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Seven Rules For Financial Success
 

Seven Rules For Financial Success

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Everyone wants to be more financially secure, but don't know the basics of how to get there. This presentation is a roadmap with seven simple rules for financial success. It is part of a series of ...

Everyone wants to be more financially secure, but don't know the basics of how to get there. This presentation is a roadmap with seven simple rules for financial success. It is part of a series of seminars offered by Saunders Learning Group on personal money management. You can now view the presentation here, order the Family Financial Freedom book from any of the ebook sites for iPhone, iPad, Kindle, Nook, Kobo reader etc. contact me at floyd.saunders@yahoo.com for a copy of the presentation or more information on how to get seminar materials.

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  • There are several observations here. First, the ending balance of just over $2 million is in today’s dollars assuming a 3.1% inflation rate. The actual retirement savings balance after 35 years is over $6 million. The chart is broken into three colors: yellow, blue and purple. The yellow is the actual amount of money invested, blue the amount earned directly from the money invested (called simple interest), and purple the amount earned from the simple interest (called compound interest). The point is that given enough time, the compound interest earned will far exceed the amount invested or even the simple interest. That’s the most powerful force in the known universe that Einstein was talking about! Finally, note that the $2 million balance in today’s dollars is enough to withdraw about $80,000 a year for retirement, exactly what you’d need if you were seeking to replace 80% of your income in today’s dollars.
  • This is the example of Jane who started saving $1,000 per month and earned an hypothetical 8% rate of return. At age 65, Jane has $3.5 million to retire on. Gary started 10 years later, saving the same $1,000 per month @8% and had half as much at age 65.

Seven Rules For Financial Success Seven Rules For Financial Success Presentation Transcript

  • The Beginning Investor Series. Seven Rules for Financial Success Tried and True, these are just seven common sense rules to build financial success, plus 12 rules for successful stock investing Saunders Learning Group, LLC May 2012
  • Training from Saunders Learning Group Saunders Learning Group provides a variety of training programs, workshops and seminars targeted to the financial services industry. Programs are available in a wide range of topics, and we are specialists in developing custom programs that are targeted to your needs. Contact the founder, Floyd Saunders at 316-680-6482 or at floyd@floydsaunders.com for more information. Saunders Learning Group, LLC, Andover, KS2
  • All About Figuring Out Wall Street ... Everything has changed in the financial services industry and it affects your financial well-being. From bank failures, to record unemployment, home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone from first time investors to veterans of banking understand what to do to persevere and restore our faith in our financial systems.Published by Saunders Learning Group.Training for financial professionals and consumers. If your interest is financial turn toSaunders Learning Group for your training needs.Contact information: email: floyd@floydsaunders.com mobile: 316-680-6482 Saunders Learning Group, LLC, Andover, KS 3
  • Rule One – Pay off Consumer Debt Credit cards and other consumer debt is the greatest barrier to financial success you face.  You pay high cost to borrow money (finance charges)  You increase your debt load and Debt-to-Income Ratio  You decrease the amount that you should be saving  You may put your property at risk (if you can’t pay)  Less money each month for household expenses, saving and investing  Can easily overspend and create financial difficulties61% of Americans live from paycheck to paycheck, up from 32% in 2008.43 million Americans are on food stamps, mostly the elderly, children, and the working poor. 50%are white, 27% are black43% of Americans have less than $10,000 save for retirement, 36% contribute nothing24% of us postpone retirement by at a year80% of Americans have less than 6 months of income in reserve for a rainy dayPersonal bankruptcy increased by 32% in 1980, as millions of Americans lost their jobs and homesThe bottom 50% of incomes own less than 1% of the wealth in America Use the “Snowball Effect to pay off debt Saunders Learning Group, LLC, Andover, KS 4
