INDEX @ Money + Evolution from Barter System to Cryptocurrency + Real Assets & Real Liabilities + Cash Flow | How to be Rich? @ Expenses and Budgeting + Types of Expense + Budgeting + Difference between Needs & Wants | 50:30:20 Rule + Steps to make a budget for yourself @ Banking & Insurance + Bank and its functions + EMI + Debit cards & Credit card + Credit Score + Insurance @ Saving and investing + Setting goals - Short-term, Medium-term, Long term + Need to save for an emergency fund - How inflation is eroding the value of money + How you can use the power of compounding to grow your money + Basics of Investing and Importance of investingWhat is Money? Money is something which is used by people to buy/purchase things (transact) in day-to-day life. So using money we buy goods such as toys, books, grocery, car, TV etc. We also use money to get services like get our hair cut done, watch movies, get things repaired.EVOLUTION of money EARLY (==)) BARTER CIVILISATION SYSTEM FIAT MONEY (Metal Coin, Paper Notes) fs CHINAS wy INVENTION NON DIGITAL MONEY MONEY (Debit/Credit Card UPI/E-Transfers) CRYPTO FUTURE CURRENCY MONEYEVOLUTION of money Barter System Trading services or goods with another person when there is no money involved. Fiat Money Paper money was invented in China in the Tlth century CE. Paper money was certainly easier than barter as could be used as a medium of exchange. Digital Money Mobile payments are money rendered for a product or service through a portable electronic device, such as a cellphone, smartphone, or tablet device. Cryptocurrency Cryptocurrencies are digital tokens, they are not physical coins or cash that allows people to make payments directly to each other through an online system without any government interference.REAL ASSETS & REAL LIABILITIES What is Real Asset ? Real Assets are those items that gener- ate income. Unless something is put- ting money in your pocket, it’s not an asset. For example: if you give your car on rent and in return you get some money then your car is your asset N )REAL ASSETS & REAL LIABILITIES What is Real Liabilities ? Something that takes money out of your pocket is a Liability. #5 vCASH FLOW Cash flow is the movement of money into and out of your pocket. Cash flows in and flows out. [ CASH INFLOW JF When money flows into your pocket ® it’s called Cash Inflow. = Monthly salary earned by your Mom-Dad is a Cash Inflow When money flows out of your pocket it’s called Cash Outflow Expenses for Grocery, Electricity bill are Cash Outflow Maximise Cash Inflow and Minimise cash outflow isWhat Is Expense? An expense or expenditure is an outflow of money to another person to pay for a Good, or service. Types of expenses :- ZZ 6H HH ( ( ( Fixed Variable Periodic Discretionary + Apartment Rent Grocery Shopping | + Car Servicing + Meals at restaurants + Car loan EMI + Buying clothes + Computer repair + Entertainment expenses + Driver's salary + Mobile recharge + Gifts + Vacation expenses + Dentist's feesYou need to differentiate between NEEDS and WANTS But, what are “NEEDS” gWHAT ARE “NEEDS”? A need is something that is necessary for your survival. EXAMPLES OF NEED y, ‘e eé6] =i ¢ LEU Water to drink Food to eat Clothes to keep yourself warmWHAT ARE “WANTS”? When you have a desire to possess or do something that you wish for, it is referred as a “want”. EXAMPLES OF WANTS Apple IPAD Fast Food PlayStationBUDGETING Budgeting is the process of creating a plan to spend your money. This spending plan is called a budget. REAL ASSETS & REAL LIABILITIES Creating this spending plan allows you to determine in advance whether you will have enough money to do the things you need to do or would like to do. Budgeting helps you keep check on your expenses Budgeting helps you achieve targeted savings WHY DO WE NEED A BUDGET? If you don't have a concrete plan to track your monthly cash inflows and outflows, spending can get out of hand.THE BUDGETING RULE SAVINGS 20% 30% 50% WANTS NEEDS + Hobbies + Groceries + Dining out + Housing + Shopping + Utilities7 STEPS TO A BUDGET MADE EASY Set Goals Identify Income and Expenses Separate Needs from Wants Design Your Budget Put Your Plan into Ac Manage Seasonal Expenses SOOOOOO Looking AheadWhat is BANKING? Banks act as financial intermediaries because they stand between savers and borrowers. We deposit saved money into the Banks and in return get interest from banks However, people who borrow money from bank have to repay the amount with interest.LOAN Loan is