financial planning manual usjaycees

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TABLE OF CONTENTS

1. Getting Started2. Your Net Worth3. Where Does It All Go?

4. Financial Counseling in Bad Times and Good5. Setting Family Financial Goals6. What You Should Know About Income Taxes

7. Preparing An Adequate Insurance Program8. Investments: Financing For The Future9. About Your Retirement

10. Estate Planning11. A Glossary of Financial Terms

Bibliographies:Personal Financial Planning

Investments and Retirement Planning

12. Program Options

47

9

121320

22

25

2933

35

3738

39



TABLE OF CONTENTS

1 . Getti ng Started2. Your Net Worth3. Where Does It All Go?

4. Financial Counseling in Bad Times and Good5. Setting Family Financial Goals6. What You Should Know About Income Taxes

7. Preparing An Adequate Insurance Program8. Investments: Financing For The Future9. About Your Retirement

10. Estate Planning11. A Glossary of Financial Terms

Bibliographies:Personal Financial Planning

Investments and Retirement Planning

12. Program Options

4

7

9

121320

22

25

29

33

35

3738

39



FOREWORD

For most Americans, personal financial planning

is a good news/bad news story. The good news is

that virtually anyone with a desire to learn and thewill ingness to plan ahead can achieve a considerable

degree of financial security. The bad news is that inthe rush of daily living, too few of us are willing toset aside a few extra hours to establish a solid foun

dation for our financial planning."Financial Planning - Controlling Your Personal

Destiny" is designed to provide a guide for you in de

veloping your own personal financial plan. It is not a"how to get more money" program, but a program to

help you use more effectively the money you now have.You won't be asked to fit into a preconceived mold

and manage your money "our" way. Instead, whatthis book does is give you some effective techniquesthat can be adapted to fit your financial situation.

The book is divided into two parts. The firstdeals with personal financial planning now, and the

second discusses retirement planning. Although

planning for retirement now may seem far too premature for most Jaycees, you will probably be pleasantly surprised to learn how saving and investingnow can make an important difference not only in

how much you enjoy the years to come, but in yourtax situation right now.

Finally, a workable financial plan will help you

put first things first, such as staying within yourincome and at the same time directing that incometo do what you want it to do. Very few of us ever

feel that we have enough of an income, but by plan

ning and spending wisely, we can gain greater satisfaction from the money we do possess. This book

will help you to do just that.



GETTING STARTED

The most important part of financial planning is

getting started. The most logical first step is pullingtogether all of your important financial documentsand records.

These documents and records are important notonly as financial planning tools; many of them arealso important in and of themselves and should be

given special care.Not only is it necessary for you to know where

your important documents are. but it is also necessary for someone else to know. Most people don'tlike to think of calamity or death. But if your home

burned down or you died tomorrow, would you (oryour survivors) have the information necessary to

carry on?

IMPORTANT DOCUMENTS CHECKLIST

CHAPTER 1

It's equally important that your valuable docu

ments be kept in a safe place. Since it will do youno good to have all of your important documents inyour home file if your house burns down, it makes

good sense to rent a safe deposit box from yourbank. The rental fee is nominal (and usually tax

deductible) and well worth the peace of mind youwill gain from knowing that your valuable papers aresafe.

The following is an "important documents

checklist" for all of the major items and records youshould have on file. Original documents and other

valuables always should be placed in a safe depositbox; copies of inventory sheets can remain in yourhome files.

In order to get your affairs in order, gather the following documents. Place the originals in your safe

deposit box and copies in your home files. The exception to this rule is your will. The original signed document should be filed with your lawyer. Since your financial status will change periodically, it's a good idea toreview and update this material at the beginning of each new year.

PERSONAUFAMIL Y RECORDS USE_S NOTESWills (file original with lawyer)

Birth and death certificates

Marriage license

Adoption, custody papers

Divorce and separation papers;property agreements

Citizenship papers

Military service records

Passport

Diplomas and school transcripts

Social Security card or stub

PROPERTY RECORDS:REAL ESTATE

Deeds and title papers to property

Appraisals of real property

Mortgage documents - includes:records of mortgage paymentsassessed tax value

tax paymentsrepairs and improvements to house

purchase price, closing costs, and

selling costs

Required to go through probate and tosettle estate.

These family records needed to:-Settle an estate

-Obtain insurance and other benefits

-Give evidence of marital status,

citizenship and military service

Required to travel to most places out of thecountry.

May be required to show job qualifications

Needed to obtain benefits

USES

Property records required to:-Prove ownership-Settle an estate

-Sell property-Pledge property as security for a loan-Obtain tax advantages in property sale

4

NOTES



PROPERTY RECORDS:

HOUSEHOLD

Household inventory

(room-by-room list and colorphotos of all possessions;

receipts for purchases;

appraisals of antiques and

jewelry)

PROPERTY RECORDS:

PERSONAL

Titles, bills of sale for autos,

motorcycles, boats, other

valuable property

FINANCIAL RECORDS

Bank accounts

(location, account number)

Stock certificates and bonds

(originals are negotiable andthus attractive to thieves; be

sure to keep in safe deposit box)

Records of stocks

(name of company, kind of stock;number of shares; unit and total

cost; purchase date; dividend

date and payments; yield; saleprice and date; profit or loss)

Record of bonds

(name of company, municipality or

government; serial numbers, denominations; purchase date and price;interest payments and dates; matur

ity dates; selling price and date;

profit and losses; records of anycoupons)

Savings certificates and passbooks

Credit records

(loan papers, installment

contracts, etc.)

List of credit cards with names of

issuers and account numbers

USES

May be required to document insurance claimin case of fire or theft

USES

Required to sell or transfer property

USES

Records of bank accounts, stocks and bondsneeded to:

-Figure income tax-Analyze financial position

-Figure net worth-Make buy-and-sell decisions

-Figure profits and losses in

buying and selling-Plan for financial security-Settle an estate

(SHOULD BE KEPT FOR FIVE YEARS)

Required to make deposits and withdrawals;

Required to settle estate

Required to figure income tax

Needed to notify issuers if cardis lost or stolen

NOTES

NOTES

NOTES



RETIREMENT AND

INSURANCE RECORDS

Records of pension/profit sharing

plans - include all statementsissued by employer

IRA/Keogh plans(all statements issued by employer)

Insurance policies

(copies of all policies, payment!claims records)

TAX RECORDS

Copies of past returns (keep 7 years)

Records of deductible expenses withreceipts

Records of income, includinginterest and dividends

Records of payments

Cancelled checks (keep for 7 years)

USES

Pension/profit sharing/retirement planrecords needed to:

-Analyze financial position

-Figure net worth-Make buy-and-sell decisions

-Settle an estate-Figure profits and losses when

buying or selling

Required to make claims; to evaluate

adequacy of insurance coverage periodically;to settle an estate

USES

Both are required for possible tax audits

and are helpful in filing future returns

Both are required for possible taxaudits and are helpful in filingfuture returns

May be needed for tax audit or indispute over bill payment

NOTES

NOTES

PLACE THIS CHECKLIST IN YOUR

HOME FILE FOR REFERENCE

Location of safe deposit box: _

Box number: _

Number of keys: _

Location of keys: _

DISCUSSION QUESTIONS

CHAPTER 1

1. Why should a person go to all the trouble involved in separating and storing documents?2. Have you made a list of all your important documents?

3. Do you store them outside the home?4. Does someone other than your wife know where these documents are in case of an emergency?

5. Do you have an inventory list with either sales value or replacement value assigned to each item?6. Why should a person keep as accurate a record as possible of all the important documents or possessions he

owns?

6



YOUR NET WORTH

Establishing your net worth on a regular basisis essential to personal financial planning because itprovides you with a yardstick of your financialprogress.

Simply stated, your net worth is all of yourassets minus all of your liabilities. By reviewing

your net worth annually, you will be able to seehow effectively you are managing your finances,and the amount of funds you have to work with forfuture planning.

The net worth form provided in this chapter

NET WORTH PLANNER

CHAPTER 2

offers a simple step-by-step method for establishingyour net worth. Once you have assembled all ofyour records, you should be able to complete thisform in approximately one hour.

Generally speaking, your net worth shouldincrease every year. If you find your net worth isnot increasing annually, you may wish to considerseeking professional financial counseling to ensureyourself of a comfortable nest egg by the time youreach retirement.

YOUR ASSETS

Cash (money in savings and checking accounts, bank certificates of deposit,

money market funds, cash at home, etc.)

Stocks, bonds, securities (current market value is often available in financial

pages of your newspaper)

Your home (current market value)

Other real estate (current market value)

Cars, motorcycles, vans, airplanes (current market value)

Cash value of life insurance policies (note: this isnot the face value)

Money owed to you (loans you have made to others; rebates due you, etc.)

Company savings or profit-sharing plans (actual amount of money due you if

you left your present employer tomorrow)

Company vested pension plan (actual amount due to you currently)

Individual Retirement Account (current balance)

Keogh (current balance)

Home furnishings/household goods (resale value)

Art, antiques, jewelry, furs, etc. (market value)

Trusts (fair market value of property)

Interest in a business/partnership/group investment, etc.

Other assets

TOTAL ASSETS:

DOLLAR AMOUNT

OR VALUE

$ -------

$ -------

$ -------

$ -------

$ -------

$ --------

$ --------

$ -------

$ --------

$ --------

$ -------

$ -------

$ --------

$ --------

$ --------

$ -------

$:..========



YOUR LIABILITIES

Home mortgage (unpaid balance)

Other mortgages/real estate loans (unpaid balance)

Balance due on other loans (Le.,car loans, personal loans)

Loan against insurance policy (balance due)Unpaid bills (total balance due)

DOLLAR AMOUNT

OR VALUE

$ -------

$ -------

$ ------

$ -------

$ -------

Unpaid taxes (amount currently due on federal, state, local income or propertytaxes. Do not include amounts withheld from your paycheck or mortgagepayment.) $ _

Other liabilities (legal statements, etc.)

