Congratulations, besides the good feeling of being recognized by the rest of the staff for your accomplishment of completing level 2 and developing a whole new set of professional goals, you’ll be making more money when you finish this level as well! I’m not a financial consultant. I don’t have a degree in economics. However, I’ve learned a lot about the fundamentals of goal setting, investing, taxes, banking, borrowing, property and just being economically smart. At each level, I’ll share some new ideas with you so that you can retire from our practice financially secure.
Here are some frightening statistics:
40% of Americans retire on incomes of less than $5,000 a year
22% of Americans retire on incomes of less than $5000 $10,000 per year
As you progress through the levels, I hope you will be able to reach these financial goals:
1. Working together with spouse and children on money matters to achieve a preferred future of financial security.
2. Learn more about money management to become financially secure.
3. Become more confident about taking control of your financial future.
4. With knowledge and confidence make smarter financial decisions.
5. Budget better.
6. Reduce your debt.
7. Save more money.
8. Invest more and do so wisely.
9. Help your children learn about money.
10. Be able to retire comfortably.
It’s time to try to reduce the tax bite by taking some tax-free benefits rather than taxable salary.
Child care Small children can be a difficult responsibility for a working parent. Up until now, you have balanced their needs with your responsibilities here at HealthPark as well as you could. Now you can at least make the care of your child less expensive.
We are too small to have our own day care center. Fortunately, there are several fine centers available in our area. Here are guidelines for evaluating a day care center. Spend at least 1 hour at the center. Interview the director (background in early childhood training and provides continuing education for the staff).
Infants and children under three need:
• the same caregiver(s) over a long period. Parents should find out how long the individual plans to work in the day care center. High turnover of individuals, several turnovers, or any turnover at critical points of development can distress a child.
• a caregiver who will play and talk with them, praise them for their achievements, and enjoy them. Parents should seek a caregiver who is self-confident, affectionate, and comfortable with the children. The caregiver should be able to encourage social skills and positive behavior, and set limits on negative ones.
• more adults per child than older children require. Infants and young children need a lot of individual attention.
• Toys should be scrubbed daily
In groups, older children can have fun while they learn how to interact with others. Parents of children three and older should seek day care services with:
• trained, experienced teachers who enjoy, understand, and can lead children.
• opportunity for creative work, imaginative play, and physical activity.
• space to move indoors and out.
• lots of drawing and coloring materials, and toys, as well as equipment such as swings, wagons, and jungle gyms.
• small, rather than large, groups. (Studies have shown that five children with one caregiver is better than 20 children with four caregivers.)
If the child seems afraid to go to day care, parents should introduce the new environment gradually: At first, one parent can go along, staying nearby while the child plays. The parent and child can stay for a longer period each day until the child wants to become part of the group.
Though parents may worry about how the child will do, they should show pleasure in helping their child succeed. If the child shows unusual or persistent terror about leaving home, parents should discuss it with their pediatrician.
Please write down the name, address, telephone number, and description of the center you use. Some of our new employees may want to take advantage of this center since you’ve “checked it out.”
The expense involved in placing your child in a day care program can be paid as a tax-free benefit your flexible spending account.
Choosing Day Care
1. Ask around (friends, co-workers, church)
2. Contact our local Child Care Choices
a. Staff deeply involved with kids
b. Minimal or no TV watching
c. Adult / child ratio
d. Background of each adult
e. Do parents participate
f. Safe and clean
g. Outdoor play space
h. Emergency procedures in place
i. Do you get feedback reports
j. How sick should you’re child be to stay home
k. Snacks / meals
Latch Key Kids
If your children are 12 13 years old, you may be considering allowing them to stay home after school by themselves (Latchkey kids). Don’t let age be the deciding factor. Some 10 11 year olds could handle this well enjoying the quiet time. Some 13 14 year olds would be scared and lonely.
Here are some ways to tell if your child is ready to stay home alone:
1. Understands clearly safety issues
a. when to call 911
b. can tell you the safety precautions in his own words
i. What do you do if you feel lonely or scared?
ii. What if someone comes to the door?
iii. What if the phone rings?
iv. What if the power goes out?
2. Has good judgment, makes well thought out decisions
3. Comfortable being alone – will she stay upstairs alone when you’re home
4. Have several dry runs.
a. You be home, but unavailable.
b. You go to a friend’s home.
5. Post a complete set of rules, such as:
a. visiting friends
6. When your child passes all the tests and stays home alone, be sure to praise her. It’s an
If you believe the child is ready to be alone, here are some tips:
1. Make a list of neighbors that are home and their telephone numbers.
2. Add to this list police, fire, emergency squad, etc.
3. Make sure at least one neighbor has an extra house key.
4. Write down the telephone number where you can be reached.
5. Begin by allowing your child to be alone for short periods of time say 15 minutes when you go to the store. Make sure they lock the door.
