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Building a Strong Financial House 4-29-2011
The document provides advice on building strong personal finances. It discusses five ways to handle money: earning, spending, saving, giving, and debt. It recommends developing a monthly budget to spend less than you earn, eliminating high-interest debt, and saving 3-6 months of living expenses as an emergency fund. The overall goal is to gain control over cash flow and implement a plan to meet long- and short-term financial objectives.
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Building a Strong Financial House 4-29-2011
- 1. Building a StrongFinancial House Tim Mooney
- 2. My Background… FormerBank Examiner. Fellow struggler with money. Non-Profit Financial Education Campaign Leader. My Passion… Financial Education. Connecting people with resources. My Day Job… Director of Graduate & Adult Degree Admissions for Corban University Tim Mooney
- 3.
- 4. Realities about MoneyMoney is a big part of life work housing college education healthcare insurance clothes groceries utility bills cars hobbies vacation children marriage investing divorce
- 5. Realities about MoneyHandling money is a struggle… With cultural messages: Things bring happiness. Just a little more money will solve all my problems. Buy now, worry about paying for it later.
- 6. Realities about MoneyHandling money is a struggle… With my own expectations: How well am I handling my money? What indicators would tell me? Five Ways to Handle Money
- 7. Realities about MoneyWhen “Life” happened… … my money was affected! Job changes Income Fluctuations Relationships Opportunities The Unexpected Happens
- 8. Realities about MoneyWhen “Life” happened… … I asked natural questions: Now what? How can I navigate through this? Will I come out of this in good shape? Make a plan and work it!
- 9. What are theFive Ways to Handle Money?
- 10. Five Ways toHandle Money Earning Spending Saving Giving Debt
- 11. Five Ways toHandle Money Earning Spending Saving Giving Debt
- 12. Five Ways: Earning Principle: Work is a healthy part of life Quality Issues: You enjoy what you do It fits you…the right mode Employee, Business Owner, Investor Mix of Income Streams Q: An opportunity to redefine yourself?
- 13. Five Ways: Earning Goal: Bring in more than you send out Quantity Issues: Need more income? How much is enough? How much for a realistic lifestyle? Q: Ready to do the work & find a right fit?
- 14. Five Ways: Earning Practical Tips: Variable Income Estimate annual income after-tax Divide by 12 to get monthly amount Avoid the trap of Take-Home Pay You can adjust taxes withheld to match estimated taxes owed. Track deductions like spending items
- 15. Five Ways: Earning Resources: Life Remix Network liferemix.net/blogs IDAK Group – CareerMatch idakgroup.com Further your education? Work and study at same time Online programs are very valid!
- 16. Five Ways toHandle Money Earning Spending Saving Giving Debt
- 17. Five Ways: Spending Principle: Spend to meet needs and approach contentment Fixed Expenses: Housing, Utilities Auto, Transportation, Parking Insurances: auto, life, health
- 18. Five Ways: Spending Variable Expenses: Gasoline, Maintenance & Repair Professional Services, Childcare Household or Personal Items Medical, Dental, Prescriptions Phones & Data Plans?
- 19. Five Ways: Spending Discretionary Expenses: Entertainment, Books, Subscriptions Clothing Cable TV, Internet Phones & Data Plans? Education
- 20. Five Ways: Spending Goal: Send out less than you bring in! Fixed : Lock in the lowest realistic costs. Variable : Push toward the predictable… estimate, track, adjust. Discretionary : Spend when you have it. Watch out for impulses.
- 21. Five Ways: Spending Practical Tips: Track your spending Set a Spending Plan See how you did at end of month Repeat…every month!
- 22. Five Ways: Spending Resources: Online Tools Mint.com Financial Software Quicken, TurboTax Internet Search… Simplicity Movement Couponing
- 23. Five Ways toHandle Money Earning Spending Saving Giving Debt
- 24. Five Ways: Saving Principle: Save wisely to build, preserve and invest. Benefits: Take advantage of time and money Leverage power of compounding Reinvestment: earnings that earn too
- 25. Five Ways: Saving Goal: Save with a purpose in mind Define your purpose(s): For what? By when? How much needed? Once reached, then what?
