Financial Fitness through

Sound Money Management

(12th MCD Spouse Orientation/LINKS Course)
(Set a Goal, Make a Plan, Save Automatically!)

 Michael A. McIsaac, MBA, AFC

Personal Financial Management Specialist
Personal & Professional Development, Bldg 14
MCRD San Diego, CA 92140
(619-524-1204)
michael.mcisaac@usmc.mil
 What is Financial Fitness
 Financial Fitness is the “process” of
organizing, projecting & controlling the
6 key areas of your financial life:
 Money Management 55%
 Savings & Investing 20%
 Retirement Planning 10%
 Risk management 05%
 Tax Planning (Throughout) 05%
 Estate Planning (Throughout) 05%

 Why’s it Important? What’s in it for me?

 Key Financial Issues for
Recruiters and their Families
 You are away from military support systems
(PX, Commissary, Medical, Legal, Housing, etc.)
 Must shop in civilian stores and markets
 Local financial institutions not military friendly
 Tax preparers not familiar with military issues
 Your Recruiter is “mostly” unavailable to family
 Feel like you are deployed in a foreign country
 Difficult to maintain a normal spending plan
 Over spending is a major concern for all
 Not saving and investing like normal
 Money Management,
Why is it Important?
 Helps you spend less than you earn (+cash flow)
 Enables you to control use of credit
 Can keep you out of debt – Debt Sucks!
 Helps you prepare for emergencies
 Enables you to meet your obligations
 Helps accomplish savings & investing goals
 Can improve your marriage / career
 The choices you make, “Make You!”
The Financial Fitness Pyramid

Options,
Commodities,
etc.

Controlled
Spending
 Key Money Management
Action Steps

1. Manage Your Cash Flow (Control

your Spending)

2. Overcome Challenges to Your

Family’s Financial Fitness
3. Take Action (Execute Your Plan to Get
Out of Debt & Build Wealth)
 Step 1:
Manage Your Cash Flow
 How to
start your
Personal
“Financial
Action”
Plan!
MYPAY
 Leave & Earnings Statement

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 Leave & Earnings Statement

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 Leave & Earnings Statement
(Pay, Allowances & Deductions)

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 Develop an Action Plan to
Control Your Cash Flow
 Calculate regular monthly “net” income
 Itemize living expenses (including savings)
 Identify all required debt payments
 Determine monthly cash flow (inc – exp) (+/-)

 Calculate Debt to Income Ratio (<15% good)

 Project future income & expenses (Goals)
 Create a spending plan, and work your plan

 Review and revise on a regular basis

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 How
Your
Money
Flows

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 Sample Savings / Spending
Plan for Your “Net” Income
 10% Savings
 20% Debt Payments
 70% Living Expenses
Housing
Utilities
Food
Transportation
Insurance
Medical/Dental
Clothing
Entertainment

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 Functions of a Spending Plan

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 Why Have a Spending Plan
Have a Spending Plan to help you:
 Achieve the things you want from life (your goals);
 Manage your monthly cash flow;
 Live within your means;
 Anticipate Emergencies;
 Control your debt and reduce stress;
 Find the dollars to save and invest; and
 Build long-term Wealth for you and your family

“The rich get richer!”

They are not any smarter, they just understand how money works.

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 Building Wealth
(Set a Goal, Make a Plan, Save Automatically!)
 Set up direct deposit to savings
 Pay “all” your bills on time
 Maintain excellent credit history
 Use cash instead of credit cards
 If you use cards – pay off each month
 Keep making loan payments to yourself
 Save extra money from raises, Special Duty Pay,
gifts, tax refunds, or bonuses (at least half)
“You don’t get rich by what you earn. You get
rich by what you don’t spend.” – Henry Ford
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 Wealth Building Tools

 Savings Accounts
 CDs, Savings Bonds
 Money Market Accounts

 Stocks, Bonds & Mutual Funds

 Roth & Traditional IRAs
 TSP, 401k, 403b & 457 Plans
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 How Does TSP Work?
 The TSP is a “Defined Contribution” retirement
savings plan
 You decide how much to invest from Base pay,
SDA pay, & Bonus / Incentive pay
 Money is invested before income tax or after
tax with the Roth Option
 Money invested earns tax deferred or tax free
(5 Options plus Lifecycle Funds)
 You can enroll / disenroll at any time – myPay
 An Individual account is maintained for each
participant by Social Security Number & name

