Career  Financial Planning
Objectives <ul><li>Annual Budget’s due </li></ul><ul><ul><li>Did you gain insight into more/less expenses you will encount...
A Billion is Chump Change Is turning down the money stupid or brave? <ul><li>Po walked away from a $300,000 salary offer s...
The Lockbox Fantasy Getting Rich Changes You <ul><li>Po describes people who wanted to get rich, then follow their dream. ...
How much is enough? <ul><li>“ Put your money where your values are”  </li></ul><ul><ul><ul><li>- David Bach, Finish Rich I...
The Value of Money Security Safety Prestige Belonging Accomplishment Power Self-esteem Comfort Acceptance Freedom Status L...
Goals <ul><li>Knowing your primary goals in life  (hopefully determined by your values)  can help you determine if somethi...
Live within your means <ul><li>The key principle to survive at any salary is to … spend less than you make! </li></ul>Woul...
Where can you cut today? <ul><ul><li>Keep track of where your money is going to help </li></ul></ul><ul><ul><li>determine ...
Are you thinking about your future?
Why start now? <ul><li>How many of you have an IRA or Roth now? </li></ul><ul><li>Who thinks it is too early to think abou...
Start early – get there quicker <ul><li>Compound Interest Example:  Invest $10 at 10% annual interest for 5 years </li></u...
Time Value of Money <ul><li>Susan  (10% return) </li></ul><ul><li>Age Invest Value </li></ul><ul><li>19 $3000 $3300 </li><...
Regular vs Retirement <ul><li>Regular account is taxable </li></ul><ul><li>Retirement account has tax benefits </li></ul><...
How to Invest Your Money <ul><li>Asset allocation  divides your money among different asset classes, according to your:  <...
Asset Classes <ul><li>Stocks  represent ownership of a company </li></ul><ul><ul><li>You receive part of the company’s pro...
Higher Risk = Higher Return <ul><li>As your level of risk increases, so does the variance of your portfolio </li></ul>Risk...
 
Mutual Funds <ul><li>A combination of stocks or bonds that diversify their portfolio with a variety of individual companie...
The Case for Diversification <ul><li>Diversification  is reducing risk by spreading around the investments </li></ul>Perfo...
401(k) Plan <ul><li>A type of employer-sponsored retirement plan </li></ul><ul><li>Works like an IRA where employee is abl...
Retirement Plan  Withdrawals <ul><li>If you leave the company, you may transfer your 401(k) into an IRA without penalties ...
Retirement Plan  Matching <ul><li>An employer may  match  certain funds which are the employees to keep once  vested . </l...
Retirement Plan  Vesting <ul><li>Your money is always yours! </li></ul><ul><li>The money the company contributes is yours ...
Retirement Plan  Options <ul><li>Most plans are participant-directed allowing the employee to select from a number of inve...
Other Benefits <ul><li>Companies offer a variety of other benefits that are of value to an employee: </li></ul><ul><li>Sto...
For next week… <ul><li>Business Etiquette </li></ul><ul><li>Mock Interview due </li></ul>
Salary Negotiation <ul><li>Tom Halasz, Associate Director Career Resource Center </li></ul>
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Career Financial Planning

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Career Financial Planning

  1. 1. Career Financial Planning
  2. 2. Objectives <ul><li>Annual Budget’s due </li></ul><ul><ul><li>Did you gain insight into more/less expenses you will encounter in your future? </li></ul></ul><ul><li>Career Financial Planning </li></ul><ul><ul><li>Preparing for you financial future </li></ul></ul><ul><ul><li>Understanding retirement plans </li></ul></ul><ul><li>Guest Speaker Tom Halasz from the CRC </li></ul><ul><ul><li>Understanding the job offer process </li></ul></ul><ul><ul><li>Salary & benefits negotiation </li></ul></ul>
