Financial Independence

KEY 1 - GET ORGANIZED

List your important family information in this worksheet, then print it for your records

DIRECTIONS: List your important family information in this worksheet, then print it for your records.

KEY 2 - SET FINANCIAL GOALS

Develop a set of short-term and long-term goals that will guide your financial decision making.

What Are Your Goals?
The first step in achieving success in any endeavor is setting goals. In planning for financial success, you need to set specific goals. Use this page to list your financial goals. Some of your goals will require money, such as, "Save $200 per month in my retirement plan." Others will be things to do, such as, "Review my retirement benefits" or "Set up a monthly budget."

Saving for Your Specific Goals

• Determine how much you will need to save to reach them.
• Approximate the total dollar amount you will need for each goal.
• Determine the appropriate investment return for your time frame.
• Calculate how much you will need to save on a regular basis to reach your goal.

This worksheet can be used for determining how you will reach any future financial goal. It will take into account the effect of inflation on reaching your goal.

DIRECTIONS: From the tables below, choose rates of return that are consistent with your time frame for achieving your goal. Keep in mind that higher rates of return require that you take greater risk. If your time frame is short, you should be more conservative in your rate of return assumption than if your time frame is long.

Insert Goals Summary Here from the Course

KEY 3 - AVOID EXCESS DEBT

Make sure you can easily afford your necessary debts, such as mortgages and car loans, and avoid credit card and consumer debts.

Preparing Your Net Worth Statement
Make a list of your net worth. Be sure to include any items that might apply to your financial profile, such as the following:

Assets
An asset is anything that you own. Investment assets are things that can be readily converted to cash, such as bank accounts, stocks, bonds, and mutual funds. Personal assets are those assets that you will not rely on for achieving your financial goals. These include your home, cars, and personal property.

Liabilities
A liability is anything that you owe. They include loans such as mortgages, personal loans, car loans, life insurance policy loans, and student loans. Other liabilities are credit card balances and taxes that you owe.

Net Worth
Your net worth is the total of your assets minus the total of your liabilities.

Ownership
It is important to know how your assets are owned and who is responsible for your liabilities. Assets can be titled in your name alone, jointly with your spouse, jointly with another person, or as community property if you live in a community property state.

Use this worksheet to calculate your net worth.

DIRECTIONS: Calculate your net worth by filling in the following information.

Net worth statement as of (date): _________

KEY 4 - PAY YOURSELF FIRST

Pay yourself first by making your contributions to your savings plan the first expenditure you make every month. The first place to start is by taking a look at your current employment benefits and the savings plans your employer makes available.

Your Employee Benefits
These include a retirement plan, health insurance, life insurance, disability insurance, a cafeteria plan, or other benefit plans. Basically two types of retirement plans are available: defined benefit plans and defined contribution plans.

Defined Benefit Plans: Named because the future monthly retirement benefit is defined in advance, the plan contains a formula, based upon the employee's age, years of service, and salary, that is used to determine the future retirement benefit that will be paid to the employee. Annual statements show your projected retirement benefit or the monthly benefit that you have already earned should you leave your job before retirement.

Defined Contribution Plans: The employer, and sometimes the employee, makes retirement plan contributions according to a formula that includes the employee's salary and, sometimes, the employee's age and years of service. If you are a participant in a defined contribution plan, periodic statements show your projected retirement benefit or the monthly benefit that you have already earned should you leave your job before retirement.

Other Important Employee Benefits: These benefits include health insurance, life insurance, disability insurance, and cafeteria plans. Many employers offer insurance coverage; some pay all or some of the costs as well. Some employers now provide Section 125, or a cafeteria plan. Several benefits are offered: two common benefits are the day-care reimbursement plan and the medical expense reimbursement plan.

