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[MUSIC PLAYING] - Welcome to Financial Knowledge, a path to your financial success presented by Navy Federal Investment Services.

- We're going to focus on some of the most important fundamental aspects of personal finance and investing and how you can use this knowledge to achieve financial wellness.

- Before we dive into the presentation, I also wanted to take a moment to mention that the concepts we're discussing today will be presented at a high level. This information anyone can and should use; however, every person's financial circumstances are different.

- How you apply this knowledge to your personal finances and your investment decisions now and in the future will depend wholly on your situation. Throughout the presentation, we'll be sure to call out Navy Federal Investment Services products and services that are designed specifically to help you achieve your unique goals.

- If you have any questions or want to learn more about how to put these solutions into action for yourself, don't hesitate to contact one of our Navy Federal Investment Services advisors, either in your local branch or over the phone.

- With that, let's dive in.

MALE PRESENTER: We're going to start with the basics, financial foundations that set the stage for building wealth and creating financial wellness. We all have aspirations for our money and wealth. It's the everyday good habits and long-term vision that help us achieve those goals. The goal today isn't necessarily to teach you how to budget, but instead, get you thinking about goal-setting as it relates to budgeting and managing debt.

You may feel like you have your financial situation totally under control, but how many of you have a household budget, something you stick to each month? A monthly budget is a great foundational tool for managing your money, but it's only a part of personal financial management.

The definition of personal finance is the management of current financial resources and planning for future financial goals. It involves making informed decisions about income, expenses, assets, and liabilities to achieve financial stability.

- Think of it like this. It's like the owner's manual for your money. It's about figuring out what you have coming in your paycheck; what's going out for things like rent, groceries, that specialty coffee habit; and how to make it work for you in the long-run. For most of us, it's a lot simpler than it may seem. It really comes down to a few core pieces of financial knowledge.

First, you need to understand your financial position. What's your annual income? What debts do you have? What are your assets worth? Before you can boss around your money, you need to know what you're working with. Understanding your financial position puts you in a better control over your financial decision-making.

MALE PRESENTER: Next, you need to set achievable goals. What financial objectives do you want to achieve this year, or next year, or even over the next 10 years into retirement? Goal-setting determines your path forward, how you'll get from where you are today to where you want to be financially. To get where you are, to where you want to be, you need a plan.

A budget is a foundation of that plan. Creating and managing a budget will help you save, invest, and pay down debt consistently. A budget might sound boring, but it's a roadmap to your financial goals. By creating a budget and sticking to it, you'll be surprised how much you can save and invest while also paying down debt.

Finally, and this is important, you need to protect yourself from unexpected. Life throws curveballs, sometimes car repairs, surprise medical bills, you name it. Before you can start investing to grow your wealth, it's important to build an emergency fund. Having cash on hand to cover unexpected expenses can protect any money you have saved for and invested.

These steps might seem basic, but they're powerful. No matter where you are financially right now, you can take control. And the best part is these are skills you can build throughout your life. Do you have debt outside of a mortgage? Debt is something almost all of us have, but it doesn't need to be.

FEMALE PRESENTER: We all like to dream about waking up on payday and not watching our hard-earned money go to credit cards, student loans, and auto loans. To realize that dream, you need to plan to make it a reality. To tackle your debt, the first step is to get to know what debt you have.

List out all of your loans, including the amount owed, interest rate, and how much longer to repay them. Then look closely at the terms of each. When looking at the interest rate, remember, the higher the interest rate, the faster your debt grows. With this in mind, you can start to formulate a plan to manage and eliminate your debt.

The best strategy is paying down debt is one that works for you. You may want to focus on the debt with the highest interest rate first, saving you the most money in the long-run.

- Remember, financial literacy is about understanding how individual actions contribute to the bigger picture of your financial wellness. As we're talking about savings and debt management, we also need to take a moment to talk about how they affect your credit score. Have you checked your credit score recently? What did you check for it?

Your credit score is a quantification of your credit worthiness, ranging from 300 to 850, and it has a huge impact on your financial well-being. It dictates how much credit lenders are willing to extend when you apply for a loan or credit card, and it can influence the interest rate that accompany new lines of credit. A good credit score paves the way to better loan terms that can save you thousands over time.

For example, if you finance a $250,000 home with a 30-year fixed interest rate of 5% versus 6%, your interest savings over the long-term of the loan will be approximately $56,456. Whether you qualify for a 5% or 6% loan depends heavily on your credit score.

