Fitting the Pieces Together

1
Chapter 18

• Fitting the Pieces Together

2
The Ingredients of Success

• It is impossible to succeed financially unless
  you
• Evaluate your financial health.
• Plan and budget.
• Manage your cash and credit.
• Control your debt.
• Make knowledgeable consumer decisions.

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The Ingredients of Success

• It is impossible to succeed financially unless
  you
• Have adequate health, life, property, and
  liability insurance.
• Understand investing principles.
• Make investment decisions that reflect your
  goals.
• Plan for retirement.
• Plan for what happens to your accumulated wealth
  and your dependents after your die.

4
The Financial Life Cycle

• Recent graduates make many financial decisions
  after leaving college. They
• May purchase a car and possibly a home.
• Will establish credit and pay taxes.
• May get married and begin a family.
• Set up an emergency fund, start saving for your
  goals, and begin a retirement account.

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The Financial Life Cycle

• At age 19, put away 2000 at the end of each year
  for 7 years in an IRA that earns 11, and then
  nothing thereafter at age 65 you will have more
  than 1.2 million.
• If you wait until you are 25 to start that IRA
  and make payments every year for 40 years, you
  still wont catch up (youll have 1.164
  million).
• Start at 30, make 35 payments, and end up with
  less than 700,000.

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Women and Personal Finance

• While the basic principles of personal finance
  dont change whether youre a man or a woman, it
  is tougher for women to achieve financial
  security.
• Women
• Generally earn less
• Are less likely to have pensions
• Qualify for less Social Security
• Live longer than men

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Women and Personal Finance

• Consider these facts
• Over 90 of all women take sole responsibility
  for their financial decisions at some point.
• Nearly half of all women over 65 get 90 of their
  income from Social Security, compared to 35 of
  comparable men.
• 75 of women dont know how much they need to
  save for retirement.
• Women tend to be more conservative in their
  investments, so they earn less.

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Women and Personal Finance

• Consider these facts
• Only 28 of women over 65 receive pension
  benefits, compared to 45 of men, and the average
  mens pension was twice that of women.
• At age 65, women outnumber men 3 to 2, by 85 they
  outnumber them 5 to 2.
• While 12 of the elderly live in poverty, 75 of
  them are women.
• In 2001, median personal income for 65 year-old
  women was 11,313, while for 65 year-old men it
  was 19,668.

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Women and Personal Finance

• How does a woman start to take charge?
• Acquire knowledge.
• Make things happen create a plan.
• See a financial planner about specific concerns.

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Financial Life Events

• Life Event 1 Getting Started
• Lay the groundwork understand investments and
  personal finance and assess current finances with
  planning for the future
• Expenses and a budget
• Control debt
• Establish an emergency fund
• Insure yourself
• Control your credit score
• Keep current on personal finance

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Financial Life Events

• Life Event 1 Getting Started
• Identify your goals
• Identify and prioritize financial goals.
• Set a time frame.
• Identify the costs of your goals.

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Financial Life Events

• Life Event 1 Getting Started
• Begin saving for your goals
• Save more than you think you can.
• Make savings automatic.
• Dont procrastinate.
• Catch your matches.
• ROTH.
• How much risk can you tolerate?
• Put together a strategy.
• Control your spending.

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Financial Life Events

• Life Event 2 Marriage
• Get Organized review and reorganize finances.
• Work together discuss approaches to handling
  money.
• Update financial records.
• Gain control of your debt and your credit score
  clear up debt issues to work towards getting a
  mortgage.
• Merge finances to make good decisions.

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Financial Life Events

• Life Event 2 Marriage
• Revisit Your Financial Goals revisit both long-
  and short-term goals
• Reexamine your financial goals.
• Begin saving for new goals.
• Make saving automatic.
• Make sure you have an emergency fund.
• Begin working towards retirement.

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Financial Life Events

• Life Event 2 Marriage
• Reexamine your insurance and benefits may
  change beneficiaries, buy additional insurance,
  and coordinate benefits.
• Review your beneficiaries.
• Include all family members.
• Review your insurance.
• Coordinate your benefits.

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Financial Life Events

• Life Event 2 Marriage
• Reexamine your taxes your tax status and the
  tax-advantaged benefits from your employer may
  change.
• Update W-4 form.
• Take advantage of tax breaks.
• Make a will.
• Review your beneficiaries.

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Financial Life Events

• Life Event 3 Buying a Home
• Does the purchase fit your financial plan?
• Keep track of your credit score.
• Consider the tax implications.
• Take advantage of tax benefits.
• Build tax benefits into your budget.
• Reexamine your investments.
• Update your employer records.
• Know your state.

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Financial Life Events

• Life Event 4 Having a Child
• Survey your finances.
• Assess your current financial situation.
• Reexamine your financial goals.
• Revise your budget.
• Plan for college.
• Estimate costs.
• Automate your savings.

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Financial Life Events

• Life Event 4 Having a Child
• Reconsider your insurance needs.
• Review and update insurance.
• Update wills and trusts.
• Update or make a will.
• Update your retirement account beneficiary.
• Take advantage of tax savings.
• Apply for Social Security number.
• Update W-4.

