Download personal-finance-101-brief1

Personal Finance 101
Part 1 . . .
5/24/2017
AGENDA
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Purpose
Budgeting
Credit Cards
Three Tenets of Personal Finance
Emergency Savings
Retirement Investing
– Thrift Savings Plan (TSP)
– Individual Retirement Accounts (IRAs)
• Life Insurance
– Servicemembers’ Group Life Ins (SGLI)
– Term vs. Whole Life Insurance
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PURPOSE
To provide Army leaders with a Better
Understanding of personal financial planning
in order to provide our Soldiers timely,
accurate, and honest information in order to
make more informed decisions.
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Budgeting
• Almost everyone hates
to budget
• You must have a good
idea of your income and
expenses
• For one month = keep
track of every penny you
spend. You’ll be
shocked to see where
your money goes
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Credit Cards
If you spend $4,000
on credit cards at
18.5% interest and
pay only the minimum
payments, it will take
you 11 years to pay off
($7,800 total).
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Three Main Tenets of Personal Finance
• Savings
– Emergency Fund
• Investing
– Individual Retirement Accounts
(IRA)
– Federal Thrift Savings Plan
• Insurance
– Servicemembers’ Group Life
Insurance (SGLI) & Family SGLI
– Term vs. Whole Life
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Emergency Savings
Rainy days will happen….
• You need 3-6 months of living expenses
saved
• Very liquid….not in CDs, mutual funds,
etc.
• The more secure your job, the less you
need (Army = 3 months)
• Most should aim for $10,000
• More responsibilities = larger savings
needed
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Getting Started
Everyone can begin saving
something
• Start with $50 a month if nothing else
• Many mutual funds can be started with as
little as $50 (USAA for example)
• Everyone has a Latte Factor…find yours.
• Time is your biggest benefit. You miss out
on compounding interest the longer you
wait.
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Retirement Investing - TSP
Thrift Savings Plan….
• Exactly like a civilian 401-k retirement plan
• Five index funds & four target date Life Cycle funds
– Index funds follow S&P 500, Wilshire 5000, etc.
– Life Cycle funds are too conservative for most
• Funded with before tax dollars
• Earnings grow tax deferred & taxes are owed on
the interest and capital gains when withdrawn
• Can withdraw the money at 59 ½ years old
• $15,500 maximum yearly contribution limit
• Automatic enrollment….coming soon!
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Retirement Investing – Roth IRA
Roth IRAs….
• Usually invested inside mutual funds or a
brokerage account with individual stocks
• Funded with after tax earnings
• Earnings grow tax free & no taxes are owed on
interest and capital gains when withdrawn
• Can withdraw the money at 59 ½ years old
• $5,000 maximum contribution limits ($416 a
month)
• Investing $5,000 a year starting at 22 years-old,
earning 8% annually, will grow to over $2.2
million at age 62 (your investment =$245,000)
• Skip a Traditional IRA until you max out a Roth
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Investing Tips
• It’s usually more beneficial to start with a
Roth IRA and then invest in TSP
• You can take out a loan for college, but
you can’t take out a loan for retirement
• Investments with low expenses (like Index
Funds) are a great place for a beginner
investor
• Individual stocks are hard to track, mutual
funds are better & more diversified
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Life Insurance
Is $400,000 SGLI enough? Maybe….
• You need approximately 10x your income
– For an E-6 with 10 years of service, you should have
$500,00 in insurance. Do not forget to include BAH.
• Do you depend on your wife’s income? You may
need insurance for her.
• Will the Family SGLI be enough to cover full time
daycare for children, fixing meals, etc.?
• You have disability insurance with the Army, but
does your spouse have it at her work? Can you
survive a loss of her income?
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Life Insurance
• For most people, Term insurance is better
than Whole Life
– $100,000 Whole Life = $100 a month
– $500,000 Term Life = $40 a month
• 20 to 30 year term insurance (like SGLI)
will protect you while your children are
young
• You only need insurance to protect income
• Insurance on children is a waste of money
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The Last Word…..
If you take
nothing else
away….
Start now!
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QUESTIONS ?
“Amateurs talk about tactics, but
professionals study Logistics.”
– General Omar Bradley
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