Personal  Finance  Road  to  Financial  Wellness  

Jason  Vitug  @jasonvitug  

“Make  more  money.  Spend  more  money.  Work  more  hours.”  

But…  “It’s  not  the  size  of  the  paycheck  that  maHers  but  how  it’s  managed.”    

 

My  Story  

Financial  Rough  Waters  

“My  relaKonship  with  money  wasn’t  always  posiKve.”  

Living  My  Dreams  

“We  don’t  have  to  wait  Kll  a  

‘reKrement  age’  to  live  our  dreams.”  

Borobudur,  Indonesia  2012  Bagan,  Myanmar  2012  

Understanding  PerspecKve  

“We  all  see  things  differently  

but  it’s  our  perspecKve  that  maHers.  Don’t  like  it?  Change  

it.”  

Borobudur,  Indonesia  2012  

Change  of  Mindset  

“The  secret  to  financial  wellbeing  is  an  awareness  of  lifestyle  goals,  

financial  planning  and  living.”  

IntroducKon  

•  My  Background  •  The  plan  is  to  provoke  discussion  and  interest  in  the  subject  of  personal  finance.  

•  The  goal  is  to  incite  acKon  in  furthering  your  educaKon  and  knowledge.  

•  My  hope  is  to  build  the  foundaKon  for  you  to  achieve  prosperity.  

Prosperity  is  the  successful  and  thriving  living  condi2on  with  

respect  to  finances.  

Why  Financial  EducaKon?  

•  We  learn  the  area  of  a  triangle  but  not  the  value  of  the  dollar.  

•  We  can  calculate  the  circumference  of  a  circle  but  not  the  power  of  compounding  interest.  

•  Money  is  a  taboo  subject  but  we  learn  our  financial  habits  through  family  and  social  interacKons.  

•  Tremendous  amount  of  informaKon;  confusion  •  Don’t  be  fooled.  Money  impacts  your  life!  

What  we  hear  about  money?  

Why  Financial  EducaKon?  •  American consumers owe:

–  $854.2 billion in credit card debt –  $8.15 trillion in mortgages –  $1.12 trillion in student loans

•  Consumers paid $32 billion in overdraft fees

•  70 million Americans are “underbanked” •  Financial relationships, credit reports and credit scores

impact your well being.

EducaKon  empowers  you  to  make  beHer  informed  financial  decisions.

Road  to  Financial  Wellness  

•  Imagine  a  cross  country  road  trip  without  a  plan  and  the  tools  to  reach  the  desKnaKon.  

•  Your  desKnaKon  to  financial  wellbeing  requires  planning  and  you  can  choose  to  get  there  sooner.  

•  Have  a  life  plan  not  just  a  financial  plan.  – Financial  goals  without  an  understanding  of  how  it  contributes  to  your  desired  lifestyle  prevent  you  from  achieving  your  life  plan.  

 

A  lifestyle  is  the  way  in  which  you  live.  

Financial  goals  are  targets  that  revolve  around  money.  

Lifestyle  Choices  

•  Envision  the  life  you  want  to  live.    –  Ask  yourself,  “What  brings  happiness  into  my  life?”  –  Ask  yourself,  “If  I  had  no  debt  or  financial  obligaKons,  how  would  I  spend  my  Kme?”  

•  Beware  of  Lifestyle  InflaKon  –  spend  more  when  you  have  more  to  spend.    – When  you  earn  more  the  cost  of  your  lifestyle  choices  increases  accordingly  limiKng  your  ability  to  build  wealth.  

•  Keeping  up  with  the  joneses.    –  Purchases  are  made  to  keep  up  appearances.  

•  Lifestyle  choices  are  sKcky.  Income  fluctuates.    

You  Only  Live  Once  

•  Spend  what  you  make  only  leads  you  to  “living  at  the  workplace”  more  oden  than  you  need.  

•  If  you  only  live  once,  why  not  spend  it  doing  the  things  you  want  to  do  all  the  'me  rather  than  just  the  weekends?  

