Transcript Diapositiva 1
The Development of Superior Investing Performance: 6 Strategies for Increasing Financial Fitness Financial Planning for Women Presented by Jean Lown Erica Abbott & Brittani Bushman Nov. 7, 2012
Take the Financial Fitness Test
• 14 Questions • Score yourself (need to adjust score if single) < 25: Poor 25-30: Baseline 31-36: Good > 36: Very good 2
Acknowledgements
• Research by David Eccles, Elizabeth Goldsmith, & Paul Ward of Florida State Univ.
• The material was produced as part of a project funded by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation – www.finrafoundation.org
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What is Financial Fitness?
• Financial fitness is like physical fitness – Affects your well being & security • Physical fitness involves building muscle & aerobic capacity • Financial Fitness involves – building financial reserves – making your money work more efficiently 4
Financial Fitness is More Important than Ever
• We are living longer than ever! • Average life expectancy is increasing – In U.S. Utahns live longest – Women live longer than men – This means we need more $ for retirement – Reduction in employer provided pensions – YOYO!
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Financial Fitness
• Helps cope with life’s financial challenges & increases ability to retire comfortably • Physical & financial fitness require work • Being prepared for the future • Safeguarding your family • Providing better opportunities for healthcare 6
Financial Fitness
• Yes, it takes time! – Benefits far outweigh the costs though.
• No more excuses! Help shape your future! • You deserve to give yourself the gift of living well through Financial Fitness 7
How Can I Increase My Financial Fitness?
• We know what people
should
do but what do real people
actually
do that works? • 3 year study at Florida State University – Studied personal financial strategies that helped real people become Financially Fit & accumulate wealth • What works for you?
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Research
• Contrasted the PF strategies of householders who had
similar opportunities
to accumulate wealth over their lifetimes but ended up with
very different amounts of wealth
near retirement • Focused on the PF strategies used in “top performing” households: – Pre-retirees who were most Financially Fit 9
Study revealed six strategies: The SIMPLE 6 (Podcast)
1: Talk about it 2: Ask your employer 3: Work out what you’ll need 4: Forecast what you’ll have 5: Maximize saving & earning interest 6: Minimize debt and paying interest http://www.lsi.fsu.edu/centers/hprc/projects/finra/ 10
1. Talk about it
•
Communicate with your partner (if you have one) about household finances
• Work out strategies together to deal with $ • Share with your partner any understanding you gain about managing finances • Two heads are better than one • If single: talk with a trusted friend 11
15 Minute Workout: Talk about $ with partner or close friend
• Communicate, communicate, communicate!
• Set up regular $ talk time • Share responsibilities (or alternate years) • Each needs “pocket $” (allowance) • Don’t hide $ activity from your partner • Get help: USU FLC (435-797-1569) – Marriage & family therapy – Housing & Financial Counseling 12
What works for you?
• Share your story, your advice, your experience 13
2. Ask your employer
• Financial/retirement advice & plans • Take advantage of employer resources • USU: TIAA-CREF, Fidelity & URS advisors provide free consultations • If self-employed/small business: IRA – Simplified Employee Pension (SEP) – Saving Incentive Match Plan for Employees (SIMPLE) 14
3. Work out what you’ll need
•
Estimate how much money you will need to live on in retirement
(www.usu.edu/fpw) • Ballpark Estimate http://www.choosetosave.org/ballpark • Consult
fee-only
financial professional – Beware of financial salespeople! – Certified financial planner ( www.cfp.net
) – www.NAPFA.org
– http://garrettplanningnetwork.com/ 15
4. Forecast what you’ll have
•
Estimate how much money you think you will have by the time you plan to retire
• $Fit HHs work out how much they would have as they near retirement & compare to what they need • • online retirement calculators & FPW PPTs – www.bankrate.com/calculators http://www.usu.edu/fpw/schedule/powerpoints.htm
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5. Maximize saving & earning interest
• Save from every paycheck (Automate) • Build emergency fund – Online savings/CDs – I-bonds • Invest in Roth IRA every month – See FPW past presentations for specific advice on low-cost mutual funds for IRAs • Save up for big ticket purchases (vehicles) 17
15 Minute Workout: Set up an Individual Retirement Account (IRA) • Lots of great info on FPW website – http://www.usu.edu/fpw/schedule/powerpoints.htm
– What’s an IRA?
• Traditional vs. Roth • Best mutual funds for an IRA • Especially valuable for non-earning spouse • Fund your IRA w/ automatic monthly transfer • Use a commitment contract! Have someone hold you responsible to follow through.
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ROTH IRA does double duty
• Roth IRA doubles as true (catastrophic) emergency fund http://www.rothira.com
• you can withdraw your Roth IRA contributions at any time without paying any taxes (you’ve already paid taxes on this money) or penalties • Early withdrawal of earnings are subject to tax & 10% penalty 19
6. Minimize debt & paying interest
• • •
Pay household bills on time (automate!) Pay full credit card balance each month
–
If not, you’re living beyond your means!
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Don’t be a debt slave for life
www.PowerPay.org
Build an emergency fund
–
Autosave in online savings
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15 Minute Workout: Create an Emergency Fund
• How much? something is better than nothing – Save w/ automatic transfer from checking – Online savings accounts • FDIC insured • Higher rates than traditional accounts • No minimum – Once you build up emergency account • I-bonds (keep up with inflation; no state income tax on earnings; out of sight, out of mind 21
What Works for You?
• How do you find $ to save? • Other ideas on places to stash your emergency savings? 22
Gender and Credit Card Behavior
• Females: more costly credit card behavior than males • Compared to men, women were – 9% more likely to carry a balance – 11% more likely to pay only minimum – 26% more likely to incur a late fee 23
15 Minute Workout: Pay credit card in full each month
• When you carry a balance, everything you charge costs LOTS more than list price!
• Check out repay info on your statement – Pay only min.: pay twice the price!
– Required $ to pay to pay off in 3 years • Use https://powerpay.org/ or get help at USU Family Life Center: 435-797-7224 • Once you pay off: set max. $ charge/mo.
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6. Minimize debt
continued
•
Pay extra on mortgage principal each month (what FF HHs did in this study)
–
Maybe… better to invest for retirement, save for child’s college or buy earthquake insurance or…
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Refinance to today’s ultra low rates
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Resources
• Are you Financially Fit? Workbook: http://www.finrafoundation.org/web/groups/foundation/@f oundation/documents/foundation/p122359.pdf
• Summary brochure: http://www.finrafoundation.org/web/groups/foundation/@f oundation/documents/foundation/p122356.pdf
• Financial Fitness Project website: http://www.lsi.fsu.edu/centers/hprc/projects/finra/ • Podcast 26
Questions? Experiences?
• What is your Personal Finance Action Plan? 27
Upcoming FPW
• The Quest for 850 (credit scores) – January 30, 2013 – Al Bingham – USU TSC Ballroom – 11:30-1 pm • Alternative Gift Market – Saturday, Dec. 1, 9 am – 2 pm – Presbyterian Church, 178 W. Center 28
FPW Website & BLOG
• http://ww.usu.edu/fpw • http://fpwusu.blogspot.com/ • Kiplinger Personal Finance Magazine • Money magazine • WSJ Sunday (online): http://online.wsj.com/public/page/sundayjournal.html
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Money Girl's Quick and Dirty Tips for a Richer Life
• • http://lauradadams.com/ • 288 MG How to Make Decisions About Personal Finances http://stitcher.com/s/player.php?AAKAAIH5N
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