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P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M Saving and Investing 1.

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Presentation on theme: "P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M Saving and Investing 1."— Presentation transcript:

1 P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M Saving and Investing 1

2 S A V I N G & I N V E S T I N G2 Invest for the Long Term Get Started Early... What will it take to have ½ million dollars at retirement…starting at age 25? 35? 45? * 10% rate of return, tax-deferred Start Saving at 25 $79 per month $37,920 Out of Pocket $500,000 Total $37,920 Start Saving at 35 $221 per month $79,560 Out of Pocket $500,000 Total $79,560 Start Saving at 45 $658 per month $157,920 Out of Pocket $500,000 Total $157,920

3 S A V I N G & I N V E S T I N G3 You Can Be a Millionaire! Plan A AgePaymentTotal 21$3,000$3,300 22$3,000$6,930 23$3,000$10,923 24$3,000$15,315 25$3,000$20,147 26$3,000$25,462 27$0$28,008 28$0$30,808 29$0$33,889 30$0$37,278 31$0$41,006 32$0$45,107 33$0$49,617 34$0$54,579 35$0$60,037 36$0$66,041 37$0$72,645 38$0$79,909 39$0$87,900 40$0$96,690 41$0$106,359 42$0$116,995 43$0$128,694 AgePaymentTotal 44$0$141,564 45$0$155,720 46$0$171,292 47$0$188,422 48$0$207,264 49$0$227,990 50$0$250,789 51$0$275,868 52$0$303,455 53$0$333,800 54$0$367,180 55$0$403,898 56$0$444,288 57$0$488,717 58$0$537,589 59$0$591,348 60$0$650,482 61$0$715,531 62$0$787,084 63$0$865,792 64$0$952,371 65$0$1,047,608 $18,000 $1,047,608

4 S A V I N G & I N V E S T I N G4 You Can Be a Millionaire! Plan B AgePaymentTotal 21$0 22$0 23$0 24$0 25$0 26$0 27$0 28$0 29$0 30$0 31$3,000$3,300 32$3,000$6,930 33$3,000$10,923 34$3,000$15,315 35$3,000$20,147 36$3,000$25,462 37$0$28,008 38$0$30,808 39$0$33,889 40$0$37,278 41$0$41,006 42$0$45,107 43$0$49,617 AgePaymentTotal 44$0$54,579 45$0$60,037 46$0$66,041 47$0$72,645 48$0$79,909 49$0$87,900 50$0$96,690 51$0$106,359 52$0$116,995 53$0$128,694 54$0$141,564 55$0$155,720 56$0$171,292 57$0$188,422 58$0$207,264 59$0$227,990 60$0$250,789 61$0$275,868 62$0$303,455 63$0$333,800 64$0$367,180 65$0$403,898 $18,000 $403,898

5 S A V I N G & I N V E S T I N G5 You Can Be a Millionaire! Plan C AgePaymentTotal 21$0 22$0 23$0 24$0 25$0 26$0 27$0 28$0 29$0 30$0 31$3,000$3,300 32$3,000$6,930 33$3,000$10,923 34$3,000$15,315 35$3,000$20,147 36$3,000$25,462 37$3,000$31,308 38$3,000$37,738 39$3,000$44,812 40$3,000$52,594 41$3,000$61,153 42$3,000$70,568 43$3,000$80,925 AgePaymentTotal 44$3,000$92,317 45$3,000$104,849 46$3,000$118,634 47$3,000$133,798 48$3,000$150,477 49$3,000$168,825 50$3,000$189,007 51$3,000$211,208 52$3,000$235,629 53$3,000$262,492 54$3,000$292,041 55$3,000$324,545 56$3,000$360,300 57$3,000$399,630 58$3,000$442,893 59$3,000$490,482 60$3,000$542,830 61$3,000$600,413 62$3,000$663,755 63$3,000$733,430 64$3,000$810,073 65$3,000$894,380 $105,000 $894,380

6 S A V I N G & I N V E S T I N G6 You Can Be a Millionaire! Plan D AgePaymentTotal 21$0 22$0 23$0 24$0 25$0 26$0 27$0 28$0 29$0 30$0 31$0 32$0 33$0 34$0 35$0 36$10,000$11,000 37$10,000$23,100 38$10,000$36,410 39$0$40,051 40$0$44,056 41$0$48,462 42$0$53,308 43$0$58,639 AgePaymentTotal 44$0$64,503 45$0$70,953 46$0$78,048 47$0$85,853 48$0$94,438 49$0$103,882 50$0$114,270 51$0$125,697 52$0$138,267 53$0$152,094 54$0$167,303 55$0$184,033 56$0$202,437 57$0$222,680 58$0$244,948 59$0$269,443 60$0$296,387 61$0$326,026 62$0$358,629 63$0$394,492 64$0$433,941 65$0$477,335 $30,000 $477,335

7 S A V I N G & I N V E S T I N G7 Your Honor, I Object! I’ll be dead when I’m 65! – Financial Planners are planning out to age 100. Where can I get 10%?? – It’s out there, and we’ll show you where!

