Millennials: Ditch Debt and Start Saving. A strategy to help you do more with your money

Transcription

1 Millennials: Ditch Debt and Start Saving A strategy to help you do more with your money

2 Hi. We re Fidelity. Our resume Family-owned company, 70 years experience Products and solutions for every stage in life Expertise to help you make more informed decisions about your money

3 Today s Topics CREATING A BUDGET PRIORITIZING DEBT AND SAVING SAVING FOR OTHER GOALS RESOURCES TO HELP

4 Creating a budget Where are you now? FIGURE OUT YOUR INCOME SUBTRACT YOUR LIVING EXPENSES SUBTRACT MONTHLY LOANS AND DEBT PAYMENTS

5 Creating a budget Where are you now? FIGURE OUT YOUR INCOME SUBTRACT YOUR LIVING EXPENSES SUBTRACT MONTHLY LOANS AND DEBT PAYMENTS What s left over? You can use that money to: PAY OFF DEBT SAVE FOR SHORT- AND LONG-TERM GOALS

6 Prioritizing debt and saving Planning for what s leftover STEP ONE BUILD AN EMERGENCY FUND STEP TWO CONTRIBUTE TO YOUR PLAN STEP THREE PAY OFF HIGH-INTEREST CREDIT CARDS STEP FOUR PAY OFF PRIVATE STUDENT LOANS STEP FIVE CONTRIBUTE EVEN MORE TO YOUR PLAN STEP SIX TACKLE LOWER INTEREST LOANS LAST

7 ANNIE S FINANCIAL FIRSTS Chatting about budgeting at the Salon

8 STEP ONE BUILD AN EMERGENCY FUND

9 STEP ONE Build An Emergency Fund What is it? Money you put away just for emergencies How much do you need to save? 3-6 months of living expenses Keep it in a separate account Consider automatic transfers

10 STEP TWO CONTRIBUTE TO YOUR PLAN

11 STEP TWO Contribute to your Plan What is it? A tax-advantaged retirement account typically offered through work How much do you need to save? Start with at least 1% of your salary Take advantage of automatic payroll deductions Take advantage of starting early

12 About your retirement plan Duke University and Duke University Health System ELIGIBILITY You can enroll in the plan at any time. The IRS Contribution limit for 2015 is $18,000. EMPLOYER CONTRIBUTIONS Generally Faculty and Staff paid monthly are eligible for Duke s contribution after completing 1 year of service and reaching age % on your first $59,000 of salary. 13.2% on your salary in excess of $59,000, up to $265,000. CONTACT INVESTMENTS You can select and change your investments at any time. If no investment options are selected, contributions start off in a Fidelity Freedom K Fund, based on your date of birth, at the direction of your employer. VESTING Immediate vesting in your own voluntary contributions to the plan Vested after three years in Duke contributions GUIDANCE Web: Service Center: Free onsite one-on-one guidance is available with Fidelity. Schedule at

13 ANNIE S FINANCIAL FIRSTS Retirement planning in the hot tub

14 STEP TWO The Power of Compounding Initial monthly cost of 1% savings boost Potential income boost over 25-year retirement

15 STEP TWO The Power of Compounding $1.5M $1M $796,687 $.5M Age: 25 Age: 35 Age: 70 This hypothetical example assumes the following (1) $5,500 annual IRA contributions on January 1 of each year for the the age ranges shown, (2) an annual rate of return of 7% and (3) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees or inflation. If they did, amounts would be lower. Earnings and pre-tax (deductible) contributions from Traditional IRAs are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax free provided certain requirements are met. IRA distributions before age 59 1/2 may also be subject to a 10% penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market. This example is for illustrative purposes only and does not represent the performance of any security. Consider your current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for a 7% annual rate of return also come with risk of loss.

16 STEP TWO The Power of Compounding $1.5M $1,641,122 $1M $796,687 $.5M Age: 25 Age: 35 Age: 70 This hypothetical example assumes the following (1) $5,500 annual IRA contributions on January 1 of each year for the the age ranges shown, (2) an annual rate of return of 7% and (3) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees or inflation. If they did, amounts would be lower. Earnings and pre-tax (deductible) contributions from Traditional IRAs are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax free provided certain requirements are met. IRA distributions before age 59 1/2 may also be subject to a 10% penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market. This example is for illustrative purposes only and does not represent the performance of any security. Consider your current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for a 7% annual rate of return also come with risk of loss.

17 STEP THREE PAY OFF HIGH-INTEREST CREDIT CARDS

18 STEP THREE Pay off high-interest credit cards Why is it important? You could be paying more in interest than the cost of the item How much should you pay off? More than the monthly minimums until the balance is paid

19 STEP THREE SO, YOU JUST PUT THAT $2,000 TV ON YOUR CREDIT CARD

20 STEP THREE SO, YOU JUST PUT THAT $2,000 TV ON YOUR CREDIT CARD COST OF YOUR FLAT SCREEN TV $2,000

21 STEP THREE SO, YOU JUST PUT THAT $2,000 TV ON YOUR CREDIT CARD COST OF YOUR FLAT SCREEN TV MINIMUM MONTHLY PAYMENT $2,000 $40

22 STEP THREE SO, YOU JUST PUT THAT $2,000 TV ON YOUR CREDIT CARD COST OF YOUR FLAT SCREEN TV MINIMUM MONTHLY PAYMENT TIME FRAME TO PAY OFF DEBT $2,000 $40 17 Years

23 STEP THREE SO, YOU JUST PUT THAT $2,000 TV ON YOUR CREDIT CARD COST OF YOUR FLAT SCREEN TV MINIMUM MONTHLY PAYMENT TIME FRAME TO PAY OFF DEBT $2,000 $40 17 Years INTEREST PAID $2,500 THAT S MORE THAN DOUBLE THE ORIGINAL COST OF THE TV! For illustrative purposes only. Source: Bankrate, Inc.

24 STEP FOUR PAY OFF PRIVATE STUDENT LOANS

25 STEP FOUR Pay off private student loans Why is it important? Higher interest rates Interest is deductible only in some cases How much should you pay off? Prioritize debt over 8% interest Pay more than the monthly minimums

26 STEP FIVE CONTRIBUTE EVEN MORE TO YOUR RETIREMENT SAVINGS

27 STEP SIX Contribute even more to your retirement savings Why is it important? It gives your money more time to grow Earning interest can be more beneficial than paying off debt How much should you contribute? Save a percentage of your raise each year Increase your savings amount annually

28 ANNIE S FINANCIAL FIRSTS Learning about Mutual Funds while visiting the farm

29 STEP SIX TACKLE LOWER INTEREST LOANS LAST

30 STEP SIX Tackle lower interest loans last Why s it important? Car payments and government student loans have low interest rates; some interest is tax deductible You could benefit more from investing your money How much should I pay off? Make just the monthly payments

31 SAVING FOR ADDITIONAL GOALS Balance paying off debt and saving for the future with other goals Cinch SM, our free budgeting tool, can help Cinch is a service mark of FMR LLC.

32 RESOURCES TO HELP Visit mymoney.fidelity.com Designed to help you plan for all of life s firsts Education Access articles, videos, tools, and more Tools Try Cinch, an easy way to track your spending and saving UPDATES Fidelity to get daily updates and news. You can also check out our Facebook page for more helpful info.

33 Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money. Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation. Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI FMR LLC. All rights reserved