04/22/23

Personal Finance 101Part 1 . . .

04/22/23

AGENDA

• Purpose• Budgeting• Credit Cards• Three Tenets of Personal Finance• Emergency Savings• Retirement Investing

– Thrift Savings Plan (TSP)– Individual Retirement Accounts (IRAs)

• Life Insurance– Servicemembers’ Group Life Ins (SGLI)– Term vs. Whole Life Insurance

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To provide Army leaders with a Better Understanding of personal financial planning

in order to provide our Soldiers timely, accurate, and honest information in order to

make more informed decisions.

PURPOSE

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Budgeting

• Almost everyone hates to budget

• You must have a good idea of your income and expenses

• For one month = keep track of every penny you spend. You’ll be shocked to see where your money goes

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Credit Cards

If you spend $4,000 on credit cards at 18.5% interest and pay only the minimum payments, it will take you 11 years to pay off ($7,800 total).

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Three Main Tenets of Personal Finance

• Savings– Emergency Fund

• Investing– Individual Retirement Accounts

(IRA)– Federal Thrift Savings Plan

• Insurance– Servicemembers’ Group Life

Insurance (SGLI) & Family SGLI– Term vs. Whole Life

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Emergency Savings

Rainy days will happen….• You need 3-6 months of living expenses

saved• Very liquid….not in CDs, mutual funds,

etc.• The more secure your job, the less you

need (Army = 3 months)• Most should aim for $10,000• More responsibilities = larger savings

needed

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Getting Started

Everyone can begin saving something

• Start with $50 a month if nothing else• Many mutual funds can be started with as

little as $50 (USAA for example)• Everyone has a Latte Factor…find yours.• Time is your biggest benefit. You miss out

on compounding interest the longer you wait.

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Retirement Investing - TSP

Thrift Savings Plan….• Exactly like a civilian 401-k retirement plan• Five index funds & four target date Life Cycle funds

– Index funds follow S&P 500, Wilshire 5000, etc.– Life Cycle funds are too conservative for most

• Funded with before tax dollars• Earnings grow tax deferred & taxes are owed on

the interest and capital gains when withdrawn• Can withdraw the money at 59 ½ years old• $15,500 maximum yearly contribution limit• Automatic enrollment….coming soon!

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Retirement Investing – Roth IRA

Roth IRAs….• Usually invested inside mutual funds or a

brokerage account with individual stocks• Funded with after tax earnings• Earnings grow tax free & no taxes are owed on

interest and capital gains when withdrawn• Can withdraw the money at 59 ½ years old• $5,000 maximum contribution limits ($416 a

month)• Investing $5,000 a year starting at 22 years-old,

earning 8% annually, will grow to over $2.2 million at age 62 (your investment =$245,000)

• Skip a Traditional IRA until you max out a Roth

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Investing Tips

• It’s usually more beneficial to start with a Roth IRA and then invest in TSP

• You can take out a loan for college, but you can’t take out a loan for retirement

• Investments with low expenses (like Index Funds) are a great place for a beginner investor

• Individual stocks are hard to track, mutual funds are better & more diversified

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Life Insurance

Is $400,000 SGLI enough? Maybe….• You need approximately 10x your income

– For an E-6 with 10 years of service, you should have $500,00 in insurance. Do not forget to include BAH.

• Do you depend on your wife’s income? You may need insurance for her.

• Will the Family SGLI be enough to cover full time daycare for children, fixing meals, etc.?

• You have disability insurance with the Army, but does your spouse have it at her work? Can you survive a loss of her income?

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Life Insurance

• For most people, Term insurance is better than Whole Life– $100,000 Whole Life = $100 a month– $500,000 Term Life = $40 a month

• 20 to 30 year term insurance (like SGLI) will protect you while your children are young

• You only need insurance to protect income• Insurance on children is a waste of money

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The Last Word…..

If you take nothing else

away….

Start now!

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QUESTIONS ?

“Amateurs talk about tactics, but professionals study Logistics.”

– General Omar Bradley