Seven Rules For Financial Success

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Saunders Learning Group, Newton, KS Seven Rules for Financial Success The Beginning Investor Series. Tried and True, these are just seven common sense rules to build financial success, plus 12 rules for successful stock investing

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Everyone wants to be more financially secure, but don't know the basics of how to get there. This presentation is a roadmap with seven simple rules for financial success. It is part of a series of seminars offered by Saunders Learning Group on personal money management. You can now view the presentation here, order the Family Financial Freedom book from any of the ebook sites for iPhone, iPad, Kindle, Nook, Kobo reader etc. contact me at [email protected] for a copy of the presentation or more information on how to get seminar materials.

Transcript of Seven Rules For Financial Success

  • 1. The Beginning Investor Series.Seven Rules forFinancial SuccessTried and True, these are justseven common sense rules tobuild financial success, plus 12rules for successful stockinvestingSaunders Learning Group, Newton, KS

2. SaundersLearningGroupprovidesavarietyoftrainingprograms,workshopsandseminarstargetedtothefinancialservicesindustry.Programsareavailableinawiderangeoftopics,andwearespecialistsindevelopingcustomprogramsthataretargetedtoyourneeds.Contactthefounder,FloydSaundersat316-680-6482oratfloyd@floydsaunders.comformoreinformaKon.Saunders Learning Group, LLC, Andover, KS2Training from Saunders Learning Group 3. All About Figuring Out Wall Street ...Published by Saunders Learning Group.Training for financial professionals and consumers. If your interest is financial turn toSaunders Learning Group for your training needs.Contact information: email: [email protected] mobile: 316-680-6482Saunders Learning Group, LLC, Andover, KSEverythinghaschangedinthefinancialservicesindustryanditaffectsyourfinancialwell-being.Frombankfailures,torecordunemployment,homeforeclosuresandpanicaroundtheworld,FiguringOutWallStreet,istheconciseguidetohelpeveryonefromfirstKmeinvestorstoveteransofbankingunderstandwhattodotopersevereandrestoreourfaithinourfinancialsystems.3 4. Rule One Pay off Consumer Debt! Credit cards and other consumer debt is the greatest barrier to financialsuccess you face.! You pay high cost to borrow money (finance charges)! You increase your debt load and Debt-to-Income Ratio! You decrease the amount that you should be saving! You may put your property at risk (if you cant pay)! Less money each month for household expenses, saving and investing! Can easily overspend and create financial difficulties61% of Americans live from paycheck to paycheck, up from 32% in 2008.43 million Americans are on food stamps, mostly the elderly, children, and the working poor. 50%are white, 27% are black43% of Americans have less than $10,000 save for retirement, 36% contribute nothing24% of us postpone retirement by at a year80% of Americans have less than 6 months of income in reserve for a rainy dayPersonal bankruptcy increased by 32% in 1980, as millions of Americans lost their jobs and homesThe bottom 50% of incomes own less than 1% of the wealth in AmericaSaunders Learning Group, LLC, Andover, KS4Use the Snowball Effect to pay off debt 5. Snowball effect! Reviewallofyourdebt! Takethelowestbalancecreditcardorconsumerdebtandapplyasmuchaspossibletothebalanceeachmonthun:litispaidoff.! Cancelthatcardonceitispaidoff(unlessithasthelowestinterestrate)! Thentakethesamemonthlypaymentyoujusteliminatedanapplyittothenexthighestbalanceaccount(inaddi:ontowhatyourwerepaying),un:litispaidoff.! Dothisun:lyouhavepaidoffallofyourconsumerdebtandthenonlykeeponeopencreditcardaccount(findinganaccountwiththelowestpossibleinterestrate).Saunders Learning Group, LLC, Andover, KS5 6. What is the Cost of Credit?! If you borrow money on credit you will pay the lender a finance chargeSaunders Learning Group, LLC, Andover, KS6(their profit) for the use of their money.! Example of the cost of credit:Lets say that you borrow $10,000 from the Bank to purchase a car. The interest rate is 12% on the $10,000 auto loan. Your monthly payment is $222.44 for 5 years. Your total cost for borrowing $10,000 is $3,346.67 or 33.4% of the$10,000 borrowed. 