The Roadmap to Financial Success

1
The Roadmap to Financial Success

• Presented By
• The Credit-Wise Cats

2
Your Financial Road Map

• Today well talk about
• The PFP Process
• Consumer Credit
• Savings
• Insurance

3
The Personal Financial Planning Process

• A six-step process
• Determine your current financial situation
• Develop your financial goals
• Identify alternative courses of action
• Evaluate the alternatives
• Create and implement a financial action plan
• Evaluate and revise the financial plan

4
Where do you stand right now?

• Step 1 Determining your current financial
  situation
• Personal Property
• Income
• Savings
• Expenses
• Debts

5
Where do you want to go?

• Step 2 Develop your financial goals
• Goals should be
• Specific and Measurable
• Attainable and Realistic
• Time bound
• Goals should be SMART!

6
Where do you want to go?

• Types of financial goals
• Short term (1 yr) Spring Break Trip
• Intermediate (2-5 yrs) New Car
• Long-Term (5 yrs) Pay off student loans
• Keep in mind
• Needs versus Wants

7
Which road should you take?

• Step 3 Identify alternative courses of action
• Know what options you have
• Step 4 Evaluate those alternatives
• Direct and Opportunity Costs
• What is the best plan for you?

8
Make your plan and make it work

• Step 5 Constructing a financial plan
• Develop financial documents to be used
• Comprehensive Budget
• Net worth Statement
• Cash Flow Statement
• Spending Ledger
• Step 6 Reevaluate and revise your plan
• Changes in personal, social and economic
  conditions lead to updates and changes to your
  plan

9
A Budget Your Financial Direction

• Budgets are helpful for
• Assessing your current situation
• Planning your financial direction
• Implementing your financial plan
• Evaluating your financial progress
• Successful budgets are
• Well planned, Realistic, Flexible and Clearly
  Communicated

10
A Budget Your Financial Direction

• Income....2000
• Rent......450
• Utilities..100
• Food..250
• Car.200
• Insurance.....150
• Clothing.100
• Entertainment......200
• Savings.200
• Credit Card Debt.300
• Remaining Income....50

11
Tracking your Progress

• Track your spending
• Evaluate progress
• Identify trouble areas
• Make adjustments to budget
• Expense Tracking Tools
• Check Registers, Spending Ledgers, Bank
  Statements, Financial Software

12
Consumer Credit Financial Fuel

• Three ways to finance a current purchase
• Take money from savings
• Use present earnings
• Borrow against future income
• Credit is an arrangement to receive cash, goods
  or services now, and paying for them in the
  future.

Buy now, Pay Later
13
Consumer Credit Financial Fuel

• Types of Credit
• Close-ended Credit
• A Specific Purpose and Amount
• Mortgage Loan, Auto Loan, Student Loan
• Open-ended Credit
• Use as needed until reaching credit limit
• Credit Card, Home Equity Loan

14
Consumer Credit Financial Fuel

• Read the small print
• APR, Finance Charges, Annual Fee, Sign-Up Fee,
  Grace Period, Credit Limit
• Free Gifts
• Incentives to apply for credit cards
• Open lines of credit
• Application and annual fees

15
Consumer Credit Financial Fuel

• Advantages of Credit Cards
• Buy now, pay later
• Cards are safer then cash
• Accepted almost everywhere
• Credit cards gives you status with merchants
• Identifies you as a qualified buyer

16
Consumer Credit Financial Fuel

• Disadvantages of Credit
• Overuse. Credit cards are easy to get and easy to
  use.
• Credit cards are viewed as extra income not debt
  that must be paid off.
• Delaying payments will hurt you credit report.

17
Consumer Credit Financial Fuel

• Your Credit Report
• A financial report card
• Contains Information about your consuming and
  payment habits of the last 7 years
• Bankruptcy stays with you for 10 years
• Your Credit Score
• A financial GPA
• It ranges from 300 to 850 points
• Calculates your Credit Worthiness

18
Guarding You Credit

• Watch your payment habits
• Never be late on a payment!
• If late, dont be too late 90 days late is worse
  that 60 days 60 days is worse than 30 days.
• Always try to make larger payments than the
  minimum, but never miss making at least the
  minimum payment.
• If possible, try paying the full balance of your
  credit card each month It saves you money and
  frees your credit balances.

19
Guarding You Credit

• Watch the number of credit cards in your wallet
• Having 2 or 3 is a good idea to build credit
• Having too many credit cards is not.
• Remember that gas cards or retail store cards are
  also considered credit cards, just like a Visa or
  MC.
• Having a credit card and not using it doesnt
  help building a good credit score.
• If you are thinking about canceling some credit
  cards, keep the ones with the most seniority.

20
Guarding You Credit

• Watch your credit limit
• How much is ideal? It depends on your annual
  income and credit history.
• The limit on any open line of credit is
  considered by loan executives as good as money in
  you pocket, whether you use it or not.
• Try to never exceed more than 50 of your limit.
• Keep the line of credit as free as possible for
  emergencies.

21
Savings The fast lane to success

• Pay yourself first!
• Let your money work for you!
• Short-term savings
• A rainy day fund
• Long-term savings
• Retirement money

22
Savings The fast lane to success

• Different Avenues of Savings
• Savings Account
• Certificates of Deposits (CDs)
• Bonds
• Stock (Common and Preferred)
• Mutual Funds
• Retirement Accounts

23
Savings The fast lane to success

• Evaluating risk
• Will you lose money?
• The greater the risk, the higher the potential
  for growth
• Savings Account vs. Stock
• Liquidity
• How quickly can you turn an asset into cash?
• House vs. Stock
• Savings Account vs. CD

24
Savings The fast lane to success

• Retirement
• Start Saving Now!
• The earlier you start, the more comfortable you
  will be in retirement.
• Expenses will go up
• People are spending more years in retirement

25
Savings The fast lane to success

• Johnny Fast
• Invests 25 65
• 300/mth _at_ 9
• At Retirement
• 1.4 Million
• Interest Income
• 1,256,000

• Jessie Slow
• Invests 45 65
• 300/mth _at_ 9
• At Retirement
• 201,000
• Interest Income
• 129,000

• Jimmy Medium
• Invests 35 65
• 300/mth _at_ 9
• At Retirement
• 550,000
• Interest Income
• 442,000

26
Protecting Yourself

• Insurance
• Its better being safe than sorry
• Home and Auto Insurance
• Health and Disability Insurance
• Life Insurance
• What else can you insure?

27
The Roadmap to Financial Success

• Budget and Track Spending
• Save 10 of Your Income
• Use Credit Wisely

28
The Roadmap to Financial Success
Questions?