  3. 3. A Billion is Chump Change Is turning down the money stupid or brave? <ul><li>Po walked away from a $300,000 salary offer selling bonds, because he knew his calling was in writing. The other bondsmen stayed even if it wasn’t their calling. </li></ul><ul><li>“ Failure’s hard, but success is far more dangerous. If you’re successful at the wrong thing, the mix of praise and money and opportunity can lock you in forever. It is so, so much harder to leave a good thing.” </li></ul><ul><li>Have you ever stayed somewhere because you were good at it, even though you wanted something else? </li></ul><ul><li>Has high income been a distraction for you? </li></ul>
  4. 4. The Lockbox Fantasy Getting Rich Changes You <ul><li>Po describes people who wanted to get rich, then follow their dream. He ran across plenty of rich people, but they had become accustomed to their lifestyle. They dreamed about quitting and changing their life, but they couldn’t. They wanted the “golden key to unlock their golden handcuffs. No matter how much they earned, it was never quite enough to free them.” </li></ul><ul><li>Do you feel that it is better to make money, then follow your dream or go straight for your dream? </li></ul>
  5. 5. How much is enough? <ul><li>“ Put your money where your values are” </li></ul><ul><ul><ul><li>- David Bach, Finish Rich Inc. </li></ul></ul></ul><ul><li>Why is money important to you? </li></ul><ul><li>What does it represent? </li></ul><ul><li>What does it buy? </li></ul>
  6. 6. The Value of Money Security Safety Prestige Belonging Accomplishment Power Self-esteem Comfort Acceptance Freedom Status Love Confidence
  7. 7. Goals <ul><li>Knowing your primary goals in life (hopefully determined by your values) can help you determine if something is a necessity or a desire. </li></ul><ul><li>Spending on needs vs wants can help you attain your financial goals much faster. </li></ul>
  8. 8. Live within your means <ul><li>The key principle to survive at any salary is to … spend less than you make! </li></ul>Would you rather work harder to make more money or cut back on your expenses to afford your dream job now?
  9. 9. Where can you cut today? <ul><ul><li>Keep track of where your money is going to help </li></ul></ul><ul><ul><li>determine where you can cut back. </li></ul></ul><ul><ul><li>Saving $5 per day = $150 per month = $1,800 per year </li></ul></ul>
  10. 10. Are you thinking about your future?
  11. 11. Why start now? <ul><li>How many of you have an IRA or Roth now? </li></ul><ul><li>Who thinks it is too early to think about retirement? </li></ul><ul><li>Are you planning to retire or do you expect to work until you die to afford your expenses? </li></ul>
  12. 12. Start early – get there quicker <ul><li>Compound Interest Example: Invest $10 at 10% annual interest for 5 years </li></ul><ul><li> Year Invest Interest Value </li></ul><ul><li>1 $100 $10 $110 </li></ul><ul><li>2 $11 $121.00 </li></ul><ul><li>3 $12.10 $133.10 </li></ul><ul><li>4 $13.30 $146.40 </li></ul><ul><li>5 $14.60 $161.00 </li></ul><ul><li>Now imagine if you added a few zeros or continued to invest additional money! </li></ul>
  13. 13. Time Value of Money <ul><li>Susan (10% return) </li></ul><ul><li>Age Invest Value </li></ul><ul><li>19 $3000 $3300 </li></ul><ul><li>… $3000 </li></ul><ul><li>27 $ 0 $41,512 </li></ul><ul><li>… $ 0 </li></ul><ul><li>65 $ 0 $1.55 mil </li></ul><ul><li>Total $21,000 invested </li></ul><ul><li>x 73.8 </li></ul>Kim (10% return) Age Invest Value 19 $0 $0 … $0 27 $3000 $3300 … $3000 65 $3000 $1.32 mil Total $114,000 invested x 11.6 It’s about time in the market, not timing the market!
