Personal Finance Basics April 27 th , 2019 Lauren Vanderlugt, CPA
● Income & Expenses ● Values based analysis ● Adjusting expenses ● Increasing your income Agenda ● Saving & Investing ● Resources ● Discussion
Income March 2019 Primary job $3,000 Investment Interest $5 Side gig - Uber $400 Total Income $3,405 Income & Expenses Rent & utilities $1200 Expenses Groceries $300 Restaurants $250 Car payment & gas $500 Miscellaneous $100 Total Expenses $2,350 Net Income $1,055 https://jamesclear.com/core-values
Values Based Analysis Values Goals Get married and have a wedding next year Family Retire by 55 Step 1: Honesty Climb Mount Kilimanjaro Health Write down Buy a house Service you values & Leadership goals https://jamesclear.com/core-values
Annual Salary = $50,000 Time Commitment Hours Weekly income & Values Based costs Working hours 45 Analysis Weekly salary $962 Commuting 5 Benefits $100 Total hours 50 Step 2: Commuting by car ($100) Real hourly wage calculate your Coffee, snacks, ($50) lunches $892 / 50 hours = real hourly Clothes & shoes ($20) $17.84/hr wage Weekly net income $892 Adapted from: Your Money or Your Life, Vicki Robin & Joe Dominguez
Real hourly wage $892 / 50 hours = $17.84/hr Values Based Analysis Category Spending Hours Rent & utilities $1200 67.3 Step 3: Groceries $300 16.8 Restaurants $250 14.0 tally expenses and calculate Car payment & gas $500 28.0 Miscellaneous $100 5.6 hours spent Total 2,350 131.7 Adapted from: Your Money or Your Life, Vicki Robin & Joe Dominguez
Category Spending Hours Rent & utilities $1200 67.3 Groceries $300 16.8 Restaurants $250 14.0 Values Based Analysis Car payment & gas $500 28.0 Miscellaneous $100 5.6 Total 2,350 131.7 Step 4: ask questions Is the value I’m getting from this expenditure worth the hours? Is this expenditure furthering my goals or my life’s purpose? Is this expenditure in harmony with my values? Adapted from: Your Money or Your Life, Vicki Robin & Joe Dominguez
• Focus on your goals & values, within reason • Continue to track your expenses (and your income!) Adjust your • Apps – Mint, You Need A Budget • Monthly review spending • Focus on big items first • Budgeting
● At your primary job ● Raise or promotion ● Internal transfer ● Look elsewhere Increase your ● Consider “real” hourly wage income ● Goals & values ● Side gigs ● Temporary ● Long-term
● Build an emergency fund Extra cash – ● Pay down debt what should I ● Save for short term goals do with it? ● Invest for long term goals
Emergency ● 1-6 months of expenses ● Essentials only fund ● Consider using a separate savings account
● Know your debt ● Current balance ● Interest rate ● Minimum monthly payments ● Paying it off Debt ● Snowball method ● Avalanche method ● Interest rates ● >7%: pay it off as soon as possible ● <7% interest rate: work on paying it off, but consider other priorities
● Less than 5-10 years ● Keep savings accessible in a high interest savings account ● Usually 1.5-2.0% interest rate Save for short ● Examples term goals ● Down payment ● Home repairs ● Education ● Car
● More than 5-10 years away ● Examples ● Retirement ● Children’s education ● Elderly care Invest for long ● Tax Advantaged Accounts ● 401(k), 403(b) term goals ● IRA ● HSA ● Roth vs Traditional ● Brokerage Accounts
● Stocks ● Bonds Types of ● Funds ● Mutual Funds Investments ● Index Funds ● Active vs passively managed ● Real estate
Dow Jones Industrial Average 1915-2019 The stock market https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
Saving vs investing Contributing $300 per month for 40 years
● 401k or 403b ● Employer match Investing: ● $19K annual max getting ● IRA ● Vanguard, Fidelity, Charles Schwab started ● $6K annual max
Income & expense analysis (monthly) Emergency fund High interest debt Review 401k or 403b match Other debt Short term savings goals Long term investing goals
● Books ● Get A Financial Life: Personal Finance in Your 20’s & 30’s by Beth Kobliner ● Broke Millennial by Erin Lowry ● Your Money Or Your Life by Vicki Robin ● The Simple Path to Wealth by J.L. Collins Resources ● Your Complete Guide to a Successful & Secure Retirement by Larry Swedroe ● Websites ● Nerdwallet.com ● reddit.com/r/personalfinance
● Q & A Thank you! ● Contact me: laurenvanderlugt@gmail.com
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