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PART 5: LIFE CYCLE ISSUES
 

PART 5: LIFE CYCLE ISSUES

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    PART 5: LIFE CYCLE ISSUES PART 5: LIFE CYCLE ISSUES Presentation Transcript

    • Chapter 18 Fitting the Pieces Together
    • The Ingredients of Success
      • It is impossible to succeed financially unless you:
        • Evaluate your financial health.
        • Plan and budget.
        • Manage your cash and credit.
        • Control your debt.
        • Make knowledgeable consumer decisions.
    • The Ingredients of Success
      • It is impossible to succeed financially unless you:
        • Have adequate health, life, property, and liability insurance.
        • Understand investing principles.
        • Make investment decisions that reflect your goals.
        • Plan for retirement.
        • Plan for what happens to your accumulated wealth and your dependents after your die.
    • The Financial Life Cycle
      • Recent graduates make many financial decisions after leaving college. They:
        • May purchase a car and possibly a home.
        • Will establish credit and pay taxes.
        • May get married and begin a family.
      • Set up an emergency fund, start saving for your goals, and begin a retirement account.
    • The Financial Life Cycle
      • At age 19, put away $2000 at the end of each year for 7 years in an IRA that earns 11%, and then nothing thereafter; at age 65 you will have more than $1.2 million.
      • If you wait until you are 25 to start that IRA and make payments every year for 40 years, you still won’t catch up (you’ll have $1.164 million).
      • Start at 30, make 35 payments, and end up with less than $700,000.
    • Women and Personal Finance
      • While the basic principles of personal finance don’t change whether you’re a man or a woman, it is tougher for women to achieve financial security.
      • Women:
        • Generally earn less
        • Are less likely to have pensions
        • Qualify for less Social Security
        • Live longer than men
    • Women and Personal Finance
      • Consider these facts:
        • Over 90% of all women take sole responsibility for their financial decisions at some point.
        • Nearly half of all women over 65 get 90% of their income from Social Security, compared to 35% of comparable men.
        • 75% of women don’t know how much they need to save for retirement.
        • Women tend to be more conservative in their investments, so they earn less.
    • Women and Personal Finance
      • Consider these facts:
        • Only 28% of women over 65 receive pension benefits, compared to 45% of men, and the average men’s pension was twice that of women.
        • At age 65, women outnumber men 3 to 2, by 85 they outnumber them 5 to 2.
        • While 12% of the elderly live in poverty, 75% of them are women.
        • In 2001, median personal income for 65 year-old women was $11,313, while for 65 year-old men it was $19,668.
    • Women and Personal Finance
      • How does a woman start to take charge?
        • Acquire knowledge.
        • Make things happen – create a plan.
        • See a financial planner about specific concerns.
    • Financial Life Events
      • Life Event 1: Getting Started
      • Lay the groundwork – understand investments and personal finance and assess current finances with planning for the future:
        • Expenses and a budget
        • Control debt
        • Establish an emergency fund
        • Insure yourself
        • Control your credit score
        • Keep current on personal finance
    • Financial Life Events
      • Life Event 1: Getting Started
      • Identify your goals:
        • Identify and prioritize financial goals.
        • Set a time frame.
        • Identify the costs of your goals.
    • Financial Life Events
      • Life Event 1: Getting Started
      • Begin saving for your goals:
        • Save more than you think you can.
        • Make savings automatic.
        • Don’t procrastinate.
        • Catch your matches.
        • ROTH.
        • How much risk can you tolerate?
        • Put together a strategy.
        • Control your spending.
    • Financial Life Events
      • Life Event 2: Marriage
      • Get Organized – review and reorganize finances.
        • Work together – discuss approaches to handling money.
        • Update financial records.
        • Gain control of your debt and your credit score – clear up debt issues to work towards getting a mortgage.
        • Merge finances to make good decisions.
    • Financial Life Events
      • Life Event 2: Marriage
      • Revisit Your Financial Goals – revisit both long- and short-term goals
        • Reexamine your financial goals.
        • Begin saving for new goals.
        • Make saving automatic.
        • Make sure you have an emergency fund.
        • Begin working towards retirement.
    • Financial Life Events
      • Life Event 2: Marriage
      • Reexamine your insurance and benefits: may change beneficiaries, buy additional insurance, and coordinate benefits.
        • Review your beneficiaries.
        • Include all family members.
        • Review your insurance.
        • Coordinate your benefits.
    • Financial Life Events
      • Life Event 2: Marriage
      • Reexamine your taxes: your tax status and the tax-advantaged benefits from your employer may change.
        • Update W-4 form.
        • Take advantage of tax breaks.
      • Make a will.
        • Review your beneficiaries.
    • Financial Life Events
      • Life Event 3: Buying a Home
      • Does the purchase fit your financial plan?
        • Keep track of your credit score.
      • Consider the tax implications.
        • Take advantage of tax benefits.
        • Build tax benefits into your budget.
        • Reexamine your investments.
        • Update your employer records.
        • Know your state.
    • Financial Life Events
      • Life Event 4: Having a Child
      • Survey your finances.
        • Assess your current financial situation.
        • Reexamine your financial goals.
        • Revise your budget.
      • Plan for college.
        • Estimate costs.