- 26. Five Ways: Saving Three Kinds of Saving: Emergency Replacement Long-Term
- 27. Five Ways toHandle Money Earning Spending Saving Giving Debt
- 28. Five Ways: Giving Principle: Give generously to help others…and yourself! Ways to Give: Money Stuff Assets Time Expertise
- 29. Five Ways: Giving Three Goals: Give something Give regularly Get started ASAP
- 30. Five Ways: Giving Practical Tips: Giving breaks the hold of money. It’s not about how much you give. Even if it’s a little, the gift matters. Give to what you are passionate about. Watch for how your gift is stewarded.
- 31. Five Ways: Giving Resources: Lots of Local Charities International Development Kiva.org charity: water Do your research! charitynavigator.org
- 32. Five Ways toHandle Money Earning Spending Saving Giving Debt
- 33. Five Ways: Debt Principle: Pay back what you borrow Kinds of Debt: Auto Home Mortgage Education Business Consumer (Credit Card)
- 34. Five Ways: Debt Principle: Enter into debt cautiously Caveats: Not all debt is bad…sensible purposes. Necessary purchases require more cash than normally available.
- 35. Five Ways: Debt Goal: Eliminate short-term, high-interest, consumer debt Tips & Rules: Limit to one credit card. Use a debit card linked to bank account. Use for items in Spending Plan. Pay balance in full each month. If you violate the rules, cut up the cards!
- 36. Make a Planand Work it! Building a Strong Financial House
- 37. A Strong FinancialHouse How do I practically put the Five Ways to Handle Money into action? What does a well-rounded financial life actually look like?
- 38. Building a StrongFinancial House Control Cash Flow Implement a Sequential Investment Strategy Plan Your Estate Manage Risks of Life
- 39. Charitable Giving ManageTaxes Utilize Monthly Budget to Spend Less Than You Make Channel the Excess Properly Eliminate Short-Term High-Interest Debt Set Aside 3-6 Months Living Expenses for Emergencies or Unexpected Needs Save for Planned Purchases of Major Items (House, Auto, Furniture) Accumulate Funds for Long-Term Goals (Education, Retirement) Select an Attorney Draft Your Wills Consider Need for Trusts or Other Options INCOME DISRUPTION Disability Insurance EARNING ABILITY Life Insurance PROPERTY LOSS Homeowner’s or Renter’s Insurance Control Cash Flow Building a Strong Financial House Implement a Sequential Investment Strategy Plan Your Estate Manage Risks of Life
- 40. Bringing it alltogether…How? Focus on your NEXT ACTION STEP Take setbacks as opportunities Be honest with yourself about money Effective money handlers are made, not born
- 41. Questions? Contact Tim:[email_address]
Editor's Notes
- #3 My Day Job….I’m not here to recruit
- #4 There are three realities about money we will start with. These are things I have dealt with in my own life. Share the story of my own financial journey and discoveries. Hope we all can learn something in the process.
- #5 Money is a big part of life Think about the things that are part of life: Work, housing, college education, healthcare, insurance, clothes, groceries, utility bills, cars, hobbies, vacation, children, marriage, investing, divorce Touch on every area of my life…that makes money very important.
- #6 Handling money is a struggle… … With messages from our culture: “ Things bring happiness” “ Just a little more money will solve all my problems” “ Buy now, worry about paying for it later” Advertising sends us potent messages: They tell us what their sponsors want us to do with our money If we handle money effectively, we are less susceptible
- #7 Handling money is a struggle… … With my own expectations. How well am I handling my money? What indicators would tell me? We will look at the Five Ways to Handle Money Talk about them objectively. Discuss how to evaluate them. Principles & goals for each.
- #8 When “Life” happened… … My money was affected! Job changes (unemployed, under-employed, well-compensated) Income fluctuations Relationships (break-ups, children born) Opportunities arise The Unexpected happens suddenly “ Life” has happened – or may happen – to me AND to you!
- #9 When “Life” happened… … I asked natural questions: Now what? How can I navigate through this? Is there a way to come out on the other side in healthy shape? ** And hope to come up with reasonable answers Make a plan and work it! Financial House as a framework for planning. Parts of your house to focus your strategy in the near term. Help make decisions when “Life” happens.
- #10 So, here is a key question….
- #13 EARNING - Principle …Work is a healthy part of life. Quality Issues: You enjoy what you do. It fits you. Employee, Business Owner, Investor Mix of Income Streams POINT: Opportunity to redefine yourself?