TOTAL LIABILITIES:

YOUR NET WORTH

Total Assets

Minus Total Liabilities

equals NET WORTH:


CHAPTER 2

$ -------

$======

$ ---------

$--------

$ DATE _

1. How did you feel about doing the Net Worth Planner?2. Were you shocked or pleased after totaling your net worth?3. When was the last time you computed your net worth?4. How much money is enough? Too much?5. Where should you start in planning your financial future?6. What makes money important?



WHERE DOES IT ALL GO?

Planning Yqur Monthly Budgetx_. ·' .••• 10 •••••• "

Once you have identified your net.worth, thenext step is to look at your income and'expenses

and establish where your money is:coming from ...and where it is going.

Although virtually everyone operates-on a'1unwritten monthly budget, effectiveJinahcial planning requires setting down on~pacperal~monthlyincome and expenses. The.following is~monthly

'IP,.W " \ , :"

budget planner that lJas"been.established for y~uruse." •.

You'll notice'thatrthis planner covers all incomeand expenseS-during the year, so it may be~necessary to go through last year's records to~niake sureyou can identify all sources of income, fixedmonthly expenses, average monthly' expenses, andthose occasional expenses that arise d"Urlng,the

year. (You should be putting some money asideeach month to be able to meet these'"o-ccasio"nal

expenses as they come up.)A sound monthly budget calls for regularly

setting aside some money each month-forsavi"ngspurposes. Everyone, regcirdless'o{the size of his orher income, should'"Sav.era--setamount of money on

a regular basis.! If.•.oU"discover you aren't saving atleast a small percentage of your income everymonth, you are either spending too much or allo-

CHAPTER 3

cEtting too much money for non-essential items.The following monthly budget planner' provides

three columns for identifying your annu~1 incorTleand allocating all expenses during the year.

• Th~)ir.st,co.!umn i~ntifiesA;th'e amo!Jrit ofincome ,or expense~nd·the period for which it is

11'- ! -"lit!. -..... ..... J .'"earned or spent- usually y<1Urpay period.

- • The second"c6lumri is provided inorder toconvert your pay,:period and annual:quarterly, or" '" - rirregular income:and expensesJrom column oneinto a monthiy, amount. The*tabie)below will help

Lio ro. "- '\

you convert these sumsrinto monthly sums.

• The third column~is.yolli...rn9"nthly budgetcolumn. Here, you should put how much you earnor plan to spend-each month on each item.

If, C}.ftercompleting your monthly budget

planner, you find that your monthly income exceedsyour expenses, you should consider adding thoseadditional dollars to your savings or investing themoney. But if your expenses exceed your income,this planner will help you to examine each itemcarefully to see where you can reduce your spending. Should you find it impossible to make yourbudget "balance," you may wish to see a financialcounselor to avoid getting too deeply in debt.

RULES FOR CONVERTING TO MONTHLY AMOUNTS

If your information is in:

DaysWeeks

Every two weeksTwice a month

Irregular

MONTHLY BUDGET PLANNER

Adjust as shown below:$ amount x 365 -;- 12$ amount x 52 -;- 12$ amount x 26 -;- 12$ amount x 2Work out an estimate for the year and divide by 12

Listed below are the common income and expense categories for most American households. Revieweach item and write down the appropriate amount for your own situation.

INCOME SOURCE

Take-home pay

Commissions,bonuses, tipsInterest, dividends

(include stock andmoney market mutualfunds here)

Real estate income

Social Security,pensions

Other

TOTAL INCOME

COLUMN 1

($ per pay period)

INCOME PER MONTH

9

COLUMN 2

($ per month)

COLUMN 3

(BUDGET $ per month)

$---



EXPENSES

SAVINGS

COLUMN 1OLUMN 2OLUMN 3$ per month)BUDGET $ per month)Short term savingsong term savingsmergency fundtherSUBTOTAL:

Savings per month$OLUMN 1OLUMN 2OLUMN 3Property taxesncome, local taxesnsuranceifeutoealthomeowners/renterstilities (electricity,ater, etc.)ousing maintenancend operationank loansar paymentsther debts (list)hild care/educationSUBTOTAL:

Fixed expenses per month$OLUMN 1OLUMN 2OLUMN 3

Food

ClothingMedical/dental

TelephoneTransportation (gas,

car repair, busfares, etc.)

Credit cards

Home furnishings,equipment

Dry cleaning/laundryDonations, club dues,

churchVacation moneyChristmas gifts/

other giftsPersonal items/

miscellaneousOther

SUBTOT AL:

ADD

Flexible expenses per month

Savings per monthFixed expenses per monthFlexible expenses per

month

TOTAL MONTHLY EXPENSES

10

$--$--$---$---$===




CHAPTER 3

1. Why is a monthly and a yearly budget important?2. Were you able to account for all your money using the Monthly Budget Planner?3. What is the difference between fixed and.flexible expenses?

4. If it becomes necessary to adjust your b~dget, how would you do it?5. Did any of the items surprise you?6. What are your three largest items,in"expenses? Are they the most important?7. How many items of the monthly buaget are from credit card purchases?8. Do you have a grasp on your cr~dit card situation?9. With lots of bills to payoff, h9V\1Ca'ilyou still l ive decently from day to day?

10. How accurate should the check record in a checkbook be?



FINANCIAL COUNSELING IN BAD TIMES

AND GOOD CHAPTER 4

Suppose you have figured out your monthlyincome and expenses and have the nagging feeling

that you may be in trouble. The following are 10early warning signals that can help you spot problems while there is still time to take correctiveaction.

1. Do you use credit today to buy many of the things

you bought last year with cash?2. Have you taken out loans to consolidate your

debts or asked for extensions on existing loans toreduce monthly payments?

3. Does your checkbook balance get lower by themonth while your standard of living stays thesame?

4. Instead of paying most bills in full each month,

as you did in the past, are you now paying onlythe minimum amount due on your chargeaccounts?

5. Have you begun to receive repeated notices ofoverdue bills from your creditors?

6. Have you been drawing on savings to pay regularbills that you used to payout of your monthlypaycheck?

7. You've borrowed before on your life insurance

policy but this time, are the chances of payingit back more remote?

8. Do you now depend on extra income, such asovertime and dividends, to get you through tothe end of the month?

9. Do you use your checking account "overdraft"to pay regular monthly bills?

10. Are you juggling your rent or mortgage moneyto pay other creditors?Be honest with yourself. If you answered "yes"

to two of these questions, it's time to take a close

look at your budget. If you answered "yes" to three

questions, you may be headed for difficulty. And iffive or more of these questions apply to you, you

are definitely in trouble.Should you discover that your financial situation

is serious, DON'T PANIC. The most important step

you can take at this time is to explain your situationto your lenders.

This sounds simple, and it is. But many people

feel it is a sign of personal failure when they seethemselves getting into financial trouble and they


CHAPTER 4

make the unfortunate mistake of avoiding theirlenders. Instead, they stop paying and wait for

dunning letters and phone calls. Not only does thisaggravate the problem, but it also often damages aperson's credit rating unnecessarily.

If you're having trouble, go to see your lender.Most lenders know that people with good credithistories can run into credit difficulties because of

sudden unemployment, emergency medical bills, orother unexpected problems.

Lenders know that it is not in their best interest

or yours to repossess your property. They can offeryou a number of alternatives, based on their company policies and their reading of your situation.

For example, a lender may be able to help youreorganize your personal finances in a way that will

eliminate the need for more drastic steps. He or shemay suggest refinancing your loan to lower yourmonthly payments. He or she may suggest

converting all of your debts into one loan. And inthe case of mortgage loans, some companies mayallow you to make smaller payments for a year ortwo. after which you make up the difference.

BANK HELP AVAILABLE IN GOOD

TIMES, TOO

Even when your present financial situation looksgood, making the most of your money - andmaking the right decisions on how to manage yourmoney - can be complicated.

Fortunately, a financial counselor who can helpyou at little or no cost is as close as your local fullservice bank.

Once you have organized your personal filesand finances, you should meet with a banker to

review your current situation and your goals.Bankers can provide helpful information, backed upby their banks' financial services divisions, to makesure you make the most of your hard-earned dollars.

It's a good idea to get into the habit of consulting your banker regularly as your financial situation changes. so that you can get the benefit of continuing financial planning advice.

1. Did you answer the ten early warning questions honestly?2. According to your answers to the ten questions, what do you think you should do?3. Does it really do any good to talk to your lenders when you are having trouble?4. Depending on your situation, counseling can be very beneficial whether you need help meeting expenses or

help investing your money? Why should we ask for assistance?

5. Have you seen a financial counselor. banker, insurance agent, or accountant for assistance?6. Can most people manage their money without the assistance of a professional financial counselor?

12



SETTING FAMILY

FINANCIAL GOALS

By looking at the Net Worth Planner and the

Monthly Budget Planner, you ought to be able to tell

which way your financial situation is headed. Thepertinent question now is, "Are you satisfied?" If you

are satisfied, then you can continue your present

spending and investment patterns and checkyourself periodically to see that things are still undercontrol.

But if you are not satisfied, then you have somework left to do. You must decide, or plan, what it is

you want to do. Are you spending too much? Areyou in debt? Are you living the way you want tolive?

This chapter of Financial Planning devotes itself

to setting family financial goals and how you canplan your spending to achieve those goals. From

this point on, it becomes absolutely essential thatboth the husband and wife participate in financial

planning together and with a positive attitude. Thisis extremely important because, if you are not satisfied with your present financial situation, the neces

sary decisions will not be easy or pleasant for either

spouse. When a husband and a wife attempt tojointly resolve the problem, they expose theirsensitive areas.

