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Money Rx: Your Prescription to Sound Financial Health

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Learn how to wisely save money now and be a millionaire midway through your career through sound financial planning.

Learn how to wisely save money now and be a millionaire midway through your career through sound financial planning.

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    Money Rx: Your Prescription to Sound Financial Health Money Rx: Your Prescription to Sound Financial Health Presentation Transcript

    • Your RX
      for
      Financial Health
      Money RX
      Take one smart spending pill daily.
      Avoid high interest.
      Consult with financial planner before decreasing dosage.
      Your Prescription for Sound Financial Health
      Jerry Love, CPA/PFS, CFP
      AICPA Personal Financial Planning Executive Committee
    • Starting at the End
      “Let’s start with the end in mind.” -Steven Covey
      For most people, that’s retirement
      November 9, 2010
      Money Rx
      Slide 2 of 20
    • America’s Financial Literacy
      The average American family spends $1.22 for every dollar it earns
      One in five American families with annual household income of less than $50,000 is spending 40% of after-tax income to service its debt
      Average card debt among people who have at least one card is $9,205
      In 2003, 1.6 million Americans filed for bankruptcy – the highest amount in history
      November 9, 2010
      Money Rx
      Slide 3 of 20
    • The Problem
      Average per household debt in the U.S., not counting mortgage or debt on cars, is about $14,500
      A typical credit card purchase ends up costing 112 percent more than if cash were used
      About 60 percent of active credit card accounts are not paid off monthly
      A typical American family today pays about $1,200 annually in credit card interest
      November 9, 2010
      Money Rx
      Slide 4 of 20
    • Living Paycheck to Paycheck
      Some 40 percent of American families annually spend more than they earn
      The average college student has $2,700 worth of credit card debt by the time they graduate
      The median debt for school loans for college graduates in 2006 was $17,125
      The average graduate student has six credit cards and one in seven owes more than $16,928 (plus school loans in excess of $40,000)
      November 9, 2010
      Money Rx
      Slide 5 of 20
    • You must understand…
      You can borrow more money than you can afford to repay
      November 9, 2010
      Money Rx
      Slide 6 of 20
    • Financial ABCs
      Attitudes – “Pay myself first”
      Behaviors – “I’m saving every payday”
      Control and Confidence – “I can do this”
      This reduces financial distress and increases one’s sense of financial well-being
      November 9, 2010
      Money Rx
      Slide 7 of 20
    • A Sound Financial Plan Helps You…
      Be in control so you can:
      Pay down debt
      Budget (spend less than you earn)
      Establish some basic financial goals
      Create a revolving savings fund
      Save for short-term goals
      Make contributions to long-term savings
      November 9, 2010
      Money Rx
      Slide 8 of 20
    • Comfortable retirement is like…
      the proverbial carrot Dangling in front of us
      November 9, 2010
      Money Rx
      Slide 9 of 20
    • Do the Math
      Net worth basics
      Determine your average income for the most recent 10 years
      Multiply by your age
      Divide by 10
      This is your target net worth
      November 9, 2010
      Money Rx
      Slide 10 of 20
    • Target Net Worth Illustration
      Assume Family Income of $70,700
      Assume 2% annual raises
      Saving 15.1% annually starting age 24
      Investments earning 7.5% annually
      November 9, 2010
      Money Rx
      Slide 11 of 20
    • What You’ll Earn
      November 9, 2010
      Money Rx
      Slide 12 of 20
    • Questions to Ask
      When do you want to retire?
      Where do you want to live after you retire?
      How much money will you need to have the type of life you want to lead?
      Who will share your retirement with you or otherwise depend on you financially?
      November 9, 2010
      Money Rx
      Slide 13 of 20
    • What You’ll Need to Save
      General rule of thumb for retirement expenses will be 60 to 80 percent of your pre-retirement income
      That means you’ll need to have $1,655,930 at the time you retire
      Must save $472,154 or an average of $14,755 per year (15.1%)
      November 9, 2010
      Money Rx
      Slide 14 of 20
    • People have peace of mind when spending 80% and saving 20% because
      their money is working for them, not the other way around
      November 9, 2010
      Money Rx
      Slide 15 of 20
    • Spending Plan Basics
      Setting up a spending plan
      Monitor expenses
      Mortgage payment, insurance and property taxes should not be more than 28 percent
      Maximum total monthly debt shouldn't be more than 36 percent
      November 9, 2010
      Money Rx
      Slide 16 of 20
    • Financial literacy isn’t just a matter of knowing what you have and knowing your options…
      It is a matter of planning for life’s milestones
      November 9, 2010
      Money Rx
      Slide 17 of 20
    • Seek Professional Guidance When:
      Getting married or divorced
      Having a baby or adopting a child
      Paying for your child's college education
      Buying or selling a business
      Changing jobs or careers
      Planning for retirement
      Developing an estate plan
      Coping with the death of your spouse
      Receiving an inheritance or a financial windfall
      November 9, 2010
      Money Rx
      Slide 18 of 20
    • Financial Literacy:
      Knowing what you need to know to achieve your financial goals
      November 9, 2010
      Money Rx
      Slide 19 of 20
    • Need More Information?
      Contact me: jlove@dkcpa.com or www.DKCPA.com
      www.ValueYourMoney.org – free TSCPA consumer website
      www.360financialliteracy.org – free AICPA consumer website
      November 9, 2010
      Money Rx
      Slide 20 of 20