Post on 04-Jan-2016
Caring For Those Who Serve
Setting and Monitoring Financial
GoalsPresenter: Mark Conner
August 16, 2010
Learning,Living & Leading
Stewardship
Our Mission
To serve and support the financial well-being of participants guided by the principles of The United Methodist Church
Today’s Agenda
• Establishing Financial Goals
• Two financial tools with practical uses:■ Net worth statement■ Spending plan
• Building savings & investment programs
• Selected Topics
• What’s your legacy ?
We Are Stewards of Our Resources
• Cultivate skills• Plan ahead• Pieces of the puzzle
■ Resources■ Saving and investing■ Insurance or risk management■ Taxation■ Retirement and benefits■ Estate planning
• Develop good habits
Financial Planning Process
• Witness with Christian stewardship • Understand our resources • Define purpose for resources• Withstand pressure to consume• Project accomplishment of goals• Handle economic and unexpected changes• Invest with social responsibility • Pass our legacy to future generations
Enables us to:
For Every Financial Goal
• Identify a cost or define success• Project a time horizon—
hope vs. required• Determine how it will it be
funded• Decide how to measure progress• Determine how this goal fits into
the overall scheme• State the consequences for
not accomplishing• Decide what will be the next
steps, secondary goals
Exercise 1:Exercise 1: Financial Goals Financial Goals
How are you using your resources?
• Track expenditures
• Create budget both of resources and uses
• Build tithe and savings into your plan
• Align spending with goals
Purpose: to raise awareness of spending patterns in order to align them with goals
Keeping Track of What You Have Acquired
Purpose: To set a baseline for where you are today to be compared periodically with future results
• Create a listing of assets and liabilities (net worth statement)
■ Expectation is to see growth in assets and reduction in liabilities
Cash Management System
• Create a “tracking system”
• Establish an emergency fund
• Reconcile spending and savings accounts
• Monitor progress towards goals and annually review net worth changes
• Revisit collection of goals for any additions, deletions or new priorities
• Get back on track
Get In the Habit of Saving Early
• First step—build emergency reserve
• Time value of money
• Next step—goal funding
Emergency Reserve
• Three to six months of living expenses
• Liquid and accessible account
• Line of credit or credit card• Loans
Insurance policy Credit union Home equity
Backup Resources:
Exercise 2:Exercise 2: Emergency Fund Emergency Fund
Detour Strategies
FinancialFinancialPlanning Planning ProcessProcess
EmergencEmergencyy
FundFund
InsuranceInsurance
Risk Management
• Provision for income continuation
• Premature death—need to replace future earnings
• Medical expenses
• Personal liability
• Loss of personal or real property—due to fire, casualty, theft, etc.
• Unreimbursed rehabilitation or custodial care
• Longevity—living beyond resource stream
Investing Basics: Considerations
Time frame for investing
Risk tolerance
Diversification
Sociallyresponsible
choices
Concepts and Principlesof Saving and Investing
Sticking to basics
Diversification:Choose from a variety of
possibilitiesMaximizing return + minimize riskCreate a portfolio that uses
multiple assets classes
Asset allocation:The mix by “category”
Keeping the pieces in balance
5-year holding periods
Compound annual return20-year holding periods
Each bar shows the range of compound annual returns for each asset class over the period 1926–2006
1-year holding periods
Smallcompany
stocks
Largecompanystocks
Governmentbonds
Treasury bills
-75%
-50%
-25%
0%
25%
50%
75%
100%
125%
150%
10.4%12.6% 5.4% 3.7%
This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. 2007 Morningstar, Inc.© All rights reserved.
Reduction of Volatility Over Time
Asset Classes for Diversification
AlternatiAlternative ve
AssetsAssets
Common Common EquitiesEquities
Fixed Fixed IncomeIncome
Cash and Cash and EquivalenEquivalen
tsts
• Real estate•
Commodities
• Other
• U.S. and international• Growth and value• Large, midsize
and small-cap companies
• Government bonds
• Corporate bonds
• Inflation-indexed bonds
• Money market accounts• CDs
• Commercial paper
Less Risk/Return More Risk/Return
Risk/Potential Return
Investment Options -UMPIP
SVFSVF
IPFIPF
DBFDBF
MAFMAF
DSFDSF
ISFISF
BSVPFBSVPF• Stable Value Fund• Inflation Protection Fund• Domestic Bond Fund• Multiple Asset Fund
• Balanced Social Value Plus Fund
• Domestic Stock Fund• International Stock Fund
Ris
kR
isk
Return PotentialReturn Potential
Historical Inflation Rates
Source:Stocks, Bonds, Bills and Inflation 2007 Yearbook™Morningstar, Table C-7
1997 - 2006
1992 - 2006
1987 - 2006
1926 - 2006
1967 - 2006
Investment Characteristics
INCOME
SAFETY GROWTH
Retirement AnalysisRetirement Analysis
Social Security,
After Taxes
Pension, After Taxes
After Tax Income Need
Steward Puts “House in Order”
Financial resources• Savings• Credit ‘worthy’• Tax savvy
Cash managementsystem
Estate documents
and other tools
Faithful Stewardship
Earn all you can
Make best use of resources
Save all you can
Set financial goals
Develop good habits
Be disciplined
Take time for financial education
Give all you can