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Personal Finance 101 Part 1 . . .

Personal Finance 101 Part 1 . . . AGENDA. Purpose Budgeting Credit Cards Three Tenets of Personal Finance Emergency Savings Retirement Investing Thrift Savings Plan (TSP) Individual Retirement Accounts (IRAs) Life Insurance Servicemembers’ Group Life Ins (SGLI)

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Personal Finance 101 Part 1 . . .

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  1. Personal Finance 101Part 1 . . .

  2. AGENDA • Purpose • Budgeting • Credit Cards • Three Tenets of Personal Finance • Emergency Savings • Retirement Investing • Thrift Savings Plan (TSP) • Individual Retirement Accounts (IRAs) • Life Insurance • Servicemembers’ Group Life Ins (SGLI) • Term vs. Whole Life Insurance

  3. PURPOSE To provide Army leaders with a Better Understanding of personal financial planning in order to provide our Soldiers timely, accurate, and honest information in order to make more informed decisions.

  4. Budgeting • Almost everyone hates to budget • You must have a good idea of your income and expenses • For one month = keep track of every penny you spend. You’ll be shocked to see where your money goes

  5. Credit Cards If you spend $4,000 on credit cards at 18.5% interest and pay only the minimum payments, it will take you 11 years to pay off ($7,800 total).

  6. Three Main Tenets of Personal Finance • Savings • Emergency Fund • Investing • Individual Retirement Accounts (IRA) • Federal Thrift Savings Plan • Insurance • Servicemembers’ Group Life Insurance (SGLI) & Family SGLI • Term vs. Whole Life

  7. Emergency Savings Rainy days will happen…. • You need 3-6 months of living expenses saved • Very liquid….not in CDs, mutual funds, etc. • The more secure your job, the less you need (Army = 3 months) • Most should aim for $10,000 • More responsibilities = larger savings needed

  8. Getting Started Everyone can begin saving something • Start with $50 a month if nothing else • Many mutual funds can be started with as little as $50 (USAA for example) • Everyone has a Latte Factor…find yours. • Time is your biggest benefit. You miss out on compounding interest the longer you wait.

  9. Retirement Investing - TSP Thrift Savings Plan…. • Exactly like a civilian 401-k retirement plan • Five index funds & four target date Life Cycle funds • Index funds follow S&P 500, Wilshire 5000, etc. • Life Cycle funds are too conservative for most • Funded with before tax dollars • Earnings grow tax deferred & taxes are owed on the interest and capital gains when withdrawn • Can withdraw the money at 59 ½ years old • $15,500 maximum yearly contribution limit • Automatic enrollment….coming soon!

  10. Retirement Investing – Roth IRA Roth IRAs…. • Usually invested inside mutual funds or a brokerage account with individual stocks • Funded with after tax earnings • Earnings grow tax free & no taxes are owed on interest and capital gains when withdrawn • Can withdraw the money at 59 ½ years old • $5,000 maximum contribution limits ($416 a month) • Investing $5,000 a year starting at 22 years-old, earning 8% annually, will grow to over $2.2 million at age 62 (your investment =$245,000) • Skip a Traditional IRA until you max out a Roth

  11. Investing Tips • It’s usually more beneficial to start with a Roth IRA and then invest in TSP • You can take out a loan for college, but you can’t take out a loan for retirement • Investments with low expenses (like Index Funds) are a great place for a beginner investor • Individual stocks are hard to track, mutual funds are better & more diversified

  12. Life Insurance Is $400,000 SGLI enough? Maybe…. • You need approximately 10x your income • For an E-6 with 10 years of service, you should have $500,00 in insurance. Do not forget to include BAH. • Do you depend on your wife’s income? You may need insurance for her. • Will the Family SGLI be enough to cover full time daycare for children, fixing meals, etc.? • You have disability insurance with the Army, but does your spouse have it at her work? Can you survive a loss of her income?

  13. Life Insurance • For most people, Term insurance is better than Whole Life • $100,000 Whole Life = $100 a month • $500,000 Term Life = $40 a month • 20 to 30 year term insurance (like SGLI) will protect you while your children are young • You only need insurance to protect income • Insurance on children is a waste of money

  14. The Last Word….. If you take nothing else away…. Start now!

  15. QUESTIONS ? “Amateurs talk about tactics, but professionals study Logistics.” – General Omar Bradley

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