Post on 25-May-2015
BUILDING A FINANCIAL FOUNDATION 1
DO
IT R
IGH
T!
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BUILDING A FINANCIAL FOUNDATION 2
WE
ALT
H W
ITH
RES
PO
NS
IBIL
ITY THE WEALTH FORMULATHE WEALTH FORMULA
Money+ Time
+/- Rate of Return
- Inflation- Taxes
You can build a successful financial future!
Wealth
BUILDING A FINANCIAL FOUNDATION 3
DO
IT R
IGH
T! THE X-CURVE CONCEPT OF
WEALTH & RESPONSIBILITY
You must take care of your responsibilities while building your wealth.
This concept theorizes that a person’s responsibilities generally decrease and wealth generally increases over time.
THE X-CURVE
BUILDING A FINANCIAL FOUNDATION 4
WE
ALT
H W
ITH
RES
PO
NS
IBIL
ITY SAVE EARLY
MR. START EARLY saves $3,600 per year for 7 years in an 8% tax deferred account.
Procrastination is one of the main causes of failure.
MR. WAIT LONGERstarts saving $3,600 per year for 17 years in an 8% tax deferred account, 7 years later than Mr. Start Early.
BUILDING A FINANCIAL FOUNDATION 5
PA
Y Y
OU
RS
ELF
FIR
ST SMALL CHANGES,
BIG MONEY
Discipline and consistency are the keys.
What if you can make small changes in your spending habits and start saving $10/day ($300/month)?
$300/MONTH AT 8% IN 30 YEARS2
$447,107
$600/MONTH AT 8% IN 30 YEARS2
$894,214
Can you cut down on the following:• Sodas • Cigarettes • Lattes • Cable TV • Games • Bottled Water • Sweets •
New Gadgets • Shopping • Driving a Big Car • Eating Out • Partying ...
2 All figures are for illustrative purposes only and do not reflect an actual investment in any product. Additionally, they do not reflect the performance risk, expenses or charges associated with an actual investment. Past performance is not an indication of future results.
BUILDING A FINANCIAL FOUNDATION 6
DO
IT R
IGH
T! THE POWER OF COMPOUNDING
INTEREST
The difference between $10,000 at 4% versus 12% is $600,000. $600,000 is equivalent to 20 years salary of a person who works at an
annual salary of $30,000.
THE RULE OF 72
BUILDING A FINANCIAL FOUNDATION 7
UN
DE
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TA
ND
TH
E R
EA
L R
ATE O
F R
ETU
RN
THE EFFECT OF TAXES &
INFLATIONON YOUR PURCHASING POWER:
EXAMPLE 1:If you save.................$1,000.00at 3% Interest............+ 30.00Pay Tax at 25%......... - 7.50(Combined Fed & State)….. ________
Net After Tax..............$1,022.50Inflation at 3.5%….....- 35.00Actual Return.............$ 987.50
(After Tax & Inflation)
EXAMPLE 2:If you save.................$1,000.00at 5% Interest............+ 50.00Pay Tax at 25%......... - 12.50(Combined Fed & State)….. ________
Net After Tax..............$1,037.50Inflation at 3.5%….....- 35.00Actual Return.............$1,002.50
(After Tax & Inflation)
You must get
about 5% or morein interest to beat
taxes and inflation.
You Lose!
BUILDING A FINANCIAL FOUNDATION 8
Are youwinning or losingthe money game?
UN
DE
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TA
ND
TH
E R
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L R
ATE O
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ETU
RN
THE COST OF LIVING IN THE UNITED STATES IN 1978
Average Income Per Year: $17,000
Average Cost of a New House: $54,800
Average Rent: $260
Cost of a Gallon of Gas: 63 cents
Dozen Eggs: 48 cents
Average Cost for a Chevrolet Nova: $3,823
BUILDING A FINANCIAL FOUNDATION 9
BE
CE
RTA
IN IN
UN
CE
RTA
IN T
IME KNOW THE RISKS
Let’s do some Math. Mr. A and Mr. B both have $100 to invest. In the following scenarios, who ends up doing better?
