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Lets Talk Money!

Lets Talk Money!. Part Three: Investing and Growth. Week 1 Recap. Financial Principles Plan (Luke 14:28-30) Protect/Stewardship (Proverbs 27:23) Provide (1 Timothy 5:8) Budget Goals (50/20/10/20) Income ≥ Expenses Reduce/Eliminate Debt Increase Savings Include Dreams. Week 2 Recap.

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Lets Talk Money!

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  1. Lets Talk Money! Part Three: Investing and Growth

  2. Week 1 Recap • Financial Principles • Plan (Luke 14:28-30) • Protect/Stewardship (Proverbs 27:23) • Provide (1 Timothy 5:8) • Budget Goals (50/20/10/20) • Income ≥ Expenses • Reduce/Eliminate Debt • Increase Savings • Include Dreams

  3. Week 2 Recap • Debt • Lender = Master, Debtor = Slave • Debt payments reduce buying power • Debt causes missed opportunities • Debt kills/stalls dreams • Reduce Debt • Snowball Method • Understand the impact to the big picture

  4. Week 2 Recap • Savings Vehicles • Savings Account • Money Market Account • Bank CDs • How to Save • Start with a $1000 EMERGENCY fund • Out of Sight/Out of Mind- Automate savings • “Compound interest is the eighth wonder of the world. He who understands it, earns it… He who doesn’t, pays it.” – Albert Einstein

  5. Investing vs. Saving • Investing occurs after saving • Invest for the longer term > 10 years • Education/Retirement/Legacy • Protects buying power • Average inflation = 3% • $100 today = $97 next year • Stock Market has averaged +10%/yr over last 40 years • Increased returns come with increased risks • In 2008 the stock market lost 37%

  6. Investing • Start Early: Time is an asset

  7. Investing • Stocks • A share of ownership in a company • Bought and sold on a stock exchange • NYSE; Nasdaq • Typically bought through a brokerage account • ETrade, Fidelity, TD Ameritrade, Schwab, etc. • Prices based on the growth and profitability of a company as well as supply/demand

  8. Investing • Bonds (IOU issued by an organization) • Interest(Coupon) Rate • Set at the time of issue (higher rate=higher risk) • Represented by a % paid on face value • Face Value • Amount that will be paid back at maturity • Maturity Date- Date when face value is paid • Issue Price- Price that the bond is sold • Lock in higher rates with longer terms • www.Investopedia.com/terms/b/bond.asp

  9. Investing • Mutual Funds • Pool of money from investors that a company uses to buy and sell stock or bonds. Typical in a specific category. • Actively managed by a professionals, which incurs management fees. • Investment minimums typically apply, and vary. • Price set at the end of each trading day. • Vanguard; American Funds; Blackrock

  10. Investing • Exchange Traded Funds (ETFs) • Pool of money from investors that a company uses to buy and sell stock or bonds. Typical in a specific category. • Passively managed by a professionals, which incurs smaller management fees. • Bought and sold like stocks, minimum investment equal to the share price. • Share price changes throughout trading day. • SPDR; iShares; Vanguard

  11. Investing STOCKS STOCKS BONDS BONDS ETFs Mutual Funds

  12. Investing • Employer Sponsored Retirement Account • 401(k)/403(b)/457 • Pre tax contributions (withdrawals taxed as income) • $19K/yr max, additional $6k/yr for 50+ • 10% early withdrawal penalty + taxes • ALWAYS get the match • https://investorjunkie.com/retirement/employer-sponsored-retirement-plans/

  13. Investing • Individual Sponsored Retirement Account (IRA) • Traditional • Tax deductibility based on income • No contributions after 70.5 yrs old • Contributions limited to $5500, or $6500 for 50+ • Roth • No tax deductibility, but withdrawals untaxed • No withdrawal penalties • Contributions allowed after 70

  14. Investing • Brokerage Account • Start Small • Use “excess” funds • Be careful of commissions; commission < 5% of trade • Research • Build a watch list • Big rewards come with big risks • Be careful of unreliable sources

  15. College (529 Plan) • Virginia 529 Plan- Tax free savings plan used to pay for education expenses. • Beneficiary can be changed without penalty • 10% penalty for non-education expenses • Contributions can be gifted • Consists of 2 options: • Invest529 • CollegeAmerica • www.virgina529.com

  16. College (529 Plan) 6.5% Avg. Return

  17. College (529 Plan) • Invest 529 Plan- Direct-sold plan with access to several mutual funds. • $250 min. to open, and no per month min. • Target date fund options • Select closes date of graduation • Automatically adjust risk based on date • 15 other funds available • Must be used 30 years after beneficiary graduates

  18. College (529 Plan) • CollegeAmerica Plan- Advisor-sold plan with access to several mutual funds. • $250 min. to open, and $50 per month • Target date fund options • Select closes date of graduation • Automatically adjust risk based on date • American Funds mutual funds also available • Must be used 30 years after beneficiary graduates

  19. Real Estate Investing • Purchase Price is Critical • Be patient and do your research • Monthly Cash Returns • 1% rule • $200k X 1% = $2k/month rental price • Mortgage (20% dwn) for $200k = $1k/mth • Core Investment Growth • Neighborhood/Repairs/Rental Pool

  20. Real Estate Investing • Start with Current Home • Quality of home is known. • Instant equity from payments • Won’t require 20% down • Remaining loan balance will count in Debt/Income ratio <40%-45% • May hinder upgrade potential

  21. Real Estate Investing • Start with New Home • Expect unforeseen repairs. • After purchase, home may need to be brought up to code. • Most secondary mortgages require 20% down • Remaining loan balance will count in Debt/Income ratio <40%-45% • Home can be “less than ideal”

  22. Homework • Start a Budget (50/20/10/20) • Stick to the Budget • Start Saving- $1000 Emergency Fund • Increase Tithing- Commit to auto giving • No New Debt • Reduce Debt • Avoid Lifestyle Inflation • Invest for the Future

  23. Resources • https://www.daveramsey.com/ • https://www.stewardshipcentral.org/ • https://mydfree.org/ • https://www.investopedia.com/ • https://www.bankrate.com/ • The Millionaire Next Door by Thomas Stanley • The Total Money Makeover by Dave Ramsey • Rich Dad Poor Dad by Robert Kiyosaki • The Holy Bible, especially the book of Proverbs

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