-They let down personal barriers.-They try to see the partner's point of view.

-They try to overcome selfish impulses.-They try not to let theirego dictate their decision.Is it really this big a deal? You bet it is! Sacri

fice and changing habits do not come easily. So

when you try this program, think about your ego,your selfishness, and how it may seem from your

partner's point of view. This may sound more like alecture in human relations than a financial planning

program, but it's appropriate at this point, since agood positive attitude is half the battle. Now let'sreturn to the financial planning process.

GOALS

Managing your money without goals is great if

you plan to always be where you are now. But ifyou think there might be more to life than thepresent circumstances, or you'd like to spend lesstime thinking about how you'll spend your money

and more time deciding how you'll spend your life,then consider setting some goals.

Once you've established a list of goals, you cannow measure your spending. You should know how

much you'll need by a certain date and whether youcan afford that extra luxury item or not. With clearlyset goals there is less frustration. You can see where

you are going and you can gain a sense of achievement as you move closer to them. Without goals,there's always the old nagging feeling that you're

CHAPTER 5

not getting anywhere. "All these years I've worked

and what do I have to show for it ... nothing!"

Sound familiar? It doesn't have to if you set goals.

YOUR PLAN

Now that you have established a system forfinancial records and for analyzing your financial

situation, you are ready to set objectives and allocate your money to meet those objectives.

A workable spending plan is a road map for

living. It provides you the opportunity to think aboutthe ways you would like to live and the things you

would like to do with your money.



To make a realistic plan, it is important to

consider the needs and wants of the family as awhole, as well as the needs and wants of each indi

vidual member of the family. It is also important toset short-term goals for the coming year, as well asobjectives for two or five or more years ahead.

Family planning for spending should not bedone by one member of the family. All memberswho share in the spending should also understand

how the money will be spent. Including the childrenin the planning process is a good lesson for theirfinancial understanding. It will give them valuabletraining and help them appreciate family circumstances. If this kind of planning becomes a way ofputting on paper what each member of the familywants and is willing to live with, it is a valuable

family experience. All too often young people lackan understanding of these important parts of thefamily process and fail to develop a systematicapproach to their own spending habits because they

have not been included in family money matters.Everyone in the family should speak up about

specific goals and wishes. Where do you want to goon vacation this year? Is there something thatshould be purchased for the house? A good suggestion is to ask everyone to write down separatelywhat he or she thinks or envisions his life would be

like five years from now and use that as a springboard to a family goal-setting discussion.

Your goals may be many and varied. They mayinclude planning for vacations, Christmas gifts, anew color TV, college educations for the children, aretirement income, a new home, a new car, addi

tional life insurance, a household appliance replace

ment, automobile insurance premiums, or what youmust save immediately to avoid repossession of

111

your car or furniture. The important point to

remember is that, regardless of your goal, it's a loteasier to save money and make it a family effort if

you have a specific reason rather than just trying todevelop a nest egg.

Now, have each member of the family make out

a personal dream list. What would you really like tohave in the next year, the next five years?

After each family member has finished his list,

ask him to separate the items into groups: Nice tohave; Ought to have; Must have. Next, separatethem further by noting the approximate date(month/year) you'd like to have them. Be realistic,considering your present situation.

If you've read this far and haven't yet made out

your dream list, STOP. Go back and list the thingsyou'd like to have or do, then proceed.• Which items were on more than one list?• Which are true needs and which are luxuries?

• Which ones will benefit the entire group?• Which ones benefit only one person?

Spend as much time as you need on thisdiscussion. Set priorities based on needs, desires,

and available funds. Establish a list the group is

comfortable with consisting of the following:Short-term goals (one year), and

Long-term goals (two or more years).

After a thorough discussion of family goals,

write them on the following form. Beside each goal,indicate when you would like to have it (target date).Determine the number of months between now and

the target date (time to complete) and enter theapproximate cost as shown. To determine the cost

per month, provide the approximate cost by the timeto complete.



FAMilY AND INDIVIDUAL GOALS

Short-Term Time to Approximate(one-year) Target Date Complete Cost

Cost perMonth

SAMPLE:

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Insulatethe Attic

Aug ust 1 8 months $750.00 $93.75

$---- $---Approximate

Cost

SAMPLE:

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Long- Term(two or more Target Date

years)Down Payment Jan. 1, 19 __

on a new $60,000Home

TOTAL

Time to

Com plete

48 months 15% $9,000

Cost perMonth

$187.00

Add cost per month from Short-Term GoalsTotal per month needed to reach all goals

15

TOTAL $ _

$---$.----

$----



You now have the basic equipment for develop

ing a workable financial plan: a list of what you wantand a record of how you are using your moneynow. The next step in this process is to interrelatethe two items.

Add up the approximate cost and cost permonth columns of all your goals by category (short

and long-term). Now total the cost per month for

both categories. From this you should know how

much you will need to set aside during each payperiod in order to reach your goals as planned.

Once you have definitely established theamount you need to set aside each pay period,

consider your fixed expenses over which youhave little or no control - taxes, mortgage or rent

payment. installment amounts - and enter them inthe appropriate spaces in column three of the incomeand Expense Plan you complete in the previous

chapter. It is important that you set aside money each

pay period for these savings and expenditures.

The next step is to look at the remaining flexible

expenses (the ones over which you have somecontrol). In doing so, don't forget to include personal

allowances, and be realistic. If you know you'll buya candy bar and a cola every day, allow for it. At thispoint, total all of your expenses and compare thatfigure with your total monthly income.

Chances are good that the total needed permonth to reach all goals is more than your currentincome and expenses will allow. If not, congratula

tions! If so, don't give up yet. There is still hope for

you. You have pinpointed the problem area.The options open to you now are:

1. Increase your income.2. Decrease your expenses.3. Eliminate or modify your goals.

Your best solution will probably be a combination of

the above options. If you are on a fixed income,

option number one might mean taking a second job.So, look carefully at numbers two and three.

Go over your list and mark the obvious problemareas.

HABITS

At this point, you may realize that the only way

you are going to reach your goals is to change yourspending habits. Notice we didn't say spenddifferently, we said change your spending habits.

People are creatures of habit. They develop patternsof doing things. If you doubt this, just refer to yourcheckbook records for the past year. You'll probablynotice a definite pattern from one month to the next.

We establish habits because they take less effortthan having to rethink something every time we doit. We become comfortable with our ways.

16

Habits are fine as long as they will take us

where we want to go. But when they are leading usin the wrong direction, it is time to change them.That's where the rub comes. It is not comfortable,

nor is it easy, to break a habit. They can be broken,however. To break a habit, the first step is self

awareness. Be aware of what you are doing andhow. Do this by listing your income, expenses, and

net worth. The second step is goal-setting

deciding what you want to replace your habit with.That's where we are now. You know what you'vebeen doing and you know what you want, now all

we have to do is develop a plan for changing.Consider the alternatives:

Could you earn more money?How?

In which areas could you cut back expenses?How?

Which goals could you reduce?How?

Can you still get excited about them in this reducedstate?



These are just some basic questions to ask

yourself in preparing your plan. You can probablythink of many more. Take all the time you need andanswer them all.

If you still can't identify enough ways to saveepxenses, hang in there! There are lots of things wehaven't considered yet. The rest of this book willcover many of them.

Let's assume you have decided to cut back on

some items. Cutting back or reducing expenditureswon't be easy, but it is possible. If your income werecut by $50 or $100 a month right now, you wouldprobably manage, even though it would mean some"belt tightening." Why wait for this to happen? If youcan take such an income drop, you can also beginto save a similar amount to meet goals you wouldlike to achieve. We are all prone to buy some-thing on impulse or because it appears to be a gooddeal. But when your first priority is meetingobjectives you can visualize, then it becomes easierto pass up the non-essential purchase or seek outand get a better price.

As your family begins to face the question of

which expenses to alter or reduce, it might be helpful to look at a conversation that could arise in your

home. You say to your mate, "If you can cut downon driving around during the day and I cut down onmy lunch expenses, we can save some money."

Let's examine that exchange and see if we canlearn from it. The important point to note is thatthere is an "if you do something, I'll do something"attitude exhibited. If this man and his wife are only afew dollars away from reaching their plan, they maymake it with this type of approach. But if they needto reduce their expenditures by a sizable amount tomake their plan work, then we suggest they openlyand critically examine their largest flexible expense

items first. Remember that purchasing power andwillpower are inseparable.These are the first steps that most of us should

take. We should examine the food, clothing, trans

portation, housing, and miscellaneous purchases inan objective manner and relate them to the goals wehave set.

Once you have reached the satisfactoryexpenditure levels, record the new expense figuresin column three of the Income and Expense Plan inChapter 3. You now have your expense plan. Withthis plan as a base, you can turn to using the FamilyOperation Statement in this chapter to track yourprogress each month. This is a monthly summary

statement to show how well you are doing on yourexpenditures in relation to your monthly income.

Keep it with your bills, and each time you pay abill or make a purchase, write it down. This may bea bit hard to do at first, but don't abandon it if yourfirst records are incomplete. Just try to be moreaccurate next month. Remember, even a partialrecord beats none at all.

Enter your income at the top of the column.Then list all expenses below it as they occur. At theend of the month, go over your Operation Statement and your account balances and see where youstand. Are you on target or did you go over/under insome areas? Zero in on those areas next month and

try to control them. It may take a month or two toget used to this, so don't worry. The important thing

is that you are working to establish new spendinghabits, not just correct a temporary situation.

If you are not comfortable with this form, deviseyour own. It's the record, not the format, that isimportant.

