The Importance of Saving: Basics of Personal Financial Planning

The Importance of Saving: Basics of Personal Financial Planning
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Learn the basics of personal financial planning and money management to achieve your financial goals. Prioritize saving and build up your emergency fund, with tips on how to save and where to get the money from.

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PowerPoint presentation about 'The Importance of Saving: Basics of Personal Financial Planning'. This presentation describes the topic on Learn the basics of personal financial planning and money management to achieve your financial goals. Prioritize saving and build up your emergency fund, with tips on how to save and where to get the money from.. The key topics included in this slideshow are Personal finance, money management, emergency fund, saving money, wealth building,. Download this presentation absolutely free.

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1. Basics of Personal Financial Planning & Money Management Basics of Personal Financial Planning & Money Management

2. Ya Gotta Save! Ya Gotta Save! SAVE MONEY! SAVE MONEY! Make it a priority Make it a priority Pay yourself first Pay yourself first Save for 3 reasons: Save for 3 reasons: Emergency Fund Emergency Fund Purchases Purchases Wealth Building Wealth Building When do I start? NOW!!! When do I start? NOW!!!

3. Ya Gotta Save! Ya Gotta Save! At least $1000 in your emergency fund At least $1000 in your emergency fund Savings Account Savings Account Easy to get to when emergencies happen Easy to get to when emergencies happen Then 3-6 months expenses saved Then 3-6 months expenses saved Money Market Money Market Where do I get the $1000 Where do I get the $1000 Sell something Sell something Cut back pizza & coke money Cut back pizza & coke money Work extra 2 nd job/overtime Work extra 2 nd job/overtime

4. Other Uses for Your Savings Other Uses for Your Savings Purchases Purchases Purchase with cash Purchase with cash Dont borrow money to buy the things you want Dont borrow money to buy the things you want Wealth Building- Retirement, College Funding, etc. Wealth Building- Retirement, College Funding, etc. Be consistent over time Be consistent over time 40 years of saving $100 per month, at 12 %, will build to $1,176,477!! 40 years of saving $100 per month, at 12 %, will build to $1,176,477!! Direct deposit some of your paycheck into savings, and some into checking Direct deposit some of your paycheck into savings, and some into checking Its easy when you never see the money Its easy when you never see the money

5. The Dreaded B Word The Dreaded B Word Make a written budget! Make a written budget! Know before the month begins where your money is going Know before the month begins where your money is going Pay necessities first Pay necessities first Food Food Shelter rent/house & insurance Shelter rent/house & insurance Transportation car & gas Transportation car & gas Clothing Clothing

6. The Dreaded B Word The Dreaded B Word Learn to manage money, or the lack of it will manage you Learn to manage money, or the lack of it will manage you Keep your checkbook balanced Keep your checkbook balanced Duplicate checks Duplicate checks NO Hot checks, EVER!! NO Hot checks, EVER!! CAREFUL with your DEBIT or ATM card! CAREFUL with your DEBIT or ATM card!

7. Why Must I Budget? Why Must I Budget? A budget removes the management by crisis from your finances A budget removes the management by crisis from your finances Managed money goes farther Managed money goes farther Removes money fights, guilt, shame, & fear from marriage & life Removes money fights, guilt, shame, & fear from marriage & life Removes a lot of stress and over-spending Removes a lot of stress and over-spending Use a zero-based budget & an envelope system Use a zero-based budget & an envelope system

8. Dumping Debt Dumping Debt Stop borrowing money! Stop borrowing money! Credit Cards Credit Cards Cars Cars Houses Houses Boats, SeaDoos, Motorcycles Boats, SeaDoos, Motorcycles Student Loans Student Loans Start paying off any existing debt as soon as you start drawing a paycheck Start paying off any existing debt as soon as you start drawing a paycheck

9. The Nevers of Smart Money The Nevers of Smart Money Never loan money to family or friends Never loan money to family or friends Never co-sign a loan for someone else Never co-sign a loan for someone else Never use Cash-Advance, Rent-to-own, Title Pawning, or Tote-the-Note Car Lots Never use Cash-Advance, Rent-to-own, Title Pawning, or Tote-the-Note Car Lots Never lease a vehicle Never lease a vehicle Never buy a new car (until youre rich!) Never buy a new car (until youre rich!) Never get a Home Equity Loan Never get a Home Equity Loan Never take out a 30-year mortgage Never take out a 30-year mortgage Never take out an ARM or Balloon mortgage Never take out an ARM or Balloon mortgage

10. The Nevers of Smart Money The Nevers of Smart Money Never get a credit card to build your credit Never get a credit card to build your credit Never carry a balance on a credit card Never carry a balance on a credit card Never get or allow your kids to get a credit card Never get or allow your kids to get a credit card Never get a debt consolidation loan Never get a debt consolidation loan How much could you give, save, blow, and give if you didnt have any payments? How much could you give, save, blow, and give if you didnt have any payments?

