P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M Saving and Investing 1.

P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M

Saving and InvestingSaving and Investing

1

S A V I N G & I N V E S T I N G 2

Invest for the Long TermInvest for the Long Term

Get Started Early...What will it take to have ½ million dollars at retirement…starting at age 25? 35? 45?

* 10% rate of return, tax-deferred

Get Started Early...What will it take to have ½ million dollars at retirement…starting at age 25? 35? 45?

* 10% rate of return, tax-deferred

Start Saving at 25$79 per month

$37,920 Out of Pocket$500,000 Total

$37,

920



$79,

560



$157

,920


You Can Be a Millionaire!Plan AYou Can Be a Millionaire!Plan A

Age Payment Total21 $3,000 $3,300 22 $3,000 $6,930 23 $3,000 $10,923 24 $3,000 $15,315 25 $3,000 $20,147 26 $3,000 $25,462 27 $0 $28,008 28 $0 $30,808 29 $0 $33,889 30 $0 $37,278 31 $0 $41,006 32 $0 $45,107 33 $0 $49,617 34 $0 $54,579 35 $0 $60,037 36 $0 $66,041 37 $0 $72,645 38 $0 $79,909 39 $0 $87,900 40 $0 $96,690 41 $0 $106,359 42 $0 $116,995 43 $0 $128,694

Age Payment Total44 $0 $141,564 45 $0 $155,720 46 $0 $171,292 47 $0 $188,422 48 $0 $207,264 49 $0 $227,990 50 $0 $250,789 51 $0 $275,868 52 $0 $303,455 53 $0 $333,800 54 $0 $367,180 55 $0 $403,898 56 $0 $444,288 57 $0 $488,717 58 $0 $537,589 59 $0 $591,348 60 $0 $650,482 61 $0 $715,531 62 $0 $787,084 63 $0 $865,792 64 $0 $952,371 65 $0 $1,047,608

$18,000

$1,047,608$1,047,608


You Can Be a Millionaire!Plan BYou Can Be a Millionaire!Plan B

Age Payment Total21 $0 $0 22 $0 $0 23 $0 $0 24 $0 $0 25 $0 $0 26 $0 $0 27 $0 $0 28 $0 $0 29 $0 $0 30 $0 $0 31 $3,000 $3,300 32 $3,000 $6,930 33 $3,000 $10,923 34 $3,000 $15,315 35 $3,000 $20,147 36 $3,000 $25,462 37 $0 $28,008 38 $0 $30,808 39 $0 $33,889 40 $0 $37,278 41 $0 $41,006 42 $0 $45,107 43 $0 $49,617

Age Payment Total44 $0 $54,579 45 $0 $60,037 46 $0 $66,041 47 $0 $72,645 48 $0 $79,909 49 $0 $87,900 50 $0 $96,690 51 $0 $106,359 52 $0 $116,995 53 $0 $128,694 54 $0 $141,564 55 $0 $155,720 56 $0 $171,292 57 $0 $188,422 58 $0 $207,264 59 $0 $227,990 60 $0 $250,789 61 $0 $275,868 62 $0 $303,455 63 $0 $333,800 64 $0 $367,180 65 $0 $403,898

$18,000

$403,898$403,898


You Can Be a Millionaire!Plan CYou Can Be a Millionaire!Plan C

Age Payment Total21 $0 $0 22 $0 $0 23 $0 $0 24 $0 $0 25 $0 $0 26 $0 $0 27 $0 $0 28 $0 $0 29 $0 $0 30 $0 $0 31 $3,000 $3,300 32 $3,000 $6,930 33 $3,000 $10,923 34 $3,000 $15,315 35 $3,000 $20,147 36 $3,000 $25,462 37 $3,000 $31,308 38 $3,000 $37,738 39 $3,000 $44,812 40 $3,000 $52,594 41 $3,000 $61,153 42 $3,000 $70,568 43 $3,000 $80,925

Age Payment Total44 $3,000 $92,317 45 $3,000 $104,849 46 $3,000 $118,634 47 $3,000 $133,798 48 $3,000 $150,477 49 $3,000 $168,825 50 $3,000 $189,007 51 $3,000 $211,208 52 $3,000 $235,629 53 $3,000 $262,492 54 $3,000 $292,041 55 $3,000 $324,545 56 $3,000 $360,300 57 $3,000 $399,630 58 $3,000 $442,893 59 $3,000 $490,482 60 $3,000 $542,830 61 $3,000 $600,413 62 $3,000 $663,755 63 $3,000 $733,430 64 $3,000 $810,073 65 $3,000 $894,380

