How to Manage Your Money: Personal Finance 101

Transcription

1 May 22-25, 2016 Los Angeles Convention Center Los Angeles, California How to Manage Your Money: Personal Finance 101 Presented by Brittney Castro, CRPC, AAMSm CFP FM31 5/25/2016 1:15 PM - 2:45 PM The handouts and presentations attached are copyright and trademark protected and provided for individual use only.

2 How To Manage Your Money: Personal Finance 101 Presentation by: Brittney Castro, CFP, CRPC, AAMS Founder & CEO Financially Wise Women About Brittney: Brittney Castro, CFP, CRPC, AAMS and founder and CEO of Financially Wise Women, launched her own registered investment advisory firm in 2013 at the age of 28. In just three short years, she s leveraged social media to build a six-figure financial planning firm; launch an online six-week evergreen product called The Money Class; become a well-known financial expert for women of all ages; and land national media recognition from CNN, CNBC, The Wall Street Journal, The New York Times, CBS, KTLA, Fox 11 News, Glamour, Elle, Marie Claire, Financial Planning Magazine, Investment News, and Registered Rep Magazine and many more. She specializes in working with busy professional and entrepreneurial women who are passionate about life and want to gain clarity around their money. Brittney s mission is to help women plan and create the life of their dreams, free from anxiety about money. She is known for her innovative, non-judgmental, compassionate approach to financial planning. Away from the office, you can find Brittney working out, drinking green juice, reading, playing at the park with her dog Arya and of course dancing. Follow her on twitter at

3 In this presentation you will learn how to: Identify how to budget your money easily and effectively every month. Name the tips to save more of the money you make without feeling restricted or deprived. Discuss how to build cash, pay off your debts and improve your credit score. Describe the basics of investing and retirement accounts. Determine the different types of protection you need as you build and grow your net worth. The new way to budget your money and track your expenses with ease.

4 What is a budget? A way to track your income and expenses over a period of time. Set up your budget following the Pay Yourself First system: Here is a rough guideline as to how your net income should be allocated for your different expenses: 50% Fixed Expenses 20% Savings- Pay Yourself First 30% Fun/Variable Expenses

5 Fixed: Mortgage, rent, utilities, health insurance, groceries (basic), childcare, tithing, etc. Pay Yourself First /Savings: Cash cushion, extra debt payments, retirement, home down payment, etc. Fun: Dining out, entertainment, shopping, travel, clothes, etc. Example: Net Income is $6,000 per month: 50% =$3,000 Fixed Expenses 20 % =$1,200 Pay Yourself First=Savings 30% =$1,800 Fun/Variable Expenses

6 Little changes really do add up: Do you: Drink 1 latte every morning? What If you: Drank 1 latte every other day (3x/week)? Savings over 15 yr period $14,812 Spend $2,500 per year on clothes, shoes, etc? Saved $20 per week from shopping? $32,915 Go out for lunch every day during the week? Brown- bagged your lunch 3x/week? $49,372 How does it all add up? Took the money you would have spent and invested it? $97,099 Assumptions: Lattes save $9 per week, Shopping saves $20 per week, Brown Bag saves $30 per week. Take savings and invest monthly for 15 years (monthly Compound interest). All of the above savings use the average annual return of the S&P index for the past 76 years of 9.92% This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of returns used do not reflect the deduction of fees and charges inherit to investing. The S &P 500 is an unmanaged index and cannot be investing into directly. Past performance is no guarantee of future results. Schedule weekly Money Dates 1. Choose day/time for your money dates. 2. Update your budget, track, manage, forecast, review. 3. Make them fun and consistent. 4. Budgeting tools- bank apps, mint.com, level money app, quicken, etc. 5. HAVE FUN!