11. Steps Out of Debt Steps Out of Debt S S a a v v e e m m o o n n e e y y ! ! S S e e l l l l s s o o m m e e t t h h i i n n g g ! ! P P a a r r t t - - t t i i m m e e j j o o b b o o r r o o v v e e r r t t i i m m e e U U s s e e t t h h e e D D e e b b t t S S n n o o w w b b a a l l l l

12. Debt Snowball Debt Snowball Item Total Minimum New Payments Cumulative Payoff Payment Payment Remaining Payments JC Penney $150 $15 $0 0 Garage sale Sears $250 $10 $25 11 11 VISA $500 $75 $100 Paid 11 Mastercard $1,500 $90 $190 5 16 Car $4,000 $210 $400 4 20 Student Loan $4,000 $65 $465 6 26 Finish Emergency Fund Fund Retirement/College Pay off the house: House $70,000 $700 $1,165 104 132

13. Investing Investing Keep your investments DIVERSIFIED Keep your investments DIVERSIFIED Save long-term with tax-favored dollars. Save long-term with tax-favored dollars. Tax deferred Tax deferred Pre-tax Pre-tax 15% of your household income to retirement 15% of your household income to retirement 401k, 403b Retirement Plans 401k, 403b Retirement Plans ALWAYS contribute amount = the company match ALWAYS contribute amount = the company match

14. Investing Investing IRA Individual Retirement Account IRA Individual Retirement Account Must have earned income to participate Must have earned income to participate $4000 per year (changes yearly) for worker $4000 per year (changes yearly) for worker $4000 per year for non-working spouse $4000 per year for non-working spouse SEPP Simplified Employee Pension Plan SEPP Simplified Employee Pension Plan Self-employed may deduct up to 15% of their net profit & put into a SEPP Self-employed may deduct up to 15% of their net profit & put into a SEPP Roth IRA Roth IRA After-tax IRA that grows TAX FREE! After-tax IRA that grows TAX FREE!

15. Roth IRA Roth IRA Only available at certain income levels Only available at certain income levels Single income up to $95,000/year Single income up to $95,000/year Married filing jointly income up to $150,000/year Married filing jointly income up to $150,000/year More choices More choices Youll be in a higher tax bracket at retirement (saves you thousands!) Youll be in a higher tax bracket at retirement (saves you thousands!) More invested More invested More flexibility More flexibility

16. Flexibility of the Roth IRA Flexibility of the Roth IRA T T a a x x f f r r e e e e a a n n d d p p e e n n a a l l t t y y f f r r e e e e w w i i t t h h d d r r a a w w a a l l s s a a n n y y t t i i m m e e e e q q u u a a l l t t o o c c o o n n t t r r i i b b u u t t i i o o n n s s F F o o r r e e m m e e r r g g e e n n c c y y i i f f e e m m e e r r g g e e n n c c y y f f u u n n d d i i s s d d r r y y A A f f t t e e r r 5 5 y y e e a a r r s s , , p p e e n n a a l l t t y y f f r r e e e e w w i i t t h h d d r r a a w w a a l l s s i i f f : : O O v v e e r r 5 5 9 9 y y e e a a r r s s o o l l d d D D e e a a t t h h o o r r d d i i s s a a b b i i l l i i t t y y F F i i r r s s t t t t i i m m e e h h o o m m e e p p u u r r c c h h a a s s e e ( ( m m a a x x $ $ 1 1 0 0 , , 0 0 0 0 0 0 ) )

17. An American Dream An American Dream A 30 year old couple funds a Roth IRA at $3,000 each per year ($500/mo @ 12% growth). At 70 years old they have. A 30 year old couple funds a Roth IRA at $3,000 each per year ($500/mo @ 12% growth). At 70 years old they have. $5,882,386.26 TAX FREE! $5,882,386.26 TAX FREE!