Mr. A Mr. BYear 1: +40%+10%Year 2: -20%+10%
Net: 20% 20%
SCENARIO 1:
Mr. A Mr. B$140 (100+40)$110 (100+10)$112 (140-28)
$121 (110+11)
$112 vs. $121
Result:
Mr. A Mr. BYear 1: +50% +0%Year 2: -50% +0%
Net: 0% 0%
SCENARIO 2:
Mr. A Mr. B$150 (100+50)$100 (100+10)$75 (100-75) $100
(100+10)
$75 vs. $100
Result:
BUILDING A FINANCIAL FOUNDATION 10
Client 1 Client 2
D EBT _______ _______
I NCOME _______ _______
MORTGAGE _______ _______
E DUCATION _______ _______
TOTAL: _______ _______
TA
KE
CA
RE
OF
YO
UR
FA
MIL
Y PROTECT YOUR FAMILYTHE DIME METHOD
Combined credit cards,
loans and other debts.D EBT $ 50K $3K/mo. ($36K/yr.) income replacement for
10 years. I NCOME $360KMortgage balances.
MORTGAGE $200KAssuming $15K/yr. for a 4-year college for 2 kids.
E DUCATION $120KProtection NeededProtection Needed
TOTAL: $730K
BUILDING A FINANCIAL FOUNDATION 11
TA
KE
CA
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OF
YO
UR
FA
MIL
Y THE ODDS OF LIFE BEFORE AGE 65
AgeDeathvs.Disability25 24.1% 34.8%30 23.5% 33.1%35 22.8% 31.3%40 21.8% 29.1%45 20.4% 26.3%50 18.3% 22.6%55 14.9% 17.6%60 9.3% 10.6%
BUILDING A FINANCIAL FOUNDATION 12
TA
KE
CA
RE
OF
YO
UR
FA
MIL
Y WHAT IS YOUR FAMILY’SMOST IMPORTANT ASSET?
• Your house?
• Your cars?
• Your valuables?
It’s You!!!It’s your ability to generate
income!
BUILDING A FINANCIAL FOUNDATION 13
KN
OW
YO
UR
PR
IOR
ITY BUILDING A SOLID
FINANCIAL FOUNDATION
Like building a house,you must build it
from the ground up.
Build it right.
Build it strong.
INVESTMENT
EMERGENCY FUND
DEBT MANAGEMENT
PROTECTION
BUILDING A FINANCIAL FOUNDATION 14
Scenario 2
Pay a Little Morethan Minimum: $145/month
Time Pay: Less than 4 years
TotalInterest Paid: About $1,600
PAY MORE THAN THE MINIMUM, REDUCE YOUR DEBT SOONER.
KN
OW
YO
UR
PR
IOR
ITY MANAGE YOUR DEBT
Scenario 1
Pay Minimum(2.5% per month):$112.50/month
Time Pay: Over 25 years
TotalInterest Paid: Over $6,000
Control your debt or your debt will control you.
Example: $4,500 Credit Card BalanceInterest Rate 18%
BUILDING A FINANCIAL FOUNDATION 15
KN
OW
YO
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PR
IOR
ITY CREATE AN EMERGENCY FUND
You should set aside 3-6 months income to help cope with emergencies and unexpected changes:
• Job Loss
• Major Damages or Repairs for Homes, Business Properties, Cars, etc.
• Illness
• Disaster
• Be Prepared for the Rainy Days.
BUILDING A FINANCIAL FOUNDATION 16
GE
T S
TA
RTE
D N
OW MANAGE GROWTH
The 4 Cornerstones of a Strong Financial Future:
YOUR FINAL TEST
Can it potentially GROW
to achieve your goal?
Is it SAFE enough?Does it have TAX ADVANTAGES?Does it have the properPROTECTION for your family?
Your Plan for the Future:
REDUCEYOURDEBT
REDUCEYOURDEBT
PAYYOURSELF
FIRST
PAYYOURSELF
FIRST
MAKEMORE
MONEY
MAKEMORE
MONEY
BUILDUP
EQUITY
BUILDUP
EQUITYPRESERVE YOUR
ESTATEPRESERVE YOUR
ESTATE
Build it with confidence.
BUILDING A FINANCIAL FOUNDATION 17
DO
IT R
IGH
T!
U.S.:World Financial Group, Inc. (WFG) is a financial services marketing company whose affiliates offer life insurance and a broad array of financial products and services. Securities offered through Transamerica Financial Advisors, Inc. (WGS), Member FINRA/SIPC. Insurance products are offered through World Financial Group Insurance Agency, Inc. (WFGIA) or its subsidiaries. In California such services are provided under the name World Financial Insurance Agency, Inc. WFG, WGS and WFGIA are affiliated companies. Headquarters: 11315 Johns Creek Parkway, Johns Creek, GA 30097-1517, PO Box 100035, Johns Creek, GA 30096-9403. Phone: 770.453.9300.
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