1 / 27

We “Watch-ovia” Your Money

We “Watch-ovia” Your Money. By: Frank Bruno Matthew Cohen Kevin Connelly Matthew DiCroce. Family Background. Family of four Father works for Wachovia as bank executive Mother works as professor at Law School Two children, ages 12 & 10 401(K) plans with 5 & 8% matching

emory
Download Presentation

We “Watch-ovia” Your Money

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. We “Watch-ovia” Your Money By: Frank Bruno Matthew Cohen Kevin Connelly Matthew DiCroce

  2. Family Background • Family of four • Father works for Wachovia as bank executive • Mother works as professor at Law School • Two children, ages 12 & 10 • 401(K) plans with 5 & 8% matching • Wachovia stock options • Minimal Savings • $2,000 mortgage payment

  3. Financial Overview • Maximize 401(K) savings • Lowers taxable income and provides additional savings through company matching program • 529 Plan for both children • Various Moderate Risk Mutual and Retirement Funds • Pay down mortgage

  4. Second Home • Due to minimal savings and high first mortgage rate. • Invest in Tax beneficial plans • 401(K) • To buy house, you would need approximately 20% down payment.

  5. Household Income • Household pre-tax earnings = $200,000 • Less ($28,000) 401K contributions = $172,000

  6. Mortgage Interest Deductions • Interest payment components of mortgages are tax deductible. • To find the interest portion, we set up an amortization table and find the interest components for this year, then deduct them from our pre-tax income.

  7. Mortgage Interest Deductions • Starting Pre-tax income = $172,000 • Less ($22,108) Interest = $149,892

  8. Taxes • 28% Federal Tax Bracket, 3% State, Plus local and property taxes. All rounded to 35%. • Pre-Tax Income $149,892 • Less Income Tax Expense ($56,462.50) • NET INCOME = $97,430

  9. Mortgage Payment • Payments contributing to principle are NOT tax deductible. • Net Income = $97,480 • Less Mortgage Payment (non interest) ($1893) • INCOME LEFT = $95,537

  10. Other Expenses • Health Insurance = $1,200 • Car Payments = $9,600 • Car Insurance = $4,000 • Gas = $3,600 • Food = $10,000 • Clothes = $6,000 • Utilities = $6,000 • INCOME LEFT = $55,137

  11. Misc. Expenses • We estimated that the family will spend around $20,000 in other everyday costs. (Holidays, Birthdays, Vacations, Medicines, Summer Camps, Kid Expenses, Etc.) • INCOME LEFT = $35,137

  12. College Plan • Family will invest in a 529 College Plan to cover 60% of 2 college educations. • Cost: $15,360 / yr • INCOME LEFT: $19,777

  13. Savings • Of the left over income, we will allocate about 30% for savings. • Funds Available for Investment: $13,777

  14. Allocation • Mutual Funds: $6,300 • Stocks: $3,000 • Bonds: $4,477

  15. Mutual Fund Investment • $6,300 Dollar Allotment for Mutual Funds • Vanguard as Fund Manager • Reliable • Proven Performer • Quality Customer Service

  16. Types of Funds • No-Load Index Funds • Minimal maintenance fees • Provide broad market exposure for low income investors • Reduce risk • $3,000 Minimal Investment • 2 funds per year • Indexes Covered • Large Cap Stocks, Emerging Markets, Growth Stocks, Real Estate, Bond Markets

  17. First Year • Vanguard Large Cap Index Fund • $20.44 share • 5.06% after tax return since inception in 2004 • Holdings: Exxon Mobil and J&J • Vanguard Long Term Treasury Fund • $11.67 share • 5.88% annual return last 10 years • Holdings: 10-30 year bonds

  18. Second Year • Vanguard Small Cap Index Fund • $24.91 • Holdings: Reliant Energy and DeVita Inc. • 9.13% after tax annual return past 10 years • Vanguard Emerging Market Index Fund • $14.67 • Holdings: China Mobil and Samsung • 5.28% annual after tax return • 17.44% most recent year

  19. Third Year • Vanguard Money Market Fund • $1.00 fixed cost • Holdings: short term money market products • 3.74% 10 year annual return • REIT Index Fund • $17.88 • Holdings: Real estate and capital growth stocks • 14.97% after tax annual returns

  20. Bond Investments • After other expenses and investments • $4,477 for bond investments • What bonds to invest? • Low risk • Long-term return • Treasury bonds • Municipal bonds

  21. Bond Investments

  22. Equity Investments • After other expenses and investments • $3,000 for equity investments • Stock options at Wachovia • Can exercise 1,000 shares at $60 • Currently valued at $50.26 as of 4/26/05

  23. What to Invest in? • Minimal Savings • Need to save for college and retirement • Type of Equities to consider • Low to Moderate Risk • Different Sectors • Strong earnings

  24. Consider This • Market Cap • Beta • P/E Ratio • Dividend payout or stock split

  25. Careful Consideration

  26. Stocks

  27. Family Equity Portfolio • Overall Beta of Portfolio • 1.474 • Diversification- 4 Sectors • Technology • Conglomerate • Life Insurance • Computer Software

More Related