Day-Care Reimbursement Plan: The employee contributes a predetermined amount (not to exceed $5,000 per year) to the day-care reimbursement plan. The contributions are made by payroll deduction on a pretax basis. Then the employee presents the plan administrator with day-care receipts. The employee is reimbursed for the amounts of the receipts from the plan. In this way, the employee has avoided paying taxes on that portion of his or her salary.

Medical Expense Reimbursement Plan: This plan works exactly like the day-care reimbursement plan, except that the covered expenses are medical expenses that are not covered by insurance. Common out-of-pocket medical expenses include insurance co-payments and deductibles, prescriptions that are not covered, and dental or vision care not covered by insurance.

Retirement Savings & Investment Opportunities

All retirement investments are tax-deferred. It is important to realize that you will eventually pay income tax on the tax-deductible contributions to your retirement investments and on their tax-deferred earnings; each is an "envelope" into which you contribute your retirement savings and then select the type of investment that is appropriate. You may also pay a penalty tax if you withdraw your retirement investments before you are 59½ years old.

403(b) Plans and 401(k) Plans
Employees of nonprofit institutions, such as schools, are eligible to participate in 403(b) plans, and corporate workers can participate in 401(k) plans. If you are eligible for one of these plans, you will want to contribute as much to it as you possibly can. You may currently contribute up to $10,000 per year to these plans. Your contributions are tax-deductible. Participants in 403(b) plans may also qualify to make additional "catch-up" contributions if they have many years of service. The contribution limits are adjusted over time to reflect inflation. Many employers make matching contributions to add to their employees' savings.

Fixed and Variable Annuities
Annuities are tax-deferred investment contracts issued by insurance companies. Fixed annuities pay a guaranteed rate of interest each year. Variable annuities offer a variety of stock and bond investment alternatives. In both cases, your principal is guaranteed upon death. Contributions to annuities are not tax-deductible, but their earnings are tax-deferred. Annuities provide a vehicle for tax-deferred retirement savings outside of employer-based or state retirement plans.

Individual Retirement Accounts (IRAs)
Any person with at least $2,000 of earned income in a year can contribute $2,000 per year to an IRA. Your spouse can also contribute $2,000 to an IRA even if he or she doesn't work. Your contribution to an IRA will be tax-deductible if you are not a participant in any other retirement plan or if you meet the family income test. Whether or not you qualify for a deductible or nondeductible IRA, your investment earnings within the IRA will not be taxed until they are withdrawn.

Roth IRAs
Since 1998, anyone with an adjusted gross income below $150,000 can make a contribution of up to $2,000 to a Roth IRA. A contribution of $2,000 can also be made for a nonworking spouse. While the contribution is not tax-deductible, the Roth IRA has a feature that is not found in any other retirement investment. If you qualify, you should take advantage of this retirement opportunity.

Investments

Cash Accounts: (bank accounts, certificates of deposit, and money market funds) These accounts provide safety of principal but relatively low income.

Fixed Annuities: These are issued by insurance companies and provide tax-deferred income and a guarantee of investment principal.

Variable Annuities: These are issued by insurance companies and provide tax-deferred income that is based on the performance of the underlying investment choices.

Bonds: Bonds reflect a loan made by the investor to a corporation, the U.S. government, or municipal governments. Bonds provide a high level of income with little chance of appreciation over time.

Stocks: Stocks represent ownership in a corporation. Stocks pay dividends from the corporation's profits, which can increase or decrease over time, depending on the business operations of the corporation.

Mutual Funds: Investors turn over their money to a fund manager who pools the assets and invests them for a particular purpose. Mutual funds typically focus on a particular type of stock or bond investment. Mutual funds' income and growth prospects depend on the types of investments that they hold.

A Word About Risk

Any investment program that includes stocks and bonds involves some degree of risk.

Market Risk: The value of your stock or bond investments may decline.

Inflation Risk: You will lose purchasing power if the returns on your conservative investments are less than inflation.

Credit Risk: The issuer of your stock or bond investment may default.