The final step in your financial planning processis re-examination. If the plan isn't working, be realistic and change it. But if you find yourself changingthe plan every few months, it's time to ask yourself ifyou really went through an honest planning process.Unless you approach this honestly, a financial planturns out just like any other way of living beyondyour income, except, of course, you have a recordof it.

-------•••••••------

17



ACTUAL MONTHLY OPERATION STATEMENT

Monthly Plan JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL

TOTAL INCOMEI

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CHAPTER 5

1. Should the entire family be involved in financial planning, or can one person do it for the group?2. Who makes the financial decisions in your household?3. How are goals important to financial planning?4. Whatproblemsdid you encounter in making a personal dream list? How can this behandledmosteffectively?

5. In setting priorities, how did you make your decisions?6. Why do people have so much trouble setting personal and family goals?7. What spending habits are hardest to change? Why?8. Discuss your reactions to the questions under "Consider the Alternatives" in this chapter.9. How could you best use the Actual Monthly Operation Statement in this chapter?

1Q



WHAT YOU SHOULD KNOW

ABOUT INCOME TAXES CHAPTER 6

Our federal income tax system is progressive innature, which means that the higher your taxable

income, the higher the rate at which you will betaxed.

The percentage rate at which an individual istaxed is referred to as his or her "tax bracket." This

percentage rate can be found in the tax tablesprinted in a federal income tax instruction booklet.

For example, a single person with a taxableincome of $16,000 in 1982 owed taxes of $2,230 onthe first $15,000 of income, and 27 percent of the

remaining $1,000. That person is therefore referredto as being in the "27 percent tax bracket," whichmeans that for each additional dollar earned, 27

percent will go to federal income taxes.This progression continues until his or her

income reaches $41,500 at which point his tax ratebecomes 50 percent. Every taxable dollar he or sheearns above that figure - no matter how high hisearnings - will be taxed at 50 percent.

ORGANIZING YOUR TAXES

Paying taxes doesn't rank high on anyone's listof "favorite things to do," but the job can be made alot easier if you plan and organize your tax records.

The easiest way to organize your records is toset up a series of files in which you place all of yourmonthly income and expense receipts, as well asreceipts for major purchases and unusual expenditures. Most people need files for receipts and bills in

the following areas:EXPENSES

Mortgage payment'Other loan payments'

Utility billsGasoline and car repair billsHomeowner's insuranceLife insuranceHealth insurance and medical billsHome maintenance bills

Education expensesChild care expensesChurch donations and charitable contributions

Club expenses and duesCredit card payments'Property taxes and other tax receiptsIRA or Keogh contributionsOther pension contributions'Each year your mortgage holder and othercreditors will furnish a statement of the amountof interest paid. Be sure to watch for this statement and put it in your files.

20

INCOME

Paycheck stubs

Interest payments received (from savings, bankcerfificates of deposit, loans you have made toother people, etc.)

Dividend payments received (from moneymarket mutual funds, stocks and bonds, etc.)Other income received (Le., rental propertyincome)

OTHER FILES (if applicable)

__ Moving expenses__ Business expenses

__ Theft or other casualty lossesThese receipts will provide you with the infor

mation you need to complete your tax forms.Equally important, they will give you much of the"back-up" that the Internal Revenue Service willrequire if you are audited.

At the end of each year, after you havecompleted your tax returns, gather these receiptstogether and place them with copies of your taxreturns in a new file marked "Income Tax for Year

____ ." Keep your income tax records for atleast seven years.

OTHER RECORDS TO KEEP FOR

TAXES

In addition to these receipts, your bank statements or cancelled checks are excellent records for

tax purposes.Keep a file of all your statements in numerical

order. Should you ever need to provide proof ofpurchase or expenses, you can then obtain theappropriate document from your file or from yourbank. You should keep this information for at leastseven years.

It's very important to retain all receipts, workorders, cancelled checks, and other documents

relating to the purchase and improvement of yourhome and other real estate. You will need those

records to document capital gains or losses shouldyou ever sell your property.

By the same token, be sure to keep all records

relating to any investments for at least seven yearsafter you have sold or disposed of them.



REDUCING YOUR TAXES

The two primary methods of reducing your federal income tax are tax deductions and tax credits.

Deductions allowed by the IRS (and there are many)are subtracted from your adjusted gross income.This, in turn, lowers your taxable income - theamount of income on which you must pay taxes.

Tax credits, on the other hand, reduce your

final tax bill dollar-for-dollar.Recent changes in the tax laws have created

some new tax deductions and tightened up on otherdeductions, such as medical care and casualty andtheft losses. One of the most important new taxdeductions in recent years is that allowed for'Individual Retirement Accounts. Up to $2,000 ofyour contribution to an individual IRA ($4,000 formarried couples who are both employed and $2,250for a married couple with a non-working spouse) isfully deductible.

You should consult a financial counselor, suchas a Full Service Banker or an accountant, for

further information about reducing your taxes.

And, whether you prepare your own tax returnsor have them done by a professional, it is importantto remember that the taxpayer alone is ultimatelyresponsible for the accuracy of his or her tax return.

Always make sure that you thoroughly check overyour own tax return before mailing it. Any additional taxes or penalties assessed because of aninaccurate tax return will be your responsibilityalone.


CHAPTER 6

AN IMPORTANT NOTE

The Jaycees will not assume any responsibilityfor determining an individual's tax liability or status.The information provided herein is not in any wayintended to be comprehensive or to be relied uponin preparing a tax return. Moreover, the informa

tion given in this material is subject to change. Anyquestions you may have about your taxes or your

tax liability should be directed to the InternalRevenue Service or to a qualified tax professional.

1. Do you know your tax bracket?2. Do you keep a record of non-reimbursed business expenses, Jaycee expenses for volunteer purposes, edu-

cational expenses, or other deductible expenses?3. Do you know what expenses are deductible for your family? For your business? For Jaycees?4. Do you have your personal tax records for the last seven years?5. If you have investment property, or documents, do you have them in a safe place? Does anybody else know

that you have them?6. What is the difference between a tax deduction and a tax credit?



PREPARING AN ADEQUATE

INSURANCE PROGRAM CHAPTER 7

Insurance is a way of paying for security. It is

protecting yourself, your family, and even those

major possessions - your car, home, furniture, orjewelry - in which you have invested.

When you have insurance, you are reducing

your risk of loss. Not having insurance is, therefore, accepting a risk. The question you alone cananswer is just what degree of risk do you findacceptable?

Like savings and investments, insurance should

be planned. You should analyze your goals, determine your needs, familiarize yourself with group

policies available through your employer, and tailora total insurance package to give you the degree of

security you want, need, and can afford.

LIFEINSURANCE

The primary purpose of life insurance is to

provide protection for your family if you should die.A secondary purpose, however, can be savings orretirement income.

There are essentially two types of life insurance

- term and permanent.With term insurance, you pay a specific

premium to obtain a certain cash payment to yoursurvivors upon your death. Because your chances of

dying increase as you grow older, term insurance

premiums increase with age.With permanent insurance, you also pay a

premium to provide your survivors with a specific

amount of money if you should die. However, thistype of insurance also includes a mechanism forbuilding up a savings nest egg. And, unlike terminsurance, the premiums on permanent policies areset when you first buy it and do not increase or varyfrom year to year.

The premiums for permanent insurance areconsiderably higher than those for term insurance,because only part of each payment goes to provide

you with life insurance per se. The remainder ofyour premium is used to build up a type of savingsaccount. This is the "cash value" of your policy.

With a permanent policy, you can cancel the

policy at any time and receive its cash value as ofthat date, although most people usually do not cash

in permanent insurance policies until they retire.Another feature of the permanent policy is that

you may borrow against its "cash value" at generallylower-than-market interest rates, while sti ll keepingthe insurance in force.

Overall, term insurance provides the greatestamount of insurance coverage for the least amount

of money. But, as stated before, term insurance

generally provides no savings vehicle.

22

WHO NEEDS LIFE INSURANCE?

Most financial experts agree on the followinglife insurance guidelines:

• If you are single and do not have any dependents,you probably do not need life insurance.

• If you are married and have no dependents,you probably need life insurance if only onespouse is employed. If both spouses work andhave no dependents and each earns adequateincome for self-sufficiency, they may notneed life insurance.

• If you have children to support, you definitelyneed life insurance.

• If you're at retirement age, you probably do notneed life insurance.

In addition, many financial experts recommend

that everyone carry enough life insurance to pay forfuneral and burial expenses.

HOW TO BUY LIFE INSURANCE

Purchasing life insurance is fairly complicated.There are hundreds of companies offering literallyhundreds of different variations on the term and

permanent policies. The best course of action is to:

• Read about life insurance to try to determine

the type of life insurance you need.

• Make appointments with representatives ofseveral different life insurance companies and

compare their rates and voerage.• Make your decision carefully and base it on

logic, not emotion. Think it over for at leasta day before you sign anything.

PROPERTY INSURANCE

Most individuals' largest assets are their homeand personal possessions (furniture, silver, jewelry,clothes, art, etc.). To protect against the loss ofthese assets from fire, theft, or natural disasters,

most people buy homeowner's or renter'sinsurance.

The cost of homeowner's insurance is generally

proportional to the value of your home. The cost ofrenter's insurance is generally proportional to the

value of your possessions. Rates do vary, however,according to your geographical location, the qualityand proximity of the fire department, the age andconstruction of your house, etc.

Homeowner's insurance policies usually insure

all physical structure on your residential property,



as well as your home's contents and its improve

ments (swimming pool, patio, landscaping, etc.). Italso provides you with liability protection if

someone is injured in your home or on yourproperty.

Renter's insurance policies are generally limited

to personal possessions and furnishings (i.e., everything inside the rental structure that you actuallyown.) Most renter's insurance policies also provide

personal liability protection.Condominium insurance policies are similar to

renter's insurance in that they cover all of yourpossessions within the condominium unit. And, like

homeowner's insurance, they also cover the

physical structure that you own (i.e., the actual unitas bounded by your interior walls). These policies

also provide personal l iabil ity protection.

