Financial Seminar For Nurses

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Financial Seminar For Nurses

• Patrick Heyman, Ph.D., ARNP

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Financial Independence

• No debt
• Own house free and clear
• Enough savings/investments
• Benefits
• Less stress
• More security
• Work for enjoyment
• Able to freely contribute to Gods kingdom

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Biblical Principles

• All money is God's money
• Stewards caring for what is not ours
• To whom much is given, much is required Luke
  1248
• He who is faithful in small things will be
  entrusted with more Matthew 2514-28
• Look at the ant's example - Proverbs
• A borrower is slave to the lender - Proverbs

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Biblical Principles

• Work diligently
• Give a tithe back to God
• Save
• Be generous toward those in need
• Care for your family
• Stay out of debt
• But I thought Jesus said, Blessed are the
  poor?

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Crown Money Map

1. Emergency Savings (3 mos expenses)?
2. Pay off credit cards
3. Pay off consumer debt
4. Save for major purchases
5. Buy home, begin investing
6. Home mortgage paid off
7. True financial freedom

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Transforming Debt to Wealth Plan

1. Pay off credit cards
2. Pay off consumer debt
3. Emergency Savings
4. Purchase/Pay off house
5. Begin investing
6. True financial freedom

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Debt is the Single Biggest Obstacle to Building
Wealth

• Example You have 100 a month extra. You want
  to buy a 1000 Widescreen TV
• Save it for 10 months with 4.5 interest
• 1 1000 widescreen TV
• 20.86 left over in interest
• Buy it now on a credit card at 8 interest
• After 10 months you have 1 TV
• You still owe 145
• Net difference 165.86 in lost wealth

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To become financially independent you must

• Control Spending live under your means
• Do not earmark future raises for spending
• Resist credit
• If you are in debt, pay it off as quickly as
  possible
• Paying off a 9.6 credit card is the same as
  getting 9.6 in interest after taxes
• Save/invest
• If you don't have the self control, create
  artificial scarcity

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Counter Culture

• Income vs Net Worth
• Most high income earning households will never
  become millionaires
• Spend too much
• Status symbols
• Increased living expenses
• Poor role models/peer support
• Most millionaires are first generation
• Savings is more important than income

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Do I Really Need to Know All This? I'm Young and
Poor!!!

• Sara starts working at 18 and invests 2000/ year
  for six years, and then never invests again.
• Stephanie starts working at 25 and invests 2000/
  year until she retires at 67.
• Ashley starts working at 35 and invests 2000/
  year until she retires at 67.

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And the Winner is...

• Assuming 8 interest, at age 67
• Sara invested 12,000 and has 468,332
• Stephanie invested 84,000 and has 711,899
• Ashley invested 64,000 and has 315,253
• And if Sara decides to keep investing 2,000 a
  year until she retires....
  1,239,343!!!!

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Things to include in budget

• Net income
• Tithe and Charity (PBA alumni association)
• Expenses
• Monthly (rent, electricity)
• Non-monthly (insurance premiums)
• Unexpecteds (car repairs)
• Savings
• Retirement/Long term
• Goal oriented (new car, vacation)
• Some fun (personal allowance)

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Destroyers of Wealth/Creators of Misery

• Debt
• Divorce number 1 wealth destroyer (also
  happens to be counterbiblical)
• Fighting about money
• Poor
• Rich
• Spending styles
• Number one predictor of millionaire????

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Tips For Significant Other

• If dating
• Maintain separate accounts
• Avoid buying high value items together (boat,
  house, etc.)?
• If married
• Agree on a budget do a monthly evaluation
• Keep a joint account for marital expenses
• Keep an individual account for each spouse, and
  give yourself a budgeted allowance that each
  spouse can use or save how they want

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Tips Continued

• Designate one person to keep the books/pay the
  bills
• Make sure the other reviews regularly
• Detect problems early (gambling or risky
  investments)
• Premature death

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The Heyman Money Plan For Marital Bliss
Wife Salary
Husband Salary
Main Checking Account
Short Term Savings
IRAs
Long term/ Emergency Savings
Wife Allowance
Husband Allowance
Arrows indicate automatic transactions. Bills
are paid from main checking.
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Protecting Your Small Fortune