7 Build cash, pay off debts and improve your credit score. Build a cash cushion: Typically you want 3-6 months of committed expenses in cash accounts. Why? Emergencies Opportunities Investing- need staying power Insurance deductibles Business owner

8 Set up your bank accounts to work for you: Checking Account Savings Account High yield savings, CD, Money Market, etc. Structure your bank accounts: Checking Account: Deposit income, pay bills, track expenses. Savings Account: Keep for bigger expenses, emergencies, to protect against overdraft fees. CD/Money Market Account/High Yield savings: Use for majority of Cash Cushion, can still access but more out of sight, out of mind.

9 Pay off debts effectively: 1. Acknowledge the debt you have. 2. Accept the debt you have and forgive yourself. 3. Create a game plan. 4. Make additional payments. 5. Celebrate mini milestones. Acknowledge the debt you have: We live in a debt nation. You are not a bad person because you have debt. Get clear about the facts. List out all your debts- type, balance, interest rate, minimum payment.

10 Accept the debt you have and forgive yourself: Forgive yourself from the past. Be present with what is. Write a letter to your debt. Set an intention for paying off your debts. Choose a debt reduction game plan: The Snowball Method: Start by paying the minimum on all debts and allocate additional debt payments toward the debt with the lowest balance while simultaneously paying the minimums on the rest of your debts. The Avalanche Method: Start by paying the minimum on all debts and allocate any additional debt payments toward the debt with the highest interest rate while simultaneously paying the minimums on the rest of your debts.

11 Make additional debt payments: How much of your 20% can be allocated toward extra debt payments? Work with your financial planner to help you figure this out. Make your extra debt payments automatic. Celebrate mini successes: Set up mini goals to stay motivated. Remember your intention for being debt free.

12 Debit card vs. secured card vs. credit card: Debit card: Connected to your checking account. Overdraft fees may apply. ATM to withdrawal and deposit money. Credit Card: Borrow money from credit card company up to a limit. Charged an interest rate for any unpaid balance. Affects your credit score. Secured Card: Acts like a credit card except you attach money to the account to act as collateral if you don t pay off your bill every month. Affects your credit score. The best way to use credit cards: Charge expenses that you KNOW you can PAY OFF every month. This will help your credit score. Bankrate.com Dinkytown.net

13 Understand your credit report: Your credit report is like a file on you and your credit history. It basically tells lenders how risky of a borrower you are. So when it comes time to purchasing your new home or new car, you want your credit report and credit score to be in top financial shape! Understand your credit score: Credit score, also known as your FICO score, is calculated using the information from your credit report. Can range from Over 760 considered excellent. Request your credit report today by logging onto one of the three different credit reporting bureaus: Equifax, Experian, or TransUnion. You can also visit creditkarma.com to view your credit score for free on a regular basis.

14 The 5 factors that contribute to your credit score: Payment History- 35% of your score. Total Amount Owed- 30% of your score. Length of Credit History- 15% of your score. New Credit- 10% of your score. Types of Credit Used- 10% of your score. The goal is for your score to be above 760. This means you have excellent credit. Why do you need to invest your money?

15 Today's Dollars Investing basics: The effect of inflation Purchasing power of $200,000 at 3% annual inflation $250,000 $200,000 $150,000 $100,000 $50,000 $ Year Investing basics: The effect of compounding $3,000 annual investment at 6% annual growth, assuming reinvestment of all earnings and no tax. $800, $700, $600, $679,500 $500, $400, $300, $200, $100, $0.00 $254,400 $120, Beginning at age 20 Beginning at age 35 Beginning at age 45 This is a hypothetical example and is not intended to reflect the actual performance of any investment.

16 Growth of annual $5,000 investments $450,000 $400,000 $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Investing basics: The effect of compounding Year $5,000 invested annually 6% annual growth rate All earnings reinvested This is a hypothetical example and is not intended to reflect the actual performance of any specific investment. Investment fees and expenses, and taxes are not reflected. If they were, the results would have been lower. Rule of Rate of Return = Years Needed to Double in Value Rule of 72 4% 18 yrs 9 yrs 72 8% 72 Year Amount 1 10, , , ,000 Year Amount 1 10, , , , , , ,000 *The rule of 72 is a mathematical concept and does not guarantee investment results nor functions as a predictor of how an investment will perform. It is an approximation of the impact of a targeted rate of return. Investments are subject to fluctuating returns and there is no assurance that any investment will double in value.