18. An American Dream, continued An American Dream, continued The same 30 year old couple made $40,000 and saved 15% in a 401k ($6000/year, $500/mo @ 12% growth). At 70 years old they have. The same 30 year old couple made $40,000 and saved 15% in a 401k ($6000/year, $500/mo @ 12% growth). At 70 years old they have. $5,882,386.26 in the 401k $5,882,386.26 in the 401k

19. An American DREAM!! An American DREAM!! That 30 year old couple, DEBT FREE, saved $1000 per month. At 70 years old they will have That 30 year old couple, DEBT FREE, saved $1000 per month. At 70 years old they will have $11,764,772.51!!! $11,764,772.51!!! This can be your This can be your American REALITY! American REALITY!

20. An American DREAM!! An American DREAM!! If their investments are making 12%, they can draw out 8% per month (leaving 4% for inflation) and live on If their investments are making 12%, they can draw out 8% per month (leaving 4% for inflation) and live on $40,000 per month!! $40,000 per month!!

21. Big Bargains Big Bargains Negotiate everything! Negotiate everything! Ask for a good deal! Ask for a good deal! Use the power of cash Use the power of cash Have patience Have patience Find good deals Find good deals Trade something of value, goods, services Trade something of value, goods, services

22. Where to Find Bargains Where to Find Bargains Estate/Garage Sales Estate/Garage Sales Individuals Individuals Auctions Auctions Couponing Couponing Flea Markets Flea Markets Repo Lots Repo Lots Refunding/ Refunding/ Rebates Rebates Foreclosures Foreclosures Pawn Shops Pawn Shops Classified Ads Classified Ads Consignment Sales Consignment Sales Convention at Closing Time Convention at Closing Time

23. Buyer Beware Buyer Beware M M a a r r k k e e t t i i n n g g , , M M a a r r k k e e t t i i n n g g , , M M a a r r k k e e t t i i n n g g P P e e r r s s o o n n a a l l S S e e l l l l i i n n g g F F i i n n a a n n c c i i n n g g ( ( i i n n - - h h o o u u s s e e / / 9 9 0 0 d d a a y y s s s s a a m m e e a a s s c c a a s s h h ) ) T T V V , , R R a a d d i i o o , , a a l l l l M M e e d d i i a a P P r r o o d d u u c c t t p p o o s s i i t t i i o o n n i i n n g g B B r r a a n n d d R R e e c c o o g g n n i i t t i i o o n n C C o o l l o o r r S S h h e e l l f f P P o o s s i i t t i i o o n n P P a a c c k k a a g g i i n n g g

24. Buyer Beware Buyer Beware Wait overnight before making a purchase Wait overnight before making a purchase Carefully consider your buying motives Carefully consider your buying motives No amount of stuff equals contentment or fulfillment No amount of stuff equals contentment or fulfillment Never buy anything you dont understand Never buy anything you dont understand Consider the opportunity cost of money Consider the opportunity cost of money Seek the counsel of your spouse, parent, or friend Seek the counsel of your spouse, parent, or friend If you cant pay for it, dont buy it! If you cant pay for it, dont buy it!

25. Buying a House Buying a House Owning a home is a great investment Owning a home is a great investment Forced savings plan Forced savings plan Inflation hedge Inflation hedge Grows virtually tax free Grows virtually tax free Buy at bottom of price range in neighborhood Buy at bottom of price range in neighborhood Location, location, location Location, location, location Have the VISION! (carpet, paint, landscaping) Have the VISION! (carpet, paint, landscaping)

26. Buying a House Buying a House Attractive from the street & good floor plan Attractive from the street & good floor plan Have the home inspected and appraised Have the home inspected and appraised 15 year mortgage only 15 year mortgage only Payment no more than 25% of take-home Payment no more than 25% of take-home At least 10% down At least 10% down

27. Buying a House Buying a House Original Amount Original Amount Years Years Payment Payment Paid Out in 10 years Paid Out in 10 years Balance Balance $95,000 $95,000 15 years 15 years $907/mo. $907/mo. $108,840 $108,840 ($907*12 *10) ($907*12 *10) $44,000 $44,000 $95,000 $95,000 30 years 30 years $697/mo. $697/mo. $83,640 $83,640 ($697*12 *10) ($697*12 *10) $83,000 $83,000