  • Snowball effect Review all of your debt Take the lowest balance credit card or consumer debt and apply as much as possible to the balance each month until it is paid off. Cancel that card once it is paid off (unless it has the lowest interest rate) Then take the same monthly payment you just eliminated an apply it to the next highest balance account (in addition to what your were paying), until it is paid off. Do this until you have paid off all of your consumer debt and then only keep one open credit card account (finding an account with the lowest possible interest rate). Saunders Learning Group, LLC, Andover, KS 5
  • What is the Cost of Credit? If you borrow money on credit you will pay the lender a finance charge (their profit) for the use of their money. Example of the cost of credit: Let’s say that you borrow $10,000 from the Bank to purchase a car. — The interest rate is 12% on the $10,000 auto loan. — Your monthly payment is $222.44 for 5 years. — Your total cost for borrowing $10,000 is $3,346.67 or 33.4% of the $10,000 borrowed. Saunders Learning Group, LLC, Andover, KS 6
  • Rule Two: Pay Yourself First Each Month Use automatic transfers to move money from your paycheck or checking account to a savings account or mutual fund. The sure path to financial security is to set aside 10% of whatever you earn in a savings account, until you had an emergency fund of at least six months of your income. Sad Fact: 80% of Americans have less than six months of income in reserve. Saunders Learning Group, LLC, Andover, KS 7
  • Rule Three: Build From A Financial Foundation Once you have an paid off consumer debt and have an emergency fund, you can begin to invest, but do it in a sensible way – By pyramiding you savings and investments Futures High Risk Contracts Options, and Collectibles Aggressive Growth Stocks, junk bonds, mutual funds Medium Risk Real Estate High Quality Stocks and Bonds Mutual Funds Variable Government Securities Low Risk Annuities Treasury Bills & Notes Bonds Mutual Funds Insured Savings Money Certificates Savings Bonds Market of Deposit Accounts EE & HH Funds Goals Financial Life Health Records Financial Plan Insurance Disability Budget Net Worth Property & Liability Financial Foundation Saunders Learning Group, LLC, Andover, KS 8
  • The Magic of Compound Interest  Compound Interest is the eighth wonder of the world.The chart shows the growth of saving %15,000 a year, assuming a 10%return, 3.1% inflation and savings beginning at age 30. Saunders Learning Group, LLC, Andover, KS 9
  • Start Early With Compound Interest Saunders Learning Group, LLC, Andover, KS 10
  • Rule Four: Learn the basics of Investing Start with a sensible investment plan using;  Tax advantages retirement plans: 401ks, 403(b), IRAs, Roth IRAs  Mutual Funds, Exchange Traded Funds and Dividend Reinvestment ProgramsRetirement Plans Mutual Funds Every wage earner has a tax problem  Diversification & Divisibility: Qualified retirements plans allow to shelter — A single investment is immediately diversified your retirements savings from taxes and in through the fund’s holdings most cases reduce your taxable income.  Liquidity You should always maximize your  Record Keeping contributions to retirement plans before making any other investments choices.  Professional Management: — Informed money managers may make better If your employer provides matching decisions than uninformed investors. contributions to a retirement plan, take it, it’s free money.  Reduced transaction costs: Costs are reduced with economies of scale. Saunders Learning Group, LLC, Andover, KS 11
  • Rule Five: Buy Term Insurance - Invest Your Savings As long as you have established a regular savings plan, have created an emergency fund and started a retirement savings account, you are saving money by buying term insurance. Term insurance does not come with built in cash values or investment accounts like other forms of more expensive insurance. Follow the idea that your responsibilities decrease over time, while your savings and investment increase and you can see that less expensive term insurance, frees up money to create an investment plan that makes you more secure in the future. It works like this: In the early years, you need In the later years, you need less more coverage . . . coverage . . . Life Insurance Savings & Investments 4.Young children Li fe 4.Children are grown 5.More debt In 5.Debts paid off 6.A Home mortgage su ra 6.Mortgage paid 7.A loss of income would be nc 7.Savings for Retirement in place devastating e In the later years, you don’t need Savings & Investments much insurance. In the early years, you don’t Life Insurance have much money . . . Saunders Learning Group, LLC, Andover, KS 12