        • Automate your savings.
    • Financial Life Events
      • Life Event 4: Having a Child
      • Reconsider your insurance needs.
        • Review and update insurance.
      • Update wills and trusts.
        • Update or make a will.
        • Update your retirement account beneficiary.
      • Take advantage of tax savings.
        • Apply for Social Security number.
        • Update W-4.
    • Financial Life Events
      • Life Event 5: Inheritances, Bonuses, or Unexpected Money
      • Examine the priorities of your goals.
      • Reexamine your goals.
      • Consider estate planning.
      • Examine the tax implications.
        • Plan for tax implications.
        • Consider estate taxes.
    • Financial Life Events
      • Life Event 6: A Major Illness
      • Reexamine your finances.
        • Assess current financial situation.
        • Emergency fund – adequate liquidity.
        • Reexamine financial goals.
        • Reexamine investment strategy.
        • Revise budget.
      • Take advantage of tax breaks.
        • Understand the tax implications.
        • Explore flexible spending accounts (FSAs).
    • Financial Life Events
      • Life Event 6: A Major Illness
      • Alternatives to Finance Your Illness.
        • Reverse mortgage
        • Life insurance
        • Disability insurance
    • Financial Life Events
      • Life Event 7: Caring for an Elderly Parent
      • Health care and estate planning concerns.
        • Talk to your parents.
      • Oversee your parents’ financial affairs.
        • Understand their goals and budget.
      • Discuss long-term health care options.
        • Long-term health care insurance.
      • Estate planning.
        • Discuss estate planning.
    • Financial Life Events
      • Life Event 8: Retiring
      • Develop a retirement income plan.
        • Mental and financial preparation.
        • Plan how to use your retirement savings.
      • Manage your income in retirement.
        • Withdrawal strategy.
        • Monitor your investments.
        • Emergency fund.
    • Financial Life Events
      • Life Event 8: Retiring
      • Review your insurance coverage and your will.
        • Employer retiree health care.
        • Medicare and Medicare supplemental insurance.
        • Long-term health care insurance.
        • Homeowner’s insurance.
        • Review your will.
      • Keep track of important retirement planning dates.
    • Financial Life Events
      • Life Event 9: Death of a Spouse
      • Organize financial material.
      • Contact sources of survivor benefits.
        • Insurers.
        • Social Security.
        • Past Employers.
      • If you are the executor, carry out your responsibilities.
        • Distribution of assets.
    • Financial Life Events
      • Life Event 9: Death of a Spouse
      • Change ownership or title to assets.
        • Insurance policies.
        • Automobiles.
        • Bank accounts, stocks, bonds, and safe deposit boxes.
        • Credit cards.
        • Determine if your benefits change.
        • Review your insurance.
    • Financial Life Events
      • Life Event 10: Divorce
      • Nearly ½ of all marriages end in divorce and money problems are a main cause.
      • Prepare for divorce.
        • Pay down debt.
        • Keep the costs down.
        • Protect yourself with the help of a financial planner.
        • Consider a prenuptial agreement.
    • Financial Life Events
      • Life Event 10: Divorce
      • Avoid Credit Damage.
        • Late payments and your credit report.
        • Have your account re-aged.
      • Revisit your financial goals.
        • Insurance coverage.
        • Child support and alimony.
      • Rework your budget.
        • Retirement savings.
        • Reexamine your expenses.
    • Making Financial Success Happen
      • Wealthy Americans:
        • Net worth from $1 million-$5 million, not inherited.
        • Most have incomes less than $100,000.
        • They own a home valued at $278,000.
        • They are self-employed or a partner.
        • In their original marriage, have 3 kids.
        • They are frugal – clip coupons, buy on sale or do without.
    • The Keys to Success: A Dozen Decisions
      • Number 1: Become Knowledgeable – avoid financial pitfalls and bad advice, handle unwanted financial surprises.
      • Number 2: Don’t Procrastinate - your financial future starts now.
      • Number 3: Live below your means – don’t spend at your level or earning.
    • The Keys to Success: A Dozen Decisions
      • Number 4: Realize You Aren’t Indestructible - consider life and health insurance, stay healthy.
      • Number 5: Protect Your Stuff – have insurance to protect you from financial ruin.
      • Number 6: Embrace the “B” Word (Budget) – the budget is a means to reach your goals.
    • The Keys to Success: A Dozen Decisions
      • Number 7: Reinvent and Upgrade Your Skills – prepare for job insecurity by having the right skills.
      • Number 8: Hide Your Plastic – credit cards are a dangerous threat to your financial well-being.
      • Number 9: Stocks Are Risky, But Not as Risky as Not Investing in Them – invest long-term in stocks and keep up with inflation.
    • The Keys to Success: A Dozen Decisions
      • Number 10: Exploit Tax-Favored Retirement Plans to the Fullest.
      • Number 11: Plan for the Number of Children You Want.
      • Number 12: Stay Married.
    • Successful Debt Management
      • Key #1: The Obvious: Spend less than you earn and budget your money.
      • Key #2: Know the costs.
      • Key #3: Understand the difference between good and bad debt.
    • Successful Debt Management
      • Key #4: Make sure you can repay what you borrow – set your own standards.
      • Key #5: Keep your credit score strong – it keeps costs down and is a source of emergency money.
      • Key #6: Don’t live with bad (and expensive) debt.
    • Getting Started: Just Do It
      • Start today – don’t procrastinate.
      • Begin with budgeting and planning.
      • Pay attention to managing your cash.
      • Rid yourself of bad debt.
      • Your safety net should be in order.
      • Start investing.