Goal Setting Saving

and

Investing

Florida Saves 2020Florida Saves 2020“See Your Future Clearly”

Purpose of Saving Money

To set aside money you could spend today so you can spend it tomorrow…

What will happen if you:

• Lose your job? • Get sick? • Have an emergency?

Overview

• Two futures:– The one we plan for – The one that happens

• Save for the future you “want”

• Prepare for a “rainy day”

• Pay Yourself First!

Saving should be planned, not an afterthought

Defining “Goal”

“ A statement of future wishes. It describes what is trying to be accomplished.”

(Cothran and Wysocki, 2009)

Importance of Goal Setting

“You've got to be very careful if you don't know where you're going, because you

might not get there.”

– Yogi Berra

(Cothran and Wysocki, 2009)

S.M.A.R.T. GoalsS.M.A.R.T. Goals

Strategize to Save for Goals

1. Calculate amount to save for each goal per month

2. Stretch amount over the course of the month

3. Deduct from incomeConsider enrolling in an automatic savings program – up to 10% of income

Activity• Fill out the SMART Goal Worksheet

• Construct a SMART Goal

Goal Planning• Short-Term

– Less than one year• A significant gift

• Medium-Term– 1-5 years

• Down payment for a car, a vacation, or large purchase

• Longer Term– 5 years and more

• House, car, retirement, education

Emergency Fund and Meeting Short-Term Cash Needs for

Expenses

Foreseeable Large Purchases

Intermediate Goals: Home, Business

Tax Advantaged: Education & Retirement

Dream Big

$

Savings Pyramid: Layer Your Savings!

Emergency Fund: Base Savings Pyramid

• Should be a requirement

• 3 - 6 months of necessary expenses when times are good

• 8 -15 months when times are uncertain

• Think of saving as a bill; force yourself to pay your “saving bill” first.

Foreseeable Large Purchases

• Plan ahead

• Build into budget– Avoids purchasing

with credit

• Use Savings, CDs, Money Markets when appropriate

Intermediate Goals: For Home, For Business

For a Down Payment Start-Up Capital

Tax Advantaged: Education and Retirement

• Starting early is important

• Choose plan for state tax deduction

• Transfer money to another family member if goes unused.

• Have an old 401(k), 403(b) or tax-sheltered annuity from another employer?

• Roll it over to manage in a Traditional IRA

• May expand investment choice and save costs

Retirement Is a Goal

• Use qualified or tax-deferred saving vehicles– Prevent use until age 59 ½– Early use is a 10% penalty

• Make IRA contributions• Take advantage of employer provided

plans with matching contributions

Dream Big• Other goals?• Once you have

adequately funded your other layers, you can put money to these dreams… whatever they are.

Pay Yourself First!• Stop thinking sacrifice!

• Plan for savings

• Make it part of your budget– Make it a habit

– Budget it in as the first line item for each goal

• Don’t give yourself a choice– Payroll deduction into savings

– Bank automatically transfer• Choosing the right account and method is important

Strategies for Saving Money

• Continue “to make loan payments” when loan is paid in full – Redirect that money into savings

• Plan a “nothing week”

• Leave the debt/credit card “at home day”

• Avoid paying credit charges

Strategies for Saving Money

• Start small then increase every 3-6 months• Save some of your tax return • Save overtime money• Save your raise or bonus• Save 50 cents a day in loose change

• $15 per month• Save 75 cents a day– More than halfway to a five hundred dollar emergency fund

Strategies to Reduce Spending

• Shop with a list

• Save coupon money– Look online for price matching

and coupons

• Shop for sale prices

• Collect loose change

• Research reward programs

Strategies to Reduce Spending

• Reduce grocery bill by 2 per cent• Bring lunch to work = $60 per month• Conserve water and energy at home• Eating out two fewer times a month = $30

per month• Name brand vs. generic brand

Investment Planning Process1. Define financial goal(s)

2. Discover your risk tolerance

3. Establish a saving program into financial account(s)

4. Learn about available investment choices

5. Purchase and diversify investments across different asset classes

6. Monitor, review and rebalance annually

Types of Accounts

• Basic savings account • Certificate of Deposit• Education and Retirement accounts• Money Market Account• General investment brokerage accounts

Depends on why you are saving

Match the account to your goal

Basic Savings Account

• Excellent vehicle to accumulate money for emergencies or short-term goals

• Can be linked to checking account– Excellent for overdraft protection!

Certificate of Deposit• Timed deposit account• Good to use for intermediate goals

Traditional• Tax deferred• Max contribution

$5,000 per year per spouse

• May or may not be fully deductible – If participating in

employer plan this will vary

Roth • Does not provide

current tax savings• Max contribution $5,000

per year per spouse• No phase out based on

material participation in DC plan

• Provides for tax-free growth on savings. No deduction now, but also no taxes later

Basic Rules of Investing

• Don’t put your eggs in one basket

• Timing the market does not work in long run

• Avoid moving money to chase returns

• Financial markets reflect public information

Investments• Mutual Funds• Stocks• Bonds• Real Estate

Hypothetical value of $1 invested at year-end 1925. Assumes reinvestment of income and no transaction costs or taxes.

