Dreams 2012 (Setting Financial Goals)


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SMART FInancial Goal Setting

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  • When setting financial goals, it’s important to understand the types of goals you are trying to achieve. In general, there are three types of financial goals, all distinguished by the time it would likely take to achieve them. One of your first goals should be saving for an emergency fund of three to six months of expenses. It is always important to keep that emergency fund on your radar as you’re working toward achieving other financial goals. Short-Term Goals (Less Than a Year) Emergency fund Buying a TV Buying new furniture Going on vacation Mid-Term Goals (One to Three Years) Getting out of debt Buying a car Buying a home Emergency fund Long-Term Goals (More than Three Years) College fund Retirement Vacation home Emergency fund Once you’ve set your financial goals, achieving them requires planning to get to where you want to be. Take these steps to get going: Goals: Amount Needed: Date Needed: Months Until Needed: Monthly Amount Needed: Ways To Reach Goal
  • Dreams 2012 (Setting Financial Goals)

    1. 1. DREAMS
    2. 2. <ul><li>Buying a Car </li></ul><ul><li>Trip to Kazakhstan </li></ul><ul><li>Owning a Home </li></ul>LIST 3 DREAMS FOR YOUR FUTURE
    3. 3. CONGRATULATIONS! <ul><li>You now have 3 Financial Goals </li></ul><ul><li>By making them SMART Goals you can make them a reality </li></ul>
    4. 4. STRONG FINANCIAL GOALS <ul><li>Are SMART </li></ul><ul><ul><li>Specific </li></ul></ul><ul><ul><li>Measurable </li></ul></ul><ul><ul><li>Action-oriented </li></ul></ul><ul><ul><li>Realistic </li></ul></ul><ul><ul><li>Timely </li></ul></ul>
    5. 5. GOAL SETTING SAMPLES SMART GOAL I will have $1 million in assets by age 65. To do that I will invest $250 per month in mutual funds with an average annual earnings of 10%. WEAK GOAL I want to be rich
    6. 6. I WILL BUY A HOUSE WITHIN THE NEXT FIVE YEARS. <ul><li>To achieve this goal I will: </li></ul><ul><li>Get a copy of my credit report within 30 days. </li></ul><ul><li>Pay off my car one year early by making double payments each month. </li></ul><ul><li>Double my current savings to equal $500 per month to be able to have $30,000 for closing costs, down payment and other expenses. </li></ul>
    7. 7. THE FINANCIAL PLANNING PYRAMID Options, Commodities, etc. Controlled Spending Adequate Income Adequate Insurance Goal- Getter Emergency Reserve SAVINGS LEVEL MANAGEMENT LEVEL Stocks Bonds Mutual Funds Real Estate Hard Assets INVESTMENT LEVELS
    8. 8. WHAT IS A SPENDING PLAN? <ul><li>A written method to achieve your financial goals and manage your money. </li></ul><ul><li>A common name for a spending plan is a budget! </li></ul>
    9. 9. A SPENDING PLAN: <ul><li>Is a guide </li></ul><ul><li>Doesn’t need to be down to the penny </li></ul><ul><li>Is easy to understand </li></ul><ul><li>Is a reflection of your needs, wants, values and goals </li></ul>
    10. 10. A SPENDING PLAN: <ul><li>Is based on current income and expenses </li></ul><ul><li>Is practical and realistic </li></ul><ul><li>Is flexible </li></ul><ul><li>Provides for pleasures as well as necessities </li></ul>
    11. 11. PLANNING WILL HELP YOU: <ul><li>Live within your income </li></ul><ul><li>Realize personal goals </li></ul><ul><li>Maintain a good credit history </li></ul><ul><li>Get more for your money </li></ul><ul><li>Reduce financial stress and arguments </li></ul><ul><li>Achieve financial competence and confidence </li></ul>
