Achieving Your Financial Goals Presenter Name | Presenter Title

America’s 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).

America’s 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

What is Financial Literacy?

Financial Literacy The ability to effectively evaluate and manage one’s finances in order to make prudent decisions toward reaching life’s goals The understanding of: - Money - Cash flow - Basic economic/financial concepts - Debt/risk management

Financial Literacy Key areas of personal finance: Money & income Spending & debt Savings & investments Risk management Life’s milestones

Money & Income

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

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

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 or electricity bill. Enter your discretionary expenses, such as clothing and entertainment. Enter the amount you put into savings. 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.

Spending & Debt

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

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

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

Spending & Debt How to reduce debt: Cut back on spending Consolidate your debt Seek out payment options Don’t miss payments or default Homeowners: use your equity Home equity credit is often cheaper

Saving & Investing

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

Saving & Investing Saving money: Save on a regular basis Willpower + a good plan = success You’ll feel the power You’ll be motivated

Saving & Investing Small changes add up: Get out your piggy bank– again! Feed the Pig Small amounts add up to big savings

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

Saving & Investing Small money saving tips: Brew your own coffee — at 1/8 th 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 bank’s ATMs; avoid other banks’ charges Find out whether your health insurer covers gym dues Don’t spend your next raise; bank it Sign up for payroll deductions Invest in savings bonds or CDs Sign up for payroll direct deposit

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

Saving & Investing Compound interest: Consistent steps, even small ones, can add up $25/week for 10 5% = $16,950 Add $1 a week, and you’ll have $17,840!

Saving & Investing The Rule of 72 Growth over Time $- $10,000 $20,000 $30,000 Years Value 4% 6% 8% 4% $6,083 $7,401 $9,005 $10,956 6% $6,691 $8,954 $11,983 $16,053 8% $7,347 $10,795 $15,861 $23,305 5 yrs10 yrs15 yrs20 yrs

Saving & Investing Short-term investment options: Certificate of Deposit (CD) Money Market Funds Savings Account

Saving & Investing Long-term investment options: Mutual fund Stocks Bonds

Saving & Investing Retirement investment options: 401(k) Individual Retirement Account (IRA) Social Security

Risk Management

Insurance Identity theft

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

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

Risk Management Life insurance: Choosing coverage >premiums >family need >time period Term vs. Permanent

Risk Management Permanent life insurance options: Whole life Universal life Variable life

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.

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.

Life’s Milestones

Buying your first home: Establish good credit Understand “real costs” Assess risks

Life’s Milestones Getting married: Understand “financial partnership” Establish separate and joint credit/bank accounts Create wills and trusts Identify beneficiaries Choose owners on title assets

Life’s Milestones Finance a family: Budget - Education - Health care - Child care Manage risk, insurance Create wills Instill financial literacy

Life’s Milestones Starting a business: Understand - cash flow - expense timing Manage income and expenses

Life’s 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.

Life’s Milestones Preparing a will: Designate beneficiaries Determine asset distribution Identify insurance

Life’s 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

Life’s Milestones Planning for unexpected milestones: Loss Sandwich generation Divorce

Financial Education Resources

Lifelong learning courses Financial media Internet resources Your CPA Organizations: >Virginia Society of CPAs ( >American Institute of CPAs ( >Virginia Jump$tart Coalition for Personal Financial Literacy (

Financial Education Resources Virginia Society of CPAs: Financial planning articles Personal budget guide & spending plan E-newsletter “Ask a CPA” Program (free advice from CPAs) Financial check-up quiz Consumer workshops Speakers Bureau Nonprofit pro bono assistance Tax help programs

Financial Education Resources American Institute of CPAs: Financial education to help consumers at every life stage Feed the Pig Ad Council campaign

Financial Education Resources Your friend Benjamin Bankes: A joint creation of the AICPA, state CPA societies and the Ad Council. Help is available at Take charge of your money and your life!

Free weekly savings tip: Financial Education Resources

Financial Literacy: Knowing What You Need To Know To Achieve Your Financial Goals

Thank You!