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.
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