8 S A V I N G & I N V E S T I N G8 The Financial Planning Pyramid

9 S A V I N G & I N V E S T I N G9 Savings Plans Savings factors to consider: Safety Liquidity Yield

10 S A V I N G & I N V E S T I N G10 Savings Tools Regular savings account or Share savings account Certificates of deposit Money market accounts U.S. savings bonds (EE and I)

11 S A V I N G & I N V E S T I N G11 Saving vs. Investing Different Time Frames Different Risks Inflation : $100 in 1984 = $215.00 in 2007 Taxes The Effect of Compound Interest and Time

12 S A V I N G & I N V E S T I N G12 How Savings and Investments in “Regular Account” are Taxed Earn Interest and Dividends Taxed Annually Savings Earn Dividends and Capital Gains Taxed when “realized” or annually for Mutual Fund gains Invest- ments

13 S A V I N G & I N V E S T I N G13 How Savings and Investments in “Tax-Deferred Accounts” are Taxed Contributions are taken out of your pay before taxes are withheld, so you pay less tax now. Taxes on contributions and attributable earnings are deferred until you withdraw your money. Qualified withdrawals are taxed at MITB (at the time of withdrawal).

14 S A V I N G & I N V E S T I N G14 Compound Interest and Time $36,000 Thousand $ Years 50 100 0 5 10 15 20 25 30 150 200 0 0 250 $83,673 $228,033 10% 5% 0%

15 S A V I N G & I N V E S T I N G15 Should I Spend That Nest Egg? Thousand $ Years 50 100 $228,033 0 5 10 15 20 25 30 150 200 250 Spent nest egg on a car $133,889 $94,144 LOST! 10%

16 S A V I N G & I N V E S T I N G16 The Tools of Investing

17 S A V I N G & I N V E S T I N G17 Asset Classes Stocks Stock Mutual Funds Real Estate Hard Assets Equity Bonds Bond Mutual Funds Fixed- Income Money Market Instruments Money Market Funds Cash Equivalents Everything else is a combination of these three!

18 S A V I N G & I N V E S T I N G18 Fixed-Income: Bonds Represent a loan Provide fixed income payments Reliable source of income Rate of Return: 3.7 – 5.5% Moderate level of liquidity Typically purchased through a brokerage

19 S A V I N G & I N V E S T I N G19 Equity: Stocks U.S. Foreign Large Companies Small Companies Growth Value Represent ownership Can be purchased through a brokerage, an employer investment plan, or directly from issuing company (DRIPs)

20 S A V I N G & I N V E S T I N G20 Stocks Returns from dividends and capital gains Rate of Return: 10 - 12% Higher Risk than Bonds Need from 10 – 30 to diversify! Best choice for long-term growth

21 S A V I N G & I N V E S T I N G21 The Lessons… Stocks provide a higher potential for earnings over the long-term There is always a trade-off between S-L-Y A well-balanced portfolio has a combination of all asset classes There are no good or bad tools, just good or bad uses For younger investors, it is better to be an owner than a loaner The steady income stream provided by bonds is great for retirement Investing can be complex, but doesn’t have to be! Stocks provide a higher potential for earnings over the long-term There is always a trade-off between S-L-Y A well-balanced portfolio has a combination of all asset classes There are no good or bad tools, just good or bad uses For younger investors, it is better to be an owner than a loaner The steady income stream provided by bonds is great for retirement Investing can be complex, but doesn’t have to be!

22 S A V I N G & I N V E S T I N G22 Mutual Funds Pool of Investors The Funds Professional Management Diversified Portfolio Interest & Dividends Capital Gains NAV

23 S A V I N G & I N V E S T I N G23 Mutual Funds Advantages: Professional Management Diversification Liquidity Affordability Benefits small investors

24 S A V I N G & I N V E S T I N G24 Mutual Funds Disadvantages: Cost Despite Negative Returns Lack of Control Price Uncertainty Not Insured Complex Records

25 S A V I N G & I N V E S T I N G25 Mutual Funds Stocks: Growth Income Index Sector Stocks & Bonds: Asset allocation Balanced Stocks: Growth Income Index Sector Stocks & Bonds: Asset allocation Balanced Bond: High-yield bond Corporate bond Municipal (tax-free) bond Government bond Index Cash: Money Market Bond: High-yield bond Corporate bond Municipal (tax-free) bond Government bond Index Cash: Money Market

26 S A V I N G & I N V E S T I N G26 Choosing a Mutual Fund Goals/Objectives Performance/Risk (long-term) Management Cost (loads & fees) Services

27 S A V I N G & I N V E S T I N G27 What is “The Market”? The Dow NASDAQ S&P 500 Wilshire 4500 Wilshire 5000 LBA Bond NYSE AMEX NIKKEI EAFE LBA Bond NYSE AMEX NIKKEI EAFE

28 S A V I N G & I N V E S T I N G28 The TSP Investment Options Returns are as of end of year 2006. For up-to-date returns go to www.tsp.gov. G Fund Government Securities Especially Issued for TSP 2006: 4.93% 10 Yr: 5.31% F Fund Bonds Based on LBA Index 2006: 4.40% 10 Yr: 6.25% C Fund Stocks Based on S&P 500 Index 2006: 15.79% 10 Yr: 8.37% S Fund Stocks Based on Wilshire 4500 Index 2006: 15.30% 10 Yr: 9.56% I Fund International Stocks Based on EAFE Index 2006: 26.32% 10 Yr: 7.53% L Funds Combination of other funds Combination based on Time Horizon to Retirement

29 S A V I N G & I N V E S T I N G29 Saving & Investing Techniques Pay Yourself First The Military Saves Campaign Maximize Tax-Deferred Opportunities Make disciplined, regular monthly investments that fit in your budget

30 S A V I N G & I N V E S T I N G30 Take Action! Determine financial goals Review your budget Save money you don’t have … Yet! Establish savings funds Get help if you need it Build an investment portfolio Keep learning Keep at it!

31 S A V I N G & I N V E S T I N G31 Print Your Certificate Click on the following link to add your name to the certificate and print it: Saving & Investing Click on the following link to add your name to the certificate and print it: Saving & Investing


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