1. Building Your Financial House WELCOME !

2. Program Objectives Become more comfortable talking about money issues
Identify the Framework for Building Your Financial House
Walk away with facts and skills needed to build your financial house
Gain confidence to make good money choices for your situation
Be in a better position for long-term financial stability and success.
Module 5: Make Money Work

3. Modules 1. Invest in Yourself 2. Maximize Earnings 3. Spend Sensibly
4. Check Taxes
5. Make Money Work
6. Protect Your Potential
7. Borrow to Grow
Module 5: Make Money Work

4. Recap: Check Taxes Last time, we talked about:
The value in good record keeping
Key components of a tax return
Differences between total and taxable income; total tax and withholding
Recipes for tax refunds
Differences between tax preparers
Module 5: Make Money Work

5. Do You Have a Goal?
Module 4: Check Taxes (PAGE CT-3)

6. Did You Practice?
Module 4: Check Taxes

7. Did You Learn More?
Module 4: Check Taxes (PAGE CT-23)

8. Did You Take Action?
Module 4: Check Taxes

9. Module 5
Make Money Work
Module 5: Make Money Work

10. 5
Make Money Work
Much like adding an extra room in the attic, you can expand your financial house by making your money work for you through saving, investing, and monitoring what you own.
Adrian
Review where this module fits within the Framework for Building Your Financial House.
-Next-

11. Self-Assessment
Module 5: Make Money Work (PAGE MMW-3)

12. Objectives Knowledge Actions Differentiate between working and wealth
Recognize growing money starts with saving money
Identify the power of compounding and time when building assets
Distinguish between types of assets, their uses, risks, and costs
Recognize net worth as a measure of wealth
Pay yourself first
Save early, save often and reinvest
Assess an asset’s use, expectations, pros and cons when making an investing choice
Calculate net worth and monitor ownership
Module 5: Make Money Work

13. Invest, Investing, Investment
Word Gallery
Invest, Investing, Investment
Module 5: Make Money Work

14. YOUR MONEY Working Hard
Cash-in
Working
(Employment)
Wealth
(Ownership)
SAVE and INVEST
YOU
Working Hard
YOUR MONEY Working Hard
Module 5: Make Money Work (PAGE MMW-5)

15. is to set aside cash for a future use.
To Save…
is to set aside cash for a future use.
STASH YOUR CASH
Use now
Liquid (turned into cash quickly)
Safe (no loss, guaranteed)
Earns little interest
Module 5: Make Money Work (PAGE MMW-6)

16. To Invest…
is to use saved cash to buy assets that build wealth and future income.
BUILD ASSETS
Use in the future (two years +)
Less liquid (harder to turn into cash quickly)
Some risks (may lose, no guarantee)
Future income or profit
Module 5: Make Money Work (PAGE MMW-6)

17. The First Step… DECIDE SAVING IS POSSIBLE, and
MAKE THE COMMITMENT TO SAVE!
Module 5: Make Money Work (PAGE MMW-7)

18. 3. No Amount Too Small 2. Pay Yourself First The Commitment to Save
1. It’s Necessary
2. Pay Yourself First
3. No Amount Too Small
Module 5: Make Money Work (PAGE MMW-7)

19. Side Bar: Saving Spending Leaks!
It’s only (a $2.00) cup of coffee…
1 week = $10
1 month = $44
1 year = $520
5 years = $2,600
10 years = $5,200
20 years = $10,400
Module 5: Make Money Work

20. Where to Stash Your Cash
Financial Institutions:
Safe/guaranteed
Liquid
Low interest earned
Module 5: Make Money Work (PAGE MMW-8)

21. Where to Stash Your Cash
Savings account
Money market deposit account
Certificate of deposit (CD)
Savings Money Market Certificate
Account Deposit Account of Deposit
Module 5: Make Money Work (PAGE MMW-8)

22. Rules for Building Assets
Start Early- take advantage of the time value of money
Stay Invested-take advantage of compounding interest
Diversify-mix it up and build a variety of assets
Module 5: Make Money Work (PAGE MMW-10)

