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Money RX
Your Prescription for Sound
Financial Health
Jerry Love, CPA/PFS, CFP
AICPA Personal Financial Planning
Executive...
Starting at the End
• “Let’s start with the end in
mind.” -Steven Covey
• For most people, that’s
retirement
November 9, 2...
America’s Financial Literacy
• The average American family spends $1.22 for every dollar
it earns
• One in five American f...
The Problem
• Average per household debt in the U.S., not
counting mortgage or debt on cars, is about
$14,500
• A typical ...
Living Paycheck to Paycheck
• Some 40 percent of American families annually
spend more than they earn
• The average colleg...
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 ...
A Sound Financial Plan Helps You…
• Be in control so you can:
– Pay down debt
– Budget (spend less than you earn)
– Establ...
THE PROVERBIAL CARROT
DANGLING IN FRONT OF US
Comfortable retirement is like…
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
– Divid...
Target Net Worth Illustration
• Assume Family Income
of $70,700
• Assume 2% annual raises
• Saving 15.1% annually
starting...
What You’ll Earn
November 9, 2010 Money Rx
Saving 15.1%
each year
will fund it
with:
•$1,657,930 at 55
•$3,736,679 at 65
R...
Questions to Ask
• When do you want to retire?
• Where do you want to live after you retire?
• How much money will you nee...
What You’ll Need to Save
• General rule of thumb for retirement expenses
will be 60 to 80 percent of your pre-retirement
i...
THEIR MONEY IS WORKING
FOR THEM, NOT THE
OTHER WAY AROUND
People have peace of mind when
spending 80% and saving 20% becau...
Spending Plan Basics
• Setting up a spending plan
• Monitor expenses
• Mortgage payment, insurance and property
taxes shou...
IT IS A MATTER OF
PLANNING FOR LIFE’S
MILESTONES
Financial literacy isn’t just a matter of knowing
what you have and knowi...
Seek Professional Guidance When:
• Getting married or divorced
• Having a baby or adopting a child
• Paying for your child...
KNOWING WHAT YOU
NEED TO KNOW TO ACHIEVE
YOUR FINANCIAL GOALS
Financial Literacy:
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 websi...
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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.

Published in: Economy & Finance, Business
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Transcript of "Money Rx: Your Prescription to Sound Financial Health"

  1. 1. Money RX Your Prescription for Sound Financial Health Jerry Love, CPA/PFS, CFP AICPA Personal Financial Planning Executive Committee
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. You must understand… YOU CAN BORROW MORE MONEY THAN YOU CAN AFFORD TO REPAY November 9, 2010 Money Rx Slide 6 of 20
  7. 7. 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
  8. 8. 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
  9. 9. THE PROVERBIAL CARROT DANGLING IN FRONT OF US Comfortable retirement is like… November 9, 2010 Money Rx Slide 9 of 20
  10. 10. 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
  11. 11. 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 $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 $4,000,000 Age 35 Age 45 Age 50 Age 55 Age 65 Net Worth Slide 11 of 20
  12. 12. What You’ll Earn November 9, 2010 Money Rx Saving 15.1% each year will fund it with: •$1,657,930 at 55 •$3,736,679 at 65 Retire at 55 •Family income of $130,625 the year before retirement •Need $5,261,978 for 33 years of retirement (w/o Social Security) Start career at 24 •Earn $3,126,851 over 32 years Slide 12 of 20
  13. 13. 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
  14. 14. 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
  15. 15. THEIR MONEY IS WORKING FOR THEM, NOT THE OTHER WAY AROUND People have peace of mind when spending 80% and saving 20% because November 9, 2010 Money Rx Slide 15 of 20
  16. 16. 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
  17. 17. IT IS A MATTER OF PLANNING FOR LIFE’S MILESTONES Financial literacy isn’t just a matter of knowing what you have and knowing your options… November 9, 2010 Money Rx Slide 17 of 20
  18. 18. 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
  19. 19. KNOWING WHAT YOU NEED TO KNOW TO ACHIEVE YOUR FINANCIAL GOALS Financial Literacy: November 9, 2010 Money Rx Slide 19 of 20
  20. 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
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