1. HQ U.S. Air Force Academy
I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Personal
Financial
Readiness
Peggy Kramer
Accredited Financial Counselor®
333-3444

2. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Money: What Good is It?

3. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Overview
 Basics
 Budgets
 Credit & Debt
 Identity Theft
 Saving & Investing
 IRAs & TSP
 Regular Investments
 Suggestions for Success
 Summary Thoughts

4. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Budget
 A deliberate plan to spend each dollar as you
intend
 Realistic and continually updated
 Distribution:
 Savings 10-20%
 Needs 50% of take-home pay
 Wants 30% of take-home pay
 Budget in some FUN!
 Track expenses by category
 Be patient for things you can’t afford – they’ll
come with time

5. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
How to Develop a Budget
 Determine monthly “net income”
 Income less deductions = take-home pay
 Select categories to track and amounts to spend
 Use records or imagine amounts you typically spend
 Keep priorities in mind:
 1. Savings – set up allotment!
 2. Needs (approx 50%)
 3. Wants – prioritized
 Keep track of where the money actually goes
 Be careful of letting bank do it for you!
 Idea: use commercial software

6. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Credit and Debt Management
 Establish and maintain good credit
 Used properly - can be a great help to you
 Can be a convenience
 Pay attention to terms and conditions
 Always pay off balance each month
 Avoid Payday Loans (sharks)
 Understand what your FICO score is
 Don’t be a victim of Identity Theft – America’s
fastest-growing crime
 Keep vigilant
 Know your consumer rights

7. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Managing Credit
 Review your credit reports
 Free report from each company annually
 www.AnnualCreditReport.com
 Equifax 800-685-1111
 Experian 888-397-3742
 Transunion 800-888-4213
 Hint: develop rotation of 1 report every 4 months
 Best way to ruin credit score: pay late
 35% of score is payment history
 Next best way: increase amount of indebtedness
 Being “maxed out” lowers your score

8. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Debt
 Eliminate consumer debt
 Debt is stressful
 Expensive
 Not tax-efficient
 Limits flexibility to spend the way we want today
 Limits our ability to save for the future
 Looks bad to employers (including USAF)
 They may pull a credit report when you apply for security
clearance or a job outside USAF
Have we become too comfortable with debt ??

9. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Debt (cont)
 Avoid getting into debt
 Use cash v. credit cards (or pay off balance each month)
 Stick to a budget
 Save for future (emergency cash cushion)
 Live on LESS than you earn
 Getting out of debt
 Face the problem and decide to take back control
 Charge no more!
 Pay more than minimum (highest rate first)
 Keep saving so you don’t have to use credit

10. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Identity Theft
 Protect your credit / identity
 Don’t give out SSN
 Shred everything personal or financial
 Keep eye on credit / debit cards and checks
 Use electronic bill pay / delivery of statements
 Mail theft accounts for ~2% of identity theft
 Think you’re a victim – report immediately
 www.FTC.gov/IDtheft

11. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Saving and Investing
 Why do I need to save?
 So you can use cash v. credit
 Avoid debt. Debt = stress!
 Savings: short-term needs / emergency cash
 3-6 months of normal expenses
 Pay yourself first (use allotment)
 Save before you invest!
 Investing: mid- to long-term goals
 IRAs and TSP
 Regular investment accounts
 Important: money is tied up for a while

12. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Jill and Bill
Jill: $300 per
month x 8 yrs
at 10%
$869,950
$678,146
$300 per month at 10% return
Bill: waits until age 30
$300 per month x 30 yrs at
10%
22 30 60

13. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
TSP
 You are eligible to contribute to TSP
 Government “401(k)”
 Voluntary contributions
 No government matching
 Tax-deferred growth
 USAFA cadets may not participate
 Leave funds in TSP and resume upon active duty
 All withdrawals will be 100% taxable
 Recommendation: 10% (unless you contribute to
Roth IRA)
 Max for 2012: $17,000

14. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
IRAs
 Individual Retirement Accounts (IRAs)
 Traditional (tax deferred)
 Roth (tax free) if account open 5 years and age 59½
 IRS penalty of 10% for early withdrawals
 Recommend Roth IRA
 Max contribution for 2012: $5,000
 Automatic monthly contributions may be possible
 Investments: usually mutual funds
 Roth IRA contributions already taxed - not taxed
again
 Like paying tax on seed v. tax on crop
 You get the growth for free!

15. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Regular Investments
 Mutual Funds
 Individual or Joint account
 Easy to manage
 Interest is taxable every year
 Liquid
 Hire an advisor or do-it-yourself?
 Vanguard, Fidelity, T. Rowe Price, USAA, and
others offer direct on-line access
 Automatic monthly investments possible

16. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Suggestions for Success
 Create your wealth – save at least 10% annually
1. Emergency Fund – $5,000 - $10,000 liquid savings
2. Roth IRA – up to $5,000 for 2012
3. Regular investment – equal to Roth contribution
 Diversify among funds and cash
 Dollar-Cost Average Investing
 Consistent amount every month
 When you get a raise, bank it!
 Be frugal – once money’s spent....

17. I n t e g r i t y - S e r v i c e - E x c e l l e n c e
Summary Thoughts
 Live on LESS than you earn
 If you have credit card debt you’ve probably been using
credit cards as a paycheck extender!
 Don’t perpetuate (non-deductible) debt
 Understand taxes
 Invest as young as possible and keep on saving
 10% at least (20% if you can)
 Set goals and plan
 Biggest risk to creating wealth
 Debt

18. I n t e g r i t y - S e r v i c e - E x c e l l e n c e