Achieving Your Financial
Goals
What is Financial Literacy?
Financial Literacy
• The ability to effectively evaluate and manage
one’s finances in order to make prudent
decisions toward reaching life’s goals
• The understanding of:
- Money
- Cash flow
- Basic economic/financial concepts
- Debt/risk management
Financial Literacy
Key areas of personal finance:
• Money & income
• Spending & debt
• Savings & investments
• Risk management
• Life’s milestones
Money & Income
Money & Income
• Time is money
• How many hours do you need to work to pay
for your mortgage, car insurance, electricity
bills, extras, etc?
Money & Income
Developing a budget:
• A plan for coordinating income and expenses
• No average budget to follow
• Unique to your financial situation
• Depends on set savings/spending priorities
Money & Income
Budget exercise:
• Enter your net income or take-home monthly income.
• Enter your fixed expenses, such as car payments and rent.
• Enter your flexible expenses, using figures you gathered
from a typical month, such as your phone or electricity bill.
• Enter your discretionary expenses, such as clothing and
entertainment.
• Enter the amount you put into savings.
• Now total all of your expenses and your savings and subtract
this total from your net income.
• If you have money left over, you may
want to use it to increase your savings.
Spending & Debt
Spending & Debt
• Weigh benefits and costs of spending
alternatives
• Credit can be a friend — and not a foe —
as a basic financial tool
Spending & Debt
Use credit wisely:
• Beware of credit card intro rates
• Avoid having multiple credit cards
• Pay in full every month
• Pay on time
• Avoid cash advances
Spending & Debt
Use credit wisely:
• Stay within your credit limit
• Review your statements carefully
• Protect your credit history
• Report lost/stolen cards immediately
• Protect personal information
Spending & Debt
How to reduce debt:
• Cut back on spending
• Consolidate your debt
• Seek out payment options
• Don’t miss payments or default
• Homeowners: use your equity
• Home equity credit is often cheaper
Saving & Investing
Saving & Investing
• Saving means not spending money.
• Investing means that you earn a return on
the money you put into it.
Saving & Investing
Saving money:
• Save on a regular basis
• Willpower + a good plan = success
• You’ll feel the power
• You’ll be motivated
Saving & Investing
Small changes add up:
• Get out your piggy bank– again!
• Feed the Pig
• Small amounts add up
to big savings
Saving & Investing
7 steps to get started:
• Think small
• Be consistent
• Make it easy
• Pay yourself first
• Allow for slip-ups
• Team up
• Congratulate yourself
Saving & Investing
Small money saving tips:
• Use your own bank’s ATMs; avoid other banks’
charges
• Find out whether your health insurer covers gym dues
• Don’t spend your next raise; bank it
• Sign up for payroll deductions
• Invest in savings bonds or CDs
• Sign up for payroll direct deposit
Saving & Investing
Investing money:
• Compound interest
• Rule of 72
• Planning for wealth
• Make the most of a 401(k)
Saving & Investing
Compound interest:
• Consistent steps, even small ones, can add up
• $25/week for 10 years @ 5% = $16,950
• Add $1 a week, and you’ll have $17,840!
$25/Week for 10 years
$20,000
$15,000
Accumulation
4 % Return
$10,000
6 % Return
$5,000
$0
1 2 3 4 5 6 7 8 9 10
Years
Saving & Investing
The Rule of 72
Growth over Time
$30,000
$20,000 4%
Value
6%
$10,000
8%
$-
5 yrs 10 yrs 15 yrs 20 yrs
4% $6,083 $7,401 $9,005 $10,956
6% $6,691 $8,954 $11,983 $16,053
8% $7,347 $10,795 $15,861 $23,305
Years
Saving & Investing
Short-term investment options:
• Certificate of Deposit (CD)
• Money Market Funds
• Savings Account
Saving & Investing
Long-term investment options:
• Mutual fund
• Stocks
• Bonds
Saving & Investing
Retirement investment options:
• 401(k)
• Individual Retirement Account (IRA)
• Social Security
Risk Management
Risk Management
• Insurance
• Identity theft
Risk Management
Health care insurance:
• Types of Managed Care Plans
> Health Maintenance Organizations (HMOs)
> Preferred Provided Organizations (PPOs)
> Point-of-Service Plans (POS)
Risk Management
Long-term disability insurance:
• Benefit amount
• Term
• Elimination period
• Noncancelable
• Guaranteed renewables
• Own vs. any occupation
• Workers’ compensation
• Social security disability
• Veterans benefits
• Federal Employees Retirement System
Risk Management
Life insurance:
• Choosing coverage
> premiums
> family need
> time period
• Term vs. Permanent
Risk Management
Permanent life insurance options:
• Whole life
• Universal life
• Variable life
Risk Management
Identity theft:
• Make a list of all of your credit cards, and store in a
secure place that is easily accessible.
• Keep your credit card in sight when you use it to pay
for a purchase, if possible.
• Don't carry your birth certificate or Social Security card
in your wallet.
• When dining out, keep your purse or wallet secure.
• Use drive-through ATMs or use only in safe, well-
trafficked area, if possible.
Risk Management
Identity theft:
• Shred pre-approved credit card or loan applications.
• Check your bank statements as soon as you receive
them, and order a copy of your free credit report once
a year.
• Never give your Social Security, credit card or bank
account numbers to anyone who calls you.
• If you are concerned about a potential scam, call the
local police.
Life’s Milestones
Life’s Milestones
Buying your first home:
• Establish good credit
• Understand “real costs”
• Assess risks
Life’s Milestones
Getting married:
• Understand “financial partnership”
• Establish separate and joint credit/bank accounts
• Create wills and trusts
• Identify beneficiaries
• Choose owners on title assets
Life’s Milestones
Finance a family:
• Budget
- Education
- Health care
- Child care
• Manage risk, insurance
• Create wills
• Instill financial literacy
Life’s Milestones
Starting a business:
• Understand
- cash flow
- expense timing
• Manage income and expenses
Life’s Milestones
Planning for retirement:
• Determine how much money you will need.
• Determine where your retirement income will come
from.
• Devise a budget and investment strategy to help you
meet your goals.
Life’s Milestones
Preparing a will:
• Designate beneficiaries
• Determine asset distribution
• Identify insurance
Life’s Milestones
Tax planning:
• Make the system work for you
• Get a tax credit for any dependent care you provide
• Keep good records to document your deductions
• Deduct mortgage interest and real estate taxes
• Plan your investment gains to minimize taxes
• Bank your tax refund
ASSIGNMENT: Budgeting
Monthly income: P 12,000.00
Common expenses (rent, utilities, groceries,
entertainment, etc.) with estimated costs.
1. Create a budget that includes all these
expenses, ensuring you don't exceed your
income.
2. Allocate a certain percentage to savings.
Thank You!
