Achieving Your Financial
Goals
Presenter Name | Presenter Title
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).
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
What is Financial Literacy?
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:
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Money
Cash flow
Basic economic/financial concepts
Debt/risk management
Financial Literacy
Key areas of personal finance:
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Money & income
Spending & debt
Savings & investments
Risk management
Life’s milestones
Money & Income
Money & Income
• Time is money
• How many hours do you need to work to pay
for your mortgage, car insurance, electricity
bills, extras, etc?
Money & Income
Developing a budget:
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A plan for coordinating income and expenses
No average budget to follow
Unique to your financial situation
Depends on set savings/spending priorities
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.
Spending & Debt
Spending & Debt
• Weigh benefits and costs of spending
alternatives
• Credit can be a friend — and not a foe —
as a basic financial tool
Spending & Debt
Use credit wisely:
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Beware of credit card intro rates
Avoid having multiple credit cards
Pay in full every month
Pay on time
Avoid cash advances
Spending & Debt
Use credit wisely:
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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
Spending & Debt
How to reduce debt:
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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
Saving & Investing
Saving & Investing
• Saving means not spending money.
• Investing means that you earn a return on
the money you put into it.
Saving & Investing
Saving money:
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Save on a regular basis
Willpower + a good plan = success
You’ll feel the power
You’ll be motivated
Saving & Investing
Small changes add up:
• Get out your piggy bank– again!
• Feed the Pig
• Small amounts add up
to big savings
Saving & Investing
7 steps to get started:
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Think small
Be consistent
Make it easy
Pay yourself first
Allow for slip-ups
Team up
Congratulate yourself
Saving & Investing
Small money saving tips:
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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
Saving & Investing
Investing money:
• Compound interest
• Rule of 72
• Planning for wealth
• Make the most of a 401(k)
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
Accumulation
$20,000
$15,000
4 % Return
$10,000
6 % Return
$5,000
$0
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4
5
Years
6
7
8
9
10
Saving & Investing
The Rule of 72
Growth over Time
Value
$30,000
4%
$20,000
6%
$10,000
8%
$5 yrs
10 yrs
15 yrs
20 yrs
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
Years
Saving & Investing
Short-term investment options:
• Certificate of Deposit (CD)
• Money Market Funds
• Savings Account
Saving & Investing
Long-term investment options:
• Mutual fund
• Stocks
• Bonds
Saving & Investing
Retirement investment options:
• 401(k)
• Individual Retirement Account (IRA)
• Social Security
Risk Management
Risk Management
• Insurance
• Identity theft
Risk Management
Health care insurance:
• Types of Managed Care Plans
> Health Maintenance Organizations (HMOs)
> Preferred Provided Organizations (PPOs)
> Point-of-Service Plans (POS)
Risk Management
Long-term disability insurance:
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Benefit amount
Term
Elimination period
Noncancelable
Guaranteed renewables
Own vs. any occupation
Workers’ compensation
Social security disability
Veterans benefits
Federal Employees Retirement System
Risk Management
Life insurance:
• Choosing coverage
> premiums
> family need
> time period
• Term vs. Permanent
Risk Management
Permanent life insurance options:
• Whole life
• Universal life
• Variable life
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, welltrafficked area, if possible.
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.
Life’s Milestones
Life’s Milestones
Buying your first home:
• Establish good credit
• Understand “real costs”
• Assess risks
Life’s Milestones
Getting married:
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Understand “financial partnership”
Establish separate and joint credit/bank accounts
Create wills and trusts
Identify beneficiaries
Choose owners on title assets
Life’s Milestones
Finance a family:
• Budget
- Education
- Health care
- Child care
• Manage risk, insurance
• Create wills
• Instill financial literacy
Life’s Milestones
Starting a business:
• Understand
- cash flow
- expense timing
• Manage income and expenses
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.
Life’s Milestones
Preparing a will:
• Designate beneficiaries
• Determine asset distribution
• Identify insurance
Life’s Milestones
Tax planning:
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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
Life’s Milestones
Planning for unexpected
milestones:
• Loss
• Sandwich generation
• Divorce
Financial Education Resources
Financial Education Resources
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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)
Financial Education Resources
Virginia Society of CPAs:
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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
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
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!
Financial Education Resources
Free weekly e-mail savings tip: www.FeedthePig.org
Financial Literacy:
Knowing What You Need To
Know To Achieve Your Financial
Goals
Thank You!