Money Management Achieving financial goals A project of Consumer Action | Funded by Consumer Action’s Money Management Project © 2010 Rev. 2/16

Money Management Two: Achieving financial goals Money Management Achieving Financial Goals

Updating your budget Money Management Achieving Financial Goals

Saving for a purpose Goal Total needed Current savings Need to save Target date Savings/ month Savings/pa y period Buy a computer $800$240$56010 months$56$28 Pay off credit card $3,000$0$3, months (2½ yrs) $100$50 Home down- payment $30,000$0$30, months (5 yrs) $500$250 Money Management Achieving Financial Goals

Savings vehicles Passbook or statement savings account Money market account (MMA) Certificate of deposit (CD) Individual development account (IDA) U.S. savings bond Money Management Achieving Financial Goals

The power of starting early Investor:DwayneDan Monthly deposit:$50$100 Starting age:3050 Ending age:7070 Years of deposits:4020 Annual return*:8%8% Total invested:$24,000$24,000 Final balance:$174,575$58,907 Dan would have to save $300/month to achieve the same balance as Dwayne. *Compounded monthly Money Management Achieving Financial Goals

Saving vs. investing Annual returnBalance in 10 yearsTypes of investments 1%*$11,051Savings accounts 3%$13,493Longer-term CDs 5%$16,470Certain bonds 7%$20,096Stocks 9%$24,513Stocks Value of $10,000 in 10 years at hypothetical rates of return * All rates are hypothetical; for example, interest rates on standard savings accounts and MMAs at the time of publication ranged from around.01% to around 1% Money Management Achieving Financial Goals

Life stage investing Asset30s50s70s Cash5%10%20% Bonds10%20%45% Stocks85%70%35% Hypothetical asset allocation through life stages Money Management Achieving Financial Goals

Individual retirement account (IRA) TraditionalRoth No income limits on contributionsIncome limits on contributions Tax-deductible contributions*After-tax contributions Tax-deferred growthTax-free growth Min. required distributions at 70½No required distributions Taxable withdrawalsTax-free withdrawals Money Management Achieving Financial Goals *For those who meet requirements

Retirement plan advantages Targeted monthly savings:$125 Years until income needed:30 Hypothetical rate of return:8.00% Your current tax rate:15% After-tax value in 30 years:$125,327 Tax-deferred value in 30 years:$187,536 Assumes a 15 percent federal tax rate. Taxes must be paid on the earnings when you withdraw the money from the tax-deferred account. Source: Tax deferred investment calculator, Money Management Achieving Financial Goals

Key considerations for investors Objective Time frame Expected return Risk tolerance Tax consequences Money Management Achieving Financial Goals

Lenders Loan types Loan terms Loan approval Mortgages Money Management Achieving Financial Goals

Successful homeownership Money Management Achieving Financial Goals

Protecting your assets

Money Management Achieving Financial Goals Be covered

Money Management Achieving Financial Goals

Congratulations! You’ve completed Part 2 of the Money Management training. Money Management Achieving Financial Goals