Successful Financial Planning…

Vance L. Falbaum, CIMA®Senior Vice President – Financial Consultant

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The future belongs to those who believe in the beauty of their dreams.

Eleanor Roosevelt

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Today’s Agenda

• Setting Goals

• Developing a Plan

• Monitoring the Plan

• Challenges to Your Success

• Where to get the best caddy for THIS game

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But first a word on…words!

For purposes of this presentation:

Retirement is having the CHOICE of whether or not to go to work today

Safety is achieving your goals

Volatility is the daily movements of an investment

Risk is something outside your personal comfort level

Goals are a wish with a time line and are written down

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Setting Goals

• Think in today’s dollars

• Consider inflation

• Prepare for the unavoidable inevitable

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Developing a Plan

• What is YOUR safety net

• Determining the correct buckets to use

• How much can you save

• What should you expect to earn based on the investment decisions you make

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The Safety Net

Cash

Insurance

Wealthy Parents or Kids

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Where and how is the best place to save and invest?

Earnings

Pre-Tax

Savings

After-Tax

Savings

BankBrokerage

Firm401(k) Plan SIMPLE Plan IRA’s

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How Much to Save?!

In 1980 the average saving rate for an American was 8.2% of their wage

By the end of the 1990’s that had dropped to less than 1%!

Center for a New American Dream

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“The most powerful force in the universe is compound interest”

Albert Einstein

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Historical Growth of $1January 1926 – June 2010

Asset Ending Averag

e

Class Balance Return

Small Cap $7,058 11.1%

Large Cap $2,417 9.7%

LT Gov''t Bonds $95 5.5%

Treasury Bills $21 3.7%

Inflation $12 3.0%

Small Cap Equities: Represented by the Russell 2000 Index.

Large Cap Equities: Represented by the S&P 500 Index.

Long Term Gov’t Bonds: Represented by the Citigroup USBIG Treasury 10+ Year Index.

Treasury Bills: Represented by the Citigroup 3-month T-Bill Index.

$0

$1

$10

$100

$1,000

$10,000

1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010

Small Cap Equities

Large Cap EquitiesLong Term Gov't Bonds

Treasury BillsInflation

Inflation: Represented by the Consumer Price Index – All Urban Consumers (CPI-U).Past performance does not guarantee future results.Data Source: Ibbotson Associates and Zephyr Associates.

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- 50

- 40

- 30

- 20

- 10

0

10

20

30

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Perc

en

t D

iffere

nce

U.S. Stocks vs. U.S. BondsCalendar Year Returns

Returns through September 2010.

U.S. Stocks represented by the S&P 500 Index.

U.S. Bonds represented by the BarCap Intermediate Government Credit Index.

Data Source: Zephyr Associates.

U.S. Stocks Outperform U.S. Bonds

U.S. Stocks Underperform U.S.

Bonds

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Balancing Savings Against Time

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Monitoring the Plan

Frequency?

What to look at?

Manage risk

not returns!

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Challenges to Your Success

• Potentially Bad Information – The Media

• Cognitive Biases

• Inflation

• Taxes

• Yourself

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Media Effects…and the DJIA

March 9th, 2009

October 13th, 2008

September 14th, 1998

November 7th, 1987

Source – Bloomberg through 12/2010

86.1%

31.9%

93.1%

975.6%

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Biases

Conditioning

Overconfidence

Fear

Recency

Herding

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The New 1040 Tax form…

Line 1 – How much did you make? $_______

Line 2 – Send it in!

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Protecting yourself from…yourself

Average Return S&P 500 1989-2008

8.35% 1.87%

Average Equity Investor

Return 1989-2008

Data Source: Standard & Poor's Financial Services LLC

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THANK YOU!