.com/global/story.asp
Costs paid out in connection with booking of cargo and arranging transport (eg commission).
www.shipping.francoudi.com/main/main.asp
Alternatively expenses are the costs of goods and services used to produce the educational services provided by the institution.
heads.arts-accredit.org/index.jsp
Costs incurred to create revenue.
investor.news.com/Engine

In order to build a budget you need to have the ability to forecast the future. A budget shows your expected income and where it will come from as well as your expected expenses and what you will be doing with the money.

How can you build a forecast? What information do you have to help?

Expected Income: ____________________ Expected Expenses: ____________________

Where do you expect to get money from? How much?

1________________________________________________ $_____________

2________________________________________________ $_____________

3________________________________________________ $_____________

4________________________________________________ $_____________

(If you need more, use another piece of paper.)

Where do you expect your money to go? How much?

1________________________________________________ $_____________

2________________________________________________ $_____________

3________________________________________________ $_____________

4________________________________________________ $_____________

(If you need more, use another piece of paper.)

When will you get your income?

Date 1 Date 2 Date 3 Date 4

___________ ___________ ____________ ____________

When will you be spending your money?

Date 1 Date 2 Date 3 Date 4

___________ ___________ ____________ ____________

What is profit? What is Loss?

How can you build a P&L Statement for yourself?

Does it matter?

Requirement 3

Discuss 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 emotions play into what we do with our money?

Are emotions good or bad?

What do you think a little money is? _________ What is a lot of money? _________

What is the difference?

What is Cash Flow?

Is this something that just happens?

How do you control Cash Flow?

Describe some tools that you have to help with Cash Flow

________________________________________________

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.

Definitions of savings on the Web:

a fund of money put by as a reserve
wordnet.princeton.edu/perl/webwn
In common usage, saving generally means putting money aside, for example, by putting money in the bank or investing in a pension plan. Outside of economics, saving is typically used to refer to economizing, cutting costs, or to rescuing someone or something.
en.wikipedia.org/wiki/Savings
Money set aside so that it can be used later.
www.smithbarney.com/yin/he_dictionary.htm
difference between available income and current consumption expenditures.
www.nscb.gov.ph/ru12/DEFINE/DEF-INC.HTM
All income of households (and firms) that is neither immediately spent on goods and services for final consumption nor taken by the government as taxes. Such savings may be held as balances in bank accounts or as cash on hand. Savings may be held for the purpose of subsequent investment or for some other purpose, such as accumulating sufficient funds for future consumption spending on big ticket items, maintaining an emergency reserve against the possibility of unpredicted consumption expenses, providing for post-retirement consumption spending, or even for the perverse psychological pleasures of hoarding in the miserly tradition of Silas
www.jezuici.pl/iss/politdic/s.html

Definitions of investing on the Web:

the act of investing; laying out money or capital in an enterprise with the expectation of profit
wordnet.princeton.edu/perl/webwn
Investment is a term with several closely related meanings in finance and economics. It refers to the accumulation of some kind of asset in hopes of getting a future return from it.
en.wikipedia.org/wiki/Investing
The act of using money to make more money.
www.frbatlanta.org/invoke.cfm
This is a problematic term to define. In common usage it is taken to mean exchanging money for a promise of more money in the future (investing in a bond), exchanging money for some or total ownership of a company or companies (investing in a stock or mutual fund), and the exchange of money by a business for an addition to their ability to produce (capital investment). While most people are familiar with the first two uses, I will henceforth always be specific when I use the third and call it capital investment. (A side-note for the interested: investment
www.unimpressed.net/archives/000026.html

Definitions of return on investment on the Web:

A figure of merit used to help make capital investment decisions. ROI is calculated by considering the annual benefit divided by the investment amount.
www.gao.gov/policy/itguide/glossary.htm
In the private sector, the annual financial benefit after an investment minus the cost of the investment. In the public sector, cost reduction or cost avoidance obtained after an improvement in processes or systems, minus the cost of the improvement.
www.balancedscorecard.org/basics/definitions.html
The net annual income divided by the original cash investment equals a percentage return on investment.
www.prou.net/utilities/glossary/glossary09.html
(ROI) The interest rate at which the net present value of a project is zero. Multiple values are possible.
bioenergy.ornl.gov/faqs/glossary.html
Investment result as a percentage of average invested assets. Invested assets include investments, funds held by ceding companies, net cash equivalents and net reinsurance assets. Average invested assets are calculated as opening balance plus one half of the net asset turnover.
www.swissre.com/INTERNET/pwswpspr.nsf/vwRobotCrawlLU/ABOD-5UCLEM
An amount, expressed as a percentage, of the profit or loss resulting from a security transaction. In the corporate realm, it is the amount earned on a company's total capital calculated by dividing total capital into earnings before taxes, invest and dividend payments are deducted. Used as tool to evaluate companies in terms of management efficiency and product viability.
www.trader-soft.com/option-trading/option-glossary/qr.html
An accounting ratio expressing the profit of an organization for a financial year as a percentage of the capital employed. Used ratios for assessing the performance of organizations. Profit is usually taken as profit before interest and tax, while capital employed refers to fixed assets plus working capital minus current liabilities.
www.promitheas.com/glossary.php

Definitions of simple interest on the Web:

Interest paid only on the principal of a loan. No interest is paid on interest accrued during the term of the loan.
www.onlinewbc.gov/docs/starting/glossary.html
If you earn simple interest on money you deposit in a bank or use to purchase a certificate of deposit (CD), the interest is figured on the amount of your principal alone. For example, if you had $1,000 in an account that paid 5% simple interest for five years, you'd earn $50 a year ($1,000 x .05 = $50) and have $1,250 at the end of five years. In contrast, if you had been earning compound interest, you'd have $1,276.29 at the end of five years, since the interest you earned each year, as well as your principal, would
www.morganstanleyindividual.com/customerservice/dictionary/Default.asp
Used on loans with a single payment. Interest is calculated on the amount of the loan during the time period for which the money is borrowed. The effective rate is the same as the stated rate.
www.extension.iastate.edu/agdm/wholefarm/html/c3-05.html
is the method in which outstanding balances grow linearly with time. In each period, the total balance grows by some fraction of the principal (that is, of the original investment).
encyclopedia.laborlawtalk.com/Interest
Interest calculated on the original sum (principal) invested and not also interest reinvested. It can be calculated form the formula I = Pni where I is the amount of simple interest, P is the principal, n is the number of periods, and i is the simple rate of interest per period. Simple interest is normally only used when the interval of time involved is short.
www.indiainfoline.com/bisc/accs.html
a savings account pays simple (rather than compound) interest when interest is paid only against the original principal (deposit)
wellspring.isinj.com/sample/econ/macro/glosss.htm
In finance, interest has three general definitions. *Interest is a surcharge on the repayment of debt (borrowed money). *Interest is the return derived from an investment. *Interest is the right to claim in a corporation such as that of an owner or creditor.
en.wikipedia.org/wiki/Simple_interest

Definitions of compound interest on the Web:

Interest earned on an investment at periodic intervals and added to the original amount of the investment. Future interest payments are then calculated and paid at the original rate but on the increased total of the investment. This is really interest paid on interest.
www.globeinvestor.com/resources/glossary/glossaryc.html
Interest credited daily, monthly, quarterly, semiannually, or annually on both principal and previously credited interest.
www.tiaa-cref.org/pubs/html/financial_terms/abc.html
Interest paid on accumulated interest as well as on the principal.
www.astoriafederal.com/html/glossary/glossary_text.html
Income earned on income that was previously earned. For example, if you invest $20,000 at 8%, you would earn $1,600 interest the first year. In the second year, you would earn an additional $128 of interest on the $1,600 interest of the first year as well as another $1,600. That $128 is called compound interest.
www.tdcanadatrust.com/mutualfunds/glos_mutual.jsp
As opposed to simple interest. The accumulation of interest on a loan over time where interest is charged not only on the principal of the loan but also on all interest accrued against the principal to the end of the last compound period.
www.omegarealtors.com/Glossary/default.asp
(Intérêts composés) Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.
patrick-bouteculet.tripod.com/ED.html
Compound interest means that each time interest is paid, it is added to or compounded into the principal and thereafter also earns interest. For example, a new deposit balance is estimated each day for daily compounding. Common compounding periods are daily, monthly, quarterly, annually and continuously. The more frequent the compounding, the higher the effective rate of interest.

