the 30 minute round the world intro to financial planning: bell helicopter
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The 30 Minute Round the World Intro to Financial Planning: Bell Helicopter. Jason Hull Hull Financial Planning. Who Is This Presentation For?. Anyone who doesn’t feel like their personal finances are in a rock solid position …in other words… YOU!. What Will You Learn?. - PowerPoint PPT PresentationTRANSCRIPT
The 30 Minute Round the World Intro to Financial Planning:
Bell Helicopter
Jason HullHull Financial Planning
http://www.hullfinancialplanning.com
Who Is This Presentation For?
• Anyone who doesn’t feel like their personal finances are in a rock solid position
…in other words…
YOU!
http://www.hullfinancialplanning.com
What Will You Learn?
• Common personal finance mistakes and how to avoid them
• Ideas for how to squeeze that little bit more out of your budget
• Ideas for how to make your business work for you
http://www.hullfinancialplanning.com
Who Am I?
• Army veteran• Founded and sold a software development
company• Financial planner, CFP® candidate• Personal finance columnist, U.S. News &
World Report
http://www.hullfinancialplanning.com
Common Personal Finance Mistakes:No Plan
No budget = money controls you• If you don’t have a budget, you’re actually in the
majority (51%) of Americans!*• Don’t overcomplicate– Use a simple spreadsheet– Start with income– Then known “must pay” expenses– Then variable expenses– Don’t forget to save!
http://www.pewsocialtrends.org/2007/02/07/what-americans-pay-for-and-how/306-3/http://www.hullfinancialplanning.com
Common Personal Finance Mistakes:No Plan
No retirement plan = don’t know if or when you can quit• 4 out of 10 Americans have no plan besides Social
Security*• 30% say they will have to work into 80s to retire;
however, 22.5% between 60-84 report employment disability
• Start with the goal and work backwards – expenses in retirement and how much you have to save to get there
http://www.pewsocialtrends.org/2007/01/04/most-americans-moderately-upbeat-about-family-finances-in-2007/http://www.hullfinancialplanning.com
Common Personal Finance Mistakes:Risk Management
The risk ostrich = you may be underinsured• Optimism bias affects future thinking• 70% of people over age 65 require long-term care*• 43% of people who need to use their LTC policies are under
age 64• 10.2% of people age 19-64 can’t work because of disability or
poor health• Look at appropriate term life, disability, and long-term care
insurance– If someone tries to sell you something other than term life, make
them show you quantitative aftcast to show superior performance
http://www.longtermcare.gov/LTC/Main_Site/Understanding/Definition/Know.aspxhttp://www.hullfinancialplanning.com
Common Personal Finance Mistakes:Retirement Saving
If you save, are you saving enough?• Only 51% save for retirement*• 21% of workers covered by 401(k) don’t participate• IRA limits
– $5,500/year/person– $6,500/year/person if age 50 or older
• 401(k)/403(b)/457/TSP limits– Your contribution: $17,500/age 50+ catchup: $5,500– Total contribution (+ employer contrib): $51,000/$56,500
• Set aside money every month so you don’t have to think about it – automate!
• Think about your future self before making a decision on how much to set aside for retirement savings.
http://money.cnn.com/2012/05/10/retirement/saving-retire/index.htmhttp://www.hullfinancialplanning.com
Common Personal Finance Mistakes:Retirement Saving
http://www.hullfinancialplanning.com
5.00%7.50%
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Starting Investing at Age 50
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Vs.
5.00%7.50%
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102030405060708090
Starting Investing at Age 30
Savings Rate
Retir
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t Age
5.00%7.50%
10.00%
12.50%
15.00%
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20.00%
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102030405060708090
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Starting Investing at Age 40
Savings Rate
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t Age
Common Personal Finance Mistakes:Investing Mistakes
Fees and timing are your portfolio’s silent killer• DO NOT PAY FOR LOADS IN MUTUAL FUNDS!• Look at 12-b(1) fees• Trying to time the market = -35.8% performance vs value cost
averaging*• In 2012, 89.8% of actively managed stock funds
underperformed their index counterparts• Depending on trading frequency, it takes between 20-25 years
to determine skill vs. luck in investing. Do you have that much time to waste on a gamble?
• Value cost average into INDEX funds with LOW FEES.
