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					      Financial Planning for the
             Real World
                Marshall Smith
         President, DelPhi Foundation




Agenda
•   Introduction
•   Common Problems
•   Addressing Issues
•   Looking Forward




Introduction
•   Marshall Smith
•   President, DelPhi Foundation
•   Beta Alpha chapter, Alpha class
•   Treasurer, National Alumni Association
    (2003-2007)




                                             1
Common Problems

• Lack of savings

• Unable to fund large purchases

• No cash for casual expenses




Common Problems – How they
Happen

• Living above means

• Misprioritizing expenses

• Poor planning




Debt
•   Not all debt is bad
•   Consider the value of money over time
•   Credit card debt is (basically) always bad
•   Average college graduate has $2,500 in
    high interest credit card debt

• Is it an “investment” or an “expense”?




                                                 2
Debt – Investment vs. Expense
• Investment
    – Increase in value over time
    – May be something used or just savings
    – Example: house, stock market, bonds
• Expense
    – Decreases in value after purchase
    – Consumable items, little to no residual value
    – Example: consumer electronics, clothing, cars




Addressing Issues
•   Track Monthly Expenses
•   Create a Budget
•   Have an Emergency Fund
•   Save Every Month
•   Avoid Casual Purchases on Credit Cards




Addressing Issues
• Track Monthly Expenses
    – Pay each bill on time to avoid late fees and
      interest. These are just a waste.
    – Never use credit protection, credit card
      insurance, or payday loans. Insure yourself
      and you can keep that money.
    – Keep a journal of each debt item with how
      long it will take to pay off. Update as each
      payment is made.




                                                      3
Addressing Issues
• Create a Budget
  – Accurately measure available income.
  – List ALL expenses – accumulate history to be
    accurate.
  – Prioritize each expense.
  – Make sure to include savings/paying off debt.
  – Utility payments are never refundable – work
    to minimize them.




Addressing Issues
• Have an Emergency Fund
  – Plan to save a bit every pay period to create a
    buffer.
  – Allows you to handle emergency situations
    with less stress and urgency.




Addressing Issues
• Save Every Month
  – Target to save 10% of your income every
    month – after 5 years you’ll have six months
    worth of take-home pay for a fund.




                                                      4
Addressing Issues
• Avoid Casual Purchases on Credit Cards
    – Never carry a balance on credit cards
    – If you can’t manage that, get rid of the cards
    – Use cards smartly and earn benefits




Looking Forward
•   Finding a Job
•   Employment Savings Plans
•   Credit Reports
•   Savings




Looking Forward
• Finding a Job
    – Consider benefits packages (insurance, time
      off, etc.) in conjunction with actual cash pay
    – A $60K job with benefits can be better than
      $90K with no benefits included
    – Intangible benefits can also be valuable




                                                       5
Looking Forward
• Employment Savings Plans
  – Always save in 401(k)/403(b) plans up to the
    company match – free money
  – Every raise, increase your savings by a
    percentage point or two
  – Rebalance annually or select a target
    retirement fund
  – A dollar saved only “costs” $0.40 to $0.75
  – If you can, max out your contributions. Never
    tap the fund.




Looking Forward
• Credit Reports
  – Get your three free reports every 12 months
  – Get one each four months and you’ll always
    be able to get one for free
  – Never pay for a credit score: it’s like paying
    for your IQ – it’s not needed and you either
    know it’s good or know it sucks




Looking Forward
• Savings
  – Saving just $5/week will accumulate $3,400 in
    10 years
  – Saving just $10/week will accumulate $36,000
    in 30 years
  – These are with very conservative rates…




                                                     6
Savings
                           $5/week

        600000


        500000


        400000
                                             5%
                                             8%
        300000
                                             11%
                                             14%
        200000


        100000


            0
                 10   20           30   40
                           years




Key Takeaways
• Pay yourself first (Savings)
• Spend smartly
  – Necessary expenses can pay you back
• Avoid all fees and charges that can be
  alleviated by planning
• Plan for the future and then you will be
  able to do whatever you want




                                                   7