Creating a personal budget Gordon B Ward Onsite

Creating a personal budget Gordon B. Ward Onsite Education Specialist February 5, 2015

Disclosure Registered representative and retirement educational seminars are provided by Voya Retirement Advisors LLC (VRA). These educational seminars are provided to you as a supplemental service to your plan sponsor as part of the Plan Administrative services provided by Voya Institutional Plan Services, LLC (VIPS). The information contained herein should not be constituted as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. You should contact your investment representative (or advisor), attorney, accountant or tax advisor, with regard to your individual situation prior to implementing a retirement plan strategy. © 2014 Voya Services Company. All rights reserved. CN-1114 -10389 -1216

Agenda 1. Assess your current financial situation 2. Set a budget 3. Meet your budget 3

Assess your current financial situation § § § Goals Gathering information Cash flow Net worth Review 4

Assess your current financial situation Set your goals What would you do with… $2, 262, 037 § § Pay off debt Buy homes, cars, boats Go on vacations Donate to charities 5

Assess your current financial situation Set your goals Guess what? $2, 262, 037 § This is what an average person can earn over their lifetime – Start working at the age of 25, earning $30, 000 – Earnings grow each year by 3 percent – Retire at 65 The above scenario is hypothetical, is not guaranteed and is not intended to reflect the performance of any specific investment. 6

Assess your current financial situation Goals § Goals are an important, but often overlooked, aspect of personal finance § Popular goals – – Pay off debt Buy a first, larger or vacation home Pay for college Live a comfortable retirement § Proper planning will increase the probability of attaining these goals 7

Assess your current financial situation Goals § Quantitative goals – New home, debt, retirement, etc. § Qualitative goals – Happiness, financial security, etc. § When setting goals … – – Be specific – timeframe and dollar amount Be realistic and achievable Write them down and share with friends and family Prioritize – you can accomplish more than one goal at a time 8

Assess your current financial situation Gathering information § Keep track of your financial information – – – Pay stubs Account statements Social Security estimate statement Insurance policies Estate planning documents 9

Current financial situation Determine your cash flow § Write down your monthly income – Gross salary, interest, etc. § Write down your monthly expenses – Mortgage, rent, credit card, loan payments, entertainment, gas, cable TV, utilities § Subtract your expenses from your income; this is your net income Income − Expenses 10 = Net Income

Current financial situation Determine your net worth § Write down the value of your assets – House, car, checking account, cash, etc. § Write down your liabilities – Mortgage, loans, credit card balances § Subtract your liabilities from your assets; this is your net worth Assets − Liabilities 11 = Net Worth

Current financial situation Why these numbers are important Net income § Your net income (or cash flow) tells potential creditors your ability to pay off debt Net worth § Your net worth gives you a true picture of what you actually own – It tells you where you stand financially – It can help you determine areas in need of protection (insurance) 12

Assess your current financial situation Review § You should review your goals and financial situation at least once a year – Have you attained any goals? – Do you have any new goals? – Have you improved your cash flow and net worth? § Keep detailed records today in order to compare tomorrow 13

Set a budget § § Why use a budget Creating a budget Expense log Emergency fund 14

Set a budget Why use a budget? § Creating a budget is essential to your personal money management § A budget will help make sure that you are spending your money with your best interest in mind § It will help take some of the emotion out of your finances § Will make sure an entire household is on the same page § It will help you work toward your financial goals 15

Set a budget Creating a budget Monthly Income Monthly Expenses 16 Surplus/ Deficit

Set a budget Creating a budget § Monthly income – – Salary Interest Dividends Benefit payments 17

Set a budget Creating a budget § Monthly expenses – Core § Mortgage, rent, car payment, insurance, food, medical – Everyday extras § Entertainment, video rentals, eating out – Long-term luxuries § Homes, vacations, new car § Budget your savings – pay yourself first – Many financial professionals suggest that you should try to save at least 10 percent of your pre-tax income each month. 18

Set a budget Expense log § Log every time you spend money – This should be done for 4 -8 weeks – Regardless of how small or big the expense This expense log will make you aware of your true spending habits. Did you know, the $4 café latte you get each morning costs you $121 a month, or $1, 460 a year? 19