Lenders assess a variety of factors when evaluating your credit worthiness. Positive indicators, such as a solid savings history and manageable debt load, contribute to a higher credit score, and greater access to credit at favorable terms.

Let's look at other factors. First is your payment history. This is the most significant factor, accounting for about 35% of your credit score. It includes whether you've paid past credit card accounts on time and have any missed or late payments. Next is your credit utilization ratio. This accounts for roughly 30% of your score. It's the ratio of your credit card balances to your credit limits. Keeping this ratio low, below 30%, can positively impact your credit score.

Then we have your length of credit history. This makes up around 15% of your score. It considers how long your credit accounts have been established in the age of your oldest account. Your credit mix is next and accounts for about 10% of your score. It considers the variety of credits you have, such as credit cards, loans, and mortgages. A diverse mix of credit types can positively impact your score.

And lastly, your new credit will be looked at. This factor makes up approximately 10% of your score. It considers how many new credit accounts you've opened up recently and how many recent inquiries you've made into your credit report. Even when you're not actively seeking loans or new lines of credit, maintaining a good credit score sets the tone for a long-term financial wellness.

- Credit reports typically include information from the past seven to 10 years, although negative items such as missed payments or bankruptcies may remain on the report for longer periods. Lenders focus on recent credit behavior to assess your current financial situation and repayment habits, but they may also consider longer-term patterns and credit history when making lending decisions.

Now that we've discussed budgeting, goal-setting, personal financial basics, and debt management, we can start to talk about the building phase. As we wrap up, I'd like to tie everything together and leave you with a few key takeaways.

Understand your financial position. Understanding your financial position puts you in a better control over your financial decision-making. Develop achievable financial goals. Goal-setting determines your path forward, how you'll get from where you are today to where you want to be financially.

Create and manage your budget. Creating and managing a budget will help you save, invest, and pay down debt consistently. Build up your savings and emergency funds. Having cash on hand to cover unexpected expenses can protect any money you have saved or invested.

Start by getting comfortable with your budget and setting financial goals. A strong grasp of your everyday finances will prepare you for bigger concepts like saving and investing.

MALE PRESENTER: Beyond just putting money in a savings account each month or paying a little extra towards your debts, let's explore some of the ways you can really make an impact on your financial well-being through an understanding of interest rates, compounding interest, and early investing.

When it comes to savings, the most important piece of financial knowledge you can have is understanding of interest rates. Interest rates essentially represent the credit union paying you for the privilege of using your funds measured by an annual percentage yield.

So for instance, imagine you deposit $10,000 into an account that offers a 6% APY. After one year, you'd earn $600 of interest, 6% of 10,000, bring your total balance to $10,600. When building your emergency fund or keeping cash accessible, you'll typically want to look at products like savings accounts and money market accounts and think of these savings options like tools in a toolbox. Each one has its pros and cons.

Savings accounts are great for easy access to cash, like your emergency fund. They may not earn a ton of interest, but you can withdraw your money whenever you need it. Money market accounts are good for growing your savings a little faster, but there might be some rules about how often you can take money out.

- Understanding interest rates is a stepping stone to understanding the most powerful concept in personal finance-- compound interest. Compounding is where the value of an investment grows exponentially over time because both the initial investment and any accumulated earnings generate interest.

Put another way, your money earns money, and that money earns money. Compound interest is why investing your money is so important and why saving alone isn't enough. Say you invest $100 and contribute $100 each month with a compound interest rate of 6% per year.

After the first year, the interest earned amounts to $6, bringing the total balance to 1,306. In the second year, interest paid increases to approximately $84, resulting in a total balance of $2,584. This compounding process continues with interest being calculated on the new total balance each year, resulting in exponential growth of an investment over time. After 50 years, you would have approximately $350,000. Consider the power of compound interest over a lifetime.

Investing is the best way to take advantage of compound interest. The APY on many savings account is too low to generate significant returns. Investment products, however, achieve much higher annual rates of return, and those rates compound annually. The earlier you start investing and the longer the investment remains untouched or is added to, the more powerful the effect of compounding becomes. Even if you only have a very small amount, you can invest each month. Now is the time to start investing.

While we're talking about savings, it's important to understand the primary benefit is accessibility, not necessarily growth. If you want your money to grow, look to investment products and keep the Rule of 72 in mind. The Rule of 72 estimates the time it takes for an investment to double in value given a fixed annual rate of return. To use it, divide 72 by the APY. The result is the approximate number of years it will take for the investment to double in value.

For example, if you have a savings account with the annual rate of return of 2%, you can use the Rule of 72 to estimate how long it will take to double in value. This would be 72 divided by 2, taking approximately 36 years for the investment to double. That's a long time to wait.