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 price

b. How much the price changed from the previous day

c. The 52-week high and the 52-week low prices

Use the booklet at the end of this book to help you select and track your stock.

Stock

An ownership investment in a corporation, represented by shares that are a claim on the company's assets and earnings. “Common stock” gives investors voting rights in the company, entitling them to vote on the election of directors and other issues, either at shareholders meetings or by proxy. "Preferred stock" usually does not grant voting rights, but preferred shareholders have a prior claim on assets and earnings. That is, dividends must be paid on preferred stock before being paid on common stock.
www.state.il.us/treas/Education/Glossary.htm

Bonds

Definitions of Bonds on the Web:

Bonds are loans. When you buy a bond, you are lending money to a bond issuer in return for a set rate of interest. The issuer agrees to repay your principal on a specified future date. There are three main types of bonds: government, corporate, and municipal bonds.
www.pncadvisors.com/investments/view/1,1419,Glossary,00.html
A certificate which is evidence of a debt on which the issuer promises to pay the holder a specified amount of interest for a specified length of time, and to repay the loan on its maturity. Strictly speaking, assets are pledged as security for the loan, except in the case of government bonds, but the term is often loosely used to describe any debt issue. Bonds are issued by corporations and by federal, provincial and municipal governments. Bond holders are first in line before shareholders to claim any of a company's assets in the event of liquidation.
www.globeinvestor.com/resources/glossary/glossaryb.html
Officially called debt securities, bonds provide ways for governments to raise large sums of money by borrowing. Bonds usually have a principle amount and a contract interest rate. The principle can be paid at maturity while the interest is generally paid semi-annually as a percent of the principle. For example, a government could see 10,000,000 in bonds with a 5% interest rate. If the bonds matured in five years, then the 10,000,000 would have to be paid to the bondholder. During that period, 500,000 would have to be paid in interest each year or 250,000 semi-annually. These bonds
www.pwc.gmu.edu/course/govt490/C4-glossary.html
A bond is simply an IOU. It is an agreement under which a sum is repaid to an investor after an agreed period of time. By purchasing a bond you are lending money to the institution issuing the bond. Such loans normally repay a fixed rate of interest (unlike equities) over a specified time and then repay the original sum in full after a fixed period when the bond matures. Bonds are generally issued by either the government (gilt-edged bonds), or a public company (corporate bonds).
www.guardian.co.uk/business/glossary/page/0,13866,1052792,00.html

Pick and track five stocks for four days. Enter the data from your stocks here.

Stock	Price Day 1	Price Day 2	Price Day 3	Price Day 4
1.
2.
3.
4.
5.

If you invested $1,000 on Day One, what would you have at the end of Day Four?

Please show work:

Pick and track five bonds for four days. Enter the data from your bonds here.

Bond Name	Price Day 1	Price Day 2	Price Day 3	Price Day 4
1.
2.
3.
4.
5.

If you invested $1,000 on Day One, what would you have at the end of Day Four?

Please show work:

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 stocks

b. Mutual funds

c. Life insurance

d. A certificate of deposit (CD)

e. A savings account or U.S. savings bond

Definitions of Common stock on the Web:

A representative Equity share proving ownership in a specific corporation.
www.lasallebank.com/investments/glossary.html
Securities that represent an ownership interest in a corporation. If the company has also issued preferred stock, both common and preferred have ownership rights. Common stockholders assume the greater risk, but generally exercise the greater control and may gain the greater award in the form of dividends and capital appreciation. The terms common stock and capital stock are often used interchangeably when the company has no preferred stock.
www.raymondjames.com/gloss.htm
Equity securities representing ownership in a corporation and provides the holder with voting rights and the right to a share of the company's residual earnings through dividends and/or capital appreciation.
www.thecorporatelibrary.com/Help/glossary/glossary.asp
Common stock is one of two types of stock an investor may purchase in a company. Owners of common stock have voting privileges and are entitled to receive dividends. If a company liquidates, common stockholders are paid after bondholders and investors who hold preferred stock. In most cases, however, common stock has the greater potential for capital appreciation.
www.banknorth.com/assetmgmt/assetmgmt/glossary.html

Definitions of Preferred stock on the Web:

A class of capital stock that pays dividends at a specified rate and that has preference over common stock in the payment of dividends and the liquidation of assets. Preferred stock does not ordinarily carry voting rights.
www.earlycapital.com/private_equity_glossary.htm
A security that shows ownership in a corporation and gives the holder a claim, prior to the claim of common stockholders, on earnings and also generally on assets in the event of liquidation. Most preferred stock pays a fixed dividend that is paid prior to the common stock dividend, stated in a C£ amount or as a percentage of par value. This stock does not usually carry voting rights. Preferred stock has characteristics of both common stock and dept.
www.clrfn.com/extras/glossary/exglostext.html
A preferred stock is a type of capital stock that pays dividends at a set rate (at the time of issuance). Dividend payments to preferred holders must be made before common stock dividends can be paid. Preferred stocks usually do not have voting rights.
www.environmentalinvestors.com/glossary/ilPrPt.htm

Please answer the following:

How many shares of Common Stock does IBM have outstanding? __________________

How many shares of Common Stock does GE have outstanding? __________________

How many shares of Preferred Stock does IBM have outstanding? __________________

How many shares of Preferred Stock does GE have outstanding? __________________

Why would a person Buy common stock over preferred stock?

________________________________________________________________________

Some corporations issue both common and preferred stock. Each provides unique benefits to investors. Both common and preferred shareholders own a company, so the two types vary largely by rights. Common stock confers voting and pre-emptive rights. Preferred stock may trade voting and pre-emptive rights for dividends and a higher claim to liquidated company assets than common stock.

In this tutorial, we will first explain shareholder rights and privileges, followed by common and preferred stocks and their respective properties. For common stock, we will cover these topics:

For preferred stock will cover these areas:

SHAREHOLDER RIGHTS AND PRIVILEGES

Both common and preferred shareholders have the following rights and privileges (although preferred shareholders may have theirs restricted or applied only in certain situations).

VOTING RIGHTS

Owners of common stock have the right to vote on company matters. For example, they can vote on whether to allow a stock split, or whether the objective of the company should be changed. They cannot, however, vote on whether dividends should be distributed.

A shareholder has one vote for each share owned. To cast their votes, most shareholders use a form of absentee ballot called a proxy.

Shareholders also elect the management of the corporation. There are two methods of voting. The statutory method provides one vote per share for each vacant seat; this method benefits those who hold many shares. The cumulative method allows those who do not own many shares to have as many votes as there are seats to be filled. Shareholders can cast all their votes for one candidate or distribute their votes among several. For example, if five directors were to be elected, an owner of 30 shares of stock with the cumulative voting right would have 150 votes that they could cast for one director or spread among the five directors.

PREEMPTIVE RIGHTS

Preemptive rights may give shareholders the right to keep their proportionate ownership of the company. If the company offers a new issue of stock to the public, shareholders are accorded the right to buy new shares to keep their percentage of ownership the same. With preemptive rights, they can maintain voting control, share of earnings and share of assets.

Preemptive rights let common shareholders buy new shares of stock before non-stockholders. Thus, these rights assure the keeping of previous percentages of ownership. They must be exercised within 45 days. If they are not, the company may sell the stock to non-shareholders.

OTHER RIGHTS OF COMMON STOCKHOLDERS

Shareholders have the right to inspect the books and records of the company. They also have the right to sue the management for any unauthorized activities.

They have the privilege of receiving dividends as cash, stock or property. The board of directors, however, is allowed to forego paying dividends if it feels that doing so is against the best interests of the corporation.

Stockholders also have the right to receive distributions of any remaining assets should the company go out of business. However, as stated before, they are last in line for the asset-claiming privilege. Preferred shareholders are paid before common shareholders.

AN OVERVIEW OF COMMON STOCK

Common stock represents ownership in a corporation.

Common stock dividends may be paid in cash, stock or property. The most common payment method is a cash dividend. The board of directors determines whether or not to pay dividends to common shareholders. Increases or reductions most frequently depend on how well the company is performing. In a weak economy the company may even suspend dividends until its balance sheet improves.

Should the corporation issuing the stock go bankrupt and have to sell its assets, common stockholders will receive the assets, but only after all other creditors, bondholders and preferred stockholders receive them first.

