Goal Setting
Saving
and
Investing
Florida Saves 2020
“See Your Future Clearly”
Purpose of Saving Money
To set aside money you could spend today so you
can spend it tomorrow…
What will happen if you:
• Lose your job?
• Get sick?
• Have an emergency?
Overview
• Two futures:
– The one we plan for
– The one that happens
• Save for the future you “want”
• Prepare for a “rainy day”
• Pay Yourself First!
Saving should be planned, not an afterthought
Defining “Goal”
“ A statement of future wishes. It describes
what is trying to be accomplished.”
(Cothran and Wysocki, 2009)
Importance of Goal Setting
“You've got to be very careful if you don't
know where you're going, because you
might not get there.”
– Yogi Berra
(Cothran and Wysocki, 2009)
S.M.A.R.T. Goals
Strategize to Save for Goals
1. Calculate amount to save for each goal
per month
2. Stretch amount over the course of the
month
3. Deduct from income
Consider enrolling in an automatic savings
program – up to 10% of income
Activity
• Fill out the SMART Goal Worksheet
• Construct a SMART Goal
Goal Planning
• Short-Term
– Less than one year
• A significant gift
• Medium-Term
– 1-5 years
• Down payment for a car, a vacation, or large purchase
• Longer Term
– 5 years and more
• House, car, retirement, education
Savings Pyramid:
Layer Your Savings!
$
Dream Big
Tax Advantaged:
Education & Retirement
Intermediate Goals:
Home, Business
Foreseeable Large Purchases
Emergency Fund and Meeting
Short-Term Cash Needs for Expenses
Emergency Fund:
Base Savings Pyramid
• Should be a requirement
• 3 - 6 months of necessary expenses
when times are good
• 8 -15 months when times are uncertain
• Think of saving as a bill; force yourself to
pay your “saving bill” first.
Foreseeable Large Purchases
• Plan ahead
• Build into budget
– Avoids purchasing
with credit
• Use Savings, CDs,
Money Markets
when appropriate
Intermediate Goals:
For Home, For Business
For a Down Payment
Start-Up Capital
Tax Advantaged:
Education and Retirement
• Choose plan for state tax deduction
• Have an old 401(k), 403(b) or taxsheltered annuity from another
employer?
• Transfer money to another family
member if goes unused.
• Roll it over to manage in a
Traditional IRA
• Starting early is important
• May expand investment choice and
save costs
Retirement Is a Goal
• Use qualified or tax-deferred saving
vehicles
– Prevent use until age 59 ½
– Early use is a 10% penalty
• Make IRA contributions
• Take advantage of employer provided
plans with matching contributions
Dream Big
• Other goals?
• Once you have
adequately funded
your other layers, you
can put money to
these dreams…
whatever they are.
Pay Yourself First!
• Stop thinking sacrifice!
• Plan for savings
• Make it part of your budget
– Make it a habit
– Budget it in as the first line item for each goal
• Don’t give yourself a choice
– Payroll deduction into savings
– Bank automatically transfer
• Choosing the right account and method is important
Strategies for Saving Money
• Continue “to make loan payments” when
loan is paid in full
– Redirect that money into savings
• Plan a “nothing week”
• Leave the debt/credit card “at home day”
• Avoid paying credit charges
Strategies for Saving Money
•
•
•
•
•
Start small then increase every 3-6 months
Save some of your tax return
Save overtime money
Save your raise or bonus
Save 50 cents a day in loose change
• $15 per month
• Save 75 cents a day
– More than halfway to a five hundred dollar emergency
fund
Strategies to Reduce Spending
• Shop with a list
• Save coupon money
– Look online for price matching
and coupons
• Shop for sale prices
• Collect loose change
• Research reward programs
Strategies to Reduce Spending
•
•
•
•
Reduce grocery bill by 2 per cent
Bring lunch to work = $60 per month
Conserve water and energy at home
Eating out two fewer times a month = $30
per month
• Name brand vs. generic brand
Investment Planning Process
1. Define financial goal(s)
2. Discover your risk tolerance
3. Establish a saving program into financial
account(s)
4. Learn about available investment choices
5. Purchase and diversify investments across
different asset classes
6. Monitor, review and rebalance annually
Types of Accounts
•
•
•
•
•
Basic savings account
Certificate of Deposit
Education and Retirement accounts
Money Market Account
General investment brokerage accounts
Depends on why you are saving
Match the account to your goal
Basic Savings Account
• Excellent vehicle to accumulate money for
emergencies or short-term goals
• Can be linked to checking account
– Excellent for overdraft protection!
Certificate of Deposit
• Timed deposit account
• Good to use for intermediate goals
Traditional
Roth
• Tax deferred
• Max contribution
$5,000 per year per
spouse
• May or may not be
fully deductible
– If participating in
employer plan this
will vary
• Does not provide current
tax savings
• Max contribution $5,000
per year per spouse
• No phase out based on
material participation in
DC plan
• Provides for tax-free
growth on savings. No
deduction now, but also no
taxes later
Basic Rules of Investing
• Don’t put your eggs in one basket
• Timing the market does not work in long
run
• Avoid moving money to chase returns
• Financial markets reflect public information
Investments
•
•
•
•
Mutual Funds
Stocks
Bonds
Real Estate
Year-end 1925–2005
$20,000
$10,000
Small company stocks
Large company stocks
Government bonds
Treasury bills
Inflation
$1,000
$13,706
12.6%
$2,658
10.4%
Ending
wealth
Average
return
$100
$10
$71
5.5%
$18
$11
3.7%
3.0%
$1
$.10
1925
1935
1945
1955
1965
1975
1985
1995
2005
Hypothetical value of $1 invested at year-end 1925. Assumes reinvestment of income and no transaction costs or taxes.