28. How to Finance a House How to Finance a House C C o o n n v v e e n n t t i i o o n n a a l l D D o o w w n n p p a a y y m m e e n n t t s s f f r r o o m m 5 5 % % - - 2 2 0 0 % % o o r r m m o o r r e e 2 2 0 0 % % d d o o w w n n s s a a v v e e s s y y o o u u P P M M I I F F H H A A I I n n s s u u r r e e d d b b y y H H U U D D - - T T h h e e g g o o v v e e r r n n m m e e n n t t C C h h a a r r g g e e s s M M I I P P ( ( M M o o r r t t g g a a g g e e I I n n s s u u r r a a n n c c e e P P r r e e m m i i u u m m ) ) f f o o r r t t h h e e l l i i f f e e o o f f t t h h e e l l o o a a n n L L o o w w e e r r d d o o w w n n p p a a y y m m e e n n t t H H i i g g h h e e r r i i n n t t e e r r e e s s t t r r a a t t e e

29. How to Finance a House How to Finance a House V V A A I I n n s s u u r r e e d d b b y y t t h h e e V V e e t t e e r r a a n n s s A A d d m m i i n n i i s s t t r r a a t t i i o o n n D D e e s s i i g g n n e e d d t t o o b b e e n n e e f f i i t t t t h h e e v v e e t t e e r r a a n n O O w w n n e e r r F F i i n n a a n n c c i i n n g g y y o o u u p p a a y y t t h h e e o o w w n n e e r r C C a a n n b b e e c c r r e e a a t t i i v v e e i i n n t t h h e e s s t t r r u u c c t t u u r r e e o o f f t t h h e e l l o o a a n n

30. How to Finance a House How to Finance a House ARM Adjustable Rate Mortgages ARM Adjustable Rate Mortgages Interest rate changes on a schedule (every X number of years) Interest rate changes on a schedule (every X number of years) BAD DEAL!!! BAD DEAL!!! More than 35% of ARMs are adjusted inaccurately More than 35% of ARMs are adjusted inaccurately Fixed Rate Mortgage Fixed Rate Mortgage Interest rate is fixed for the term of the loan Interest rate is fixed for the term of the loan BEST DEAL!! BEST DEAL!!

31. Gotta Have Insurance! Gotta Have Insurance! Insurance is used to transfer risk Insurance is used to transfer risk Homeowners or Renters Homeowners or Renters Auto Auto Health Health Disability Disability Life Life Long-term Care Long-term Care

32. Gotta Have Insurance! Gotta Have Insurance! Homeowners Homeowners Home replacement cost Home replacement cost Contents update this as your stuff increases Contents update this as your stuff increases Liability Liability Renters Renters Personal belongings Personal belongings Liability Liability

33. Gotta Have Insurance! Gotta Have Insurance! Auto Auto Liability Liability Full Coverage (comprehensive/collision Full Coverage (comprehensive/collision Umbrella Umbrella Can be purchased if you have auto & home Can be purchased if you have auto & home Need once you have some assets Need once you have some assets

34. Gotta Have Insurance! Gotta Have Insurance! Health Health Buy through work to get best rates Buy through work to get best rates Self-employed can use an MSA (Medical Savings Account) or HSA (Health SA) Self-employed can use an MSA (Medical Savings Account) or HSA (Health SA) Disability Disability To replace lost income due to short term or permanent disability To replace lost income due to short term or permanent disability Should be for 65% of your take home pay Should be for 65% of your take home pay Know what the elimination period is Know what the elimination period is

35. Gotta Have Insurance! Gotta Have Insurance! Life Life This is really death insurance for your family This is really death insurance for your family Term Life Insurance Term Life Insurance For a specified period For a specified period Cheaper than other types Cheaper than other types No savings plan built in No savings plan built in Cash Value Insurance Cash Value Insurance For life For life More expensive in order to fund the savings More expensive in order to fund the savings

36. Why Not Cash Value Insurance? Why Not Cash Value Insurance? Much more expensive than term Much more expensive than term Historically Low Returns Historically Low Returns When you die with cash value, the company keeps the cash in most cases When you die with cash value, the company keeps the cash in most cases Very high fees Very high fees

37. How to Buy Life Insurance How to Buy Life Insurance Buy low-cost level term Buy low-cost level term Do not forget your spouse Do not forget your spouse No fancy options No fancy options Need about 10X your annual salary Need about 10X your annual salary

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