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 Why Would You Want To
Participate in TSP?
The TSP allows you to:
 Start saving for your retirement “Now!” (the
power of compounding is on your side)
 Own and Control a Supplemental Retirement
Plan (similar to a 401(k)) that you keep
 Save small amounts Automatically
 Employ disciplined investment techniques such
as Dollar Cost Averaging & Diversification
 Save on Taxes (money goes in before tax and
earns tax deferred or after tax and earns tax
free until withdrawn)

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 TSP Investing Strategies
 Determine your acceptable risk tolerance
http://www.rce.rutgers.edu/money/riskquiz/
 Determine your objectives and time horizon
 Diversify among investment categories
 Invest for the long term using:
 Automatic Deduction
 Asset Allocation
 Low Fee Instruments
 Dollar-Cost Averaging
 Tax Efficient Investments
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 Facing the Facts - 2015
You are now in the DIY Retirement Age:
 Social Security will only cover 30-35% of your
lifestyle
 The 401(k) started in 1978 – so how’s been that
working?
 As of 2015 most of those over 50 have $30,000 or
less invested, and 1/3 of those over 50 have “nothing”
saved for retirement
 As of 2015, 43 million baby boomers have turned 65

 By 2030, 73 million baby boomers will be over 65

 As things stand now, 49% of the middle class will

be at, or near poverty level after they retire, or quit
working

SO, WHERE WILL YOU BE BY AGE 67?

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 How Much Should You Save
to Provide “55%” of Final Pay
 Your Target Savings Rate by Age:
 25 0.1 50 4.5
 30 0.3 55 6.2
 35 1.1 60 8.2
 40 2.0 65 10.6
 45 3.2 70 12.3
To see if you are saving enough, multiply the target
saving rate by you annual salary, and if your
balance is less than the target, consider kicking
your savings up a notch!

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 You Too Can Build Wealth!

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 Step 1 Summary: Manage Your
Cash Flow - Get Out of Debt,
Control Credit, & Build Wealth
 Pay off debt with highest interest rate first
https://powerpay.org/
 Pull credit reports – review and correct!
www.annualcreditreport.com
 Create a savings/spending plan (e.g. 10/20/70)
 Use cash for purchases under a $100
 Live within your means (in bone-head English
“Spend Less than you Earn!”)
 Put savings on auto pilot (take out an allotment)
 Save extra money from raises, special duty pay,
gifts, tax refunds, and bonuses (at least half)

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 Step 2: Overcome Challenges to
Your Family’s Financial Health
 Lack of direction (No Goals/No Plan)
 Lack of organization (financial records)
 Everyday spending (impulse buying)
 Buying major items you can’t afford
 Debt (paying interest to others) - Debt Sucks!
 Bad credit history (late pay, collections, repos)
 Lack of a Savings / Investment Program
 Lack of Financial Education & Training
 Time (no 2nd time around in this life)

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 Step 3: Take Action
(Execute Your Plan to Get Out of
Debt & Build Wealth!)
1. Decide to Do it (Make the Commitment!)
2. Determine Present Financial Position
3. Write Your Goals (Short and Long Term)
4. Deal with Credit Card and Debt Issues
5. Draft a Rough Savings / Spending Plan
6. Execute Your Plan! (Just Do It!)
7. Keep Simple Records & Track Progress

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 In Summary
Become Debt Free & Build Wealth
 Set Goals and Create a Plan (10/20/70)
 Spend less than you earn! (10-20% less)
 Reduce / Eliminate Debt – Debt Sucks!
 Manage your cash flow!
 Check your Credit Reports & Correct!
 Take Action (Execute Your Plan)
 Create a “Surplus” for Your Future
 Special Opportunities / Business / Education
 Retirement / Travel / Charities / Hobbies

“Happiness is a Positive Cash Flow – Choose to be Happy!”

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 Additional Resources
 http://militarypay.defense.gov/
 https://mypay.dfas.mil
 www.dod.mil/dfas
 www.tricare.mil
 www.tsp.gov
 www.va.gov
 www.ssa.gov
 www.irs.gov
 www.turbotap.org
 www.taxsites.com
 www.powerpay.org
 www.mymoney.gov
 www.saveandinvest.org
 www.mccsmcrd.com/pfm
 www.consumerfinance.gov
 www.mymoneycheckup.org
 www.militaryandmoney.com
 www.saveandinvest.org/MilitaryCenter/MilitaryFinancialToolkits

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 QUESTIONS?

Semper Fi & God Speed!

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