1. Investing Fundamentals
Budget bootcamp
whip your finances into shape!
Investing Fundamentals

2. THE PROBLEM
Client: I’m trying to plan for retirement. How much do I need to save?
Advisor: No problem. Just tell me when you’re going to die.

3. Retirement Steps Where will I get money to live through retirement?1
Account for all sources 2
How much do I need?
Your Number
How much do I need to save each month to get there? 3
What’s in your control 4
Where do I save it?
IRAs, 401(k) / 403(b), Roth, Traditional

4. + Withdrawal from savings = Your retirement monthly income1
Where will you get the money?
+ Income / Wages
+ Social Security
+ Pension
+ Withdrawal from savings
= Your retirement monthly income
Source: Dalton, Retirement Planning and Employee Benefits, SmartPath Analysis

5. A word on social security…1
A word on social security…
Source: Dalton, Retirement Planning and Employee Benefits, SmartPath Analysis 5

6. How much will you need? 2 Monthly spend in retirement $3,000
(less) Social Security
($1,800)
GAP
$1,200
$______
$1200 per month

7. 4% How much will you need? Gap $1,200 per month x 12 months/year
$360,000
$______
$1200 per month 4%
Gap $1,200 per month
x 12 months/year
Gap $14,400 per year
= $360,000 4%

8. 3
So how much each month?
20%

9. You have options.. What can you do? Increase savings (fuel)
Reduce standard of living (today and in future)
Build passive income
Manage health
Plan, adjust, plan
$360,000
Today

10. ….and be smart about investments
(1) Which type of retirement account?
(2) Which investments are best for you?
Employer Plan vs. IRA
Roth vs. Traditional
Safe vs. Risky
Fees

11. 401(K) Investment Steps Decide on how much ‘risk’ you can take
Prepare
Get risk level for each fund 2
Get fees for each fund 3
Select your investments 4
Execute
Buy monthly 5
Review annually 6 11

12. [Your Age] = % in safer stuff1
How much can you risk?
Take risks, let it grow
Balance yourself, protect with growth
Lock in security, protect your assets
[Your Age] = % in safer stuff

13. Adjust to your life More Conservative More Aggressive1
Adjust to your life
More Conservative
More Aggressive
Significant retirement savings (beyond what you need)
Ability to pass to future generations
Other, defined sources of retirement income
You may need the money sooner than retirement
Limited safety nets (family and personal)
Can’t sleep at night

14. 401(K) Investment Steps Decide on how much ‘risk’ you can take
Prepare
Get risk level for each fund 2
Get fees for each fund 3
Select your investments 4
Execute
Buy monthly 5
Review annually 6 14

15. What is TRRBX??

16. 60% Stock, 40% Bond Mutual funds are diversified Stock Bond2
LMAO Stock
BYOR Stock
Stock
Bond
THX Stock
OMG Stock
OMG Stock
BYOB Bond
LOL Bond
BYOB Bond
TBT Bond
NP Stock
AT Stock
ABC Bond
Mutual Fund
60% Stock, 40% Bond 16 16
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17. 2
Diversification rules
We are the last Dodos on the planet, so I’ve put all of our eggs safely into this basket 17 17
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18. Enter Fund 5 Letter Symbol18
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19. Risky = US Stock + Non US Stock + Other
See Allocations
Safe = Cash + Bond
Risky = US Stock + Non US Stock + Other 19
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20. 401(K) Investment Steps Decide on how much ‘risk’ you can take
Prepare
Get risk level for each fund 2
Get fees for each fund 3
Select your investments 4
Execute
Buy monthly 5
Review annually 6 20

21. Enter Fund 5 Letter Symbol
See Fees 21
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22. ~$128,000 Fees matter Broker Fees (Load) Management Fees (% of Assets)3
Fees matter
30 yrs old
Invests $1,000 in each of 2 identical funds
Broker Fees (Load)
Funds 1 fees = 1.15%, Fund 2 fees = .65%
Return on the funds is 6%
Management Fees (% of Assets)
~$128,000
Trading Fees
Administrative fees 22 22
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23. 401(K) Investment Steps Decide on how much ‘risk’ you can take
Prepare
Get risk level for each fund 2
Get fees for each fund 3
Select your investments 4
Execute
Buy monthly 5
Review annually 6 23

24. What are her current investments and risk level?4
Start with where you are today
40 yr old woman investing for retirement
Fund
Amount
FKTHX (Fidelity Freedom 2035)
$10,000
VTINX (Vanguard Target Retire Inc.)
$20,000
Total
$30,000
What are her current investments and risk level? 24 24
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25. Start with where you are today4
Start with where you are today
40 yr old woman investing for retirement
Amount
Risky
Safe
FKTHX
(Fidelity Freedom 2035)
$10,000
90%
10%
$9,000
$1,000
VTINX
(Vanguard Target Retirement Inc.)
$20,000
30%
70%
$6,000
$14,000
TOTAL PORTFOLIO
$30,000
50%
50%
$15,000
$15,000 25 25
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26. Adjust 40 yr old woman investing for retirement If you’re too risky….
If you’re too safe….
Adjust the investments
Put future money into safer investments
Adjust the investments
Put future money into riskier investments

27. Target date funds get safer as you get older4
Target Date Funds (Lifecycle Funds)
Fidelity Freedom 2035  for someone retiring in 2035
Young
More stocks,
Less bonds/cash
Target date funds get safer as you get older
Older
Less stocks,
More bonds/cash

28. Know your investments!! But they’re not all made ‘alike’4
But they’re not all made ‘alike’
Fidelity Freedom 2035
Wells Fargo Target 2035
Safe
Safe
Risky
Risky
Know your investments!!

