Achieving Financial Goals Tips on Financial Mgt

Financial Management

1. Achieving Your Financial
Goals
Presenter Name | Presenter Title

2. America’s Financial Literacy
•The average American family spends $1.22 for
every dollar it earns.
•One in five American families with annual household
income of less than $50,000 is spending 40% of
after-tax income to service its debt.
•Credit card debt has tripled in past two decades, and
the average American household owes more than
$9,000 ($2600 in 1989).

3. America’s Financial Literacy
•2 out of 3 households will probably
fail to realize life goals
•Financial illiteracy is passed to the
next generation
•Average high school senior failed
2006 financial knowledge survey

4. What is Financial Literacy?

5. Financial Literacy
•The ability to effectively evaluate and manage
one’s finances in order to make prudent
decisions toward reaching life’s goals
•The understanding of:
-Money
-Cash flow
-Basic economic/financial concepts
-Debt/risk management

6. Financial Literacy
Key areas of personal finance:
•Money & income
•Spending & debt
•Savings & investments
•Risk management
•Life’s milestones

7. Money & Income

8. Money & Income
•Time is money
•How many hours do you need to work to pay
for your mortgage, car insurance, electricity
bills, extras, etc?

9. Money & Income
Developing a budget:
•A plan for coordinating income and expenses
•No average budget to follow
•Unique to your financial situation
•Depends on set savings/spending priorities

10. Money & Income
Budget exercise:
• Enter your net income or take-home monthly income.
• Enter your fixed expenses, such as car payments and rent.
• Enter your flexible expenses, using figures you gathered
from a typical month, such as your phone or electricity bill.
• Enter your discretionary expenses, such as clothing and
entertainment.
• Enter the amount you put into savings.
• Now total all of your expenses and your savings and subtract
this total from your net income.
•If you have money left over, you may
want to use it to increase your savings.

11. Spending & Debt

12. Spending & Debt
•Weigh benefits and costs of spending
alternatives
•Credit can be a friend — and not a foe —
as a basic financial tool

13. Spending & Debt
Use credit wisely:
•Beware of credit card intro rates
•Avoid having multiple credit cards
•Pay in full every month
•Pay on time
•Avoid cash advances

14. Spending & Debt
Use credit wisely:
•Stay within your credit limit
•Review your statements carefully
•Protect your credit history
•Report lost/stolen cards immediately
•Protect personal information
•Access and review your free credit report annually at
www.annualcreditreport.com

15. Spending & Debt
How to reduce debt:
•Cut back on spending
•Consolidate your debt
•Seek out payment options
•Don’t miss payments or default
•Homeowners: use your equity
•Home equity credit is often cheaper

16. Saving & Investing

17. Saving & Investing
•Saving means not spending money.
•Investing means that you earn a return on
the money you put into it.

18. Saving & Investing
Saving money:
•Save on a regular basis
•Willpower + a good plan = success
•You’ll feel the power
•You’ll be motivated

19. Saving & Investing
Small changes add up:
•Get out your piggy bank– again!
•Feed the Pig
•Small amounts add up
to big savings

20. Saving & Investing
7 steps to get started:
•Think small
•Be consistent
•Make it easy
•Pay yourself first
•Allow for slip-ups
•Team up
•Congratulate yourself

21. Saving & Investing
Small money saving tips:
•Brew your own coffee — at 1/8
th
the price of latte
•Cook on the weekends; eat portions during the week
•Borrow library DVDs; save on rental and cable fees
•Use your own bank’s ATMs; avoid other banks’ charges
•Find out whether your health insurer covers gym dues
•Don’t spend your next raise; bank it
•Sign up for payroll deductions
•Invest in savings bonds or CDs
•Sign up for payroll direct deposit

22. Saving & Investing
Investing money:
•Compound interest
•Rule of 72
•Planning for wealth
•Make the most of a 401(k)

23. Saving & Investing
Compound interest:
•Consistent steps, even small ones, can add up
•$25/week for 10 years @ 5% = $16,950
•Add $1 a week, and you’ll have $17,840!
$25/Week for 10 years
$0
$5,000
$10,000
$15,000
$20,000
1 2 3 4 5 6 7 8 9 10
Years
A
c
c
u
m
u
l
a
t
i
o
n
4 % Return
6 % Return

24. Saving & Investing
The Rule of 72
Growth over Time
$-
$10,000
$20,000
$30,000
Years
V
a
l
u
e
4%
6%
8%
4% $6,083 $7,401 $9,005 $10,956
6% $6,691 $8,954 $11,983 $16,053
8% $7,347 $10,795 $15,861 $23,305
5 yrs 10 yrs 15 yrs 20 yrs