Volatility: The value of your investment will rise and fall. The degree of fluctuation depends on the characteristics of each investment.

Planning for Retirement

Answering these questions may help you determine how much money to plan for retirement:

At what age do I want to retire?
What kind of lifestyle do I want to have when I retire?

Retirement Expenses
The first step is to review your Cash Flow Statement. You will make choices about what you want to spend money on during retirement, such as travel or gifts for your family. Remember, when you retire, you will avoid some expenses, such as payroll taxes, and incur others, such as medical expenses.

1. Taxes: You will pay no employment taxes. Your income taxes will probably be less.
2. Mortgage payments: Your mortgage may be paid off or you might move to a smaller home.
3. Job expenses: You won't have to pay for commuting, business clothes, business lunches, etc.
4. Education expenses: You will probably have paid for your children's costs.
5. Debt service: You will not make as many expensive purchases.
6. Insurance: Many life insurance policies are paid up by age 65.

KEY 5 - MANAGE FINANCIAL RISKS

Use the appropriate forms of insurance to control your financial losses due to illness, property loss, disability, premature death, or personal liability. Use an attorney to write your estate documents and a professional tax preparer to help you with any tax problems.

How to Manage Risk
Insurance provides benefits to you in the event of loss. That can be an important key to financial success.

Health Insurance
Health insurance provides the coverage needed to avoid devastating health costs. Employers often provide health insurance, frequently by sharing the cost with the employee.

• Preferred Provider Organization (PPO): A preferred provider organization is a medical insurance plan that contracts with medical providers for a discounted rate on medical services. A PPO allows a person to see any physician, but better benefits are provided if the person visits a physician within the insurance (PPO) network. PPO plans pay their physicians on a fee-for-service basis, which means that the medical provider must submit a claim to the insurance company for payment each time a medical service is performed.
• Health Maintenance Organization (HMO): This type of organization takes a financial risk to provide members with specific medical services for a fixed price and for a given period of time. A person with an HMO must choose a physician as a primary care physician (PCP). The PCP acts as a "gatekeeper" for medical services to specialists. An HMO does not allow a person to see a physician outside of the network. As a result, HMOs are more effective in controlling costs by paying physicians on a captivated basis and monitoring costs involved in treating patients, such as reviewing utilization rates, referral patterns, and methods of treatment. Significantly lower premium costs may outweigh the negatives of an HMO.

Life Insurance
There are basically two types of life insurance: term and whole life. Term insurance is designed to cover the risk of death during a certain period only. Whole life insurance, on the other hand, creates a benefit for the insured's whole life.

Disability Insurance
Disability insurance is designed to provide you with a benefit to replace your lost income in the event of a disability. The benefit is based on your level of pay before the disability. Some employers provide group disability insurance.

Property and Casualty Insurance
Property and casualty insurance covers losses to your personal property and liabilities for causing harm to others. Homeowner's; renter's; automobile and excess liability insurance are all types of property and casualty insurance.

Long-Term Care Insurance
Long-term care insurance provides benefits for elderly people who need custodial care, whether in their own homes or in a nursing home.

Estate Planning
A will spells out your desires for distributing your assets. If you die without a will, your state has laws to determine how your assets will be divided. You may also want to consider signing a living will, which states your wishes for either maintaining or not maintaining life support systems for you.

Supplemental Medical Insurance
This type of specialty insurance is designed to help you pay for expenses that are related to medical care and are not covered by your health insurance. Most people do not think about expenses such as travel and missed workdays when considering insurance coverage. Such expenses can add up quickly. Supplemental coverage includes specialty coverage such as Cancer Expense Protection and Hospital Indemnity coverage.

Key 6 Monitor and Control

Perhaps no other single factor is as crucial as the monitoring and control.  It is more important to keep any amount of money routinely than to do any of the other planning and wealth building strategies. 

