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7 Ways to Get Your Financial House in Order

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7 Ways to Get Your. Financial House in Order. Scott Nevitt, CORE Asset Management ... Shopping around at a few different companies to explore the options they provide ... – PowerPoint PPT presentation

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Title: 7 Ways to Get Your Financial House in Order


1
7 Ways to Get Your Financial House in Order
  • Scott Nevitt,
  • CORE Asset Management

Securities offered through Berthel Fisher
Company Financial Services, Inc. (BFCFS) Member
FINRA/SIPC. CORE Asset Management is independent
of BFCFS.
2
WHAT IS YOUR FINANCIAL IQ?
  • QUESTION 1

Stocks whose returns are tied closely to the
overall national economy are typically called
  • Blue Chip stocks
  • Defensive stocks
  • Speculative stocks
  • Cyclical stocks

3
STEP 1SHOP, SHOP,SHOP
  • When you are making large financial decisions it
    is important to make sure you are getting all of
    the information possible. Shopping around at a
    few different companies to explore the options
    they provide is an essential financial decision.
    Here are the large purchases that require extra
    attention..

4
HOME
  • For the average person, this is the single
    most important purchase you will make. Beyond the
    actual home decision, there are two further
    choices that are equally important to support
    your purchase.
  • Which type of mortgage should you get?
  • Are all of your insurance choices the same?

5
The Top 6 Mortgage Types
  • Fixed Rate Mortgage
  • One-Year Adjustable Rate Mortgage
  • 10/1 ARM
  • 30-due-in-7 Mortgage
  • 5/5 and 3/3 ARMs
  • Balloon Mortgage

6
INSURANCE
  • 1. Shop around. As with anything else you buy,
    what seems to be the same product can be priced
    different by different companies.
  • 2. Raise your deductible
  • 3. Buy your home and auto policies from the same
    insurer

7
  • 4. Insure your house, not the land.
  • 5. Beef up your home security
  • 6. See if you can get group coverage
  • 7. Compare the limits in your policy and the
    value of your possessions at least once a year.
  • 8. Look for private insurance first

8
CAR
  • With leasing options today, the car market has
    become challenging. Your vehicle is also the only
    asset that is worth less the minute you buy it
    and drive it home.

9
WHAT IS YOUR FINANCIAL IQ?
  • QUESTION 2
  • A benchmark asset, commonly considered by
    investors to be risk-free
  • Treasury Bill (T-Bill)
  • Share of preferred stock
  • A Eurobond
  • A junk bond

10
STEP 2Plan Ahead Understanding Life Insurance
11
Think you dont need Life Insurance?Think again.
  • Many people thing they dont need life
    insurance because they are protected in some
    other way. While other sources of income are
    important, will they be enough?

12
SAVINGS INVESTMENTS
  • If you think you can only afford to put money
    into savings and investments or buy life
    insurance, consider buying life insurance first
    because
  • Fiscal discipline is built into the plan
  • Management expertise is provided for you
  • Lost income due to death is replaced for your
    family by proceeds from the policy
  • The money is guaranteed as long as the
    policy is in force

13
SOCIAL SECURITY
  • Social Security benefits generally fall short of
    what your family will need. Furthermore, a
    surviving spouse will not be eligible for even
    partial benefits unless he or she is caring for
    an unmarried child under 18 or until he or she
    turns 60.

14
EMPLOYEE BENEFITS
  • You may have some life or disability insurance
    through your employer, but
  • Group coverage through employers is usually term
    insurance, which does not build cash value.
  • Group coverage does not stay with you if you
    change jobs or retire.
  • The values are probably not enough to maintain
    your familys standard of living.

15
WHAT IS YOUR FINANCIAL IQ?
  • QUESTION
  • 3

Investments in CD
  • Are riskier than investments in stocks
  • Are inferior to investments in 8-tracks and vinyl
    records
  • Are always tax deferred
  • Are insured by the FDIC, but have generally
    underperformed stock investments over the long
    run.