money received from a Bank with a promise to pay back the amount with interest Equated monthly installment (EMI) An EMI is a fixed payment made bya borrower to Bank at a fixed date each month. It is a way through which you can buy a product without paying the full price immediately. Loan we take from bank can be repaid over a period of time ...Let’s say 5 years....ie 60 months...so there will be 60 EMIsea DEBIT CARD Debit cards let you buy things without carrying cash. It is a thin rectangular plastic card issued by Banks. If there is no money in your account, Debit Card is of no use. You can use your debit card in most places to pay for something. You just swipe the card and enter your PIN number on a keypad. CREDIT CARD , A credit card is a thin rectangular plastic card issued by Banks, which lets you borrow money within a limit to pay for your purchases. The limit is decided by the banks issuing the card based on your credit score.Credit Score Credit score is just like the grades we get in schools. Someone with A+ is considered to be a good and hardworking student...... Just like that a person with good credit score is considered more reliable and trustworthy . A credit score is a score you get that depicts your creditworthiness. Those with higher credit score get loans easily as they are seen as trustworthy. Why is it important? Credit scores are an important part of your financial health. You want good credit scores because they can unlock many savings and benefits, including access to loans and credit cards. With poor credit scores, you will find it difficult to get credit cards or loans. And if you do, the interest rate will be very high, compared to people with better credit scores.INSURANCE Insurance is a means of protection from a Money loss. Insurance is a way to manage your risk. When you buy insurance, you purchase protection against unexpected financial losses. How does Insurance work? Imagine you're driving your car and you hit a tree, which damages your car. If you have the right kind of auto insurance policy, the insurance company will pay the costs of the car repairs.Setting GOALS Setting short-term, midterm, and long-term financial goals is an important step toward becoming financially secure. If you aren’t working toward anything specific, you're likely to spend more than you should.SHORT TERM FINANCIAL GOALS Establish a budget: It will combine the information from all your accounts into one place so you can label each expense by category. Create an emergency funds: An emergency fund is money you set aside specifically to pay for unexpected expenses. MEDIUM TERM FINANCIAL GOALS Get Life Insurance and disability Income insurance: Insurance will replace a portion of your income if you become seriously ill or injured to the point that you can’t work. Consider your dreams: Midterm goals can also include goals like buying a first home or, later on, a vacation home. LONG TERM FINANCIAL GOALS Estimate your retirement needs: Estimate your desired annual living expenses during retirement and start planning your retirement finances. Estimate how much in retirement assets you need for your desired retirement date. Base this on what you currently have and are saving on an annual basis.WHAT IS INFLATION? Inflation means that the general level of prices is going up. More money will need to be paid for goods (like a loaf of bread) and services (like getting a haircut at the hairdresser's). WHAT CAUSES INFLATION ? Price Rise causes Inflation. When the Goods or Services we want reduce or become rare OR When demand of Goods and services increases Example Imagine if all the people start eating McDonald’s French Fries, then there will not be sufficient fries for every one. This will result in price rise or inflation. so, JUST LIKE YOUR EXPENSES ARE GROWING, , SHALL YOUR MONEY ALSO GROW? Well, your money can grow by itself through INVESTING | --—--—--——SINVESTMENT ILLUSTRATION Let’s understand this with an illustration: r+ @ You spant $30 You keep your $20 in towards monthly expenses your savings box. You wish to save until ‘You got $50 pocket money You are left $100 and buy yourself a with $20 as your savings , 7 ©. Now the day you collect but the shopkeeper tells you $100 you go to the shop because of inflation the price of watch is now $150. Had you invested your money you would have earned returns and YOU COULD BUY YOUR WATCH! YOUR INVESTMENTS IS THE OTHER SOURCE OF INCOME. If done correctly can even surpass your salary. - > KS