1. Saving and Investing to Build Wealth Steps to Financial Freedom Savings Plan and Methods Power of Compound Interest Saving for Retirement 401ks, 403bs IRAs Investing Options

2. Building wealth is like building a brick wall. Set realistic goals. Work to accomplish each step- Prior to moving to the next step. One brick on top of the other; Make sure the wall is solid; Add another brick.

3. Dream Your Goals A goal without a plan is just a wish. This activity will help you put an approximate price tag on your financial goals. (worksheet) –How much for a wedding? –How much for a down payment on a car? –What will the financing cost? –How much to pay for college in five years? –New heater, head gasket on car, etc.?

4. Needs and Wants What is the difference between a: NEED and a WANT? Needs are things you use or require every day. Wants are things you would love to have but can live without.

5. Good Debt and Bad Debt Good Debt: –Car loan and home –Save to buy special wanted items –Things I need and can afford Bad Debt –Things I want, not need –Things that make me feel good (conspicuous spending) –Have no long term value or growth potential Borrow strategically will help you meet long term goals What Is My Worth? – ( handout)

6. SAVING - Diversification not putting all financial eggs in one basket.

7. COMMODI TIES PENNY STOCK SPECULATIVE STOCKS/BONDS/ MUTUAL FUNDS COLLECT- IBLES FINANCIALPLANNINGPYRAMID Highest Risk/ Highest Earnings Lowest Risk/ Lowest Earnings BLUE CHIP COMMON STOCK REAL ESTATE GROWTH MUTUAL FUNDS BALANCED MUTUA L FUNDS HIGH-GRADE PREFERRED STOCK HIGH-GRADE CONVERTIBLE BONDS MONEY MARKET ACCOUNTS or MUTAL FUNDS HIGH-GRADE MUNICIPAL BONDS or MUTUAL FUNDS HIGH-GRADE CORPORATE BONDS or MUTUAL FUNDS INSURED SAVINGS/ CHECKING ACCOUNTS U.S. SAVINGS BONDS CERTIFICATES OF DEPOSIT TREASURY ISSUES AUTOMOBILE INSURANCE HOMEOWNERS OR RENTERS INSURANCE LIFE INSURANCE MEDICAL/ DISABILITY INSURANCE LIABILITY INSURANCE

8. The Rule of 72 ……states that 72 divided by the interest rate will result in the number of years it will take your investment to double…...

11. Three Questions: Every Financial Advisor Should Ask. How much do you want to invest? For how long do you want to invest? Hows your risk tolerance (stomach)? –Can you handle volatility over the long period of investing? –Is this money you need or money you want!

12. Savings Accounts Savings accounts are accounts at financial institutions designed to keep your money safe and help it grow. –Low interest rate –Provides liquidity –Losing growth to inflation Guaranteed by FDIC up to $250,000 You can make deposits and withdrawals as needed Initial deposit varies with the bank. From $1 to as much as $1,000

13. Insured v. Uninsured Accounts Savings accounts and bank CDs that are insured by the FDIC offer a smaller return because they are safer. Stocks, bonds and mutual funds are not insured or offer guarantees. There is not a single investment that gives you high return, low risk, and ease of access (liquidity).

14. CDs, or Time Deposits Certificates of deposit (CDs) are a safe way to make your money grow. The longer you leave your money on deposit, the higher interest rate youll earn. Length of deposit varies form 1 month to 5 years.

15. U.S. Treasury Investments Include Savings Bonds and Treasury Bills. When you buy treasury securities you are making a loan to the government. Interest varies, but you are always guaranteed a minimum return Low risk, low return Interests and principal payments are backed by the federal government

16. Treasury Bills T-Bills are sold for less than their face value. Your profit is the difference between the purchase price and the face value. T-Bills pay you back with interest in one year or less from their issue date.

17. U.S. Savings Bonds Interest can vary, but you are always guaranteed a minimum return. Dominations ranging from $50 to $10,000. Maximum purchase in one year is $5,000. Redeemable only to the person to whom they are registered. Earnings on savings are not tax deductible.

18. Stock Market Risk No guarantee that stock prices will go up or that you will make money on stocks. Banks now sell all types of investment products which are NOT insured. BE AWARE! Volatility can be bad and good!

19. Bonds U.S. Government Bonds (Treasuries): –Exempt from state and local taxes. –U.S. Treasury bills -- maturities from 90 days to one year –U.S. Treasury notes (coupons) -- maturities from two to 10 years –U.S. Treasury bonds -- maturities from 10 to 30 years Municipal Bonds –Many munis are safe from city, state and federal taxes. Corporate Bonds –Riskiest fixed-income securities. –Susceptible to economic problems, mismanagement and competition. –Pan Am and Chrysler bankruptcies of 1979 come to mind.

20. Mutual Funds Are a portfolio of stocks, bonds, and other securities. Run by a fund manager who gets a commission. Each investor in a fund shares in the funds gains, losses and expenses. A way to diversify or spread out your risk.

21. Saving for Education There are a number of special accounts that can help you save for your childrens college educations. –Unified Gift to Minors Act (UGMAs – Age 18) –529 College Savings Plans –IRAs can be used for educational expenses

22. Traditional v. Roth IRA TraditionalRoth IRA Who May ContributeUnder age 70 ½No age limit - MAGI Single below $116,000 Married below $169,000 2008 Contribution LimitIndividual: $5,000 Married (jointly): $10,000 Age 50+:$1,000 catch up Individual: $5,000 Married (jointly): $10,000 Age 50+:$1,000 catch up Federal Income Tax Deductible Deductible if part of employee plan No income tax deduction Tax-Advantaged Growth (5 year hold) No taxes on distributions until you withdraw Tax free growth and withdraws after age 59 ½ Required DistributionsApril 1 st of the year after turning 70 ½ No mandatory age for taking distributions.