23. Time Value of Money $ 87,275 $ 8,651 $698,200 $69,208 Age 25 30 40 50
Monthly
Amount Invested
Age 25 30 40 50
$ 25
$ 87,275
$ 57,347
$ 23,776
$ 8,651
$100
$349,100
$229,388
$95,105
$34,604
$200
$698,200
$458,776
$190,208
$69,208
$ 87,275
$ 8,651
$698,200
$69,208
This time value of money illustration assumes an average annual return of 8%.
Module 5: Make Money Work

24. The Cost of Waiting 55 yrs old $1325/month = $250,000 45 yrs old
This time value of money illustration assumes an average annual return of 7%.
Module 5: Make Money Work (PAGE MMW-12)

25. The One Tree Forest 8 + 8 = 16 Year One Year Two Year Three 4 + 4 = 8
Year Four
= 2
Tree Seed Trees
= 4
Trees Seeds Trees
= 8
Trees Seeds Trees =
Trees Seeds Trees
Module 5: Make Money Work (PAGE MMW-13)

26. Stay Invested. It Pays! Interest Simple Compound $464 Y-One Y-Two
Y-Three
Y-Four
= $100
= $ $400
= $100
= $110
= $121
= $133
$464
Module 5: Make Money Work (PAGE MMW-13)

27. Diversify-Mix It Up Financial Real property Personal property
Small business
Module 5: Make Money Work (PAGE MMW-14)

28. Why Diversify? ≠
What if … NO
Module 5: Make Money

29. Financial Assets
Module 5: Make Money Work

30. Case Study (Page 24) Module 5: Make Money Work
BYFH – Spend Sensibly (2016)

31. Role Play: Investing in Anna
Module 5: Make Money Work

32. Taking the Fear Out of Financial Assets - Stocks
1 Saver has cash and wants to make it work.
2 Company needs cash to make their product.
CASH
STOCK
Module 5: Make Money Work (PAGE MMW-15)

33. Taking the Fear Out of Financial Assets - Stocks$0
Pays No Dividend
Pays Dividend
Sell for Profit
Sell for Loss
Module 5: Make Money Work (PAGE MMW-15)

34. Taking the Fear Out of Financial Assets - Bonds
1 Saver has cash and wants to make it work.
2 City needs cash to build a museum.
CASH
Bond
Module 5: Make Money Work (PAGE MMW-16)

35. Taking the Fear Out of Financial Assets - Bonds$0
Pays No Interest
Pays Interest
Loan Repaid
Loan Not Repaid
Module 5: Make Money Work (PAGE MMW-16)

36. Taking the Fear Out of Financial Assets – Mutual Funds
1 Savers have cash and wants to make it work. They don’t want to choose stocks and bonds
2 Money manager can choose stocks and bonds.
CASH
Shares
Module 5: Make Money Work (PAGE MMW-17)

37. Taking the Fear Out of Financial Assets – Mutual Funds
Pays Interest
and Dividends
Pays No Interest
or Dividends
Sell for Profit
Sell for Loss
Module 5: Make Money Work (PAGE MMW-17)

38. How do I choose? Eeny, meeny, miny, moe…. Module 5: Make Money Work
Script
Now that you know how your money values may influence your spending, ultimately, it’s still your choice to spend or not to spend on any particular thing.
Click
So, how can we make sensible spending decisions?
Eeny, meeny, miny, moe is probably not the best method to make spending choices!
-Next-
Module 5: Make Money Work

39. Investing Strategies OBJECTIVE RISK TIME
Asset allocation by using Model Portfolios
ING Description
Module 5: Make Money Work (PAGE MMW-18)

40. Investing Strategies ∙Sell for profit ∙Guaranteed value ∙Cash payments
OBJECTIVE
∙Guaranteed value
∙Cash payments
∙Sell for profit
Asset allocation by using Model Portfolios
ING Description
Module 5: Make Money Work

41. Investing Strategies TIME Short-term: less than one year
Medium-term: two – five years
Long-term: five years +
TIME
Asset allocation by using Model Portfolios
ING Description
Module 5: Make Money Work

42. Investing Strategies RISK Market Risk – “follow the leader”
Company Risk –
“one bad apple”
Liquidity Risk –
“get cash now”
Inflation Risk –
“worth less” dollars
RISK
Asset allocation by using Model Portfolios
ING Description
Module 5: Make Money Work

