Achieving Your Financial Goals

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Achieving Your Financial Goals

• Virginia Society of CPAs

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Americas 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).
• More than 2 million Americans filed for
  bankruptcy in 2005 the highest amount in
  history.

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Americas 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

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What is Financial Literacy?
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Financial Literacy

• The ability to effectively evaluate and manage
  ones finances in order to make prudent decisions
  toward reaching lifes goals
• The understanding of
• Money
• Cash flow
• Basic economic/financial concepts
• Debt/risk management

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Financial Literacy

• Key areas of personal finance
• Money income
• Spending debt
• Savings investments
• Risk management
• Lifes milestones

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Money Income
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Money Income

• Time is money
• How many hours do you need to work to pay for
  your mortgage, car insurance, electricity bills,
  extras, etc?

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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

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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 bill
  or electricity bill.
• Enter your discretionary expenses, such as
  clothing and
• entertainment.
• Enter the amount you put into savings. This is
  also a
• discretionary expense.
• 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.

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Spending Debt
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Spending Debt

• Weigh benefits and costs of spending alternatives
• Credit can be a friend and not a foe as a
  basic financial tool

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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

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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 www.annualcreditreport.com

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Spending Debt

• How to reduce debt
• Cut back on spending
• Consolidate your debt
• Seek out payment options
• Dont miss payments or default
• Homeowners use your equity
• Home equity credit is often cheaper

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Saving Investing
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Saving Investing

• Saving means not spending money.
• Investing means that you earn a return on the
  money you put into it.

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Saving Investing

• Saving money
• Save on a regular basis
• Willpower a good plan success
• Youll feel the power
• Youll be motivated

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Saving Investing

• Small changes add up
• Get out your piggy bank again!
• Feed the Pig
• Small amounts add up
• to big savings

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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

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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 banks ATMs avoid other banks
  charges
• Find out whether your health insurer covers gym
  dues
• Dont spend your next raise bank it
• Sign up for payroll deductions
• Invest in savings bonds or CDs
• Sign up for payroll direct deposit

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Saving Investing

• Investing money
• Compound interest
• Rule of 72
• Planning for wealth
• Make the most of a 401(k)

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Saving Investing

• Compound interest
• Consistent steps, even small ones, can add up
• 25/week for 10 years _at_ 5 16,950
• Add 1 a week, and youll have 17,840!

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Saving Investing

• The Rule of 72

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Saving Investing

• Short-term investment options
• Certificate of Deposit (CD)
• Money Market Funds
• Savings Account

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Saving Investing

• Long-term investment options
• Mutual fund
• Stocks
• Bonds

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Saving Investing

• Retirement investment options
• 401(k)
• Individual Retirement Account (IRA)
• Social Security

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Risk Management
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Risk Management

• Insurance
• Identity theft

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Risk Management

• Health care insurance
• Types of Managed Care Plans
• Health Maintenance Organizations (HMOs)
• Preferred Provided Organizations (PPOs)
• Point-of-Service Plans (POS)

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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

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Risk Management

• Life insurance
• Choosing coverage
• premiums
• family need
• time period
• Term vs. Permanent

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Risk Management

• Permanent life insurance options
• Whole life
• Universal life
• Variable life

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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.

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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.

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Lifes Milestones
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Lifes Milestones

• Buying your first home
• Establish good credit
• Understand real costs
• Assess risks

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Lifes Milestones

• Getting married
• Understand financial partnership
• Establish separate and joint credit/bank accounts
• Create wills and trusts
• Identify beneficiaries
• Choose owners on title assets

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Lifes Milestones

• Finance a family
• Budget
• Education
• Health care
• Child care
• Manage risk, insurance
• Create wills
• Instill financial literacy

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Lifes Milestones

• Starting a business
• Understand
• cash flow
• expense timing
• Manage income and expenses

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Lifes 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.

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Lifes Milestones

• Preparing a will
• Designate beneficiaries
• Determine asset distribution
• Identify insurance

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Lifes 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

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Lifes Milestones

• Planning for unexpected milestones
• Loss
• Sandwich generation
• Divorce

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Financial Education Resources
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Financial Education Resources

• 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 Jumptart Coalition for Personal
  Financial Literacy (www.vajumpstart.org)

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Financial Education Resources

• Virginia Society of CPAs
• www.FinancialFitness.org
• Financial planning articles
• Personal budget guide spending plan
• E-newsletter
• Financial check-up quiz
• Consumer workshops
• Speakers Bureau
• Nonprofit pro bono assistance
• Tax help programs

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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

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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!

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Financial Education Resources
Free weekly e-mail savings tip www.FeedthePig.org
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Financial Literacy Knowing What You Need To
Know To Achieve Your Financial Goals
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Thank You!