7. Rule Two: Pay Yourself First Each Month! Useautoma:ctransferstomovemoneyfromyourpaycheckorcheckingaccounttoasavingsaccountormutualfund.! Thesurepathtofinancialsecurityistosetaside10%ofwhateveryouearninasavingsaccount,un:lyouhadanemergencyfundofatleastsixmonthsofyourincome.! SadFact:80%ofAmericanshavelessthansixmonthsofincomeinreserve.Saunders Learning Group, LLC, Andover, KS7PayYourselfFirstWhere doI get theMoney tostart?AdditionalOutsideIncomeAvoidCreditTrapsBuy theRightInsuranceBudget forwants vs.needsRealignyourassets 8. Rule Three: Build From A Financial Foundation! Onceyouhaveanpaidoffconsumerdebtandhaveanemergencyfund,youcanbegintoinvest,butdoitinasensiblewayBypyramidingyousavingsandinvestmentsMedium RiskFuturesContractsOptions, andCollectiblesHigh RiskVariable Low RiskAnnuitiesTreasury Bills & Notes Bonds Mutual FundsFinancial PlanSaunders Learning Group, LLC, Andover, KS8Government SecuritiesFinancial FoundationInsuranceGoalsBudgetFinancialRecordsNet WorthLifeDisabilityHealthProperty &LiabilityInsuredSavingsAccountsSavingsBondsEE & HHMoneyMarketFundsCertificatesof DepositAggressive GrowthStocks, junk bonds, mutual fundsReal EstateHigh QualityStocks and Bonds Mutual Funds 9. The Magic of Compound Interest! CompoundInterestistheeighthwonderoftheworld.The chart shows the growth of saving %15,000 a year, assuming a 10% return,3.1% inflation and savings beginning at age 30.Saunders Learning Group, LLC, Andover, KS9 10. Start Early With Compound InterestSaunders Learning Group, LLC, Andover, KS10 11. Rule Four: Learn the basics of InvestingReKrementPlans! Every wage earner has a tax problem! Qualified retirements plans allow to shelteryour retirements savings from taxes and inmost cases reduce your taxable income.! You should always maximize yourcontributions to retirement plans beforemaking any other investments choices.! If your employer provides matchingcontributions to a retirement plan, take it,its free money.Saunders Learning Group, LLC, Andover, KSMutualFunds! Diversifica:on&Divisibility: Asingleinvestmentisimmediatelydiversifiedthroughthefundsholdings! Liquidity! RecordKeeping! ProfessionalManagement: InformedmoneymanagersmaymakebeZerdecisionsthanuninformedinvestors.! Reducedtransac:oncosts:Costsarereducedwitheconomiesofscale.11! Start with a sensible investment plan using;" Tax advantages retirement plans: 401ks, 403(b), IRAs, Roth IRAs" Mutual Funds, Exchange Traded Funds and Dividend Reinvestment Programs 12. Rule Five: Buy Term Insurance - Invest Your Savings! Aslongasyouhaveestablishedaregularsavingsplan,havecreatedanemergencyfundandstartedare:rementsavingsaccount,youaresavingmoneybybuyingterminsurance.Terminsurancedoesnotcomewithbuiltincashvaluesorinvestmentaccountslikeotherformsofmoreexpensiveinsurance.! Followtheideathatyourresponsibili:esdecreaseover:me,whileyoursavingsandinvestmentincreaseandyoucanseethatlessexpensiveterminsurance,freesupmoneytocreateaninvestmentplanthatmakesyoumoresecureinthefuture.Itworkslikethis:Life InsuranceSaunders Learning Group, LLC, Andover, KS12In the early years, you needmore coverage . . .1. Young children2. More debt3. A Home mortgage4. A loss of income wouldbe devastatingIn the early years, you donthave much money . . .Savings & InvestmentsLife InsuranceSavings & InvestmentsIn the later years, you need lesscoverage . . .1. Children are grown2. Debts paid off3. Mortgage paid4. Savings for Retirement in placeIn the later years, you dont needmuch insurance. 13. Rule Six: Maximize contributions to tax-deferredretirement accounts before any other investment.! First,inmostcases(theROTHistheexcep:on)thecontribu:onsaremadewithpre-taxdollarsandthereforeyoutaxableincomeisreducedbyyourcontribu:onsinadefinedbenefitplanordefinedcontribu:onplan(typicallya401k).! WithaROTHIRA,yourcontribu:onsaremadewitha_ertaxdollars,butatre:rement,youpaynotaxesonyourwithdrawals.! Second,thecontribu:onsgrowonatax-deferredbasis.Thatmeansalloftheinterests,dividendsandcapitalgainsareaddedtoyouraccountwithouttaxesbecomingdue.Youareonlytaxesonthewithdrawalsmadeinre:rement.! Third,re:rementplansareprofessionalmanagedandyoutypicallyhavearangeofop:onstohelpyouselectsub-accountsorseparatefundsthatmatchyourdesiresforagreaterreturnsvs.theriskstakentogetbeZerreturns.! Fourth,becauseyouhavearangeofop:onsyoucandiversitybetweeninvestmenttypestobeZermanagerisksandreturns.Saunders Learning Group, LLC, Andover, KS13 14. Rule Seven: Have A Will, Trust and Estate Plan! A will protects your assets from probate in most cases (consult a lawyer)! A will allows you pass your estate according your wishes! Include a Durable Power of Attorney and Medical directives to insureyour wishes about how to handle medical decisions are done accordingto your wishes.! Trust accounts allow you manage assets and often defer taxesSaunders Learning Group, LLC, Andover, KS14 15. INVESTING BASICS TO KNOWHerearethebasicsyouneedtoknowtoinvestinstocksSaunders Learning Group, LNLeCw,t Aond, oKvSe r, KS15 16. Economic AnalysisInvolves assessing economic conditions that can affect a firms stock priceEconomic growthA measure of growth in a countryseconomy over a particular periodGross domestic product (GDP):the total market value of all productsand services produced in a countryWeak economic conditions! Lowers demand and stock prices! Consumers spend less, furtherlowering demandFiscal policyThe means by which the U.S. governmentimposes taxes on individuals andcorporations and by which it spends itsmoneyInterest rates# Stocks perform better when interestrates are low# Some stocks are more sensitive tointerest rates than others# The Federal Reserve uses monetarypolicy to influence interest ratesInflationThe increase in the general level of prices ofproducts and services over a specified period# Consumer price index (CPI): a measure ofinflation that represents prices of variousconsumer products# Producer price index (PPI): a measure ofinflation that represents prices of productsused to produce other productsSaunders Learning Group, LLC, Andover, KS 14-16 17. Sources for Economic AnalysisSaunders Learning Group, LLC, Andover, KS 14-17 18. Evaluating StocksThe Internet Most corporationshave their own Websites. The information maybe more detailedthan material fromthe corporationsprinted publications. You can also usesearch engines tofind informationabout investing instocks.General financialnews Specific informationabout a companyand its stocksperformanceSaunders Learning Group, LLC, Andover, KSStock AdvisoryServices Contains informationabout stock prices andcapitalization,earnings, and dividends Provides a detaileddescription of thecompanys majoroperations Offers currentinformation about netincome and salesrevenueCorporate NewsPublications Annual and quarterlyreports offer: A summary of acorporationsactivities Detailed financialinformation You do not have to bea stockholder to get anannual report. You canalso get informationabout specificcompanies fromfinancial publications 19. Analysis of the FirmFirm-specific characteristics - Analysis of a firms income statement and balance sheet can reveal the following characteristics:Liquidity Current ratioThe ratio of a firmsshort-term assets toits short-termliabilities Show the firmsability to coverexpensesFinancial leverage Debt ratioA measure offinancial leveragethat measures theproportion of totalassets financedwith debt Times interestearned ratioA measure offinancial leveragethat measures theratio of the firmsearnings beforeinterest and taxesto its total interestpaymentsEfficiency Inventory turnoverA measure ofefficiency;computed as thecost of goods solddivided by averagedaily inventory Average collectionperiod A measure ofefficiency;computed asaccounts receivabledivided by averagedaily sales Asset turnover ratioA measure ofefficiency;computed as salesdivided by averagetotal assetsSaunders Learning Group, LLC, Andover, KS 14-19Profitability Operating profitmargin A firmsoperating profitdivided by sales Net profit marginA measure of netprofit as apercentage of sales Return on assetsA measure ofprofitability;computed as netprofit divided bytotal assets Return on equityA measure ofprofitability;computed as netprofit divided bystockholders equity 20. Financial Ratios Used to Evaluate a BusinessSaunders Learning Group, LLC, Andover, KS 14-20 21. Evaluating StocksTo find out about the health of a corporation, you can use numerical measures such as:Current Yield The annual dividend of an investment divided by the current market valueTotal Return A calculation that includes the annual dividend as well as any increase or decrease in theoriginal purchase price of the investmentEarnings Per Share A corporations net, or after-tax, earnings divided by the number of outstanding shares ofcommon stock Measures the amount of corporate profit assigned to each share of common stock Gives a stockholder an idea of a companys profitability, an increase in earnings per share isa good sign for stockholders.Price-earnings (PE) ratio The price of one share of stock over the last 12 months Used to compare the corporate earnings to the market price of a corporations stock. Study the price-earnings ratio for a corporation over a period of time so that you can see arange.Industry Norms, Goto:hZp://biz.yahoo.com/research/indgrpProvidesinforma:ononvariousindustrygroupsandfinancialinforma:ononfirmsyouspecifyinanyindustry.Saunders Learning Group, LLC, Andover, KS 22. Analysis of the FirmSaunders Learning Group, LLC, Andover, KS 14-22 23. 