TYPES OF COMMON STOCK DIVIDENDS

Common stock pays dividends in three forms: cash, stock and property. Let's take a look at each one.

Cash dividends are those that are paid out in cash form. They are treated as investment income and are taxable in the year they are paid.

Stock dividends are dividends paid out in the form of additional stock shares in the corporation, or shares of a subsidiary corporation. They are usually issued in proportion to shares owned. For example, for every 100 shares of stock owned, a 4 percent stock dividend will yield four extra shares. When the company distributes these new shares to investors, the price of each share decreases to account for the new shares. This is a recalculation of cost basis. It means that the stock dividends will not be taxed when distributed.

Stock dividends benefit the company by conserving its cash and they benefit the shareholder by increasing his/her number of shares of the company.

Property dividends are paid with assets owned by the issuing company. Property dividends are usually paid in the form of products or services that the corporation produces. Often the corporation, when paying property dividends, will use securities of other companies owned by the issuer.

This concludes our look at common stock. Read below to learn about preferred stock ownership.

PREFERRED STOCK

Preferred stock also represents ownership in a corporation.

Preferred stock promises guaranteed dividends and a claim on a company's assets that is above that of common shareholders. The tradeoff may be that preferred shareholders cannot vote or share other specified rights. Preferred stock pays a fixed dividend that is specified and set down in advance. Unless the stock is retired or called back, it will continue paying dividends forever.

Preferred stock is usually issued with a $100 par (face) value. The dividend payments are a fixed percentage of the par. For example, if the par value of a stock share were $100 with a 6 percent annual dividend rate, the annual dividend would be $6 on that share. In recent years, some companies have also begun issuing preferred shares with variable rates tied to interest rates.

The par value is the most that the shareholder will receive if the company declares bankruptcy. Preferred stock is generally issued at its par value.

TYPES OF PREFERRED STOCK

Preferred stock further divides into four types: cumulative, non-cumulative, participating and convertible.

Cumulative preferred stock accords its owner a continuous claim to his or her dividends. Any unpaid dividends accumulate until the corporation resumes paying them. Since the cumulative preferred owner is entitled to all past and present dividends, he or she is paid before common shareholders once payment is resumed. If the board of directors suspends dividends, the shareholder still has a claim on them.

Non-cumulative (straight) preferred is the opposite of cumulative preferred: it doesn't confer a steady claim on dividends in the event of a dividend suspension. Shareholders of this type may not be paid any missed dividends prior to payments being made to the common shareholders.

Participating preferred shareholders receive extra dividends over their nominal ones when the company makes an extra profit and the board of directors declares dividends.

Convertible preferred stock may be converted to a certain number of shares of common stock. Preferred investors who want the opportunity to share in the appreciation of the company's common stock may find this option attractive.

Preferred stock has features other than fixed, steady dividends. The next section will explain these features.

FEATURES OF PREFERRED STOCK

LIMITED VOTING RIGHTS

Preferred stockholders may be limited to voting only in these situations:

When the company wants to merge with another
When the company wants to liquidate a large portion of its assets
When the company wants to issue new bonds or preferred stock

CALL PROVISIONS

Preferred stock may carry a call provision. This means that the issuing company can repurchase the stock from the shareholders. Though preferred stock is usually called at par value, some call provisions actually tack on a premium.

Because of the steady dividends accorded to preferred shareholders, call provisions are not usually advantageous to them, despite any premiums. However, a corporation may use calls as a way to eliminate dividends, thus increasing earnings for common shareholders.

Mutual Funds

Definitions of Mutual funds on the Web:

Pools of money that are managed by an investment company.
www.thecorporatelibrary.com/Help/glossary/glossary.asp
A mutual fund is a company that makes investments on behalf of investors with similar goals (e.g., growth, income, etc.). As a shareholder, you participate in the fund’s gains, losses, income and expenses in an amount proportionate to your investment.
www.pncadvisors.com/investments/view/1,1419,Glossary,00.html
These are open-end funds that are not listed for trading on a stock exchange and are issued by companies which use their capital to invest in other companies. Mutual funds sell their own new shares to investors and buy back their old shares upon redemption. Capitalization is not fixed and normally shares are issued as people want them.
www.globeinvestor.com/resources/glossary/glossarym.html
Mutual funds are comprised of securities in a variety of industries and companies. Each investor within the fund owns interest in each security, which allows for investment diversification.
www.astoriafederal.com/html/glossary/glossary_text.html
A mutual fund is an investment that pools your money with the money of an unlimited number of other investors. In return, you and the other investors each own shares of the fund. The fund's assets are invested according to an investment objective into the fund's portfolio of investments. Aggressive growth funds seek long-term capital growth by investing primarily in stocks of fast-growing smaller companies or market segments. Aggressive growth funds are also called capital appreciation funds.
www.entfederal.com/investing/glossary.asp
Investment funds, which are made up of other investments and often defined by themes. For example, a “Global” fund would invest in companies around the world, while a “Property” fund would invest primarily in real estate.
www.sagicor.com/bofw-glossary.aspx
are investment companies that make investments on behalf of individuals and institutions that share common financial goals. The suitability of a particular mutual fund for an individual investor depends on the type and nature of the fund's investments and amount of diversification. Funds are rated widely as to risk and return, and such ratings can be used to establish a match with investor goals and suitability.
www.msfinancialsavvy.com/archive/investment_definitions.html

Mutual Funds

Overview

There are dozens of magazines cluttering the shelves of your local book megastore with covers proclaiming "The Best Mutual Funds You'll Ever Find for This Year!", "Mutual Funds That Really Work in Crazy Markets Like This One!" and other equally over-capitalized headlines. Don't pay any attention to them. Almost everything that you'll ever need to know about mutual funds is contained in these four simple words: "Buy an index fund." If that seems too simple and not sufficiently attention grabbing, try it this way: "BUY AN INDEX FUND!"

Introduction to Mutual Funds

A mutual fund is simply a collection of stocks and/or bonds. Most mutual funds are "actively managed," meaning the mutual fund shareholders, through a yearly fee, pay a mutual fund manager to actively buy and sell stocks or bonds within the fund. Though you would think that mutual funds provide benefits to shareholders by hiring alleged "expert" stock pickers, the sad truth of the matter is that the vast majority of mutual funds under perform the average return of the stock market. Over time, because of their costs, approximately 80% of mutual funds will under perform the stock market's returns. Currently, most mutual funds do not make their fees very easy for shareholders to understand. (Founding Fool David Gardner testified in September 1998 before Congress on this very topic. Read his testimony here.)

On the whole, the average mutual fund returns approximately 2% less per year to its shareholders than does the stock market in general. The stock market's historical returns are roughly 11% per year, but managed mutual fund shareholders as a group can expect to see any return reduced by the approximate costs imposed by the funds.

Advantages of Mutual Funds

Diversification. Buying a mutual fund provides instant holdings of several different companies.
Liquidity. Like individual stocks, a mutual fund investment can be converted into cash upon your request.

Disadvantages of Mutual Funds

The Wisdom of Professional Management. That's right, this is not an advantage. The average mutual fund manager is no better at picking stocks than the average nonprofessional, but charges fees as though she is.
No Control. Unlike picking your own individual stocks, a mutual fund puts you in the passenger seat of somebody else's car.
Dilution. Mutual funds generally have such small holdings of so many different stocks that insanely great performance by a fund's top holdings still doesn't make much of a difference in a mutual fund's total performance.
Buried Costs. Many mutual funds specialize in burying their costs and in hiring salesmen who do not make those costs clear to their clients.

Fund Classification

Mutual funds now come in every possible size, shape, and color, and if you're in your company's 401(k) or 403(b) plan, you've probably noticed that already. Here are some of the general categories of mutual funds.

Bond Funds
Bond mutual funds are pooled amounts of money invested in bonds (see Step 5. Bonds). Bonds are IOUs, or debt, issued by companies or by governments. A purchaser of a bond is lending money to the issuer, and will usually collect some regular interest payments until the money is returned. Usually the amount of interest paid (the coupon) is fixed at a set percentage of the amount invested, thus, bonds are called "fixed-income" investments.

Balanced Funds
Balanced funds mix some stocks and some bonds. A typical balanced fund might contain about 50-65% stocks and hold the rest of shareholder's money in bonds. It is important to know the distribution of stocks to bonds in a specific balanced fund to understand the risks and rewards inherent in that fund.