Know how to keep others from getting your money.  For example:

If the same method is used, but the person keeps $300 per month from the age of 15 to retirement at age 65, the wealth accumulated is $2,395,381.70.

If you wonder how some of those "rich .... " got all their money - now you know.  They have kept some of it every month for every month of their lives.   The accumulation of wealth is sometimes "lucky".  Sometimes just being at the right place at the right time.  Sometimes it is recognizing opportunity.   Sometimes knowledge - sometimes working with a friend.  However - under all circumstances nothing will service to accumulate the wealth by giving it to others.

This concept is so obvious - yet simultaneously can be difficult or by some people the concept is lost entirely.

Keep it or lose it !

Here are some "old adages" that all of us have heard from time to time - ponder each

• It takes money to make money
• Use it or lose it
• To make a great amount of money you must take risks
• Only the rich can make money

Society can do one a real disservice by telling us that white is black and black is white.  The world sometimes treats truths as myths and myths as truths.  Do not allow any friend, adviser, article, the news, etc. convince you that to keep money you must "spend" it.  Do not allow others to confuse you between an investment and and expense.  Do not let others confuse you between debt and profit.

Specific Goal Analysis and Actions

Is it worth the time, effort and money to reach this goal?  _______yes ________no _________later

Special Areas of Attention

Instructions. Respond to each item below by placing an ‘X" in the box that best expresses the accuracy of each statement as the description of you and your habits. If the statement is not like you at all, check box number one. If it fits you perfectly, check box number seven. The boxes in between allow you to indicate varying degrees of fit.

When you have checked all items, review your ratings and indicate in the box labeled "plus or minus" whether you are satisfied with your honest rating of yourself. Enter a plus (+) if you are pleased with your rating or a minus (—) if you feel a need for a change. The "minus signs" you enter could be suggestions for concrete goal setting in this area.

Physical & Health

Instructions. Respond to each item below by placing an "X" in the box that best expresses the accuracy of each statement as the description of you and your habits. If the statement is not like you at all, check box number one. If it fits you perfectly, check box number seven. The boxes in between allow you to indicate varying degrees of fit.

When you have checked all items, review your ratings and indicate in the box labeled "plus or minus" whether you are satisfied with your honest rating of yourself. Enter a plus (+) if you are pleased with your rating or a minus (—) if you feel a need for a change. The "minus signs" you enter could be suggestions for concrete goal setting in this area.

1. I eat a balanced diet.

2. My weight is about right.

3. I have an adequate regular exercise program.

4. I get enough rest.

5. I sleep well at night.

6. I often suffer tension in my work.

7. I frequently suffer tension in my family or social life.

8. I have a physical checkup every year.

9. I am often sick.

10. I have plenty of energy.

11. I frequently have indigestion.

12. I am physically stronger than the average person my age.

13. I pay little attention to physical development.

14. I often eat too hurriedly.

15. I carefully observe safety rules.

16. I have some habits that are harmful to my health.

17. I become tired easily.

18. I frequently work at night or overtime.

19. I have definite goals for physical fitness.

20. I clearly understand the importance of good physical development in relation to other goals in my life.

21. I feel depressed frequently.

22. I am generally happy.

23. I experience frequent shifts in mood.

Family and Home

Instructions. Respond to each item below by placing an "X" in the box that best expresses the accuracy of each statement as the description of you and your habits. If the statement is not like you at all, check box number one. If it fits you perfectly, check box number seven. The boxes in between allow you to indicate varying degrees of fit.

When you have checked all items, review your ratings and indicate in the box labeled "plus or minus" whether you are satisfied with your honest rating of yourself. Enter a plus (±) if you are pleased with your rating or a minus (—) if you feel a need for a change. The "minus signs" you enter could be suggestions for concrete goal setting in this area.

