Marsha Lockard, MS

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Marsha Lockard, MS Extension Educator Marilyn
Bischoff, MS Extension Family Economics
Specialist Linda Gossett, MPA Extension
Educator-EFNEP
College of Agricultural and Life Sciences
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Marsha Lockard, MS Extension Educator Marilyn
Bischoff, MS Extension Family Economics
Specialist Linda Gossett, MPA Extension
Educator-EFNEP
College of Agricultural and Life Sciences
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Nobody but can do it but YOU!

• Financial Freedom is never something that just
  happens to us.
• Big inheritance
• Win the lottery
• Big bonus
• It is something we must fight for.
• If it is to be, it is up to me! (William H.
  Johnsen)

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MONEY PERSONALITIES

• SPENDERS
• HOARDERS
• AVOIDERS
• AMASSERS
• MONEY MONKS

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Different Personalities

• Use your strengths
• The nerd can manage the numbers
• But the free spirit must have equal input.
• Cannot just nod and say whatever you think
  honey.

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Each has an equal vote.

• Communicate on a scheduled basis.
• Set goals
• May even want to bring kids into the decision
  making process.

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What would you do with
What if . . . (Close your eyes)
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Activity (Part 1)

• What are your goals?
• Each person pull out a piece of paper
• List
• Dreams
• Life goals
• What makes you tick?
• What is your lifes purpose?
• No limited to financial goals

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Goal Setting (Not limited to financial purchases)

• What are your dreams?
• Home?
• Travel?
• Skydiving?
• Rocky Mountain Climbing?
• Ride 2.7 seconds on a bull named FuManchu

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Shoot for the Moon!

• Once you have your five goals - prioritize them.

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What are some of our goals and ambitions?

• Is your list different from your spouses list?
• Is it any wonder we fight about money?
• Different personalities, going different
  directions.
• WE ARE DIFFERENT!
• Is it possible to communicate and compromise?
  Ill help us save up for some furniture, if
  youll help us save up for a boat.

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Theres no such thing as NO!

• When you communicate and work together theres no
  such thing as no! Its only a matter of when.
• But you do have to agree
• Is it a priority?
• Is it fair?

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SMART GOALS

• Specific
• Measurable
• Agreed upon
• Realistic
• Timed

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A Financial Plan

• Building a financial plan around your goals, is a
  way to get and stay motivated.

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Steps to Financial Freedom
1. Spend Less Than You Make. 2. Prepare for
Financial Emergencies 3. Become Debt Free 4.
Prepare for Retirement 5. Teach Kids About
Money 6. Pay Off Your Home Early 7. Build a
Legacy  
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Spend Less Than You Make!

• What is a budget to you?
• A four letter word.
• Something that Ive tried, but cant follow.
• Something that limits my fun.
• Something that limits my freedom.
• A tool?
• A tool that helps you spend less than you make.

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A budget

• A budget is knowing where your money has been so
  that you can tell it where to go.
• A budget can be anything you want it to be, as
  long as it works, and you know for a fact that
  you spend less than you make every month.

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FIND OUT WHERE IT GOES

• Receipt
• Envelope
• Notebook/
• Calendar
• Checkbook register
• Computer

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Receipt Method

• Keep all receipts if you do not get one, make a
  receipt
• Put receipts in a box, envelope, or other
  container

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Envelope Budgeting

• Label envelopes with category, amount and date
  due
• Divide cash into envelopes
• Save unused money

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Calendar or Notebook Method

• List income on the date received
• Write in bills and expenses on date due
• Mark off bills as they are paid

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Checkbook Method

• Use checks or debit card for all bills
• Record check or debit card transaction in check
  register
• Total all spending categories at the end of each
  month

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Computer Method

• Use personal finance software or a spreadsheet
• Regularly enter transactions in categories

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Tracking is the only way you will know!

• After tracking for a month you can
• Categorize your purchases
• Set target amounts
• Separate your needs from your wants
• Communicate about how to reduce expenses, reach
  goals.

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When should you stop tracking?

• The majority of millionaires track their expenses
  every month and use spending goals.
• Do you want to join the club?
• If so, thats a pretty small price to pay.

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Millionaire Next DoorThomas J. Stanley William
D. Danko

• The majority of Americas Millionaires
• Tracking and spending plan.
• Drive used cars.
• Own modest homes, but are completely paid for.
• Have savings for emergencies.

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So . . . .youve tracked and found that youre
not quite making it.

• What can you do?
• Theres really only two choices.
• Increase income
• Decrease expenses

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Decrease Expenses

• Pay bills on time
• Barter services with friends
• Buy generic or store brands
• Combine shopping trips to save time and money
• What else can you think of?

EXPENSES
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Separate Needs Wants

• Needs are necessary to live
• Without them we may jeopardize our health, safety
  or well being.
• Wants are the things that make our lives more
  comfortable and more enjoyable.
• Wants are limitless.
• Before making a purchase ask yourself
• Do I need it?
• Is it my 1 want?