General Equity (Stock) Funds: Styles and Sizes
Stock or equity mutual funds are pooled amounts of money that are invested in stocks. Stocks represent part ownership, or equity, in corporations, and the goal of stock ownership is to see the value of the companies increase over time. Stocks are often categorized by their market capitalization (or caps), and can be classified in three basic sizes: small, medium, and large. Many mutual funds invest primarily in companies of one of these sizes and are thus classified as large-cap, mid-cap or small-cap funds. For more information and definitions on how stocks and mutual funds are categorized (growth vs. value, income-oriented, etc.) see Step 6. Analyzing Stocks.

International/Global Funds
International funds invest in companies whose homes are beyond the fair shores of this great nation. (There are, of course, many other great nations.) Global funds invest in both U.S. and international-based companies. In general, international and global funds are more volatile than domestic funds.

Sector Funds
Sector funds invest in one particular sector of the economy: technology; financial, computers, the Internet, llamas. (Just kidding. No one has yet started the Llama Fund, though it's only a matter of time.) Sector funds can be extremely volatile, since the broad market will find certain sectors very attractive and very unattractive - often in rapid succession.

Buy an Index Fund

Remember the overview to this step? Here's a reminder: "Buy an index fund."

Stock index funds seek to match the returns of a specified stock benchmark or index. An index fund simply seeks to match "the market" by buying representative amounts of each stock in the index, rather than paying a manager to make bets on individual stocks, sectors, or investment strategies. Index funds do not even attempt to beat the equities market, they simply seek to come as close as possible to equaling it. The key to the unquestioned superiority of index funds is their extremely low expenses - they charge very low fees for providing the market's returns.

Sound simple? Sound like aiming too low? It isn't. Almost all actively managed equity mutual funds over time lose to the market averages. And those funds that do beat the market's return typically do so for only a very short period of time, and then quickly reverse course.

The largest and most well-known index fund is the very first index fund, the Vanguard S&P 500 Index Fund. This fund, started by the Vanguard Group, nearly matches the returns of the Standard & Poor's 500 Index, and over the last ten years it has beaten the performance of over 90% of all mutual funds. Many other mutual fund companies now offer S&P 500 index funds.

There are numerous other indices, however, and therefore numerous other index funds. There are funds to match mid-cap indices, small-cap indices, small-cap growth indices, foreign indices - you name it. These other index funds in all probability will outperform most managed funds that invest in the same sectors of the market.

One caveat though. Due to the recent popularity of index funds, several fund companies are charging higher fees than necessary. If you're considering an index fund (and you definitely should if you're investing in mutual funds), always remember to compare its expense ratio (see below) against other similar index funds.

What should you do if you're in a 401(k) plan and no index fund choice is offered? Make your voice heard! Tell your company that an index fund option is necessary for your company to live up to its commitment to its employees. We've got a sample letter you can send to your company.

In the meantime though, while you're waiting for your plan to change, you need to know how to find the fund that is most like an index fund, and that means finding the one with the lowest annual fees.

Understanding Fund Fees

Mutual funds charge fees. Huge fees. Outrageous fees. As a group (though there are certainly individual exceptions) managed mutual funds appear to charge the highest fees they can get away with, and they charge these fees in the most confusing manner possible. There is a solution for this, and, as you might have guessed, it goes something like this: "Buy an index fund."

Should you wish to explore the crazy and bizarre world of mutual funds beyond the index fund, make sure that you know exactly what fees you're paying. Here's the skinny on them.

A mutual fund's expense ratio is the most important fee to understand. The expense ratio is made up of the following:

The investment advisory fee or management fee is the money used to pay the manager(s) of the mutual fund. On average, this fee is about 0.5% to 1.0% annually of the fund's assets, and is seemingly necessary to make sure that the manager of the fund can be very well-dressed at all times and is able to go on exotic vacations and own a house in the Hamptons.

Administrative costs are the costs of recordkeeping, mailings, maintaining a customer service line, etc. These are all necessary costs, though they vary in size from fund to fund. The thriftiest funds can keep these costs below 0.2% of fund assets, while the ones who use engraved paper, colorful graphics, and phone answerers with high-falutin' accents might fail to bring administrative costs below 0.4% of fund assets.

Surely the fee that you as a mutual fund investor should be most outraged by is the 12b-1 distribution fee. This fee ranges from 0.25% of a fund's assets all the way up to 1.0% of the fund's assets. This fee is spent on marketing, advertising and distribution services. Yup, that's right. If you're in a fund with a 12b-1 fee, you're paying every year for the fund to run commercials and try to sell itself. Can this in any way really help you? Do you enjoy seeing advertisements of your fund or your fund family on television? Unless you really do, you should avoid funds that carry a 12b-1 fee.

You don't really need to concern yourself with how these components of the expense ratio are divided. You just need to know the bottom line. Again, the most important question that you should always determine about your mutual fund is, "How high is the expense ratio?" And remember, for actively managed funds, the average number is about 1.5%.

Meanwhile, in the wonderful world of index funds, the expense ratio is typically around 0.25% and does get as low as 0.19% for the king of all index funds - the Vanguard S&P 500 Index Fund.

Finding the Expense Ratio. The expense ratio for each and every publicly traded mutual fund can be found at numerous web sites that are open, like this one, 24 hours a day, seven days a week. Try searching online to identify the expense ratios of any mutual fund you own, or are thinking of owning.

Loads. "Load" refers to the sales charge many funds use to compensate the broker for his or her "services" in selling the fund to an investor, and this is in addition to the annual expenses discussed above. "No-load" funds simply are those funds that are sold directly to the investor, rather than through a middleman. The recent explosion of no-load funds gives you all the fund choices you need to maximize your potential returns.

Front-End Load. Ack! A Fool would never buy a fund with any kind of a load. A front-end load is a chunk of money that a broker or other adviser pays to himself or his company for telling you to buy that fund. Front-end loads typically congregate around the 5% figure, but can go up to 8%. That means that if you were investing $1000 in a 5% front load fund, $50 is immediately taken out of your investment and put into the broker's pocket. Don't buy any front-loaded funds.

Deferred Load. Yikes! Deferred load or contingent deferred sale load (CDSL) funds (sometimes called back-end loads), often labeled "B" class shares, are just as expensive (read: bad) as front-end load funds, but they're not as clearly labeled. These funds defer the sales fee until you leave the fund, but end up being as bad to your financial future as if you paid them up front.

Level Loads. Double Yikes! Level load funds, or "C" shares, are a load of trouble. These charge small front loads, and level loads every year thereafter. Although "C" class shares might look like they aren't so bad to buy, they end up being very, very expensive to hold.

Turnover Rate and Taxes. A fund's turnover rate basically represents the percentage of a fund's holdings that it changes every year. A managed mutual fund has an average turnover rate of approximately 85%, meaning that funds are selling most of their holdings every year. Because buying and selling stocks costs money through commissions and spreads, a high turnover indicates higher costs (and lower shareholder returns) for the fund. Also, funds that have large turnover ratios will end up distributing yearly capital gains to their shareholders. Shareholders will have to pay taxes on these gains, and paying these taxes can be a real killer. Keep an eye on the turnover rate of any fund you own, and look to own funds with low (preferably no higher than 25%) turnover rates. (Index fund turnover is around 5% or lower.)

Load vs. No Load

If you're able to read these words, you're intelligent enough and have enough time to make your own investment decisions. (Psst. "Buy an index fund.") You don't need to pay any adviser to find a mutual fund for you. Studies show that no-load funds perform as well or better than load funds anyway, so make it from this day forward that you only buy no-load funds. If you're in a 401(k) or 403(b) plan, make sure that you know whether the fund choices offered are load or no-load, as that information may not be contained in any one-sheet summaries of fund choice performance.

Stars

Generally, you shouldn't pay too much attention to the "stars" that you often see associated with mutual funds and their advertisements. The premier mutual fund data provider, Morningstar, assigns stars on the basis of risk and return, attempting to compare one fund with other funds that have similar investment objectives. For more on Morningstar's star system, check out Morningstar's website.

Selecting Funds

Selecting the best fund is relatively easy. ("Buy an index fund.") Index funds are available for international funds, growth funds, mid-caps, small-caps, and just about anything else you can think of. If you wish to go beyond buying an index fund, please make sure that you understand all the costs and fees associated with buying, and with owning, that fund.

