1. Planning for the long-term
Personal Finance
Planning for the long-term

2. Key Questions

4. Strategic Planning

5. Investment Vehicles Individual Retirement Accounts
Simplified Employee Pension (SEP)
Traditional
Roth
”Qualified” Retirement Plans
401(k)
403(b)
457(b)
Defined Benefit Plans
AKA pensions

6. Defined Contribution Plans
401(k)
Anyone employed by a nonprofit (public) school
Employees of private, for-profit companies
Local and State government employees

7. Individual Retirement Accounts
Traditional IRA
Contributions are deductible from taxable income
Contributions and interest grow tax-deferred
Good choice if you expect to be in a lower tax bracket when you retire
Roth IRA
Contributions NOT tax deductible
Contributions and interest grow tax free

8. Investing is more than the stock market

9. Buying a house
Purchasing a home is one of most important investment decisions most of us will make
Rent or own?
Owning builds equity over time (decades), but initially most of payment is interest cost
How long will you live there?
Rule of thumb: you need to live in a house at least three years to break even
How much can you afford to put down?
Today you can get mortgages with zero down. Don’t!!!
Save until you can put 20% down
Better interest rate
Won’t have to pay primary mortgage insurance (PMI)

10. Buying a House (cont) Don’t forget other costs Don’t erode equity!
Property taxes
Insurance (mandatory)
Maintenance costs
Don’t erode equity!
Do not take out a second mortgage or borrow against the equity in your house to improve your lifestyle

11. Value of education

12. Investment SMarts If it looks too good to be true, it is
Only deal with legitimate, respected parties
Never purchase an investment solicited by phone or
Don’t let yourself be forced into quick decisions
Don’t let friendships influence investment decisions
Never, never listen to high-pressure marketing

13. Using Insurance to Manage Risk

14. Life involves risk Insurance can protect us from financial loss
Risk makes us decide whether to get insurance (and how much)
Risk is also what insurance companies use to decide whether to offer insurance and how much they will charge
Insurance is a legal contract that transfers the risk from a policy older to an insurance provider

15. Why is it important to have insurance?
Helps limit financial losses when an accident occurs
Helps an individual/family be prepared for the unexpected
Plays a large role in most financial management plans

16. Types of insurance Homeowners (or renters) Auto Life Medical/Dental
Liability
Long-term Care
Travel
Pet
Etc.

17. Good decision or bad?
Insure against events that would impose severe financial hardship
Life
Traditional
Term
Health
Long-term Disability
Auto
Other types may or may not make financial sense
E.g. extended warranties, liability, long-term care