http://money.usnews.com/money/blogs/the-smarter-mutual-fund-investor/2012/11/05/herd-behavior-hurts-fund-investorshttp://www.hullfinancialplanning.com
Common Personal Finance Mistakes:Hopping on the Hedonic Treadmill
Don’t stuff a huge house full of furniture!• Once we graduate from college, we feel like
we’ve “earned” a lifestyle upgrade• We buy – a nice new car– a big house– and rooms full of furniture
• Instead of paying off debt and investing
http://www.hullfinancialplanning.com
Squeeze More Out of Your Budget
Remove recurring costs you don’t need• Do you need cable TV?– Try Netflix, Hulu, PlayOn, and stations’ websites
• Paying for more cell phone than you need?– Lower minutes– Get Google Voice– Remove landline
• Gym membership you don’t use?– Plyometrics, body weight exercise, home Crossfit
http://www.hullfinancialplanning.com
Squeeze More Out of Your Budget
Automate your finances• Set up side accounts– Christmas fund– Home/car insurance fund– Roof/car replacement fund
• Have investments automatically withdrawn• Set up automatic bill pays so you don’t have to
remember when to pay them
http://www.hullfinancialplanning.com
Squeeze More Out of Your Budget
DEBT SUCKS• KILL YOUR DEBT OR IT WILL KILL YOU• 46.7% of American households carry a credit card
balance• Pay absolutely everything you can towards debt
(credit card, personal loan, car loan, mortgage)• Look at total interest payments first before
deciding which one to pay down/off – combines psychology and math
http://www.hullfinancialplanning.com
Questions From the Audience
How to invest for personal wealth?• Don’t try to hit a 7 run home run• You, statistically speaking, won’t beat the
market over the long run• Fees and loads kill performance• 5% rule – if you want to speculate, do it with
<= 5% of your investable assets
http://www.hullfinancialplanning.com
Questions From the Audience
Do you have tips for making a budget and sticking to it?
• Keep it relatively simple – the fewer categories, the better
• I use Mint to track spending• Do budget review 1x/month WITH YOUR
SPOUSE (where applicable)• Automate payments, then carry cash
http://www.hullfinancialplanning.com
Questions From the Audience
Why do you need a financial planner?• Reason #1: Trade money for time. You can spend
hundreds of hours getting answers from reading/Internet or pay to get them applied to your situation.
• Reason #2: You’re not succeeding as a DIY• Reason #3: You’re not really a planner (I don’t mean
financial planner, either)• Reason #4: You have an out-of-the-ordinary situation
(chronic illness, large inheritance, etc.)
http://www.hullfinancialplanning.com
Questions From the Audience
How do you choose a financial planner? How can you really trust them?
• Ask the following:– How are you getting paid?– You’re going to sign a legally binding, fiduciary
contract with me, right?– What is your net worth?– How did you get the net worth?
• CFP, CLU, ChFC certifications good
http://www.hullfinancialplanning.com
Questions From the Audience
Are the 2040, 2050, etc. 401K investments good options?
• Look at– Fees of fund compared to index brethren– TDF 2015 to see equity allocation
• Match to what you want to do– Will you buy annuities at retirement?– Will you invest in equities heavier to try to grow nest egg?
• Reasonable “lazy portfolio” solution
http://www.hullfinancialplanning.com
Questions From the Audience
Advice on getting out of debt early on or going after the matching contribution.
• As long as you– Have income > expenses– Won’t take on MORE debt– Have sufficient assets outside of retirement
account(s) to tap in emergency• …then contribute up to match first
http://www.hullfinancialplanning.com
Questions From the Audience
Are there better funds out there to be in versus the company sponsored ones? Leverage the
opportunities available through Fidelity Brokerage Link.
• Yes, but…• Company match means breakeven of globally
optimal funds is a long, long time• 401k more efficient if you plan on retiring early
(age 55 + terminate employment vs. age 59 ½)
http://www.hullfinancialplanning.com
Questions From the Audience
Roth versus Traditional IRA/401k• Roth = pay taxes now, withdraw tax-free in future• Traditional = tax deduction now, pay ordinary income
tax rate on withdrawals in future• I recommend mixing due to tax efficient retirement
withdrawal strategies, but lean towards Roth where possible
• Front load with Roth, because when AGI > $127k for singles and $188k for married, can’t use Roth IRA. Can still use Roth 401k.
http://www.hullfinancialplanning.com
Questions From the Audience
Percent of annual income to be putting away into tax deferred savings
• Depends on goals– If planning on working until age 55 or 59 ½, then as much as
possible (subject to IRS limits)– If planning on retiring earlier, will need some taxable
accounts to draw on• If this is the case, roughly (retirement age – current age) / (90 –
current age) is % for taxable accounts
• Can always save more in taxable accounts once you hit IRS contribution limits
http://www.hullfinancialplanning.com
Questions From the Audience
Do you think that the government will change the Roth advantages or take them away?
Eventually taxing them like social security was not supposed to be.
• I’m not a politician!• I expect changes to Roths eventually• I do not expect retroactive treatment• But maybe not…Roth = taxes now.
http://www.hullfinancialplanning.com
Questions From the Audience
Recommended books. Paid Investment advising programs that were useful.
• Total Money Makeover by Dave Ramsey (though I don’t agree with his investment or retirement withdrawal advice)
• Think and Grow Rich by Napoleon Hill• Secrets of Closing the Sale by Zig Ziglar• (SHAMELESS SELF-PROMOTION ALERT!) Winning
With Money course by me – coming out in August
http://www.hullfinancialplanning.com
How to Reach Me
• http://www.hullfinancialplanning.com• [email protected]• (817)476-0584
If you want to read more about the topics in this presentation, go to http://www.hullfinancialplanning.com/bhipres
http://www.hullfinancialplanning.com