1. I maintain good relationships and open communication with all members of my family.

2. I show courtesy and consideration for each member of my family.

3. I am willing to compromise when differences exist.

4. I respect the right of each member of my family to hold beliefs and convictions that differ from mine.

5. I make a serious effort to deal constructively with any problems that arise in my family.

6. I never make derogatory comparisons between the behavior of some member of my family and anyone else.

7. I allow the members of my family the psychological freedom to be individuals in their own right.

8. I can express disagreement with some other member of the family without unpleasant emotional scenes.

9. I can forgive and forget after a disagreement or quarrel.

10. My attitudes and behavior contribute to meeting the needs for self-esteem and self-respect of other members of my family.

11. I plan and carry through on entertainment and relaxation designed to bring family members closer together.

12. I do not feel jealous of the time that members of my family spend with outside friends.

13. I express my affection and love for each member of my family.

14. I enjoy mealtime with my family.

Spiritual and Ethical Area

Instructions. Respond to each item below by placing an "X" in the box that best expresses the accuracy of each statement as the description of you and your habits. If the statement is not like you at all, check box number one. If it fits you perfectly, check box number seven. The boxes in between allow you to indicate varying degrees of fit.

When you have checked all items, review your ratings and indicate in the box labeled "plus or minus" whether you are satisfied with your honest rating of yourself. Enter a plus (±) if you are pleased with your rating or a minus (—) if you feel a need for a change. The "minus signs" you enter could be suggestions for concrete goal setting in this area.

2. I am basically a truthful person.

3. I consider spiritual and ethical values important in my life.

4. I love other people.

        5. It is important to me to help others.

6. I tend to hold grudges rather than freely forgive.

7. I sympathize with underprivileged people.

8. I am constantly developing a better character.

9. I practice sincerely the religious beliefs I hold.

10. Knowing the truth is important to me.

11. I am a law-abiding citizen.

12. I am a person who can be trusted.

13. I have a sense of purpose in life.

14. My system of values places character ahead of pleasure.

15. I am judgmental of other people.

16. I frequently feel guilty.

17. I am basically selfish.

18. Freedom is more important to me than goodness.

19. I like to share with others.

20. Having high morals is important to me.

21. I try to exercise a good moral and ethical influence on others.

22. I would rather be rejected by my friends than sacrifice my principles.

23. My choices and decisions are strongly affected by my values.

24. I am an active member of a~reIigious group that reflects my own commitments.

Social and Cultural

Instructions. Respond to each item below by placing an "X" in the box that best expresses the accuracy of each statement as the description of you and your habits. If the statement is not like you at all, check box number one. If it fits you perfectly, check box number seven. The boxes in between allow you to indicate varying degrees of fit.

When you have checked all items, review your ratings and indicate in the box labeled "plus or minus" whether you are satisfied with your honest rating of yourself. Enter a plus (+) if you are pleased with your rating or a minus (—) if you feel a need for a change. The "minus signs" you enter could be suggestions for concrete goal setting in this area.

 

I feel at ease in any social gathering.

I have many friends.

I have pleasing social manners.

I understand how to introduce people

I understand the customs of titles

I understand customs of other countries and religions

I understand proper dining graces

I understand proper dressing

People consider me courteous.

I like most people.

I tend to trust people too ~rnuch.

I always strive to be the center of any social situation.attention in

I have many fears.

I am careful never to gossip about others.

I control my temper. 

I am always soft spoken in my response. 

I always listen, without interrupting. 

I always recognize my thinking is biased - and make concerted effort of study to compensate for the bias. 

I always respond instead of react. 

I never use foul language, never speak of human anatomy, nor profanity. 

I never use religious. gender or racial slurs. 

I always place myself in the other's position BEFORE I respond.

I have a good sense of humor.

I care about what others think.

I tend to be a leader rather than a follower.

Most people like me.

I am a self-confident person.

I can follow as well as lead.

I can get along with people of different types.

I respect the right of others to hold opinions different from mine.

I can discuss controversial subjects without becoming upset.

I feel a responsibility for helping my community improve.