Making the Most Making the Most of Your Moneyof Your Money

Jonathan PondJonathan Pond

Key to Financial SuccessKey to Financial Success

Never take financial Never take financial responsibility for anything that responsibility for anything that eatseats..

The Three Major Drags on Your The Three Major Drags on Your MoneyMoney

# 3. Pets# 3. Pets

# 2. Spouses, partners, girlfriends # 2. Spouses, partners, girlfriends & boyfriends & boyfriends

# 1. # 1. CHILDRENCHILDREN

My hair stands on end at the cost My hair stands on end at the cost and charges of these boys. and charges of these boys.

Why was I ever a father! Why was Why was I ever a father! Why was my father ever a father!my father ever a father!

-Charles Dickens

Four (Legal) Ways to Create Four (Legal) Ways to Create WealthWealth

Marry itMarry it

““Marriage may be grand,Marriage may be grand,but divorce is about but divorce is about

a hundred grand”a hundred grand”

Four (Legal) Ways to Create Four (Legal) Ways to Create WealthWealth

Marry itMarry it

Inherit itInherit it

Win the lotteryWin the lottery

Live beneath your meansLive beneath your means

On Budgeting: On Budgeting:

Nobody was ever meantNobody was ever meantTo remember or inventTo remember or inventWhat he did with every cent." What he did with every cent."

- Robert Frost

Oh money, money, money !!Oh money, money, money !!I often stop to wonderI often stop to wonderHow thou canst go out so fastHow thou canst go out so fast

When thou comest in so slowlyWhen thou comest in so slowly..

Ogden Nash

It’s All About RetirementIt’s All About Retirement

The challengesThe challenges

Prepare a projectionPrepare a projection

Planning for a Financially Planning for a Financially Comfortable RetirementComfortable Retirement

Retirement:Retirement:

That's when you return from work That's when you return from work one day and say, one day and say,

"Hi, honey, I'm home "Hi, honey, I'm home ---- foreverforever." ."

--Gene PerretGene Perret

I’ve got all the money I’ll ever need if I I’ve got all the money I’ll ever need if I die by four o’clock.die by four o’clock.

--Henny YoungmanHenny Youngman

Expense Reductions Expense Reductions When You RetireWhen You Retire

Expense Item Spending LevelExpense Item Spending LevelSavings 5 to 20%Savings 5 to 20%Work expenses 3 to 5%Work expenses 3 to 5%Social Security taxesSocial Security taxes 6 to 8%6 to 8%

Expense reduction @ retirement Expense reduction @ retirement -------- 14 to 33%14 to 33%Reduced income taxes Reduced income taxes ---- 10%10%

Expense and income tax Expense and income tax 24 to 43%24 to 43%reductions @ retirementreductions @ retirement

Finding Out Where You Finding Out Where You StandStand

Life ExpectancyLife Expectancy 9595

Inflation RateInflation Rate 3%3%

Annual Investment ReturnsAnnual Investment Returns 6%6%

Important AssumptionsImportant Assumptions

The Late Starter ChecklistThe Late Starter Checklist

Find out where you stand nowFind out where you stand now

Put yourself on a budget to increase Put yourself on a budget to increase savingssavings

Consider ways to increase incomeConsider ways to increase income

Consider delaying retirement or relocatingConsider delaying retirement or relocating

Don’t become discouragedDon’t become discouraged

Best Places to Put Money Best Places to Put Money Away for RetirementAway for Retirement

Which Retirement Plans are Best ? Which Retirement Plans are Best ?

BEST: BEST: Any plan with an employer matchAny plan with an employer match

NEXT BEST:NEXT BEST:Any preAny pre--tax or tax deductible plantax or tax deductible plan

STILL WORTHWHILE:STILL WORTHWHILE:A nondeductible plan, especially a Roth IRAA nondeductible plan, especially a Roth IRA

Becoming a Successful Becoming a Successful InvestorInvestor

The WellThe Well--Diversified Investment PortfolioDiversified Investment Portfolio

1 1 YearYear 3 3 YearsYears 5 5 YearsYears 10 10 YearsYears 15 15 YearsYears

Large Cap StocksLarge Cap Stocks(S&P 500)(S&P 500) 21% +12% +11% + 7% +11%21% +12% +11% + 7% +11%

Mid Cap StocksMid Cap Stocks(S&P 400)(S&P 400) +18 +15 +14 +13 +15 +18 +15 +14 +13 +15

Small Cap StocksSmall Cap Stocks(S&P 600)(S&P 600) +16 +14 +14 +11 +16 +14 +14 +11 ----

Annualized Return for Periods Ending June 30, 2007Annualized Return for Periods Ending June 30, 2007

QuizQuizStocks lost value in 2000, 2001, and Stocks lost value in 2000, 2001, and 2002. In how many years over the past 50 2002. In how many years over the past 50 years have stocks suffered losses?years have stocks suffered losses?