Review the Prospectus

A mutual fund prospectus will provide most, if not all of the information that you need to determine, "What's up with this fund?"

Fees can be found in the Fees Table.
Objectives and Policies tell you more or less how the fund plans to invest your money.
Risk tells you the risk involved in owning the fund.

Selling Funds

If you currently own any managed mutual funds, the chances are very, very high that they are charging you more for their "service" than they are providing you for the risk you are taking in keeping your money in them. Over time, an index fund is extremely likely to improve your investment performance. Therefore, take the time to educate yourself about the long-term risks of holding any actively managed mutual funds and consider moving that money into passively managed index funds. You can educate yourself about your own mutual funds by posting a question about them on The Motley Fool's Mutual Fund message board, Index Fund message board, or Foolish 401(k)s message board. On these message boards you can ask questions about specific funds and other Fools from around the globe will eagerly share their knowledge with you. Even better though, make sure that you do some online research about your funds on your own before buying or selling anything.

Online Research

There are a great many web sites where an investor can currently find virtually all of the information necessary to make an informed choice about her mutual funds. The information readily available at web sites includes expense ratios, turnover rates, styles and sizes, Morningstar star ratings, largest individual stock holdings, and 1-year, 3-year, 5-year, and 10-year performance.

The following sites have some very useful information, and they are all updated frequently, adding new features. Try each to see which you prefer:

Summary and Next Steps

Should you sell any of your mutual funds based on this little introduction? Certainly not. You should only sell mutual funds, or buy mutual funds or stocks, or make any other financial decisions based on your own research. The more you research mutual funds, we are quite sure you will determine for yourself that actively managed mutual funds, taken as a whole, are something that you can improve upon.

Besides index funds, what might that preferable investment be? Generally, we think that purchasing individual stocks will provide you all of the upside of actively managed mutual funds, while costing less. Furthermore, unlike mutual funds, studying and following individual companies can be a lot of fun. In Step 6. Analyzing Stocks, we'll show you how to start looking for good investments.

Definitions of Life insurance on the Web:

A policy that will pay a specified sum to beneficiaries upon the death of the insured.
www.msagroup.com/underterms/
Insurance in which the risk insured against is the death of a particular person, the insured, upon whose death while the policy is in force, the insurance company agrees to pay a stated sum or income to the beneficiary.
www.farmers.com/FarmComm/WebSite/html/glossary/glossaryL.jsp
If the donor makes the Foundation the owner of the policy, the value of the gift will be approximately the policy's cash surrender value as provided by the insurance policy. If the gift is not paid at the time of the donation, you may make additional contributions each year of the premiums and the WVU Foundation will handle the payment to keep the policy in force. If the donor makes the Foundation the beneficiary of the policy, the estate will receive a charitable deduction for the policy's proceeds.
www.wvuf.wvnet.edu/Text/tdefinition.htm
Any form of life insurance except term; generally insurance that builds up a cash value, such as whole life.
onestopfinancials.net/Ins_defs.htm
A contract whereby, for a stipulated premium, the insuring company agrees to pay the insured, or his beneficiary, a fixed sum or its equivalent in income, upon the happening of death or some other specified event.
www.finet.com.hk/insurance/l.html
With its origins in the provision of funeral expenses by the prepayment of regular amounts, life insurance has historically received favorable tax treatment and has grown into a sophisticated and multi-faceted industry concerned as much with the mitigation of tax and the provision of savings as the pure protection product it was originally designed to be.
www.bigoffshore.com/glossary/l.html

How to CHOOSE LIFE INSURANCE

The top five things you should know...

1. Are you looking at immediate needs coverage or long-term needs?

2. Ask yourself what type of life insurance works best for you and your family.

3. Your insurance agent can explain the three basic types of life insurance most common today.

4. When you buy life insurance, you buy a promise against financial loss caused by death.

5. Ask your insurance agent about the options that best suit your needs. Consumer Check the financial strength of your potential insurer and be confident with the level of customer service you receive.

Life insurance is a practical way to protect your family’s financial hopes and dreams. The death of a family member can be devastating to survivors both emotionally and financially. Life insurance through a company, like State Farm Insurance, can provide cash to help with your family’s immediate and long-term needs.

Immediate needs include funeral expenses, unpaid medical bills and taxes.

Long-term needs include care for a disabled child or elderly parent, college expenses and, in general, the chance for members of your family to continue to live the life to which they are accustomed. Life insurance is not for the people who die, but for people who live. It’s wise to explore options while you are still healthy; health problems can make life insurance expensive or unavailable.

Ask yourself what type of life insurance works best for your and your family. Three forms of life insurance are most common today: Term life insurance This is temporary life insurance for a specific time period (one, five, 10 or more years). It can provide shortterm coverage on a limited budget. Term insurance, however, costs more to buy as you get older.

There are two common types of term life insurance:

Level term: the amount of protection remains the same during the coverage period.

Decreasing term: the amount of protection gradually declines during the coverage period.

Whole life insurance

Premiums are generally level with cash value growth throughout the life of the policy. Cash values can be borrowed (with interest charged) during the insured person’s lifetime to help meet temporary or emergency needs. Funds borrowed reduce the death benefit and cash surrender value.

Universal life insurance

This offers many traditional advantages of whole life insurance (such as protection for life), but also offers flexibility. Coverage amounts and premium payments are flexible to help meet changing needs during an insured person’s lifetime (subject to certain conditions).

When you buy life insurance, you buy a promise of protection against financial loss caused by death. The promise is only as good as the company that stands behind it.

What do you think about the article above?

________________________________________________________________________

How does it make you feel?

________________________________________________________________________

Would you buy a form of Life Insurance for your investment? Why?

________________________________________________________________________

Life insurance for kids?

By Pat Curry • Bankrate.com

If you want to start an argument, ask a group of financial advisers what they think about buying life insurance for children.

To some, it's a great, low-cost way to set money aside for the future and to make sure he'll have insurance as an adult, in case an illness later in life makes him uninsurable. Others say it's an outdated product that has been replaced by more effective savings tools, such as 529 plans. Still others say that since the purpose of insurance is to replace a wage-earner's income, it's inherently wrong to sell insurance on someone who doesn't have a job.

According to research from the American Council of Life Insurers, life insurance for children isn't a popular purchase. They report that only about 15 percent of people under the age of 18 have life insurance, a percentage that has stayed steady for more than a decade. The average amount of coverage on children is small, usually in the range of $5,000. Many companies will tack on a small amount of insurance to a parent's policy, essentially to cover burial costs.

Still, it's a commonly asked question and many parents aren't sure what to do, if anything.

"Most folks are torn," says Victor Gainor, second vice president of individual insurance products for TIAA-CREF, a life insurance company for teachers and their families.

What do you think about having life insurance for kids?

________________________________________________________________________

Definitions of certificate of deposit on the Web:

A short-term debt security with a period of maturity ranging from a few weeks to several years. Interest rates are established by market demand and competition.
www.tiaa-cref.org/pubs/html/financial_terms/abc.html
Money deposited in a bank or savings and loan for a stated time period and normally paying a fixed rate of interest.
www.yourcreditcounts.com/cred/hycc_tools_glossary.jsp
An arrangement between an investor and a financial institution which calls for the financial institution to pay a specific rate of interest over a set period of time. Certain deposits are FDIC insured up to applicable limits.
www.northerntrust.com/pws/jsp/display.jsp
A money market instrument characterized by its set date of maturity and interest rate. There are two basic types of CDs: traditional and negotiable. Traditional bank CDs typically incur an early-withdrawal penalty, while negotiable CDs have secondary market liquidity with investors receiving more or less than the original amount depending on market conditions. ^ top
www.401k-center.com/glossary-words.htm
A document written by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.
www.davismtg.com/davismtg_gloss.aspx

Investing and Saving Certificates of Deposit

A certificate of deposit, or CD, is a special type of deposit account that typically offers a higher rate of interest than regular savings accounts. When you invest in a CD, you lock in your savings for a particular length of time, generally three months to five years. If you withdraw your funds early, you pay a penalty. Like savings accounts, CDs are protected by federal deposit insurance up to $100,000, which makes them relatively safe investments.

