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Achieving Your Financial Goals

Gain financial wisdom to achieve your dreams and secure your future. Learn to manage money, reduce debt, and invest wisely towards life milestones. Discover key areas of personal finance and start building a solid financial foundation today!

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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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