Now, consider if you put that money in a mutual fund with the 12% return. Under the Rule of 72, you double your money in just six years. The lesson here-- pay attention to interest rates. They matter when it comes to how quickly your money makes money.

I'd like to take a moment to emphasize a couple of the military-specific considerations that can come into play when we start thinking about savings, debt management, and even investments. I'm talking, of course, about the unpredictability of situations like Permanent Change of Station, or PCS, a sudden deployment, or even the transition from active duty to civilian life.

These transitions can strain finances and exacerbate financial stress for military members and their families. The best way to approach them is to be prepared for them and start with everything we've already talked about. Establishing an emergency fund to cover unexpected expenses, such as PCS-related costs or loss of income during deployment, can create financial buffer during times of uncertainty. Developing a comprehensive budget can help prioritize spending and identify areas for potential cost-savings.

Good habits are a good habit regardless of the situation, and having clear understanding of why these habits are so important can make you feel better during uncertain times. Don't forget that Navy Federal Investment Services is always here to help you. Whether you're going through a difficult PCS or need help financial planning or separation from military service, we're here to help you manage your personal finances and keep you on track to achieve your goals.

As we wrap up, I'd like to tie everything together and leave you with a few key takeaways. Understanding interest rates when it comes to savings. The most important piece of financial knowledge you can have is an understanding of interest rates. Take advantage of compounding interest. Compounding is where the value of the investment grows exponentially over time because both the initial investment and the accumulated earnings generate interest.

Use the Rule of 72. The Rule of 72 estimates the time it takes for an investment to double in value given a fixed annual rate of return. Consider military-specific situations. Permanent change of station, or PCS, a sudden deployment, or even the transition from active duty to civilian life can be difficult, but we are here to help.

As you develop good habits and understanding interest, apply them to your savings and debt management strategies. Building a strong foundation will set you for successful investing and retirement.

FEMALE PRESENTER: The time is now to start thinking about investing for the future. Learning how to invest strategically is the engine that will drive you to achieve your financial goals. Most of us have some idea of what investing is, but there's this idea that investing is just too hard or complicated for the everyday person.

It's not as complicated as you think it is since most of investing revolves around being consistent and waiting. Having even a small amount of knowledge can go a long way in helping you invest with confidence.

The first thing to know about investing isn't just about stocks or mutual funds or any single investment vehicle. Instead, we're talking about putting your money into a portfolio of investment vehicles that are specifically designed to help you manage risk and maximize returns.

Every investment comes with risk and reward, and those two variables serve to balance one another. High reward generally follows high risk, while low reward tends to be the product of low risk investments. A low-risk, high-reward investment is usually too good to be true, and a high-risk, low-reward investment isn't worth making. It's up to every person to build a portfolio that balances risk and reward at the level they're comfortable with. This is called asset allocation and diversification.

Asset allocation and diversification involves distributing your investment portfolio across different asset classes to manage risk and optimize returns based on your financial goals, time horizon, and risk tolerance. Some of those asset classes include stocks. Stocks provide ownership in companies offering potential high rewards, but higher risk. You can invest in individual stocks or diversified funds.

Another asset class are mutual funds. These are pooled investments that invest in stocks, bonds, or other assets offering diversification and professional management. Bonds are another option. Bonds are debt securities from government or corporations providing regular interest payments and lower risk compared to stocks.

And then we have cash equivalents. These are highly liquid, low-risk investments like cash, savings, or CDs. Cash equivalents offer stability and easy access to funds.

MALE PRESENTER: Through asset allocation and diversification, you can balance your exposure to risk while growing your wealth. A well-balanced portfolio is the key to generating long-term wealth. Everyone is on the right path, even if you don't realize it. Whether you already have investments or you're just getting started, you're doing better than you realize. Don't lose sight of your long-term goals.

A Navy Federal Investment Services financial advisor is here to help you understand what you have and how to move forward to meet those goals. You also have the option to do it yourself or utilize automated investing with Navy Federal Digital Investor.

So far, we've talked about investing as a way to build financial wealth, but it's also important to understand wealth in the context of financial security. Specifically, the ultimate form of financial security is a retirement plan that allows you to live out your days comfortably. The money you invest today holds the potential to support you through golden years and beyond.

To make sure it does, you need the right investment vehicle and a clear understanding of how today's financial decisions affect your financial security tomorrow. While strategies like asset allocation and diversification are important for retirement investment, what's even more important is the investment vehicle you choose.