6 .At least 75% of children who are home alone are occasionally afraid. Doorbells, phone calls, dark corners, strange sounds, all will occasionally cause a chill. Let your child know that’s okay. It happens to all of us. Don’t deny these feelings. Help the child to recognize and accept them.
7. Help your child to prepare for specific situations.
a. Emergency neighbors
b. Fire fire department
c. Strange person police
d. Hungry list okay snacks
e. Lost key neighbor
f. Play at friend’s house call you
8. Have the child practice safety procedures
a. Lock windows
b. Lock doors
c. Keep a radio or TV playing (for company)
If your child is young, and can’t stay alone, you have three choices:
1. Family day care in a person’s own home. This person should show you licenses.
2. Day Care Center in churches, businesses. Health/safety standards and adult/child ratios are regulated by the state.
3. In home childcare a person comes to your home. Be sure to write a contract so both sides know what to expect. This contract should include:
b. Hours, wages
c. Benefits food, transportation, etc.
d. TV limitation? Spanking? Guests?
e. Withhold for Social Security
The cost of a baby sitter can cut into the value of your salary here at HealthPark. One possibility I would recommend is to try to develop a co-op babysitting service. Run an ad in the Tipp and Troy papers. Look for other working couples with young children. See how many half days each week one parent doesn’t work. You may find that you can avoid 2 4 days of baby-sitting fees by swapping this service among your group. You could even decide what activities/toys you want to make available and share the cost of these.
Here are some ideas:
1. Try to interest 10 families
2. At the organization meeting:
a. Appoint a secretary
b. Print up 1000 slips representing 1/2 hours of baby-sitting each
c. Give everyone a copy of each families’ names, children’s ages, addresses, telephone numbers (home and work)
d. Secretary is paid one slip for each 1/2 hour s/he works on the groups needs
3. Process: A family can arrange for a baby-sitter directly or through the secretary.
4. Each family buys 10 slips at 5 each to start out. The most my one family can buy is 50 slips, after that you have to earn them be baby-sitting for others. The secretary keeps track of the payments and is responsible for the money.
5. The whole group (with children) should get together once a year to review the system and solve any problems. Why not have a picnic?
6. Some hours will need to be paid extra, or you won’t find anyone who will help. These times are often:
a. 5 7 p.m. during the week (a bonus slip/hour)
b. Saturday nights (a bonus of 2 slips)
c. After 12:30 a.m. (double slips)
d Each extra child in a family (1/2 slip)
7. To special precautions:
a. Notify your homeowners insurance company that you are baby-sitting.
b. You are supposed to let the IRS know you are getting a bartered service and estimate its value as part of your income.
8.Career expenses So you want to belong to some career organizations, attend seminars, travel to some out of state meetings, etc. Just let Dr. Smith know how much money you would like to budget for these activities on a biweekly period. This amount will then be withheld from your paycheck to form a pool of money that you can use at your discretion.
In 2001-2002, 74.7 million Americans (1/3 of Americans under 65) had no health insurance.
In our society, you must protect yourself and your family from the financial impact of a serious illness or injury. We offer you this coverage. You can also add your spouse and/or children for an extra expense.
Generally, we have a handful of people on our health insurance plan in any year. We are part of the local Chamber of Commerce program to receive a discount on our premiums. Our staff on the health insurance are rated as a group every year on our health. We are assigned a number of how healthy our group is. The healthier we all are, the lower our costs will be. Therefore, you can make a difference in your health insurance cost by staying as healthy as possible. Here are some tips:
1. Exercise, don’t smoke, watch your weight, eat a balanced diet, stay healthy. Every time you go to a physician or purchase medication it is tracked. The more we spend, the more our costs will go up.
2. Take advantage of all the preventive care visits available on our plan – there are several that will not cost you anything – these include an annual ob gyn visit, an annual eye exam, an annual flu shot, annual well visit checks for children and their immunizations.
3. Read your copy of our policy carefully. Be sure to use in network physicians and hospitals.
4. Use generic prescription drugs when possible. Ask your doctor if there is a less expensive option available.
5. Take advantage of the healthy rewards – if you complete an online assessment or coaching you will earn gift cards valued from $50 – $100 every year!
Earn Healthy Rewards
In 2007 – 2008, our health insurance plan offers Healthy Rewards – you may earn reward dollars to redeem for gift cards to select retailers. This program rewards you for taking steps to improve your health.
If you do this: You can earn:
Complete the Health Assessment online $50
Enroll in the Personal Health Coach Program $100
Graduate from the Personal Health Coach Program $200
Complete our Smoking Cessation Program $50
Complete our Weight Management Program $50
Here is a sample staff explanation of our health insurance. This will be updated every year, but it gives you an idea of how our health insurance works.
Health Insurance Plan
The plan that we have chosen is _____________________. This is a PPO health insurance plan that maintains a list of physicians that you can choose from for your health care in order to receive in-network coverage. You can go online at ________________ to look up your doctor as well. Hospitals covered include: _____________________________-.