  • Rule Six: Maximize contributions to tax-deferredretirement accounts before any other investment. First, in most cases (the ROTH is the exception) the contributions are made with pre- tax dollars and therefore you taxable income is reduced by your contributions in a defined benefit plan or defined contribution plan (typically a 401k). With a ROTH IRA, your contributions are made with after tax dollars, but at retirement, you pay no taxes on your withdrawals. Second, the contributions grow on a tax-deferred basis. That means all of the interests, dividends and capital gains are added to your account without taxes becoming due. You are only taxes on the withdrawals made in retirement. Third, retirement plans are professional managed and you typically have a range of options to help you select sub-accounts or separate funds that match your desires for a greater returns vs. the risks taken to get better returns. Fourth, because you have a range of options you can diversity between investment types to better manage risks and returns. Saunders Learning Group, LLC, Andover, KS 13
  • Rule Seven: Have A Will, Trust and Estate Plan A will protects your assets from probate in most cases (consult a lawyer) A will allows you pass your estate according your wishes Include a Durable Power of Attorney and Medical directives to insure your wishes about how to handle medical decisions are done according to your wishes. Trust accounts allow you manage assets and often defer taxes Saunders Learning Group, LLC, Andover, KS 14
  • Investing Basics to knowHere are the basics you need to know to invest in stocksSaunders Learning Group, LLC, Andover, KS 15
  • Economic AnalysisInvolves assessing economic conditions that can affect a firm’s stock priceEconomic growth Interest ratesA measure of growth in a country’s  Stocks perform better when interesteconomy over a particular period rates are lowGross domestic product (GDP):  Some stocks are more sensitive tothe total market value of all products interest rates than othersand services produced in a country  The Federal Reserve uses monetary policy to influence interest rates Weak economic conditions Inflation  Lowers demand and stock prices The increase in the general level of prices of products and services over a specified period  Consumers spend less, further lowering demand Consumer price index (CPI): a measure of Fiscal policy inflation that represents prices of various The means by which the U.S. government consumer products imposes taxes on individuals and Producer price index (PPI): a measure of corporations and by which it spends its inflation that represents prices of products money used to produce other products Saunders Learning Group, LLC, Andover, KS 14-16
  • Sources for Economic Analysis Saunders Learning Group, LLC, Andover, KS 14-17
  • Evaluating Stocks Saunders Learning Group, LLC, Andover, KS
  • Analysis of the FirmFirm-specific characteristics - Analysis of a firm’s income statement and balance sheet can reveal the following characteristics: Saunders Learning Group, LLC, Andover, KS 14-19
  • Financial Ratios Used to Evaluate a Business Saunders Learning Group, LLC, Andover, KS 14-20
  • Evaluating StocksTo find out about the health of a corporation, you can use numerical measures such as: Industry Norms, Go to: http://biz.yahoo.com/research/indgrp Provides information on various industry groups and financial information on firms you specify in any industry. Saunders Learning Group, LLC, Andover, KS
  • Analysis of the FirmSaunders Learning Group, LLC, Andover, KS 14-22
  • 12 Rules for Investing in Stocks1. Start with an emergency fund2. Open a “cash” only account with a stock broker – Online, Discount, Full-Service 1. Save the margin account for later, after you know more about what you are doing 1. New investor, need advise – Use a full service brokerage for guidance, check for a good track record 2. More experienced – Use a discount brokerage with good service and quality products3. Start with $1,000 in mutual funds 1. $5,000 buy just two to three stocks 2. $10,000 add one or two additional stocks 3. $25,000 allows you have five or six stocks 4. $100,000 Not more than 20 stocks, unless you want to spend 100% of your time investing4. Buy the very best companies, concentrate on a limited number of stocks with growing dividends, and watch them closely using stock alerts. Saunders Learning Group, LLC, Andover, KS 23
