Building Your Financial Houseusing
Maslow’s Hierarchy of Needs Theory
Diana Webb, Ph.D.Associate Professor of Finance
Building Your Financial House
Get Rich Quick Futures Options Individual Stocks Accounts
Savings Emergency
Checking Money
Market Retirement 401K , IRA
Insurances = Protection Health Disability Income
Life Long Term Care
Auto & Home Retirement
Retirement Planning for the 21st Century
• 50 years ago Social Security was strong More people were paying in than taking out of the system People worked until they were age 65
• Today the Social Security System is weakLiving longer due to advances in the medicineMore add-ons to Social Security (widows, orphaned children, disabled workers)More people retiring earlier than age 65
What do we do now that we understand the Federal Government cannot support our retirement?
• Plan ahead for our retirement and stop depending on Government
• Take charge of our lifestyle
• Begin saving today
• How do we do this saving for retirement?– Raises at work– Income tax refund– Bonuses– Inheritance
Ideas on How to Invest, What to Invest, and Where
Mutual Funds Individual Stocks
Government Bonds Money Market Accounts
Municipal Bonds Corporate Bonds
Growth Stocks Income Stocks
International Stocks International Bonds
EE Savings Bonds Utilities
Real Estate Investment Trusts (REITs)
Ideas on How to Open a Retirement Account
• Employer Plans– 401 K plans– 403 B plans– 457 plans
• Individual Retirement Accounts– Roth Individual Retirement Accounts– Traditional Retirement Accounts
• Brokerage Accounts– Online Accounts without using a broker or
registered representative – Internet education on investing– Personal Finance class via CMU
What to know before you begin investing
• Your risk analysisWhere are you on a scale of 1-10?
1 = Not willing to take any risk
Conservative
5 = Willing to take some risk Moderate
10 = Willing to take a lot of risk Aggressive
• How willing are you to take on risk?– Interest Rate Risk– Stock Market Risk– Economic Risk
Funding Your Child’s Future Education 529 College Savings Plans
• 529 Plans and how they work
• Setting up a 529 Plan
• Funding the 529 Plan
• Advantages
• Disadvantages
• Information on 529 Plans
Finding Your Financial Direction Using Your Compass
• Where are you today?
• Where do you want to be tomorrow?
• How do you assess where you are today? Hint: take a personal finance class and learn about building your financial house
• Setting goals
• Getting rid of debt
• Starting fresh
The Role of Financial Advisor
• Help you assess what you need
• Help you plan for the future
• Help you get organized
• Help you during life changes
• Help you realize your dreams of tomorrow
• How do financial advisors get paid
Why & When to Rebalance your Investment Accounts• As we get older our investment objectives change
Accumulation Stage (ages 25-65)– Your working years– You can be more investment aggressive up to about age 60-65
• Stocks • Bonds
– Prior to retirement, rebalance for more moderate investing
• Distribution Stage (ages 65-85)– Your retirement years– More moderate investments due to retirement– Keeping up with inflation and taxes, but more moderate– Rebalance more money in moderate to conservative
investments
• Estate Planning Stage (65-?)
• Where do you want your investments and money to go?
Getting Started• Where are you today?• Take your pulse • What debt do you have?• Does your debt include Needs or Wants?• Track every single cent you spend for 4 months• Is more going out for senseless things?• Do you see patterns of spending?• Can you change those patterns of spending?• After the 4 months of record keeping you will know your
pulse• Now you can begin to build a healthy financial house &
remember its all about the money, honey!Sincerely,Dr. Webb