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!

–

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…

–

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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