Building Your Future. Basics in Budgeting. in BLOG. Extraco Banks is a Member FDIC.

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Percival Baker
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1 Building Your Future Basics in Budgeting Extraco Banks is a Member FDIC. f in BLOG

2 TABLE OF CONTENTS DEBT Assessment WEALTH What is wealth? Net worth BUDGET 6-7 Financial goals Budget worksheet INVEST 8-10 Types of investments Retirement INSURANCE Types of insurance RESOURCES Online NOTES ADDITIONAL RESOURCES 19 1

3 DEBT Scoring for this assessment is calculated on a scale of 0-10, where 0 = Failure to plan, & 10 = You have a plan in place... NOTES Assessing your Debt: Score: Creating a Budget: Score: Understanding Your Credit Rating: Score: Maintaining Good Credit: Score: General Observations: Score: Average Score on Skills Assessment: 2

4 WEALTH What is wealth? Some people think that wealth means being able to pay bills on time. Others see wealth as having an expensive home and being able to travel. What can wealth do for you? Financial wealth would help me to... Example: 1. Put my kids through college 2. Own a home 3

5 Here are the terms you need to know... ASSET, LIABILITY, & NET WORTH ASSETS Things that you own LIABILITIES Money that you owe WEALTH CREATING -A savings account -A retirement plan -Stocks and bonds -A house NON - WEALTH CREATING -A home mortgage -Credit card balances -A car loan DEBTS -A home mortgage -Credit card balances -A car loan NET WORTH is calculated using this simple formula... ASSETS - LIABILITIES = NET WORTH 4

6 Assets What is my net worth? Assets Cash $ Savings account $ Stocks, bonds & (other investments) $ 401 (K) retirement plan / IRA $ Market value of home $ Market value of car $ Other assets $ Total value of assets: $ Liabilities Liabilities Home mortgage $ Home equity loan $ Car loan balance $ Credit card balances $ Student loan(s) $ Child support (per year) $ Other liabilities $ Total liabilities: $ Now add in your numbers... ASSETS - LIABILITIES = NET WORTH 5

7 BUDGET Now that you know your net worth, what do you want your net worth to be? In fve years? In ten years? Your net worth won t improve without some work. The next step in building your fnancial future is to set some goals. Here are some examples... Short-term goals Save $500 this year Save $5,000 in three years for a down payment on a house Long-term goals Save $15,000 in eight years to help my child go to college What are your fnancial goals? Short-term goals Long-term goals

8 Making a budget Income Salary 1 (take home pay) Salary 2 (take home pay) Other Income Total Income Budget Actual Variance Expenses Fixed Expenses Mortgage / Rent Car/ Lease payment Loan payment(s) Insurance - Car Insurance - Homeowner Insurance - Life Charitable Contributions Childcare Other Total General Expenses Electric / Gas Telephone, Internet, Cable Food Gasoline Pet supplies Medical / Healthcare Personal Care Other Monthly Expenses Total Miscellaneous Expenses Entertainment Gifts Clothing Other Total 7 Total Expenses

9 INVEST How should you go about using your money? Using your budget, you can decide how much you can afford to save or invest. When you decide to save, here are the steps you should follow RESEARCH Read whatever you can about investments and saving. Don t be intimidated by complicated terms. All of this information is readily available online or at your local library. 2. ASK FOR HELP Go to your bank and speak with a relationship banker or investment advisor. Extraco offers excellent services to help you understand how to make your money work for you. 3. CONSCIOUS SPENDING When you want to save or invest, commit to do so. Use your budget to decide how much you can save or invest and be mindful about keeping up with your plan. Now for some more specifcs... 8

10 Types of investments When learning about investments there are two factors to keep in mind when you decide to invest. Risk -The potential to lose money Return -The potential to gain money Here are some types of investments... Bonds Low risk, low return This is when you lend money to a company or government. You lose access to the funds for a given amount of time (usually a few years) and in return the company or government that you lend the money to will pay you interest. Stocks Potential high risk, potential high return A stock makes you a part owner in a company. You give the company money by buying shares and if the company does well, your share becomes worth more. If the company does badly, your share becomes worth less. Mutual Funds Low risk, low return This investment option takes your money and invests it in many different stocks or other types of investments. This requires almost no effort on your part after you set up the fund. 9

11 Retirement INVEST FOR RETIREMENT How much money will you need when you retire? Many people don t save enough for retirement. Use the following chart to calculate how much you need to invest today to achieve your retirement goal. How old are you? How much do you want to save by retirement? Invest Today to Meet Retirement Goals at Age 65. Age Amount Invested 20 $ 6,265 $ 12,531 $ 18,796 $ 25,062 $ 31, ,206 18,412 27,619 36,825 46, ,527 27,054 40,581 54,108 67, ,875 39,751 59,626 79,502 99, ,204 58,407 87, , , ,910 85, , , , , , , , , , , , , , , , , , , $ 200,000 $ 400,000 $ 600,000 $ 800,000 $ 1,000,000 Growth based on an 8 percent return that is compounded annually 10

INSURANCE AUTO INSURANCE State law requires that all motor vehicles have liability insurance to cover injury to other people or damage to their property.