How Do I Earn Interest?
• Return based on amount of risk taken
• Risk is uncertainty
• Proper mix of stocks, bonds and
alternative investments may provide
maximum return for your comfort of risk
taking
13% Return
Maximum risk portfolio:
100% Stocks
12
80% Stocks, 20% Bonds
60% Stocks, 40% Bonds
11
50% Stocks, 50% Bonds
Minimum risk portfolio:
25% Stocks, 75% Bonds
10
100% Bonds
9
•
10% Risk
11
12
13
14
15
16
Past performance is no guarantee of future results. Risk and return are measured by standard deviation and arithmetic mean,
respectively. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an
index.
17
Asset Allocation At Work
Growth of $10,000 over 25 Years
1
(3/31/83 – 3/31/08)
Conservative
Moderate
5%
10%
10%
10%
45%
15%
70%
30%
70%
35%
$118,309
Stocks
Aggressive
$152,769
Bonds
Foreign Stocks
$221,714
Commodities
1. Source of chart data: FactSet 3/31/08. These asset allocation models are for illustrative purposes only and are not intended as investment advice or recommendations. Results are for
$10,000 hypothetical investments allocated to the percentages shown in each model from 3/31/83 – 3/31/08. Stocks are represented by the S&P 500 Index, a broad-based measure of
domestic stocks performance; bonds by the Lehman Brothers Aggregate Bond Index; foreign stocks by the Morgan Stanley Capital International (MSCI) EAFE Index, a broad-based measure
of foreign stock performance; commodities by the S&P GSCI, a composite index of commodity sector returns re presenting an unleveraged, long-only investment in commodity futures that is
broadly diversified across the spectrum of commodities. Indices include reinvested income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors.
This chart is for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.
Stocks, commodities and bonds are subject to different risks. Stocks and commodities are also different from bonds, where bonds, if held to maturity, may offer both a fixed rate
of return and a fixed principal value. Fixed income investing entails credit risks and interest rate risks. When interest rates rise, bond prices generally fall and the Fund’s share
prices can fall. Foreign investing has special risks, including currency fluctuations, foreign taxes and political and economic
factors. Commodities may be subject to greater volatility. Diversification does not assure a profit or protect against a loss.
Past performance does not guarantee future results. Due to ongoing market volatility, current performance may be more or less
than the results shown in this presentation. The performance information does not show the effects of income taxes on an individual’s
investment. Taxes may reduce your actual investment returns or any gains you may realize if you sell your investment. An investor’s
shares, when redeemed, may be worth more or less than the original cost.
How to Open an Account
•
•
Consult a financial representative at your
financial institution
Call your bank or investment broker
Be prepared by gathering personal information
ahead of time :
1. Social security numbers
2. Beneficiaries date of birth, address, phone
numbers
3. Financial account numbers
4. Drivers license
5. Voided check
•
Go directly to an institution’s online website
Trying to Predict the Market?
Stay in the Market—Don’t Miss Your Window
of Opportunity
1
Hypothetical $1,000 investment over 20-year period
If You…
$7,948
Stayed
Invested
$6,146
Missed the
Top 5
Days
10.9%
9.5%
$4,218
$4,071
Missed the
Top 15
Days
Compound
Return
(3/31/88 – 3/31/08)
7.3%
$2,836
No one can accurately
predict market
performance. Trying
to do so by moving in
and out of the market
can be very costly.
Bonds
Missed the
Top 25
Days
5.4%
7.5%
1. Source of chart data: Ned Davis Research, 3/31/08. The chart shows the results of a $1,000 hypothetical investment in the S&P 500 Index on 3/31/88 held through
3/31/08 compared to similar hypothetical investments in stocks that were not invested on the days that were the market highs during the period. The S&P 500 Index is a broad-based
measure of domestic stock market performance that includes the reinvestment of dividends. The index is unmanaged and cannot be purchased directly by investors. Index performance
is shown for illustrative purposes only and does not predict or depict the performance of any investment. For comparison, an investment in bonds is shown, represented by the Lehman
Brothers Aggregate Bond Index. Indices are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the
performance of any Oppenheimer fund. Past performance does not guarantee future results. Stocks and bonds have different risks, where bonds, if held to maturity, may offer
both a fixed rate of return and a fixed principal value.
Past performance does not guarantee future results. Due to ongoing market volatility, current performance may be more or less
than the results shown in this presentation. The performance information does not show the effects of income taxes on an individual’s
investment. Taxes may reduce your actual investment returns or any gains you may realize if you sell your investment. An investor’s
shares, when redeemed, may be worth more or less than the original cost.
Take Home Message
• Goal Setting
– Be creative and realistic, most all be SMART!
• Saving
– Pay yourself now for the
future you want
• Investing
– Invest for the long run and remember the
basic rules of investing
When you have
questions,
we have answers!