$105,000

$894,380$894,380


You Can Be a Millionaire!Plan DYou Can Be a Millionaire!Plan D

Age Payment Total21 $0 $0 22 $0 $0 23 $0 $0 24 $0 $0 25 $0 $0 26 $0 $0 27 $0 $0 28 $0 $0 29 $0 $0 30 $0 $0 31 $0 $0 32 $0 $0 33 $0 $0 34 $0 $0 35 $0 $0 36 $10,000 $11,000 37 $10,000 $23,100 38 $10,000 $36,410 39 $0 $40,051 40 $0 $44,056 41 $0 $48,462 42 $0 $53,308 43 $0 $58,639

Age Payment Total44 $0 $64,503 45 $0 $70,953 46 $0 $78,048 47 $0 $85,853 48 $0 $94,438 49 $0 $103,882 50 $0 $114,270 51 $0 $125,697 52 $0 $138,267 53 $0 $152,094 54 $0 $167,303 55 $0 $184,033 56 $0 $202,437 57 $0 $222,680 58 $0 $244,948 59 $0 $269,443 60 $0 $296,387 61 $0 $326,026 62 $0 $358,629 63 $0 $394,492 64 $0 $433,941 65 $0 $477,335

$30,000

$477,335$477,335


Your Honor, I Object!Your Honor, I Object!

•I’ll be dead when I’m 65!– Financial Planners are planning

out to age 100.

•Where can I get 10%??– It’s out there, and we’ll

show you where!

•I’ll be dead when I’m 65!– Financial Planners are planning

out to age 100.

•Where can I get 10%??– It’s out there, and we’ll

show you where!


The Financial Planning PyramidThe Financial Planning Pyramid

Options, Commoditie

s, etc.

Controlled Spending


Savings PlansSavings Plans

Savings factors to consider:•Safety•Liquidity•Yield

Savings factors to consider:•Safety•Liquidity•Yield

Options, Commoditie

s, etc.

Controlled Spending


Savings ToolsSavings Tools

•Regular savings account or Share savings account

•Certificates of deposit

•Money market accounts

•U.S. savings bonds (EE and I)

•Regular savings account or Share savings account

•Certificates of deposit

•Money market accounts

•U.S. savings bonds (EE and I)


Saving vs. InvestingSaving vs. Investing

•Different Time Frames

•Different Risks

•Inflation : $100 in 1984 = $215.00 in 2007

•Taxes

•The Effect of Compound Interest and Time

•Different Time Frames

•Different Risks

•Inflation : $100 in 1984 = $215.00 in 2007

•Taxes

•The Effect of Compound Interest and Time


How Savings and Investments

in “Regular Account” are Taxed

How Savings and Investments

in “Regular Account” are Taxed


How Savings and Investments in “Tax-Deferred Accounts” are Taxed

How Savings and Investments in “Tax-Deferred Accounts” are Taxed

•Contributions are taken out of your pay before taxes are withheld, so you pay less tax now.

•Taxes on contributions and attributable earnings are deferred until you withdraw your money.

•Qualified withdrawals are taxed at MITB (at the time of withdrawal).

•Contributions are taken out of your pay before taxes are withheld, so you pay less tax now.

•Taxes on contributions and attributable earnings are deferred until you withdraw your money.

•Qualified withdrawals are taxed at MITB (at the time of withdrawal).


Compound Interest and TimeCompound Interest and Time

$36,000$36,000

Th

ou

san

d $

Th

ou

san

d $

YearsYears

5050

100100

0 5 10 15 20 25 300 5 10 15 20 25 30

150150

200200

00

250250

$83,673$83,673

$228,033$228,033

10%10%

5%5%

0%0%


Should I Spend That Nest Egg?Should I Spend That Nest Egg?

Th

ou

san

d $

Th

ou

san

d $

Years

Years

5050

100100

$228,033$228,033

0 5 10 15 20 25 300 5 10 15 20 25 30

150150

200200

250250

Spent nest egg on a car

$133,889$133,889

$94,144

LOST!

10%10%

10%10%


The Tools of InvestingThe Tools of Investing

Options, Commoditie

s, etc.

Controlled Spending


Asset ClassesAsset Classes

Everything else is a combination of these three!


Fixed-Income: BondsFixed-Income: Bonds

•Represent a loan

•Provide fixed income payments

•Reliable source of income

•Rate of Return: 3.7 – 5.5%

•Moderate level of liquidity

•Typically purchased through a brokerage

•Represent a loan

•Provide fixed income payments

•Reliable source of income

•Rate of Return: 3.7 – 5.5%

•Moderate level of liquidity

•Typically purchased through a brokerage


Equity: StocksEquity: Stocks

•U.S.

•Foreign

•Large Companies

•Small Companies

•Growth

•Value

•U.S.