This health insurance plan has a $________ individual and $______ family deductible. To clarify how the deductible on family coverage works: The family deductible must be met before any individual family member will receive benefits. After the deductible is met, then the plan covers 80% in network and 50% out of network for both hospital and doctor care. Preventive care such as well baby visits, pap smears, immunizations (flu shots), and annual eye exams are covered at 100% and do not have any deductible requirement. The in network maximum out of pocket amount is $_____ individual and $______ family, after you have paid this amount in copays and deductibles then you pay nothing more for the rest of the policy year.
For more information on providers, the Healthy Rewards Incentives or the prescription program go to www._________________ and register. To apply for our health insurance, you must fill out the Application and give to our office manager to submit. Our contact is _________________. You can call with ANY health insurance related question – she can help you to understand and maximize your health insurance benefits.
As a participant in our health insurance plan, you should establish a Health Savings Account. This .HSA is a new way to give you good coverage at a relatively low cost. In this plan, your deductible is very high, so you must protect yourself financially by having a “rainy day” fund to cover your costs until you reach your deductible. This is a savings account used for medical expenses that can be used similar to our existing flex plan, but it has these added benefits:
• It rolls over year to year
• It is portable – Your money belongs to you, not in an office account.
• Other people can contribute (Ex. If grandparents want to give you a Christmas gift, they could put some money into your HSA.)
• You can earn 3.50% interest on your savings.
• If you never spend any of this savings account money, then it turns into retirement money and can be used for anything, not just medical expenses.
This Health Savings Account will be with _______________ Bank. Applications are done online.
Who will be covered by your insurance? Categories for our insurance include:
a. Employee only
b. Employee + Spouse
c. Employee + Children
To determine the costs for joining our group health insurance plan, we need to know:
Your age _______________ and the age of others you want on your insurance plan ____________________
With this information we can determine your monthly premium cost.
To figure your health insurance cost:
$____________ Total monthly premium for the family
$____________ Breakdown of premium for yourself
$____________ Breakdown of premium for spouse and/or children
= $___________ Your cost per month
Divided by: $_____________ Your pay rate
= _____________ Number of hours/month to cover health insurance
This plan provides TAX FREE benefits to you. If you and your family earn less than $24,000, you may be better off taking a child care tax credit, but for every other occasion you are probably better off avoiding federal state, and social security taxes that are 28% of a salary of $24,000.
Not only will you avoid paying taxes on thousands of dollars of your salary, you also get to choose which benefits you want and exactly how much money you want to spend on each benefit. Each year you can reevaluate your needs and change your benefit package. For almost everyone, the flexible spending account is a much better tax saver than itemizing healthcare expenses.
You can begin to use this flexible spending account as soon as you work 20 hours or more per week and have been on staff for more than 90 days. This plan can also include:
2. Unmarried children
a. Up to 19 years old
b. Up to 25 years old if full time student
c. Up to 25 years old if physically or mentally disabled and fully dependent on you
Next is an outline of the “benefit bank” of items you may choose from in developing your individualized package. Any item on this list that you plan to purchase this year will save you around 35% if you include it in your plan.
Does this seem too good to be true? Well, there is one “joker” in the plan. Any money that you allocate into this plan must be spent during that current year. Any unspent money is lost to you and used to offset the cost of running the plan. Here’s an example of how the plan works.
Let’s assume you earn $19,000 per year and currently pay for individual medical insurance at the rate of $100/month. Setting up a flexible benefit plan for medical reimbursement would result in an increase in spendable income of approximately $306 assuming certain tax rates as follows:
Employee income Present Flexible
Gross Income $19,000 $19,000
Medical Insurances 0 1,200
Taxable Income $19,000 $17,800
Federal Tax (15%) 2,850 2,670
State Tax (3%) 570 534
Social Security (7.5%) 1,425 1,335
Medical Insurance Premium 1,200 0
Net Spendable Income $12,955 $13,261
Increase in Spendable Income $ 306
for Employee with Flexible Plan
Here is a second example
Health care account contribution $350
Dependent care account contribution 3,500
Total pretax contribution 3,850
Total estimated tax savings (25%) 988
As a rule of thumb, you will save 25 cents in taxes for every dollar you use in this fund.
Okay, now it’s time to put your package together. Here are some areas to save
1. Birth Control Pills, abortions
3. Claritin and other over the counter allergy medications
4. Cosmetic surgery
5. Day care (maximum of $5,000)
a. Children under 13
b. Disabled at any age
c. Includes nursery, babysitting
d. Includes housekeepers if their duties include care for dependents
e. Includes social security and unemployment taxes and any similar state taxes you pay for someone who provides care to your dependents
6. Dental HealthPark provides a fixed annual amount that can be used by you and your immediate family. Estimate your uncovered expenses and add them into your plan. This helps with specialists (ortho, perio, etc.)