43. If You Invested $100 in 1980… $3,220 $1,405 $616
Module 5: Make Money Work

44. Savings & CD’s Bonds Risk/Reward Pyramid Stocks Real Property REWARD
Small
Business
Collectibles
Stocks
Real Property
Bonds
Savings & CD’s
RISK
REWARD
Risk/Reward Pyramid
Module 5: Make Money Work (PAGE MMW-20)

45. Capital Preservation Time: Now; there when needed Risk: Low
Expectations:
Stability, guaranteed value
Liquid; quickly turned to cash
Time: Now; there when needed
Risk: Low
Module 5: Make Money Work (PAGE MMW-21)

46. Income Expectations: Time: short, medium, and long-term
Receiving regular cash payments
Interest or dividends
Time: short, medium, and long-term
Risk: Low to high depending on credit rating or profitability of borrower
Asset allocation by using Model Portfolios
ING Description
Module 5: Make Money Work

47. Growth Expectations: Time: medium to long-term
Worth more than paid for it
Buy low, sell high for profit
Time: medium to long-term
Risk: medium to high depending on profitability of company
Asset allocation by using Model Portfolios
ING Description
Module 5: Make Money Work

48. Growth and Income Time: medium to long-term
Expectations:
Some worth more, some cash payments
Balanced
Time: medium to long-term
Risk: medium to high depending on profitability of borrower/company
Asset allocation by using Model Portfolios
ING Description
Module 5: Make Money Work

49. Value and Hedging Value expectations: Hedging expectations:
Good stuff cheap!
Out-of-fashion or overlooked
Hedging expectations:
Taking both sides!
Limiting loss
Both: short to long-term
Risk: medium to high
Asset allocation by using Model Portfolios
ING Description
Module 5: Make Money Work

50. Easy Ways to Start Investing
Employee retirement savings accounts i.e., 401(k)’s, 403(b)’s, 457’s
529 Plans w/guaranteed, investment, and beneficiary age options
Index mutual funds
Target date mutual funds
Module 5: Make Money Work

51. Before you buy -or- sell!
Assess Assets
Uses:
Cash Reserve
College
Retirement
Shelter
Career
Personal
Objective/Expectations
Cash (like)-There when I need it
Income-Pay me cash
Growth-Worth more; sell for profit
Value-On sale, cheap!
Hedge-Have cake…eat it too!
Before you buy -or- sell!
Pros
Easily accessible/liquid
Safe/guaranteed
Higher interest/return
Tax advantages
Interest fulfilled
Relationships strengthened
Cons
Less liquid
Chance of loss
Low interest/return
Expensive
Storage
Debt incurred
Module 5: Make Money Work (PAGE MMW-22)

52. Monitor Ownership So, where do you stand? What is your net worth?
Module 5: Make Money Work (PAGE MMW-25)

53. Jargon Alert: “NET WORTH”
What you have -
What you owe
= Net Worth
Assets - Debts
Module 5: Make Money Work

54. Net Worth
Module 5: Make Money Work (PAGE MMW-25)

55. Net Worth “What’s Your Number?” Calculate at least once every year
Can be positive or negative
Barometer for progress
Measure of “wealth”
Module 5: Make Money Work

57. Make Money Work We’ve covered:
Working vs. wealth; saving vs. investing
Save early, save often and reinvest to maximize compound interest and the time value of money
Types of assets, their uses, risks, and potential for financial gain
Measuring and monitoring net worth
Module 5: Make Money Work

58. Take Action – Set a Goal Module 5: Make Money Work (PAGE MMW-3)
BYFH – Make Money Work (2016)

59. Take Action – Worksheets
Module 5: Make Money Work
BYFH – Make Money Work (2016)

60. Take Action – Learn More
Module 5: Make Money Work (PAGE MMW-23)

61. Measure – Track Your Progress
Module 5: Make Money Work (PAGE MMW-3)

62. Please complete the session evaluation form.
(Page MMW-27)
Module 5: Make Money Work

63. Building Your Financial House Thank You!