29. 401(K) Investment Steps Decide on how much ‘risk’ you can take
Prepare
Get risk level for each fund 2
Get fees for each fund 3
Select your investments 4
Execute
Buy monthly (you’re already doing this) 5
Review annually 6 29

30. Dollar Cost Average – Buy each month and hold for the long term5
Stop timing, buy every month
Dollar Cost Average – Buy each month and hold for the long term
(P.S. You’re already doing this if you’re contributing to retirement)

31. 401(K) Investment Steps Decide on how much ‘risk’ you can take
Prepare
Get risk level for each fund 2
Get fees for each fund 3
Select your investments 4
Execute
Buy monthly (you’re already doing this) 5
Review annually 6 31

32. Consider this….
“If investing is entertaining, if you’re having fun, you’re probably not making any money. Good investing is boring.”
– George Soros 32 32
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33. FUEL: THE MOST IMPORTANT NUMBER
Ask for additional ‘ground rules’

34. FUEL over Year

35. FUEL over Lifetime

36. THE 7-TANK SYSTEM What do you do with your financial fuel?1
Retirement Match 2
1-Month Emergency Fund 3
Payoff Bad Debt 4
3-6 Month Emergency Fund 5
20% Gross to Retirement 6
Children’s College Savings* 7
Bucket List*

37. MARY WESTING What should she do? Scenario Age 34, single
Income - $60,000 / year
Total student loans - $53,000
What should she do?
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38. GOALS Pay the lowest cost (monthly and/or overall)
Scenario
GOALS
Pay the lowest cost (monthly and/or overall)
Maintain flexibility
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39. Find out what you have Student loan strategy Federal vs. Private
Type (Private/ Federal)
Outstanding Balance
Interest Rate
Payments
# of Months
Total cost of loan
Great Lakes (federal)
$16,000
6.8%
$215
116
$26,100
Navient (Federal)
$22,000
$307
100
$30,700
Sallie Mae (Private)
$15,000 5%
$318 60
$19,100
Federal vs. Private
Outstanding Balance
Interest Rate
Payment and # of months
Total cost of the loan

40. Your Options 1 2 3 4 5 5-7 years post residency Residency Long term
Standard Repayment (10 years)
Debt Free 2
IBR / PAYE
Standard +
Debt Free 3
IBR / PAYE (10 yrs + Nonprofit)
PSLF 4
IBR / PAYE (20-25 years)
Loan Forgive 5
Forbearance
Standard +
Debt Free

41. Total Cost (Monthly Payment * # of months)
Consolidations and Refis
Lower Costs
Maintain Flexibility
Monthly Payment
Federal
and/or
vs.
Total Cost (Monthly Payment * # of months)
Private

42. Lowering Costs Do you need? Can you afford? Higher Lower Lower Higher
Change in Total Cost
Can you afford?
Lower
Lower
Higher
Change in Payment

43. Maintain Flexibility Federal Private Repayment options
Deferment / Forbearance
Forgiveness
Varies by lender
Maybe lower interest rate (see costs)

44. Your Options Lower Month Lower Total Cost Maintain Flexibility
IBR / PAYE
Consolidation (Fed to fed)
Consolidation (private to private)
Consolidation (Fed to private)
Deferment / Forbearance
Use another loan (e.g. home equity)
Only with forgiveness
Varies
Varies
Varies
Varies
Varies

45. Map it out…
2017
2018
2019
2020
2021
2022
Take home pay (after retirement)
$3,100
(less) Student loan
($500)
= my living expenses
$2,600
Map for different repayment options
Show total paid, total interest and total forgiven
See what’s possible with your living expenses (and live within those means)

46. AGENDA A 7 Step Strategy for your money
Student Loans: It Was Worth It!
Credit: Bad Credit it Good
Retirement: What’s My Number
Investing: KISS
Homeownership: The Cash Black Hole

47. EFX, TU, EXP, your new best friends
Credit Report
Credit Score
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48. DRIVERS OF YOUR CREDIT SCORE
New credit applications
Mix of credit
Bill payment
Length of credit history
Your credit score is a measure of ‘risk’ for the lender. It’s not personal.
Credit usage
Source: myFICO.com, vantagescore.com
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49. CREDIT UTILIZATION GOAL Lisa Alex <$1,500 $1,000 $4,000 $5,000
Outstanding Balance
<$1,500
$1,000
$4,000
$5,000
$5,000
Credit limit
(on credit cards)
$5,000
Credit usage ratio
<30%
20%
80%
Higher = More Risky

50. CREDIT SCORES Remember….
Your score is based on your credit report. If the report has inaccuracies, so will your score.
Scores have ‘reason codes’ that will help you understand the drivers of your score and how you can improve it.
Your credit score is about your past – you only have control over your future.
850
Excellent
Good
Fair
Bad
Very Bad
300
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