You can purchase a CD through a bank or thrift institution. In the last few years, many brokerage firms have also begun offering CDs. Brokerage firms buy their CDs through a bank and then resell them to you. These firms can sometimes negotiate a higher rate of interest for a CD by promising to bring a certain number of deposits to a particular banking institution.

Before you invest in the Certificate of Deposit, ask these questions:

When does the CD mature?

Each CD has a maturity date, which is the date you can withdraw your money without paying a penalty. Make sure you receive a written document that tells you the length of time your money will be locked away in your CD. Some CDs can tie your money up for as long as 10 or 20 years.

Does the Federal Deposit Insurance Corporation (FDIC) insure the CD?

Make sure the FDIC insures the bank that issues your CD. This will protect your CD account from losses up to $100,000. If you are buying your CD through a brokerage firm, make sure the bank that issued the CD to the broker has FDIC insurance.

Does the CD have any "call" features?

As mentioned earlier, you can only receive your money from a CD when the CD matures, unless you want to pay a penalty. However, if the CD has a call feature, the issuing bank has the right to terminate the CD before the maturity date. If a bank "calls" your CD, you should receive the full amount of your deposit, plus any unpaid accrued interest. However, you will lose any interest that might have accrued between the call date and the maturity date.

What is the interest rate?

You should receive a document that tells you a CD's interest rate. Find out if your interest will be paid every month or twice each year.

What is the penalty for early withdrawal?

Be sure to find out what it will cost to cash in your CD before it matures. Most banks charge you an early-withdrawal fee. If you get the CD from a broker, you may be told that there is no early-withdrawal penalty. Don't let this make you complacent about cashing in your CD early. Even though you won't pay an early-withdrawal fee, you could still lose money by cashing a CD early.

Here's how:

If you buy a CD through a brokerage firm and cash it before it matures, the broker may try and sell the CD to another investor. This arrangement will work in your favor if interest rates are lower when you cash your CD than they were when you bought it. But if interest rates are higher, your broker will probably try to sell your CD at a discount. This means you'll lose money. In fact, the money you lose could be greater than the early-withdrawal penalty you'd pay if you had purchased the CD through a bank. You could even lose an amount equal to your original deposit.

For More Information

Federal Deposit Insurance Corporation (FDIC)

The Fall 2000 issue of ‘FDIC Consumer News’ features an article that discusses what to consider when buying a CD through a broker rather than a bank.

URL: www.fdic.gov/consumers/consumer/
news/cnfall00/BankCD.html

Securities and Exchange Commission

The SEC has published a fact sheet called ‘Certificates of Deposit: Tips for Investors.’ This brochure is available to read online. It presents tips that can help you figure out which CD features make sense for you. It also includes a list of banking regulators that you can call if you have a complaint.

URL: www.sec.gov/investor/pubs/certific.htm

Where would you get a CD? ____________________________________________

Why would you buy a CD?

________________________________________________________________________

Definitions of savings bond on the Web:

A nontransferable, registered security issued by the Treasury at a discount in denominations from $50 to $10,000. The interest earned on savings bonds is exempt from state and local taxation; it is also exempt from federal taxation until the bonds are redeemed.
www.cbo.gov/showdoc.cfm
A government bond that earns interest, issued in face value denominations from $50 to $10,000. Interest on the bond accumulates tax free.
www.beneficial.com/learn/Glossary.jst
Similar to zero-coupon bonds, savings bonds are sold at a discount to their face value, which is fully paid at maturity. They are exempt from state and local taxes and you can defer paying federal taxes until maturity. They can be purchased for as little as $50 or up to $10,000. The cost and the maturity depend on the series (E, EE and HH) and the interest rate being paid. They can be bought or redeemed (after six months) at your local bank, the Federal Reserve or the Bureau of Public Debt. Call 800-872-6637 or go to
www.comerica.com/cma/cda/main/0,00,3_A_1859,00.html
A savings bond is a unique type of bond that cannot be traded. Like a zero-coupon bond, it is sold at a discount and is worth its face amount at maturity. Savings bonds - exempt from state and local taxes, and from federal taxes prior to redemption - are available in denominations ranging from $50 to $10,000. Price, maturity and return depend on the type of savings bond (E, EE or HH), and bonds issued after April 30, 1997, are subject to a 3-month interest penalty if held for less than five years.
www.banknorth.com/assetmgmt/assetmgmt/glossary_p_t.html
A non-marketable security issued by the US Treasury in relatively small denominations for individual investors. Three categories of bonds are available. Interest on these bonds is exempt from state and local, but not federal, taxation.
www.yourdollarsandsense-budgets.com/personal-finance-budget-credit-debt-glossary-s-w.html

Definitions of savings account on the Web:

an account at a bank on which interest is usually paid and from which withdrawals can be made.
library.thinkquest.org/J003358F/terms.html
Money kept in a bank or savings and loan association for safekeeping. Savings accounts earn interest on all money kept in the account.
www.beneficial.com/learn/Glossary.jst
An account maintained by a customer with a depository institution for the purpose of accumulating funds over a period of time. Funds deposited in a savings account may be withdrawn only by the account owner or a duly authorized agent, or on the owner's nontransferable order. The account may be owned by one or more persons. Some accounts require funds to be kept on deposit for minimum length of time, while others permit unlimited access to funds. Earnings are in the form of interest for deposit type accounts.
www.midfirst.com/library1.asp
Savings deposits are accounts maintained by banks, savings and loan associations, credit unions, and mutual savings banks that pay interest but cannot be used directly as money. These accounts let customers set aside a portion of their liquid assets that could be used to make purchases. But to make those purchases, savings account balances must be transferred to "transactions deposits" (or "checkable deposits") or currency. However, this transference is easy enough that savings accounts are oft
en.wikipedia.org/wiki/Savings_account

Why would you put money into a savings account?

________________________________________________________________________

What interest should you expect from your local bank?

________________________________________________________________________

Requirement 7

Explain 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.

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

e. Ways to eliminate debt.

Definitions of loan on the Web:

the temporary provision of money (usually at interest)
A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the borrower and the lender. The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt.
en.wikipedia.org/wiki/Loan
A loan is a type of financial aid, which must be repaid, with interest. The federal student loan programs (FFELP and FDSLP) are a good method of financing the costs of your college educational These loans are better than most consumer loans because they have lower interest rates and do not require a credit check or collateral. The Stafford Loans and Perkins Loans also provide a variety of deferment options and extended repayment terms.
www.riheaa.org/borrowers/loans/glossary.html

Definitions of APR on the Web:

The effective interest rate paid on a loan, expressed as an annual rate. APR measures the true cost of borrowing by including any fees or prepaid interest involved in obtaining a loan. For instance, if a borrower pays $500 in closing costs to obtain a $10,000 loan, the APR is higher than the simple interest rate because the borrower is repaying a $10,000 loan but only receiving net proceeds of $9,500. The federal Truth-in-Lending Act requires lenders to disclose the APR.
sharedcontent.progressive.com/calcs/AUT0.exe/progressive
The annualized cost of credit expressed as a percentage in a finance agreement. In a lease, there is no annual percentage rate or equivalent rate.
www.acvl.com/glossary/content.htm
The cost of credit, expressed as a yearly rate. APR is generally not the same as the contract interest rate.
www.yourcreditcounts.com/cred/hycc_tools_glossary.jsp

Calculating APR

Smart Ways To Borrow Money

For many, borrowing money is easy - repaying it is the hard part. That's why it's important to borrow only when necessary and to do so carefully, taking into consideration your overall financial plan. The Texas Society of CPAs provides the following guidelines for borrowing sensibly.

Tap Your Home Equity

Do you own a home? If so, you may be able to borrow against your equity - that is, the difference between the value of your home and the amount you owe on it. In other words, equity is the cash you'd make if you sold the home and repaid your mortgage lender. Although you may use the money in any way you choose, many home equity borrowers use the proceeds for home improvements, auto purchases, or debt consolidation.

One of the reasons home equity loans and lines of credit make good financial sense is because the interest on home equity debt is deductible. Under current law, you can borrow as much as $100,000 (halved for married filing separately), as long as it is secured by your home. What’s more, you may be able to deduct all the interest on the loan. But there is a downside, and it's a serious one. If you can't repay your home equity loan or credit line, you could lose your house. So, never borrow against your home unless you're absolutely sure you can repay.