•Foreign

•Large Companies

•Small Companies

•Growth

•Value

Represent ownership

Can be purchased through a brokerage, an employer investment plan, or directly from issuing company (DRIPs)


StocksStocks

•Returns from dividends and capital gains

•Rate of Return: 10 - 12%

•Higher Risk than Bonds

•Need from 10 – 30 to diversify!

•Best choice for long-term growth

•Returns from dividends and capital gains

•Rate of Return: 10 - 12%

•Higher Risk than Bonds

•Need from 10 – 30 to diversify!

•Best choice for long-term growth


The Lessons…The Lessons…

• Stocks provide a higher potential for earnings over the long-term

• There is always a trade-off between S-L-Y

• A well-balanced portfolio has a combination of all asset classes

• There are no good or bad tools, just good or bad uses

• For younger investors, it is better to be an owner than a loaner

• The steady income stream provided by bonds is great for retirement

• Investing can be complex, but doesn’t have to be!

• Stocks provide a higher potential for earnings over the long-term

• There is always a trade-off between S-L-Y

• A well-balanced portfolio has a combination of all asset classes

• There are no good or bad tools, just good or bad uses

• For younger investors, it is better to be an owner than a loaner

• The steady income stream provided by bonds is great for retirement

• Investing can be complex, but doesn’t have to be!


Mutual FundsMutual Funds

Pool of Investors

The Funds Professional Management

Diversified Portfolio

Interest &Dividends

CapitalGains

NAV



Advantages:

•Professional Management

•Diversification

•Liquidity

•Affordability

Advantages:

•Professional Management

•Diversification

•Liquidity

•Affordability

Benefits small investorsBenefits small investors



Disadvantages:

•Cost Despite Negative Returns

•Lack of Control

•Price Uncertainty

•Not Insured

•Complex Records

Disadvantages:

•Cost Despite Negative Returns

•Lack of Control

•Price Uncertainty

•Not Insured

•Complex Records



Stocks:• Growth• Income• Index• Sector

Stocks & Bonds:• Asset allocation• Balanced

Stocks:• Growth• Income• Index• Sector

Stocks & Bonds:• Asset allocation• Balanced

Bond:• High-yield bond• Corporate bond• Municipal

(tax-free) bond• Government

bond• Index

Cash:• Money Market

Bond:• High-yield bond• Corporate bond• Municipal

(tax-free) bond• Government

bond• Index

Cash:• Money Market


Choosing a Mutual FundChoosing a Mutual Fund

•Goals/Objectives•Performance/Risk (long-term)•Management•Cost (loads & fees)•Services

•Goals/Objectives•Performance/Risk (long-term)•Management•Cost (loads & fees)•Services


What is “The Market”?What is “The Market”?

The Dow

NASDAQ

S&P 500

Wilshire 4500

Wilshire 5000

The Dow

NASDAQ

S&P 500

Wilshire 4500

Wilshire 5000

LBA Bond

NYSE

AMEX

NIKKEI

EAFE

LBA Bond

NYSE

AMEX

NIKKEI

EAFE


The TSP Investment OptionsThe TSP Investment Options

Returns are as of end of year 2006. For up-to-date returns go to www.tsp.gov.

G Fund• Government

Securities

• Especially Issued for TSP

• 2006: 4.93%

• 10 Yr: 5.31%

F Fund• Bonds

• Based on LBA Index

• 2006: 4.40%

• 10 Yr: 6.25%

C Fund• Stocks

• Based on S&P 500 Index

• 2006: 15.79%

• 10 Yr: 8.37%

S Fund• Stocks

• Based on Wilshire 4500 Index

• 2006: 15.30%

• 10 Yr: 9.56%

I Fund• International

Stocks

• Based on EAFE Index

• 2006: 26.32%

• 10 Yr: 7.53%

L Funds• Combination

of other funds

• Combination based on Time Horizon to Retirement


Saving & Investing TechniquesSaving & Investing Techniques

•Pay Yourself First

•The Military Saves Campaign

•Maximize Tax-Deferred Opportunities

•Make disciplined, regular monthly investments that fit in your budget

•Pay Yourself First

•The Military Saves Campaign

•Maximize Tax-Deferred Opportunities

•Make disciplined, regular monthly investments that fit in your budget


Take Action!Take Action!

•Determine financial goals

•Review your budget

•Save money you don’t have … Yet!

•Establish savings funds

•Get help if you need it

•Build an investment portfolio

•Keep learning

•Keep at it!

•Determine financial goals

•Review your budget

•Save money you don’t have … Yet!

•Establish savings funds

•Get help if you need it

•Build an investment portfolio

•Keep learning

•Keep at it!


Print Your CertificatePrint Your Certificate

Click on the following link to add your name to the certificate and print it:

Saving & Investing

P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M Saving and Investing 1.

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