    12. 12. DEVELOP A PERSONAL FINANCIAL PLAN Financial Planning Worksheet
    13. 13. THE NET WORTH <ul><li>Assets - Liabilities = Net Worth </li></ul><ul><li>(What you OWN minus what you OWE) </li></ul><ul><li>A measure of your wealth at a certain point in time </li></ul><ul><li>Calculate yearly </li></ul>
    14. 14. THE CASH FLOW OR BUDGET <ul><li>Income </li></ul><ul><li>Savings </li></ul><ul><li>Living Expenses </li></ul><ul><li>Indebtedness </li></ul>
    15. 15. INCOME <ul><li>Gross Income: total pay, everything you earn </li></ul><ul><li>Net Income: gross pay less taxes </li></ul><ul><li>Take-home pay: net income less any other deductions or automatic allotments </li></ul>
    16. 16. SAVINGS <ul><li>Monthly Contributions to </li></ul><ul><ul><li>Reserve Fund </li></ul></ul><ul><ul><li>Emergency Fund </li></ul></ul><ul><ul><li>Goal-Getter Fund </li></ul></ul><ul><ul><li>Investments/IRAs, etc. </li></ul></ul><ul><ul><li>TSP </li></ul></ul>
    17. 17. LIVING EXPENSES <ul><li>Monthly Amounts </li></ul><ul><li>Typical Expenses </li></ul><ul><ul><li>Housing and Utilities </li></ul></ul><ul><ul><li>Food </li></ul></ul><ul><ul><li>Transportation </li></ul></ul><ul><ul><li>Child Care </li></ul></ul><ul><ul><li>Clothing </li></ul></ul><ul><ul><li>Insurance and Healthcare </li></ul></ul><ul><ul><li>Leisure, etc. </li></ul></ul>
    18. 18. TRACK EXPENSES <ul><li>Track for 30 days </li></ul><ul><li>Record all expenses each day </li></ul><ul><li>Identify expense category </li></ul><ul><li>Total monthly expenses for each category </li></ul>
    19. 19. INDEBTEDNESS <ul><li>List Creditor and Total Balance Due </li></ul><ul><li>List only the Minimum Monthly Payment Amount </li></ul><ul><li>List Interest Rate </li></ul><ul><li>Total at the Bottom </li></ul>
    20. 20. SUMMARY BLOCK <ul><li>Guidelines for Total Net Income </li></ul><ul><ul><li>70% Living expenses </li></ul></ul><ul><ul><li>20% Indebtedness </li></ul></ul><ul><ul><li>10% Savings </li></ul></ul>
    21. 21. DEBT-TO-INCOME RATIO <ul><li>Total of all monthly debt payments divided by net monthly income (not including mortgage) </li></ul><ul><ul><li><15% OK to add credit </li></ul></ul><ul><ul><li>15 - 20% Fully extended </li></ul></ul><ul><ul><li>21-30% Overextended </li></ul></ul><ul><ul><li>>30% Seek help immediately </li></ul></ul>
    22. 22. DEBT-TO-INCOME RATIO <ul><li>Example: </li></ul><ul><li>Net income= $2980 </li></ul><ul><li>Total minimum monthly debt payments= $545 </li></ul><ul><li>545 / 2980 = .1829 </li></ul><ul><li>.1829 * 100 = 18.29 </li></ul><ul><li>Debt-to-income ratio = 18.29% </li></ul>
    23. 23. Where should this go? How can we fix this? Surplus Deficit Where should this go? How can we fix this?
    24. 24. THE ACTION PLAN <ul><li>Ways to Improve Your Plan </li></ul><ul><ul><li>Decrease living expenses </li></ul></ul><ul><ul><li>Increase income </li></ul></ul><ul><ul><li>Decrease indebtedness </li></ul></ul><ul><li>Referrals and Recommended Training </li></ul><ul><li>Goals Section </li></ul>
    25. 25. YOUR SPENDING PLAN <ul><li>Paycheck-by-paycheck breakdown </li></ul><ul><li>Forces you to make deliberate spending decisions </li></ul><ul><li>If you consider buying something not on your plan: </li></ul><ul><ul><li>You must make a choice: take on more debt, spend money allotted to something else, or pass on the expense. </li></ul></ul>