  • 12 Rules for Investing in Stocks1. Cut loses on stocks @ 8% with Stop Lost orders  This takes out the hope and fear of investing, makes for rational decision making  Be persistent about cutting loses, so you have money to invest in the next best option2. Sell your best stocks with 25 to 30% gains  Always sell you worst-performing stocks first, not your best, but don’t hang on for the last ounce of gains3. Pick Market leaders in areas you have some knowledge  Profits drive the price of stocks: improving earnings (EPS), growing profits, increasing sales and earnings growth  #1 in their category with strong Return on Equity (ROE)4. Invest dollars, not number of shares. Pick stocks with a price between $15 and $150 per share  70% of trades are with institutional investors, who drive the market and shun low priced stocks Saunders Learning Group, LLC, Andover, KS 24
  • 12 Rules for Investing in Stocks1. Use fundamental analysis for picking stocks to own and technical analysis to know the buy and sell signals  Technical analysis is reading a stock’s prices and trading volume to time the buying and selling of stocks. Look for price corrections and base building in charts.2. Earnings Per Share of 30% or more  Over time 3 of 4 of the biggest winners are growth stocks with EPS of 30% or more3. Buy leaders  Sales up 25%  Look for stocks with gains of 25% in the same quarter from a year earlier  #1 in their field for recent sales, earning growth, profit margins and ROE (20% or more)  Also look for strong management team and management ownership with strong institutional ownership4. Look for stocks with a strong record of annually increasing dividends Saunders Learning Group, LLC, Andover, KS 25
  • QuestionsSaunders Learning Group, LLC, Andover, KS
  • Post Workshop Action Plan  Complete the Post Workshop Action Plan Saunders Learning Group, LLC, Andover, KS27
  • Reference Material Figuring Out Wall Street Consumer’s Guide To Financial Markets By Floyd Saunders Publisher: Saunders Learning Group ISBN: 978-0-9824019-0-3 available from Amazon, B&N, and http://www.figuringout wallstreet.com or www.floydsaunders.com Book summary: From bank failures to home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone understand how this latest crisis happened, who was responsible and what to do now to restore our financial systems. Written in an easy to understand manner, even the most complex financial concepts are easy to digest. This book provides help to monitor investments with a review of investment products, financial regulators and economic indicators. Learn how the stock market exchanges work and the world of investment banking, hedge funds, venture capital and private equity. Every chapter includes action plans for investing.Saunders Learning Group, LLC, Andover, KS
  • QuestionsSaunders Learning Group, LLC, Andover, KS
  • Post Workshop Action Plan  Complete the Post Workshop Action Plan Saunders Learning Group, LLC, Andover, KS30
  • Reference Material Figuring Out Wall Street Consumer’s Guide To Financial Markets By Floyd Saunders Publisher: Saunders Learning Group ISBN: 978-0-9824019-0-3 available from Amazon, B&N, and http://www.figuringout wallstreet.com or www.floydsaunders.com Book summary: From bank failures to home foreclosures and panic around the world, Figuring Out Wall Street, is the concise guide to help everyone understand how this latest crisis happened, who was responsible and what to do now to restore our financial systems. Written in an easy to understand manner, even the most complex financial concepts are easy to digest. This book provides help to monitor investments with a review of investment products, financial regulators and economic indicators. Learn how the stock market exchanges work and the world of investment banking, hedge funds, venture capital and private equity. Every chapter includes action plans for investing.Saunders Learning Group, LLC, Andover, KS
  • About the Author  Floyd Saunders has worked on Wall Street with both Bank of America and JPMorgan, where is was a vice president in global financial systems. He has worked across the industry in retail, commercial, and investment banking.  He has taught courses in Money and Banking and extensively for the American Institute of Banking and various colleges.  As a consultant, he developed and taught a wide range of banking and investing courses.  He authored three programs for the American Bankers Association: Banking on Mutual Funds and Annuities, Introduction to Securities Markets and Investing in Securities.Saunders Learning Group, LLC, Andover, KS date