- #14 EARNING - Goal: Bring in more than you send out Quantity Issues: Need more income? How much is enough? Watch those cultural messages How much will it take for a realistic lifestyle? Research & experience for the right fit: Explore various modes Adjust the mix of income POINT: Ready to do the work to find a right fit?
- #15 EARNING - Practical Tips on Earning: Variable Income Estimate annual income after-tax Divide by 12 to get monthly “Pay” amount Avoid the trap of Take-Home Pay You can adjust taxes withheld to match estimated taxes owed. Track deductions like you would spending **You can’t adjust them if you don’t know about them!
- #18 SPENDING - Principle… Spend to meet needs and approach contentment Let’s think about the kinds of needs to spend on. Fixed… AMOUNTS DO NOT VARY PER MONTH…NOT MUCH CHOICE Housing, Utilities Auto, Transportation, Parking Insurances: auto, life, health
- #19 SPENDING - Variable… AMOUNTS CHANGE FROM MONTH TO MONTH…NOT MUCH CHOICE Gasoline, Maintenance & Repair Professional Services, Childcare Household or Personal Items Medical, Dental, Prescriptions Phones & Data Plans?
- #20 SPENDING - Discretionary… YOU CAN CHOICE WHEN AND HOW MUCH TO SPEND Entertainment, Books, Subscriptions Clothing Cable TV, Internet Phones & Data Plans? Education
- #21 SPENDING - Goal: Send out less than you bring in! STRATEGIES: Fixed…Lock in the lowest realistic costs Variable…Push variable toward the predictable…estimate, track, adjust Discretionary : Exercise TRUE discretion… Spend when you have it. Watch out for impulses.
- #22 SPENDING - Practical Tips on Spending: Track your spending Keep records. Use what works for you…online tools or software, a manual system, cash envelopes. Check your bank records at least twice per month!! Set a Spending Plan Better than “Monthly Budget” (diet?) Balance it each month…or shoot for that goal See how you did at end of month Tally it up in a simple report Share it with someone for accountability (spouse, roommmate) Repeat…every month!
- #25 Compound Interest Example: $100 @ 10% = $10 interest $110 @ 10% = $11 interest $100 per month accumulates $1,200 per year Over 20 years to $24,000 total Over 40 years = $48,000 total $100 invested each month @ 10% over 20 years = $76,500 Over 40 years = $637,000 Compound interest produces gain of $589,000 ** Still a good deal even if you don’t have 20 or 40 years until retirement!
- #35 CAVEAT… Not all debt is bad…some makes sense…. To purchase something that increases in value. To invest in a business or investment that will pay you back. 3. Student loans for higher education (in reasonable amounts) are “sensible” Earning power increase means the education pays you back. Necessary purchases require more cash than normally available. Home purchases Automobiles (but not necessarily pre-owned)
- #38 FINALLY, you are probably wondering . . . How do I practically put the Five Ways to Handle Money into action? What does a well-rounded financial life actually look like? I have asked those same questions AND put together a model to help you make practical application NEXT SLIDE
- #39 Building a Strong Financial House What is this good for? Model is a snapshot of a well-rounded life according to sound financial principles. Also can be used as a step-by-step guide for “putting your financial house in order” READ SEGMENTS FOCUS ON FOUNDATION KEEP UPPER LEVELS IN MIND AS YOU ARE READY FOR THEM
- #40 Caveats: Not everyone’s house will look the same! We all start to build our financial house at different places. Don’t try all of these at once! Start with the foundation and build from there. If your house is already messy, don’t give up! You can put it back together with some work and commitment.
- #41 Ten years ago, my wife Angela and I began discovering many of the things I talked about tonight. We have experienced the ups and downs that most people go through when they get serious about this. I began to wonder what made the difference between KNOWING the right things to do and actually DOING them in a faithful. I believe I know the key. . Truly sensing love from God will inspire action It is in having a compelling reason for doing the things we have discussed. Let me explain. . . In 2002, my wife Angela and I traveled to a province in the northwestern part of the country of China. We visited the main city in that region and got to visit several universities and learn about Chinese culture. (I highly recommend it!) One afternoon we climbed up the side of a mountain to a Buddhist shrine and looked out over that city of almost 3 million people. Here’s what it looked like [picture]
- #42 So, here is a key question….