The Advantages of Budgeting Prepare for retirement … wisely

Helping You Reach Your Goals, Helping You Achieve Your Dreams

Some Budgeting Misconceptions Budgets are only for people in financial trouble. Budgets are only for people with fixed and low incomes. If I make enough money to pay my bills, I don’t need a budget. I should budget only if I’m planning a major purchase.

Your Budget is a Plan A savings plan A retirement plan An investment plan A spending plan

The Reasons for Budgeting More than just “cutting up the pie” –Increase predictability. –Maximize your financial worth. –Manage surprises when they happen. –Improve your standing with lenders.

Evaluate Your Income Wages/salary Income from self-employment Interest and dividends Alimony or child support

Fixed Expenses Which expenses are set in stone (more or less)? For example: Taxes Housing Utilities Insurance Automobiles Child care

Variable Expenses Which expenses change each time? For example: Food Clothing Furniture, appliances Gas, oil Entertainment Medical care Gifts Vacation Tuition Personal items

Doing the Math Compare your income vs. your expenses. –Surplus? –Deficit? –Both require budgets.

Assuming You Have a Surplus What do you do with it? Time to choose: Spend it. Save it. Invest it.

Making the Choice What do you do with it? Your decision depends on your goals. Having no concrete goals means it’s difficult to make smart budgeting decisions.

Setting Goals Short term –Within one year Intermediate –Within five years Long term –Five to 10 years and beyond

Taking Action Today Can Make Life Easier Tomorrow A nest egg requires many years to build. Your retirement could last more than 20 years.

Determine the Financial Impact of Your Goals Are your goals in sync with your income? Which goals will require the most money? When will you need the money? Which goals are most important to you?

Taking Action Maintain a weekly spending log. –Save receipts. –Note cash expenditures. –Record all checks and debit card transactions.

Taking Action Take inventory of your assets. –Cash/savings –Stocks, bonds, mutual funds –Home, car, etc. –Furnishings, antiques, jewelry, coins, etc. Should you use them to help fund your goals?

Taking Action Prioritize and categorize your expenses. –Which are unavoidable? –Which are luxuries? –Which are long term and/or short term? Make spending adjustments. –Which expenses can you eliminate? –Which expenses can you decrease?

Taking Action The Long-Term Value of Saving Today ExpenseGive up how often Monthly savings* Value if invested for 25 years** Dinner outOnce a week$100$95,102 Lunch outTwice a week $50$47,551 Coffee and bagelTwice a week $20$19,021 Vending machine soda Once a day$12$11,412 Movie ticketOnce a month $10$9,510 * Monthly costs are based on general averages. ** Source: Great-West Retirement Services, FOR ILLUSTRATIVE PURPOSES ONLY. This illustration is hypothetical and assumes an investment in a tax-deferred retirement account in which you earn an average annual rate of return equivalent to 8%, compounded monthly. Rates of return may vary. This hypothetical example is not based on (or predicting the performance of) any specific investment plan or savings strategy.

Taking Action Cost-cutting tips –Prepare foods ahead, such as soups and casseroles, and freeze them. –Leave the ATM card at home. –Brown-bag your lunch a couple days a week. –Shop for groceries with coupons and a list. –Skip menu beverages at restaurants; order water instead. –See an afternoon matinee instead of an evening movie. –Carpool to work. – or send letters to long-distance family and friends instead of calling.

Taking Action Identify and correct spending “leaks.” –Overbudgeting –Underbudgeting Reallocate income toward your priority items.

Taking Action Calculate your debt ratio. debts income = debt ratio Did you know? Mortgage lenders often look at 28% to 36% as maximum debt ratio, including housing costs. Source; Great-West Retirement Services ® is not responsible for, nor does it endorse the content contained in the additional Web sites provided. These Web sites are for general education and information only and are provided as a benefit to the users of the sites.

Taking Action To improve debt ratio: Increase your income. -or- Pay down credit card balances. Pay down loans. Pay more than the monthly minimum to reduce the principal.

Want Help? Online calculators * Access to the Web site may be limited or unavailable during periods of peak demand, market volatility, systems upgrades/maintenance or other reasons.

Questions? Representatives of GWFS Equities, Inc. are not registered investment advisers and cannot offer financial, legal or tax advice. Please consult with your financial planner, attorney and/or tax adviser as needed. Core securities (except the self-directed brokerage option), when offered, are offered through GWFS Equities, Inc., a wholly owned subsidiary of Great-West Life & Annuity Insurance Company. Great-West Retirement Services ® refers to products and services provided by Great-West Life & Annuity Insurance Company and its subsidiaries and affiliates. Great-West Retirement Services ® is a registered service mark of Great- West Life & Annuity Insurance Company. All rights reserved. Not for use in New York. ©2010 Great-West Life & Annuity Insurance Company. Form# CB1000_BP (5/10) PT

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