Qualified retirement accounts offer significant benefits for retirement savings, such as tax advantages or even matching contributions from an employer. The most common types of qualified retirement accounts include a 401(k) plan. These are employer-sponsored retirement plans that allow employees to contribute a portion of their salary to a tax-deferred investment account. Some employers may also offer matching contributions.

Another is a 403(b) plan. These are similar to 401(k) plans, but offered to employees of certain tax exempt organizations such as schools, hospitals, and religious institutions. There are also 457 plans. A 457 retirement plan is offered to employees of state and local governments and certain non-profit organizations, allowing them to save for retirement on a tax-deferred basis.

I'm sure you all have heard of Individual Retirement Accounts, or IRAs. These are personal retirement accounts you can set up on your own and are available to everyone with earned income and can be purchased through NFIS or NFCU. There are different types of IRAs, including traditional IRAs, Roth IRAs, and SEP IRAs.

And lastly, there's Thrift Savings Plans, or TSP. A TSP is a retirement savings plan for federal employees, including members of the uniform service. It operates similar to a 401(k) plan offering tax-deferred contributions. It's important to see which types of retirement accounts you qualify for and are available to you in a way that benefits these retirement savings vehicles.

The key takeaway for each of them is the tax-advantaged status, which allows your investments to grow tax-free while you save for retirement. And remember, the sooner you start and the more frequently you save, the longer compound interest can do its job and the more wealth you'll build for retirement.

When and how much you invest are equally as important as what you invest in. The best answer to when is regularly and how much depends on your current financial situation.

FEMALE PRESENTER: Generally speaking, it's best to try and invest the same amount over the same regular interval in the same products. It's a strategy called dollar cost averaging. By consistently purchasing investment assets at different price points, the investor buys more shares when prices are low and fewer shares when prices are high. This approach smooths out the impact of market volatility and can result in a lower average cost per share over the long-term.

For instance, let's say you decide to invest $100 in a mutual fund every month. On month 1, if the price of the mutual fund is $10 per share, your $100 buys 10 shares. If the price drops to $8 per share in month 2, your $100 buy 12.5 shares. Finally, if the price increases to $12 per share in month 3, your $100 buys 8.33 shares.

Over time, this strategy allows you to purchase more shares when prices are low and fewer shares when prices are high, smoothing out the impact of market fluctuations.

Dollar cost averaging is a great strategy for investors with a longer time horizon. While you won't necessarily buy at the lowest price, it helps mitigate the risk of making large investments at unfavorable times and can result in a lower average cost per share over the long-term.

As we've just discussed, if you have an employer-sponsored plan or are investing in an IRA, you can utilize this strategy effectively in those accounts to help build wealth over time.

Before we go, I'd like to tie everything together and leave you with a few key takeaways. Understand risk versus reward. It's up to every person to build a portfolio that balances risk and reward at the level they're comfortable with. Utilize asset allocation and diversification. Asset allocation and diversification involves distributing your investment portfolio across different asset classes to manage risk and optimize returns based on your financial goals, time horizon, and risk tolerance.

- Take advantage of qualified retirement accounts. Qualified retirement accounts offer significant benefits for retirement savings, such as tax advantages or even matching contributions from an employer. Don't forget to dollar cost average. This approach helps smooth out the impact of market volatility and can result in lower average cost per share over the long-term.

Understanding risk and reward and concepts like diversification and asset allocation will help you be a more confident investor. Be diligent and consistent in your contributions to qualified retirement accounts and take advantages of strategies that will set you up for long-term success.

Let's imagine we're in the future, 30 years from now. You've done a tremendous job of managing your personal finances and you made smart investment decisions that have paid off in a financial security. You have a strong retirement fund and you're ready to enjoy your golden years. Great work.

But don't think about retirement as a finish line as there are many decisions you may face in retirement. You must begin thinking about how you will distribute income to maintain your desired lifestyle in retirement. It's also important to make sure you have safeguards in place to protect your plan so you can truly enjoy the years ahead. Let's take a moment to look at retirement income and the power of insurance and estate planning and solidifying your long-term financial vision.

- Can any of you guess what the number one fear many have about retirement? You probably guessed it-- running out of money. You're probably already ahead of where you think you are since you've paid into Social Security and you may have a 401(k) or a TSP or maybe even a pension. Again, it comes back to the personal financial habits you began with.

