Personal Finance - Money Mindset and The Road to Financial Wellness by Phroogal

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Personal Finance Road to Financial Wellness Jason Vitug @jasonvitug

description

The seminar stress the importance of financial education in achieving life plans. It starts with financial awareness, creating a plan, taking control and seeking knowledge to ensure financial wellbeing and success.

Transcript of Personal Finance - Money Mindset and The Road to Financial Wellness by Phroogal

Page 1: Personal Finance - Money Mindset and The Road to Financial Wellness by Phroogal

Personal  Finance  Road  to  Financial  Wellness  

Jason  Vitug  @jasonvitug  

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“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  

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Financial  Rough  Waters  

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

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Living  My  Dreams  

“We  don’t  have  to  wait  Kll  a  

‘reKrement  age’  to  live  our  dreams.”  

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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.”  

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Borobudur,  Indonesia  2012  

Change  of  Mindset  

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

financial  planning  and  living.”  

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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.  

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Prosperity  is  the  successful  and  thriving  living  condi2on  with  

respect  to  finances.  

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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!  

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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.

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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.  

 

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A  lifestyle  is  the  way  in  which  you  live.  

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Financial  goals  are  targets  that  revolve  around  money.  

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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.    

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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.  

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

saved.    

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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.  

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If  you  won  a  million  dollars,  what  would  

you  do?  

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Was  the  first  thought  about  paying  for  

stuff?  

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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.  

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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.  

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Cu@ng  expenses  is  more  powerful  than  increasing  income.  

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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.  

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Spending  >  Income  =  Downward  Spiral  

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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?  

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

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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    

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InvesKng  

•  Benefits  of  an  early  start  

•  Compound  Interest  

•  401(k)  match  

•  Roth  IRA  

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

homeowner?  

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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.  

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A  bargain  isn’t  a  bargain  if  you  actually  

don’t  need  it.  

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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?”  

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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.  

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Debt  is  reserving  your  future  2me  to  

work  rather  than  fun.  

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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  

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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.  

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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.  

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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.  

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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.  

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