17 In summary, investing allows us to grow our money faster than inflation overtime. Don t put off investing The sooner you start, the longer your investments have to grow Playing catch-up later can be difficult and expensive Basic Investing Tips

18 Asset Allocation Financial Advisor Picks: Portfolio Performance * 91.5% Asset Allocation 4.6% Security Selection 1.8% Market Timing 2.1% Other Factors *Source: Determinants of Performance, Brinson & Beebower Diversification $100,000 Invested at 8% for 25 Years $684,848

19 The Power of Diversification At 5% At 7% At 10% At 15% The Power of Diversification

20 Investing Do s and Don ts Do: 1. Your research 2. Read about investment options 3. Invest for the long-term 4. Understand the risks of investing 5. What to expect when investing 6. Hire help when needed

21 Don t: 1. Invest blindly 2. Invest for short term goals 3. Allow your emotions to get involved 4. Listen to all chicken little 5. Compare your investment plan to others 6. Be afraid to ask more questions Types of Retirement Accounts

22 IRA vs. Roth IRA *Note future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. Traditional IRA Roth IRA NO Taxes Ø TAXES $ Tax deduction (pre-tax contribution) NO Taxes Ø Tax deferred growth NO Taxes Ø Tax deferred growth No Tax Deduction (after-tax contribution) TAXES $ Fully taxable (ordinary income taxes) 59 ½ yrs old NO TAXES Ø Income tax free 59 ½ yrs old Steps to opening up an investment account: 1. Choose a brokerage firm. 2. Open up the account. 3. Fund the account. 4. Buy investments within the account. 5. Review every 6 months.

23 How to get the right insurance policies in place to protect your family. Get the right insurance in place. Health insurance. Disability insurance. Life insurance. Liability insurance. Property insurance. Worker s compensation insurance. Key employee insurance. Long-term care insurance.

24 Disability insurance: What happens if you are too sick or injured to work? Review your options at work and enroll in disability insurance coverage. Life insurance: Simply put, you get life insurance if you love someone or owe someone. Types- Group term, individual term, whole life, universal life, etc.

25 Long-term care insurance: LTC Insurance is like health insurance, it's for a really big events, the kind that could cause you to use up all your savings and assets. "The #1 fear retirees have is the fear of running out of money. - Forbes Magazine Here s what you learned in this presentation: Identify how to budget your money easily and effectively every month. Name the tips to save more of the money you make without feeling restricted or deprived. Discuss how to build cash, pay off your debts and improve your credit score. Describe the basics of investing and retirement accounts. Determine the different types of protection you need as you build and grow your net worth.

26 Additional resources: Financially Wise Toolkit which includes: Dream Worksheet 9 Steps to Becoming ebook Life Stage Financial Checklists Weekly videos with finance tips Call To Action: Take action on one thing you learned today in the next 48 hours.

27 Thank you! Brittney Castro, CFP, CRPC, AAMS CERTIFIED FINANCIAL PLANNER TM practitioner Founder & CEO Financially Wise Women 8391 Beverly Blvd. #375 Los Angeles, CA P: F: Financially Wise Women is a registered investment adviser offering advisory services in the State of California and in other jurisdictions where exempted. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. There is no assurance that the techniques and strategies discussed are suitable for all investors or will yield positive outcomes. The purchase of certain securities may be required to affect some of the strategies. Investing involves risks including possible loss of principal. This information is not intended to be a substitute for specific individual tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. This is a hypothetical example and is not representative of any specific situation. Your results will vary. The hypothetical rates of returns used do not reflect the deduction of fees and charges inherit to investing. The S &P 500 is an unmanaged index and cannot be investing into directly. Past performance is no guarantee of future results. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be investing into directly.

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