25. Saving & Investing
Short-term investment options:
•Certificate of Deposit (CD)
•Money Market Funds
•Savings Account

26. Saving & Investing
Long-term investment options:
•Mutual fund
•Stocks
•Bonds

27. Saving & Investing
Retirement investment options:
•401(k)
•Individual Retirement Account (IRA)
•Social Security

28. Risk Management

29. Risk Management
•Insurance
•Identity theft

30. Risk Management
Health care insurance:
•Types of Managed Care Plans
>Health Maintenance Organizations (HMOs)
>Preferred Provided Organizations (PPOs)
>Point-of-Service Plans (POS)

31. Risk Management
Long-term disability insurance:
•Benefit amount
•Term
•Elimination period
•Noncancelable
•Guaranteed renewables
•Own vs. any occupation
•Workers’ compensation
•Social security disability
•Veterans benefits
•Federal Employees Retirement System

32. Risk Management
Life insurance:
•Choosing coverage
>premiums
>family need
>time period
•Term vs. Permanent

33. Risk Management
Permanent life insurance options:
•Whole life
•Universal life
•Variable life

34. Risk Management
Identity theft:
•Make a list of all of your credit cards, and store in a
secure place that is easily accessible.
•Keep your credit card in sight when you use it to pay
for a purchase, if possible.
•Don't carry your birth certificate or Social Security card
in your wallet.
•Install a locked mailbox to prevent mail theft.
•When dining out, keep your purse or wallet secure.
•Use drive-through ATMs or use only in safe, well-
trafficked area, if possible.

35. Risk Management
Identity theft:
•Shred pre-approved credit card or loan applications.
•Check your bank statements as soon as you receive
them, and order a copy of your free credit report once
a year.
•Ask DMV to remove Social Security number on your
driver's license and assign random number.
•Never give your Social Security, credit card or bank
account numbers to anyone who calls you.
•If you are concerned about a potential scam, call the
local police.

36. Life’s Milestones

37. Life’s Milestones
Buying your first home:
•Establish good credit
•Understand “real costs”
•Assess risks

38. Life’s Milestones
Getting married:
•Understand “financial partnership”
•Establish separate and joint credit/bank accounts
•Create wills and trusts
•Identify beneficiaries
•Choose owners on title assets

39. Life’s Milestones
Finance a family:
•Budget
-Education
-Health care
-Child care
•Manage risk, insurance
•Create wills
•Instill financial literacy

40. Life’s Milestones
Starting a business:
•Understand
-cash flow
-expense timing
•Manage income and expenses

41. Life’s Milestones
Planning for retirement:
•Determine how much money you will need.
•Determine where your retirement income will come
from.
•Devise a budget and investment strategy to help you
meet your goals.

42. Life’s Milestones
Preparing a will:
•Designate beneficiaries
•Determine asset distribution
•Identify insurance

43. Life’s Milestones
Tax planning:
•Make the system work for you
•Get a tax credit for any dependent care you provide
•Keep good records to document your deductions
•Deduct mortgage interest and real estate taxes
•Plan your investment gains to minimize taxes
•Bank your tax refund

44. Life’s Milestones
Planning for unexpected milestones:
•Loss
•Sandwich generation
•Divorce

45. Financial Education Resources

46. Financial Education Resources
•Lifelong learning courses
•Financial media
•Internet resources
•Your CPA
•Organizations:
>Virginia Society of CPAs (www.vscpa.com)
>American Institute of CPAs (www.aicpa.org)
>Virginia Jump$tart Coalition for Personal Financial
Literacy (www.vajumpstart.org)

47. Financial Education Resources
Virginia Society of CPAs:
•www.FinancialFitness.org
•Financial planning articles
•Personal budget guide & spending plan
•E-newsletter
•“Ask a CPA” E-mail Program (free advice from CPAs)
•Financial check-up quiz
•Consumer workshops
•Speakers Bureau
•Nonprofit pro bono assistance
•Tax help programs

48. Financial Education Resources
American Institute of CPAs:
• www.360financialliteracy.org
• Financial education to help consumers at every life stage
• Feed the Pig Ad Council campaign
• www.feedthepig.org

49. Financial Education Resources
Your friend Benjamin Bankes:
•A joint creation of the AICPA, state
CPA societies and the Ad Council.
•Help is available at
www.FeedthePig.org
•Take charge of your money and
your life!

50. Free weekly e-mail savings tip: www.FeedthePig.org
Financial Education Resources

51. Financial Literacy:
Knowing What You Need To Know To
Achieve Your Financial Goals

52. Thank You!