Building Personal Wealth: How to Save Money

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Building Personal WealthHow to Save Money

• Presented by
• Joan Burgess, AFC
• 301-856-5000 x.900 or jburgess_at_uspsfcu.org

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Developing Your Savings Goals

• Write out your goals.
• Be specific and clearly defined.
• Be ambitious, require yourself to stretch, but be
  practical.
• Frame your goals positively.
• Make them personally meaningful to you.

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Developing Your Savings Goals

• Consider the timeframe required (short-term,
  intermediate, long-term, etc.).
• Consider available as well as needed resources.
• Review your goals regularly.
• Rank your goals.
• Involve other family members when applicable.

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Types of Savings Accounts

• Basic Share Account
• Special Savings Account Vacation Savings,
  Christmas Savings, Tax Savings
• Share Certificate Account
• Money Market Certificate Account
• IRAs Traditional or Roth
• Coverdell Education Account
• Custodian Accounts
• Savings Bonds www.savingsbonds.gov
• Investment Account Stocks, Bonds, Mutual Funds

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What are your goals?
Planned Savings for Planned or Recurring
Expenses Traditional Savings Goals
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Planned Saving for Recurring Expenses

• Determine the annual total of your recurring
  non-monthly expenses.

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• Designate a savings or checking account to manage
  your planned savings and expenses.
• Deposit 1/12 of your annual total recurring
  non-monthly expenses to your planned savings
  account every month.
• Pay for your recurring non-monthly expenses from
  your planned savings account.

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Traditional Savings Goals

• Traditional Savings Goals
• Retirement
• Emergency or Contingency Fund
• Down Payment on Home
• Higher Education
• Wedding
• Big Purchases or Special Events

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Setting Goals for Traditional Savings

• Retirement
• Use the free planning tools available on the
  internet or at the library and attend free
  seminars.
• Talk to a Retirement Planner.
• Dont wait. Start saving now.

www.choosetosave.org/tools/fincalcs
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Setting Goals for Traditional Savings

• Emergency Fund
• Determine the total of your basic monthly living
  expenses.
• How many months of living expenses in a savings
  account will help you sleep easier? One month?
  Three months? Six months?

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Setting Goals for Traditional Savings

• Home Purchase
• Determine how much you can comfortably afford.
• 3 x Your Gross Annual Salary A Reasonable
  Mortgage
• 50 of your Monthly Net Salary (Monthly Gross
  Salary less taxes) less your current minimum debt
  payments Reasonable Mortgage Payment
• 36 of your Gross Monthly Salary less your
  current minimum debt payments Reasonable
  Mortgage Payment
• Determine how much you need or want to save for a
  down payment.
• Determine how much you will need for settlement
  and moving expenses.

Typically 10-11 of purchase price of a home will
be sufficient to cover your down payment,
settlement and moving expenses. For more
information on home purchase and mortgages visit
www.homebuyingguide.com.
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Setting Goals for Traditional Savings

• Higher Education
• Determine how much you will need for tuition by
  the time your children are college age.
• Call or visit colleges
• Research online and at the library
• Research Education IRAs or 529 College Saving
  Plans. USPS FCU offers Coverdell Education
  Savings Accounts (Education IRAs).
• If your children are close to college age
  consider saving only for room and board or books
  and fees. Explore other means of paying for
  tuition and remaining expenses.
• Save tuition expense by attending a community
  college for the basic credits.
• National College Scholarship Foundation
  www.ncsfdn.org. The CARE Book College Aid
  Resources for Education

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Setting Goals for Traditional Savings

• Wedding
• Dont go into debt for a party.
• Start a Special Savings Account now.
• If you dont have enough saved for your childs
  Dream Wedding consider giving the Happy Couple
  what you do have saved and letting them decide
  how to spend it.

