 Start with a specific measurable goal ◦ Save $ to open an IRA  Pay Yourself First ◦ Set up a direct deposit to a personal club account. ◦ Open a savings account at a different bank so that it is a little more inconvenient to access the money you have save.

 Employee sponsored Retirement Plans ◦ One of the best ways to invest for retirement. ◦ Pre-packaged investment programs suitable for any situation. ◦ Employer may match contributions. ◦ Usually grows tax deferred.  Power of tax deferred growth: Not tax deferred: Invest Gross $100 = Net $75 after taxes Tax deferred: Invest Gross $100 = $100 Tax is paid when money is withdrawn from account.

 Safety – the chance of losing your money is very small  Risk – the uncertainty of a particular outcome  Typically, a very safe investment would provide a __________ return.  Typically, a very risky investment would provide a __________ return.  RISK/REWARD

 Inflation Risk: the general rise in prices that affects everybody.  Example: Earning 5% on a CD and the inflation rate that year was 3%. What was your real rate of return on the investment?  Jonathon put $2,000 in a CD for one year at 3% interest. The inflation rate that year was 5%. ◦ Calculate the loss of buying power in percent. ◦ Find the loss in buying power in dollars. ◦ Calculate how much it would cost to buy the same investment today.

 The risk that the company will be less profitable than you thought or file bankruptcy.  Applies common stock, preferred stock and corporate bonds  Even if the company sells an incredible product if the employees do not execute well the company could deliver below average profits.  In the current economic environment, do you think the business failure risk is high or low? Why?

 Applies to investments that provide a fixed rate of return, such as government or corporate bonds, ◦ Value of investment will go down if interest rates go up. ◦ Value of investment will go up if interest rates go down.

 The risk that the value of your investment will go down due to the overall state of the financial markets.  The value of your stock could decrease just because the entire value of the market is going down.  Very relevant risk to consider at this time.

 The risk associated with investing in foreign countries.  Different account standards and regulations can make it difficult of figure out the true value of a company.  Currency exchange rate can affect the value of an investment. ◦ Buy Euros to invest in Volkswagen.  1$ =.75Euro  In one year you sell investment now 1$ =.85  What is your total loss in the exchange of currency?