GUIDELINES FOR PROPERTY

INSURANCE COVERAGE

If you own your own home and have a mort

gage on it, virtually all lenders require that you be

insured for a certain percentage of its replacementcost. Because of inflation, it's essential to evaluate

regularly the cost of replacing your home to make

sure that you have adequate coverage. Automaticinflation adjusters are available on many policies.

You should also regularly reevaluate thecoverage on your personal possessions. Since most

insurance policies do not pay fully for the loss of

certain luxury items such as jewelry, furs, antiquesand stereo components, you may wish to take out

an additional policy or rider to cover these fully.As with life insurance, be sure to shop around

before purchasing a policy. And you can oftenreduce your premiums by increasing the deductible or qualifying for special discounts available to

reduced-risk policy holders, i.e., non-smokers orindividuals with burglar alarm or smoke alarm

systems.

HEALTH INSURANCE

The skyrocketing costs of medical care have

made health insurance a necessity for everyAmerican. Statistics show that 50,000 Americans go

bankrupt every year because of medical expenses.Although many people are covered by their

employers' group health insurance plans, some 30million Americans are not and must find insurance

on their own. Many millions more seek additional

23

health insurance because their existing coverage is

inadequate. And individuals who are between jobs,who retire before the age of 65 and thus are not

eligible for Medicare, or who lose their groupcoverage through divorce or spouse's death also

need to have health insurance coverage.Most health insurance coverage falls into one

of the following three categories:• Basic hospitalization - This covers the basic

cost of surgery or treatment in a hospital andincludes nursing services, hospital supplies,

drugs and the use of special hospital facilities.The amount of coverage varies, but it is

usually a percentage of the total cost minusthe deductible.

• Major Medical - This coverage helps pay forreally large medical bills. In other words,

major medical coverage (or "catastrophic in

surance") often begins where basic hospitalization ends, providing coverage for seriousinjuries or prolonged illnesses.

• Disability - This type of insurance provides

you with money (usually a percentage of yoursalary) should you be injured or become too

ill to work. Actual payment does not normallybegin until regular medical coverage and/or

sick leave coverage end. You should seriouslyconsider disability insurance as a way ofprotecting yourself in case of medical disaster.Most financial advisors recommend that disa

bility payments cover between 60 and 70 percent of your regular income.

If you do not know or are unsure about the

adequacy of your medical insurance. contact yourlocal hospital or county medical association. Ask

them for customary charges in your area andcompare these costs to your current insurancecoverage.

On the following page is a Family InsuranceFact Sheet which, when completed, will give you a

good record of your current insurance coverage

and allow you to see what additional coverage maybe needed or what insurance may be excessive.



FAMILY INSURANCE FACT SHEET

Type of PolicyPolicy

Date ofompany & Agent CoverageashAnnualremium

NumberPurchase Value*remiumue Date

*If appropriate.


CHAPTER 7

1. How do you feel about life insurance?2. Which type of life insurance is the best? Explain.

3. How many forms of insurance should a person have? Explain.4. What is the primary purpose of life insurance? Secondary purpose?5. What is the difference between term and permanent insurance?

6. If you are considering a purchase of a life insurance contract, what should you do to get the best coverage?7. Do you have insurance protection on your largest asset, your home and your possessions?

8. Do you know how to reduce the cost of liability insurance on your home or possessions?9. Do you know what the basic health insurance coverages are?10. Does your health insurance policy have first day accident and sickness coverage? What day does it become

effective?

11. Do you know what insurance protection you have personally? Through work?12. Have you listed your insurance policies and included them in a safe deposit box?

24



INVESTMENTS: FINANCING

FOR THE FUTURE CHAPTER 8

Investments are made to acquire future income

or benefits. Short-term investment goals will invari

ably change according to age, income level, orfamily obligations. Such objectives may includebuying your home, starting your own business, or

sending your children to college.

In the final analysis, however, the ultimate goalof your investment strategies should be directed

towards attaining a comfortable retirement nest egg.The key to effective investing lies in a basic

understanding of your own financial needs and thetypes of investments that can best meet thoseneeds.

SOME COMMON INVESTMENTS

The following descriptions of common investments have been compiled to provide a basic understanding of some different financial instruments and

how they work. After you have looked it over, youshould consult with a qualified professional in thefield, such as a banker or registered financial

advisor, to learn more about specific investmentvehicles.

CORPORATE SECURITIES:

STOCKS AND BONDS

• Common stock - Purchasing the common

stock of a company is equal to purchasing ashare of ownership in that corporation. Theprice of a company's stock moves up or downaccording to the firm's business acumen and

the general state of business and the economy.Generally, the company's board of directorswill return a portion of the company's annualearnings to its stockbrokers in the form of

dividends. Although stockholders are part

owners of a corporation, their claims againsta company's assets rank behind those of itsbondholders.

• Bonds - These essentially represent "loans"

that an individual makes to a corporation. Theface value of each bond represents the amount

of the loan. In return for lending money to thecorporation, the bondholder holds a priorityclaim against the company's assets and regularly receives interest on the loan until a pre

determined date, at which time the debt is fullyrepaId at face value.

Stocks and bonds are bought and sold in thestock market. Sales are handled through brokeragehouses which have seats on the various stock

exchanges where actual sales are made. The two

national exchanges are the New York Stock

Exchange and the American Stock Exchange.

MUTUAL FUNDS

Another way of investing in the stock market is

through mutual funds. Here, instead of investing inindividual stocks, you buy shares in a mutual fund

which in turn uses your money to buy the stocksand bonds of other companies. Mutual funds are

directed by professional investment managers but,as in other investments, you should check carefully

the records of several mutual funds before choosingto invest in one. Your stockbroker can help you getthe background information you need.

MONEY MARKET MUTUAL FUNDSRather than stocks and bonds, these funds

invest in short-term money market instruments such

as bank certificates of deposit, U.S. government

securities and commercial paper. Money marketfunds were restricted to brokerage houses until

recently, when Congress passed legislation allowingbanks and other financial institutions to set upsimilar money market accounts. Unlike moneymarket mutual funds, the new money marketaccounts at banks and other financial institutions

are federally insured.

CERTIFICATES OF DEPOSITThese are contracts with banks and other

financial institutions where the investor agre,es todeposit a set amount of money with that institutionfor a specific period of time. During that time,

interest accrues on the savings. Because thefinancial institution is guaranteed the use of the

investor's money for a relatively long period of time,the interest rate available is relatively high. Thelonger the time to maturity, the higher the rate of

interest. There are substantial penalties for earlywithdrawals.

REAL ESTATESome investors purchase commercial and/or

residential properties as an investment, deductingthe expenses of property maintenance, mortgageinterest, and the property's depreciating usefulnessfrom their taxable income. Besides the tax deduc

tions, the investor gains rental income and a

growing equity in a property that may wellappreciate in value.

COLLECTIBLESCollectibles are unique or limited items that

often have an aesthetic value in and of themselves

- such as art, precious gems, antiques, rare books,and commemorative stamps. Investors purchasethese items for the purpose of reselling them at alater date, when it is presumed their worth will have

increased in relationship to their increasing rarityand value.



TAX SHELTERS

These are investments in specific types ofindustries where, because of the risk involved, the

government has authorized tax benefits to investorsas a way to encourage the funding of theseventures.

Tax shelters usually offer the investor

exceptionally large tax deductions in connectionwith the venture's initial operations (generally in the

first year). Later on, if the venture becomes profitable, the investor will realize profits, which may bereported as capital gains.

In essence, tax shelters are for individuals whoneed tax deductions rather than income. Laws

governing tax shelters and their constitution changeconstantly, so it is essential to check out carefullyany such venture with a qualified tax advisor or

banker before investing in one.

SOME RULES OF THUMB FOR

SUCCESSFUL INVESTING

1. Determine your investment objectives, includ

ing your ability (financial and psychological) toassume risks. Investments are long-term commitments of funds that involve some element

of risk. The greater the risk, the greater thepotential return - or loss. You should only getinvolved in an investment after you have estab

lished an adequate emergency fund of readilyaccessible savings. Factors you should consider include growth of capital, need forcurrent income from investments, safety of

principal, liquidity or marketability, and taxes.2. Consider several different types of investment

vehicles before choosing the one or more thatbest fit YOUR needs. Ask for advice from

others whose professional knowledge and

judgment you respect.

INVESTMENT ORGANIZER

3. Once you have selected your investment

methods, become as knowledgeable aspossible on the subject. Don't be afraid to askquestions, and don't make any investment until

you feel comfortable with the subject matter.4. Don't go too far from home. Generally we reap

success in those areas we know best. There

fore, it makes good sense to concentrate on

those geographical areas or industries that you

understand most thoroughly.5. Measure risk very carefully, including intan

gibles as well as dollar costs and benefits.

6. Don't make investment decisions hastily.When you do not know what to do, it's often

best to do nothing.7. Monitor your investments closely, whether

they are doing well or poorly. Compare theactual performance of your investments withyour initial projections.

8. Invest generally for the long haul. Short-termswings will always occur, and even profes

sionals have a hard time calling them. Don'ttry. Your commitment is to the future.

9. Don't be stubborn about an obvious loss on an

investment. Take it and try again. The object isto make the most of your good buys and cutthe losses on your bad ones.

10. Finally, be sure to consider the tax

consequences of your investment decisions.

ORGANIZING AND KEEPING

TRACK OF YOUR INVESTMENTS

Below and on the following page are charts tohelp you keep up to date on your investments andtheir earnings. When property filled out, these chartswill also be helpful each year when you computeyour income taxes and update your net worth infor

mation sheet.