Answer:Answer: Stocks lost value in 10 out of the 50 Stocks lost value in 10 out of the 50 yearsyears

Don’t gamble!Don’t gamble!

Take all your savings and buy some Take all your savings and buy some good stock and hold it ‘til it goes up, good stock and hold it ‘til it goes up, then sell it. If it don’t go up, don’t then sell it. If it don’t go up, don’t buy it. buy it.

- Will Rogers

Now for the three steps for Now for the three steps for successful investing …successful investing …

Step 1: Step 1: How Much to Invest in Stocks vs. InterestHow Much to Invest in Stocks vs. Interest--Earning Earning SecuritiesSecurities

Step 2:Step 2:Divvying Up Your Stock and InterestDivvying Up Your Stock and Interest--Earning MoneyEarning Money

Step 3:Step 3:Periodically Rebalancing Your InvestmentsPeriodically Rebalancing Your Investments

Step 1:Step 1: Divvying up your money Divvying up your money between stocks & interestbetween stocks & interest--earning earning securitiessecurities

It all dependsIt all dependsHow your age influences the way How your age influences the way

you investyou investThe 60% / 40% solutionThe 60% / 40% solution

Step 1Step 1

StocksStocks 60%60%

BondsBonds 40%40%

100%100%

Step 1Step 1

Where does a pension plan fit in?Where does a pension plan fit in?

Step 2: Step 2: Divvying Up Your MoneyDivvying Up Your Money

Various Categories of Stocks Various Categories of Stocks and Interestand Interest--Earning SecuritiesEarning Securities

Step 2 Step 2 -- StocksStocks

Large companiesLarge companies

SmallSmall-- and midand mid--sized sized companiescompanies

International companiesInternational companies

Step 2 Step 2 -- BondsBonds

U.S. GovernmentU.S. Government

MunicipalMunicipal

CorporateCorporate

Step 2 Step 2 -- Diversifying WithinDiversifying Within Investment CategoriesInvestment Categories

Examples

Step 2 Step 2 -- Stock AllocationStock Allocation ExampleExample

Large companiesLarge companies 20%20%

Small & midSmall & mid--sized companiessized companies 1515

Real EstateReal Estate 1010

International companiesInternational companies 151560%60%

Step 2 Step 2 -- Bond Allocation Bond Allocation ExampleExample

U.S. governmentU.S. government 15%15%

MunicipalMunicipal 1010

CorporateCorporate 151540%40%

Step 2 Step 2 -- Real EstateReal Estate

Real estate stocksReal estate stocks

Real estate mutual fundsReal estate mutual funds

OwnOwn--itit--yourselfyourself

Step 2 Step 2 -- Temporary InvestmentsTemporary Investments

•• Shop for the highest interestShop for the highest interest

Step 3 Step 3 -- PeriodicallyPeriodically Rebalancing Your InvestmentsRebalancing Your Investments

How to do it?How to do it?

Step 3 Step 3 -- RebalancingRebalancing

TargetTarget

StocksStocks 60%60%

BondsBonds 40%40%100%100%

Step 3 Step 3 -- RebalancingRebalancing

CurrentCurrent Target Target AllocationAllocation

Stocks 60%Stocks 60% 64%64%

Bonds Bonds 40%40% 3636100%100% 100%100%

Step 3 Step 3 -- RebalancingRebalancing

CurrentCurrentTarget Target AllocationAllocation RebalanceRebalance

Stocks 60%Stocks 60% 64%64% 60%60%Bonds Bonds 40%40% 3636 4040

100%100% 100%100% 100%100%

Step 3 Step 3 -- RebalancingRebalancing

Rebalancing forces you to:Rebalancing forces you to:

-- Buy stocks after they’ve declinedBuy stocks after they’ve declined

Step 3 Step 3 -- RebalancingRebalancing

Rebalancing forces you to:Rebalancing forces you to:

-- Sell stocks after they’ve risenSell stocks after they’ve risen

Step 3 Step 3 -- RebalancingRebalancing

Rebalancing forces you to:Rebalancing forces you to:

-- Buy bonds after interest rates haveBuy bonds after interest rates haverisen (and bond prices have declined)risen (and bond prices have declined)

Step 3 Step 3 -- RebalancingRebalancing

Rebalancing forces you to:Rebalancing forces you to:

Sell bonds after interest rates have Sell bonds after interest rates have declined (and bond prices have risen)declined (and bond prices have risen)

Step 3 Step 3 -- PeriodicallyPeriodically Rebalancing Your InvestmentsRebalancing Your Investments

How often?How often?

