Financial Planning for Women

The Development of Superior Investing Performance:

6 Strategies for Increasing Financial Fitness

Presented by Jean LownErica Abbott & Brittani Bushman

Nov. 7, 2012

Take the Financial Fitness Test

• 14 Questions• Score yourself (need to adjust score if

single)< 25: Poor25-30: Baseline31-36: Good> 36: Very good

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Acknowledgements

• Research by David Eccles, Elizabeth Goldsmith, & Paul Ward of Florida State Univ.

• The material was produced as part of a project funded by the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation– www.finrafoundation.org

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What is Financial Fitness?

• Financial fitness is like physical fitness– Affects your well being & security

• Physical fitness involves building muscle & aerobic capacity

• Financial Fitness involves – building financial reserves– making your money work more efficiently

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Financial Fitness is More Important than Ever

• We are living longer than ever! • Average life expectancy is increasing

– In U.S. Utahns live longest– Women live longer than men– This means we need more $ for retirement– Reduction in employer provided pensions– YOYO!

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Financial Fitness

• Helps cope with life’s financial challenges & increases ability to retire comfortably

• Physical & financial fitness require work• Being prepared for the future • Safeguarding your family• Providing better opportunities for

healthcare

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Financial Fitness

• Yes, it takes time! – Benefits far outweigh the

costs though.• No more excuses! Help

shape your future! • You deserve to give

yourself the gift of living well through Financial Fitness

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How Can I Increase My FinancialFitness?

• We know what people should do but what do real people actually do that works?

• 3 year study at Florida State University– Studied personal financial strategies that helped

real people become Financially Fit & accumulate wealth

• What works for you?

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Research

• Contrasted the PF strategies of householders who had similar opportunities to accumulate wealth over their lifetimes but ended up with very different amounts of wealth near retirement

• Focused on the PF strategies used in “top performing” households: – Pre-retirees who were most Financially Fit

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Study revealed six strategies:The SIMPLE 6 (Podcast)

1: Talk about it2: Ask your employer3: Work out what you’ll need4: Forecast what you’ll have5: Maximize saving & earning interest6: Minimize debt and paying interesthttp://www.lsi.fsu.edu/centers/hprc/projects/finra/

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1. Talk about it

• Communicate with your partner (if you have one) about household finances

• Work out strategies together to deal with $• Share with your partner any understanding

you gain about managing finances• Two heads are better than one• If single: talk with a trusted friend

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15 Minute Workout: Talk about $ with partner or close friend

• Communicate, communicate, communicate!• Set up regular $ talk time• Share responsibilities (or alternate years)• Each needs “pocket $” (allowance)• Don’t hide $ activity from your partner• Get help: USU FLC (435-797-1569)

– Marriage & family therapy– Housing & Financial Counseling

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What works for you?

• Share your story, your advice, your experience

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2. Ask your employer

• Financial/retirement advice & plans• Take advantage of employer resources• USU: TIAA-CREF, Fidelity & URS

advisors provide free consultations• If self-employed/small business: IRA

– Simplified Employee Pension (SEP)– Saving Incentive Match Plan for Employees

(SIMPLE)

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3. Work out what you’ll need

• Estimate how much money you will need to live on in retirement (www.usu.edu/fpw)

• Ballpark Estimate http://www.choosetosave.org/ballpark

• Consult fee-only financial professional– Beware of financial salespeople! – Certified financial planner (www.cfp.net)– www.NAPFA.org– http://garrettplanningnetwork.com/

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4. Forecast what you’ll have

• Estimate how much money you think you will have by the time you plan to retire

• $Fit HHs work out how much they would have as they near retirement & compare to what they need

• online retirement calculators & FPW PPTs– www.bankrate.com/calculators

• http://www.usu.edu/fpw/schedule/powerpoints.htm16

5. Maximize saving & earning interest

• Save from every paycheck (Automate)• Build emergency fund

– Online savings/CDs– I-bonds

• Invest in Roth IRA every month– See FPW past presentations for specific advice on

low-cost mutual funds for IRAs• Save up for big ticket purchases (vehicles)

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15 Minute Workout: Set up an Individual Retirement Account (IRA)

• Lots of great info on FPW website– http://www.usu.edu/fpw/schedule/powerpoints.htm– What’s an IRA?

• Traditional vs. Roth• Best mutual funds for an IRA

• Especially valuable for non-earning spouse• Fund your IRA w/ automatic monthly transfer• Use a commitment contract! Have someone hold

you responsible to follow through.18

ROTH IRA does double duty

• Roth IRA doubles as true (catastrophic) emergency fund http://www.rothira.com

• you can withdraw your Roth IRA contributions at any time without paying any taxes (you’ve already paid taxes on this money) or penalties

• Early withdrawal of earnings are subject to tax & 10% penalty

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6. Minimize debt & paying interest

• Pay household bills on time (automate!)• Pay full credit card balance each month

– If not, you’re living beyond your means!– Don’t be a debt slave for life

www.PowerPay.org• Build an emergency fund

– Autosave in online savings

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15 Minute Workout: Create an Emergency Fund

• How much? something is better than nothing– Save w/ automatic transfer from checking– Online savings accounts

• FDIC insured• Higher rates than traditional accounts• No minimum

– Once you build up emergency account• I-bonds (keep up with inflation; no state income tax

on earnings; out of sight, out of mind

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What Works for You?

• How do you find $ to save? • Other ideas on places to stash your

emergency savings?

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Gender and Credit Card Behavior

• Females: more costly credit card behavior than males

• Compared to men, women were – 9% more likely to carry a balance – 11% more likely to pay only minimum– 26% more likely to incur a late fee

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15 Minute Workout: Pay credit card in full each month

• When you carry a balance, everything you charge costs LOTS more than list price!

• Check out repay info on your statement– Pay only min.: pay twice the price!– Required $ to pay to pay off in 3 years

• Use https://powerpay.org/ or get help at USU Family Life Center: 435-797-7224

• Once you pay off: set max. $ charge/mo.24

6. Minimize debt continued

• Pay extra on mortgage principal each month (what FF HHs did in this study)– Maybe… better to invest for retirement,

save for child’s college or buy earthquake insurance or…

– Refinance to today’s ultra low rates

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Resources

• Are you Financially Fit? Workbook: http://www.finrafoundation.org/web/groups/foundation/@foundation/documents/foundation/p122359.pdf

• Summary brochure: http://www.finrafoundation.org/web/groups/foundation/@foundation/documents/foundation/p122356.pdf

• Financial Fitness Project website: http://www.lsi.fsu.edu/centers/hprc/projects/finra/

• Podcast

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Questions? Experiences?

• What is your Personal Finance Action Plan?

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Upcoming FPW

• The Quest for 850 (credit scores)– January 30, 2013– Al Bingham– USU TSC Ballroom– 11:30-1 pm

• Alternative Gift Market– Saturday, Dec. 1, 9 am – 2 pm– Presbyterian Church, 178 W. Center

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FPW Website & BLOG

• http://ww.usu.edu/fpw• http://fpwusu.blogspot.com/ • Kiplinger Personal Finance Magazine• Money magazine• WSJ Sunday (online):

http://online.wsj.com/public/page/sundayjournal.html

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Money Girl's Quick and Dirty Tips for a Richer Life

• http://lauradadams.com/• 288 MG How to Make Decisions About

Personal Finances• http://stitcher.com/s/player.php?AAKAAIH5N

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