Achieving Your Financial Goals - VSCPA

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					Achieving Your Financial
    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
• 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
 • The understanding of:
   -   Money
   -   Cash flow
   -   Basic economic/financial concepts
   -   Debt/risk management
Financial Literacy

 Key areas of personal finance:
 •   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:
•   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
• 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
• Credit can be a friend — and not a foe —
  as a basic financial tool
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
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
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
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:
•   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:
•   Think small
•   Be consistent
•   Make it easy
•   Pay yourself first
•   Allow for slip-ups
•   Team up
•   Congratulate yourself
    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’
•   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!
Saving & Investing

The Rule of 72
                              Growth over Time


        $20,000                                                       4%


                      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
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:
•   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, well-
  trafficked 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
• 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:
•   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
• 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:
•   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
• Loss
• Sandwich generation
• Divorce
Financial Education Resources
Financial Education Resources

•   Lifelong learning courses
•   Financial media
•   Internet resources
•   Your CPA
•   Organizations:
    > Virginia Society of CPAs (
    > American Institute of CPAs (
    > Virginia Jump$tart Coalition for Personal Financial
      Literacy (
Financial Education Resources
Virginia Society of CPAs:
•   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:
• Financial education to help consumers at every life
• Feed the Pig Ad Council campaign
 Financial Education Resources

Your friend Benjamin Bankes:
• A joint creation of the AICPA, state
  CPA societies and the Ad Council.
• Help is available at
• Take charge of your money and
  your life!
Financial Education Resources
Free weekly e-mail savings tip:
      Financial Literacy:
 Knowing What You Need To
Know To Achieve Your Financial
Thank You!