12 Rules for Investing in Stocks1. Startwithanemergencyfund2. OpenacashonlyaccountwithastockbrokerOnline,Discount,Full-Service1. Savethemarginaccountforlater,a_eryouknowmoreaboutwhatyouaredoing1. Newinvestor,needadviseUseafullservicebrokerageforguidance,checkforagoodtrackrecord2. MoreexperiencedUseadiscountbrokeragewithgoodserviceandqualityproducts3. Startwith$1,000inmutualfunds1. $5,000buyjusttwotothreestocks2. $10,000addoneortwoaddi:onalstocks3. $25,000allowsyouhavefiveorsixstocks4. $100,000Notmorethan20stocks,unlessyouwanttospend100%ofyour:meinves:ng4. Buytheverybestcompanies,concentrateonalimitednumberofstockswithgrowingdividends,andwatchthemcloselyusingstockalerts.Saunders Learning Group, LLC, Andover, KS23 24. 12 Rules for Investing in Stocks5. Cutlosesonstocks@8%withStopLostorders$ Thistakesoutthehopeandfearofinves:ng,makesforra:onaldecisionmaking$ Bepersistentaboutcukngloses,soyouhavemoneytoinvestinthenextbestop:on6. Sellyourbeststockswith25to30%gains$ Alwayssellyouworst-performingstocksfirst,notyourbest,butdonthangonforthelastounceofgains7. PickMarketleadersinareasyouhavesomeknowledge$ Profitsdrivethepriceofstocks:improvingearnings(EPS),growingprofits,increasingsalesandearningsgrowth$ #1intheircategorywithstrongReturnonEquity(ROE)8. Investdollars,notnumberofshares.Pickstockswithapricebetween$15and$150pershare$ 70%oftradesarewithins:tu:onalinvestors,whodrivethemarketandshunlowpricedstocksSaunders Learning Group, LLC, Andover, KS24 25. 12 Rules for Investing in Stocks9. Usefundamentalanalysisforpickingstockstoownandtechnicalanalysistoknowthebuyandsellsignals$ Technicalanalysisisreadingastockspricesandtradingvolumeto:methebuyingandsellingofstocks.Lookforpricecorrec:onsandbasebuildingincharts.10. EarningsPerShareof30%ormore$ Over:me3of4ofthebiggestwinnersaregrowthstockswithEPSof30%ormore11. Buyleaders$ Salesup25%$ Lookforstockswithgainsof25%inthesamequarterfromayearearlier$ #1intheirfieldforrecentsales,earninggrowth,profitmarginsandROE(20%ormore)$ Alsolookforstrongmanagementteamandmanagementownershipwithstrongins:tu:onalownership12. LookforstockswithastrongrecordofannuallyincreasingdividendsSaunders Learning Group, LLC, Andover, KS25 26. QuestionsSaunders Learning Group, LLC, Andover, KS 27. Post Workshop Action Plan! CompletethePostWorkshopAc:onPlanSaunders Learning Group, LLC, Andover, KS27 28. Reference MaterialSaunders Learning Group, LLC, Andover, KSFiguring Out Wall Street Consumers Guide ToFinancial MarketsBy Floyd SaundersPublisher: Saunders Learning GroupISBN: 978-0-9824019-0-3available from Amazon, B&N, and http://www.figuringout wallstreet.comor www.floydsaunders.comBook summary: From bank failures to home foreclosures and panicaround the world, Figuring Out Wall Street, is the concise guide to helpeveryone understand how this latest crisis happened, who was responsible andwhat to do now to restore our financial systems. Written in an easy tounderstand manner, even the most complex financial concepts are easy todigest. This book provides help to monitor investments with a review ofinvestment products, financial regulators and economic indicators. Learn howthe stock market exchanges work and the world of investment banking, hedgefunds, venture capital and private equity. Every chapter includes action plansfor investing. 29. About the AuthorSaunders Learning Group, LLC, Andover, KS! FloydSaundershasworkedonWallStreetwithbothBankofAmericaandJPMorgan,whereiswasavicepresidentinglobalfinancialsystems.Hehasworkedacrosstheindustryinretail,commercial,andinvestmentbanking.! HehastaughtcoursesinMoneyandBankingandextensivelyfortheAmericanIns:tuteofBankingandvariouscolleges.! Asaconsultant,hedevelopedandtaughtawiderangeofbankingandinves:ngcourses.!HeauthoredthreeprogramsfortheAmericanBankersAssocia:on:BankingonMutualFundsandAnnui1es,Introduc1ontoSecuri1esMarketsandInves1nginSecuri1es.date