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Financial Planning 101: Basics for Wealth Accumulation

Learn the principles of accumulating wealth, starting with basic financial and estate planning. Discover how the Millionaire Next Door factors contribute to building wealth. Get insights on budgeting, saving, and investment strategies to achieve financial independence.

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Financial Planning 101: Basics for Wealth Accumulation

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  1. FINANCIAL PLANNING 101The Basics: Susan Schayes M.D Assistant Professor-CT Family Medicine, Emory University School of Medicine

  2. Learning objectives • Learn about the Millionaire next door • Learn about the principles of accumulating wealth • Learn how to get started with basic financial & estate planning

  3. Learning objectives Pop Quiz

  4. The Millionaire Next Door7 Factors • 1. They live well below their means

  5. The Millionaire Next Door7 Factors • 2. They allocate their time, energy, and money efficiently in ways conducive to building wealth

  6. The Millionaire Next Door7 Factors • 3. They believe that financial independence is more important than displaying high social status

  7. The Millionaire Next Door7 Factors • 4. Their parents did not provide economic outpatient care

  8. The Millionaire Next Door7 Factors • 5. Their adult children are economically self-sufficient

  9. The Millionaire Next Door7 Factors • 6. They are proficient in targeting market opportunities

  10. The Millionaire Next Door7 Factors • 7. They chose the right occupation

  11. The Millionaire Next DoorWealth- rule of thumb • Multiply your age times your realized pretax annual household income from all sources. • Divide by 10 • This is what your net worth should be

  12. The Millionaire Next DoorWealth- PAW vs UAW • PAW- prodigious accumulator of wealth To be well positioned in this category you must have twice the level of wealth expected • UAW- under accumulator of wealth One half or less than expected for all those in his age/income category

  13. The Millionaire Next Door Foundation for building wealth • PAW- prodigious accumulator of wealth Frugal, Frugal, Frugal Websters- “behavior characterized by or reflecting economy in the use of resources”

  14. The Millionaire Next Door Foundation for building wealth • Being frugal is the cornerstone of wealth-building • Millionaires do so by budgeting and controlling expenses, and they maintain their affluent status the same way Lavish lifestyles are promoted and sensationalized in American society so being frugal isn’t sexy

  15. The Millionaires creed • To build wealth, minimized your realized (taxable) income, and maximize your unrealized income (wealth/capital appreciation without a cash flow)

  16. What ever • But Dr. Schayes I am up to my eyeballs in student loans and debt to pay for my education This is so far from my reality I plan on sleeping the rest of the lecture

  17. The Baby steps • 1. Operate your household on a monthly and annual budget-stick to your budget. Live within your means

  18. The Baby steps • 2. Pay yourself first • 3. Stop consuming

  19. The Baby steps • 4. Stop using credit cards, use cash • 5. Be goal oriented and have clearly defined daily, weekly, monthly, and lifetime goals

  20. The Baby steps • 6. Spend more time learning/planning your financial future • -playground learner

  21. The Baby stepsGetting spending under control • Know what you earn • Track what you spend • Pay cash • D/C credit cards • Never spend more that $100 on anything without taking 48 hours to think about it

  22. Wealth Building Strategies • 1. Buy a house • 2. Maximize your retirement savings • 3. Control spending • 4. Pay down high interest debt

  23. Compound InterestHow to be a latte millionaire

  24. Compound InterestHow to be a latte millionaire Daily saving of $2 compounded daily starting at age 20, at 12% will yield $1,000,000 by age 65

  25. Compound Interest • Start saving early -use automatic deductions • Save maximally -maximize RRSP contributions • CASH is KING

  26. Credit Reporting • Determines your ability to borrow money, get services,and at what rate • Never late/miss payments

  27. Credit ReportingGetting started • Experian • Equifax • TransUnion • Central Source • www.annualcreditreport.com • 1-877-322-8228

  28. Financial planningGetting started • www.fidelity.com • www.yahoo.com finance • Businessweek • The millionaire next door- Stanley/Danko • Smart Women finish rich/Smart Couples finish rich/The Automatic millionaire-Bach

  29. Estate Planning StrategiesThe Basics • Will • Name a guardian for minor children • Living will • Power of attorney • Beneficiary designation forms • Transfer on Death Registration • 529 plans

  30. Estate Planning StrategiesThe Basics

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