Personal liability coverage in a homeowners policy protects you from loss resulting from any injuries that may occur on your property.

12 INSURANCE AUTO INSURANCE State law requires that all motor vehicles have liability insurance to cover injury to other people or damage to their property. Contact an insurance consultant to obtain a quote for any of your insurance needs. HOMEOWNERS INSURANCE This insurance covers your home and possessions. Personal liability coverage in a homeowners policy protects you from loss resulting from any injuries that may occur on your property. Your mortgage lender will require you carry a certain amount of insurance coverage as long as the mortgage is in place. You may also consider a higher-deductible insurance plan to save money on your homeowners coverage. 11

LIFE INSURANCE Life insurance pays money to the person you choose, your beneficiary, in the event of your death. It helps give financial protection to your children, spouse or parents.

FLEXIBLE SPENDING ACCOUNT (FSA) A FSA is a simple way for you to pay for your out-of-pocket medical and dependent care expenses while increasing your spendable income.

13 LIFE INSURANCE Life insurance pays money to the person you choose, your beneficiary, in the event of your death. It helps give financial protection to your children, spouse or parents. Extraco offers excellent life and accident insurance plans. FLEXIBLE SPENDING ACCOUNT (FSA) A FSA is a simple way for you to pay for your out-of-pocket medical and dependent care expenses while increasing your spendable income. HEALTH INSURANCE This insurance pays for some, but not all, of your doctor, hospital and prescription drug costs. HEALTH REIMBURSEMENT ARRANGEMENT (HRA) A HRA is an employee benefit designed to help offset medical expenses incurred by you and your family. HRAs can vary greatly in design, but are basically developed to cover expenses not covered by group health or supplemental plans. 12

RESOURCES Online resources for everyone, anywhere. The American Banker s Association http://www.aba.com/consumers/pages/default.

Use this site to learn about everything from mortgages to savings accounts. MYMONEY.gov http://www.mymoney.gov/pages/default.

cfm The Personal Finance Education page of the Federal Reserve Bank of Dallas host resources on building wealth for teachers, students,

14 RESOURCES Online resources for everyone, anywhere. The American Banker s Association The American Banker s Association has a variety of resources for all of your fnancial questions. Use this site to learn about everything from mortgages to savings accounts. MYMONEY.gov Federal Reserve Bank of Dallas The Personal Finance Education page of the Federal Reserve Bank of Dallas host resources on building wealth for teachers, students, consumers, and community leaders. MYMONEY.gov offers many resources to learn about personal fnance. Their My Money Five page presents information in an easily understood system dividing the information into 5 sections: Spend, Earn, Save & Invest, Protect, and Borrow. 13

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20 OTHER RESOURCES REDEFINING WEALTH The following resources can be used to learn more about building personal wealth. The list includes sources of information on financial literacy for adults and youth, budget and debt management and consumer protection. This guide is not intended to be allinclusive; there are many additional resources that may provide additional information on building wealth for a more secure financial future. You can always visit our website, for more information on the products and services we offer. AARP AMERICAN SAVINGS EDUCATION COUNCIL INTERNAL REVENUE SERVICE TEXAS DEPARTMENT OF BANKING fe.htm U.S. DEPARTMENT OF THE TREASURY AMERICA SAVES FDIC consumer/moneysmart NATIONAL ENDOWMENT FOR FINANCIAL EDUCATION TEXAS SAVES U.S. FINANCIAL LITERACY AND EDUCATION COMMISSION ABA EDUCATION FOUNDATION FEDERAL RESERVE BOARD education.org NATIONAL FINANCIAL EDUCATION COALITION TEXAS SOCIETY OF CPAs U.S. SOCIAL SECURITY ADMINISTRATION FINANCIAL EDUCATION YOUTH AMERICAN FINANCIAL SERVICES ASSOCIATION JUNIOR ACHIEVEMENT BANKING ON OUR FUTURE US DEPARTMENT OF THE TREASURY tools/tools_moneymath.htm FEDERAL RESERVE BOARD Information in this workbook provided by the Federal Reserve Bank of Dallas. Insurance Products are Not Deposits, Not Insured by the FDIC or any Federal Government Agency, Not Guaranteed by Extraco Banks or Its Affiliates, and May Go Down in Value. Extraco Banks is a member FDIC. Equal Housing Lender. 19

Your Retirement Lifestyle Workbook

Your Retirement Lifestyle Workbook Purpose of This Workbook and Helpful Checklist This lifestyle workbook is designed to help you collect and organize the information needed to develop your Retirement