16
What Kind of Life Insurance Should You Buy?
TERM VS. PERM
Certain limitations may apply to loans or
withdrawals. Policy loans and withdrawals will
reduce the benefit and cash values, and may be
taxable under certain circumstances.
17
TERM LIFE INSURANCE
  • The main features of term life insurance are as
    follows
  • Designed for individuals with a temporary need
    for coverage
  • Pays a benefit only if you die while the policy
    is in force
  • Offers initial, basic protection for the lowest
    premium
  • Over time, it is more cost-effective than
    permanent insurance

18
PERMANENT LIFE INSURANCE
  • The main features of permanent life insurance are
    as follows
  • Provides coverage for an insureds lifetime
  • Generates cash value that accumulates
    tax- deferred
  • Can be borrowed against to cover college
    expenses or to supplement income

19
STEP 3 Know What He Knows
According to the Bureau of Labor Statistics,
women can expect to outlive their husbands by an
average of 15-20 years.
20
A FINANCIAL PARTNERSHIP
  • Use Business Skills with the Household Finance
  • Divide Finances Fairly
  • Plan for Financial Goals

21
STEP 4 Budgeting Money Management
22
WHAT IS YOUR FINANCIAL IQ?
A 35-year old individual with 4 young children
and a spouse who doesnt work should probably
consider purchasing which of the following types
of insurance Long-term care insurance Disability
insurance Life insurance (b) and (c)
  • QUESTION 4

23
ESTABLISHING A BUDGET
  • Knowing where you money is going and having
    a plan for each dollar is essential. To develop a
    budget, youll need to take the following steps
  • Make a list of all financial goals, short term
    and long term.
  • Add up all income, including dividends, interest,
    and child support.
  • Add up all expenses and divide into two
    categories fixed and discretionary.
  • Compare your total income to your total expenses.

24
TIPS TO HELP YOUR BUDGET
  • Dont use credit cards for everyday expenses.
    Credit card debt can carry high interest rates,
    and it can damage your credit score as well.
  • Differentiate between your wants and your
    needs.
  • Reward yourself for saving money. Once a month,
    treat yourself to something small.
  • Stay flexible. Any budget that is too rigid is
    likely to fail.

25
GETTING DEBT UNDER CONTROL
  • Credit card debt is the most expensive take care
    of it first.
  • List all your unsecured debts and rank them from
    highest interest rate to lowest
  • Consider consolidating all your credit card debt
    onto the lowest rate card you can find.
  • Make sure all your debts are current by making at
    least the minimum payment to bring them up to
    date.
  • Direct any surplus income toward the debt with
    the highest interest rate.
  • As the minimum payments start to go down, dont
    pay less on your total debt. Instead, make the
    minimum payments on each debt and keep shifting
    the extra toward paying off the debt on the
    card with the highest interest rate.
  • If your bills are out of control and you feel
    overwhelmed, consider a credit counselor. A
    nonprofit credit counseling agency is your best
    bet.
  • First try negotiating with creditors yourself.
    Some might be willing to reduce what you owe
    rather than risk writing off the entire debt.
    Because college loans are typically at low
    interest rates, paying them off is a low
    priority.

26
PAYING OFF STUDENT LOANS
  • With the rising cost of post-secondary
    education, it may seem as though youll never be
    able to pay off your student loan debts. However,
    you do have options that may help
  • If youre employed in certain public service
    sectors, teach in a teacher-shortage area, or
    join the Peace Corps, some or all of your debt
    may be forgiven.
  • Review your discretionary expenses for areas in
    which you can cut spending. Instead, use those
    dollars to pay down the principal of your loans.
    Student loans can always be prepaid without
    penalty.
  • You may want to consider consolidating.
  • If it is possible, take on a second part time
    job.
  • Commit to using tax refunds, gift money, and any
    other unexpected income to pay down your
    loans. Every little bit will help.

27
WHAT IS YOUR FINANCIAL IQ?
  • QUESTION 5
  • Mortgage payments
  • Can be completely deducted from income for tax
    purposes
  • Vary from month to month on a fixed rate loan
  • Represent high principal payments early in the
    term of the loan
  • Are typically tax deductible to the extent that
    they represent payment of interest

28
STEP 5 Have Goals Make Plans
29
WHAT DO YOU WANT?
  • What goals or events to you want to achieve
    in life to help you experience your values? Are
    there milestones by which you measure your
    success that have a financial component?
  • DO YOU WANT TO
  • be financially independent?
  • retire?
  • send children or grandchildren to collge?
  • buy a second home?
  • take a special trip?
  • fund a scholarship at your alma mater or
    establish a charity?
  • commission a building for a hospital or your
    place of worship?
  • take a year off to live in another country?
  • create a travel fund so your kids or friends can
    see the world with you?

30
What are My Tangible Goals That Require Money and
Planning to Achieve?

Whether you are planning the next five years of
the next fifty, you can be on-purpose.
31
GOAL WORKSHEET
  • Goal Description Financial Independence
  • Target Date April 1, 2015
  • Amount Needed 6,000/month
  • Two or three words describing the feelings and
    thoughts I will have when this is achieved
    Relief! Proud, relaxed, having fun.

