 Personal finance, PowerPoint presentation, personal finance, check up. Prepare to get financially fit by practicing personal finance. We've been thinking about our investment goals and investment strategies, and we wanna think about that in context of our overall financial conditions at this point in time because clearly investment goals and strategies need cash flow in order to implement them. So at this point in time, if we look at our personal financial conditions, the questions then would be where would be the best place to be putting our cash flow? Clearly, if we just have the cash flow to pay the bills, then generally you would think we would need to be paying the bills first because if we don't pay the bills, then the late payments and so on will often most likely be higher than any kind of returns we would be getting on the investments most likely. So we would want to be doing our budgeting. We wanna have the balanced budget for our expenses and hopefully be able to budget for excess cash flow over and above the bills that we're paying that we can use for our investment strategy. We also have the concept of debt and for example, credit cards. And then there's a question of, well, if I have the cash flow, would it be better off for me to be paying off debt or should I be putting it into the investment? Now, when you're looking at debt that's something like a credit card, then oftentimes if you don't pay off the credit cards, you're gonna run into higher fees in terms of interest rates and those fees will oftentimes be higher than you might be able to get if you put the money into the investment. In other words, you would think then if you had debt, if you were leveraging, if you had debt and then you're putting money into the investment, you would do so because you're trying to get a higher return on the investment than the amount that you're having to pay basically with the debt. However, with the credit cards, oftentimes you will run into higher rates quite often. So generally you would like to pay off the credit card and get to the point where you're paying the credit card off each month. If you could pay the credit card off each month, then the credit card's a great tool because it might even give you some timeframe that you got free money until you pay off the credit card, right? Because if you're not getting charged any interest on it and you made the purchase sooner and then you could have paid at the end of the month or whatever. So not using the cash advance. So if you're using a cash advance for the credit card, then once again, you're taking on debt and you might have a rate that could be higher than high enough that it's gonna eat away any kind of returns that you would have. Therefore, you'd like to pay that down. Limited number of cards. So clearly one way to manage your debt with regards to credit cards would be to limit the number of cards that you have. Cash and liquidity sources. So another thing that we would like to be spending our cash on is first to have that emergency fund available, have an emergency fund at least three months living expenses so that if something happens that we have the capacity to get the liquid cash flow we need. In other words, we don't wanna lock our investments down so that we can't reach them at least for that short-term liquidity. Now note that some investments are less liquid than others. So if you put your money into something like a 401k plan, which is where most people would start their long-term investment planning, it's under the umbrella of an investment plan that has tax consequences. So you can't really take the money out there very easily in the event of an emergency. If you have money outside of the umbrella of a 401k plan that you put into something like a mutual fund or an index funds, then you might be able to access it fairly quickly in the event that there's an emergency. You might have tax consequences in terms of gains possibly. You wouldn't like to possibly pull that out but maybe you can get more access to that. Obviously, if you had money into a savings account or the checking account or something like that, that's gonna be the most liquid type of cash that you could basically access. Obviously, if you put money into the stock market too, it's possible that it could go down which would reduce your ability to pull it out if you need it. So access to other sources of cash, pre-approved line of credit, so it would be great if in the event that you had an emergency, you could take on the debt in order to get the cash flow necessary for that timeframe. In other words, you don't really wanna be in a situation where if an emergency happens, you have no capacity to get cash flow either through debt or through a savings fund or an emergency fund and therefore have to take on something like possibly take money out of a 401k plan or something like that because the 401k plan is gonna, you're gonna have penalties related to that. So the ability to have the pre-approved credit line would be great and hopefully you don't have to use it because if you have to use it, then you're gonna be paying interest on it. Note that if you have debt in something like a home, then you've got the long-term mortgage. Then the question of, well, is it more beneficial for me to be paying off the mortgage or is it more beneficial for me to be putting money into investments becomes a more complex one because generally the mortgage rate might be lower and you might have tax benefits on the interest at least on the mortgage. Therefore, if you put money into an investment, especially if you get a tax benefit from it, like putting money into an IRA, then you might be able to get a return from your investment that would be higher than if you like pay down basically the mortgage. So there's kind of some question as to the debt. Is it worthwhile to pay down the debt or should you be putting money into the investment at that point? Again, with the credit card, most likely you'd like to pay down the credit card oftentimes because of the higher rates there or possibly consolidate if you have a lot of debt, for example, if possible. So cash advance on your credit card. So the cash advance on your credit card, again, it would be nice to have it available and then not use it if you don't need to use it unless there's an emergency. So you have the cash flow if needed. Getting cash for investment. So where does the cash come from investment? So employer sponsored retirement program. Some employers match part or all of the contributions. So if you're an employee, then oftentimes you might have the ability to have a 401K plan. Many businesses do because it's one of the biggest benefits that they can give to the employee. If the employer can give the employee money that goes further, how could it go further? By not paying, not having the tax implications with it, then it's beneficial for both the employer and the employee. So that the retirement plan is a big benefit in that way because they can give you money that's gonna go into the retirement plan and have a tax benefit there because you may not have the tax on and they might match with it as well. So you would like to be able to max out as much as possible on the 401K, but obviously to do so, you would need the cash flow to do it. So you're gonna have to manage your budget, make sure that you're paying off the expenses and all the credit cards and all the stuff that we talked about and whatnot. And then hopefully you can have money taken out of your paycheck automatically, which is a great tool because then you don't have to basically get the money in your hands and then physically, because once it's in your hands, it's more likely that you're gonna spend it. You wanna set up a system where it's automatically saved and then your budgeting is based on what you're receiving so that you can spend what you're receiving. Otherwise, we tend as human beings to spend what we get. So if we get it, we're probably, we may spend it. So if we could take it out before we get it, as long as it's going into our account, then that's gonna be good. So obviously the government knows that too, that's why they take the money before we get it as well. They take out withholding, social security, Medicare, federal income tax. That's bad because we don't get that money in theory. It goes to programs or whatever, but if we plan it for ourselves and tell our employer to withhold it for our benefit and our retirement fund, then that's using this idea in a positive way instead of a coercive one. So I think an elective saving program, I'm many withheld from paycheck, each payday that goes into savings. So obviously, again, if you can take, if you can make it automatic that the money comes out and goes into the saving, you put that into your budget, that's the way to go so that you can just make it part of your normal routine. Make special savings effort one or two months each year. So you might pick one or two months and say, hey, I'm gonna live, lean, I'm gonna be cutting back for the one or two months, which I think could have multiple benefits. Obviously it could free up some money for savings, but if you pick activities that are less expensive, for example, you might also find that some of the things that you're spending a lot of money on are possibly even harmful to you, or at least not helpful to you, or not any better than other types of things, possibly. So I think it's useful to experiment with that from time to time. Remember that time value of money concepts have a big impact on saving. So obviously if we put the money away sooner, the better chances we have to meet our goals such as retirement goals, but obviously to start saving sooner, we need to have the cash flow to be able to do that and to be able to cap the cash flow to be able to do that. We gotta be at least having our budget for paying down the bills and then hopefully paying down the debt, at least the debt that's gonna have a high cost to it due to the interest rates related to it. So that we can then focus our time and attention on the savings component, the planning, the retirement savings, for example.