QuizQuizMost investors earn about 4% annual return on Most investors earn about 4% annual return on their investments.their investments.

If an investor averages an 8% return and holds If an investor averages an 8% return and holds onto the money for 20 years before withdrawing onto the money for 20 years before withdrawing it for retirement, how much more income will the it for retirement, how much more income will the investor be able to enjoy from this money?investor be able to enjoy from this money?

A. 25%A. 25%B. 50%B. 50%C. 75%C. 75%

Answer:Answer:This is a trick question.This is a trick question.None of the given answers are correct.None of the given answers are correct.

The answer is 110%The answer is 110%

Advice for the Lazy Advice for the Lazy InvestorInvestor

Autopilot InvestmentsAutopilot Investments

Lifestyle fundsLifestyle funds

Target date fundsTarget date funds

Investing in Your CareerInvesting in Your Career

Your Home is Your Best Your Home is Your Best Investment Investment ––

But it Isn’t an InvestmentBut it Isn’t an Investment

House,House, n.n.

A hollow edifice erected for the A hollow edifice erected for the habitation of man, rat, mouse, beetle, habitation of man, rat, mouse, beetle, cockroach, fly, mosquito, flea, bacillus, cockroach, fly, mosquito, flea, bacillus, and microbe.and microbe.

-Ambrose Bierce

It takes a heap of other things It takes a heap of other things besides besides A heap o’livin’ to make a home out A heap o’livin’ to make a home out of a house.of a house.To begin with, it takes a heap o’ To begin with, it takes a heap o’ payin’payin’

O d N hO d N h

If medical science continues to If medical science continues to

prolong life, some of us may prolong life, some of us may

eventually pay off the mortgage. eventually pay off the mortgage.

A man's home is his A man's home is his hassle.hassle.

I I hate housework! You make the hate housework! You make the bed, you do the dishes bed, you do the dishes –– and six and six months later you have to start all months later you have to start all over againover again..

--Joan RiversJoan Rivers

Buying and MaintainingBuying and Maintaining a Homea Home

Growth in home prices createsGrowth in home prices createsfalse sense of wealthfalse sense of wealth

Easy ways to pay off the mortgageEasy ways to pay off the mortgage

Doubling Up Your Principal Doubling Up Your Principal PaymentsPayments

Payment # Principal Interest Total Payment

121 $344 $920 $1,264

122 346 918 1,264

Total payment: $1,264 + $346 = $1,610

Cuts the remaining time to pay off the mortgage in HALF

Paying for Big Ticket ItemsPaying for Big Ticket Items

Income TaxesIncome Taxes

““Found money”Found money”

Maximize contributions to retirement plansMaximize contributions to retirement plans

Look for other ways to cut your tax billLook for other ways to cut your tax bill

Did you ever notice? When you put Did you ever notice? When you put the 2 words "The" and "IRS" the 2 words "The" and "IRS"

togethertogether it spells: "THEIRS.“it spells: "THEIRS.“

Saving for collegeSaving for college

CaveatsCaveats529 plans529 plans

Knowledge accumulates in universities, Knowledge accumulates in universities, because the freshmen bring a little in because the freshmen bring a little in and the seniors take none away.and the seniors take none away.

Jonathan Hates CarsJonathan Hates Cars

Old Rule of Thumb:Old Rule of Thumb:Don’t pay more than one month’s Don’t pay more than one month’s

salarysalaryfor a car.for a car.

New Rule of Thumb:How much car can I buy so that my How much car can I buy so that my payments are less than $400 a month?payments are less than $400 a month?

The only way to solve the traffic The only way to solve the traffic problems of the country is to pass a law problems of the country is to pass a law that only paidthat only paid--for cars are allowed to use for cars are allowed to use the highways.the highways.

--Will RogersWill Rogers

Top five reasons you know it’s Top five reasons you know it’s time to trade in your cartime to trade in your car

# 5# 5 Instead of an air bag, there is a whoopee cushion Instead of an air bag, there is a whoopee cushion taped to your steering wheel.taped to your steering wheel.

# 4# 4 For a 15For a 15--minute job, Jiffy Lube needs to keep yourminute job, Jiffy Lube needs to keep yourcar 3 days. car 3 days.

# 3# 3 Thieves repeatedly break in your car just to stealThieves repeatedly break in your car just to stealthe "Club.“the "Club.“

# 2# 2 Traffic reporters start referring to you by nameTraffic reporters start referring to you by namewhen discussing morning tiewhen discussing morning tie--ups.ups.

# 1 While sitting at a stoplight, people keep # 1 While sitting at a stoplight, people keep running up to you and asking if anyone was hurt.running up to you and asking if anyone was hurt.