•  YOLO  is  using  knowledge,  resources  and  Kme  to  achieve  desired  lifestyle  in  this  life'me.    –  You  can  spend  your  days/nights  working  to  pay  for  a  lifestyle  you  can’t  afford.    

•  YOLO  is  knowing  the  value  of  your  Kme  to  create  experiences  and  memories.  

Wealth  is  not  measured  by  how  much  you  spend  but  how  much  you’ve  

saved.    

Financial  Habits  

•  Influenced  by  the  Culture  of  Debt.    •  Taught  a  spending  habit.  •  Consumerism  has  taught  us  quanKty  of  stuff  not  quality.  Disposability  not  usability.    

•  Savings  is  postponed  for  instant  graKficaKon.  •  Purchase  things  over  experiences.  

If  you  won  a  million  dollars,  what  would  

you  do?  

Was  the  first  thought  about  paying  for  

stuff?  

Mind  the  Gap  -­‐  Mindset  

•  What’s  your  relaKonship  with  money?  –  Do  we  control  it  or  control  us?  –  Do  we  value  life  by  how  much  we  spend?  

•  Money  is  personal.    –  It’s  not  just  numbers.  

•  Spending  Habits  –  Mindless  spending  can  prevent  you  from  spending  on  needs  and  wants.  –  The  longing  of  a  purchase  is  more  impaciul  than  the  ownership.  –  Place  more  value  on  things  we  can’t  afford.  

•  Savings  Habits  –  WaiKng  to  have  more  income  to  save.    

•  ReKrement  isn’t  an  age.  

Happiness  Mindset  

•  Money  does  buy  happiness.    –  Ensures  we  don’t  worry  about  basics  to  sustain  life.  

•  Materialism  does  not  buy  happiness.  –  Wealthiest  don’t  want  it  all.  

•  Fear:  More  money  more  problems.  –  LoHery  winners  lose  winnings.  

•  Buying  things  or  experiences  are  the  same.  –  It’s  the  value  you  place  on  them.  

•  Personal  saKsfacKon  can’t  ever  be  purchased.    •  Money  is  a  tool  not  the  answer.  

–  Used  wisely  can  help  you  conKnuously  achieve.  

•  Money  does  not  give  you  purpose  in  life.    –  Makes  it  easier  to  achieve  a  purpose.  

Cu@ng  expenses  is  more  powerful  than  increasing  income.  

Understanding  Income  

•  Income  comes  and  goes.  •  It’s  not  how  much  more  you  can  make.  It’s  the  relaKon  to  how  much  you  spend.    

•  You  can  live  paycheck-­‐to-­‐paycheck  with  a  six  figure  salary.  

•  It’s  not  just  the  paycheck.  It’s  the  benefits  too!  •  Diversify  income  sources.  

Spending  >  Income  =  Downward  Spiral  

Mindful  Spending  

•  Awareness  of  how  money  is  spent  to  improve  quality  of  life.  

•  Knowing  purchases  made  today  can  impact  ability  to  reKre  early.    

•  QuesKoning  purchases.  – Do  I  need  it?  – Do  I  need  it  now?  – What  will  happen  if  I  don’t  have  it?  

Do  I  have  cash  to  make  the  purchase  now  or  am  I  willing  to  work  more  hours  in  the  future  to  pay  for  it?  

Savings  

•  Savings  is  necessary  to  get  capital  needed  to  make  wealth.  •  PrioriKze  Savings  –  Pay  yourself  first.  •  Find  ways  to  reduce  spending  and  save  more.  •  Have  a  Purposeful  Savings  Strategy    

–  Emergency  Fund  –  6  months  of  expenses  in  liquid  account  for  use  in  event  of  loss  of  employment  or  underemployment.  

–  Short  Term  (within  a  year)  –  VacaKon,  Holidays,  Taxes    –  Midterm  Goals  –  Home  and  auto  purchase,  college  expenses,  growing  

family.  –  ReKrement    

InvesKng  

•  Benefits  of  an  early  start  

•  Compound  Interest  

•  401(k)  match  

•  Roth  IRA  

Do  you  want  to  be  the  Starbucks  loving  apartment  renter  or  the  Folgers  Crystal’s  

homeowner?  

