By definition, wealth measures the value of all the assets of worth owned by a person, community, company or country. You might argue that how much wealth an individual has depends on how much income he makes. That is not entirely right. Maximum wealth using all resources is the objective of wealth management and financial planning is by far the best way to achieve financial objectives.

You will be shocked how little people know about their own financial facts.

It is necessary for a college student to walk out of campus knowing these things that he or she is expected to know and hope you will have a better understanding of the topic after completing the class.

For this week,

Update: Share a story you know about how people successfully achieve their objectives by effectively planning or how people fail. Talk to your classmates, comment under their posts, and share your thoughts.

Comment: Do you know the answers to the questions asked in the video? What do you think of the fact that everyone knows the exact length of Kim Kardashian's marriage but no one can say for sure what is the interest rate on their credit cards?

One of the basic concepts in financial planning is risk management and insurance is an instrument to transfer the risk to another party in exchange for monetary compensation (the premium you paid). 

Insurance works by pooling risks. Look at this video about how insurance works.

While some may claim that insurance is a waste of money when there is nothing happens to the insured, it is not true. Insurance gives you protetion against risks and risks is literally everywhere in our life.

In the event of death, life insurance kicks in and provide financial security for deceased's family.

There are many types of life insurance such as term life insurance, whole life insurance, and universal life insurance.

For this week,

Update: Choose one type of life insurance. Research it and introduce it to your classmates. Your post should include but not limit to basic definition, pros and cons, what types of people the insurance best fit, and different strategies involve it. Talk to your classmates, comment under their posts, and share your thoughts.

Last time we talked about general insurance needs and life insurance particularly. There are still a lot of types of insurance out there in the world. You might be familiar with auto insurance and health insurance. Disability insurance, home insurance, and long term care insurance are also very common. 

Health insurance protects against exonomic loss in the event of serious accidents or illinesses. It has always been a big part of national debate. The teminologies of health insurance can be very confusing. The video should give you a better idea of health insurance.

Let's then talk about automobile insurance. It is required by law that every vehicles should be properly insured. The state requirment for liability is 25/50/20. This coverage pays up to $25,000 on bodily injury per person, $50,000 on bodily injuey per accident and $20,000 on property damage. You can also choose to purchase medical payment insurance, colloision insurance, comprehensive insurance, and uninsured motorist insurance.

Now remember that insurance companies operate for profit. We talked about how insurance companies make money by charging more premium than paying claims. So sometimes insurance companies will try not to fullfill your claim. 

Insurance companies are not evil. They are just doing very they can to avoid paying within the law. As people who are insured, you should always know your policy before purchasing.

For this week,

Update: share a story about your or someone's exprience dealing with insurance company. What happened? How was the exprience? What is your opinion towards your insurance company(and please DO NOT share the specific name of the company)? Talk to your classmates, comment under their posts, and share your thoughts.

If you put $1,000 in your bank account, how much will you have one year later? It is a simple question. The answer is you can earn an interest which equals the interest your bank offer times the amount you have in the account. Because of the existence of interest, time value of money is the idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.

Most banks do not calculate interest once a year. Normally they do that per month. And compound interest can be very powerful. Basically that does compound interest means is that the interest you earned is invested immediately and starting to earn interest on itself. You might think it is only a small amount of money. However, over time, the differnece is amazing.

Calculation of time value of money

Before learning how to caculate, there are a few terms to learn.

1. Present Value(PV): How much does the money worth now?

2. Future Value(FV): How much does the money worth in the future?

3. Interest rate(i): What is the interest rate you expect to earn? Remember, all of the interest you earned is reeinvested immediately at the same rate.

4. Number of periods(N): How many periods of time do you expect to receive interest? If you plan to keep the money in your account for 5 year and your bank pay interest annually, N should be 5.

5. Payment(PMT): How much money do you put in or withdraw from your account every period?

Don't worry if you don't have financial caculator. There are a few tools that can help you caculate time value of money. 

- Excel: Excel has built in function that can help you caculate time value of money. For more information, visit http://www.tvmcalcs.com/calculators/excel_tvm_functions/excel_tvm_functions_page1

- Online financial caculator: There are online caculators offered at various sites. Here is an example: https://www.msn.com/en-us/money/tools/timevalueofmoney. You can always use other caculators as well.

For this week,

Update: make up your own numbers and work on four scenarios on a saving plan.

1. start early and save a lot every period of time.

2. start early and save a bit every period of time.

3. start late and save a lot every period of time.

4. start late and save a bit every period of time. 

Compare the oucomes of four scenarios and what is your thoughts on time value of money after doing the caculation. Talk to your classmates, comment under their posts, and share your thoughts.

 

Saving for retirement is a big deal for most of people. When thinking about retirement planning, think about the following questions:

1. When do you want to retire(how long do you have to save)?

2. How much money do yo think you will need(what kind of lifestyle do you want to maintain after retirement, how much do you need to save)?

It is not hard to come up with a plan once you figure out these questions. 

There are several tools people normally use to save for retirement.

IRA

Individual retirement account(IRA) is basically a saving account. However, it does provide great tax benefit compared to a regular saving account and that is what makes IRA ideal to store money for retirement.

Annuity

As we talked about before, life insurance protects one's family against the event of one's early and unexpected death. Annuity, on the other hand, protects against longevity. If people live longer than they expected, what they save for retirement would probably not be enough. Annuity is basically a products a person can buy that promised to pay that person certain amount of money every year until he dies.