Set a budget Day one Day two Expense Type Savings Gas Auto Newspaper Entertainment Lunch Cost Expense Type Cost Coffee Food $4. 00 Newspaper Entertainment $0. 75 Lunch Food $5. 50 Food $7. 75 Tolls Auto $0. 50 Pharmacy Care $12. 50 Groceries Food $35. 00 Cable Entertainment $60. 00 Rent Living $775. 00 Soda Food Credit Card* Debt $50. 00 Donation Miscellaneous Total $225. 00 $35. 00 Total $1, 128. 00 This can be tedious but it could be an important exercise. *Carrying cost of debt (i. e. , interest) 20 $1. 25 $10. 00 $94. 50

Set a budget Subtract your monthly expenses from your monthly income to determine if you are living within your budget. Monthly income Earnings Bank interest Total monthly income $2, 500 $35 $2, 535 Core expenses Rent, utilities, gas Income taxes Health care Car loan Savings Total core expenses $1, 050 $550 $220 $175 $225 $2, 220 Everyday extras Health club Entertainment Total everyday extras $20 $125 $145 Long-term luxuries Vacation fund $100 Grand total Total income Total expenses Total surplus/deficit 21 $2, 535 −$2, 465 $70

Set a budget What goes into creating a budget § Budget your savings § Pay yourself first – Financial professionals suggest that you should try to save at least 10% of your pre-tax income each month § § Emergency needs House Retirement Family education 22

Set a budget Emergency fund § An emergency fund is an account that can pay for costs that arise due to an unplanned event – Sickness – Accident – Job loss § This money should be set aside in a savings account or money market – Should be accessible – Should not be at risk of losing value – Should earn interest 23

Set a budget Emergency fund § Depending on your situation you should have somewhere between 3 -9 months’ worth of fixed expenses Mortgage $1, 250 Auto payment 175 Student loan 80 Utilities/food 450 3 months $ 6, 315 Insurance 100 9 months $18, 945 Credit card* Monthly expenses: $ 2, 105 Emergency fund: 50 $2, 105 § It may take between 3 -9 months for someone to recover from an unplanned financial event *Minimum monthly payment on carrying debt 24

Set a budget Emergency fund § How does one determine an adequate Emergency fund (3 -9 months) – Do you have more than one wage earner in your family? – Do you have steady income or an income that may vary widely during a year? – Do you have additional income sources other than earned income? § Your emergency fund is meant to be a financial security blanket for you and your family; you must decide upon an adequate emergency fund amount based upon your situation § If you don’t have an emergency fund, you may want to start saving a small amount on a monthly basis to build up your reserve 25

Meet your budget § § Be flexible Increase income Decrease expenses Monitor your budget 26

Meet your budget Be flexible § § § If you are not meeting your budget at first, that is okay A budget should be flexible – life happens Make sure your budget is realistic You must work to stay on budget There are things you can do to get on track 27

Meet your budget Increase income § Increase monthly income – Work overtime – Look for opportunities for promotion – Ask for a raise – Review tax withholdings* – Get a second job – Review interest rates on savings Monthly Income *Neither Voya Financial Advisors nor its representatives offer tax advice. Please consult with your tax adviser regarding your individual situation. 28

Meet your budget Decrease expenses § Look at your extra and luxury expenses first – – Brew coffee at home Get rid of premium cable channels Stop smoking Brown bag your lunch § If needed, review your core expenses – Move to a less expensive apartment or house – Downsize your auto – Carpool – Increase insurance deductibles to lower premiums – Clip coupons / stretch food budget 29 Monthly Expenses

Meet your budget Monitor your budget § Staying on budget takes hard work – – Keep track of your financial information Store records Monitor your income and expense Adjust as needed Everyone is different. Find a method that works best for you. 30

Create a personal budget Take action § § § Review your current financial situation Track your expenses Create a budget Review and adapt Seek professional help if necessary 31

Important Notes § Today’s workshop was designed to provide you with fundamental information on retirement planning and to outline other sources of information to assist you in managing your personal finances § This presentation does not constitute legal, investment or financial advice of any kind § Please consult your own financial, legal and/or tax advisors for such advice Products and Services offered through the Voya™ family of Companies © 2014 Voya Financial. All Rights Reserved. Created November 2014 32