7. Fertility treatment
8. Health Insurance deductibles
9. Hearing aids and batteries
10. Home improvements for medical reasons
11. Home nursing care
12. Laser eye surgery
13. Inpatient drug and alcohol treatment
14. Long term care premiums
15. Massages prescribed by a physician
16. Medical any deductibles, co pays, or non-covered expenses you expect (physicals, elective surgery, any doctor visits.)
17. Mental health care
18. Optometry, eye glasses, contact lenses
19. Prescription and non prescription drugs not covered by insurance
20. Stop smoking programs
21. Tutors for dependent children
24. Your portion of health insurance premiums
25. Corrective eye surgery
26. Unconventional medical expenses? ( acupuncture, massage therapy, etc.)
27. Health club dues if membership prescribed by your doctor for a specific illness.
28. Home exercise equipment if prescribed by your doctor for a specific illness.
So how does this work?
1. During November decide which benefits you can use in the following year
2. Decide how much money you want to fund for each benefit
3. Money will be withheld from each paycheck to build up enough money so that by the end of the year you will have withheld an amount equal to your total benefit amount needed.
4. During the year when you incur an expense that is covered by your account
a. Pay the expense personally and get a receipt
b. Fill out a reimbursement request form
c. Give Loraine the request form and a copy of the paid receipt that includes date, description of service, and amount
5. Loraine will send this information to Mega-benefits
6. Mega-benefits will send you your check within 2 weeks
You can make changes during the plan year if
1. Birth or adoption of child
4. Death of a family member
5. Change in spouse’s employment status/benefits
1. Failing to shop for the best price
a. Don’t be afraid to say no to an insurance agent or get 2 3 estimates
b. The money you save will be your own!
2. Don’t buy unnecessary insurance
1. If you’re single you probably don’t need life insurance
2. Children don’t need life insurance
3. Special policies: flight insurance, cancer are over priced and duplicate better existing programs
4. Collision coverage on autos that are more than 5 years old
5. Not taking the highest deductible you can afford
a. A higher deductible reduces your premiums on auto, health, and house
6. Not having disability insurance you are three times more likely to be disabled before you are 65 than you are to die.
7. Dealing with an insurance agent that doesn’t care about you
a. Independent agents are usually best
8. Not taking advantage of discount insurance plans
a. Dental association policies
9. Canceling a policy when angry because of a premium increase expect them, that’s the way insurance companies are now they may still have the best policy for you
10. Not updating your coverage every year
a. Did you get married/have a child, buy a new car, add onto the house?
b. Get a good insurance agent and review everything with him/her in November of each year
11. Accidental death life insurance (buy what you need without this)
12. Waiver of premium coverage for life insurance (too costly for benefit)
13. Mortgage and credit life insurance (very expensive life insurance)
14. Air travel insurance (silly)
15. Car rental insurance (check with your agent, usually covered by your auto insurance)
16. Credit card loss insurance (government only allows $50 maximum)
17. Identity theft insurance (often covered by home owners insurance)
Your home is probably your most valuable possession. Home insurance protects your from a huge loss that you couldn’t afford to pay out of pocket. Although insurance can be a little confusing, the better you understand your coverage the safer you’ll be and the less money you’ll spend.
Here are the parts of a homeowner’s policy
1. Property protection covers house and contents
2. Liability against medical payments for injuries and damage to others and their property usually maximum of $100,000
3. Additional coverage extras such as reimbursement for stolen credit cards, floods, etc.
There are 3 types of homeowners insurance
HO 1 Basic protection with many restrictions (11 perils covered)
HO 2 Better coverage (17 perils covered) 5 10% more expensive
HO 3 Best coverage, 10%-15% more expensive than HO-1 (covers all perils not
Thoughts on insurance
1. Be sure to have enough insurance to cover 85% of the replacement cost of your house. If less than 80%, you are penalized.
2. Floaters are separate policies for anything not specifically excluded from your policy for any value. Can be used to increase coverage on specific items (jewelry, cameras, etc.) for replacement value.
3. Endorsements and riders are an addition to your policy on specific items up to the maximum of the policy.
4. Flood insurance – includes sewer water back up
5. If you only rent, be sure to get renters insurance (about $100/year)
6. We live in an earthquake zone, so this is good coverage to add.
7. Mortgage life insurance to pay off your home mortgage if you die is too expensive just get more life insurance
8. An inflation guard automatically increases the value of your house by the inflation rate every year.
9. Ways to get discounts
a. Multiple policies The more kinds of insurance (house, car, etc) you buy from a company, the lower will be your individual premiums (5 15%).
b. Smoke detectors (1 20%)
c. Burglar alarms (1 20%)
d. High deductible discounts
1. $500 deductible = 10%
2. $1,000 deductible = 15%
3. $2,500 deductible = 25%
e. Nonsmoker (4 10%)
f. Fire resistant house 15%
g. 55 years old + (10%)
h. Long time policy holder 5 10%
i. sprinkler system 15-20%
j. don’t insure value of land – using about 25% of total price
k. notify your insurance company when you renovate
l. Buy multiple policies (home owners, liability, etc. from the same company).
m. Keep a good credit rating – helps determine premiums.
n. Coverage should include: Bodily injury, property damage, uninsured/underinsured motorists coverage.
