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Personal Finance 101 Part 1 . . . AGENDA. Purpose Budgeting Credit Cards Three Tenets of Personal Finance Emergency Savings Retirement Investing Thrift Savings Plan (TSP) Individual Retirement Accounts (IRAs) Life Insurance Servicemembers’ Group Life Ins (SGLI) - PowerPoint PPT Presentation
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04/22/23
Personal Finance 101Part 1 . . .
04/22/23
AGENDA
• Purpose• Budgeting• Credit Cards• Three Tenets of Personal Finance• Emergency Savings• Retirement Investing
– Thrift Savings Plan (TSP)– Individual Retirement Accounts (IRAs)
• Life Insurance– Servicemembers’ Group Life Ins (SGLI)– Term vs. Whole Life Insurance
04/22/23
To provide Army leaders with a Better Understanding of personal financial planning
in order to provide our Soldiers timely, accurate, and honest information in order to
make more informed decisions.
PURPOSE
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Budgeting
• Almost everyone hates to budget
• You must have a good idea of your income and expenses
• For one month = keep track of every penny you spend. You’ll be shocked to see where your money goes
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Credit Cards
If you spend $4,000 on credit cards at 18.5% interest and pay only the minimum payments, it will take you 11 years to pay off ($7,800 total).
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Three Main Tenets of Personal Finance
• Savings– Emergency Fund
• Investing– Individual Retirement Accounts
(IRA)– Federal Thrift Savings Plan
• Insurance– Servicemembers’ Group Life
Insurance (SGLI) & Family SGLI– Term vs. Whole Life
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Emergency Savings
Rainy days will happen….• You need 3-6 months of living expenses
saved• Very liquid….not in CDs, mutual funds,
etc.• The more secure your job, the less you
need (Army = 3 months)• Most should aim for $10,000• More responsibilities = larger savings
needed
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Getting Started
Everyone can begin saving something
• Start with $50 a month if nothing else• Many mutual funds can be started with as
little as $50 (USAA for example)• Everyone has a Latte Factor…find yours.• Time is your biggest benefit. You miss out
on compounding interest the longer you wait.
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Retirement Investing - TSP
Thrift Savings Plan….• Exactly like a civilian 401-k retirement plan• Five index funds & four target date Life Cycle funds
– Index funds follow S&P 500, Wilshire 5000, etc.– Life Cycle funds are too conservative for most
• Funded with before tax dollars• Earnings grow tax deferred & taxes are owed on
the interest and capital gains when withdrawn• Can withdraw the money at 59 ½ years old• $15,500 maximum yearly contribution limit• Automatic enrollment….coming soon!
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Retirement Investing – Roth IRA
Roth IRAs….• Usually invested inside mutual funds or a
brokerage account with individual stocks• Funded with after tax earnings• Earnings grow tax free & no taxes are owed on
interest and capital gains when withdrawn• Can withdraw the money at 59 ½ years old• $5,000 maximum contribution limits ($416 a
month)• Investing $5,000 a year starting at 22 years-old,
earning 8% annually, will grow to over $2.2 million at age 62 (your investment =$245,000)
• Skip a Traditional IRA until you max out a Roth
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Investing Tips
• It’s usually more beneficial to start with a Roth IRA and then invest in TSP
• You can take out a loan for college, but you can’t take out a loan for retirement
• Investments with low expenses (like Index Funds) are a great place for a beginner investor
• Individual stocks are hard to track, mutual funds are better & more diversified
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Life Insurance
Is $400,000 SGLI enough? Maybe….• You need approximately 10x your income
– For an E-6 with 10 years of service, you should have $500,00 in insurance. Do not forget to include BAH.
• Do you depend on your wife’s income? You may need insurance for her.
• Will the Family SGLI be enough to cover full time daycare for children, fixing meals, etc.?
• You have disability insurance with the Army, but does your spouse have it at her work? Can you survive a loss of her income?
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Life Insurance
• For most people, Term insurance is better than Whole Life– $100,000 Whole Life = $100 a month– $500,000 Term Life = $40 a month
• 20 to 30 year term insurance (like SGLI) will protect you while your children are young
• You only need insurance to protect income• Insurance on children is a waste of money
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The Last Word…..
If you take nothing else
away….
Start now!
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QUESTIONS ?
“Amateurs talk about tactics, but professionals study Logistics.”
– General Omar Bradley