• Inflation
• Debasement Loss of the value of money
• Expansionist monetary policy
• Artificially low interest rates
• Artificial bubbles
• Boom/Bust cycle
• Avoid debt
• Invest in gold, commodities, stocks
• Stay out of cash, bonds

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This Is Only A PrimerSuggested Further Reading

• www.crown.org/library
• Stanley Danko The Millionaire Next Door
• Suze Orman The Money Book for the Young,
  Fabulous Broke
• Larry Swedroe The Successful Investor Today 14
  Simple Truths You Must Know When You Invest
• John Cummuta Transforming Debt to Wealth (Buy it
  on E-bay if available)?
• P.J. O'Rourke Eat The Rich

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Libertarian Thoughts,aka Freedom in American
Society

• Murray Rothbard, What Has Government Done to Our
  Money?http//mises.org/money.asp
• Murray Rothbard, The Case Against the Fed
  http//mises.org/books/fed.pdf
• Peter Schiff, Crash Proof How to Profit From the
  Coming Economic Collapse

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Creating Artificial Scarcity

• Pay yourself first technique
• Fund retirement accounts before the paycheck ever
  gets to you
• Have automatic transfer of money from checking to
  a savings/investment account
• Pay your bills as soon as you get them do not
  wait until they are due

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Okay, I'm living under my means

• What do I do with all this money Lying around?
• Pay off debts
• Fund retirement accounts
• Save for house
• Pay off the house
• Save/invest for retirement
• Enjoy life a little

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Retirement Plans

• 401(k), 403(b) Employer plans
• Reduce before tax income
• Grow tax free
• Often have matching contribution programs
• Vestment period
• Traditional IRA Personal Plan
• Up to 4000/year
• Reduces current taxes
• Grows tax free

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Retirement Plans cont

• Roth IRA Individual Plan
• Up to 5000/year
• Must pay taxes on contributions
• Grows tax free, and is never taxed again
• Other plans SEP, Simple, etc.
• More for Private businesses, self-employed

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Retirement Plan Strategy

• First Question Should I fund my retirement plan
  or pay down debt?
• Contribute to 401(k), 403(b) to meet the employer
  matching
• Max out Roth IRA
• Get your emergency savings
• Max out 401(k), 403(b)?

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Retirement Accounts

• One thing in common reduce or delay income tax
• How income tax works
• Income vs Taxable income
• Marginal tax bracket

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Marginal Tax Rates
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Concrete Examples Please
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How do I get anIRA or Roth IRA?

• IRAs must be held by a financial institution
• Can transfer between institutions
• Can invest in a wide variety of options
• Stocks, mutual funds, bonds, even real estate,
  gold, silver, commodities
• Depends on the financial institution
• Mutual Funds are most popular

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Income Tax Myths

• Myth Maximize deductions to reduce tax burden
• Example Take a big mortgage, so you get the
  interest deduction
• Reality Maximize taxable deductions by
  minimizing taxable income AND maximizing wealth
  (net worth)?
• Example Fund retirement accounts

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Investment Basics

• Basic terms
• Liquidity ability to use an asset
• Risk possibility that value of an asset may go
  down
• No risk investments
• FDIC insured accounts
• U.S. Treasury Bonds
• Emergency Funds should be in no risk relatively
  liquid accounts
• i.e., savings account not stocks

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What is investing?

• Americans live in a chosen country to which has
  been vouchsafed a new era in which all one has
  to do is buy well-selected stocks at any time,
  at any price, and hold with sufficient patience
  in order to sell for more than one paid and
  thereby realize a handsome return on the
  investment -- Chamberlain and Hay, 1927

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What is investing?