10. An inflation guard automatically increases the value of your house by the inflation rate and changes in construction costs.
11. The best policy is a guaranteed replacement cost coverage. This eliminates the possibility of being underinsured. You will be required to insure for the full cost of rebuilding. Each year your company will adjust the cost (and your premium). This policy costs 10-15% more than actual cost value (covers 50-75%) but is well worth the added cost.
12. Ideally, you should take pictures (or video tape) all the contents of each room. This inventory should be stored out of the house.
13. Your home owners policy includes liability insurance, which covers other people and their property damaged by you and /or your family. It includes coverage for
a. property damage ($100,000 maximum average, $300,000 better)
b. medical payments ($1,000)
c. law suits
d. small claims you’re not legally responsible for.
14. Umbrella liability insurance takes over when you have reached your maximum on homeowners or auto insurance ($1,000,000 to $5,000,000). This policy also adds coverage for libel, slander, mental anguish, etc. Have at least $2 million in this coverage. It is cheap and can save your financial life.
15. Review your policy annually – did you remodel, add a stereo system etc?
16. Compare quotes
The cost of car insurance premiums is going up every year. Since cars are getting more expensive each year, expect rates to go up too. Here are several ideas to help you keep this cost down.
1. Choose the right car (and save up to 30%)
a. Sports and high performance cars are the worst
b. Four door cars in general are best
c. The more a car costs and to repair it adds to insurance
d. Safety features: front/side airbags, antilock brakes, electronic stability controls
e. Ask your insurance agent for a list of the cars with the best claims record and likelihood of being stolen you can also write for crash test results this information to:
Insurance Institute of Highway Safety
Publications Dept., Watergate 600
Wash. D.C. 20037
2. Pick the right company the best way to lower costs
a. These prices vary greatly
b. USAA (800-531-8100) is always the lowest rate best coverage, but you must have been in the military to get this coverage
c. Get a quote from AMICA (800-992-6422) or GEICO (888-283-2849) then get two or three others
d. Write to Ohio’s insurance commission and ask which companies have the most complaints. Also ask for insurance pricing guides.
3. How to lower your rates
a. Drive carefully avoid tickets
b. Total weekly commuting of less than 30 miles/week reduces premiums 10 30%
c. Carry plenty of liability coverage $100,000 per person, 300,000 per accident, and 50,000 for property damage.
d. Avoid life insurance option and disability by separate policies car towing, theft insurance for tapes, CB’s (better on a homeowner’s policy)
e. 5 10,000 medical insurance for your passengers is okay if your major medical hospitalization doesn’t cover them.
f. You get reduced coverage for airbags, anti-theft systems.
g. Take the highest deductible you can afford. Ask your agent to quote you the rates on comprehensive deductible on $200, and $500 deductibles and collision deductibles 500 and 1,000.
h. Avoid high risk cars (sports cars, etc.)
i. Kids-take drivers training
j. Don’t buy “new car replacement” – adds to premium and only pays when car totaled.
4. Look for special discounts only when you’ve narrowed the field to the last couple companies
b. Taking an approved drivers education course, good student discount
c. Factory installed airbags or automatic seatbelts
d. Discount for carrying other insurance policies with the same company.
e. No citations
5. 6 parts of car insurance and suggested coverage
a. Liability $100,000 per person $300,000 per accident, $50,000 for another’s property/accident
b. Property damage to another person’s car or property caused by you,$25,000
c. Medical payments for you and your passengers, $1 $2,000
d. Collision $100 $250 deductible (go as high as you can afford) if your car is more than 7 years old then don’t carry collision
e. Comprehensive deductibles 50, $500
f. Uninsured motorists get minimum state requirement-statistically 10% of drivers don’t have auto insurance. Your life, medical, and disability will cover you.
6. Don’t assume an independent agent will shop for the best policy among many different companies. Independent agents sign agreements with various companies to accept commission when selling their policies. On average independent agents’ policies are 10% above policies marketed directly to you.
7. Get a quote for this basic package
a. $100,000 300,000 bodily injury
b. $25,000 bodily injury
c. Comprehensive coverage (theft and fire)
d. Uninsured drivers protection
e. Collision, if the car is new ($500 deductible)
8. Umbrella Policy to cover added liability (1-2 million+) from an accident
a. Separate policy
b. Additional $2 million of liability coverage
c. Usually very cheap
d. A good investment
Hopefully, within a few years, you won’t have to borrow money for anything except a house and car. Get in the habit of saving and paying cash. Never allow yourself to pay more than 15% of your paycheck for payments or loans. Never borrow money to invest.