Spending  Habits  

•  What  we  need  is  actually  much  less  than  “what  we  think”  we  want.  

•  Brand  loyalty,  impulse  buys  and  retail  therapy.  

•  Immediate  graKficaKon  over  future  needs.  

A  bargain  isn’t  a  bargain  if  you  actually  

don’t  need  it.  

Thoughts  on  Financing  

•  Purchase  on  credit  only  when  buying  long  lasKng  assets  with  short  lasKng  financing.  

•  Don’t  finance  items  for  longer  than  their  usable  life.  •  The  importance  of  credit  and  impact  to  lifestyle.  •  Necessity  of  loans  as  an  investment  (educaKon,  home,  car).  

•  Just  because  you’re  approved  doesn’t  mean  you  can  afford  it.  

•  Ask  yourself,  “How  does  the  loan  or  line  of  credit  improve  your  life  long  term?”  

Reality  of  Debt  

•  Avoid  debt  collectors,  bankruptcy  and  financial  stress  by  avoiding  debt.  

•  A  ball  and  chain  that  prevents  you  from  living  your  dream  lifestyle.  Borrowed  money  keeps  you  bound.  

•  In  debt?  PrioriKze  debt  repayment.  

Debt  is  reserving  your  future  2me  to  

work  rather  than  fun.  

ReKrement  as  a  Lifestyle  

•  Through  planning  and  sound  financial  management  reKrement  can  be  achieved  sooner.  

•  The  amount  needed  to  reKre  differs  from  one  person  to  another.  •  Power  of  Time.  Start  saving  and  invesKng  for  reKrement  early.  •  Know  your  life  plan,  preferred  lifestyle  and  financial  goals.  •  Understand  and  use  reKrement  savings  vehicles:  

–  401(k)  –  Individual  ReKrement  Accounts  (IRA)  –  Investment/Brokerage  Accounts  –  Pensions  –  Company  Stock  OpKons  –  Social  Security  

At  age  23,  you  made  $40,000/year  and  by  30  years  old  you’ve  saved  $40,000  into  your  401(k).  If  you  decided  not  to  contribute  another  dime  2ll  re2rement  and  realizing  an  8%  return,  your  $40,000  would  be  over  

$600,000.  

FACTS  over  LoHo  Dream  

•  Financial  Wellness  FACTS  Process  –  Financial  Awareness  

•  Be  mindful  of  your  life  plan,  financial  situaKon  and  your  money  habits.  •  Ask  quesKons  and  understand.  Change  mindset  and  perspecKves  as  needed.  

–  CreaKng  a  plan    •  Have  a  life  plan,  set  financial  goals  and  budget  for  everything.  •  Change  is  certain  and  plan  a  response.  

–  Taking  control  •  PrioriKze  savings  and  diversify  income.  •  Pay  down  debt,  control  spending  and  decrease  expenses.  •  Automate  and  use  financial  tools.  

–  Seeking  knowledge  •  Invest  in  yourself  through  educaKon  and  skills  aHainment.  

Achieving  Financial  Freedom  

•  Ignorance  isn’t  bliss.  Financial  independence  begins  with  financial  knowledge.  

•  The  more  you  know  about  personal  finance  the  more  control  over  your  financial  future.    

•  Change  is  inevitable  so  have  a  plan,  avoid  lifestyle  inflaKon  but  be  flexible  and  prioriKze  saving.  

•  The  magic  number  for  reKrement  varies  greatly  for  each  person.    

•  Increase  wealth  by  lowering  expenses,  curbing  spending,  saving  on  purchases,  diversifying  and  supplemenKng  income.  

Resourcesfulness  

•  Your  Knowledge  –  Invest  in  learning  more.  

•  BudgeKng  –  Helps  achieve    financial  goals  and  life  plan.  

•  Banking  RelaKonships  –  Not  all  created  equally  choose  the  right  program.  

•  Free  Resources  –  Take  advantage  of  all  available  resources  from  colleges,  non-­‐profits  and  government  sources.  

phroogal

www.phroogal.com  

Learn  more  at