THE ROAD TO

FINANCIAL SUCCESS

THE ROAD TO

FINANCIAL SUCCESS

By Marion McHenryBy Marion McHenry

PART 1:FINANCIAL

INDEPENDENCE

PART 1:FINANCIAL

INDEPENDENCE» Provide for yourself» Do the things you want to

do in life» Set financial goals» Prevent debt» Be responsible &

reasonable » Look ahead» Do the math!

“I always knew I was going to be rich. I don't think I ever doubted it for a minute”-Warren Buffet

» Start early» Use connections» Does it interest

you?» Put your skills to

use» Work hard» Be professional

PART 2:SAVING & INVESTING

PART 2:SAVING & INVESTING

“Success to me is having ten honeydew melons, and only eating the top half of each one”

-Barbra Streisand

“Making money is a hobby that will complement any other hobbies you have, beautifully”

-Scott Alexander

THINK ABOUT:» 10-15% of your annual salary » Save before you spend» Spend less» Opportunity cost of purchases» Create a savings plan» Risk of inflation

»Watch your money grow»Retire when you want to»Invest more

Tips for Saving MoneyDon’t carry too much cash

Put 10-15% of salary directly into bankThink before you buySell thingsBargain shoppingAvoid financial blunders

Investing: What is it?Investing: What is it?» A way to make your money

grow» Choice to place money in a vehicle

» Stocks, bonds, etc.» Invest to make money» Buying securities from money

markets, capital markets, liquid assets

» Investment risk

Investing Your MoneyInvesting Your Money

» Money will grow over time» Finance your dreams» Enjoy retirement

THINK ABOUT…» How much to invest» How long you let your money grow» Interest and growth rates» Where to invest your money» Valuation» When to buy/sell

More Tips on Investing…

Have an investment strategy Realize the risk Be conservative Don’t invest only in big capital gains Own something that has more money coming in than

going out Low-risk investments Keep inflation and taxes in mind Diversity among assets Look for great bargains, they’re there Start early

PART 3: DIFFERENT ASSET

CLASSES

PART 3: DIFFERENT ASSET

CLASSES

» Create a plan before you invest» Do the research

THINGS TO CONSIDER:» Your time» The amount of money you have» How willing you are to take risks» How soon you need money» How long you are willing to invest

STOCKSSTOCKS1.Expect volatility2.Expect to lose money3.Expect to wait

» Growth-time to grow» A share of ownership in a

company» Can buy/sell shares of public

stock» Long term and short term

stocks» 9-11% annual return» Growth stocks» Dividend stocks» Growth and income» Be diverse» Balance sheet & income

statement (p/e ratio)

BONDSBONDS

» Fixed income- “money now!”» Issuer holds debt» Usually pays interest (coupon)» Pay all back + interest on

maturity date» Bond holder= lender» Issuer=borrower» Provide issuer with fast cash

» Finance long term investments» Lender, not owner » Maturity date

» Consol bond-no maturity» safe

» Fixed rate bonds» Constant coupon

» Floating rate notes» Changing coupon

» Zero coupon bonds» No coupon

» Inflation linked bonds» Subordinated bonds» Perpetual bonds

» No maturity date

» Municipal bond» Issued by government» Exempt from taxes

Mutual FundsMutual Funds

» Professionally managed investment scheme

» Pools money from many investors

» Puts money in stocks, bonds and other securities

» Fund manager» Hundreds of sub-

categories» Fees

» Service, management & investment

» Open-end fund» Join and leave

» Exchange traded fund» Mixture of mutual fund

and closed-end fund

» Equity funds» Index funds» Bond funds» Money market funds» Low transaction costs

PART 4: HOW DO I DO IT?

PART 4: HOW DO I DO IT?

» How to invest in bonds, stocks and mutual funds

» How to choose a bank» How to pick the right bank

account for you

How to InvestHow to InvestStock

Brokerage account: (Merrill Lynch, Schwab)Advice for extra $$$

EtradeBond

Public authorities, credit institutions, companiesUnderwriting: Buy a bunch of bonds and sell

themBond issuers: (Morgan Keegan, Howard Weil)

Mutual FundBrokerage account

Specialize in mutual funds: (Fidelity, Vanguard)

StockBrokerage account: (Merrill Lynch,

Schwab)Advice for extra $$$

EtradeBond

Public authorities, credit institutions, companiesUnderwriting: Buy a bunch of bonds and sell

themBond issuers: (Morgan Keegan, Howard Weil)

Mutual FundBrokerage account

Specialize in mutual funds: (Fidelity, Vanguard)

Choosing a Bank

Don’t be gullibleInterest rates on different accountsFees and restrictionsNegotiate Differing regulationsWill the bank give you a loan?Can you pay back the loan?

Different Kinds of AccountsDifferent Kinds of Accounts

» Savings account» Checking account» Certificates of deposit

Checking AccountChecking Account

» Don’t earn interest

» Not for savings» Overdraft

» protection

» No interest rates!» Frequent access to

funds» Money available on

demand» For convenience » Withdraw how much

you wish, how often» Cash machines » Internet banking» Debit cards

Savings AccountSavings Account

» 65%» Pay & earn interest» Not used as direct money» Set aside a portion of

assets» Earn a return » Not as easily accessible » Government regulation

» Limits withdrawals, transfers, payments

» Pricy withdrawals» Don’t limit withdrawals

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Certificate of Deposit Certificate of Deposit

» Time deposit» Offered to consumers, banks and credit

unions» Insured (risk free)» Specific, fixed term

» 3 m, 6m, 1-5 y

» Fixed interest rate» Maturity date-get money and interest» Higher interest rates in exchange for

keeping money in bank» More money and time=higher interest rate» Penalty for early withdrawal

MY CONCLUSIVE EQUATION

MY CONCLUSIVE EQUATION

» Be financially independent» Save your money

» Watch it grow

» Invest your money» Watch it grow

» Have a plan!» THIS EQUALS FINANCIAL SUCCESS

WORKS CITEDWORKS CITEDGardner, Tom and David. The Motley Fool. New

York,NY: Fireside, 2002.

Wikipedia contributors. “Bonds.” Wikipedia. 7 May2009. http://en.wikipedia.org/w/index.php?title=Bond_(finance)&oldid=288302493.