Type of InvestmentDate Boughtnits Purchasedrice Per Unitommissionotal Cost

Investment

Date Soldnits Soldrice Per Unitommissionotal Proceeds

?f;



INTEREST/DIVIDEND INCOME

Issuer/Company Date Dividend/I nterest Paid Amount

SOCIAL SECURITY

These retirement benefits are based on taxes

that you pay into the Social Security trust fund

during your working years. Your retirement benefits

are based on your average earnings, adjusted forsuch factors as the provision of spousal retirement

benefits and the age when you begin to collect yourbenefits.

Although the system is too complex to explain

adequately in these pages, it's important to knowthat Social Security is much more than a retirement

program. For example,Social Security provides benefits for your

dependents while you are on the benefit rollsas a retired or disabled worker.

If you die (before or after retirement), it paysbenefits to your survivors to help replace your

earnings.It helps with medical and hospital expenseswhen you reach 65 or if you become disabled.

To be eligible for retirement benefits, a personmust have contributed Social Security taxes for a

minimum of 40 quarterly periods. Although most

jobs in the United States are covered by the SocialSecurity law, you should check with your localSocial Security office if you have any doubt about

your coverage.

27

Social Security payments are exempt fromfederal, state, and local income taxes and areincreased to meet increases in the cost of living

according to a mandated formula.However, it's very important to know that Social

Security was NEVER envisioned as a retirement

program in and of itself. It was designed to be aretirement supplement, to be used in conjunctionwith individual savings and other pension plans.

On the following page is an instruction sheetthat will help you estimate the amount of Social

Security retirement benefits that you can expect toreceive monthly. Obviously, the further away from

retirement you are the less accurate this statementwill be, since your earnings record to date will berelatively low. However, it is still useful to have someidea of these benefits for planning purposes.

SOCIAL SECURITY INFORMATION

YOUR SOCIAL SECURITY NUMBER:

In order to assist you in estimating your retire-

ment income, you should first establish the amountof Social Security retirement benefits that you can

expect to receive monthly. You can do this byfollowing these steps:



Date

Ask your local Social Security office for aStatement of Earnings postcard, form OAR-7004.

Fill the card out and mail it to Social SecurityAdministration, Post Office Box 57, Baltimore,

Maryland 21203. On the corner of the postcard writethe words "Quarters, please" and "Benefits estimate,

please."In return, you will receive a statement detailing

the total amount of earnings credited to your Social

Security number, plus the number of quarters thatyou have been accumulated, and an estimate ofyour monthly retirement benefit check (which isbased on the earnings credited to your account to

date.)When you receive this information, transfer your

estimated monthly benefit to the form below. Repeat

this process and update as necessary.

Estimated MonthlyBenefit At Age 65

$------$-------

$-------$-------$-------

COMPANY PENSION PLANS

Many employers provide retired workers with a

pension, provided they have worked a certainnumber of years with the company and attained acertain age. Some of these programs require

employees to contribute to the program, while


CHAPTER 8

others do not. Pension benefits are taxable as

ordinary income.

The quality and requirements of pension

programs vary dramatically from company to

company. If your company has such a program, youshould ascertain what pension benefits you areentitled to, and how much or how little you willreceive upon retirement.

In order to obtain this information, contact the

person in charge of your company's pension planand ask the following questions. You should updatethis information every three years.

1. How many years of employment doyou currently have to your credit? _

2. At what age can you receive fullretirement benefits?

3. How many years must you work at

the company before you are guar-anteed full benefits at retirement? _

4. How many years must you work atthe company to guarantee partialbenefits at retirement?

5. If you were to retire with full bene

fits, how much money would youreceive monthly?

6. What is the minimum age at whichyou can qualify for pension benefits?

7. If you die before reaching retirement at age 65, would pensionbenefits be payable to your spouse? _

8. If you die after retirement, doesyour spouse continue to receivepension benefits?If so, how much?

1. Which form of investment is recognized as ownership, stocks, or bonds? Why?

2. How would you invest in either a stock or a bond?3. What is a mutual fund?4. How does a mutual fund differ from a money market mutual fund?

5. A Certificate of Deposit, or CD, has a higher interest rate than normal, why?6. When investing in Real Estate, commercial or industrial, what benefits does the buyer receive?7. What could be a problem with investing in "collectibles?"8. When considering a tax shelter as an investment, you should seek counsel of a qualified tax advisor. Why?9. What should be the most important consideration before making any investment?

28



ABOUT YOUR RETIREMENT CHAPTER 9

Too many Americans falsely equate retirementplanning with thoughts about how they will spendtheir free time, rather than how they will pay for it.Yet the foundation for an effective retirement plan

rests with a thorough understanding of what one'sfinancial needs will be, and how those needs will bemet.

In general, the following axioms should beremembered when you're planning your retirementfinancing:• You will need to have enough income to meet

your expenses each year throughout your life.• At retirement age your income tax bracket

should be significantly lower; this affects theway you look at your investments.

• Very few people can meet their retirementincome needs from Social Security and

pension payments alone.• Most people overestimate the monthly benefits

they will receive from a company pension planat retirement because they are unaware of the

plan's requirements and restrictions.The first step to establishing a solid retirement

program is to review the most common sources ofretirement income. Generally speaking, most people

rely on one or more of the following for their retirement financing.

If you become totally disabled before you are

59%, you may withdraw your IRA funds withoutpaying a penalty. Otherwise, the IRS imposes a 10percent tax penalty on the amount withdrawn beforeyou reach 59%. In addition, the amount withdrawnwill be taxed at your Personal Tax Rate in the yearof the withdrawal.

Without question, IRAs are one of the most

exciting personal financial innovations around. Forthe first time ever, every wage earner - regardlessof whether he or she is covered under a company

pension or profit sharing plan - can take advantageof the benefits of tax-deferred savings.

You can establish an IRA account with virtually

any financial institution. With most banks, there isno fee or minimum contribution, and arrangementscan be made for monthly payments into an IRA. Inaddition, many employers are now offering theiremployees the opportunity to establish an IRA

through monthly payroll deductions.On the following page is a sample Individual

Retirement Account chart prepared by the AmericanBankers Association that shows how funds would

accrue based on an interest rate of 12 percent

compounded annually.

INDIVIDUAL RETIREMENT

ACCOUNTS

Beginning January 1, 1982, all working individuals were given the opportunity to set up their own

retirement program, even if they were alreadycovered by a company pension, by opening an .p..

Individual Retirement Account, or IRA.

These retirement savings plans allow a workingindividual to contribute up to $2,000 per year into anaccount which then earns them interest, much like a

savings account. Working individuals with nonworking spouses can contribute up to $2,250 in anIRA.

The annual contribution to an IRA is fully tax

deductible. Moreover, the earnings are tax-deferred

until you begin to withdraw funds at retirementwhen you are presumably in a lower tax bracket.You may begin to withdraw funds from an IRA

without penalty at age 59%, and youmust

beginwithdrawing funds by age 70%.

29



SAMPLE INDIVIDUAL RETIREMENT ACCOUNT CHART*

Interest Rate: 12% Compounded Annually.Figures Are Rounded to the Nearest Dollar.

Year

$5001,0001,5002,0002,250

($43.27/week)

$60 $.120 $.680 $.240 $.520 1,187,374,562.749.342,890,799.669,559.503,6765,353.0290,7062,044,5587,1150.6734,2306,009.5459.0893,6348.1780,450.6501.3006,9502,5995,424.8883.7760,6637,5510.995.2746.5494.8233,0977.235,8279.6559,4829,3094,2231,5673.1334.6996,2662,0503,5157.0290.5444,0580,8165,6961,3937.0892.7850.6338,1406.2804,4202.5591,6290.8771.7532.6303,5073,9453,9427,8841.8265.76707.7387,3754.7502,12509,49923,1871,2202,4403,66024,87940,4895,5261,05206,57942.10559,8680.3490,69921.04861.39781,5725,7511,50337.25483.00505,8811,80103,60355,40407.20633,1078,57817.15575.73334.31063,5996,16732.33498,50164,66897.7514,66749.33424.00198,66836.0014.18768.37452,56136.74878.8424.84989,69984.54879.39826.82306.79113,58320.37427.16680,56120.16640,33360,49980,66540.74935.14670,29305,43940.58508,15851,92403,84855.77207,69583.65770.71541,42912,14482,85968.21691.76083.52175.28167.04262,92215,33230.66445,99561.32768,99341.73283,46325,19566.926,087.79271.29942,59913,898,085.197.220,84704,41508,83113,246,217,661.369,86941.50583,010,024.515,366.020,536.77383.04666,091,149.137.532,183.723.70629,57159,142.288.714.718,285,933,070

• Source: American Bankers Association

Based on an approximate yield of 12%.This rate is not intended to be a statement of the actual interest rate available or guaranteed end financial results.

KEOGH PLANS

Keogh plans are similar to Individual Retirement Accounts except that you must be self

employed to qualify for one. And, unlike IRAs, themaximum yearly contribution allowable to a Keoghplan is 15 percent of your income up to a maximumof $15,000 per year.

Annual Keogh contributions are fully tax deductible, and the interest earned remains tax-deferred

10

until time of withdrawal. The age and withdrawalrequirements are the same as for IRAs. Banks andother financial institutions can also establish Keoghplans.

On the following page is an Individual Retirement Account/Keogh record that you may findhelpful.



INDIVIDUAL RETIREMENT ACCOUNT/KEOGH RECORD

Date Amt. of Contributionhere Placednterest Rateaturity Datemount of Maturityccumulated TOTAL

DEFERRED ANNUITIES

These plans allow you to deposit your savings

with an insurance company in return for aguaranteed rate of interest each year and an

agreement that upon retirement you will be paid aset monthly income for the rest of your life. Theinterest earned is tax-deferred until the time of

withdrawal, at which time it is taxed as regularincome.