Borrow Against Life Insurance

A cash value life insurance policy is another source of inexpensive credit. The amount you may borrow depends on how long your policy has been in effect, your age when it was issued, and the amount of the policy's death benefit. The interest rate you pay is generally lower than most other borrowing sources because there is no risk on the insurance company's part since your loan is secured by the cash value of the policy.

With most policies, you can either repay the loan at your own pace, or not at all. Keep in mind the policy's death benefit is reduced by the amount you borrow. That means if you should die with an outstanding loan, your heirs will receive only the amount that is remaining.

Open a Margin Account

If you have an investment portfolio, a margin loan allows you to borrow cash from your investments without selling. Under current Federal Reserve rules, you can borrow up to 50 percent of the market value of the stock you own. The interest rates charged on margin loans are among the lowest, since they're based on fully secured assets.

CPAs urge caution in borrowing against volatile stocks. If the market price of the stocks you've borrowed against drops, you could get a "margin call" from your broker requiring that you put up additional cash or securities as collateral against your loan. If you don't meet the request for additional collateral, the broker has the right to sell your stock at market price.

Borrow from Retirement Accounts

If you need money for the short term, you may be able to borrow from your IRA as long as you roll it over to another IRA within 60 days. You're allowed to do this once a year, with each of your IRAs, including Roth IRAs. Be aware that if you miss the repayment deadline, you will owe tax on the amount withdrawn and possibly an early distribution penalty.

As a last resort, you may be able to tap into your 401(k) plan, which may allow you to borrow half the money in your account, up to $50,000. The interest rate is typically a point or two above prime. However, the interest you pay goes back into your account, so you are essentially paying yourself interest. You generally have five years to repay the loan (longer if you use the money to buy a home). However, if you leave your employer before the loan is paid in full, the outstanding balance is due immediately. Any part of the loan that is not repaid is treated as a distribution and is subject to tax and possible penalties.

Try a Personal Loan

It's difficult to get a personal loan without putting up any collateral and the interest is not deductible. You may want to find out if you are eligible for a credit union loan. Then, look at savings and loans, and finally banks. Generally, smaller banks charge lower rates and fees and may be more flexible in negotiating interest rates and terms.

Since borrowing money can have a major impact on your financial situation, CPAs say it's important that you carefully weigh the decision to borrow and completely understand all the terms before you take on any type of debt.

Contact: Linda Messing
512.445.0044, ext. 124
lmessing@tscpa.net

Definitions of charge card on the Web:

A card that requires a full payment of the charge by the due date. Unlike credit cards, which give borrowers a revolving line of credit and lets them borrow against it, carrying a balance with an agreed-to interest rate, charge cards do not allow carrying a balance and no interest is charged. American Express and Diner's Club are examples of charge cards.
www.arianacreditcards.com/glossary.htm
A payment card, the terms of which include the obligation to settle the account in full at the end of a specified period.
www.chipandpin.co.uk/info/glossary.html
A card that charges no interest, but that requires you to pay your bill in full each month.
www.beneficial.com/learn/Glossary.jst

Definitions of debit card on the Web:

A card that resembles a credit card but which debits a transaction account (checking/current account) with the transfers occurring contemporaneously with the customer’s purchases.
www.aib.ie/servlet/ContentServer
A payment card that is linked directly to a customer's bank account. Some cards require a personal identification number. Others require a customer's signature. A PIN-based or direct debit card removes a purchase price from a customer's checking account almost immediately.
www.unsecured-personal-loans-for-bad-credit.net/Lending_Glossary.html
A bank card that draws funds from a card holder's bank account, usually a checking or savings account. The withdrawal of funds is immediate with online debit cards, delayed a day or two with offline debit cards.
onestopfinancials.net/gen_def.htm
An ATM bankcard, also called a check card, allows a merchant to deduct money directly directly from a customer's bank account. Debit cards issued with a Visa or MasterCard logo are accepted by any merchant that also accepts Visa or MasterCard credit cards.
www.bb2e.net/index.php

Definitions of credit card on the Web:

A bank-issued card that allows consumers to purchase goods or services from a merchant on credit.
www.vpsource.com/glossary.html
A card, which can be used to obtain cash, goods or services up to, a stipulated credit limit. The supplier is later paid by the credit card company (e.g. Access), which in due course is reimbursed by the credit card holder who will be charged interest at the end of the credit period if money is still owing.
www.bbc.co.uk/watchdog/legalglossary/c.shtml
A plastic card that with a coded magnetic stripe that, when signed, entitles its bearer to a revolving line of credit, whose size and interest rate are determined by the borrower's income and credit report. Credit cards began in the late '40s when banks began giving out paper certificates that could be used like cash in local stores. The first real credit card was issued in 1951 by Franklin National Bank in New York.
www.arianacreditcards.com/glossary.htm
A credit card gives you the power to buy goods or services now and pay for them later. It represents an approval by a bank or company to use their money. Credit card issuers are usually banks, even though the card may bear another company name or logo. The name of the issuer appears somewhere on the card. Trade names such as VISA and MasterCard are not actually card issuers. They are termed "membership associations." Banks use them for their payment processing services, policy setting and marketing assistance. Many different banks can package their own cards and different terms of

How can the difference between the credit cards and charge cards help a person?

________________________________________________________________________

How can the difference between the credit cards and charge cards hurt a person?

________________________________________________________________________

What is a Minimum Payment?

The minimum payment is the minimum dollar amount that must be paid each month. On a credit card account, the minimum payment can be as little as two to three percent of the amount owed and is often based on the balance on the billing date.
www.analyticalsourcing.com/glossary.htm

Most credit cards have a Minimum Payment of $15 to $20. The average card holder has between $5,000 and $8,000 credit line.

$5,000 x 3% = $150

$150 / 12 = $ 12.50

This is one 12^th of 3% of the minimum card limit with a processing charge of $2.50.

What would happen if spent $100 on a new game system and only paid the Minimum Payment until you the cost was paid off?

Assume that the interest rate is 20% APR and the minimum payment is $15.

Where the interest is $ 0.0166 per month.

How much extra money did you spend? ____________________________

Definitions of FICO on the Web:

The name given to a numerical score assigned by credit bureaus to measure a borrower’s credit characteristics.
mortgage-calculators.org/dictionary/dictionary.php3
FICO is a mathematical model created by the Experian credit bureau as a tool for lenders to use in evaluating the risk associated with lending you money. FICO stands for Fair Isaac Company, the company that created the original scoring model. (More Info)
www.bankturndown.com/glossary.htm

Experian Information Solutions, Inc. is one of three leading providers of personal and business credit information.

Experian Information Solutions, Inc. is a global information solutions company. Experian employees aproximately 13,000 worldwide and as of 2005 had clients in 60 countries. Experian has its headquarters in Nottingham in the UK and Costa Mesa, California. According to its website Experian's annual sales exceed $2.2 billion. Experian is owned by the British holding conglomerate GUS, plc.
en.wikipedia.org/wiki/Experian

How is a credit scoring model developed?

To develop a model, a creditor selects a random sample of its customers, or a sample of similar customers if their sample is not large enough, and analyzes it statistically to identify characteristics that relate to creditworthiness. Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk. Each creditor may use its own credit scoring model, different scoring models for different types of credit, or a generic model developed by a credit scoring company.

Here are some general suggestions to help you develop a solid credit history and influence your score for the better:

Pay your bills consistently and on time. And take heart-the scoring models all take into account the fact that everyone misses a payment once in a while. Also, negative information loses its potency over time: a recent late payment is weighted more heavily than a late payment four years ago.
Check your credit report and remove any errors. By making sure that only your accurate credit history appears on your report, you ensure that the credit score it generates isn't lowered by inaccurate information.
Keep your debt reasonable. One rule of thumb: for a good credit score, your account balances should be below 75% of your available credit. For example, if you have a $2000 credit limit, you should have a balance of no more than $1500.
Maintain only a reasonable amount of unused credit. While it's good to have a cushion of credit available, having ready access to thousands of dollars of debt makes you a poorer credit risk.
Avoid too many inquiries. Inquiries are interpreted as a sign that you have been actively seeking credit, and may be in financial difficulties or in the process of overextending yourself.

Do you think you have a FICO sore? Yes No

Why ?

________________________________________________________________________

Requirement 8

Demonstrate 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.

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.

