Air Education and Training Command

Financial Management

5 September, 2002 MSgt Nick Kopcho HQ AETC/XPRI DSN: 487-8035

I n t e g r i t y - S e r v i c e - E x c e l l e n c e

Overview

• Financial Planning • Value of Time • Common Misconceptions • Developing Your Plan • When to Begin • How to Begin • Tips for Success • Final Thoughts – "When it is a question of money, everyone is of the same religion.“ –

Voltaire, French writer and philosopher

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FINANCIAL PLANNING

• “When it is a question of money, everyone is of the same religion.” –

Voltaire, French writer and philosopher

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FINANCIAL PLANNING

• Plan First – "Though usually overlooked, setting up a good personal budget is the first step to any money management activity. Without it, you cannot control your finances and will always fall short of your goals.” -

Mark J. Randall, Certified Financial Planner

– No one plans to fail, they just fail to plan • Planning is crucial to achieve a desired result

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FINANCIAL PLANNING

• Benefits of Financial Planning – Awareness – Control – Organization – Communication – Opportunistic – Timesaving – Less Waste

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VALUE OF TIME

• Compounding—your money’s best friend – A – Age 21—$100/Month X 10Yrs = $12,000 – B – Age 35—$100/Month Till Age 65 = $36,000 – 8% Annual Growth till Age 65 • A = $300,053 • B = $150,030 – If “A” continued $100/Month till Age 65 = $52,800 – + 8% Annual Growth = $489,120 • Start now—something is better than nothing – “The best place to start is where you are with what you have.” -

Charles Schwab,

Industrialist/Banker

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COMMON MISCONCEPTIONS

• You must suffer to maintain a budget – You are already “Budgeting” – Reactive not Proactive – Free up money—eliminate waste • Budgets are for those in financial trouble – Avoid trouble – Handle crises • Takes more time – Upfront work – Easier in the long term

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DEVELOPING YOUR PLAN

• Keep it simple and easy • Communicate with and involve family • Define goals—plan is roadmap to achieve goals • Understandable—Primary and Alternate • Customizable—Flexible • Build in fun—rewards • Organization—not penny-pinching • Knowledge and Understanding—not rules • Should let you know how much you have now

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WHEN TO BEGIN

• NOW!!

• A change in your marital status • An addition to the family • A new job •

A PROMOTION

, or a raise • A new home • Retirement •

NOW!!

•

NOW!!

•

NOW!!

• A major purchase • January 1st (or the beginning of any month)

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HOW TO BEGIN

• Where does your money go?

– Look up the past • Bills • Checkbook • Bank Statements – Track your spending for one – three months • Keep a log of

every penny

• At least one full cycle of your money • Eye-opening experience • You will be surprised

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HOW TO BEGIN

• Get Organized – Current Working Files—used on a routine, bill paying session basis – Reference Files—standard information – Safety Files—important original documents – Archival Files—repository of old papers.

• Balance your checkbook!!

• Establish the Habit

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TIPS FOR SUCCESS

• Make impulse buying difficult—leave checkbook, credit cards at home • Make savings an "expense" item • Make debt repayment an "expense" item—this is what credit counselors do for you – Pay off the highest interest rate cards first – Don't use credit cards again until balance is paid off – After a loan is paid off, keep paying the loan amount to yourself—make a vacation fund, or next car fund

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TIPS FOR SUCCESS

• Have some fun money for each family member • Budget for a fun item • Plan with one income • Don't divide couple's paychecks functionally • Don't over categorize your budget—simplicity • Use an interest-bearing checking account • Set aside money monthly, for bills that are due quarterly, semi-annually, or yearly

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TIPS FOR SUCCESS

• Reconcile your budget at least once a month; when reconciling your checking statement • Make sure to mark your last reconcile point in your budget • Try to get utilities or banks to change due dates of bills to make your work easier • Remember: just the act of identifying your expenses is extremely valuable • Be Proactive—not reactive

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TIPS FOR SUCCESS

• Keep future in mind • Involve everyone • Review annually or when there is a change

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FINAL THOUGHTS

• Plan for your future – Budget is a tool – Roadmap to your goals • Start NOW!!

– Benefits of compounding – Establish a habit for life • Be proactive

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FINAL THOUGHTS

• Define Goals – Develop plan to achieve goals – Keep it easy and understandable – Involve entire family • Get organized and get started

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Questions?

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