INVESTMENTS AND SAVINGS FOR

RETIREES

Most retirees look to their investments and

savings nest egg to provide them with some portion

of their retirement income. In general, retireesshould seek investments that produce relatively

high earnings at relatively low risk. Growth stocksthat pay small dividends, tax shelters, and other

investments attractive to younger people as a

means to gain long-term appreciation or tax

advantages are generally less attractive to theretiree, who seeks income and security.

Retirees often use the interest (and portions of

the principal) from savings accounts and the cashvalue of life insurance policies as the basic cash

pool to meet their income needs.

PLANNING YOUR RETIREMENT

The form on the following page has beendesigned to help you use the information in thischapter. Again, althOugh it may seem premature to

plan for your retirement at this stage in your life, this

planning will be invaluable to you in setting not onlytomorrow's financial goals, but also today's.

31



RETIREMENT INCOME PLANNER

(Note: Use Current Figures-Do Not Factor In Inflation)

1. Your Estimated Annual Expenses:

(use your current monthly budget as a guide, remembering that many

$

but that some expenses, such as medical, will probably be increased)2.

Estimated Annual Income You Can Count On At Retirement: $

3.

Retirement Income Gap (lack of retirement income to cover your expenses

each year):o determine, subtract line two from line one:$nticipated Life Expectancy (assume age 78 for men, age 83 for women, but

adjust according to family history:

yearsumber of Years from Retirement Age Until Reaching Life Expectancy:

years

Additional Amount of Money Needed to Meet Your Retirement Needs:

To determine, multiply dollar amount on line three by number of yearsntered on line five:

$stimated Current Value of Your Savings, Investments, Insurance Policies

and Other Assets you will Convert to Cash at Retirement - i.e., money youill want to draw on during retirement:

$ubtract line six from line seven: Your Retirement Cushion (or Needs) $

If line 7 is larger than line 6, you should be able to meet your retirement needs. If the amount on line 7 is slightlysmaller than line 6, the interest income you receive on your savings and other cash items may be enough to meet

your retirement needs. If line 7 is considerably smaller than line 6, you will need to save or accumulate the differenceto meet your retirement needs.


CHAPTER 9

1. Have you planned for your retirement? How?2. Do you know what an Individual Retirement Account, or IRA, is?3. Do you know what a Keogh Plan is?4. What investments besides your company pension, if you have one, and social security, will you use for your

retirement?5. When is the best time to plan for retirement?

6. At retirement, do you want your investments to reflect liquidity and low risk or growth potential and high risk?

Why?

32



ESTATE PLANNING

Estate planning - planning for the management and disposition of your assets upon yourdeath - is one of the most important and most

overlooked aspects of financial management. Unfor

tunately, too many people confuse estate planningwith morbidity and end up playing a type of

financial Russian roulette, leaving their family'sfuture to chance.

The will is the keystone of estate planning. Ifyou die without a will or with a will that is notproperly drawn up, the state will distribute yourestate in accordance with its own laws rather than

your wishes. In addition, you will lose the privilegeof naming your executor (which could cost yourestate a great deal of money) and the privilege ofnaming a guardian for any children who are still

minors when you die. You also run a grave risk of

saddling your family with long court proceedingsand high estate taxes.

Although it is legal to write your own will, thereis no guarantee that it will stand up in court, particularly if there is anything complex about your estate.

You best bet is to consult your banker and yourlawyer when drawing up a will, changing a will ormaking a new will. It's a small price to pay for

making sure that your wishes are carried out.

NAMING AN EXECUTORAn executor is the person or qualified corpora

tion, such as a bank or trust company, that youname in your will to settle your estate. Executorsshould be chosen very carefully, because theindividual, bank, or trust company you name should

be fully competent to handle fairly complex moneymatters and should be willing to spend a good dealof time to carry out your wishes.

LETTER OF LAST INSTRUCTIONSOnce you have named an executor, it is

important to write him or her a letter of lastinstructions to be opened after your death. This

letter should contain all the necessary information

your executor will need to begin carrying out yourwishes.

I

~~

CHAPTER 10

Your letter should include the followinginformation:

• The location of your will. (Do not keep the

only copy of your will in your safe deposit box,because it may be sealed upon your death.)

• Funeral and burial instructions.

• The location of all your important documents.

• The location of your safe deposit box, its key,and a list of its contents.

• A list of special benefits, such as death or funeralbenefits.

• A list of insurance policies and where they arelocated.

• The location of all of your proofs of propertyownership, including real estate deeds andstocks and bonds.

• A list of all debts and instructions for handlingthem.

CREATING A TRUSTAs part of their overall estate plan, many people

create a trust to provide expert investment management, financial or tax protection for their estate or

educational funds for their children. Stated simply, atrust is an arrangement where an individual or a

bank trust department gains title to - and usuallymanages - property for the benefit of someoneelse.

Trusts can be set up for someone when he orshe is still alive (a living trust) or to become effective

when someone dies (a testamentary trust). Manypeople create testamentary trusts to:

• manage their estates until their minor child

becomes of age;• provide professional investment management

for a beneficiary who is inexperienced in hand

ling financial matters;• save inheritance taxes.

Living trusts are used by many people who are

seeking professional, secure management of theirinvestments. In addition, many older people createliving trusts as a method of managing their

investments now and in the future, when they feel



they may no longer be able to handle such affairs

themselves. In addition, living trusts are oftencreated as a way to pass assets on to an heir andavoid probate, which eliminates substantial costs.

In essence, because the proper handling of anestate can be extremely complicated, a trustee is

used to provide experienced and competentinvestment management. Since both living andtestamentary trusts involve complex concepts,

neither should be created without first consulting alawyer, tax expert and a bank trust officer.

The fee for trust management varies, dependingon the type of service offered and the geographicallocation of the trustee or bank. Often, the annual

management fee is based on the total value of thetrust assets.


CHAPTER 10

1. Do you and your wife have a will? An executor to the will?

2. Do you feel personally threatened by not having a will? Explain.3. In the event of your and your wife's untimely death, will your children be adequately taken care of?

4. Have you consulted with a lawyer and a banker or other financial advisor regarding the estate laws in yourstate?

5. Do you know what a trust is? Do you know the difference between a living trust and a testamentary trust?

6. Do you have a Letter of Last Instruction itemizing what should be done by your executor?

~4



A GLOSSARY OFFINANCIAL TERMS

Like many other industries, the financialindustry has a language of its own. The following

are some of the words - and their definitions you may encounter in the course of your personalfinancial and retirement planning.

AMORTIZATION - The gradual repayment

of a debt through equal periodic payments sufficientto meet current interest and to liquidate the debt at

maturity.

ANNUITY - An amount payable according tocontract over a set time or an indefinite period,

such as for a stated number of years or for life.

BALANCE SHEET - The financial statement

of a company that lists its assets, liabilities, and net

worth as of a given date.

BEAR MARKET - A term used on Wall

Street to indicate a decreasing trend in the price ofcommon stocks. An investor who describes himself

as "bearish" foresees a decrease in stock marketvalues.

BENEFICIARY - The person named as

recipient of the inheritance of a will or of theproceeds from an insurance policy, retirement plan,etc.

BOOK VALUE - The value of a company or

business as determined by taking its net worth and

dividing it by the number of stock shares outstand

ing.

BULL MARKET - A term used on Wall Street

to indicate an increasing trend in the price ofcommon stocks. An investor who describes himself

as "bullish" foresees an increase or continuingincrease in stock market values.

CAPITAL GAlN - The profit realized from

the sale of a capital asset. (A negative profit fromthe sale of an asset is termed a capital loss.)

CAPITALIZATION - The sum total of the

money that has been invested in a corporation orbusiness, including shareholder investments and the

company's reserves or surplus funds.

COLLATERAL - Specific property, often

securities, given by a borrower to a lender as a

pledge for the payment of a loan or other obligation.

COUPON - A "promise of payment" couponthat is attached to a bond. When detached and sur

rendered to the issuer, it is exchanged for the pro

mised interest payment.

CHAPTER 11

CREDIT - An advance of cash, merchandise

or commodity in exchange for a promise to pay a

definite sum at a future date, usually with interest.

CREDIT CARD - A card that gives the

holder the right to purchase or borrow cash ormerchandise against a line of credit that has beenestablished for the card holder by the card issuer.

CURRENCY - Technically, any form of

money that serves as a circulating medium,

including both paper money and metallic money(coins).

DEBIT CARD - A card issued by a financial

institution to its customers that when used by thecard holder credits or debits the card holder's

personal account with the financial institution.

DEVALUATION - An increase in the price

of gold in terms of a national currency, i.e., thevalue of local currency falls in terms of gold.

DISCOUNT RATE - The interest rate a

commercial bank pays when it borrows from aFederal Reserve Bank.

DIVIDEND - A payment to stockholders,

usually made on a quarterly basis, based on acompany's earnings.

EARNINGS - The amount of money a

company has made after subtracting its costs,expenses and taxes.

ELECTRONIC FUNDS TRANSFER

SYSTEM (EFT) - A banking system inwhich funds are debited and credited to accounts byan electronic communications network, eliminating

the need for monetary exchange via cash or checks.

EQUITY - The value of a business or propertywhen all liens or debts are subtracted.

ESTATE - All property of a person, living or

dead, including cash, securities, real estate, life

insurance policies, debts, and receivables.

EXECUTOR - A person or institution named

by a will to settle an estate. An executor's responsibilities include presenting the will to a court for

probate, gathering all assets, collecting debts,paying bills, managing the assets, distributing theestate to the heirs, etc.