  14. 14. Regular vs Retirement <ul><li>Regular account is taxable </li></ul><ul><li>Retirement account has tax benefits </li></ul><ul><ul><li>IRA and 401(k) are not taxed until money is withdrawn at retirement. </li></ul></ul><ul><ul><li>Roth is taxed before money is invested, but the growth is not taxed. Withdrawn tax-free. </li></ul></ul><ul><li>Both are invested in the same ways with stocks, bonds, mutual funds or other types of investments </li></ul>
  15. 15. How to Invest Your Money <ul><li>Asset allocation divides your money among different asset classes, according to your: </li></ul><ul><ul><li>Objectives (i.e. retirement, buying a home) </li></ul></ul><ul><ul><li>Time horizon (1, 5, 10 or 20 years) </li></ul></ul><ul><ul><li>Risk tolerance (high, medium, low) </li></ul></ul>
  16. 16. Asset Classes <ul><li>Stocks represent ownership of a company </li></ul><ul><ul><li>You receive part of the company’s profits (dividends) </li></ul></ul><ul><ul><li>As the value of the company increases or decreases, so does the value of your stock (just like owning a home) </li></ul></ul><ul><ul><li>Much more volatile, so they provide a greater return </li></ul></ul><ul><li>Bonds represent loans to a company </li></ul><ul><ul><li>Issuer promises to pay you a fixed rate of return (interest) </li></ul></ul><ul><ul><li>When the bond matures, you get back your principal plus interest </li></ul></ul><ul><ul><li>Less risky so they offer a lower return </li></ul></ul><ul><li>Cash equivalents are conservative and safe investments </li></ul><ul><ul><li>They offer high liquidity (easy access to money) </li></ul></ul><ul><ul><li>They are extremely low risk and offer very little return </li></ul></ul>
  17. 17. Higher Risk = Higher Return <ul><li>As your level of risk increases, so does the variance of your portfolio </li></ul>Riskier Safer inflation risk Money Market Savings Checking Cash Cash inflation risk Specialty City (Municipal) State Federal Bonds volatility risk Int’l Small Cap Mid Cap Large Cap Stocks
  18. 19. Mutual Funds <ul><li>A combination of stocks or bonds that diversify their portfolio with a variety of individual companies </li></ul>Small Mid X Large Growth Value
  19. 20. The Case for Diversification <ul><li>Diversification is reducing risk by spreading around the investments </li></ul>Performance
  20. 21. 401(k) Plan <ul><li>A type of employer-sponsored retirement plan </li></ul><ul><li>Works like an IRA where employee is able to put aside income and deferring taxes until withdrawal and select from a variety of investment options </li></ul><ul><li>You can join the plan during enrollment which is usually once per quarter. </li></ul><ul><li>Other salary-deferral retirement plans include: </li></ul><ul><ul><li>403(b) for educational, religious or non-profit organizations </li></ul></ul><ul><ul><li>457 plans for state and local government employees </li></ul></ul>
  21. 22. Retirement Plan Withdrawals <ul><li>If you leave the company, you may transfer your 401(k) into an IRA without penalties or you may withdraw your money for the following reasons: </li></ul><ul><ul><li>Retirement (age 59½) </li></ul></ul><ul><ul><li>Disability or Death </li></ul></ul><ul><ul><li>Financial hardship “immediate and severe financial need” for: </li></ul></ul><ul><ul><ul><li>College education </li></ul></ul></ul><ul><ul><ul><li>Purchase of primary residence </li></ul></ul></ul><ul><ul><ul><li>Prevention of eviction or foreclosure </li></ul></ul></ul><ul><ul><ul><li>Medical expenses </li></ul></ul></ul><ul><li>Withdrawing money before the age of 59½ subjects you to a 10% penalty tax in addition to the ordinary income tax already taken upon withdrawal </li></ul>
  22. 23. Retirement Plan Matching <ul><li>An employer may match certain funds which are the employees to keep once vested . </li></ul><ul><li>Example: Income of $100,000 per year </li></ul><ul><ul><li>the company will match a max of 5% ($5,000) per year </li></ul></ul><ul><ul><li>If they will match up to 20% of your contributions, you must put in $2083 per month to receive the company’s max contribution: </li></ul></ul><ul><ul><ul><li>$2083.33 (per month) * 20% = $416.67 * 12 (months) = $5,000 </li></ul></ul></ul>
  23. 24. Retirement Plan Vesting <ul><li>Your money is always yours! </li></ul><ul><li>The money the company contributes is yours based on their vesting schedule </li></ul>
  24. 25. Retirement Plan Options <ul><li>Most plans are participant-directed allowing the employee to select from a number of investment options, usually mutual funds or company stock </li></ul>
  25. 26. Other Benefits <ul><li>Companies offer a variety of other benefits that are of value to an employee: </li></ul><ul><li>Stock options </li></ul><ul><li>Health insurance </li></ul><ul><li>Life insurance </li></ul><ul><li>Vacation, Sick leave, Time off </li></ul><ul><li>Flextime </li></ul><ul><li>Performance-based Bonuses </li></ul><ul><li>Child Care Assistance </li></ul><ul><li>Tuition Reimbursement </li></ul><ul><li>Relocation Benefits </li></ul><ul><li>Signing Bonuses </li></ul><ul><li>Expense Account </li></ul><ul><li>Salary Reviews </li></ul><ul><li>Parking </li></ul>
  26. 27. For next week… <ul><li>Business Etiquette </li></ul><ul><li>Mock Interview due </li></ul>
  27. 28. Salary Negotiation <ul><li>Tom Halasz, Associate Director Career Resource Center </li></ul>

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