Many people don’t want to bother trying to manage their money. In fact, as of 1997, only 27% of workers in America had any idea how much money they would need to retire.
Here are their reasons:
1. They can’t save any more than they are now.
2. Retirement is too far in the future to worry about
3. The spouse isn’t interested
4. Cannot find the time
5. Its too complicated
6. They live from paycheck to paycheck and can’t afford to save
From this point on in your professional career, you are on the road to your personal financial success. Forget the excuses. If you will take the time and effort, you can achieve all these goals:
a. Do what you want by the time you’re 50.
b. Have control of your financial life
c. Protect your family from financial hardship
d. Avoid personal debt.
e. Avoid taxes where possible
f. Afford to have and raise children
g. Pay for college and weddings
h. Retire when you want
i. Create a cooperative financial team with your spouse
Consult with a Bank money manager
A professional money manager can be a great help to you. You may think that you don’t have enough money to worry about, however the younger you are when you apply good financial advice, the easier it will be for you to meet all your goals.
There is a difference between financial planning and investing your money. You may not have a lot of money to invest, but everyone needs to look for ways to reduce their expenses so they’ll have more to save. In the early levels we’ll focus on protecting you from making mistakes that can cost you thousands of dollars.
An advisor can warn you of risks and guide you to safe investments. Also, the Bank will offer you significant bonuses and discounts if you have your banking accounts with them. This is also a good time for you and your spouse to discuss how risky you will be you’re your finances and what kind of return you expect on your investments. If one spouse wants to be more aggressive in investing, give that person 5% of the total investments to try this approach.
This is a great time for you and your spouse to talk about how you want to handle money (how much to save, where to invest, reduce taxes, etc.) Agree on your goals (college, cars, house, etc.). If you are recently married, you may want to keep separate checking accounts for a few years until you are sure that both of you are comfortable saving.
Successful people write down their goals.
1. Where are you now financially
2. Review the budget you started in level 1
a. How much in your savings?
b. What major purchases did you make (and pay for)?
c. How is your special savings toward long term goals (car, house)?
d. What was your total income?
e. Is your spending under control?
Do you remember the financial personal guide you filled out at the end of Level 1 General? Go back and update it now. See what kind of progress you’ve made in the last few months.
You are welcome to meet with a Bank Representative since that’s where we have our business account to confidentially review your personal financial situation with you. Many people earn lots of money over the years and have nothing to show for it. Our goal is to help you be financially independent and ready for new personal challenges when you retire at age 65.
Call ___________ Bank and ask to set up this free meeting. Although your personal financial situation is confidential between you and their representative, Jill Nesbitt (firstname.lastname@example.org) is always available to discuss as much of this information as you wish to help you with your long-term goals.
Bring along a copy of the information that you filled out in level 1. Now that you’ve had several months to work on your average monthly expenses, you can begin to develop your financial goals. Here are the 4 steps to your financial plan.
As you begin to manage your money, follow these basic principles
1. You can only make money 4 ways
a. Work for it
b. Inherit it
c. Have others work for you
d. Invest to make your money grow
2. Investing principles to make more money
a. Save more
b. Invest more wisely
c. Keep your money invested longer
1′. Start as young as possible
2′. Spend less than you earn
Set up a checking account. There are several types. Try to put 10% of each pay check into these accounts. At first the amount may look tiny, but it builds over time.
1. Regular no minimum balance (dollars in your account) is necessary
a. Deposit and withdraw anytime
b. Lowest interest rates
c. Set up a pay roll automatic withdrawal from your HealthPark pay check
2. Interest bearing (Negotiable Orders of Withdrawal: NOW account) minimum balance required
a. Savings and checking account combined
b. Better interest rate
c. Withdraw by writing a check
3. Minimum Balance if drop too low must pay a service charge
a. 3 checks per month and personal (withdrawals anytime)
b. Interest rates change, but better than savings and NOW’s
4. Time Deposits (certificates of deposit, bonds)
a. Money must be left in for a specific length of time
b. The longer the time, the higher the interest
c. Certificate of deposit (CD or savings certificate)
i. Minimum initial deposit
ii. Penalty for early withdrawal
d. Government bonds
i. Safest investment guaranteed by government
ii. Buy bond for less than face value and government buys it back at maturity
Next, you’ll want to start a savings account. Most Americans save very little. Very few can retire and live the way they want. The worst way to live is without savings. This forces you to borrow for major purchases paying about 18 22% for this borrowed money. Here are some reasons to save:
1. Emergencies medical, house, car, etc.
2. Special needs college, vacation, house, car
It’s better to save for a purchase than to borrow. Here’s an example. A stereo is $400. You save for a year and buy it. You earned about $28 in interest. You may be able to get a 5% discount for cash ($20). You avoid paying interest for the 2 years (16% = $64 X 2 years = $128). All together, you would save $176 on a $400 purchase by paying cash, but you had to wait one year to own it. Can you do this?
