MC Hammer The Good Life Due to the

MC Hammer – The Good Life Due to the success of the “Please Hammer Don’t Hurt ‘Em” album, MC Hammer made about $32 million in total income. After the purchase of his $12 million home, MC Hammer was left with approximately $20 million, which was supposedly squandered on other things such as: 2

MC Hammer – The Good Life FLEET OF 17 AUTOMOBILES 2 HELICOPTERS INVESTMENTS IN THOROUGHBRED RACEHORSES EXTRAVAGANT HUGE ENTOURAGE OF 20 PARTIES PEOPLE (MOST OF WHOM WERE ON HIS PAYROLL) 3

The Good Life Without a Budget • If MC Hammer did not make any more money, how long would it take until he would go completely broke? Total Wealth $32 mil House Cars Helicopters $12 mil $ 2. 4 mil $ 2 mil Parties Racehorses Remaining Net Worth Total amount of money spent by MC Hammer amounted to $22. 4 million $9. 6 mil (not counting his entourage expenses) • At a spending rate of $200, 000 per month his money will last how many months ($9, 600, 000 divided by $200, 000)? 48 months • MC Hammer would run out of money in approximately 4 years 4

Other Notable Names Who Lost Millions Vince Young: Made $40 million throughout an NFL career that lasted 6 years. As of 2014 he has a net worth of -$1. 5 million Chris Tucker: Made over $55 million with the success of the “Rush Hour” franchise, making him the highest paid actor in Hollywood in 2007. He now has a net worth of $11. 5 million 5

Why Do They Lose Millions? The Biggest Financial Pitfalls for Pro Athletes “They see their salaries as infinite, like it doesn’t end, like they can’t spend all of it. But, if you get $5 million a year, by the time you get done paying your agent and taxes, you have $2 million left to spend. That goes very quickly. ” MLB players 60% of NBA players file 78% of NFL players file for bankruptcy within 5 YEARS of retirement MLB players file for bankruptcy 4 TIMES more than the national average 6

Avoiding Bankruptcy You can avoid bankruptcy by: Saving your money Setting a budget Investing your money Reviewing your expenses to understand how much you can afford to spend without running out of money

Those Who Learned from Others’ Mistakes Ryan Broyles formerly played for the Detroit Tigers, drafted in 2012. He is most notably known for his frugal lifestyle and abiding by the 50/30/20 rule. Broyles had a NFL contract in 2015 worth more than $3. 6 million with $1. 4 million going straight in his pocket. He keeps to a frugal $5 k a month budget, meaning only $60 k after-tax income a year with a wife and one child. “I want to invest and I want the investments to provide so I’m financially free. ” –Ryan Broyles Zooey Deschanel is an actress on New Girl. She reportedly makes $100 k a month with $1, 578, 000 in the bank, $1, 645, 000 in stocks and $693, 300 in property. Her total net worth is $3, 916, 300. She only spends $22, 500 a month on all expenses a month.

Video- Budgeting 101 9

Introduction to a Budget • • What is a budget? Has anyone ever seen a budget? What does it look like? Has anyone ever built or kept a budget? Why? How is a budget related to our priorities, our wants and our needs? Wants Dinner out Brand name sneakers Spring break trip i. Pad Needs Groceries Monthly rent Paying the electric bill Books for class Where do these examples fall? Groceries Monthly rent Spring break trip Books for class Dinner out Brand name sneakers Paying the electric billi. Pad

Building a Budget The first step in building a budget is remembering that money can move in two ways: Into your wallet Out of your wallet INCOME EXPENSES 11

Income What is considered “Income”? Salary Allowance Gifts Earnings on investments Gross Pay: Your total salary before taxes or deductions Net Pay: The amount of money you actually bring home after taxes and standard deductions 12

Expenses There are three types of expenses: • Fixed Expenses: Same amount each month • Variable Expenses: Amount may change from month to month • Periodic Expenses: Do not occur on a monthly or regular basis Periodic or Discretionary Expenses Fixed Expenses Variable Expenses Rent Utilities Vacation Telephone Entertainment Repairs Cable Clothes Medical Bills Savings Dining Out Tuition 13

50/30/20 Rule

Income: An Example You have just been hired with a starting salary of $50, 000 and here is a breakdown of your expenses. Create a monthly budget using the rules you heave learned! Gross Annual Salary ……………………………$50, 000 Gross Bi-monthly Earnings ……………………… $2, 083 “Bi-monthly” means you get paid on the 15 th and 30 th of every month = a total of 24 paychecks per year Salary Withholdings: • Social Security…………………………… $130 • Medicare……………………………… $30 • Federal Income Tax………………………… $248 • NYS Income Tax…………………………… $101 • NY Disability……………………………… $2 • NYC Income Tax…………………………… $60 • Total Withholdings………………………… $571 Net Bi-monthly Earnings………………………… $1, 512 Net Monthly Earnings = $1, 512 X 2 = $3, 024 earned per month 15

Monthly Budget – Handout or blank paper Category Description Amount $$ INCOME Total Income EXPENSES Fixed Expenses Total Fixed Variable Expenses Total Variable Periodic Expenses Total Periodic Total Expenses Total Income - Expenses 16

Talk About It! Ask your parents, family members/relatives and older friends: • Do they have a budget for their monthly expenses? • Do they use the 50/30/20 rule to save their money? 17

Opportunity Cost. . . Things to Remember! ü People choose ü All choices involve costs ü People’s choices have consequences that lie in the future 18

Any questions? The End Module 2