32
YOU CAN HAVE IT ALL
  • Decide how much spend able income you need for
    your lifestyle.
  • Figure out the amount of assets you need to
    generate the income your lifestyle requires.
  • Do the math
  • Recalculate your income goals.

33
Future Value CalculationsBased on an 8 Return
over 10 Years, Investing Once a Month
  • Payment Amount Future Balance
  • 100 18,294.60
  • 500 91,473.01
  • 1,000 182,946.03
  • 5,000 914,730.17
  • 10,000 1,829,460.35
  • 15,000 2,744,190.52
  • 25,000 4,573,650.87

This is a hypothetical example and is not
intended to imply the performance of any
specific investment.
34
WHAT IS YOUR FINANCIAL IQ?
  • Of the following, the safest type of investment
    is
  • Under the mattress
  • An FDIC-insured CD
  • A junk bond
  • An internet stock
  • QUESTION 6

35
STEP 6 It Takes Teamwork
36
ARE YOU A.
  • Do-It-Yourselfer?
  • Collaborator?
  • or Delegator?

Which method will lead you to financial success?
37
Finding a Trusted Advisor and Avoiding Salespeople
  • TRUSTED ADVISOR
  • Has a structured process for creating a
    comprehensive financial plan for clients and can
    tell you what it is.
  • Is interested in whats important to your
    significant issues in the first meeting
  • Requires that you bring all of your financial
    data to the first meeting, but does not require
    that you disclose any information until you are
    comfortable
  • Is happy to refer you to someone else if he or
    she sense there is not a good match.
  • Wont be talked into just selling you a product
    even if you insist.
  • SALESPERSON
  • Has a technique for making the sale
  • Engages you in small talk, chitchat, or banter
    designed to relax you and establish rapport with
    you.
  • Does not require that you do anything other than
    show up to the first meeting.
  • Will tell you that he or she can (and will) work
    with anybody.
  • Will sell you anything you want to buy, or will
    simply redirect you to a preferred product.

38
Testing the Trustworthiness and Competence of a
Financial Professional
  • The Advisor should interview you, not the other
    way around.
  • How are Financial Professionals paid?
  • What you can expect from your trusted advisor.
  • Does this advisor seem thorough and
    detail-oriented?
  • Is the response to your financial information
    non-judgmental and supportive?
  • Does the advisor take care in reviewing and
    calculating financial figures?
  • Does this person ask lots of relevant questions
    and listen well?
  • Does there seem to be a fit between the
    advisor, the type of clientele the advisor is
    seeking, the type of advisor you are seeking, and
    you?
  • Does this person fit the profile of a Trusted
    Advisor?
  • What do the reports look like and tell you?

39
WHAT IS YOUR FINANCIAL IQ?
  • QUESTION 7
  • Since the mid-1920s inflation in the United
    States has averaged
  • About 3 percent
  • About 7 percent
  • About 10 percent
  • About 12 percent

40
STEP 7The Next Generation
41
FINANCES FOR YOUR KIDS
  • From childhood to the college years, it is
    important to continually educate your child about
    responsible spending and saving. Here are a few
    tips to get you started.

42
CHILDHOOD
  • Lesson 1 Learn to handle an allowance
  • Lesson 2 Open a bank account
  • Lesson 3 Set and save for financial goals
  • Lesson 4 Become a smart consumer

43
THE TEENAGE YEARS
  • Lesson 1 Handling earnings from a job
  • Lesson 2 Develop a budget
  • Lesson 3 Save for the future
  • Lesson 4 Use credit wisely

44
THE COLLEGE YEARS
  • Lesson 1 Budgeting 101
  • Lesson 2 Open a bank account
  • Lesson 3 Getting Credit

45
WHAT IS YOUR FINANCIAL IQ?
  • A prudent investor
  • Does not have to consider the tax effect of
    long-term gains
  • Evaluates his/her investments on an after-tax
    basis
  • Studiously avoids income-shifting among funds
  • Knows that a drop in the dividend payout signals
    a stronger firm
  • QUESTION
  • 8

46
ANSWER TIME
4. Both b and c 5. 5. 6. 6. 7. About 3 percent 8.
8.
  • Treasury Bill
  • Cyclical Stocks
  • Are insured by the FDIC but have generally
    underperformed stock investments over the long
    run

Where do you stand?
47
Securities offered through Berthel Fisher
Company Financial Services, Inc. (BFCFS) Member
FINRA/SIPC. CORE Asset Management is independent
of BFCFS.
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