When you do this over and over, it won’t take long for you to begin saving up large sums for far away goals like retirement:
Here are characteristics of a savings plan you should decide on:
1. Interest rate paid
2. How long before you can get your money
3. Minimum initial deposit
4. Any restrictions
5. Least amount of money you can keep in the account and keep it active
6. Penalties for early wit
7. Maintenance fees
The rest of this section will give you more ideas on how to make your financial future a success.
A. Define your goals $ Needed / When needed / Inflation adjusted / Completed by
1. Pay off debts
2. New car
3. Down payment on home
4. College education
6. Special vacation
7. Home addition
8. Comfortable retirement
9. Support for elderly parents
B. Money needed to meet goals
1. When you look at all your goals, you probably realized that you don’t have enough money now to pay for them. That’s ok.
2. The concept is to invest some now, and at regular intervals in the future so that your savings and investment returns will grow enough to meet your financial goals by the time you need them.
3. Here is a chart that shows how much a monthly investment will grow into assuming an 8% return compounding annually.
C. The next step is to factor in inflation. If you want to buy something in 10 years that costs $1000 today, you know it will cost more 10 years from now. Although the rate of inflation changes every year, you will be safe if you add 4% per year to your goal. That means, in our example, that 10 years worth of 4% inflation annually would increase your $1000 goal to $1400 (4% x 10 years = 40% x 1000 = $400, original $1000 + $400 of inflation = $1400).
Level 2 is designed to help you understand how much money you will need to reach your various goals. As you build your career level by level, I will show you more ways to achieve your goals – and your future pay and benefit increases will help insure your success in achieving these goals.
Here are some guidelines to help you accurately set your major money goals. Remember, it’s okay to go into debt for your house and to continue your education.
1. Cost of a house
a. Your bank will require a down payment of 10-20% of the cost of the house. The larger your down payment the better the terms of your loan.
b. You can also expect to pay “closing costs” to cover the paperwork needed to write the mortgage.
c. Your mortgage payment shouldn’t be more than 25% of your monthly income.
Sources of income when you are 65
Social security (expect it to cover 20% of your needs)
Continued part time work (35% of your needs)
Pension/investment (45% of your needs)
Multiply this number times the number of years you plan to live after retirement. Don’t forget to add in 4% inflation every year. If you plan to retire at 65, plan to live until you are at least 85 or 90! This is going to be a BIG number. Don’t be afraid of it. It’s better to see the number and begin to plan for it now, than to be totally destroyed at age 50 – and realize you cannot retire.
Facts to consider
1. Taxes are the biggest expense you’ll have in your lifetime
2. Raising children is your second largest expense
3. The best way to achieve financial security is by avoiding costly mistakes.
4. Only ½ of food budgets are spent in supermarkets. The rest goes to restaurants
5. Regular gasoline works in all cars.
6. Borrow movies from the library rather than rent them.
7. Buy a used car rather than a new car.
In June 2001, the average American family had $8,000 in credit card debt. 56% of Americans with cards don’t pay off the balances completely each month. Situations to watch out for and defenses:
ii. Fill out the order form, put it away, pull it out one week later, and order it if you still want it.
iii. Try to find items locally to save shipping and make returns and warranties easier.
iv. Supermarket impulse buys:
1. Shop from a list
2. Anything you buy that’s not on the list place in the shopping cart’s child seat. When
you are ready to checkout, re-evaluate and remove all items that you can’t justify.
v. Pay cash rather than credit cards (you will generally spend 30% less)
vi. Have only one credit card for each spouse
a. Can you each answer these questions about the other?
How much did you save last year?
How did your spouse’s parents handle money and how has this affected the spouse’s style?
How much did you spend last month?
b. How to work together
Decide what you want, how soon you want it (security, financial freedom, fun, cars, vacations, church, childcare, etc.)
5. Being a financial success requires only a few skills. They aren’t hard to learn. Start using them now.
Read/learn about financial management on a regular basis
6. Bill Paying
One person should pay all the bills
Pay bills twice a month on the same days
Setup a 1-31 day file to organize bills as they need to be paid
Arrange a place for paying bills
1.Somewhere that you can leave everything
2.Place for your pencils, checks, envelopes, stamps, return address labels, etc.
Reoccurring bills (mortgage, utilities, etc.) try to set up on line for convenience
After paying a bill
1.Put the date paid and check number on the part of the bill you retain
2.File by category (medical, clothes, mortgage, etc.)