Year-end 1925–2005

$11

Endingwealth

3.0%

Averagereturn

Inflation

$18 3.7%

Treasury bills

5.5%$71

Government bonds

$.10

$1

$10

$100

$1,000

$10,000

$20,000

1925 1935 1945 1955 1965 1975 1985 1995 2005

10.4%$2,658Large company stocks

12.6%$13,706Small company stocks

How Do I Earn Interest?

• Return based on amount of risk taken

• Risk is uncertainty

• Proper mix of stocks, bonds and alternative investments may provide maximum return for your comfort of risk taking

• Past performance is no guarantee of future results. Risk and return are measured by standard deviation and arithmetic mean, respectively. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index.

13% Return

12

11

10

9

10% Risk 11 12 13 14 15 16 17

Maximum risk portfolio:100% Stocks

80% Stocks, 20% Bonds

60% Stocks, 40% Bonds

50% Stocks, 50% Bonds

100% Bonds

Minimum risk portfolio:25% Stocks, 75% Bonds

Growth of $10,000 over 25 Years1

(3/31/83 – 3/31/08)

1. Source of chart data: FactSet 3/31/08. These asset allocation models are for illustrative purposes only and are not intended as investment advice or recommendations. Results are for $10,000 hypothetical investments allocated to the percentages shown in each model from 3/31/83 – 3/31/08. Stocks are represented by the S&P 500 Index, a broad-based measure of domestic stocks performance; bonds by the Lehman Brothers Aggregate Bond Index; foreign stocks by the Morgan Stanley Capital International (MSCI) EAFE Index, a broad-based measure of foreign stock performance; commodities by the S&P GSCI, a composite index of commodity sector returns re presenting an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities. Indices include reinvested income, but not transaction costs or taxes, are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results. Stocks, commodities and bonds are subject to different risks. Stocks and commodities are also different from bonds, where bonds, if held to maturity, may offer both a fixed rate of return and a fixed principal value. Fixed income investing entails credit risks and interest rate risks. When interest rates rise, bond prices generally fall and the Fund’s share prices can fall. Foreign investing has special risks, including currency fluctuations, foreign taxes and political and economic factors. Commodities may be subject to greater volatility. Diversification does not assure a profit or protect against a loss.Past performance does not guarantee future results. Due to ongoing market volatility, current performance may be more or less than the results shown in this presentation. The performance information does not show the effects of income taxes on an individual’s investment. Taxes may reduce your actual investment returns or any gains you may realize if you sell your investment. An investor’s shares, when redeemed, may be worth more or less than the original cost.

AggressiveAggressive

$221,714$221,714

70%70%30%30%

ConservativeConservative

$118,309$118,309

10%10%5%5%

15%15%

70%70%

Stocks Bonds Foreign Stocks Commodities

ModerateModerate

10%10%10%10%

45%45%

35%35%

$152,769$152,769

Asset Allocation At WorkAsset Allocation At Work

How to Open an Account• Consult a financial representative at your

financial institution• Call your bank or investment broker

Be prepared by gathering personal information ahead of time :

1. Social security numbers

2. Beneficiaries date of birth, address, phone numbers

3. Financial account numbers

4. Drivers license

5. Voided check

• Go directly to an institution’s online website

1. Source of chart data: Ned Davis Research, 3/31/08. The chart shows the results of a $1,000 hypothetical investment in the S&P 500 Index on 3/31/88 held through 3/31/08 compared to similar hypothetical investments in stocks that were not invested on the days that were the market highs during the period. The S&P 500 Index is a broad-based measure of domestic stock market performance that includes the reinvestment of dividends. The index is unmanaged and cannot be purchased directly by investors. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. For comparison, an investment in bonds is shown, represented by the Lehman Brothers Aggregate Bond Index. Indices are unmanaged and cannot be purchased directly by investors. This chart is for illustrative purposes only and does not predict or depict the performance of any Oppenheimer fund. Past performance does not guarantee future results. Stocks and bonds have different risks, where bonds, if held to maturity, may offer both a fixed rate of return and a fixed principal value.Past performance does not guarantee future results. Due to ongoing market volatility, current performance may be more or less than the results shown in this presentation. The performance information does not show the effects of income taxes on an individual’s investment. Taxes may reduce your actual investment returns or any gains you may realize if you sell your investment. An investor’s shares, when redeemed, may be worth more or less than the original cost.

Stay in the Market—Don’t Miss Your Window of Opportunity

Hypothetical $1,000 investment over 20-year period1 (3/31/88 –

3/31/08)

If You…

Missed theTop 25

Days

Missed theTop 25

Days

Missed theTop 5 Days

Missed theTop 5 Days

StayedInvestedStayed

Invested

Missed theTop 15

Days

Missed theTop 15

Days

BondsBonds

Compound 10.9% 9.5% 7.3% 5.4%

Return

7.5%

$7,948

$6,146

$4,071

$2,836

$4,218

No one can accurately predict market performance. Trying to do so by moving in and out of the market can be very costly.

Trying to Predict the Market?Trying to Predict the Market?

Take Home Message• Goal Setting

– Be creative and realistic, most all be SMART!

• Saving– Pay yourself now for the future you want

• Investing– Invest for the long run and remember the

basic rules of investing

When you have questions, we have answers!