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Financial Life Events

• Life Event 5 Inheritances, Bonuses,or
  Unexpected Money
• Examine the priorities of your goals.
• Reexamine your goals.
• Consider estate planning.
• Examine the tax implications.
• Plan for tax implications.
• Consider estate taxes.

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Financial Life Events

• Life Event 6 A Major Illness
• Reexamine your finances.
• Assess current financial situation.
• Emergency fund adequate liquidity.
• Reexamine financial goals.
• Reexamine investment strategy.
• Revise budget.
• Take advantage of tax breaks.
• Understand the tax implications.
• Explore flexible spending accounts (FSAs).

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Financial Life Events

• Life Event 6 A Major Illness
• Alternatives to Finance Your Illness.
• Reverse mortgage
• Life insurance
• Disability insurance

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Financial Life Events

• Life Event 7 Caring for an Elderly Parent
• Health care and estate planning concerns.
• Talk to your parents.
• Oversee your parents financial affairs.
• Understand their goals and budget.
• Discuss long-term health care options.
• Long-term health care insurance.
• Estate planning.
• Discuss estate planning.

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Financial Life Events

• Life Event 8 Retiring
• Develop a retirement income plan.
• Mental and financial preparation.
• Plan how to use your retirement savings.
• Manage your income in retirement.
• Withdrawal strategy.
• Monitor your investments.
• Emergency fund.

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Financial Life Events

• Life Event 8 Retiring
• Review your insurance coverage and your will.
• Employer retiree health care.
• Medicare and Medicare supplemental insurance.
• Long-term health care insurance.
• Homeowners insurance.
• Review your will.
• Keep track of important retirement planning
  dates.

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Financial Life Events

• Life Event 9 Death of a Spouse
• Organize financial material.
• Contact sources of survivor benefits.
• Insurers.
• Social Security.
• Past Employers.
• If you are the executor, carry out your
  responsibilities.
• Distribution of assets.

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Financial Life Events

• Life Event 9 Death of a Spouse
• Change ownership or title to assets.
• Insurance policies.
• Automobiles.
• Bank accounts, stocks, bonds, and safe deposit
  boxes.
• Credit cards.
• Determine if your benefits change.
• Review your insurance.

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Financial Life Events

• Life Event 10 Divorce
• Nearly ½ of all marriages end in divorce and
  money problems are a main cause.
• Prepare for divorce.
• Pay down debt.
• Keep the costs down.
• Protect yourself with the help of a financial
  planner.
• Consider a prenuptial agreement.

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Financial Life Events

• Life Event 10 Divorce
• Avoid Credit Damage.
• Late payments and your credit report.
• Have your account re-aged.
• Revisit your financial goals.
• Insurance coverage.
• Child support and alimony.
• Rework your budget.
• Retirement savings.
• Reexamine your expenses.

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Making Financial Success Happen

• Wealthy Americans
• Net worth from 1 million-5 million, not
  inherited.
• Most have incomes less than 100,000.
• They own a home valued at 278,000.
• They are self-employed or a partner.
• In their original marriage, have 3 kids.
• They are frugal clip coupons, buy on sale or do
  without.

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The Keys to Success A Dozen Decisions

• Number 1 Become Knowledgeable avoid financial
  pitfalls and bad advice, handle unwanted
  financial surprises.
• Number 2 Dont Procrastinate - your financial
  future starts now.
• Number 3 Live below your means dont spend at
  your level or earning.

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The Keys to SuccessA Dozen Decisions

• Number 4 Realize You Arent Indestructible -
  consider life and health insurance, stay healthy.
• Number 5 Protect Your Stuff have insurance to
  protect you from financial ruin.
• Number 6 Embrace the B Word (Budget) the
  budget is a means to reach your goals.

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The Keys to SuccessA Dozen Decisions

• Number 7 Reinvent and Upgrade Your Skills
  prepare for job insecurity by having the right
  skills.
• Number 8 Hide Your Plastic credit cards are a
  dangerous threat to your financial well-being.
• Number 9 Stocks Are Risky, But Not as Risky as
  Not Investing in Them invest long-term in
  stocks and keep up with inflation.

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The Keys to SuccessA Dozen Decisions

• Number 10 Exploit Tax-Favored Retirement Plans
  to the Fullest.
• Number 11 Plan for the Number of Children You
  Want.
• Number 12 Stay Married.

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Successful Debt Management

• Key 1 The Obvious Spend less than you earn and
  budget your money.
• Key 2 Know the costs.
• Key 3 Understand the difference between good
  and bad debt.

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Successful Debt Management

• Key 4 Make sure you can repay what you borrow
  set your own standards.
• Key 5 Keep your credit score strong it keeps
  costs down and is a source of emergency money.
• Key 6 Dont live with bad (and expensive) debt.

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Getting Started Just Do It

• Start today dont procrastinate.
• Begin with budgeting and planning.
• Pay attention to managing your cash.
• Rid yourself of bad debt.
• Your safety net should be in order.
• Start investing.