3.Keep only the last 3 years
Decoflex makes accordion files that are great for storage
7. Where to find best prices
e. www.ebay.com – clothes
h. www.samsclub.com – electronics
i. www.amazon.com – electronics, books
j. www.orbitz.com – travel
k. www.travelocity.com – travel
IRA’s were established by the federal government to encourage people to save for their retirement. If you have no other retirement program, or you have invested all you can in your other retirement plans, then you should fully invest in your IRA every year. This is very important to your future. If you invested $4,000 every year starting in 2005 and averaged 8% interest, you would have $689,267 in 25 years. If you withdraw this money before 59 ½ you will pay a substantial penalty. There are 3 types of IRA’s that are very different from each other.
1. Who can contribute
a. Employed with earnings equal to or greater than contribution
b. Not covered by employer retirement plan
c. If covered by employer retirement plan and income below defined level
1.Married couples joint return $54-$64,000
2.Single – $34-$44,000
d. non-working spouses
2. Maximum Amount
b. over 50, $3,500
3. You and spouse must set up separate accounts
4. Contribution is tax deductible, taxable when withdrawn
The Roth IRA is a non-deductible IRA with these differences.
1. Maximum allowable income to allow contribution in 2007
c. In 2009 we can roll over any regular IRA to a Roth IRA no matter what your income, if this
conversion is made in 2010, the taxes can be postponed to 2011 and 2012.
2. Can contribute even if you are
a. Participating in a qualified retirement plan
b. Over 70 ½ years old
3. These contributions must be kept in a separate account, which increases your paperwork.
4. Contribution is not tax deductible, but is tax free when withdrawn if account is at least
5 years old.
5. You don’t have to withdraw these funds at age 70 ½. This tax free account is great for others to inherit at
Start an IRA
1. Contact 5/3rd they will help
2. Invest simply – there’s not enough money to spend a lot of effort managing it. You decide where to invest.
a. Fixed rate certificates of deposit (CD’s)
1. Penalty for early withdrawals
2. Variable rate – avoid gamble on interest rates
b. Money markets
1. Rate changes daily
3. You can invest up until April 15th of the next year and take a deduction from the previous year.
4. You can add to your IRA as often as you want.
5. Over the years you will have several of these accounts. The bank will help you manage them.
6. Keep your money in as long as possible.
7. Every 5 years review your IRA beneficiary form
a. Up to date
b. Names a primary and a contingent beneficiary. You may want to name your wife as the primary
beneficiary. If she doesn’t need this money, she can decline it and the money would go to your
contingent beneficiaries (usually your children) and this skips the taxes your children would pay
when they inherit this money when your spouse dies.
c. You have a copy of the updated form
Since you are very close to finishing this level, please schedule a meeting with Jill to discuss the financial benefits available to you when you complete this level.
More and more Americans are trying to live without health insurance. They are only 1 significant health problem away from bankruptcy!
We want to help you build a solid financial base, so let’s work together so you can protect yourself and your family by having health insurance. We use a Health Savings Account (HSA) which was established by the federal government in 2003 to meet this insurance crisis. It is designed so you can help keep the cost of your health care under control. Here is how it works
1. You make tax free contributions to your HSA account which grows tax free that
you can use to pay for any treatments that you need with this tax free money.
2. Since you are paying for any treatments out of your own savings account, the idea is you’ll find the best bargain in treatment-keeping your cost down. They want you to ask your hospital/doctor not only what is to be done/why but also how much then a 2nd opinion- including fees.
3. This means you’ll have a high deductible standard health insurance policy with a very low premium, but you’re still protected since you’ll use your HSA account to pay a lot of your expense before you reach your high deductible.
4. Your HSA account can be invested like an IRA and any interest you earn is tax sheltered and,
if you use it for medical purposes, it’s tax free. If you use this money for a non- medical,
reason you will pay tax on it plus a 20% penalty, This penalty expires when you reach 65.
Lending Money to Staff
Staff sometimes borrow/lend money to each other. –This can be a very bad idea.
As a general rule-don’t. This is great way to lose a friend and create stress on the job. If someone forgets her purse at lunch and you ‘loan” her the money, expect you many not get paid back. If she forgets, are you going to “hound” her? She may complain to everybody about how your always harassing her over $3-$4.
Now multiply this $6 lunch loan by 10-now you’ve just multiplied the chances of having a problem with this person. Please don’t put yourself in this position.
Reads the book: The Automatic Millionaire
Available for free on Kindle, this short book tells stories of regular people – waitresses, small businesspeople, etc. who learned the secret to becoming wealthy – automatic saving. This book will inspire you – you can do the same thing!
Staff have shared this book with spouses and boyfriends to help get their financial acts together.
Here are a few questions to fill out after you read this book:
1. What was the most important financial lesson you learned from this book?
2. Did you think of one change you want to make regarding your finances after reading it? What change would you make?
3. Are you ready to turn this change into a goal? A goal can be measured and has a deadline. Write out what your goal would be.
Jill Nesbitt Date