Recommended reading for the Happy Couple The
Budget Wedding Sourcebook by Madeline
Barillo Debt-Proof Your Marriage by Mary Hunt
The Motley Fool's Guide to Couples Cash How
to Handle Money With Your Honey" by Dayana Yochim
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Setting Goals for Traditional Savings

• Big Purchase or Special Event
• Know what you want.
• Know when you need or want it.
• Know how much you need to save.
• Goal
• I want a 2 week vacation for my entire family at
  a beach house on the Outerbanks of NC.
• I want it in 2 years or sooner.
• It will cost approximately 4,700.
• I need to save 195/mo. in an account paying
  0.50 monthly dividends to reach my 4,700 goal
  in two years.

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Saving vs. Borrowing
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How much money do I have to work with? Personal
Cash Flow Statement
Create your personal Cash Flow Statement to
determine your current financial status.
Your Monthly Net Income - Monthly Living
Expenses - Monthly Periodic Expense - Monthly
Debt Payments Net Monthly gain or loss.
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Gross Income / Net Income
Gross Income Your income before taxes or any
other deductions. Net Income Disposable Income
The money you have to live on after taxes and
other deductions from your pre-tax gross
income. Discretionary Income The money left
after paying for living expenses. Net Income ?
Your Payroll Allocation.
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Gross Income / Net Income

• How much is Jane Does Net Income?
• a. 672.00
• b. 1035.00
• c. 957.00

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Gross Income / Net Income

• How much is Jane Does Net Income?
• a. 672.00
• b. 1035.00
• c. 957.00

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Verify Your Cash Flow Statement

• Ask yourself if the net gain or net loss on your
  Cash Flow Statement is realistic.
• Do you have money left over at the end of the
  month?
• Are your savings accumulating?
• Are you frequently overdrawn?
• Do you use a line-of-credit or credit card to
  float you until your next payday?

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Verify Your Cash Flow Statement

• If your Cash Flow Statement seems unrealistic
  keep a Spending Diary for 30 days.
• Do not change your spending habits during your 30
  day diary period.
• Record every expenditure or keep the receipt.
• At the end of 30 days review your diary and
  verify that it agrees with your Cash Flow
  Statement. Make adjustments accordingly.

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Make More or Spend Less

• Adjust Tax Withholding. Do you usually receive
  an income tax refund? Adjust your W-4 so you are
  withholding at the correct level and your Net
  Income is more each payday. Why give the IRS an
  interest free loan?
• Overtime. Accept any and all opportunities to
  work overtime.
• Second Job. Obtain a second job either part time
  or full time.
• Add a second income to your household. If you or
  your spouse stayed home to be the primary
  caregiver for your children or other dependant
  but that role is no longer needed consider
  obtaining a paid job.

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Make More or Spend Less

• Change careers. If your career does not have the
  potential to pay your what you would like to earn
  to achieve your desired lifestyle - change
  careers.
• Sell an asset. If your house is bigger than you
  need, downsize. If you have a second or third
  car, that no one is driving on a regular basis,
  sell it. Have a traditional yard sale and use the
  proceeds to as a nest egg. EBay - the ultimate
  electronic yard sale.

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Make More or Spend Less

• Identify your needs vs. your wants.
• Review your Monthly Expenses and identify which
  line items are expenses for things you need and
  which are for things you want.
• Can you reduce or eliminate any of the wants?
• Can you reduce any of the needs?

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Sample Worksheet

• Case Study Jane Doe
• 32 Year-Old Female
• Single
• No Dependants
• College Graduate
• Starting new job and relocating to San Diego.
  Wants to be sure her new income and new expenses
  will allow her enough Discretionary Income to
  fully participate in her employer sponsored
  retirement plan, save for emergencies and
  maintain her lifestyle.

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Tools to Help You Save

• Direct Deposit to your Credit Union
• Payroll allocation to an account other than your
  Checking Savings, Special Savings Accounts,
  IRAs, Custodian Accounts.
• A second account at the same credit union.

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Tools to Help You Save

• Treat your savings like a bill to be paid every
  month or every payday.
• Pay your bills on time.
• Use a checking account vs. check-cashing stores.
• Save extra money from raises or bonuses.
• Keep making loan payments to yourself.
• Save cash gifts.

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How to Save Money

• Thank you for coming!
• Joan Burgess, AFC
• 301-856-5000 x.900
• jburgess_at_uspsfcu.org