Use the booklet at the end of this book to help you.

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.

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.

Note: Develop a budget for your project (this is not a choice in Troop 174)

For 9.b. use the project worksheet on the website (Project Planner for Personal Management) to help you plan and print your project plan. If you have trouble with the worksheet, call Mr. H.

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.

PERSONAL MANAGEMENT WORKBOOK

1) Do 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 rating systems).

2) Do 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).

3) Discuss 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.

4) Explain the following to your merit badge counselor:

A) The difference 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.

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 price.

B) How much the price changed from the previous day.

C) The 52-week high and the 52-week low prices.

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 stocks.

B) Mutual funds.

C) Life insurance.

D) A certificate of deposit (CD).

E) A savings account or U.S. savings bond.

7) Explain 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.

8) Demonstrate 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 church 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.

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.

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.

10) Do the following:

A) Choose a career you might want to enter after high school or college graduation.

B) Research the limitation of your anticipated career and discuss with your merit badge counselor what you have learned about qualifications such as education, skills, and experience.

Worksheet Created by: Rob Greenland – robgreenland@juno.com

Updated and formatted by Peter Hoernes – peter@hoernes.com

Requirement 1

Choose an item that your family might want to purchase that is considered a major expense. What item did your family choose? _____________________________________________________________________________________________

_____________________________________________________________________________________________

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. Have your merit badge counselor initial this when completed.

Discuss the plan with your family. Have a parent initial this when completed.

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 rating systems): _____________________________________________________________________________________________

_____________________________________________________________________________________________

Comparison shop for the item.

Where can you find this item for the best price? Place: _________________________________________ Price: _____________

Provide prices from at least two different price sources:

Place: ____________________ Price: _____________

Place: _____________________ Price: _____________

Call around and study ads. What did you find? Check on the Internet to see if you can find your item there.

What did you find on the Internet?

_____________________________________________________________________________________________

Look for a sale or discount coupon. Did you find any? What? _____________________________________________________________________________________________

_____________________________________________________________________________________________

Consider alternatives. Are there any? _____________________________________________________________________________________________

_____________________________________________________________________________________________

Can you buy the item used? Would you? _____________________________________________________________________________________________

_____________________________________________________________________________________________

Should you wait for a sale? Why? _____________________________________________________________________________________________

_____________________________________________________________________________________________

Requirement 2

This requirement has you prepare a personal budget reflecting your expected income, expenses, and savings. You are also asked to track your actual income, expenses, and savings for 13 consecutive weeks. To do this you may use the forms provided in the merit badge pamphlet, devise your own form, or use the one attached to the back of this worksheet. Make additional copies if needed.

___ Prepare a budget reflecting your expected income.

___ Keep track of your finances for 13 consecutive weeks.

___ After the thirteen-week period share your budget with your merit badge counselor.

Compare expected income with expected expenses:

Expected Income: ____________________ Expected Expenses: ____________________

If expenses exceed income, determine steps to balance your budget:

_____________________________________________________________________________________________

If income exceeds expenses, state how you would use the excess money: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Requirement 3

For this requirement you have been given 8 different topics or questions. Select FIVE of them and discuss them with your merit badge counselor. You are not required to write your answers down. Review the items below and give some thought to what you will discuss. After you have discussed five of these items, have your merit badge counselor initial the ones you discussed.

___ 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.

Requirement 4

Explain the following to your merit badge counselor. You may use the area provided below to write your explanations before going to your counselor.

Explain the differences between saving and investing, including reasons for using one over the other: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Explain the concepts of return on investment and risk: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Explain the concepts of simple interest and compound interest and how these affected the results of your investment exercise: _____

_____________________________________________________________________________________________

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:

Stock	Current Price: $	How much did the price change from yesterdays price?	52-week high price for this stock	52-week low price for this stock

Requirement 6

Common Stocks:

Advantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Disadvantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Mutual Funds:

Advantages:

_____________________________________________________________________________________________

Disadvantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Life Insurance:

Advantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Disadvantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

A Certificate of Deposit (CD):

Advantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Disadvantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

A Savings Account or U.S. Savings Bond:

Advantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Disadvantages: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Requirement 7

What is a loan? _____________________________________________________________________________________________

_____________________________________________________________________________________________

What is interest? _____________________________________________________________________________________________

_____________________________________________________________________________________________

How does the annual percentage rate (APR) measure the true cost of a loan? _____________________________________________________________________________________________

_____________________________________________________________________________________________

What are some of the different ways you can borrow money? _____________________________________________________________________________________________

_____________________________________________________________________________________________

Explain the difference between the following items:

Charge Card: ________________________________________________________________________________________

Credit Card: _________________________________________________________________________________________

Debt Card: __________________________________________________________________________________________

What are some of the costs and pitfalls of using these financial tools? _____________________________________________________________________________________________

_____________________________________________________________________________________________

Explain why it is unwise to make only the minimum payment on your credit card: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Explain a credit report: _____________________________________________________________________________________________

_____________________________________________________________________________________________

How can personal responsibility affect your credit record? _____________________________________________________________________________________________

_____________________________________________________________________________________________

Give several ways on how you can reduce or eliminate debt? _____________________________________________________________________________________________

_____________________________________________________________________________________________

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. You can use the space below or you can make a chart of your own.

1) ___________________________________ 32) ___________________________________

2) ___________________________________ 33) ___________________________________

3) ___________________________________ 34) ___________________________________

4) ___________________________________ 35) ___________________________________

5) ___________________________________ 36) ___________________________________

6) ___________________________________ 37) ___________________________________

7) ___________________________________ 38) ___________________________________

8) ___________________________________ 39) ___________________________________

9) ___________________________________ 40) ___________________________________

10) ___________________________________ 41) ___________________________________

11) ___________________________________ 42) ___________________________________

12) ___________________________________ 43) ___________________________________

13) ___________________________________ 44) ___________________________________

14) ___________________________________ 45) ___________________________________

15) ___________________________________ 46) ___________________________________

16) ___________________________________ 47) ___________________________________

17) ___________________________________ 48) ___________________________________

18) ___________________________________ 49) ___________________________________

19) ___________________________________ 50) ___________________________________

20) ___________________________________ 51) ___________________________________

21) ___________________________________ 52) ___________________________________

22) ___________________________________ 53) ___________________________________

23) ___________________________________ 54) ___________________________________

24) ___________________________________ 55) ___________________________________

25) ___________________________________ 56) ___________________________________

26) ___________________________________ 57) ___________________________________

27) ___________________________________ 58) ___________________________________

28) ___________________________________ 59) ___________________________________

29) ___________________________________ 60) ___________________________________

30) ___________________________________ 61) ___________________________________

31) ___________________________________ 62) ___________________________________

Make a 7-day calendar or schedule. Put in your set activities, such as school classes, sports practices or games, jobs or chores, and/or Scout or church or club meeting, then plan when you will do all the tasks from your “to do” list between your set activities. You may use the 7-day schedule on the following page or you may choose to create one of your own.

	Sunday	Monday	Tuesday	Wednesday	Thursday	Friday	Saturday
7:00 AM
7:00 AM
8:00 AM
8:00 AM
9:00 AM
9:00 AM
10:00 AM
10:00 AM
11:00 AM
11:00 AM
12:00 PM
12:00 PM
1:00 PM
1:00 PM
2:00 PM
2:00 PM
3:00 PM
3:00 PM
4:00 PM
4:00 PM
5:00 PM
5:00 PM
6:00 PM
6:00 PM
7:00 PM
7:00 PM
8:00 PM
8:00 PM
9:00 PM
9:00 PM

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.

Sunday	Task	Scheduled Time	Actual Time

Monday	Task	Scheduled Time	Actual Time

Tuesday	Task	Scheduled Time	Actual Time

Wednesday	Task	Scheduled Time	Actual Time

Thursday	Task	Scheduled Time	Actual Time

Friday	Task	Scheduled Time	Actual Time

Saturday	Task	Scheduled Time	Actual Time

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 next time: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Requirement 9

You have been asked to 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. Use the area below or create your own on a separate piece of paper.

You can use Mr. H’s Project Planning spreadsheet for this work to help you.

Describe your project: _____________________________________________________________________________________________

_____________________________________________________________________________________________

Develop a list of resources. Identify how these resources will help you achieve your goal. Use additional paper if necessary.

Resource: __________________________________________