DREAMS

1. Buying a Car

2. Trip to Kazakhstan

3. Owning a Home

LIST 3 DREAMS FOR YOUR FUTURE

CONGRATULATIONS!

• You now have 3 Financial Goals

• By making them SMART Goals you can make them a reality

STRONG FINANCIAL GOALS

• Are SMART

–Specific–Measurable–Action-oriented–Realistic–Timely

SMART GOALI will have $1 million inassets by age 65. To

do that I will invest $250per month in mutual

funds with an average annual

earnings of 10%.

SMART GOALI will have $1 million inassets by age 65. To

do that I will invest $250per month in mutual

funds with an average annual

earnings of 10%.

GOAL SETTING SAMPLES

WEAK GOALI want to

be rich

I WILL BUY A HOUSE WITHIN THE NEXT FIVE YEARS.

To achieve this goal I will:

• Get a copy of my credit report within 30 days.

• Pay off my car one year early by making double payments each month.

• Double my current savings to equal $500 per month to be able to have $30,000 for closing costs, down payment and other expenses.

THE FINANCIAL PLANNING PYRAMID

Options, Commodities,

etc.

Controlled Spending

AdequateIncome

Adequate Insurance

Goal-Getter

EmergencyReserveSAVINGS

LEVEL

MANAGEMENTLEVEL

Stocks Bonds MutualFunds

RealEstate

HardAssets

INVE

STM

ENT

LEVE

LS

WHAT IS A SPENDING PLAN?

A written method to achieve your financial goals and manage your

money.

A common name for a spending plan is a budget!

A SPENDING PLAN:

• Is a guide • Doesn’t need to be down to the penny

• Is easy to understand • Is a reflection of your needs, wants, values and goals

A SPENDING PLAN:

• Is based on current income and expenses

• Is practical and realistic• Is flexible• Provides for pleasures as well as necessities

PLANNING WILL HELP YOU:

• Live within your income• Realize personal goals• Maintain a good credit history• Get more for your money• Reduce financial stress and arguments

• Achieve financial competence and confidence

DEVELOP A PERSONAL FINANCIAL

PLAN

Financial Planning Worksheet

Financial Planning Worksheet

THE NET WORTH

• Assets - Liabilities = Net Worth

• (What you OWN minus what you OWE)

• A measure of your wealth at a certain point in time

• Calculate yearly

13

THE CASH FLOW OR BUDGET

• Income• Savings• Living Expenses

• Indebtedness

INCOME

• Gross Income: total pay, everything you earn

• Net Income: gross pay less taxes

• Take-home pay: net income less any other deductions or automatic allotments

SAVINGS

• Monthly Contributions to– Reserve Fund– Emergency Fund– Goal-Getter Fund– Investments/IRAs, etc.– TSP

•

LIVING EXPENSES

• Monthly Amounts• Typical Expenses

– Housing and Utilities– Food– Transportation– Child Care– Clothing– Insurance and Healthcare– Leisure, etc.

TRACK EXPENSES

• Track for 30 days• Record all expenses each day• Identify expense category• Total monthly expenses for each category

INDEBTEDNESS

• List Creditor and Total Balance Due

• List only the Minimum Monthly Payment Amount

• List Interest Rate• Total at the Bottom

SUMMARY BLOCK

• Guidelines for Total Net Income–70% Living expenses–20% Indebtedness–10% Savings

DEBT-TO-INCOME RATIO

• Total of all monthly debt payments divided by net monthly income (not including mortgage)<15% OK to add credit

15 - 20% Fully extended

21-30% Overextended

>30% Seek help immediately

DEBT-TO-INCOME RATIO

Example: Net income= $2980 Total minimum monthly debt payments= $545

545 / 2980 = .1829 .1829 * 100 = 18.29Debt-to-income ratio = 18.29%

Where

should this go?

How can we

fix this?

SurplusSurplus

DeficitDeficit

Whereshould

thisgo?

Howcan we

fix this?

THE ACTION PLAN

• Ways to Improve Your Plan–Decrease living expenses–Increase income–Decrease indebtedness

• Referrals and Recommended Training

• Goals Section

YOUR SPENDING PLAN

• Paycheck-by-paycheck breakdown• Forces you to make deliberate spending decisions

If you consider buying something not on your plan:–You must make a choice: take on more

debt, spend money allotted to something else, or pass on the expense.