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Achieving Your Financial Goals

Achieving Your Financial Goals. Presenter Name | Presenter Title. America’s Financial Literacy. The average American family spends $1.22 for every dollar it earns.

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Achieving Your Financial Goals

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  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 1/8th 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!

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

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

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