Using Debt to Your Using Debt to Your AdvantageAdvantage

It saves a lot of trouble if, It saves a lot of trouble if, instead of having to earn money and save it, instead of having to earn money and save it, you can just go and borrow it .you can just go and borrow it .

-- Winston ChurchillWinston Churchill

If you think nobody cares if you’re If you think nobody cares if you’re alive, alive, try missing a couple of car try missing a couple of car payments.payments.

Nowadays people can be divided into 3 Nowadays people can be divided into 3 classes classes

the Haves, the Havethe Haves, the Have--Nots, and Nots, and the Havethe Have--NotNot--PaidPaid--ForFor--WhatWhat--TheyThey--HavesHaves

-- Earl WilsonEarl Wilson

Managing Your CreditManaging Your Credit Before it Manages YouBefore it Manages You

Good debt / bad debtGood debt / bad debtDevising a plan to be debt freeDevising a plan to be debt free

Preparing for the Preparing for the UnexpectedUnexpected

Getting the Right Kind ofGetting the Right Kind of Insurance...Insurance... at the Right Priceat the Right Price

Eliminating gapsEliminating gaps

Lowering premium costsLowering premium costs

Ways to Save on InsuranceWays to Save on Insurance

Shop for lower premiumsShop for lower premiums

Eliminate unneeded coverageEliminate unneeded coverage

Increase deductiblesIncrease deductibles

Preparing for the InevitablePreparing for the Inevitable

Planning Your Estate forPlanning Your Estate for the Here and Now...the Here and Now... as well as the Hereafteras well as the Hereafter

Basic estate planning documentsBasic estate planning documents-- WillWill-- Durable power of attorneyDurable power of attorney-- Health care power of attorneyHealth care power of attorney

I owe much; I have nothing; I owe much; I have nothing; the rest I leave to the poor. the rest I leave to the poor.

-- Francois RabelaisFrancois Rabelais

Where there’s a will, I want to be in Where there’s a will, I want to be in it.it.

Family matters Family matters –– the older the older generationgeneration

Money Matters of ImportanceMoney Matters of Importance for Parentsfor Parents

Health careHealth care

InsuranceInsurance

HousingHousing

DayDay--toto--day money concernsday money concerns

Family matters Family matters –– the the younger generationyounger generation

An Impossible Dream?An Impossible Dream?

Help your kids learn about money in order Help your kids learn about money in order to reduce the chance that you’ll be to reduce the chance that you’ll be supporting them in your dotage.supporting them in your dotage.

Where I was brought up we never talked Where I was brought up we never talked about money because about money because there was never enough to furnish a there was never enough to furnish a topic of conversation.topic of conversation.

Mark TwainMark Twain

If you want a kitten, start out If you want a kitten, start out by asking for a horse.by asking for a horse.

--Naomi, age 15 Naomi, age 15

Blessed are the young, for they Blessed are the young, for they shall inherit the national debt.shall inherit the national debt.

--Herbert HooverHerbert Hoover

Family matters Family matters –– your your spouse or partnerspouse or partner

An Intractable Problem?An Intractable Problem?

Spenders are attracted to savers Spenders are attracted to savers ––

and vice versa.and vice versa.

Professor Pond’s Professor Pond’s Money QuizMoney Quiz

Retail price of coat $120Retail price of coat $120

Sales price $100Sales price $100

Question: How much have you saved?Question: How much have you saved?

Answer: You saved nothing! Answer: You saved nothing! You spent $100.You spent $100.

Words of SolaceWords of Solace

If your loved one is a spender …

To spend is human, To spend is human, but to save is divine.but to save is divine.

Not everyone wants to be a millionaireNot everyone wants to be a millionairemany are content just to live like one.many are content just to live like one.

Words of SolaceWords of Solace

If your loved one is a saver …

Misers may be tough to live with, Misers may be tough to live with, but they make great ancestors.but they make great ancestors.

Your Financial “To Do” Your Financial “To Do” ListList

Pick three things to do next weekPick three things to do next week

You You willwill achieve financial securityachieve financial security

The “Get Even With Those Ingrates” The “Get Even With Those Ingrates” CreedCreed

I [state your name]…I [state your name]…

You’re only young once, You’re only young once, but you can always be immature.but you can always be immature.

““Get Even With Those Ingrates” Get Even With Those Ingrates” CreedCreed

I [state your name]… I [state your name]… Do hereby pledge…Do hereby pledge…To retire rich…To retire rich…And after I’m retired…And after I’m retired…I will arrange my spending…I will arrange my spending…So that I may…So that I may…

DIE DESTITUTE !!!DIE DESTITUTE !!!