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Needs

• Utilities and services
• Insurance payments
• Groceries
• Transportation
• Home/shelter
• Debt payments

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Wants

• Vacation
• Piano
• Plasma TV
• Nearly all Clothes
• Most cars
• Most homes

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Activity

• Separate Needs and Wants

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What would you do with
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But many of us already spend this way.

• Spending leaks
• Giving up what you REALLY want, for something you
  just sort of want right now.

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Spending Leak Example

• Lin
• Cupcake twin pack .95
• Bag of potato chips .70
• Can of pop .60
• Every day 2.25
• Every five days 11.25
• Every four weeks 45.00
• Every year 585.00!

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Activity

• The Case of the Missing Money

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Avoid Impulse Spending

• Spending Cards

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Step Down!
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Increase Income

• Volunteer to work overtime
• Rent an unused bedroom or garage
• Have a yard sale
• Sell stuff online
• Get a second job
• What else can you do?

INCOME
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Maximize Non-Money Income

• Fringe Benefits from Employers
• Do-It-Yourself Projects
• Barter Exchange
• Other ideas?

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BEAN GAME
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Spend less than you make!

• The whole point is to be able to save!
• Until you can save a little money every month,
  youll never get ahead.

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5 Minute Break
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Oh, no! Now what?

• You made it. Youve tracked, budgeted, stepped
  down, separated needs and wants, sold stuff, took
  part time work and spend less than you make. But
  . . .
• Out of the blue you have a month with irregular
  expenses. Lets call this month December!
• Also this month, the car breaks down, and it
  needs repairs.
• Irregular and Emergency Expenses!
• What to do?

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Irregular Expenses

• Clothing
• Recreation
• Medical
• Utilities

• Transportation
• Gifts
• Education
• Personal

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What about emergencies?

• Maintenance Repairs
• Medical expenses
• Accidents
• Job loss
• Etc.

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Steps to Financial Freedom
1. Spend less than you make. 2. Prepare for
Financial Emergencies 3. Become Debt Free 4.
Prepare For Retirement 5. Teach Kids About
Money 6. Pay Off Your Home Early 7. Build a
Legacy  
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Everyone has a financial emergency plan

• Savings plan
• Credit/debt plan (default)
• What plan are you in?

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What is emergency savings?

• 3 to 6 months worth of expenses
• Accessible account
• High yield (APY)

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Check out savings rates at

• www.savingsaccounts.com

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FDIC Insured?

• 100,000 per financial institution.
• Valid only on basic savings vehicles.
• Not Valid for stocks, bonds, mutual funds, life
  insurance, annuities, etc.

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An emergency fund works for you

• Using an example of 30,000 annual income.
• 15,000 in an online savings account at 5 APY
• Yields 63 a month in interest.
• Or 750 a year!
• Online savings account, money market fund, cds?

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Emergency plan with debt.

• If you lost your job, and it took you 3 months to
  find another one.
• 3 months of expenses (using our previous example
  of a 30,000 income) 7,500
• On a visa credit card at 20 making 150 monthly
  payments 16,200 total youll have to repay.
  This will take you 108 months and cost you 8,700
  in interest.

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With an emergency fund

• You would have borrowed that 7500 from
  yourself and paid it back to the emergency fund
  once you had a job again.
• At the same rate (150 a month) it would be paid
  back in 39 months
• No interest payments.
• Plus you were still earning interest off of the
  remaining 7500 in your account.
• You only had to pay back 5,909 of the 7,500 you
  borrowed from yourself

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Compound interest

• Those who understand compound interest earn it,
  those who dont, pay it.

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Difference

• With debt as your emergency plan, you will repay
  (paying interest)
• 16,200 over 9 years
• With savings as your emergency plan, you will
  repay (earning interest)
• 5,909 over 3 years and 3 months.
• Difference 10,291 and 5 years 9 months.

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Why dont people do it?

• It takes planning and some self discipline . . .
  But not a lot!
• 1) Make it a priority
• 2) Build the habit
• Make it automatic

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How to build an emergency fund.

• This is the 2nd step to financial freedom.
• That means it comes before steps 3-7!
• Until you have at the minimum of 3 months
  expenses saved up do not
• Pay more than minimum payments on your debts.
• Save for retirement
• Save for, or buy a home.

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How

• The 10 solution!
• 10 or more of your income until you have the 3
  month minimum.
• After that, you decide. (But make sure you are
  still reaching for the 6 month total.)

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It can help reduce costs in other areas of your
life.

• Raise insurance deductibles.
• Pay cash for big ticket items, used car,
  refrigerator, sofa, etc.
• Cash discount
• No financing
• This will save you money.
• But remember, you must have a plan to repay it.

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The system is the secret.

• How you use it is not as important as your system
  for paying it back.
• 10 of your regular paychecks
• 0-3 months worth strictly for emergencies
• 3-6 months worth can be used for cash discounts