FIDUCIARY - An individual or a trust institu

tion charged with the duty of acting for the benefitof another party. Examples of fiduciary relationshipsinclude a guardian and his ward, an agent and hisprincipal, an attorney and his client, one partner andanother partner, or a trustee and his beneficiary.

FISCAL POLICY - Use of a government'sspending and revenue-producing activit ies to

achieve specific economic goals.

GUARDIAN - A person or institution, generally named by a court, to care for the property ofa minor or incompetent. Banks are usually guardians of property, while other persons are namedguardians of the person and that person's needs.

INSURANCE - A contract whereby for a fee

one party agrees to pay a sum to another in theevent the latter suffers a particular loss.

INTEREST - The sum paid for the use ofmoney or credit.

LlaUIDITY - The ability to convert non-cashassets (stocks, bonds, real estate, etc.) to cash.Assets that can be quickly converted to cash aresaid to have high liquidity.

LIVING TRUST - A trust created during thecreator's lifetime, which provides benefits during thecreator's lifetime. (Compare with testamentary trust.)

MARKET RATES - Rates of interest

resulting from the demand for, and supply of, fundsin the money market.

MONETARY POLICY - Management bya central bank of a nation's money supply to ensure

the availability of credit in quantities and at interestrates consistent with specific objectives.

PRICE-EARNINGS RATIO -The relation

ship between the price of a stock and the company'sper-share earnings. For example, a stock selling at $75per share, with earnings of $5 per share, has a priceearnings ratio of 15.

PRIME RATE - The interest rate that banks

charge on business loans to their best corporatecustomers at a given time.

RATE OF RETURN - Income earned on

any investment, expressed as a percentage of the

investment's price.

SINKING FUNDS - Money that a companyhas contracted to set aside periodically to purchaseor redeem its securities.

STOCK SPLIT - The process of dividing a

company's stock shares. For example, a 2-for-1stock split means that two shares of stock will becreated for every one share that previously existed.

36

TANGIBLE PROPERTY - Propertywhich can be touched or realized with the senses,such as a chair, as opposed to intangible property,such as a promissory note.

TESTAMENTARY TRUST - A trust

established under the terms of a will and takingeffect upon the creator's death.

TRUST - An arrangement by which anindividual or a corporation as a trustee holds thetitle to property for the benefit of one or morepersons, usually under the terms of a will or awritten agreement.

TRUST DEPARTMENT - The department of a bank that provides trust services.

TRUSTEE - An individual or institution who

generally holds legal title to property and administers it for the benefit of another.

USURY - The legal limit on the rate of interestthat can be charged for a loan.

YIELD - The annual return on an investment.

Yields are expressed as a percentage of theinvestment's cost or present price. For example, astock selling at $5 per share that pays $1 per sharein annual dividends has a 20 percent yield.



PERSONAL FINANCIAL PLANNING

RESOURCE/REFERENCE BIBLIOGRAPHY

Bailard, Thomas E., David L. Biehl and Ronald W. Kaiser; Personal Money Management; Science ResearchAssociates

Blodgett, Richard E.; The New York Times Book of Money; Quadrangle

Bridwell, Rodger w.; The Battle for Financial Security; New York Times Books

Eder, George J.; What's Behind Inflation and How to Beat It; Prentice-Hall

George, Richard; The New Consumer Survival Kit; Little, Brown and Company

Goldberg, Richard H.; Planting Your Money Tree; Chatham Square

Hardy, C. Colburn; Funk and Wagna/l's Guide to Personal Money Management; Funk and Wag nail

Mackevich, Gene; The Woman's Money Book; Bantam

Quinn, Jane Bryant; Everyone's Money Book; Dell Publishing Co.

Randle, Paul A. and Philip R. Swenson; Managing Your Money; Wadsworth, Inc.

Simons, Gustave and Alice Simons; Money and Women; Popular Library

Sprinkel, Beryl W. and Robert J. Genitski; Winning with Money: A Guide for Your Future; Dow Jones-Irwin

Stein, Ben; Moneypower: How to Make Inflation Make You Rich; Harper and Row

Stillman, Richard J.; Money Wise: The Prentice-Hall Book of Personal Money Management; Prentice-Hall

VanCaspel, Venita; Money Dynamics for the 1980's; Reston Publishing

Walker, Glen; Credit Where Credit is Due - A Legal Guide to Your Credit Rights and How to Assert Them; Holt,Rinehart and Winston

The United States Jaycees, Communication Dynamics, Cat. No. 696-1

The United States Jaycees, Leadership Dynamics, Cat. No. 675-1The United States Jaycees, Personal Dynamics, Cat. No. 682-1

The United States Jaycees, Time Dynamics, Cat. No. 687-1



INVESTMENTS AND RETIREMENT PLANNING

REFERENCE/RESOURCE BIBLIOGRAPHY

Blume, Marshall E. and Jack P. Freedman, (ed.); Encyclopedia of Investments; Warren, Gorham and Lamont, Inc.

Branch, Ben; Fundamentals of Investing; WileyCasey, Douglas R.; Crisis Investing; Harper and Row

Clay, William C., Jr.; The Dow Jones-Irwin Guide to Estate Planning; Bantam Books

Cohen, Jerome B. et al; Guide to Intelligent Investing; Dow Jones-Irwin

Gordon, George B.; You, Your Heirs and Your Estate; Farnsworth

Graham, Benjamin; The Intelligent Investor; Harper and Row

Hardy, C. Colburn; ABCs of Investing Your Retirement Funds; Medical Economics

Hardy, C. Colburn; Dun & Bradstreet's Guide to Your Investments; Harper and Row

Jehle, Faustin F.; Complete and Easy Guide to Social Security and Medicare; Dell

Johnson, Timothy E.; Investment Principles; Prentice-Hall

Klein, Michael J.; Planning for Tomorrow; A Step-by-Step Guide to a Successful Retirement; McGraw-Hili

Levitt, Arthur, Jr.; How To Make Your Money Make Money; Dow Jones-Irwin

Little, Jeffrey B. and Lucien Rhodes; Understanding Wall Street; Liberty Publishing

Porter, Sylvia; Sylvia Porter's New Money Book for the 80's; Doubleday

Rukeyser, Louis; How to Make Money in Wall Street; Doubleday

Smith, Thurman L.; Investors Can Beat Inflation; Liberty Publishing

Tobias, Andrew: The Only Investment Guide You'/J Ever Need; Bantam Books

Whitman, Martin and Shubik, Martin; The Aggressive Conservative Investor; Random House

NOTE: Many of these books do not take into account recent changes in tax and estate laws. Nevertheless, the

general information provided and concepts discussed remain valid.



PROGRAM OPTIONS

Financial Planning lends itself to many uses. Itis an excellent personal workbook, a guide to family

financial planning, a text for meaningful groupdiscussion, and a follow-up manual for lecture

series.

GROUP DISCUSSION

CHAPTER 12

to your group might bring them extra business, somost of them wil be anxious to help you out.

Tell them exactly what you want them to do

and how much time they should plan to take.

Always allow time for questions and answers. (Besure to practice your usual courtesy for guestspeakers.)

Time

10 min.

40 min.20 min.

40 min.10 min.

And many, many more.Be creative, check local resources. You may

find more potential speakers than you have time to

use. List according to preference the subjects youwant covered and contact speakers in that order.

Your financial planning program can be as long

or as brief as you wish. Let the members of yourgroup determine what subjects they want to cover

and how long the program should last. With thisapproach, you will be able to provide a valuable

learning experience for all of them.Upon completion of your program, you may

wish to present to each participant a diploma. The

U.S. Jaycees offers such a diploma through itsproducts catalog.

To use the manual most effectively in a group

discussion, note the following steps:1. Distribute a manual to each participant.

2. Allow time at the beginning of each meeting

for a personal review of the chapter or topic tobe discussed.

3. Ask each person to make notes of the itemsthey are especially interested in. Be sure to

bring these out in the discussion.4. Using the discussion questions at the end of

each chapter (plus any questions of your own),allow participant a chance to talk.

5. Strive to keep the conversation flowing. Don't

allow yourself to become "the teacher."

6. You may wish to use a tape, book, film, or

guest speaker to stimulate discussion.

Sample Agenda (2 hours)Informal call to order

Introduction of subject matter

Discussion period

Tape, film, or guest speakerDiscussion periodEvaluation of session

Adjournment

Caution: A person's finances are very private.

Don't try to pry into personal situations. If someonevoluntarily shares his personal financial circum

stances with the group, okay, but don't encouragesuch sharing. Keep the discussion on the subject.

LECTURE SERIES

Many well-qualified speakers on the subject offinance are available in most communities. You may

wish to contact them and arrange for them to

address your group about their specialty. Speaking

SUGGESTED

SPEAKERS

Financial Counselor

Life Insurance Salesman

Multi-purpose InsuranceSalesman

Attorney

Banker

Loan Officer

Real Estate Broker

Investment Counselor

Stock Broker

POSSIBLE TOPICS

Budgeting, overcomingdebtsTerm vs. cash value

insurance

Auto, home & otherinsurance

Importance of a will, types

of property ownership, etc.Use of bank services (sav

ings, checking, creditcards, trusts)

Types of loans, obtainingcredit

Home buying and realestate ownership.Types and costs of investments

The stockmarket



ACKNOWLEDGMENT

Financial Planning has been prepared for your

use by the American Bankers Association in cooper-

ation with The United States Jaycees.The preparation of a majority of this workbook

by the American Bankers Association has proveninvaluable and is deeply appreciated.

This book also includes an excerpt from the

book Preparing Your Personal Financial Plan,copyright 1973, Minnesota Jaycees, reprinted with

permission.

MERICAN BANKERS ASSOCIATI

1 120 Connecticut Avenue, NW.

Washington, D.C. 20036

financial planning manual usjaycees

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