Time value of money

We all know the power of time value of money. That is why one of the most important advice on planning for retirement is to start early. As time past, you will be amazed how big a difference it made.

For this week,

Update: Do your own research on employee sponsored retirement plans(such as 401(k),457(b)). Introduce the basic concept of the plans, pros and cons of them and compare different plans. Talk to your classmates, comment under their posts, and share your thoughts.

Credit is everywhere. Most of people have credit cards. Some people may have mortgage. Some may have car loan. Why do people use credit? One of the major reasons people using credit is because they cannot afford to buy something with cash. So they choose to pay for the stuff they purchase through multiple payments in the future. It is very reasonable to use credit especially when purchasing things such as house or cars. But is credit always a good thing? How should you use it? We will get back to this issue later

Credit Score

Credit score plays a great part in your personal credit. Lender use the score to determine the reliability of borrower thus determine whether borrower can get credit and how much is the interest rate.

How can credit scores affect your borrowing ability?

The Fair Credit Reporting Act (FCRA) requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. You can access your credit report on www.annualcreditreport.com. Remember it is required by law that you are provided with your credit report and this website is the only source authorized by federal law.

Attitude towards credit

People use credit to purchase something they cannot afford all the time. The question you need to think about before a credit purchase is not whether you can afford the payment to buy this thing but whether you can afford your life.

Health habits to use credit cards wisely

Almost everyone has credit cards and use them on a daily basis. But few people really know how to use their credit cards wisely. Here are some tips from Capital One.

1: Create and stick to a budget.

2: Borrow only what you can afford to pay back.

3: Pay your bills on time.

4: Carry credit card balances responsibly.

- Make your payments on time
- Make at least the minimum payment on your card each month, and pay more than the minimum when you can
- Avoid exceeding your credit limit
- Pay attention to your account balances—Ideally, keep your balances below 25 percent of your credit limit at any time, even if you pay off your bill in full every month. If you start getting near your credit limit, this can be a flag to potential lenders, suggesting you're maxing out your cards.
- Pay off your outstanding balance as quickly as possible

5: Check your credit report at least once each year.

6. Take advantage of technology to avoid credit pitfalls

For this week,

Update: Check your credit score. Is your credit score a big surprise to you? What is your thoughts? What your attitude towards credit? Has it changed after learning more about personal credit? Talk to your classmates, comment under their posts, and share your thoughts.

Assets are reflection of a person's wealth. Cash, real estate, vehicle, and investment asset(such as stocks and bonds) are all types of asset that people would normally own.

Cash

Cash refers to not only the cash you have on hand, but also what you have in bank account. People should build up a cash reverse in the case of emergency. Ideally, the emergency fund should be no less than a person's 6-month worth or pay check. Don't count on your credit for emergency as credit will only put you in worse situation.

Some people do not feel safe to keep cash in bank. In fact, almost all commercial banks are federally insured by U.S. government agencies. The few that are not federally insured usually obtain insurance through either a statechartered or private insurance agency. So it is reasonable to be confident that your money is safe with bank.

Real Estate & Vehicle

When making purchasing decision, think about what do you need rather than what do you like to have. Also, there are a lot of ways to purchase a car. You can write a check, finance, and lease a vehicle. There are advantages and disadvantages with each option.

Go to this website to see whether you should buy or lease a vehicle. http://www.edmunds.com/car-leasing/should-you-lease-or-buy-your-car.html

When considering a loan, use time value of money caculation we discussed before to work out the true cost of purchasing the vehicle. You will be surprised how car dealership manipulate those numbers.

Investment asset

Investment is a strong tool to accumulate wealth. It will give you extra return than you simply put the money in bank. Naturally, it will comes with more risk. 

One of the most important thing to remember when investing is "temperament is more important than IQ!"

The second most important thing to know is never put all of your eggs in one basket. You need to learn about asset allocation and diversification.

For this week,

Update: Share a story of yours or one you know about people succeed or fail in investment. What do you think is the reason why he succeed or fail? What is your takeaway from this story? Talk to your classmates, comment under their posts, and share your thoughts.

Let us start with an interesting video.

When it comes to financial planning, things can get really complicated. You may have seen ads from different kinds of financial advisors or wealth managers. As the host mentioned in the video, terms such as financial planner, financial consultant, and Financial Analyst are job titles. Whoever holds those titles may not have any specific credential. It can be very tricky to find the "right" guy. The good thing is, there are a few things to consider when looking for a financial planner.

1. Looking for someone with who is CFP. The Certified Financial Planner (CFP) designation is a professional certification mark for financial planners conferred by the Certified Financial Planner Board of Standards. To receive this certification, member has to meet education, examination, experience, and ethics requirements. Those people are trained professionals and they will be able to offer you proper advice regarding your personal situation.

2. Ask your advisor if he is fiduciary. A fiduciary is responsible for managing the assets of another person, or of a group of people. A fiduciary's responsibilities are both ethical and legal. This means that a fiduciary is required to act on the best interest of his client.

3. Ask your advisor how they get paid. It is totally okay and legitimate to ask your advisor this question. Are they get paid hourly? Are they get paid on commission? The reason why this question is important is becuase people may have bias under different circumstances. If they are paid on commision, they are likely to recommend product that they can get the most commision with but not the best fit for you.

For this week,

Update: After all the modules, what have you learnt? How does your attitude toward wealth management change? Do you have anything in your mind that you want to get started with? Talk to your classmates, comment under their posts, and share your thoughts.