• Speculation
• Purchase with the hope to sell it for more than
  you paid for it in the future
• The greater fool theory
• Investing
• Income now
• Preservation of capital
• Growth in value
• Price matters

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Investment Vehicles (Examples)

• Equity Owning a piece of something
• Stocks
• Real estate
• Partnerships
• Liability Loaning money
• Bonds
• Mortgages
• Bank account
• Derivatives and Commodities

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Investment Theory

• Modern Portfolio Theory
• It is impossible to consistently outperform the
  market
• Don't try to pick winners and losers
• Select a mix of investments that corresponds to
  your risk comfort, and sit back, enjoy the ride
• Bottom line

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Stock Terms

• Company size (market cap)?
• Large cap
• Mid cap
• Small cap
• Earnings Potential
• Growth stock earnings expected to grow rapidly
  typically do not pay dividends
• Value company is thought to have low growth
  potential usually pay higher dividends

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Stock Indexes

• GPA for a group of stocks
• Groups of stocks that track a segment of the
  market
• Dow Jones Industrial Average
• NASDAQ
• Standard Poor 500 (SP 500)?
• Russel 2000 small cap index
• Wilshire 5000 (overall American stock market)?

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Mutual Funds

• A group of stocks which is then sold in shares
• Actively managed funds
• A manager tries to pick stocks that he thinks
  will outperform the others
• Passively managed funds
• Use an algorithm or stock index to determine what
  stocks they will have
• Versatility stocks, bonds, REITs, mixes

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Mutual Funds

• Broker funds (traditional)
• Usually have a low barrier to entry, esp for IRA
  accounts
• Account maintenance fees, no commissions
• Fees are usually waived for accounts higher than
  3000 - 5000
• Exchange traded funds (ETFs) more advanced (look
  it up later)
• Are traded like stocks
• Commissions, but no maintenance fees
• 401(k), 403(b)?

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Fund Expenses

• Front load upfront commission
• Back load back end commission
• No load
• ONLY PURCHASE NO LOAD FUNDS
• Expense ratio
• When given a choice between two equally
  performing funds, go with the one with lower
  lower expense ratio
• Passive funds cost less than active funds

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How to Buy a Fund

• Choose a brokerage firm and open account
• Decide what kind of investment strategy you want
  to pursue
• Buy the fund with the lowest expense ratio that
  helps you achieve that goal

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Comparing Funds

• Don't be suckered by past performance
• In any given year, 85 of actively managed funds
  fail to outperform their benchmarks (stock
  index)?
• Of the 15 that did outperform the market, less
  than 1 will do so three years running
• Active funds have higher expense ratios. You
  must subtract that from your return
• Bottom line index funds are the way to go for
  most investors

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Diversification Building a Portfolio

• Purpose of Diversification
• Reduce risk
• Balance losses in one are with gains in another
• Stocks
• Bonds
• Money market
• Real estate
• Gold and foreign markets

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Hey I Don't Need Think I Need to Know About
Mutual Funds

• Yes you do.
• Most 401(k)'s and 403(b)'s require you to invest
  your money in on of several mutual funds that
  they provide.
• For example, the VA offers (tsp.gov)?
• G Fund Government securities (T-bills)?
• F Fund Bonds
• S Fund Small Cap
• C Fund Large Cap
• I Fund International
• L Funds Life

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Too Lazy for All That?

• Choose a blended fund
• A fund that has a set mix of stocks and bonds
• Usually, the company has a series of questions
• Age
• Planned retirement age
• Desired return
• Risk tolerance
• Buy one fund and be done with it.

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VA Lifecycle Funds
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Too Boring?

• Get really wild and crazy with specialty funds
• Gold funds
• Currency funds
• Hedge funds
• Biotech funds
• Etc.
• Generally speaking, don't buy individual stocks
  unless you put in the effort to educate yourself

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Sample Investment Mixes

• Aggressive long term
• All small cap/value stocks
• Aggressive long term with some diversification
• 70 small cap/value stocks
• 20 large cap stocks
• 10 International stocks

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Sample Invest Mixes cont

• Lower Risk Long Term
• 20 large/growth cap
• 20 small/value cap
• 10 international
• 10 REIT (real estate)?
• 30 bonds
• 10 Treasury bills

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Sample Brokerage Firms

• Vanguard
• T. Rowe Price
• TD Waterhouse
• Fidelity Investments
• Charles Schwab

• Boutique
• Euro Pacific Capital
• Full Service
• Merill Lynch
• Morgan Stanley
• Citigroup