Reviewing your lifestyle goals in retirement, creating a budget that aligns with your income stream and assets, and managing debt like, paying off your house or downsizing. There are many options available for investing in retirement. You may want to manage your mix of growth and dividend stocks or mutual funds, explore various fixed-income sources such as bonds, or consider a personal pension vehicle like an annuity. You may need to take some additional steps to get further along, and that's where NFIS can help.

MALE PRESENTER: We can help you manage these different streams by looking at options that are customizable to your situation. Just imagine-- a serious medical condition, a catastrophic damage to property, or someone else's negligence. All it takes is one unexpected accident to shake even the strongest financial foundation.

Insurance exists for a reason, and it's never too early to invest in policies that protect your financial stability and your wealth. The benefits of insurance are universal, but the policies and amounts you need to safeguard your assets will differ from someone else's. It all comes down to the type of level of protection you need to give you peace of mind.

While home and auto insurance is our policies almost everyone is familiar with, let's talk for a moment about life insurance. Life insurance is a safety net for your loved ones. You pay a premium, and in return, the insurance company provides a financial benefit if you pass away. This benefit can help your beneficiaries cover expenses, pay off debts, or maintain their financial security.

There are two primary types of life insurance-- term and whole. Term insurance provides coverage for a specific period term at a lower cost, but pays out only if you die within that term. Whole life insurance offers life-long coverage with the cash value component that grows over time, but typically comes with a higher premium. You may want to consider life insurance if you have dependents who rely on your income or if your death would cause financial hardship for your loved ones.

Insurance can help cover expenses and debts, ensuring your family's well-being even after you're gone. It's a grim topic to think about, but a prudent part of creating financial stability.

Insurance is an instrumental part of protecting your assets on the path to retirement and after you retire. Make sure you're reassessing your insurance as a situation changes, especially after buying or selling a home or car, expanding your family, or even just as you celebrate another birthday. The more you have to protect, the more peace of mind an insurance policy can give you.

- There's one more piece of financial knowledge that can help you create financial stability not only for you, but for your loved ones as well. Wills and trusts are instrumental tools in estate and legacy planning, and one of their primary roles is to help your family manage your assets and ensure your wishes are carried out after you pass away. This is particularly important if you're passing on any of that wealth that you worked so hard to build.

A will and trust work together to eliminate any ambiguity in how your remaining wealth should be handled. A will is a legal document that outlines how your assets and property should be distributed upon your death, as well as appoints guardians for minor children and an executor to administer the estate. Without a will, state laws determine asset distribution, which may not align with your preferences. That's where a trust comes in.

MALE PRESENTER: A trust offers additional flexibility and control over asset distribution by placing assets in a separate legal entity managed by a trustee for the benefit of beneficiaries. Trusts can help minimize estate taxes, avoid probate, protect assets from creditors, and provide special needs beneficiaries.

The combination of a will and trust is vital for making sure your wealth is handled according to your wishes so that you can continue to provide for your loved ones after you're gone. Having the wherewithal to establish these documents as part of your plan management approach is the capstone to successful financial security for you and those you love.

It is important to establish and review your beneficiaries on an ongoing basis. If you have a checking and savings account, you may want to set up payable upon death and transfer on death designations to ease your transition process for your beneficiaries. If you like to get started, our partners at Trust and Will can help you create both the trust or will, and Navy Federal members receive a 20% discount.

Before we go, I'd like to tie everything together and leave you with a few key takeaways. Continue to manage your goals even after retirement begins. Reviewing your lifestyle goals in retirement, creating a budget that aligns with your income stream and assets, and managing debt, like paying off your house or downsizing, is still part of the planning process. Consider your insurance needs. Insurance is an instrumental part of protecting your assets on the path to retirement and after you retire.

- Create a trust or will. Wills and trusts are instrumental tools in estate and legacy planning, and one of their primary roles is to help your family manage your assets and ensure your wishes are carried out after you pass away.

Take proactive steps to protect your plan as you review your retirement lifestyle and income requirements. Explore insurance policies and set up wills and trusts so there's never any question about how your estate should be managed.

- The more you learn about your personal finances, the more confident you'll be when it comes to building financial security. At Navy Federal Investment Services, we recommend a simple step-by-step approach to becoming financially literate. The little things you learn and do will translate into much bigger results across every step of your financial journey.

- Above all, remember that your financial journey isn't a solo one. Navy Federal Investment Services is here for you. From planning advice and investment products to insurance, wills, and trusts, we're your partners on the path to financial wellness. We're always here to help.

- If you have questions, please don't hesitate to reach out to Navy Federal Investment Services. Call 1-877-221-8108 or email us at invest@navyfederal.org.

- Thank you for watching.

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